Planning early retirement from IT

[JoeWras]

A big part of retiring in my mid-50s was to avoid learning yet another set of development tools. After transitioning through so many tools over a 30+ year career, I just couldn't muster up the enthusiasm for doing it again. Not so much lack of brain flexibility as it was lack of motivation. When I think back about the evolution of systems from the late 70s into the 2000s, it's pretty amazing - but also pretty exhausting.

Sounds familiar. Used to be fun to do new tools. Not so much anymore.

OMY+...

 

[daylatedollarshort]

So, point taken about tracking spending. I'm pretty sure hubby and I can live on 30% of our current income in retirement, so no 5MM will be necessary, but it's good to know for sure how much we need.

We decided at one point in planning for a retirement of 50 years, every $10K we could cut off our annual run rate meant needing $500K less in retirement funding (50 years X $10K). Reducing expenses $100K meant needing $5M less in total retirement funding. Even at household incomes like yours it is still a lot of work years to save up an extra $5M, so cutting expenses can make a huge difference in retirement dates. (Actually it is a bit more beneficial to cut expenses because there is no tax due on money you don't need to earn from working or investments to cover your living expenses.)

At one point we just started asking ourselves is this purchase, house, vacation, or car more important than retiring early, and for us many of our previous expenses didn't pass that litmus test. Or we found a way to keep the benefits but not the expense, like getting free music downloads from the library, free cultural event tickets from the library or getting better at price shopping.

 

[eta2020]

High savings rate boils down to minimizing 2 biggest expenses of US consumers: Housing and Transportation.


There is no other magic to it. Saving on food or Kids Piano lessons will not do it

 

[Cobra9777]

I'd say you're off to an "OK" start... a little behind where you should be, but not bad given your explanation of earnings history. And you now have the earnings power to recover quickly if you make it a priority, which it sounds like you have.

Others have already advised about tracking current and past expenses. I'm sure you will find plenty of ways to reduce expenses without affecting anything. Shopping for insurance every year, as an example. Moving your cell phones to an MVNO is another. It's just a matter of identifying the low-hanging fruit and making it a priority. Then plow the savings into your investments every month and watch it grow.

However, I think it's equally important to map out what expenses change in the future and when. You won't have all the answers today, but reasonable placeholders are good enough. For us, it was shocking how much cost went away... mortgage, college, taxes, work-related expenses, kid-related expenses, etc. I probably would have retired sooner had I mapped this out more carefully when I was your age.

Other good news is that SS will factor in at some point. Based on your earnings, it should be decent size. You just need to get a handle on all these numbers and their timing. Then run it all through FIRECalc and other tools to see where you are. Ten years is probably do-able, but you won't know until you run the numbers, including some best-case/worst-case scenarios.

Second property is negative cash flow. 400 in rent, 900 mortgage payment plus 190 HOA. It is a conscious move - my elderly parents live there....

I can certainly appreciate what you're doing for your elderly parents. But do they not have enough cash coming in (SS, etc) to at least cover your costs? $1100/per month doesn't seem like that much for rent, especially for a $240K house, but obviously I don't know the whole situation with their cashflow.

I have a somewhat similar situation in that I own two rental houses occupied by my 20-something kids and their spouses. But they cover all my costs plus provide a 6% return on invested capital. It's still slightly below market rent for them and a decent return for me. They both intend to buy me out as soon as they have the downpayment for a mortgage. But this was a way to get them into a house sooner.

 

[FarAway401]

I should probably clarify, that we are not planning to fully retire in 10 years, but rather get us into a situation where one of us retiring/going part time/having to reduce hours-earnings will not result in us working until we are 70.
Retiring at 55 would be nice, but if we can't fully retire then, no big deal. As long as we don't have to both put 40+ hours a week at stressful jobs, like we do know, we should be happy.

Also, the parents situation is not going to change, although I appreciate all the good will advice. We are first generation immigrants, so these are the parents who get nothing from our country of origin in terms of pension, but also don't qualify for SS here. They were in subsidized housing before we bought this apartment, and it's day and night as as far as quality of their life. It is important to me that they enjoy their elderly years, and it's worth every penny (dollar) to me. I'm fortunate to have my husband agree with me.

