I wanted to present our ER plan.
I welcome your thoughts, ideas, criticisms on my plan - except on the mortgage decision
I don't want to start another thread on that!!
Thank you, in advance, for your input.
We are in our late 40s with no children, living in NJ. Plan to leave work mid-year.
Risk: Ability to get well paying/satisfying jobs if we need to get back to the workforce.
Risk: Will we feel fulfilled and challenged after the initial euphoria wears out?
We have detailed records of the last 5 years of expenses. This period has included home repairs, improvements and a car purchase. A 4% SWR on our portfolio gives us about a 10% headroom over expenses. We plan to continue to exercise fiscal discipline with our withdrawals (ie. don't spend it just because its there). I don't see a correlation between our annual expense changes and the CPI.
Risk: No idea what happens to expenses when we have all this time to ourselves.
Asset Allocation is 65 % Equities / 35% Bonds with value, small, REIT and international exposure. I plan to be more conservative (60/40), but with more asset classes (energy/commodities, emerging, intl bonds etc)
Withdrawal plan is to use 4% of portfolio value for the first year. I'm still trying to decide if I should go with the 95% rule from ESR Bob's book or with the Guyton's withdrawal rules. (Note: with a ~0.5% expense ratio on my funds, I actually have a 4.5% SWR)
We are almost 15+ years away from SS, so have not given that much thought. No pensions.
Risk: Portfolio needs to provide cash-flow for 50+ years.
Risk: Down market in early years increases risk of portfolio depletion.
Risk: Markets don't behave the way they have in the past invalidating the underlying logic of SWR.
We are both in good health with no pre-existing conditions. We eat reasonably well and are active. We live in NJ, so while insurance is high, we are guaranteed coverage. We do not have any retirement health benefits.
Risk: Rise in health insurance premiums.
Risk: Illness leads to high out-of-pocket expenses.
Risk: No Long-Term Care insurance.
We have a modest mortgage (on a modest house) at a very low rate with 10 years to go. I have decided to keep it. We will revisit this decision each year. (Please don't discuss pros/cons of this. I've read the threads on it)
Risk : Real Estate taxes continue to rise faster than inflation.
Risk : Maintenance is more expensive than over past 5 years.
We have enough interests - indoors and outdoors, local & through travel, cerebral and physical - that we hope will keep us engaged and energized.
Contingency plans (mainly for money related risks):
- We're looking at our leaving work as a sabbatical, so we're staying in the mind-set that we will get back to work after a long (1+ year) break.
- We're young and have marketable skills, so we can get back into the workforce. Maybe not at the same levels of compensation/stress, but part-time to supplement our savings or handle a one time cost event.
- We could move to a lower cost of living area. However, our family and friends are here, so we may consider moving to a lower cost area of NJ/PA before we consider a more drastic move.