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Retire early in declining industry with average wages
Old 02-21-2013, 09:45 AM   #1
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Retire early in declining industry with average wages

Hello All,

My wife and I are both employed at the same business in a declining industry(work for family business). My wife also holds a night job several nights per week. I am 43, wife is 41. House is paid off. We live in the land of incarcerated governors(illinois), so our property taxes are quite high for a very average house. We bring in around $90k + about $20k from her second job. Net worth is about 1.1million with about 650k in retirement assets...the rest is house, cars, etc. We have no kids.

We would like to retire by 55. The business is on shaky ground as is the industry(printing). We are hoping to hold on for another 15 years which is pretty optimistic for the industry and highly optimistic for our family business. We both put in about 10k each in our 401 and another 5k each in a roth ira.

Investing wise, we are about 90%+ in stock mutual funds with a quite high % in overseas/emerging markets.

My questions are as follows...we have nearly nothing saved in non-retirement accounts...can start working on this as our house has just been paid off. We need some repairs at this point...maybe 20k worth. Would it be worth taking out a loan or should we get on a cash only plan now?
I had also thought about getting a loan for about 100k and investing what we don't need for repairs...wife hates this plan.

Is my investing plan and current savings schedule going to work? My wife is diabetic, so insurance between retirement and medicare frighten me.

Been lurking this site for a while now, thanks for taking time to read my post!
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Old 02-21-2013, 10:09 AM   #2
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Welcome to the forum. Have you tried out FIRECalc: A different kind of retirement calculator?

Just to get you started, I entered...
  • Portfolio $650K (home, cars, etc. excluded)
  • Added Savings $30K/yr, increasing with inflation (401k & Roth)
  • Retiring 2026
  • Plan to age 95
  • Portfolio 90% equity:10% fixed income
  • I did not attempt to estimate Soc Sec, presumably you'd have that to work with in addition
...and solved for spending level before taxes (see below), shows results for various success rates.

As for taking out a loan for home repairs, I wouldn't if I could avoid it, but it used to be common practice. And re: taking out a loan to invest, I'd side with your wife. YMMV

Best of luck with the business.
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Retired Jun 2011 at age 57

Target AA: 50% equity funds / 40% bonds / 10% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
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Old 02-21-2013, 10:22 AM   #3
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If you retire at 55, you need to think through what sources you would have to fund living expenses from when you retire until you can withdraw penalty-free from tax deferred plans. Many 401ks allow penalty free withdrawals for participants who leave company service after age 55 - check to see if yours does - if not, since you are in the family business you may be able to amend it so it does. You could also dip into Roth contributions, but having taxable funds is probably netter than Roth withdrawals.

If you intend to stay in your house for some time and and enjoy the benefit of the "repairs", I would go ahead with them now. It might be easier to have them all done at once, even if you need a short term loan rather than string them out over several years.

On the other loan to provide investment funds, you'll see a lot on this site on whether or not to take or payoff a mortgage. While in many cases it makes sense financially if your investment earnings exceed the interest you pay, many people are more comfortable not having a mortgage. To me it comes down to personal preference. If your wife hates that plan I wouldn't push it. Even if you earn a spread of 3% and begin at $80k, on average you would only benefit $100 a month ($40k average balance * 3%/12 months).

As to whether it will all work, check out Quicken Lifetime Planner (included in Quicken Deluxe and higher). Plug in your details and it should give you a good sense as to whether your plan "works" and you can see the impact of different paths on your nestegg using their "what-if" analysis.
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Old 02-23-2013, 09:52 AM   #4
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I would do the same.
Originally Posted by Midpack View Post

And re: taking out a loan to invest, I'd side with your wife. YMMV
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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