Could I retire if I had to?

[gamer-stu]

Long time lurker outing himself due to changing circumstances.

I'm 44 years old and have been working towards FIRE before I even knew it was called FIRE. I work hard, but, frankly... I really don't want to work.

Anyway, the company I work for is being acquired. I have no idea whether I am "safe" or not (are we ever? ), but I'm using the opportunity to "take stock" of my current situation.

44 years old, married, two children aged 10 and 13.
House has been paid off for a few years.
No debt. Cars paid off.
401k, Roth, and Rollover IRA ~ $700K
After tax investments/liquidity (not including home equity) ~ $300K

College savings in 529 ~$100K, enough for a state education for both kids.

Expenses ~ $48K, including taxes, insurance, and some cushion. I have priced in an Obamacare silver plan and $4,000 in reserve for medical expenses. We already are pretty frugal, so I don't know that I could squeeze more out of the budget.

Wife earns ~$8K a year. I could easily pick up some extra work if I had to, but don't really want to.

So, if I get the heave ho, could I FIRE? I've been planning on at least $1.8 million before considering, but it would be comforting to know that I could say screw it if I had to. I know that I would have to 72T, which makes me nervous. And I'm afraid that even if I could do it, I am asking for a very frugal rest of my life whether or not my tastes change.

 

[Dtail]

Welcome gamer-stu
Have you run your numbers through the Firecalc calculator located on this site?
Your net expense needs are 40k with 1mm savings which translates to a 4%WR. This could be considered on the high side for a 44 yr old.
Have you factored in expected SS benefits, big ticket maintenance for the house, car replacement costs?

 

[street]

It sounds like you are going to wait and see mode to see what happens after transaction takes place. It is possible that you could make it work but I wouldn't want to touch that 700K if it were me. Let it grow and keep it invested for years down the road. If looking for a change I would find something low key part time but also your wife would need to continue to earn some of the living expenses. I would also look at cutting expenses if you can.

Not sure if you have looked ahead and thought about SS but you should try to get the required amount of years in .

 

[Aerides]

I would say not yet, for two main reasons:

Your kids are hitting teen years, and expenses will be higher. They'll start driving, your car insurance will go up even if you don't buy them cars. They will join more activities in high school, and they become a bit of a variable wild card. Once they are in college, less so.

Health insurance, even off the ACA for a family of 4..the rates have been going up substantially the last few years, and that's a long range gamble for so tight a budget, and for a family of 4.

 

[exnavynuke]

If you had more wiggle room in the budget I'd say "maybe". With $48k in expenses, and only $8k from the wife, your portfolio would need to sustain a 4% withdrawal rate (not necessarily something it couldn't do, especially when adjusted down assuming you later get some SS to augment it) at the current $1M total. However, as others mentioned, you're spending is likely to increase over in the near-term future with the kids alone, and medical costs are likely to continue increasing, and you don't have much room to cut back in your budget. Those considerations taken into account, I'd say you still need to pull in some income, though a job making less could make it work.

 

[youbet]

Nope, not by my standards. At your age and with my family still at home and depending on me, I couldn't sleep at night while cutting it so close. But I never suffered from:

I really don't want to work.

I can't say I was always euphoric about earning a living, but I was the middle class work ethic type and got it done. You have to decide whether continuing to earn some bux is better or worse than knowing you're cutting it close...... And IMHO you would be cutting it close.

edit - Having said that, you could do much more extreme things than retiring early on a short financial leash. For example, you might just not come home one day and not be heard from while you stroll the beach of your new home, Antigua.

It's all relative.

 

[travelover]

I wouldn't do it, but it helps that you have a nice stash to supplement your lifestyle while you look for another job, if needed.

 

[gamer-stu]

Hi Dtail, yes, I Firecalc'd it, and concur that it is risky at 80% success rate. So it sounds like I need to lower the expenses or keep working and saving.

I have budgeted $5400 year to fund big ticket items and car replacements. Cars are ~5 years old and I expect 5 more years out of them, roof is 10, and AC is new. Furnace would probably need replaced in 5 years. So there is time for that "bucket" to fill up.

According to SS.gov, full retirement at 67 would be $3000, but I would expect that to go down if I have a lot of $0 years in between.

 

[dvalley]

I'd say you're very close but shave off another 3-4 years worth of expenses by continuing to work while letting your assets grow and then see how this long bull market plays out. I'd feel safer retiring at 50 with $1.4M+

 

[gamer-stu]

Thank you all, and this is pretty much what my gut was telling me. I need to save more and get through the teen years (increased insurance, interests, etc.).

Re the not wanting to work, that was perhaps glib, but I am getting sick of what I have been doing for the past 20 years. It pays well, but I could get by with a lot less. Probably the answer is a career change.

 

[Lukeee]

Thank you all, and this is pretty much what my gut was telling me. I need to save more and get through the teen years (increased insurance, interests, etc.).

Re the not wanting to work, that was perhaps glib, but I am getting sick of what I have been doing for the past 20 years. It pays well, but I could get by with a lot less. Probably the answer is a career change.

Regarding teens...Really depends. Teens can be considered a pay rise or drop. Depending on activity/sports and how high maintenance they are, not all teens are expensive. On one extreme, I have friends whose kids don’t see a need to learn to drive and are happy with jeans and tee shirts. On the other hand, I know of kids that wear a different outfit everyday and participate in $2K+ A month sports.

