Reality vs Fear

[philly17]

I enjoy reading everyone's post as I struggle to not stress about finances as the I am overly conservative and have constant fear to not mess it up. Mathematically I think we are fine but mentally I can never let go the need to work, save and invest.
I know no one here can help with the mental state but appreciate feedback on the numbers.

- 52 Years old
- Married 2 kids (23 and 14)
- Live in Philadelphia suburb
- Career - Software Sales
- Zero debt (house paid, cars paid, no CC)
- Non Retirement $'s - $2.3M
- IRA/401K - $1.7M
- House $600K
- Small Pension $672/month starting at 65
- Social Security $3,800 at age 70 . (wife would get 50% $1,900)
- Annual Spending - $120K .
- Actual spending last 10 years has averaged $100K but added some cushion to be conservative

I enjoy working in concept but am burnt on my current job/career. I can envision working in some capacity throughout my life (my mom is 85 and still works 2 jobs).
Ideally I work current career for 2-3 more years making $250K.
Switch out of career mode and make $70-$100K a year in less stressful corporate job. for 3-5 years
Part time later in life to be active, social and extra spending money $2K/month between wife and myself

Again based on my personality I can't stomach a 40% market correction. I want to be out of the game as much as possible for peace of mind.

So above is my fearful scenario to continue making income and have zero risk financially. Concern is once you leave corporate income there is no going back at this age.

My true desire would be to stop work corporate in 3-5 years and be done all work for good and work part time if I choose to for social reasons and not driven by finances.

Appreciate any thoughts and feedback as it appears dozens of people have pulled the plug at this stage with similar financial picture.

 

[NgineER]

Quick look at your numbers indicate you are good to go at 55.
Withdraw 15 years @ $120k leaves $2.2M of your nest egg at 70.
Spending $60k +SS of the remaining $2.2M at 70 gives 2.7% WR.

This assumes no appreciation of your assets. You should invest in a good mix with some equities in order to not be at risk of inflation.

 

[DrRoy]

Agree you are fine. At least de-stress soon.

 

[audreyh1]

Ratcheting down part time as you get used to less income and more doing your own thing, yet still engaged professionally so you have your skills up to speed may work best for you. It’s difficult to fund a long retirement without some market exposure to beat inflation.

I was going to suggest 30% min on equities, and I see a later post showed that recommendation from Ferri.

 

[Ronstar]

Financially you are fine, but you to do a few things:

1. Destress /develop a plan to quit your stressful job.
2. Figure out what you want to do in life and start doing it.
3. Become comfortable with your financial situation.

 

[DawgMan]

I enjoy reading everyone's post as I struggle to not stress about finances as the I am overly conservative and have constant fear to not mess it up. Mathematically I think we are fine but mentally I can never let go the need to work, save and invest.
I know no one here can help with the mental state but appreciate feedback on the numbers.

- 52 Years old
- Married 2 kids (23 and 14)
- Live in Philadelphia suburb
- Career - Software Sales
- Zero debt (house paid, cars paid, no CC)
- Non Retirement $'s - $2.3M
- IRA/401K - $1.7M
- House $600K
- Small Pension $672/month starting at 65
- Social Security $3,800 at age 70 . (wife would get 50% $1,900)
- Annual Spending - $120K .
- Actual spending last 10 years has averaged $100K but added some cushion to be conservative

I enjoy working in concept but am burnt on my current job/career. I can envision working in some capacity throughout my life (my mom is 85 and still works 2 jobs).
Ideally I work current career for 2-3 more years making $250K.
Switch out of career mode and make $70-$100K a year in less stressful corporate job. for 3-5 years
Part time later in life to be active, social and extra spending money $2K/month between wife and myself

Again based on my personality I can't stomach a 40% market correction. I want to be out of the game as much as possible for peace of mind.

So above is my fearful scenario to continue making income and have zero risk financially. Concern is once you leave corporate income there is no going back at this age.

My true desire would be to stop work corporate in 3-5 years and be done all work for good and work part time if I choose to for social reasons and not driven by finances.

Appreciate any thoughts and feedback as it appears dozens of people have pulled the plug at this stage with similar financial picture.

I hear ya brother!

I am not as much of a regular as others on this site, but there is plenty of wisdom out here to help you land the plane smoothly. That said, I have banged around much of what you are struggling with in some of my older posts.

I just turned 55 with my master plan having me quit at the end of this year. Part of my plan included having all 4 kids done with college (last one graduates in May) and having them ideally employed/self sufficient. Additionally, I was able to address a couple of other bogies as I now have 2 weddings done and paid for (still have 2 more girls to go... ouch!). Being done with kid cars/insurance, college was one of my boxes to check. I would run the math for these expenses and then add 10% - 20% so you can see it coming and throw it in your model.

