ER @ 50...Can I realistically do it?

[Ace300]

Hi Everyone, first post but have been lurking for a couple years on these forums.

For a quick background, I am turning 42 soon, DW is 43. We have 2 kids, ages 12 and 6. Our financial picture and info is listed a bit further below in the post, but here is the crux of where I am coming from:

Ever since I came out of college 20 years ago and started my first job, I had the goal in the back of my head that it would be nice to step away early from the working world and have options to be free and do other things with my time. I thus always made sure I saved and contributed to available retirement plans when I could from the start to put me in a (hopefully) good position later on. I joined my current Megacorp 14 years ago and although things went well for the first 10 years or so, I am pretty much over the whole corporate thing at this point to be quite frank. The politics, bureaucracy, hierarchies, and overall grind at times is just not aligned with how I want to spend every working day of my life for the next 20 years. I think I could hang on another 5-10 years if absolutely needed, maybe even jump to another company to change scenery and get some new life, but ultimately my goal is that I want to be done with the corporate world and having to work by my early 50’s. This would allow me to be free to do what I want, which may still entail working part-time but it would be doing something I enjoy to stay engaged and also could provide some side income, but I would not depend on it financially as it is assumed it would be at much lower wage.

My wife thinks this is a mid-life crisis but I’ve been giving this real thought for several years, however the urgency and planning has certainly accelerated once I hit 40, combined with COVID realities, my waning motivation at work, and the stock market returns of the past few years. Over the past 1-2 years I've done a lot of reading and listening on all things ER, Investing, and Personal Finance to gain knowledge, and now really trying to put pen to paper to seriously assess and gauge what options there are regarding ER plans for me.

My wife is a teacher and loves it, she has no intention to ER. I have her estimated retire date at 60. If I were to leave my job in the future, assumption is that me and the kids would get on her school’s heath insurance plan.

We live in the Midwest, so COL is fairly low/reasonable.

Here is an overview of our financial picture

Combined Annual Income: ~$200K annually
Me: $155k-ish – mostly salary and bonuses
DW: $45k-ish - salary

~$400K Home Value w/ $150K mortgage, have about 13yrs left on 15yr note @ 2.625%.

Net Worth is ~$2.4M which includes the $250K in our home as mentioned above. No other RE.

Investments: $1.925M
401k (Me): $575K
Pension - Cash Value (Me): $100K
403b (DW): $40K (30K Tax-Def; 10K Roth)
IRA’s: $235K ($200K; DW: 35K)
Roth IRA’s: $305K ( $195K; DW $110K)
HSA: $35K
Taxable Brokerage Accounts: $635K

85% of the investments across these accounts are in equities (70% is US / 15% is Int’l), and are mostly held in broad index & mutual funds with a smaller portion allocated to individual stocks
10% is then Fixed Income, mostly a mix of bonds including the Pension which is held in treasuries
5% is in alternative investments, mainly REITS and a little smattering of commodities and crypto (~1%)

In addition to the Investments listed above, we also have ~$50K in cash (emergency) and two 529 plans for our boys, which have a combined $100K (70K for the 12yo and 30K for the 6yo) and are mostly in target date funds tied to their college starting dates.

We currently max out both the 401k and the 403b. Company matches me ~$5K/year on the 401k and I get about $10K annually into the pension plan. We have been eligible for Roth IRAs and have maxed out the $12K combined the last several years, but will hit the MAGI limit probably in the next year or so and will just move those contributions over to taxable brokerage savings, or may look at backdoor Roth options. I also started maxing out our HSA at ~$7K/yr the other year and now pay most medical expenses out of pocket. On average everything comes out to $60k-70k in annual contributions each year in total to our investment accounts.

Assuming my wife works to 60, she would also be eligible for a small pension from her current employer which would be maybe $8K/yr.

The main plan has been to stick it out until my youngest graduates high school, which would be in 12 years and put me at 54. This would also coincide with our mortgage being paid off. I would then plan on pulling from the taxable brokerage account to supplement any income to meet all of our living expense requirements, and then once the 59.5 threshold is hit, we could then start drawing from the Tax-Deferred accounts as necessary.
However, given my recent deteriorating sentiment towards work as well as how well the markets have done the past couple years, I’m now wondering if I can accelerate that to 50, which seems a much more attractive target and much more motivating to me on all fronts.