 

[jollystomper]

To the OP - I agree with the others that you need to take a hard look at your expenses and start tracking them. However I'd like to add that if you want to maintain (or increase) the income part of the equation, I strongly recommend staying competitive and increasing your knowledge in the current "hot" IT technologies as much as you can, even if you must do it on your own time and dime. Not just programming languages, but things like virtualization, cloud computing, containers, etc. and see how you can relate your current work effort to them. You likely need to work at least another 12-15 years given your current financial situation, and you want to increase the odds of doing that.

I have been in IT 37+ years (longer if you count that I started learning programming in high school and majored in Computer Science in college). For relative comparison purposes: at 40 I was making $130K yearly, DW and I had savings/investment retirement of $500K, of which $184K was retirement accounts, and our network was around $370K. Our oldest child was still 5 years away from college, so we had a little more runway at that age than you. My primary skills at the time were mainframe based - though I did know something about UNIX, and I was just hearing about these "new" things like Linux, HTML, Java, etc. I decided that the best way to increase the odds of increasingly my salary was to understand these new technologies and figure out how to use/integrate them with my past skills. I saw many who did not attempt this, but still expected to work to their early 50s, get laid off well before then.

So really make an effort to learn. You will be surprised at what you can still pick up. There are some sacrifices - for example, I am a hands-on learner. When Megacorp wasn't providing us with systems powerful enough for these technologies (or worse, when some uninformed management said "you work with mainframes, why do you need PCs?") I bought my own hardware and software and started building a home lab (which 18 years later has become a home data center ). So I did the majority of learning and making mistakes on these new areas on my own time. By the time Megacorp recognized that "legacy" employees needed to understand these new areas, I was ahead of the game in many areas.

Even thought I plan to retire in a year, I still try to keep current or a little ahead. It has made a HUGE difference in the salary/bonuses over the years and in surviving layoffs that have hit the older crowd more heavily.

So... focus on both the income and expense side of things if you want to retire early. DW and I were also motivated to see our kids through college and give them the gift of "no debt" upon graduation. We have been able to do that. Even with doing that, our net worth has increased over six fold since we were 40. Which, given our current expenses, suits us fine.

I understand everyone's situation is different, so I'm just sharing some of mine since perhaps we were at a similar place. And this is a great place to learn - I joined this site about 4 years ago and have learned a lot.

 

[JoeWras]

I should probably clarify, that we are not planning to fully retire in 10 years, but rather get us into a situation where one of us retiring/going part time/having to reduce hours-earnings will not result in us working until we are 70.
Retiring at 55 would be nice, but if we can't fully retire then, no big deal. As long as we don't have to both put 40+ hours a week at stressful jobs, like we do know, we should be happy.

OK, if you want to do that, the time to plan that is now, now, now!

I can tell you as one of those 50+ people "you don't see much of", it is really hard to just be a "consultant" or whatever at this stage of the game -- unless you planned to do it earlier.

Not saying it is impossible, but don't think you'll wake up at 55 and just decide to put out a part-time shingle. Plan a little, and that reality is much easier.

If you work for Megacorp, even worse. Very hard to transition to a "no big deal less than 40 hour job." Bosses at Megacorp don't look kindly at part timers. A few dark corners of Megacorp in IT are OK with it, but most are not. If anything, they don't want 40+, they want 24x7 availability when the **** hits the fan a the server site.

Do you get my drift? PLAN FOR THAT if you want it.

 

[Sunset]

OP - Good to see you are planning what to do at 50+, because you are correct, in IT age discrimination is rampant.
Plus it does get harder to learn a new language as you noted.

If children could get student loans while going to College it might make more sense as you can always help them pay it off later, while it gives them incentive to not waste time as they can see it's not free.

Your savings rate seems low for the income, does your spouse have a solo-401K so that tax deductible contributions can be made up to the limit of approximately $53,000 /yr ?

 

[daylatedollarshort]

One option might be to do a search for digital nomad jobs and consider doing that kind of work from home or traveling as you wind down your full-time, on site jobs eventually. I've done that for awhile, though these days we're more focused on the wind down part. I also like contests, get paid to apps, freebies, deal sites etc. For me that is a fun hobby and it has reached the point where I make enough in cash, gift cards, merchandise, event tickets and travel points to be the equivalent income of a part-time job from that as well.

