Can I really retire at 55 yrs old

[purplesky]

PaPa-T, regarding health insurance, if you are going to get the Obamacare ACA, you can target a low price policy and get it by controlling the amount you receive from the 72-t. If you cannot do the rule of 55 by leaving your 401k with your employer, and you roll the 401k to an IRA, you can split off as many IRAs as you want with whatever $ amount you want in each. Pick the $ amount you need in one IRA and do a 72t on that IRA only so that you stay below the ACA income threshold.

Hopefully the ACA can survive for another 10 years. Would anyone be surprised if the ACA attacks finally work. Not looking good folks. Legislative risk is a real problem.

The millennial generation will probably figure out Healthcare once they have full control of the ship.
After they throw the baby boomers off the ship. lol

 

[KarenF]

I think your healthcare estimate is low. You can go one websites like BCBS and view the marketplace options. We have COBRA now, which is $1130/month for a high deductible plan. I am estimating about $2000/month for a worse plan than we have now when we have to use the marketplace after COBRA and before Medicare.

 

[fuelie60]

It depends on your AGI. If your AGI is low enough you will get subsidies to help pay for the premiums.

 

[mrfeh]

SS averages the 35 highest earning years. If the OP has less than 35, then zeros will be averaged to get to 35 years. If the OP has 35 or more earning years, the zero years will not affect the SS amount.

To clarify - the initial estimate you get from SS assumes you will continue to receive the same income you did last year, until FRA.

Assuming your current salary is higher than when you were younger (which is the case for just about everybody), if you stop working before FRA, your SS payment will be lower than the initial estimate.

 

[RetiredHappy]

My SS at 62 is about $600 a month between working until 53, which I did, and all the way until 62. I had only contributed into the SS system for 18 years, at the maximum level for 14 years.

 

[Librarian]

Hello, running through the numbers and think we are going to pull the trigger in Dec. 2021. We are both 55 yes old. We have 1.2m in 401k and 200k cash from sale of our lake house. Our kids bought a investment property on lake norman NC. We will become renters for the first time in our lives. Thought this would stabilize our costs of home repair...we are planning on doing a72t which amounts to 44k and supplement with cash from house for the 5 years required. This will give us a total of 76k to live on. Rent is 1800 and we have two car payment of 650 combined. Concerned about if this is enough especially with the healthcare wildcard. Can't get price until we are retired. Estimating 1000 a month.

OK...we will get about $90K/yr from our pension (approx $2M value).
We will have NO house payment & NO car payments.
Health insurance about $1100/mo.
Rent of $1800 & Car payments of $650?
Wouldn't make me comfortable.

 

[I am He]

$76k/1,4MM=5.43 withdrawal ratio. Although that's during the years without any SS. Sounds thin to me, but I'm pretty conservative, particularly after pulling the plug.

Also, the 1.2 is only 1.2 if you're able to pull it out without any taxation. If you feel you'll owe taxes along the way, you'd need to reduce the principal and re-run the numbers. We prefer to convert the IRA to Roth via a ladder. So if you chose that route, it's adding some taxable income in addition to your exclusion amount you're probably figuring upon.

As long as you don't have substantial unexpected costs that would prematurely drain the cash fund, you might be OK, but I've learned it's possible to hit Max out of pocket medical expenses for the first time of our lives which combined with premiums can hit $25k/year for an unknown timeframe. If that happens along with a new car...well, you see where I'm heading. It can be more difficult (not impossible) to get future car loans after your income is now living off the investments vs a job so it's possible that you'd need a larger downpayment or paying in cash vs the current loan environment.

 

[imnontrad]

Retirement is not ag age thing, it is a finance/lifestyle thing. I know one couple who retired in their 40's and another who retired in their early 50's. In each case, when they retired, they had no debt and did not (and still do not have) lavish lifestyles - well, not lavish compared to their net worth.
A net worth of 2 million would be really rich in some areas and barely making it in others.
Play Devil's advocate - what if your kids decide they need the money and want to sell that rental property? What (if married), they get divorced? Chances are, at least one of you will live into your 90's - will the money last until then (the4% rule was based on 30 years in retirement).

 

[Conundrum]

Nobody has a crystal ball and I certainly don’t know nuttin’ but I only offer this as food for thought.

I retired 3 1/2 years or so at 52. My biggest concern was sequence of return risk & a black swan event. I modeled my portfolio in Portfolio Visualizer. I was comfortable with the number after a 25% drawdown so I pulled the trigger. Of course the markets have been very strong so it seems those concerns are less likely to happen for me. It’s anybody’s guess if it will hit you but you are retiring during a lot of turmoil or maybe this is the new normal. Nonetheless, it’s different.

My comfort level was to be 100% debt free. That’s neither right or wrong but was best for ME. 3 years on ACA Bronze below 400% FPL has been very good. We are very happy with our carrier. One year we had health issues so we lost the bronze “gamble” we came out way ahead the other two years.

I had planned for extra discretionary spending in our retirement budget. I have used quicken since the early 90s so I had a good idea of our spending habits. We have really enjoyed traveling. We revisited the numbers and made the decision to increase discretionary to travel more..

I guess the short answer is “life happens” and nobody knows what is going to happen tomorrow. Just have a worse case plan in your arsenal if everything goes sideways. Plan for the worst, hope for the best

Best wishes for a successful retirement!

 

[Koolau]

That is not a given and should not be expected. Occasional COL increases should be the norm. They just won't gouge you.

We are renting from our daughter and so. In law so no worries of rent going up. I will do all the upgrades for their investment house so it's a pretty good arangment.

We actually have a similar arrangement with our niece. She rents us the old "homestead" and keeps the rent rather low (we rent full time but only occupy about 4 months/year so utilities are minimal as are repairs. That way she never has to worry about fixing the place up for a new renter - with all the problems unknown renters can bring.) Also, we never complain when, for instance, the old wall paper starts falling off in the bathroom. We just fix it. It's a family based symbiosis. Family is so important in life.

 

[bearkeley]

FWIW... FIRECalc with $1.4m, 50 year time horizon, $23k SS starting in 2028 (2021+62-55), $11.5k spouse SS starting in 2028, all rest defaults.... 95.5% success for $76k of spending.

OP, We retired 5 years ago in our 40s and if you’ve confirmed the SS amount above using the SS calculator (very important due to your 0 earnings the next several years) and confident you won’t need more than the 76k, then I would agree that you should go for it! Life is short an unpredictable, so do it while you can. People on this forum helped us a lot when we planned for our ER so listen to their concerns and plan for them, but otherwise, go for it!

“You can always make more money, but you can’t make more time!”

Plan for what if’s:

What if market drops 25%, how will that impact your earnings and your spend? (Diversify and plan what an acceptable frugal lifestyle will be)

What if ACA is cancelled? (Save the 1k in your budget until cars are paid off as a safety net)

What if you can’t live with daughter anymore? (Where can you rent for $1600 and be happy?)

 

[ncbill]

Assuming a household size of two, $44k is roughly 2.5x FPL so even without the temporary 8.5% limit they'll still be eligible for ACA subsidies.

EDIT: for a household of two 55-year-olds in 2021 at Lake Norman (zip 28673) a subsidized Silver plan would cost only around $150/month.

 

[PaPa-T]

Awesome news! Thank you