Retiring two years earlier than planned

[HI Bill]

^^^

Echoing what others have said, FIRECalc should incorporate SORR risk in its analysis.

It absolutely does. On the graph with all the squiggly lines, look to see if any cross the $0 threshold, and at what year. That's the year that the worst-case sequence of return would bankrupt your plan. The success rate (and ending portfolio balances) are based on those squiggly lines, and how many cross the $0 threshold vs how many succeed.

 

[SecondAttempt]

I would not be worried about a 5% withdrawal rate for a few years. I am retiring imminently, like sometime between March and June depending on how things play out at w*rk. Financially I could go now. I will be 59 when I retire.

The first 3 years my plan is to withdraw about 15% but that will drop to about 3% after that. I'm sure 15% sounds alarming to most people but that money is less being "withdrawn" and more like being spent. I've always had a separate "early retirement fund" and probably a slightly unusual plan. My regular retirement starts at 65. The early retirement fund is a separate fund in taxable accounts that I will draw from beginning when I stop working.

I also think everyone needs to consider their longevity in the planning and that is something the calculators rarely do. Both my parents died before age 72 and few of my ancestors have lived past mid 70s. I am in fairly good health but I want to enjoy my remaining years and not skimp just in case I live to be 100. My plan is solid through age 80 then I start cutting back on a lot of things like travel. I think this is realistic for my personal situation and I am comfortable with it. If longevity runs in your family, you might need to plan differently.

 

[Kork13]

You have a sound plan, as everyone else has already reinforced for you. We can only plan for and account for so much in our planning, and you've got all of the big rocks well in hand. The rest is just polishing over time, which you'll have plenty of time & opportunity to manage.

Congratulations and welcome to your early retirement!

 

[CO-guy]

Congrats! It sounds like you have a solid plan and the severance was a bonus. My better half is also a teacher. After several years of negative experiences, she recently found herself among a great group of colleagues with a boss she values and plans to stick around for a few more years. It sounds like your DW has had the same good fortune!

I'm rolling up on one year since leaving the dumpster fire of my 9-5. No severance and no regrets.

 

[TickTock]

Thanks for the link.

But isn't this what the Firecalc is simulating? Doesn't the 100% score mean we [-]will[/-] will probably be OK even with a terrible initial return?

As others have noted, yes. Yes it does.

It comes down to risk tolerance and ability to adapt. Our portfolio was 80/20 for most of our w*rking years, gliding down to 60/40 with a 5 change per year.

For me this is an issue at the heart of FIRE - in the earlier years it's preferable to spend more (on travel and such) while it's possible due to health. OTOH, higher earlier spending carries an increased SORR.

In the end, everyone has to make their own choice. I suspect DW and I are more conservative on this that your and your DW. Which is why I said earlier that only you and your DW can make the decision that works best for you. From what I see, you are making the right decision for you.

 

[RobLJ]

You are pretty much where we were 11 years ago, but with more assets; 2 years afterwards we semi-retired to Reno. DW (4 years younger) worked 2years online for her regular salary, then 2 years for about 60% at a new job which she disliked, so I told her to retire. I worked 1/2 time online for 5 years.

When I told her to retire, I modelled us withdrawing 6% or more for 5 years; now it is 5% since the portfolio grew despite withdrawals, and after I take SS at FRA next January, the withdrawal rate will be around 3.8, then 2% when DW takes SS.

Taking higher withdrawal rates until SS/pensions is pretty "normal" (or normally abbienormal). And FireCalc's data does include SORR risk. I did increase cash and bonds before we went full bore into the Mystic.

 

[Wile E. Coyote]

Hi everyone

I have been lurking here on the forum for many years and it is finally happening! Last summer, I updated my plan and targeted 2026 (age 57). However, last week I was RIFed, but from how I see it, the severance package and other good news is covering the gap.

About us:
Age: 55 / DW 55 / Son 18 year old freshman in college
Income: was $200k / DW $60k

Financial Assets: $2.6M
Taxable: $150k
Roth: $675k
Current 401k: $500k
Other IRA/401k: $1200k
529: $100k.

Retirement Income:
SS: Plan is $51k / $16k at age 70 / 62
Pension: $5k at age 65

Spending:
Base pretax spending: $101k including $14k for medical, $18k for travel and entertainment

College Expenses: $40k for three more years, but $28k is covered by scholarships. Planning to convert $35k to our son’s Roth. This was another favorable change from my Summer plan. Spring tuition is already paid.

Housing: $18k annual P&I on a 3.25% mortgage paid off in 2045. Included in the base expenses above. House is worth $700k per Zillow.

The Plan:
DW wants to keep working at least until 2025. She is a teacher and started a new job at a refreshingly well-administered school, so she does not feel an immediate need to quit.

This year: Expenses covered by DW’s job and my severance
Next Year: $60k DW + $28k 529 (no penalty due to scholarships) + $42k 401k rule of 55.
57-61: Mix of remaining excess 529 funds, 401k, and Roths to stay below the ACA limit.
62-69: DW starts collecting $16k social security. Our small pensions start at 65.
70+: My $51k social security starts

I am planning to increase involvement with volunteer activities I am already doing, run a ½ marathon in the fall, and clean out the closets. If I get bored, I may take on a low-stress part time job but that is not the preferred plan.

Concerns:
I’ve ran this plan through Firecalc with spending grossed up to $130k for taxes and got a 100% success rate, Fidelity’s retirement score is 120, and the various other online tools I’ve been obsessively checking also report a 95%+ success rates.

My biggest concern is that I am over a 5% withdrawal rate at ages 58-61. It then drops to the mid 4% range until I take my SS at age 70 and it drops to 2%, falling to under 1% near the end of the plan.

I also plan to meet with Fidelity and get their feedback and give DW another point of reference.

Am I missing anything? How concerned do you think I should I be about those high withdrawal rates?

Well, I have only found this forum and signed in less than 7 days ago... I really wish I had found it years ago.

I have already created a spreadsheet with each year of retirement and bucketized money. I have used the assumptions of Firecalc. However, I recommend to you that you map it out in a spreadsheet and visualize it (regardless of what Fidelity does or shows you). Doing that may put your mind at ease or have you making other plans/decisions. Doing it made me realize that I will be able to fund what I need out of the fixed income side of my portfolio and let the equities side ride for beneficiaries. So, in my mind that means there is really no risk.

 

[Koolau]

Yeah, we had unusually high WDR for the first few years due to our big move and 2 subsequent remodels. That put us into 2008 which should have been a disaster, but it wasn't. If we could weather that, I'm guessing you'll do fine. You'll instinctively cut back if need be. Otherwise, you just w*rk things out as you go. Good luck!