Still nervous

[kghughes1022]

Just joined this site today and great information. I went on to the FIRE calculator and based on that I hit my number, but still nervous. I have ~$3.2 million in savings, investments, equity, and 401k. I just get nervous as I have 3 kids to get through college (1 a sophomore in college, 1 a senior in HS, and another a freshman in HS) with about $150k (not included in the $3.2) in 529's. I am 52 and ready to call it a career ASAP. I need to do some more work to verify, but believe if after paying off my mortgage and by all accounts debt free $100k/year should be enough for my wife and I

 

[rodi]

Welcome kghughes1022!

I retired last year at age 52. My net worth is a bit lower than yours, but I didn't use net worth for my calculations - only investments/savings. I can't easily spend my home equity, so I didn't count it. Are you counting your home equity in your 3.2M?

I have 2 kids to get through college (currently middle schoolers) and like you, I didn't count the 529's in my plan.

Does the $100k include taxes? Health care? Firecalc assumes your "spending" on the first page is all inclusive - so it needs to include taxes and healthcare.

Welcome and good luck!

 

[kghughes1022]

Hi Rodi. If I pay off my mortgage and back out equity (as I have an investment property as well) it takes me to about $3 million with no debt (cars and house paid for). I did assume some amount of taxes and all insurance in the $100k. This is much less than I gross today, however I also eliminate all debt and thus my expenses drop significantly.

 

[DustyL]

Welcome KGhughes1022:

I am in a similar situation: 53, married, about 3M saved, about $140K mortgage with 6-7 yrs. to run (but more equity -- probably $750K), one kid about to graduate college (and with a job!!), another still in high school (with about $100K saved for college). Have been trying to figure out my spending in retirement. The hardest part for me is determining taxes and health care costs. How much are you assuming for health care and how much for taxes? What resources did you use to calculate?

 

[rodi]

Welcome KGhughes1022:

I am in a similar situation: 53, married, about 3M saved, about $140K mortgage with 6-7 yrs. to run (but more equity -- probably $750K), one kid about to graduate college (and with a job!!), another still in high school (with about $100K saved for college). Have been trying to figure out my spending in retirement. The hardest part for me is determining taxes and health care costs. How much are you assuming for health care and how much for taxes? What resources did you use to calculate?

DustyL - I used the exchange website to get health insurance quotes (in my case, CoveredCA). I also used ehealth.com. And finally - I looked at the cobra costs.

For taxes I did a "what if" tax run in turbotax. I estimated my income from various sources. If you're drawing mainly from savings and from selling investments in taxable accounts (non IRA), you'll find that taxes are lower than when working.

 

[DustyL]

Thanks rodi. I will check out the health care sources you recommend.

Depending on when I pull the trigger, I will likely be drawing mainly from savings and from selling investments in taxable accounts for a while, which will generate capital gains. This will ultimately be supplemented by a small company pension (I can take at age 55 and get about $1K a month or wait and get more), SS for myself and my DW, likely at 62 for each (she's 52 now), a very small gov. pension at age 65 and then withdrawals from IRAs/401K at 70 1/2.

 

[bingybear]

I looked up ACA cost on healthcare.gov and added added the max out of pocket for the insurance (about 20k in total) and used that as my healthcare cost. I'll be ER in 23 work days at 53.

 

[kghughes1022]

Hey Dusty I did the same as mentioned above. I went onto the exchange website and then added in the deductible of a HSA to get my insurance costs. I then went onto tax calculators and assumed my income was coming in from savings withdraws, a portion via dividend income, and the balance via interest income. Hope this helps

 

[MBAustin]

Welcome! If you haven't seen them yet, there are two excellent resources here that might help you make your "list" and check it twice (or three or four times if you are like most of us).

http://www.early-retirement.org/forums/f47/some-important-questions-to-answer-before-asking-can-i-retire-69999.html

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

We'll do our best to answer your questions also - lots of friendly and knowledgeable folks hang out here!

 

[jim584672]

" ~$3.2 million in savings"

Nervous?? Why?

 

[kghughes1022]

I guess I am nervous as 33 years is a long time with so many unknowns. I still have 3 kids colleges, 2 daughters weddings, potential illnesses I am a bit conservative which explains the nervousness.

 

[EastWest Gal]

You have the same amount in savings as we do but had more saved up for college. 11 months ago we decided to pay off the house, I joined this forum, and decided I was going to at least semi-retired. My last day was 12/31 (on call until 1/1 AM). FireCalc has me at 100% success up to about $120K/year, but we don't spend near that much. It took 15 minutes to actually sign up for ACA insurance, so that was easy.

You are in good shape, especially with so much saved for college.


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[2B]

" ~$3.2 million in savings"

Nervous?? Why?