I am guessing you may be the primary or sole income producer in the family?? My DW has been a SAHM for 29 years, which was great for us and what we really wanted to do if we could swing it. Lots of stress through the years, but probably like you, made me that much more motivated to be a good provider for the family and ultimately helped me become successful. In these cases, I think the more successful you are, the harder it is sometimes to give it up, especially if when you quit/get out you know there is no going back. This would be my case as it sounds like it is yours. I am still struggling with what I will do at the end of the year. I think most of it is letting go of your old identity and perhaps redirecting some of that energy elsewhere... that's what I continue to look for before going cold turkey and shutting off the machine!

As it relates to the whole having enough money thing, it is obviously important to run some of the calculators and project different budgets. If it makes you feel any better, I am planning for RE income more than double what you have noted (highly discretionary as I have no debt as well) with more than double the assets and I still go through the traps of OMY and "what ifs"... what if the market drops 40%, etc. I am getting better with this, but despite the high flexibility in my needed spending, these doomsday scenarios do run through my mind. Your numbers seem to work, but what helped me was really getting comfortable with my AA. In my case, 60/40 is where I am pretty comfortable and where I suspect I will stay.

So, you are not alone out there. You will read many stories on this site where people had careers that worked them like dogs and were affecting their health/well being. That is not my case, but if it was, and I had the dough needed, I think I would be motivated to jump. Others have found that passion for post RE and make the jump. Some of us, like me, enjoy much of my work and the rewards it provides and may not have found the post RE replacement so we stay a little in flux. I suppose that is ok to and as the saying goes, you will know when you know.

Good luck!

 

[24601NoMore]

Same situation here (including similar background in software sales and retiring earlier this year @ 55 when I'd finally "had enough" after several decades in the business)..my numbers look fine on paper, and everything "should" work but I also constantly worry about another market meltdown and what it will do to the plan I've built over the last couple of years - ie: sequence of return risk (SORR). And, even though I know stocks are for the "long term" (ie: 10+ year 'bucket'), I do obsess a bit about the day's market action to the point I even keep a ticker open on my 2nd monitor much of the day..

To at least try to protect against SORR, I've shifted a fair amount to fixed income (bond funds and CDs) over the past few years. At our age, fixed income is a good ballast to balance things out and if you follow the "age in bonds" rule, your portfolio could / should conceivably be ~50% FI at age 52 - ESPECIALLY since you are in essence "good to go" financially and could retire TODAY if you wanted.

If it were me (and for that reason), I'd focus on preserving what I had (since it can more than fund your ER), vs. trying to grow it significantly larger. But that also depends on what your goals are for the $$ you do have - just use it to fund your ER or leave a bunch to your kids/other heirs? That does change things..for us, I figure that we earned what we earned through sacrifice and hard work, and others (eg: potential heirs) should do the same. So, we are focusing on funding our ER and not on what we will leave to others..but, YMMV and we all have our own goals..

FWIW, the forum does at times seem to lean heavily toward having some pretty large equity positions - even as you age..but there are also many contrary opinions including those from Rick Ferri, Michael Kitces and others who advocate a hefty allocation to FI to reduce your potential exposure to SORR, especially in the years leading up to retirement and in the first decade or so of retirement. Here's an article from Kitces you might find helpful..

https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/

And another from Ferri, who writes: "I propose the center of gravity for those who have accumulated enough for retirement to be 30% stocks and 70% bonds." I don't personally go that far, but 50/50 feels "about right" to at least dampen risk somewhat in ER @ mid 50s..

 

[footenote]

Thought experiment:

If you were magically granted iron-clad, guaranteed $250k income/year plus cushy benefits for life, with the only requirement being that you quit your stressful job, what would you choose to do?

 

[RunningBum]

Runaway inflation is probably a more realistic risk than a 40% market drop. I'd go at least 40-50% equities. No need to go higher if you don't want to.

If you really want to work, keep working, but STOP thinking about earning a little extra spending money, etc. You are set financially. Get out of the mindset that you have to keep working to keep money flowing in. Why do you think you need to work an additional 3-5 years in corporate, and part-time later? You've saved up that money so you can have a comfortable retirement. Start planning for that comfortable retirement.

Biggest focus will be on what you will do without work. Start thinking about what your interests are, whether you are fine being idle or if you need some structure, and what that is. Maybe you use your skills as a part-time nonprofit volunteer. Maybe do something totally different. I started making a list of things I'd like to do, and if it was something unfamiliar to me I'd do some reading on it. This will help you when you retire, and also start putting you in the mindset to retire.

 

[USGrant1962]

Based on your numbers you are in great shape to FIRE at 55 or so.