I’ve run many projection calculators on our investments, including FireCalc, and even gone over numbers with a financial advisor and most outputs show no issues for the mid-50’s ER, however achieving a higher probability on the age 50 target can vary based on how conservative I am with the investment returns and living expense estimates.

Our living expenses run $80-100K the last few years excluding savings. I feel our standard of living is fairly muted and under control. We have no debt other than the mortgage. We do have our spending splurges, mostly eating out frequently, enjoying a nice vacation every other year, and a couple hobbies, but otherwise we don’t spend lavishly. I do like to change up my car every couple years with something lightly used, but this is always cash paid and bucketed/saved separately. My wife also drives something newer but we usually keep that for 5+ years. We also really like our current home and plan on staying here for awhile so have made several capital improvements, with some more planned, but those are always discretionary.

The (later) ER date at 54 coincides with the youngest going off to college and the mortgage being paid off, so I assume our expenses would go down at that point but I like to plan conservatively and account for a contingency, so still assuming we would need about $90k/year. Part of this is because we do have one wildcard which is that my oldest has ASD and some learning challenges. Although he is mainstreamed and doing fairly well in school, his future is a question mark in terms of how much financial support he may need getting on his feet and even afterwards as an adult. My wife and I have no questions that he will be able to hold a job and work for a living, but his earning potential may have limitations. No issues with the youngest, he is in kindergarten and ready to conquer the world, may already be smarter than me 😊

So what am I missing here or where else do I need to look? Are there items I’m not giving consideration to? The projections I run on our investments are pretty conservative as I usually put them in the 5-7% annual return range. I could assume the $1.9M today at a conservative 5% return per annum, even if I didn’t add another penny to it after this year, would be close to $3M when I turn 50. If I continue contributions and add another $0.5M to that over the next 8 years, or even longer if I go to mid-50’s, that adds more cushion and I could be north of $4M by then. I see all these things on paper and spreadsheets and they look good, but something still feels off and unrealistic about it.

Any help, insights, or words of wisdom is appreciated!

Thanks,
Ace

[marinauser]

Your two biggest unknowns in my opinion are investment returns and inflation between now and age 50/54. Sometime during your interval between now and retirement there could be a major market pullback by 33 or even 50%. Also, is current inflation transitory or are we going to see several years of ever increasing inflation. Obviously you already have significant assets that would nearly support your current expenses. Over the long term you should be fine but sequence of returns and risks are really tough to forecast out 8 to 12 years.

[MBAustin]

Nice to have you with us, Ace. You've obviously done very well, and even with 50 as your target, you still have a long time horizon and lots can happen between now and then. It seems to me that keeping your spending in check and your investments high is the best way to go for the next 5+ years, and by then you'll be within a reasonable planning timeframe.

You may want to more seriously think about changing companies. You don't mention your field, but if you could move to a different kind of company (size, culture, etc.), the next 8-10 years might be a lot more fun. I sometimes wish I had done that rather than staying safe with my megacorp.

[Aerides]

Welcome (your post is in the right place):

A couple of things pop out:

You've been thinking about ER since your 20's and yet your wife thinks this is a mid-life crisis? That sounds like this hasn't been a joint plan all along - if I'm wrong, great, if not, get working on that communication. You really need to be on the same page, even if she keeps working.

Similarly, all your planning should have zero dependency on her continuing to work. If she sees you happily ER'd, and you say "but honey, you must stay at work now I'm counting on you" - yeah... nope. So if you look good at 50, make sure it's good even if she follows you out the door. Even if she says no way the day you quit.

Other than that, you look like you're on the right track!

[pacergal]

OP--Do not assume DW will continue to work until 60. Make sure to run scenarios with her leaving at or about the same as you, just in case she sees you having all the fun and wants to join in!

Personally, I would hang on the extra 4 years to get the house paid off and both kids launched beyond high school. And it would give you some time to see how your oldest one fairs after high school, whether he does well beyond schooling/job or needs extra financial help from you.

[Ace300]

Wow, thanks for the great responses everyone. Some really good points brought up and I've addressed some of the comments:

Quote:

Originally Posted by marinauser Your two biggest unknowns in my opinion are investment returns and inflation between now and age 50/54. Sometime during your interval between now and retirement there could be a major market pullback by 33 or even 50%. Also, is current inflation transitory or are we going to see several years of ever increasing inflation. Obviously you already have significant assets that would nearly support your current expenses. Over the long term you should be fine but sequence of returns and risks are really tough to forecast out 8 to 12 years.