 

[FarAway401]

OP - Good to see you are planning what to do at 50+, because you are correct, in IT age discrimination is rampant.
Plus it does get harder to learn a new language as you noted.

If children could get student loans while going to College it might make more sense as you can always help them pay it off later, while it gives them incentive to not waste time as they can see it's not free.

Your savings rate seems low for the income, does your spouse have a solo-401K so that tax deductible contributions can be made up to the limit of approximately $53,000 /yr ?

No, he has SEP IRA - he's been self-employed since August 2015, and we wanted to see how long it would last - this is his first gig, he was always W2 employee before. So far doing the max into SEP IRA, but if he keeps working as a contractor, we may think about going Solo 401K route, which will give us room for another 18k.

 

[FarAway401]

OK, if you want to do that, the time to plan that is now, now, now!

I can tell you as one of those 50+ people "you don't see much of", it is really hard to just be a "consultant" or whatever at this stage of the game -- unless you planned to do it earlier.

Not saying it is impossible, but don't think you'll wake up at 55 and just decide to put out a part-time shingle. Plan a little, and that reality is much easier.

If you work for Megacorp, even worse. Very hard to transition to a "no big deal less than 40 hour job." Bosses at Megacorp don't look kindly at part timers. A few dark corners of Megacorp in IT are OK with it, but most are not. If anything, they don't want 40+, they want 24x7 availability when the **** hits the fan a the server site.

Do you get my drift? PLAN FOR THAT if you want it.

Oh, I'm well aware of this. I personally have a few routes I can explore in the next 10 years, and so is my spouse. Glad to think out loud here, and get some of my thoughts confirmed by a more experienced crowd.

 

[pug_ster]

Like you, I work in the IT field where people over 50 and I know many people who got laid off in their 50's and have a very hard time to find a job. Sometimes you find yourself in a big company where your responsibilities are very limited and eventually find yourself too specialized to use those skills in another job. For me, I am kind of lucky where I am working as a systems engineer in a smaller company with ~140 people where I have to maintain many of our systems here and the company is fairly good at providing a budget for the latest systems so I consider myself lucky.

As for me, I am very frugal and I watch what I spend. There are people who can't retire even though they saved 2+ million and others can easily do it with less than 1 million. So it really depend what you will do if you decide to FIRE and how can you make your money you saved last. I'm not FIREd yet, but I already have a good idea when it happens, I hope.

 

[JohnnyBGoode]

Welcome to the Forum. I too am in IT and very conscious of the lack of 50+ year olds around (and since I'm 50 this year, it seems even more obvious). I like your idea of taking a 10 year horizon to get ready for something like ER. Because who knows what the economy will be like in 10 years anyway? We may be deep in another recession and it won't just be 50 year old IT folks looking for work.

As usual, the other responses on the forum are great. Definitely +1 on the expense management and increasing income wherever possible. Might I recommend a site like Mr. Money Mustache to get inspired how much fluff there really is in one's monthly budget. You certainly don't need to follow his example exactly, but it is remarkably eye-opening to see what is really needed and what is optional. It is as much a mindset change as anything.

Best of luck!

 

[joesxm3]

A big part of retiring in my mid-50s was to avoid learning yet another set of development tools. After transitioning through so many tools over a 30+ year career, I just couldn't muster up the enthusiasm for doing it again. Not so much lack of brain flexibility as it was lack of motivation. When I think back about the evolution of systems from the late 70s into the 2000s, it's pretty amazing - but also pretty exhausting.

I found the same feeling watching guys next to me keep re-writing their web applications to use the latest fad over and over.

We are moving to Amazon Web Services and that is the great leveler. If I have to spend the brain power and time learning another environment it will be AWS and I will use it to do some small business thing away from MegaCorp.

When you are in your mid to late 50's the return on investment for the time learning the new stuff just is not there. You are probably high enough salary that they have turned off the raises and there is not a lot of time left to use the new skills before you are gone.

 

[Markola]

+ Several on the recs that you start doing a monthly spending plan. I am a big fan of YNAB (You Need A Budget) because it helped me see clearly where our $ were going. Then it highlighted in neon where we were shoveling money out the window for no purpose. Then it caused my optimization proclivities to kick in and tighten up across the board. After three years, tracking and planning our spending has become an enjoyable become a hobby that lets us accomplish bigger goals.

