We are burned out

[crispus]

I guess you could consider us young dreamers, but both of us are 56 years old and are burned out at work and want to get out asap.

We have saved around $900k (830 in reg IRA and 75 in Roth IRA). Our investments are in index funds and ETF's with a 50/50 equity/bonds spread. We have no pension, but my spouse has company paid medical for both of us. It runs about $80 per month with $1000 deductible 80/20 coverage with prescription plan. Who knows under Obama care if it will continue. We have no debt including our home as we just paid it off with our emergency fund. That emergency fund is down to $8k. Our expenses are as follows.

Condo fee $226
property taxes $300
utilities $175
cable,internet,phone $159
auto,home ins. $183
food including carryout $700
charity $100
entertainment $150
auto repair $250
auto gas $400 (this would be way lower if we retired)
home maint $200
home improv. $150
personal cash $400 (50 each per week would be lower if retired)
medical ins $81
medical ex $100
clothing $150 (lower in retirement)
travel $300 (higher in retirement)

This brings our monthly expenses to around $4000 per month. What we are hoping is that we could get some feed back on if we could retire in another year 6/11? Thanks Jeff

 

[BigNick]

You haven't said what your income is - that would let us better [-]guess[/-] calculate where your portfolio will be in 1/2/3 years time.

What's your SS situation? You might be able to envisage a slightly higher withdrawal rate than the classic 4% if SS will make up some of the difference in 8-9 years time.

Something else that stands out for me is that you are apparently spending $7,800 annually on motoring. If that's going to drop a lot after retirement, that implies that a lot of it currently goes on commuting. Don't forget to factor that in when you calculate what they're paying you, net, to work. (Also, without knowing more it's hard to say, but: if you got a more recent vehicle, maybe you could make savings on repairs and gas which could pay for a good chunk of it.)

 

[crispus]

You haven't said what your income is - that would let us better guess calculate where your portfolio will be in 1/2/3 years time.

What's your SS situation? You might be able to envisage a slightly higher withdrawal rate than the classic 4% if SS will make up some of the difference in 8-9 years time.

Something else that stands out for me is that you are apparently spending $7,800 annually on motoring. If that's going to drop a lot after retirement, that implies that a lot of it currently goes on commuting. Don't forget to factor that in when you calculate what they're paying you, net, to work. (Also, without knowing more it's hard to say, but: if you got a more recent vehicle, maybe you could make savings on repairs and gas which could pay for a good chunk of it.)

We make a combined income of $85k. I am in sales and put a lot of mileage on my car which is not reimbursed. We could conceivably use one car in retirement. I think we would like to buy a 3-4 year old vehicle to cut down on repairs. We will collect SS at 62 about 3k per month. We both used to make much more income in the good old days. We also are thinking about moving to a cheaper state. We currently live in the Baltimore MD suburbs.

 

[cardude]

I think it's doable, IF your portfolio can survive the 6 years or so until you hit SS age. During that period you will obviously have to draw out a lot more than the standard 4% SWR (more like 6% with taxes probably), but if you could cut down on expenses a little like you mentioned and live close to the bone for that period I think you could be OK. Plus, if the market tanks during the 6 year period before you get to SS age, you could always go get some $1000-1500 per month job if you really had to.

Not a lot of wiggle room, but if you're burned out and miserable why not give it a try?

 

[haha]

We make a combined income of $85k. I am in sales and put a lot of mileage on my car which is not reimbursed. We could conceivably use one car in retirement. I think we would like to buy a 3-4 year old vehicle to cut down on repairs. We will collect SS at 62 about 3k per month. We both used to make much more income in the good old days. We also are thinking about moving to a cheaper state. We currently live in the Baltimore MD suburbs.

Just with the information you have provided, it seems that the largest risks are continued paid medical, and the gap between ages 57 and whenever you can draw the $30,000 in ss. With your earning assets, it seems tight to me.

