Hi from DogGone... Can I pull the trigger in early 50s?

[DogGone]

Hi,

Thanks to those in this forum, I have read many posts and answers... informative, varied and always respectful.

Here is my situation and I welcome different points of view:

Work had become very stressful and I have little personal reward. I’ve been basically the same role for the last 10 years and the next two year will have even more stress and strain, during a time my parents move to a retirement home, my kids are still home before we go empty nest, I could spend quality time with my wife and my beloved dog is in his last years. With bonus, I am near $250k annually but will not miss work at all if I can pull the trigger now.

Financially, we have $6M total assets. I am very thankful for that, some luck and good choices got us there. Roughly $750k in house, $2M in tax differed (assuming at take lump sums now for pension), $3.5M in taxable investments. We owe $275k on house at 2.75% paid off in 7 years. Private school and college in next 7 years will cost $300k to be conservative. Our portfolio has a balanced/aggressive mix but my accountant says current tax exempt bonds, no salary and capital gains will lower my tax rate overall to 5% federal and 5% state since the first near $80k of cap gains has ZERO tax.

Our expenses today, not including the education costs, with a conservative $30k a year assumption for our own healthcare and anticipated taxes, will be $165k a year. We plan to move to Florida and downsize in 7 years when our costs should drop to around $90k and lose the 5% state tax. I have used Quicken for over 30 years, so I am solid on spending assumptions. (Whole history Still in same database)

By my math, we are at a 3.5% withdrawal rate if I pay off education and house now even with our current higher expenses. In 7 years, it gets better.

I’m just very nervous and want to be sure. I didn’t seriously research all this until the last few weeks.

Is this close? A Slam Dunk? FireCalc seems really optimistic. I tried that and maybe 30 other on line simulations and they vary wildly. I don’t want to die with a huge legacy and the next few years could have high personal reward.

Thanks all for any advice.

 

[OldShooter]

There is a lot of enthusiasm around here for Firecalc, and for good reason.

There is a better calculator out there, though: https://www.esplanner.com/ This one was developed by Larry Kotlikoff, Boston U. professor, who is also a talking head on TV once in a while. The software is the real deal and somewhat of a passion for Larry. I have talked to him on the phone and know this firsthand. (https://en.wikipedia.org/wiki/Laurence_Kotlikoff)

The downside to "better" is that ESPlanner needs an excruciating level of detail on your cash flows. Each year tuition, each kid, etc. it also handles the SS and income tax calculations. Lots of stuff to experiment with. So if you can get through the pain, I think you'll find the result to be something that is a good tool for you.

 

[Sojourner]

Most people on this board don't include the value of their primary residence in the net worth number they use to calculate their SWR, so your "investable" net worth after you pay off your mortgage and college expenses would be roughly $4.9MM. That still puts you at a very low 3.4% SWR even with your $165K annual spend. You're in good shape with those numbers, IMHO.

We plan to move to Florida and downsize in 7 years when our costs should drop to around $90k and lose the 5% state tax.

Trimming $75K from your annual spending seems quite optimistic... and, given your level of assets / nest egg, overly cautious and unnecessarily frugal. What, specifically, makes you think you can go from $165K to $90K by downsizing and moving to a "no income tax" state?

Is this close? A Slam Dunk? FireCalc seems really optimistic.

I wouldn't say "Slam Dunk" for your current situation, but that could easily change if you manage to lower your annual spending somewhat. As I mentioned, $90K is an extremely conservative level of spending in your situation, so no need to go that far. IMHO, a "Slam Dunk" is any situation where your SWR is consistently under 3%, so in your case that just means nudging your annual spend down to around $145K.

 

[HI Bill]

How old are you now? Assuming that you're in your early 50s already, it looks like its feasible, but not overly safe. Spending is the biggest wildcard. How do you anticipate cutting $75K in annual expenses?

Have you factored in Florida's high property tax rates?

 

[DogGone]

ok... in my enthusiasm on the train when I wrote this I was off memory and now in front of fixed spreadsheets.

My high side remaining for education is actually is education is actually $570k for 7 years of college (x70) and 2 years of private school (x40). Bringing the non-real estate nest egg to $4.7M after education and mortgage payoff.

My current expenses before income taxes but including prop taxes are $118k per year. Adding in $29k for medical coverage, reducing fuel and lunches with work, adding some vacations I never took before and my new estimate for investment taxes brings the short term expense estimate to a safe $155k for the next 7 years. This is 3.3% SWR short term.

When we go to Florida, we lose at least $12k per year in property tax, $10k in state taxes, $5k or so in auto coverage and cars, phones, feeding etc. for two boys, cheaper auto insurance, no home pool maintenance, etc. Revised estimate is roughly $120k spend for a 2.5% SWR from years 8-30.

Does this sound more reasonable? Is it ok to consider this a blended "low 3s SWR"?

Thanks.

 

[Dtail]

ok... in my enthusiasm on the train when I wrote this I was off memory and now in front of fixed spreadsheets.

