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Change in Plans...age 57..
Old 05-30-2021, 07:56 AM   #1
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Change in Plans...age 57..

Covid took a serious bite out of my income (-45% last year) and poor recovery thus far this year (YTD -20%) and hence we are having to change plans and struggling with some decisions. I'm tired of working. The original plan was to retire at 60 keep two homes for many years and then drop to one as we aged, and have a modest boat. Well now that won't work unless I work until I'm in my mid 60's , assuming good recovery of income.
We have realized we love boating and want to spend the first part of retirement boating as much as we can. We just downsized 18 mo ago and the second home is by the water and our boat.

Here's where we stand:

Primary home : $800K , no debt
Secondary home : $1M, $500K mortgage.
401K : $2.4M
Taxable acct. $2.15
HSA: :125K
Biz equity 1: $300K ( paid over 5 years)
Biz equity 2: $400K ( paid over 4 years)
Cash value Life Insurance : $925K (in one scenario- pays $45K per year at age 60, no COLA, until age 95)
SS @ age 67: $34K me, $17K wife.


Kids are out of college, so weddings and a bit for house down payment.
Left over 529: $200K - grandkids?

I'm ready to pull the plug in one year, but will be 58 1/2. My wife really likes this place and wants me to work to 59 1/2. In either case we would sell here, pay off the secondary, buy a bigger boat and would likely take a boat mortgage out to be paid off in 4 years from the 2nd biz equity. Also biz buy outs are tied to EBITDA and may improve over time?

I believe I could access the 401K at 58 1/2 if I leave it with my employer and then roll it over to an IRA at age 59 1/2 ?? Just read about the rule of 55. Planned expenses are $200K/yr.

Thoughts?

(Yes , I have run FIRE calc, extended I-orp, Ultimate Retirement Calc, flexible retirement planner))
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Old 05-30-2021, 08:16 AM   #2
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My thoughts:

As I'm sure FIRECalc et al have told you, you are good to go any time you want.

No need to use Rule of 55 in your case - you can easily live off of taxable for a year or two (I assume you mean $2.15M in taxable) and it will cost you less in taxes than drawing from tax deferred. So IMO 58 1/2 or 59 1/2 is not too relevant.

Considering that, you can roll over your 401(k) whenever you leave employment.

Consider using the leftover 529 for your kids (weddings/down payments) - the penalty is only 10% on the gains. You can gift grandkids later when (if) they come.

As always, make sure your planned spending considers taxes, health care, and one-off expenses (roof replacement, new car, etc.).
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Old 05-30-2021, 08:20 AM   #3
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Originally Posted by USGrant1962 View Post
My thoughts:

As I'm sure FIRECalc et al have told you, you are good to go any time you want.

No need to use Rule of 55 in your case - you can easily live off of taxable for a year or two (I assume you mean $2.15M in taxable) and it will cost you less in taxes than drawing from tax deferred. So IMO 58 1/2 or 59 1/2 is not too relevant.

Considering that, you can roll over your 401(k) whenever you leave employment.

Consider using the leftover 529 for your kids (weddings/down payments) - the penalty is only 10% on the gains. You can gift grandkids later when (if) they come.

As always, make sure your planned spending considers taxes, health care, and one-off expenses (roof replacement, new car, etc.).
That's true I could get by on taxable for a bit.
Good idea on the 529, kids could get a bigger home downpayment that way. Thx
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Old 05-30-2021, 08:22 AM   #4
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Disclaimer: I haven't run any of your numbers through Firecalc, I-orp, etc.

If I were you (and I'm not), I would say to myself that I have plenty enough to go whenever. Just by coming to that conclusion makes it easier to ignore the Covid reduced income stress.

If you go now (or at 59 1/2 to satisfy the wife's OMY desire to keep you working ... I don't think you need to do a 401K early withdraw, you have plenty in taxable account to bridge to 59 1/2.

If needed, sell one of the homes just to make your life easier in terms of things to maintain. Does your 200K/year nut assume one house or is that current ongoing w/two? Perhaps think about ways to get the $200K/year planned expenses down a bit.

Further Disclaimer: I retired in the depths of the 2009 wash out, but ended up going back to work a year later (not because I had to, but because I found something I wanted to do).
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Old 05-30-2021, 08:24 AM   #5
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Originally Posted by USGrant1962 View Post
Consider using the leftover 529 for your kids (weddings/down payments) - the penalty is only 10% on the gains. You can gift grandkids later when (if) they come.
Remember 10% penalty AND taxes on gains from 529 if not used for educational purposes.
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Old 05-30-2021, 08:33 AM   #6
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Remember 10% penalty AND taxes on gains from 529 if not used for educational purposes.
Yes, that's the other advantage, only the gains are taxed. If you fund a wedding from a 401(k)/IRA it is all taxed at ordinary rates.
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Old 05-30-2021, 08:34 AM   #7
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Originally Posted by copyright1997reloaded View Post
Disclaimer: I haven't run any of your numbers through Firecalc, I-orp, etc.

