Is it real - what do you all think?

[retire2020]

I'm 48 years old and I recently reached a milestone of 2.4M. This is where I stand:

Taxable Account: 1750K
401K/IRA: 650K

House is paid off and no debt of any kind

I've 500K capital loss which I hope to offset some day with capital gain

If I assume 8% return on my investment, my portfolio after 4 years on April 1, 2017 will be worth:
2.4M * 1.36 = 3.264M

I'll also save 28K(401K) + 22K personal savings per year, so by April 1, 2017:
I'll have saved additional 250K.

so Total on April 1, 2017: 3.5M

I'll then do following:
240K - Cash holding to withdraw for two years if market tanks like it did in 2008/2009
100K - last push for two Kids 529 plan(already have 170K put away for both..Twin boys will enter college in 2022)
100K - Travel budget in foreign acct which pays 8-9% per year
60K - Emergency fund

That leaves me with 3M and 4% withdrawal rate at age 52. Firecalc with SS income for both of us(30K), gives us 94.1% success ratio to withdraw 120K per year..

Am I right in my calculation? Is this real or I'm dreaming or made a big error somewhere? Can I retire on April 1, 2017 instead of April 1, 2020?

 

[sengsational]

8% might be optimistic. Plans are wonderful, but if the economy hits a bump, you'll be back to 2020, hehe.

 

[Meadbh]

I think you are dreaming if you expect an average of 8% returns. Try plugging in 5% and see what happens.

 

[Grigori]

8% average might be right for stocks for a 10 or 20 year period, but there should be ups and downs.

Congratulations on the tremendous job of saving!

 

[donheff]

Doesn't matter whether we get 8% or not - you will see what happens before you pull the plug so no harm, no foul. You can always go back to the original plan. The 4% withdrawal is the bigger question. It still remains a sort of generic SWR but lots of academics question it's value going forward. It's probably OK for planning/dreaming purposes if you have room to significantly curtail spending in a serious downturn in the early years of ER.

 

[pb4uski]

I agree with others. 8% return is too optimistic. I use 5.5% but could perhaps make a case for 6.5% depending on your AA. Also, a 4% WR for someone in their early 50s is too high for me. I would target 3.5% for early 50s.

I suggest you try running your numbers through Quicken Lifetime Planner and look at various scenarios.

 

[Midpack]

I agree with others. 8% return is too optimistic. I use 5.5% but could perhaps make a case for 6.5% depending on your AA. Also, a 4% WR for someone in their early 50s is too high for me. I would target 3.5% for early 50s.

+1, same read I got. I plan on a 1-2% real return (return - inflation) but I'm probably overly conservative. But the OP is doing very, very well - maybe a little optimistic but on the right track. Congrats!

 

[David1961]

I agree with the others about the 8% return. While 8% may be a good estimate for a long term return (although I personally use 6 or 7%), when you are just looking at the next 4 years, it's hard to tell.

Also, maybe you could take a look at your expenses. Could you get by with less than 120k per year? If you could lower your withdrawal rate from 4% to 3%, it will give a much higher probability of success.

 

[dtbach]

It looks to me like you are in great shape. What is not known is the value of your house. When the kids are gone you would have the option to sell and buy something smaller which would give you even more capital.

I would plug in 5% also. If in 4 years it has gone up at 8% all the better. And like others have commented, you might find things easy enough to pare your living expenses down to say 110K a year without too much sacrifice.

Anyway, great job on savings! Very impressive.

 

[jeffmete]

"Am I right in my calculation? Is this real or I'm dreaming or made a big error somewhere? Can I retire on April 1, 2017 instead of April 1, 2020?"

With 2.4 mil in the bank, I wouldn't be waiting till 2017!

 

[Ready]

If you already have $2.4M saved, and you estimate a conservative 5% return on your money, just the return would be $120K. If you're trying to live on $120K, it would seem that you are already just about there without even needing to wait a few more years. Since you have to factor in inflation, you may need to see if you could scale back the $120K a bit to leave something in the kitty to reinvest, or you could calculate how much each additional year of income would increase your overall returns. However, this is just living off the returns, not dipping into the principal, so I can't imagine how you couldn't be ready to retire any time you choose.

If I'm doing the math wrong here, hopefully someone will correct me. If not, congratulations! Go off and FIRE yourself!

 

[pb4uski]

Sequence of returns

 

[Original Wally]

Concur with the crowd. I use 6% & 3% inflation. W/D might be a tad high. But, as others posted, you have the advantage of seeing the actual results as you go along. Well done, grasshopper.

 

[BigE]

Great accomplishment 2020! I agree with the other posters regarding 4% SWR and 8% returns being on the high side. One thing that jumped out at me from your post is the 500k capital loss. For real man! That's a big, big benefit for you. Also, my tentative planned date to retire is 4-1-2017....that's kind of weird dude.

 

[chasesfish]

"Am I right in my calculation? Is this real or I'm dreaming or made a big error somewhere? Can I retire on April 1, 2017 instead of April 1, 2020?"

With 2.4 mil in the bank, I wouldn't be waiting till 2017!

+1. I hope you really, really love your job. That's well above my walk-away number

 

[woodguy00]

Social security?

Great job on what you've accomplished so far! I can't see you having to wait until 2020 short of a major market meltdown before then.

Your SS benefit (along with spouse) will make for a reasonable part of your income need after age 70. For that reason I'd have no qualms of a 4% return until SS kicks in. You'll probably be at 2-3% thereafter.