My high side remaining for education is actually is education is actually $570k for 7 years of college (x70) and 2 years of private school (x40). Bringing the non-real estate nest egg to $4.7M after education and mortgage payoff.

My current expenses before income taxes but including prop taxes are $118k per year. Adding in $29k for medical coverage, reducing fuel and lunches with work, adding some vacations I never took before and my new estimate for investment taxes brings the short term expense estimate to a safe $155k for the next 7 years. This is 3.3% SWR short term.

When we go to Florida, we lose at least $12k per year in property tax, $10k in state taxes, $5k or so in auto coverage and cars, phones, feeding etc. for two boys, cheaper auto insurance, no home pool maintenance, etc. Revised estimate is roughly $120k spend for a 2.5% SWR from years 8-30.

Does this sound more reasonable? Is it ok to consider this a blended "low 3s SWR"?

Thanks.

Sounds like you are on the right path and that is without including SS.
It also sounds like you are currently in a high tax state.

We live in Florida and found the property tax and car insurance to be much lower than the comparable expense in the Northeast. Yes, compared to some other southern states, it is more expensive, but also matters if one lives in a rural area.

Many folks coming down here from the Midwest (except Chicago) complain about the high property taxes, car/home insurance, but it is all relative if coming from a high tax state.

 

[pb4uski]

ok... in my enthusiasm on the train when I wrote this I was off memory and now in front of fixed spreadsheets.

My high side remaining for education is actually is education is actually $570k for 7 years of college (x70) and 2 years of private school (x40). Bringing the non-real estate nest egg to $4.7M after education and mortgage payoff.

My current expenses before income taxes but including prop taxes are $118k per year. Adding in $29k for medical coverage, reducing fuel and lunches with work, adding some vacations I never took before and my new estimate for investment taxes brings the short term expense estimate to a safe $155k for the next 7 years. This is 3.3% SWR short term.

When we go to Florida, we lose at least $12k per year in property tax, $10k in state taxes, $5k or so in auto coverage and cars, phones, feeding etc. for two boys, cheaper auto insurance, no home pool maintenance, etc. Revised estimate is roughly $120k spend for a 2.5% SWR from years 8-30.

Does this sound more reasonable? Is it ok to consider this a blended "low 3s SWR"?

Thanks.

I'd run your situation through FIRECalc but I think you are good to go financially.

Have you considered downshifting to a part-time role with your current employer as a transition to retirement? If that is a possibility and the idea is attractive to you if you decide to pull the plug then it probably wouldn't hurt to initiate a discussion... worst they could say is no and otherwise you were prepared to resign anyway. I worked between 80% and 50% for many years before I finally resigned and it was a nice way to keep income coming in while still having plenty of free time. I mostly worked from home and had minimal travel other than for one special client project during that period.

 

[DogGone]

FireCalc...
Have you considered downshifting to a part-time role with your current employer as a transition to retirement? .

FireCalc Results with Soc Sec:
Here is how your portfolio would have fared in each of the 118 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,400,743 to $33,771,946, with an average at the end of $10,012,397. Kind of a wide spread and I am a sample size of one... it would be great if a distribution curve of that came with the result.

Vanguard’s Nest Egg Simulation results in an average of $30M, $17-$50M 50% of the time, only 5% of the time do we ever even go below the starting balance... so hard to believe/stomach these ranges when making such a big decision.

Working part time may be a consideration. If my news is not well received or if the company drags their heels on a replacement, I will have an incredibly stressful year with 13+ hour days with travel. They are in a period of need with many changes afoot though so it could be a possibility...

 

[Sojourner]

Bringing the non-real estate nest egg to $4.7M after education and mortgage payoff.

...

Revised estimate is roughly $120k spend for a 2.5% SWR from years 8-30.

If these numbers are accurate, then you are golden. Anything below a 3% WR is historically VERY safe and is unnecessarily conservative. You probably will leave a large estate for your heirs if you spend this little year after year. But, as I've found in my few years of early retirement so far, yearly spending will naturally vary quite a bit, and you'll make some adjustments up and down as you hone in on a comfortable level of spending that's neither overly thrifty nor perilously extravagant.

 

[LiveBelowMeans]

You are set. Leave the job and save your health. It is time to enjoy life. JMHO

 

[Dtail]

FireCalc Results with Soc Sec:
Here is how your portfolio would have fared in each of the 118 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,400,743 to $33,771,946, with an average at the end of $10,012,397. Kind of a wide spread and I am a sample size of one... it would be great if a distribution curve of that came with the result.

Vanguard’s Nest Egg Simulation results in an average of $30M, $17-$50M 50% of the time, only 5% of the time do we ever even go below the starting balance... so hard to believe/stomach these ranges when making such a big decision.

Working part time may be a consideration. If my news is not well received or if the company drags their heels on a replacement, I will have an incredibly stressful year with 13+ hour days with travel. They are in a period of need with many changes afoot though so it could be a possibility...

Your lowest level balance in Firecalc of (1.4m) doesn't sound correct especially with SS included.
What inputs did you use in each section?

 

[MBAustin]

Welcome, DogGone!