Ha

 

[crispus]

Just with the information you have provided, it seems that the largest risks are continued paid medical, and the gap between ages 57 and whenever you can draw the $30,000 in ss. With your earning assets, it seems tight to me.

Ha, It feels tight to me also. If we do continue to work until 59.5 and save 20% per year would that be more sustainable, or should we continue to work until 62? We were thinking about the 72t withdrawal from the IRA, but have no idea about what interest rate is required. We are currently re-building our emergency fund with $1k per month, and I am putting 10% of my income into a simple IRA at work.

 

[W2R]

Ha, It feels tight to me also. If we do continue to work until 59.5 and save 20% per year would that be more sustainable, or should we continue to work until 62? We were thinking about the 72t withdrawal from the IRA, but have no idea about what interest rate is required. We are currently re-building our emergency fund with $1k per month, and I am putting 10% of my income into a simple IRA at work.

If you worked until 59.5, you might have a better idea of what will happen with health insurance and you will have a better idea of what your savings would be at that time. Maybe then, at age 59.5, you could revisit the question of whether or not to work until age 62. Rebuilding your emergency fund is very important before retirement.

Leaving the option of possibly retiring at age 59.5 open, might help with the burned out feeling right now. Using the burned out feeling as a source of motivation for saving can work miracles.

 

[jIMOh]

Try working this from both ends...

900k assets, 4% SWR is $36k of annual income
you need about 48k of income to meet current expenses.

I see some expenses which should change in retirement:

auto,home ins. $183
This is $2200/year... I realize your area has higher rates, if you move, this should go down.

auto repair $250
this is $3000 per year. For this cost you could possibly lease and take the risk of repairs out of the budget. I don't advocate leasing, just saying I think this number could be lower.

home maint $200
home improv. $150
this is $4200/year. You do need to maintain the house... is it possible to get improvements done before you retire? Keep the maintainance budget for new roof, new HVAC and similar in retirement, but these are not yearly costs (if you pay for a new roof more than once in your life, you are doing something not all of us do).

I found 9k per year which might be able to cut down to 6k or 4k per year.
If you can get portfolio slightly higher in value, you can retire on normal 4% SWR really soon.


You have 85k in income and about 48k of expenses. Can you suggest where the other 37k is going (if its to taxes, we can probably save you more money... if its to savings, you should be able to retire within 1-2 years).

 

[crispus]

You have 85k in income and about 48k of expenses. Can you suggest where the other 37k is going (if its to taxes, we can probably save you more money... if its to savings, you should be able to retire within 1-2 years).

That would be gross 85 not net. All additional money is going to savings (1000 per month in emergency fund and another 400 per month in my simple IRA). We had about 4k in maintenance costs on our autos in the last 6 months, but they were all basic maintenance (4 tires both cars, new timing belt, water pump, plugs, emission valve, and brake job). So hopefully the autos will be alright for another year without much in the way of service.

 

[Purron]

Is part time work a possibility? You may also consider one of you retiring first. This would take a lot of pressure off both of you since the retiree could take care of household chores.

 

[jIMOh]

That would be gross 85 not net. All additional money is going to savings (1000 per month in emergency fund and another 400 per month in my simple IRA). We had about 4k in maintenance costs on our autos in the last 6 months, but they were all basic maintenance (4 tires both cars, new timing belt, water pump, plugs, emission valve, and brake job). So hopefully the autos will be alright for another year without much in the way of service.

$85k gross is what I had
$48k of expenses is what I added up
there is 27k extra (not accounted for)

$12000 of this is going to emergency fund
$4800 of this is going to the IRA (is this pre-tax??)
$6500 of this goes to FICA (SS and medicare is 7.65% of gross wages)

About $5000 is going to taxes (federal and state income tax).


Check all that and make sure it balances...

I agree $3000 of car expenses was warranted, but in the budget you posted, would you expect that same level of car maintenance every year? I hope not. My point was for retirement shoot to get that budget lower...

You have 36k of annual retirement income now (did you know that)? My comments were looking at current expenses for what appeared to be high for retirement.