Sequence of returns is definitely a risk that has been at the forefront of my thinking about the future. I'm all too aware of the fact that a 20% gain followed by a 20% loss (or vice versa) leaves you with less capital than you started with. The question is how do you mitigate this in the near-term without making your asset allocation too conservative? It's obviously a macroeconomic risk that would affect almost all equity investors, just as inflationary pressure on the dollar would dilute the real buying power of the hard-earned money that's been saved. I've run scenarios with inflation at 3-3.5%, as well as monte carlo simulations that run thousands of scenarios with every possible historical sequence of return situation, and those seem to still paint a picture that is doable, although worst-case scenarios and/or black swan events can easily create havoc in your assumptions.

Quote:

Originally Posted by MBAustin Nice to have you with us, Ace. You've obviously done very well, and even with 50 as your target, you still have a long time horizon and lots can happen between now and then. It seems to me that keeping your spending in check and your investments high is the best way to go for the next 5+ years, and by then you'll be within a reasonable planning timeframe. You may want to more seriously think about changing companies. You don't mention your field, but if you could move to a different kind of company (size, culture, etc.), the next 8-10 years might be a lot more fun. I sometimes wish I had done that rather than staying safe with my megacorp.

Thanks MBAustin. Changing companies is something I will be seriously looking into over the next 6-12 months if the situation at my current company doesn't improve. I work in finance and skillset should be fairly transferable, however I'm a bit location bound. Hopefully there are more opportunities in Remote work roles now with the landscape change from COVID?

Quote:

Originally Posted by Aerides You've been thinking about ER since your 20's and yet your wife thinks this is a mid-life crisis? That sounds like this hasn't been a joint plan all along - if I'm wrong, great, if not, get working on that communication. You really need to be on the same page, even if she keeps working. Similarly, all your planning should have zero dependency on her continuing to work. If she sees you happily ER'd, and you say "but honey, you must stay at work now I'm counting on you" - yeah... nope. So if you look good at 50, make sure it's good even if she follows you out the door. Even if she says no way the day you quit.

Noted. Although we have had conversations, there probably could be more "joint planning" to this aspect, but given its still quite a ways into the future I haven't really had in depth communication on this subject of her working for 8 to 9 years after I call it quits. It is something that needs to be addressed further. Also good advice on running scenarios where her income stops as well at the age I were to ER. I think the probability of both of us stopping work at the same time with zero income would be very low, at the minimum one of us would still do part-time or have some side hustle going on, but its good to plan for all potential scenarios.

[1242Vintage]

Welcome!

You’ve done well saving and planning for FIRE.

Only thing I can add is the cost of kids college education. We have three kids and the cost of their university education far exceeded my estimate. We funded all three through bachelors degree and the youngest through a masters degree. Wrote some very big tuition checks along with supporting their living expenses. Was definitely worth it, but their education costs put a very big dent in our finances.

Encourage you to take a hard look at those future costs against what you project their education funds might look like when they need them.

[1242Vintage]

Quote:

Originally Posted by Ace300 … Part of this is because we do have one wildcard which is that my oldest has ASD and some learning challenges. Although he is mainstreamed and doing fairly well in school, his future is a question mark in terms of how much financial support he may need getting on his feet and even afterwards as an adult. My wife and I have no questions that he will be able to hold a job and work for a living, but his earning potential may have limitations.

We have something in common too … youngest kid (daughter) is our wildcard.

She was born with a severe hearing loss … which is a polite way of saying she is deaf. She was helped by many caring special Ed teachers along the way.

Kids with challenges have an amazing ability to adapt and overcome what life has thrown at them.

Best wishes.

[Ace300]

Quote:

Originally Posted by 1242Vintage We have something in common too … youngest kid (daughter) is our wildcard. She was born with a severe hearing loss … which is a polite way of saying she is deaf. She was helped by many caring special Ed teachers along the way. Kids with challenges have an amazing ability to adapt and overcome what life has thrown at them. Best wishes.

Thanks 1242Vintage. Kids with challenges are amazing for sure. Not mentioned earlier, but by oldest in addition to his ASD, overcame many serious medical issues as a newborn and was on supplemental oxygen for his first 2 years and had a G-tube for his first 6 years of life. He has come so far and so many are amazed, but as parents we always want more!