Like 24601NoMore, I suggest you take a look at the bond tent concept. I pulled the plug at 55 and am doing a muted version of that (also a little bit of market timing after a 10-year bull market).

A note on spousal SS - your wife gets half of your FRA amount, not half of your age 70 amount. Also, if she has 40 quarters of contributions she could claim on her own account at, say, 62 before switching to yours when you claim.

This website is great for optimizing SS https://opensocialsecurity.com/

 

[philly17]

Thought experiment:

If you were magically granted iron-clad, guaranteed $250k income/year plus cushy benefits for life, with the only requirement being that you quit your stressful job, what would you choose to do?

Yes, I would take the $250K income.

 

[gwraigty]

- Non Retirement $'s - $2.3M
- IRA/401K - $1.7M
...
- Annual Spending - $120K .
- Actual spending last 10 years has averaged $100K but added some cushion to be conservative

What is the $2.3M and $1.7M invested in now?

The interest/dividends on our investments ranges from about 3.5% to 6.5%. Our annual investment income (taken in cash and invested regularly in more income-producing investments) could easily cover our annual spending, though we don't touch it yet because my husband is still working. Price fluctuations don't concern me.

We're not at your asset/spending levels, but with your numbers, I'd be able to generate about $80,000 - $149,000 on that $2.3M alone. Add another $59,000 - $110,000 on that $1.7M to kick up that balance nicely by the time you're ready to tap into those funds.

Tax consequences vary depending on the nature of the fixed income (qualified, tax-exempt, fully taxable), but I'm just addressing the potential income flow you may have at your disposal.

 

[philly17]

What is the $2.3M and $1.7M invested in now?

The interest/dividends on our investments ranges from about 3.5% to 6.5%. Our annual investment income (taken in cash and invested regularly in more income-producing investments) could easily cover our annual spending, though we don't touch it yet because my husband is still working. Price fluctuations don't concern me.

We're not at your asset/spending levels, but with your numbers, I'd be able to generate about $80,000 - $149,000 on that $2.3M alone. Add another $59,000 - $110,000 on that $1.7M to kick up that balance nicely by the time you're ready to tap into those funds.

Tax consequences vary depending on the nature of the fixed income (qualified, tax-exempt, fully taxable), but I'm just addressing the potential income flow you may have at your disposal.

It is in variety of stocks (70%) and cash (30%) . The higher cash position is in process of being redeployed. I currently generate about $80K+ in dividend income as I own some dividend based stocks (Altria, Cisco etc).

What kind of holdings do you have to generate the 3.5-6.5% income?

 

[Bamaman]

Congratulations on your getting to where you are monetarily at this point in life. You're certainly better off than most.

It's time to slow down and enjoy life. You don't have to be so uptight about the future. Do you have any hobbies or interests you've not had time to do in the past?

Now is your time to learn how to retire.

 

[gwraigty]

It is in variety of stocks (70%) and cash (30%) . The higher cash position is in process of being redeployed. I currently generate about $80K+ in dividend income as I own some dividend based stocks (Altria, Cisco etc).

What kind of holdings do you have to generate the 3.5-6.5% income?

70% stocks, individual holdings at that, aren't what I'd consider overly conservative. No wonder you're stressed.

Disclosure: I used to invest in individual stocks/mutual funds for growth, but I planted my portfolio in a desert, so I took my losses and did a 180. I invested the proceeds in CDs. I gradually branched out into individual bonds, both muni and corporate. Recently, I've branched out into ETFs (long-term corporate, preferred stock, high dividend stock).

ETFs: IGLB, USHY, PSK, SPYD, FALN, PFF, VCLT. Mutual funds: VBLTX, VBTIX, VWESX, VWEHX. (Not a Vanguard fan. It's just where my husband's 401K is.)

 

[kcowan]

I know no one here can help with the mental state but appreciate feedback on the numbers...

I found that dealing with stress was the main way I got ahead in business. Usually taking on my responsibility involved more stress so I had to deal with it. It was worst during the first 6 months.

(It was originally required when I changed jobs: systems to sales, moved cities, neighborhood, was dealing with the pending death of Mom from breast cancer, DW had just retired from a well-paying job, had our first child, new workmates, plus I had been award-winning in my old job.)

I took regular refresher courses along the way.

 

[gwraigty]

What kind of holdings do you have to generate the 3.5-6.5% income?