 

[crispus]

jIMOH

Our current state and fed income tax comes to $14700. I do not pay that much because of deductions for business mileage, and other business expenses. I did not include the deduction for my $4800 per year in the simple IRA.

We could sell our home and downsize, but there are 4 homes on my court already for sale. Some have been for sale for over a year. Terrible real estate market. My spouse took a job at $35k. She was making over 90K at her old job, but they closed their local plant. She is working in a job that is below her talent level, and feels underpaid and overworked. She found out that her job used to be done by 2 people before she took it. It is like the Cinderella story for her. Her manager has changed my wife's job requirements (adding much more duties then she was first told). My job is in printing sales, and I am being constantly micro managed, since the recession took hold in 2009. I have weekly meetings with the sales manager (owners brother in law) and the owner, which I dread. They are always going over everything in my call log asking why I am not getting more sales. Now they want me to do vast cold calling, when I already have a book of sales from over 30 years in the business. When I have an appointment, I always hit the businesses directly next to my appointment. I have not found cold calling to be very effective and I don't have a lot of time to devote to it. I guess we are a loggerheads and I just want out.

 

[ikonomore]

$85k gross is what I had
$48k of expenses is what I added up
there is 27k extra (not accounted for)

$12000 of this is going to emergency fund
$4800 of this is going to the IRA (is this pre-tax??)
$6500 of this goes to FICA (SS and medicare is 7.65% of gross wages)

About $5000 is going to taxes (federal and state income tax).


Check all that and make sure it balances...
.

I don't think it balances. 48+27=75 not 85...unless i'm reading this wrong. 12k +4.8k +6.5k +5k = 28,300 +48k= 76,300.

 

[73ss454]

I see some good ideas here but Leasing a car is not one of them. This is about the dumbest thing you could do.

 

[crispus]

I would never lease a car. We buy off lease cars with cash.

 

[crispus]

I don't think it balances. 48+27=75 not 85...unless i'm reading this wrong. 12k +4.8k +6.5k +5k = 28,300 +48k= 76,300.

My salary is variable because of my sales commissions. So it is hard to come up with an exact annual amount. It adds up though. Look
48k spending, 12k emergency replenishment, 4.8k simple ira, 6.5k fica, and that leaves about 13k for state and fed taxes.

 

[73ss454]

When it's time to go then you gotta go. Sounds to me like you guys are fried and it's time to make a change.

I'd put the house on the market and if you price it right you will sell it. Don't worry because you can find a much cheaper house in a less expensive area and put the savings into your port. This should increase your 4% money and by stopping work you can cut down on a ton of expenses.

You guys can find some PT work to help out a bit if need be.

 

[jIMOh]

I see some good ideas here but Leasing a car is not one of them. This is about the dumbest thing you could do.

My point was an annual cost of $3k per year for a car seems high- you could almost lease a car for that.

 

[jIMOh]

My salary is variable because of my sales commissions. So it is hard to come up with an exact annual amount. It adds up though. Look
48k spending, 12k emergency replenishment, 4.8k simple ira, 6.5k fica, and that leaves about 13k for state and fed taxes.

Look at taxes as a way to save.... paying 13k taxes on 85k income is an issue (we gross 50k more than you and don't come near paying 13k in fed+state taxes).

 

[crispus]

jIMOh
I am open to advice on how to save on taxes. I deduct business mileage about 24,000 miles at .58 per mile. We deduct some software, subscriptions, charitable giving, and state income and property tax. Along with an occasional business dinner that is about it. Maryland income tax is very high.

Maybe it will be a little lower than I figured. This is the first year with my spouses reduced income. Last year with her severance we were well over 200k, and before that around 130k. I guess we could do a projection for 2010.

 

[jIMOh]

jIMOh
I am open to advice on how to save on taxes. I deduct business mileage about 24,000 miles at .58 per mile. We deduct some software, subscriptions, charitable giving, and state income and property tax. Along with an occasional business dinner that is about it. Maryland income tax is very high.