If I were you (and I'm not), I would say to myself that I have plenty enough to go whenever. Just by coming to that conclusion makes it easier to ignore the Covid reduced income stress.

If you go now (or at 59 1/2 to satisfy the wife's OMY desire to keep you working ... I don't think you need to do a 401K early withdraw, you have plenty in taxable account to bridge to 59 1/2.

If needed, sell one of the homes just to make your life easier in terms of things to maintain. Does your 200K/year nut assume one house or is that current ongoing w/two? Perhaps think about ways to get the $200K/year planned expenses down a bit.

Further Disclaimer: I retired in the depths of the 2009 wash out, but ended up going back to work a year later (not because I had to, but because I found something I wanted to do).
Sorry - yes the planned $200K spend is one house and boat, etc..
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Old 05-30-2021, 08:42 AM   #8
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In your scenario, I'd go with your approach - pull the plug on the current house now! Reasoning is simple in my view - you are being given an opportunity to sell into a hot/tight market when the prices really should be going down due to the mass exodus over the past couple years. Additionally, we really don't know how many homes are being artificially kept off the market with lenders prevented from foreclosing at this time. It's a HCOL area, taxes are high, state finances are very troublesome.

Why carry two rather than one where you have the chance to capitalize on one of them now?

Now, the most important thing is to get buy-in from DW. You can't make the decision unilaterally and have her unhappy. You should also be prepared for some compromise?

In any case, you seem to have enough that retirement (in some form) should not be difficult.

I would definitely try to get the $200k annual spend down though.

[Mod note: This post was edited to comply with other edits]
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Old 05-30-2021, 10:05 AM   #9
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Agree on selling one of two houses in high-cost areas of the Northeast. Though it's worth mentioning that the exodus is dominated by a fairly specific demographic, middle to upper-middle class residents over 50. I have family members staying there "for the [grown] kids" who would be much happier elsewhere.

Where I believe that will hurt is in exurban areas where Boomers have built or bought huge numbers of large houses. I suspect that these houses will be of far less interest to younger generations, and that the number of them that will ever be able to support $750K+ houses beyond commuting range of job centers will be small.

Almost six months into watching the full-time remote worker at my house, I'm skeptical of the idea that offices will go away.
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Old 05-30-2021, 10:21 AM   #10
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Can you dock or moor the boat at the second home or do you just have it docked at a nearby marina?

Is selling both homes and buying bigger boat and living on the boat a possibility?

I think today is a unique opportunity to get top dollar for NE real estate so would consider selling both (get while the getting is good) and then perhaps leasing a condo near the marina if boat living isn't possible.

You have plenty and want to quit so why not? Not like you'll ever get that time back.

[Mod note: This post was edited to comply with other edits]
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Old 05-30-2021, 10:51 AM   #11
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Originally Posted by pb4uski View Post
Can you dock or moor the boat at the second home or do you just have it docked at a nearby marina?

Is selling both homes and buying bigger boat and living on the boat a possibility?

I think today is a unique opportunity to get top dollar for NE real estate so would consider selling both (get while the getting is good) and then perhaps leasing a condo near the marina if boat living isn't possible.

You have plenty and want to quit so why not? Not like you'll ever get that time back.
Yep , the boat is down the street. Nice community, lots of retirees, pickle ball (lol) , tennis, docks, beach. The house is big for visiting kids, and the wife won't entertain the thought of only living on a boat.
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Old 05-30-2021, 11:22 AM   #12
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Originally Posted by Flyfish1 View Post
. My wife really likes this place and wants me to work to 59 1/2. In either case we would sell NJ, .........
Would wife be unhappy to sell the house she "really likes"

Happy wife, happy life.

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Old 05-31-2021, 07:26 PM   #13
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Originally Posted by Flyfish1 View Post
Covid took a serious bite out of my income (-45% last year) and poor recovery thus far this year (YTD -20%) and hence we are having to change plans and struggling with some decisions. I'm tired of working. The original plan was to retire at 60 keep two homes for many years and then drop to one as we aged, and have a modest boat. Well now that won't work unless I work until I'm in my mid 60's , assuming good recovery of income.
We have realized we love boating and want to spend the first part of retirement boating as much as we can. We just downsized 18 mo ago and the second home is by the water and our boat.