I could preach about this or that expenditure you outline but I think if you commit to tracking every dollar of your spending for a month to provide the basis for knowing how to plan the following month, you'll start melting away the unnecessary and lower priority spending yourself.

Otherwise, you're way ahead of the game and probably most every other American you run into.

 

[FreeBear]

Very sobering to hear how tough it can be for many (most?) IT folks in their 50's. Sound similar to what I've seen in my field of niche med/consumer electronics tech.

Also seems like folks can hang on by aggressive re-training and hustling, again similar to my field. I too just got tired of all that... I'm really glad I developed an exist plan near the start of my career so that I managed to FIRE when the fun stopped.

FB

 

[retire2020]

I'm almost 52 and have been in IT for past 25 years. Job market is good but my desire to keep working has gone down in last three/four years. I've had couple of management opportunities to move up and enhance my career which I turned down. Just can't deal with politics any more. I would like to put up with current job for two-three years and just quit or get laid off.

 

[retire2020]

He had not applied to every additional scholarship possible, and therefore, I thought it was fair for him to take whatever federal loans we were eligible for. Private loans is highway robbery .

+1. I've my daughter taking stafford loan eventhough I've enough in her 529 just to keep her in the game of responsibility.... Private loan - agreed a robbery and will never take it unless my kids go to Med School and run out 529.

 

[Trooper]

Hi FarAway401 and congrats on starting the planning process. ..it will pay big dividends going forward.

I too retired from IT this year and agree that the skills ramp is constant. Have you considered looking into a project/program management position at your firm? Some of the best PMs I've worked with don't have the greatest technical skills.

Also you mention needing an account that you can draw from prior to age 59.5. Are you aware that the IRS will let you withdraw from your company's 401k if you retire at age 55 or greater? You will still need to pay taxes but can avoid the 10% penalty.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[samsterdog]

I'm almost 52 and have been in IT for past 25 years. Job market is good but my desire to keep working has gone down in last three/four years. I've had couple of management opportunities to move up and enhance my career which I turned down. Just can't deal with politics any more. I would like to put up with current job for two-three years and just quit or get laid off.

Wow this sounds familiar. I would have liked to get laid off but was well thought of within the company. Just finally reached the point of "had enough" and resigned. 2 months RE so far and haven't looked back. Only my working DW probably is glancing back.

 

[aida2003]

Um, 250K is gross, sorry, if I wasn't clear. We net 11k/month after taxes and retirement contributions. So 132K net, not 190k.
2.5K for both mortgages (after accounting for 400 received in rent), 5K food/household items/insurance/cell phones/cable. $200 for water and gas, $335 car payment, $195 HOA.
In theory, we should have 2.5-3K left every month, but we don't. So yeah, it's going somewhere. Not to mention, it's been a while since I dissected the 5K in the paragraph above to see what's what.

So, point taken about tracking spending. I'm pretty sure hubby and I can live on 30% of our current income in retirement, so no 5MM will be necessary, but it's good to know for sure how much we need.

I agree with the rest of other posters that you should do better tracking than this. Maybe sign up for Mint.com?
I'd honestly be curious how much music lessons and camps cost and what else you spend on your kids that it costs $3k/month. My kids are not 12 yet so I might learn something new what's waiting for me in the near future.

E.g. Just this weekend I learned that it's not cool to wear Sketchers anymore . My friend handed me down her 10 year old son's almost brand new Sketchers ($60) because kids at school were laughing at him. I'll see what happens at our school in a year or so. If doesn't work, he'll wear them outside at home or for our hikes. I was told you pretty much have to wear Nikes only. My other acquaintance paid $150 for a pair of Nike's for her 10y.o. daughter. What in the world?!?!

 

[jayfriendly]

Being in the IT (mobile app dev) field myself, I know that feeling when technology outruns us and the company politics gets too much to deal with. I went through similar situation at my last stable and high paying but quite stressful job and left work for ER. Although, after over a years worth break (and bring bit bored), I decided to take up a part-time contracting work (paying almost same net pay) at a different company. I feel like I have more control and freedom of how many hours I choose to work every week and do not have to deal with BS for a full time position. Fortunately, it is relatively easier to get a decent job in IT field.