Maybe it will be a little lower than I figured. This is the first year with my spouses reduced income. Last year with her severance we were well over 200k, and before that around 130k. I guess we could do a projection for 2010.

Tax knowledge is very general, but tax problems are always very specific. Meaning I see a problem based on some high level numbers, but it might not be a problem, or it might take a professional to truly diagnose what the issue is.

Who does your taxes? It just appears high (to me) to pay 15k of taxes on 85k in income. Ohio is one of 17 states with above average tax burdens, and Maryland might be on that list too, but even I won't pay 15k in taxes and my income is north of 120k. No one single tax in Ohio "gets you", but add them all up and its quite high, especially in suburbs and urban locations. For example I pay a 5.5% state income tax, which is not really high, but high enough when combined with $5500 of property taxes and 7% sales tax... your problems will be similar but different, so feel free to remind us of what issues Maryland presents. I used to live in Potomac, so somewhat familiar with the state, but that was a long time ago.

Look for your tax liability on both state tax forms and fed tax forms.
If you pay your own SS, add that as a separate line item.

I am looking for two issues or problems to appear:

1) is taxes while working- you might find more money to save by not paying as much in taxes
2) is taxes while retired- some taxes (like FICA) go away in retirement, so understanding what taxes you will not pay in retirement is important too.


Lines on tax form to focus on

1) Income
2) Adjusted gross income
3) Tax liability
4) Taxes paid
4a property tax
4b tax withheld from paychecks
4c state income tax

There are probably other more specific issues, but without knowing above, not sure where to spend time to focus on issues specific to you.

 

[cardude]

My job is in printing sales, and I am being constantly micro managed, since the recession took hold in 2009. I have weekly meetings with the sales manager (owners brother in law) and the owner, which I dread. They are always going over everything in my call log asking why I am not getting more sales. Now they want me to do vast cold calling, when I already have a book of sales from over 30 years in the business. When I have an appointment, I always hit the businesses directly next to my appointment. I have not found cold calling to be very effective and I don't have a lot of time to devote to it. I guess we are a loggerheads and I just want out.

A suggestion from a former small business owner. Since you are pretty much FI in my opinion, and since you are burned out and ready to quit anyway, before you quit why not put the screws to the owner/sales manager and tell them what you have to have to stay. They may think they have you over a barrel and you NEED this job really badly, but you actually have the leverage since you are FI, and if you tell them that you are going to retire unless they do X you might be surprised what you get. I think it's worth a shot. They probably have no idea you are FI.


What would make you happy at work? An assistant to handle your crap work so you can make more sales calls? Extra commission per sale? Work from home? I ran a car dealership for many years and when one of my top salespeople was unhappy I almost always worked with them to try to keep them.

Just a thought.........

 

[TromboneAl]

...burned out at work and want to get out asap.

Since I think the pleasures of being retired outweigh the displeasures from minor deprivations, my suggestion would be to retire soon and cut costs.

For example, move to a small house in a small city (save $7,000/year on condo fees, utilities, prop taxes...)

You'll probably pay a lot less in taxes when you retire.

Is your taxable account total $8K?

 

[NW-Bound]

Since I think the pleasures of being retired outweigh the displeasures from minor deprivations, my suggestion would be to retire soon and cut costs.

One class of problem in engineering is "Optimal Control".

Contrary to what a layman would think, there are infinitely many optimal solutions. How so?

One has to first define what optimum is, and to assign relative values to each of the many parameters of the system, and also to the relative costs of the controls at one's disposal. Because of the infinitely many ways one can assign values and costs, there are infinitely many optimal solutions.

What this boils down to in real life, particularly ER, is what we already know. It depends on the individual's circumstances and preferences.

 

[landover]

Since I think the pleasures of being retired outweigh the displeasures from minor deprivations, my suggestion would be to retire soon and cut costs.

I think there in room in your budget to cut around 3200 month though you have to make some small compromises like $50 cash/week, eating out.

You have to decide what is the price of freedom and you are close to getting free.