Here's where we stand:

Primary home : $800K , no debt
Secondary home : $1M, $500K mortgage.
401K : $2.4M
Taxable acct. $2.15
HSA: :125K
Biz equity 1: $300K ( paid over 5 years)
Biz equity 2: $400K ( paid over 4 years)
Cash value Life Insurance : $925K (in one scenario- pays $45K per year at age 60, no COLA, until age 95)
SS @ age 67: $34K me, $17K wife.


Kids are out of college, so weddings and a bit for house down payment.
Left over 529: $200K - grandkids?

I'm ready to pull the plug in one year, but will be 58 1/2. My wife really likes this place and wants me to work to 59 1/2. In either case we would sell here, pay off the secondary, buy a bigger boat and would likely take a boat mortgage out to be paid off in 4 years from the 2nd biz equity. Also biz buy outs are tied to EBITDA and may improve over time?

I believe I could access the 401K at 58 1/2 if I leave it with my employer and then roll it over to an IRA at age 59 1/2 ?? Just read about the rule of 55. Planned expenses are $200K/yr.

Thoughts?

(Yes , I have run FIRE calc, extended I-orp, Ultimate Retirement Calc, flexible retirement planner))
You're good to go. Congratulations. I would sell one house, but that's just how I roll.
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Old 07-24-2021, 09:45 AM   #14
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Just an update :

I have formally decided to retire next summer. My wife is on board, and we are trying to finish up all the renovations on the retirement home over the next year.

My biz partners didn't even blink when I told them. Perhaps they expected it, perhaps they are very self focused. I've seen enough people retire in my profession and they are basically forgotten about in a few weeks. So, I suspect it will be similar in my case. It's OK - we were never close friends , just business partners.

Looking forward to making new friends, having new experiences and enjoying the next phase of life. Just actually making the decision and stating it to others has been a powerful move. Feeling a bit lighter and happier already.
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Old 07-24-2021, 10:02 AM   #15
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Congrats. Sounds like a good decision.
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Old 07-24-2021, 10:04 AM   #16
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Originally Posted by Flyfish1 View Post
Just an update :

I have formally decided to retire next summer. My wife is on board, and we are trying to finish up all the renovations on the retirement home over the next year.

My biz partners didn't even blink when I told them. Perhaps they expected it, perhaps they are very self focused. I've seen enough people retire in my profession and they are basically forgotten about in a few weeks. So, I suspect it will be similar in my case. It's OK - we were never close friends , just business partners.

Looking forward to making new friends, having new experiences and enjoying the next phase of life. Just actually making the decision and stating it to others has been a powerful move. Feeling a bit lighter and happier already.
Congratulations! You've just completed the hardest part of Early Retirement - making your decision. Keep us posted on how it unfolds and how much fun you will be having!
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Old 07-24-2021, 11:13 AM   #17
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Congratulations! You've just completed the hardest part of Early Retirement - making your decision. Keep us posted on how it unfolds and how much fun you will be having!
Actually, I'd say the hardest part for many is yet to come....sticking to it! OMY syndrome seems to be pretty common -- common enough to have a name!

But seriously though, congratulations, Flyfish1! It does sound like you are ready, and you have something to retire to (boating, family).
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Old 07-24-2021, 01:55 PM   #18
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My 2 cents, as a (former) sole breadwinner:

Why access the 401K when you have $2M in taxable?

I just ran my expenses on $4.3M invested and $200K is fine. I spend less than half of that, so we will have a legacy. No second home to sell, no business income coming in either. We spend far less than that.

Go enjoy your life and retire. What will an extra year give you monetarily that is better than a year of TIME? You don't need the money. You need time. Time that DW has had all her adult life. Utilize your taxable account first. No need to wait until 59-1/2 when you do not need to tap your 401K early.

You have more than enough money already. But you cannot create more time.
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Old 07-24-2021, 02:04 PM   #19
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My 2 cents, as a (former) sole breadwinner:

Why access the 401K when you have $2M in taxable?

I just ran my expenses on $4.3M invested and $200K is fine. I spend less than half of that, so we will have a legacy. No second home to sell, no business income coming in either. We spend far less than that.

Go enjoy your life and retire. What will an extra year give you monetarily that is better than a year of TIME? You don't need the money. You need time. Time that DW has had all her adult life. Utilize your taxable account first. No need to wait until 59-1/2 when you do not need to tap your 401K early.

You have more than enough money already. But you cannot create more time.

Ummmm....yep that's why I posted that I'm not waiting until 59 1/2. see my last post from today.
thanks
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Old 07-25-2021, 12:02 AM   #20
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Missed that. Sorry. And congratulations!
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