Looks like you have probably done all of this already, but If you haven't found them already, we have a helpful list of things to think about before you make the leap:

Some Important Questions to Answer

It sounds as though your stress levels and BS buckets are about where mine were when I ER'd (although I was back to 10-11 hour days in the last year). YMMV, but leaving when I did was an incredibly good decision for me and my family.

 

[pb4uski]

.... Working part time may be a consideration. If my news is not well received or if the company drags their heels on a replacement, I will have an incredibly stressful year with 13+ hour days with travel. They are in a period of need with many changes afoot though so it could be a possibility...

They should see that 50% or 75% or whatever of DogGone is better than 0% of DogGone.... which is the other alternative.

Where I worked, everything or than health insurance was proportional... 50% time for 50% salary and 50% bonus plus 0.85 days a month vacation vs 1.7 days a month... you get the idea. Health insurance was the same for 50% to FTE... and none if you worked less than 50%.

 

[DogGone]

Your lowest level balance in Firecalc of (1.4m) doesn't sound correct especially with SS included.
What inputs did you use in each section?

Hi - feel free to double check me

Portfolio 4.6M
Spending 155
Years 30

Soc security
Mine $3400/mo starting in 2037 - confirmed with Soc security even if I stop now
Spouse $2800/mo starting in 2038
My bad had monthly in before, not annual

Retirement 2019

Constant 3% inflation
Constant spending power
Portfolio as total market

New result is:
The lowest and highest portfolio balance at the end of your retirement was $262,158 to $34,820,513, with an average at the end of $11,190,594

Nice catch

 

[pb4uski]

I get the same result. Using the Investigate tab I also ran a scenario of the portfolio value that you would need to have a 98% success at $155k spending and it returned $3.563 million (and you have $4.6 million) so you are good to go financially.

 

[DogGone]

I get the same result. Using the Investigate tab I also ran a scenario of the portfolio value that you would need to have a 98% success at $155k spending and it returned $3.563 million (and you have $4.6 million) so you are good to go financially.

And I think my $28k per year in there for healthcare on my own is at least $5k too much for a healthy family... so things are looking good...

I think D-Day is next week when I tell work and talk about an expedited transition... 2-3 months...

I’ve done my typical over research before a decision, but it brings such ease of mind that you understand the variables and bounced it off many people... thanks all for your help.

 

[Dtail]

And I think my $28k per year in there for healthcare on my own is at least $5k too much for a healthy family... so things are looking good...

I think D-Day is next week when I tell work and talk about an expedited transition... 2-3 months...

I’ve done my typical over research before a decision, but it brings such ease of mind that you understand the variables and bounced it off many people... thanks all for your help.

I agree with your numbers too.
Keep in mind that those results are with using the Firecalc default stock percentage of 75% and ER fees of 0.18%.
If one uses a balanced 50/50AA, your slash line numbers are 1.2m/23.8m/7.5m since you are deemed to be taking less risk, so the lower number is higher and vice versa for your maximum and average numbers.

 

[kimcdougc]

Congrats on making a decision. That is the number one decision to finally get FIRED. You look good to me. Go and enjoy life.

 

[HI Bill]

New result is:
The lowest and highest portfolio balance at the end of your retirement was $262,158 to $34,820,513, with an average at the end of $11,190,59

Woo hoo! Good to go! Enjoy!

 

[eastnortheast]

Working part time may be a consideration. If my news is not well received or if the company drags their heels on a replacement, I will have an incredibly stressful year with 13+ hour days with travel. They are in a period of need with many changes afoot though so it could be a possibility...

The part I bolded will only happen if YOU let it happen. When you reach the point of being able to retire, YOU control the narrative, not the company.

When I told my boss of my plans to retire, I went in with the worst case scenario - i.e. that they would walk me out the door that afternoon. If that did happen, the world would go on, and I would still be financially okay.

The didn't walk me out the door, and I actually retired six months later, but they were pretty stress free months. I took on what I wanted to take on, helped with the transition to my replacement, but MADE SURE that I was walking down the stress during that time, not increasing it.

 

[Aerides]

^
Totally agree. When you tell them, if it's not "well received" who cares? You will want to search/read the many threads on topics of "how long to give notice" for perspectives. Some real eye openers in those stories.

They need to replace you, sure, but don't think they couldn't do that quickly if you were hit by a bus tomorrow. Unless you are a partner in a very small firm, your absence will be quickly absorbed.

 

[DogGone]

And now for allocations... I spoke with three advisors (mine and two friends) and did much research on my own. They range in response from:

a. Switch most of portfolio to generate income next 7 years needs (college costs), must preserve principle
b. Side Step the near guaranteed recession in the next few years and drop to at least 50% equities
c. Maintain 80% equities for now/ongoing and withdraw from principle as needed since we have a 30 yr horizon

This is my next decision. Is there a board here for those discussions, specific to longer horizons? (tried search)

Oh and pensions, lump some now in IRA or take out lump sum later (4.7% interest by my math so not bad)… unless lump sum later is estimate, not guarantee