Let's not start the "You have how much and you're still nervous?" I think everybody is nervous no matter what they have.

To OP --

Welcome. You will never achieve total confidence until you do it for a few years. You just have to go with the numbers and go with your gut. You aren't cutting things really tight but I don't know if the $100k/yr includes taxes and health insurance.

 

[Midpack]

" ~$3.2 million in savings"

Nervous?? Why?

No matter what your means, expenses or age, it's perfectly normal for everyone to pass through a period of "nervous" when they start to contemplate giving up a paying career for retirement. It can take years to reach a point where "nervous" is no longer too much of an obstacle. And "nervous" never subsides entirely, you just reach a point where you're comfortable your assets will most likely safely provide a successful retirement. And that point is different for every one of us, that's why asking others what they think is only of limited value.

 

[daylatedollarshort]

What we did was compare our budget to the Consumer Expenditure Survey. At $100K expenses (if that is a solid number with health care and taxes) you have some head room to cut back if needed and still live an upper middle class life in the U.S., where the median household income is ~$50K. Plus you have the time to take a sabbatical and maybe start a small business or find a hobby job that brings in some extra money for additional padding, if you end up feeling more comfortable downshifting than 100% retirement.

I have a lot of little money making and money saving hobbies that help add quite a bit of pad to our retirement plan.

 

[clifp]

I guess I am nervous as 33 years is a long time with so many unknowns. I still have 3 kids colleges, 2 daughters weddings, potential illnesses I am a bit conservative which explains the nervousness.

Here is a simplistic way of looking at. You have 3.2 million you invest in things that only pay the rate of inflation, and you spend 100K/year at the end of 18 years, leaving you $1.4 million

You can now collect social security. I am going to make a guess at age 70 that is between 40K to 50k. Leaving you 50-60K shortfall to make up from your 1.4 million, that means you'll run out of money sometime between age 93 and 98.

This assume that you continue spending a $100K well into your 70s and long after the kids are out of school. It also assume you have no money in the markets which over every 20 year period have outperformed inflation.

 

[jim584672]

3.2MM over 33 years put into an amortization table @ 3% works out to $152,874.96 per year. I think you can probably squeak by, if not, just cut some spending.

 

[Aus_E_Expat]

kghughes - it appears you have enough money, but my big question for you is what are you going to do with yourself when retired?

You still have kids to "parent" for a few more years, so what are you planning on doing with yourself?

 

[pb4uski]

+1 that you have enough. Even if you figure $50k a year for each kid's college, you'll still have $2.85 million left and at a 4% WR it would be $114k a year to spend.

 

[mdsmith1]

Don't think for a second funding stops once they leave college in today's job market. Factor in help for 2-4 more years if you are inclined to not cut them loose once they graduate. If they can't find a job keeping them on your health insurance helps expenses. Plus once they move off campus the cost goes up.

Sorry to be a Debbie downer but things to consider.


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[EastWest Gal]

Today's job market is not the job market of 2009. My friend's son tried for an internship and instead ended up working full time. He's going to finish his major on line.

The unemployment rate is about 5%.


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[daylatedollarshort]

I saw this today on Fidelity, retire early with $2.8M and kids to raise?

https://www.fidelity.com/insights/retirement/can-you-afford-to-retire-early-2015

 

[kghughes1022]

Thanks everyone for the great feedback as I am feeling much more confident about the prospect. I also went over all of this with my wife and showed her the FIRE calculator with 100% success rate so I think she is buying in, other than me being home 24/7.

 

[seraphim]

Don't think for a second funding stops once they leave college in today's job market. Factor in help for 2-4 more years if you are inclined to not cut them loose once they graduate. If they can't find a job keeping them on your health insurance helps expenses. Plus once they move off campus the cost goes up.

Sorry to be a Debbie downer but things to consider.


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+1

Not to start a debate, but the U2 unemployment data used by the government is somewhat deceptive. The majority of job gains since 2008 have been low paying part time positions. If you consider the eligible workers who have given up looking for a job, (I think that's the U6 data, but don't quote me), the unemployment rate is somewhere around 11%. We occasionally assist our son, who graduated 2.5 years ago. But he's going the starving artist route lol. So continued assistance is definitely something to consider when planning.


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[seraphim]

With three kids to put through college, there are a lot of unknowns coming up. Will the amount in your 529s be be sufficient for three? Much depends on their choice of college, scholarships, performance in school, and whether or not they intend to be saddled with a lot of student loans after graduation.

With $3M in investments (not net worth) a $100k budget - assuming this includes support to college aged children and you can adhere to that budget - is about a 3.3% withdrawal rate. If you end up as siting children post graduation, how will that affect your budget?


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