Regarding college costs, yes they are indeed expensive, however I'm actually a little concerned about possibly overfunding the 529 accounts. My initial plan was to have funding that will cover Tuituion/Room/Board costs for two undergraduate degrees at a 4-year large in-state public (Big 10) university. Based on inflationary costs of education, I figure this could run anywhere from $125K to $175K per kid in the future. With $100K in the account(s) already, one issue is we really don't know if our oldest would be on this exact path. So in that event we know we could transfer the funds between kids, which in one example could mean we already have $100K saved for our 6-year old, or maybe already 2/3rds funded with 12 years to go.

As a result, I think we may scale back the 529 contributions somewhat and instead direct more to our brokerage account, which we can always use to supplement college costs if needed. The tax benefits aren't as significant, but at the same time we don't want to overfund the 529 (unless we were to just leave it there for future grandchildren).

[Koolau]

It seems to me you have most of the basics well in hand.

You are an excellent saver.
You apparently understand investing and have been successful at it.
You know your yearly expenses and they are reasonably stable. You do not overspend.
Your current nest egg (and especially your proposed future nest egg) should throw off enough to cover your proposed expenses.
You have planned for your kids education.
You believe you have your health insurance covered (I'd suggest creating a back-up plan for this, just in case.)

I wouldn't worry about retiring before your last one is off to college. Our youngest was 15 when I retired.

Biggest issue I see is getting on the same page with DW about retirement. This obviously is not a "phase" you are going through and she either needs to understand/accept that or you may need to seek a j*b that works for you beyond just the cash flow.

Bridging the time between 50 (+/-) and beginning SS and ESPECIALLY Medicare are perhaps your biggest unknowns at this point. I think you're well on track but YMMV.

[Figaro]

Definitely need to get DW on the same page. Show her the numbers and the simulation. You could probably go even sooner if you are able to cut those expenses down a tad bit.

Just keep doing what you're doing, keep your eyes on other opportunities in case things head south for the Corp - ( look out for those mass-layodf severance packages as a good time to jump - it's very satisfying! ).

You could actually access your Roth funds prior to 59.5 (so no need to delay that long) by setting up a continuous 5 year Roth conversion ladder of your IRA or 401k.

[DawgMan]

Sounds like you might need a sabbatical or just step back and consider something else that might re-energize you from a career perspective. As others have said, getting on the same page with your DW will be important. Like you (and many on this site), I was an avid saver/investor with a master plan to retire at 55 based on my last kid of 4 graduating college + 1yr of transition and just picking 55 as nice number. Well, what I found is there can be ALLOT of expenses once your kids hit the gauntlet between ages 16 - 22 (i.e. cars, insurance, accidents, travel sports, fraternities, sororities, unexpected private school, how shall I say... problems that need legal assistance, just stuff). Also, as my income went up, we saw lifestyle creep and moved the goal posts a number of times. I wanted to see the fog clear on my heavy lifting years, have the house paid off, and dial in the lifestyle my DW and I really wanted. Fast forward to today at 57, I chose to slowly downsize my business which has worked well for me and am now in a good place with my "retirement".

Mathematically, you can probably do it, but I think there are allot of unknowns (financial/other) you may have yet to fully flush out and giving up your superpowers (career) too early may not be the best decision. You got the hard stuff down as a good saver/investor, just give yourself a minute to breath and think it through.

Good luck!

[Ace300]

Thank you everyone, some excellent observations and advice from members on here.

I realize the numbers on the surface look promising at this early stage, however I'm becoming much more aware there are many unknowns that exist over the next 8 years and beyond, mainly my job/career, my wife's potential attitudes towards my ER plans, and of course negative macroeconomic forces that could be at work on the equity markets and thus my portfolio. I will closely monitor everything and address what I can moving forward, and will make sure to update

I try to to be very cognizant of lifestyle creep and the pitfalls that can bring, but even while saying that as I've been tracking my expenses for the past few years the number does creep up year over year. I need to figure out how much of that is inflationary and uncontrolled vs. discretionary.

I've also been going back and reading many threads over the last few years on these forums trying to find similar situations and there are a lot of similar cases and great advice buried in those posts. It has given me things to think about for sure.