Just a few (of many) of individual bond examples for you:

McDonald's, 3.70% coupon, 3.87% purchase yield
Discovery Communications, 4.95% coupon, 5.28% purchase yield
Cleveland Clinic Foundation, 4.858% coupon, 4.95% purchase yield
Domtar Corp, 6.25% coupon, 6.32% purchase yield

A few munis:

Main Str Nat Gas Ga, 5% coupon, 5.07% purchase yield
Amern Muni Pwr Oh, 4% coupon, 4.04% purchase yield, (triple tax-exempt)
Advanced Technology, 6% coupon, 6.04% purchase yield

 

[24601NoMore]

Just a few (of many) of individual bond examples for you:

McDonald's, 3.70% coupon, 3.87% purchase yield
Discovery Communications, 4.95% coupon, 5.28% purchase yield
Cleveland Clinic Foundation, 4.858% coupon, 4.95% purchase yield
Domtar Corp, 6.25% coupon, 6.32% purchase yield

A few munis:

Main Str Nat Gas Ga, 5% coupon, 5.07% purchase yield
Amern Muni Pwr Oh, 4% coupon, 4.04% purchase yield, (triple tax-exempt)
Advanced Technology, 6% coupon, 6.04% purchase yield

Gwraigty - What's the average maturity on those munis?

 

[gwraigty]

Gwraigty - What's the average maturity on those munis?

2020, 2030, 2037, respectively

 

[24601NoMore]

2020, 2030, 2037, respectively

Nice! Imagine you've had them for a while? Where did you wind up finding those? They all look pretty decent. I just checked VG and I see a ton of PR, Illinois, California, NJ and other not so desirable issues but not much at a decent yield from a reasonably stable municipality.

OP - didn't catch that you already had a roughly $80K divvy income stream coming in. You're way beyond good to ER any time you want and don't "need" to accumulate more..and, having just retired myself from a Valley software company - I totally get why the j*b has burned you out. In my case, I needed to leave before it totally destroyed my health, happiness and well being. 25+ years in that business (multiple tech companies) was more than enough to take years off my life..

 

[copyright1997reloaded]

Plenty of $.

A couple questions: What is your plan in terms of health care coverage? You will need to cover yourself, spouse as well as your children (at least until they are on their own).

What is your plan in terms of college funding? Not working is an advantage in terms of financial aid, but offsetting this is your large (compared to most) wealth.

 

[gwraigty]

Nice! Imagine you've had them for a while? Where did you wind up finding those? They all look pretty decent. I just checked VG and I see a ton of PR, Illinois, California, NJ and other not so desirable issues but not much at a decent yield from a reasonably stable municipality.

The munis I listed are in my Schwab account. I also have some at Fidelity. Main Str I bought in 2009 when I was still with TDAmeritrade. Amern Muni and Advanced Technology - 2014. It was a sweet time for awhile, being able to regularly pick up munis with coupons like that. I don't buy many today. I still look once in awhile though. Taxable just offers much more right now.

 

[Go-NoGo]

In a similar situation to OP, financially ok - the numbers say I am good to go, but after having worked for so long (and some time between jobs to realize the downside of not getting paid on a regular schedule) I have come to depend on a paycheck every 2 weeks.

Not getting a bi-weekly paycheck held me back from even thinking about making the leap - so I created some "buckets" at Vanguard and other fund companies to have my dividends/cap gains deposited into a cash MM account.

The plan is take 2 withdrawals per month from this account to simulate a paycheck - This gives me a warm and fuzzy feeling on the 1st and 15th and more importantly helps me stay within budget and not overspend accidentally.

Once I am comfortable with my expenses I can adjust the amount up or down for each "paycheck" - If my expenses are lower I plan to re-invest the excess back into the market - which is what I do now.

The above plan has lowered my anxiety considerably and I plan on making the leap next year (fingers crossed)

Goodluck to you!

 

[philly17]

Plenty of $.

A couple questions: What is your plan in terms of health care coverage? You will need to cover yourself, spouse as well as your children (at least until they are on their own).

What is your plan in terms of college funding? Not working is an advantage in terms of financial aid, but offsetting this is your large (compared to most) wealth.

For HC would either pay out of pocket or my wife might get some low stress job that offers HC.
I didn't highlight that I have college fully funded in separate account that I don't factor into my net worth for retirement.

 

[philly17]

Based on your numbers you are in great shape to FIRE at 55 or so.

Like 24601NoMore, I suggest you take a look at the bond tent concept. I pulled the plug at 55 and am doing a muted version of that (also a little bit of market timing after a 10-year bull market).

A note on spousal SS - your wife gets half of your FRA amount, not half of your age 70 amount. Also, if she has 40 quarters of contributions she could claim on her own account at, say, 62 before switching to yours when you claim.

This website is great for optimizing SS https://opensocialsecurity.com/

Thank you for that clarification on SS benefits for my wife. I had just read it was 50% didn't realize for the FRA benefit. Much appreciated.