When is the time for ER

[pletal]

Hello, I am 46 years old, wife is 53. We are both working and really need some advice from real people, the financial management "experts" drive me crazy. We have 2.6M in cd's earning about 4.4%. 400K in sep/401k accounts and 250K in misc cash etc. accounts. Outgoing expenses: No house,car or credit card payments. Just the month to month stuff. We will have no pensions and have to buy our own insurance. Also have a business that could generate some money. Am I too young or just too scared?? to jump out there? All my friends still work, will they hate us for retiring young? Has anyone dealt with that? Thanks

 

[Midpack]

Congrats on your progress, you may well be able to retire if you want to. You're definitely an odd duck financially compared to the mainstream, but there are others like you, many here. No one can tell you if you're financially ready knowing only your assets, depends on your spending/expenses in retirement which you have not shared (understandably). Start here FIRECalc: A different kind of retirement calculator, you may want to use a 45-50 year time horizon BTW.

Here's someone who will say you could have retired a long, long time ago http://earlyretirementextreme.com/.

A good portion of the audience here have COLA'd pensions and retiree health care, but a good portion (self included) have neither. So many here are in the same boat as you are.

As for how others feel, you will most likely lose some of your current friends and make some new ones. But "friends" who are jealous/begrudge your ability to retire early probably aren't worth keeping...

 

[East Texas]

It's time to retire when there's a convergence of long-term financial security and emotional readiness. The rest is easy.

Your friends may give you a thousand reasons as to why you're making a "wrong" decision. The truth may be they are trying to justify why they are not yet able (if ever) to jump on the retirement bandwagon.

Medical is the most 'iffy". If you can get into to group programs, such as AARP, at least you'll have something - even if it's major medical.

 

[rescueme]

Your friends may give you a thousand reasons as to why you're making a "wrong" decision. The truth may be they are trying to justify why they are not yet able (if ever) to jump on the retirement bandwagon.

Ain't that the truth !!!

 

[Midpack]

It's time to retire when there's a convergence of long-term financial security and emotional readiness. The rest is easy.

+1, in the end that's exactly what it is, and exactly why no one else can tell you when it's time. When I hit the FI number, I was not emotionally ready because I wanted a safety factor beyond the common SWR's. Only then was I "emotionally ready." I suspect that's very common for anyone choosing to retire early. Nicely done ET.

 

[pb4uski]

pletal,

You didn't indicate how much you need to maintain the lifestyle that you want in retirement, but with the assets that you have accumulated you should be fine unless you are living real high on the hog.

All CDs is much more conservative that most retirement investment portfolios, but a 4.4% return is outstanding (actually a bit hard to fathom). Most ER have a portfolio that is about 60% equities/40% fixed income and plan to draw 4% or less of the initial portfolio balance (with withdrawals increasing each year for inflation). As you are probably aware, studies suggest a high probability that the portfolio would last indefinitely.

I had a friend who retired at 50 and the only complaint that he had was that there was not any other retirees around his age that he could do things with (he was into skiing and sailboarding). I addition to the financial aspects of retirement you may want to give some thought to what you would wnat to do with your time. Many ER volunteer and find it satisfying.

If a "friend" hates you for being successful and being able to retire early then they are not much of a friend. My attitude would be "good for them - hope my time comes soon". Also beware of others who by virtue of your ER will perceive and seek to take advantage of your wealth.

 

[Spanky]

We have 2.6M in cd's earning about 4.4%. 400K in sep/401k accounts and 250K in misc cash etc. accounts.

You definitely have an enormous amount of cash. A 4.4% CD rate is outstanding. A withdrawal rate of 1.4% or less should produce a very high survival rate based on an inflation rate of 3% and a guaranteed rate of return of 4.4%. If you can live on $36,400 (1.4% * 2.6e+6) before tax, you are ready financially. Obviously, this is a very conservative estimate since it's based totally only on your assets in CDs. If your 401K + cash were invested in a 60/40 (equity/fixed income), you could safely withdraw 2% from that. This would provide another $13,000 ($650K * 2%). The total will be $49,400 (before income tax). You may also include future social security payments and income from your business to determine if you have enough to cover your expenses. IMHO, you should consider reallocating your CDs to something else. That's another matter, however.

 

[RunningBum]

Why only $49K on $3M+? I'd say they could spend double that, including tax, insurance, and annualized cost of major item repair and replacement.

 

[Spanky]

Why only $49K on $3M+? I'd say they could spend double that, including tax, insurance, and annualized cost of major item repair and replacement.

They can definitely increase withdrawal rate should the composition of their portfolio be changed accordingly. Here's a link that says that a 7% withdrawal rate is possible with strategic allocation: Portfolio Success Rates: Where to Draw the Line

 

[pletal]

Cd rates

The rates for my CD's run from 6.2 % (They were bought 3yrs ago) down to 3.27% (last month) and Average 4.4% . Last year made right at $120K interest. We don't live to high on the hog at all. Thanks for the advice from everyone. Would like to draw 3% a year and keep 1.4% back for inflation what ever. I have talked to many friends about crossing over to the retired side and get great comments like: " you are lucky, etc, etc." One kid, same house since 1994 and no real bad habits. Plus work 6 days a week. Where is the luck?

 

[pb4uski]

.......I have talked to many friends about crossing over to the retired side and get great comments like: " you are lucky, etc, etc." One kid, same house since 1994 and no real bad habits. Plus work 6 days a week. Where is the luck?

Reminds me of the old saying about making your own luck. You've worked hard and earned it, now enjoy it.

 

[NW-Bound]

You did not state your expenses, but you appear to be frugal, and yes you are rich.

You should be able to ER, but how does one change from working 6 days/week to 0?

And with only one kid! Does your kid know how much you have? Will he/she ask to ER along with you too?

 

[kyounge1956]

Maybe the right time is when you

1. have enough money and
2. no longer give a rip what other people think of the fact you are retired

 

[pletal]

He has not asked to ER with us yet , Our son is 23 and knows what we have. But he has been working with me since he has been twelve and has saved over 70K himself. Is finishing school this year and will help run the business. He sometime works 15 hours a day in the office or out in the field. I think sometimes he doesn't realize most people have not saved as much as we have and that kind of bothers me, hope he can manage his money well. By the way we paid $118K for our home and have not moved since 1994. Teach your young that for many that is the key to financial freedom.