Just keep your expense under a check and make a realistic budget based on your lifestyle before opting for ER or semi-ER. I am sure you would be able to enjoy ER better once you are prepared.

 

[FarAway401]

Hi FarAway401 and congrats on starting the planning process. ..it will pay big dividends going forward.

I too retired from IT this year and agree that the skills ramp is constant. Have you considered looking into a project/program management position at your firm? Some of the best PMs I've worked with don't have the greatest technical skills.

Also you mention needing an account that you can draw from prior to age 59.5. Are you aware that the IRS will let you withdraw from your company's 401k if you retire at age 55 or greater? You will still need to pay taxes but can avoid the 10% penalty.

Sent from my SM-G900V using Early Retirement Forum mobile app

Wow, I didn't know about 55 year rule! I don't know how I missed it. Basically, if I understand correctly, if I keep rolling off my 401k-s to my current employer every time I change jobs (I do quite often it seems), I have access to all of my retirement assets (that are in 401k) at 55 without penalty. Am I correct?

As far as PM - but... I have very good technical skills . I struggle with people skills though. Long time ago, before switching from web development to ERP development, I considered PM route and found that it doesn't pay as much as development plus doesn't match my personality as well. But thanks for the suggestion!

 

[MRG]

Wow, I didn't know about 55 year rule! I don't know how I missed it. Basically, if I understand correctly, if I keep rolling off my 401k-s to my current employer every time I change jobs (I do quite often it seems), I have access to all of my retirement assets (that are in 401k) at 55 without penalty. Am I correct?

As far as PM - but... I have very good technical skills . I struggle with people skills though. Long time ago, before switching from web development to ERP development, I considered PM route and found that it doesn't pay as much as development plus doesn't match my personality as well. But thanks for the suggestion!

On 55 it depends. The summary plan description(SPD) must have the language to support it, some don't. The custodian must also have a method to distribute partial distributions, some don't.

Your correct at least from my Megacorp, PM doesn't pay what development does.

 

[FarAway401]

I agree with the rest of other posters that you should do better tracking than this. Maybe sign up for Mint.com?
I'd honestly be curious how much music lessons and camps cost and what else you spend on your kids that it costs $3k/month. My kids are not 12 yet so I might learn something new what's waiting for me in the near future.

E.g. Just this weekend I learned that it's not cool to wear Sketchers anymore . My friend handed me down her 10 year old son's almost brand new Sketchers ($60) because kids at school were laughing at him. I'll see what happens at our school in a year or so. If doesn't work, he'll wear them outside at home or for our hikes. I was told you pretty much have to wear Nikes only. My other acquaintance paid $150 for a pair of Nike's for her 10y.o. daughter. What in the world?!?!

My older one was a competitive swimmer since he was 9. The kind that go to out of state meets several times a year. That cost us ~$400/month between regular coaching fees, competition cost and travel.
My younger currently takes violin at the cost of $200/month. Recently he picked up drums and was doing private drum lessons. Next school year he will be in the performance program where they rehearse with a band for 3 hours/week and also get 45 min of private lessons a week. The cost is $325. I admit, this seems too high, but I see real quality in this program, and we will try it for year. He also swims, although not at the level or cost of older one's.

I spend VERY LITTLE on my kids in terms of clothes or gadgets. Both are boys who don't care about fashion or brands. They wear one pair of sneakers for a year. Literally, my 18 year old wore his Nike's for a year, and it was his only pair of shoes. Well, ok, he has hiking boots that he wears on the days of heavy snowstorms (we live in Colorado) 5-8 times a year. It is a good pair of shoes that costed me $80, but I think it is worth it. Whenever he needs clothes that are out of the ordinary (he went to Prom both his junior and senior year), he pays for them himself from a little side job that he has.
My younger one is very similar when it comes to clothes. Both don't have any gadgets that I deem excessive. Younger one has a small Asus laptop that he needs for school (crazy, I know, but his charter middle school REQUIRES students to have laptops) - it was $180. We bought older one a very good laptop for his 18th birthday, thinking it will last him through at least several years of college. That's it!

Oh, and my boys eat a LOT . I calculated that when older one leaves and starts eating on campus, my food bill will go down at least $300/month.