I do like the other advice though to run models with 5-6% gains. I'm with you on hoping for 8% but wouldn't want to plan on it.

 

[Rambler]

I always base my plans on no or minimal (ie means tested) SS. I think the day MAY come in the which those of us who have millions stashed may not receive any SS at all...we have means, no ?

Also 6% returns, 3% inflation, and <3% SWR in the earlier years. I'm 51 and just retired 3 months ago. That said, this is the first year for us and we are spending quite a bit on pent up demand items due to being posted overseas for many years. The good news is that the pent up demand is backed up by savings earmarked for those items. So far, and keeping those items in isolation, we're beating our budget.

BTW, more important than the SWR is the annual amount you must have to achieve your expected lifestyle, and how does that translate to SWR?

R

 

[DeborahB]

I too think 8% is unlikely. BUT I am getting 6% on my total investment portfolio - I just take what the income (dividends, usually) total up to and divide by my total invested assets. Seems to be working for me in this economy - but I'm careful though not conservative and not afraid to take some risk.

 

[Koolau]

It occurs to me that you have little to no control over your return results (a "prudent" AA could turn out to be just the wrong move in the next 4 years - who knows?) The one thing you can control now AND when you ER is spending. If your new goal of ER in 2017 instead of 2020 is more important than hitting your spending target of $120K, you may be willing to spend less (maybe now, but certainly in the future) if need be.

I look at it as buying time. ER three years earlier may "cost" you some future spending (maybe $110K or even $100k). By no means will you need to be "poor" in your ER. What is a year or three of life (with freedom) worth? It's a personal decision, so I leave it to you as YMMV.

 

[retire2020]

Thank you all for your replies. My justification for 4% withdrawal is:

* 240K CASH put away to be used in bear market are not part of 3M invested(60/40)..During bear years, I'll leave my portfolio alone and not withdraw anything
* 30K of combined SS Income in today's dollars starting at Age 67(2031)
* During bear market I can live on 80K and have that 240K stretched for 3 yrs

someone asked about the value of my house: 700K now. I've not included that in my asset and my plan is to sale someday and divide into three equal parts to pay for my Kids' house down payment someday. I'm planning to have my kids graduate debt free and give nice amount as down payment to buy their first home..other than that I'm not planning to leave anything behind.

For healthcare, I'm counting on obamacare for subsidy. During retirement, I'll not be working so I can plan my MAGI below 92K to qualify for obamacare subsidy..this way my premium will be around 800/month for a family of 4.

About 8%...only time will tell me. It feels great to know that my worst case scenario assuming 5% return is still 2019/2020 - my original plan.

Do you think 4% withdrawal rate is still justifiable now based on above strategy?

 

[obgyn65]

No, but I am more conservative than most here.

Do you think 4% withdrawal rate is still justifiable now based on above strategy?

 

[ChiliPepr]

I always base my plans on no or minimal (ie means tested) SS. I think the day MAY come in the which those of us who have millions stashed may not receive any SS at all...we have means, no?

+1

 

[HighRoller]

No, but I am more conservative than most here.

Maybe most but you are not alone!

 

[David1961]

Thank you all for your replies. My justification for 4% withdrawal is:

* 240K CASH put away to be used in bear market are not part of 3M invested(60/40)..During bear years, I'll leave my portfolio alone and not withdraw anything
* 30K of combined SS Income in today's dollars starting at Age 67(2031)
* During bear market I can live on 80K and have that 240K stretched for 3 yrs

someone asked about the value of my house: 700K now. I've not included that in my asset and my plan is to sale someday and divide into three equal parts to pay for my Kids' house down payment someday. I'm planning to have my kids graduate debt free and give nice amount as down payment to buy their first home..other than that I'm not planning to leave anything behind.

For healthcare, I'm counting on obamacare for subsidy. During retirement, I'll not be working so I can plan my MAGI below 92K to qualify for obamacare subsidy..this way my premium will be around 800/month for a family of 4.

About 8%...only time will tell me. It feels great to know that my worst case scenario assuming 5% return is 2019/2020.

Do you think 4% withdrawal rate is still justifiable now based on above strategy?

I know where you are coming from by not including the 240 in cash in your portfolio amount. In fact, when I ERd, I did a similar thing - I kept more money in cash that I could live off of for a few years so I wouldn't need to sell my other investments at a bad time. It's really a judgement call as to whether 4% is still a justifiable WR. Some will say you are OK, some would say you are not. If I had to say, I'd recommend trying to get your WR down to 3%, but I'm pretty conservative about WR's too. At any rate, I think you are thinking this out logically. Wish I had a crystal ball. Good luck.

 

[retire2020]

Great accomplishment 2020! I agree with the other posters regarding 4% SWR and 8% returns being on the high side. One thing that jumped out at me from your post is the 500k capital loss. For real man! That's a big, big benefit for you. Also, my tentative planned date to retire is 4-1-2017....that's kind of weird dude.

500K.. Ouchh..that still hurts. All that was from the year 2000. My annual turnover for that year was 4M, 100% invested in .com companies, margin calls, was young and VERY stupid. But learned a lesson of a lifetime from that mistake - paid off margin, never played margin ever after, never bought any individual stock after that and invested 100% in mutual funds after Y2K.

All the best BigE. I hope I can join you on April 1, 2017.