 

[Oz investor]

gamer-stu,

welcome ,

let's assume , you need to retire ( with maybe do some part-time work )

you are going to need to make that cash saved work ( rather hard ) for you

( and probably trim expenses a little)

are you willing to learn the art of investing ... you need your nest egg to beat inflation by enough to provide some income without drawing down until ( hopefully) at least 55 .

soooo .. can you apply your job skills ( or life skills ) to improving your investments

( and strategies ) say pick a well run company , or a shabby set of accounts , or maybe you were in sales and can spot a high pressure spiel at 20 paces

( sometimes avoiding bad investments is the edge you need )

don't forget to get opinions from your wife , they will often disagree but she will see things from a different angle and see different signs in the economy ( which could be a bonus )

maybe even the both of you watch the various markets and learn investing

first off grab a trusty calculator and start learning about investing on paper ( before you need to pay the bills , with your nest egg returns ..aka learn the ways and styles of the markets not just stocks and ETFs )

 

[gamer-stu]

gamer-stu,

welcome ,

let's assume , you need to retire ( with maybe do some part-time work )

you are going to need to make that cash saved work ( rather hard ) for you

( and probably trim expenses a little)

are you willing to learn the art of investing ... you need your nest egg to beat inflation by enough to provide some income without drawing down until ( hopefully) at least 55 .

soooo .. can you apply your job skills ( or life skills ) to improving your investments

( and strategies ) say pick a well run company , or a shabby set of accounts , or maybe you were in sales and can spot a high pressure spiel at 20 paces

( sometimes avoiding bad investments is the edge you need )

don't forget to get opinions from your wife , they will often disagree but she will see things from a different angle and see different signs in the economy ( which could be a bonus )

maybe even the both of you watch the various markets and learn investing

first off grab a trusty calculator and start learning about investing on paper ( before you need to pay the bills , with your nest egg returns ..aka learn the ways and styles of the markets not just stocks and ETFs )

Honestly, when it comes to investing, I have proven to be a horrible stock picker. I tend to panic sell (2007, I'm looking at you) and then sit out too long. A while ago I resolved to just fund invest and not pay too much attention to the noise. Outside of 1 year of expenses in savings, I pretty much dump pre and post tax money in to Vanguard Wellington, Wellesly, and Fidelity Contrafund.

 

[gauss]

I suspect if you include or exclude Social Security benefits will have a major change on your FireCalc success if you modeled everything properly. I know in my case that definitely made the difference.

The way to get a good SS estimate is to use the "Retirement Estimator" available at the Social Security web site.

Then put in your SS number and the other info that is necessary for it to pull up your earnings record. Be sure to specify $0 for last years earnings (even if this is not the case). This will cause the estimator to assume $0 earnings for all future years.

If you have no pension income, then I would suggest running the scenario with delaying SS until age 70. This is one of the choices that the estimator will provide. Repeat the process with your wife's earnings record.

Then if you want to be conservative discount these estimates by some factor - maybe 1/4 to 1/3 to adjust for any future law changes (ie $60,000 would go down to $40,000). I think current law and demographic forecasts calls for the system to payout at about 70% of current benefits perpetually if nothing is changed.

The other issue has to do with health insurance for your family prior to Medicare. If you income is under $50,000 then I suspect that would qualify for a subsidy under current law. As such, your net cost of premiums will not increase as suggested above because the design of the ACA is that your net premiums will be capped by a percentage of your income -- not the actual cost -- assuming you qualify for the subsidy.

I would be interested in seeing your FireCalc results with $0 SS compared to the currently accrued benefit for you and your wife as described above.

I know that I did similar calculations at your age and the SS effect was enough to put me way over the top.

Even if you don't decide to leave after your reorganization, having done these calculations may result in a better state of mind knowing that you could probably leave if you really needed to.

I leave you with a quote that helped me:

"I have lived through some terrible things in my life -- Some of them actually happened" Mark Twain (attributed)


-gauss

 

[gauss]

Honestly, when it comes to investing, I have proven to be a horrible stock picker. I tend to panic sell (2007, I'm looking at you) and then sit out too long. A while ago I resolved to just fund invest and not pay too much attention to the noise. Outside of 1 year of expenses in savings, I pretty much dump pre and post tax money in to Vanguard Wellington, Wellesly, and Fidelity Contrafund.

You might want to consider just moving your funds into a nice balanced fund. No need to carefully watch it and fret if you should be buying/selling/balancing.

A balanced fund will, by definition, be buying low and selling high.

This has worked out well for me once I FIRED ~ 6 years ago.

 

[Mdlerth]

You aren't golden yet, but you're more than silver

I'm in the camp that says retirement would be too risky. At age 44, you need to figure on living another 50 years. If it were me, I'd give the stash a bit more time to compound.

I'm also in the camp that says you're in a good position to withstand a RIF should your employer's merger spark one. You have low expenses and accessible assets that would cover them for a long time even without tapping tax-deferred accounts.

Also, unemployment is very low these days. There is a lot of hiring going on out there. If there ever were a "good" time to be laid off, now would be it.

Sometimes we don't need to retire so much as we just need a break. If the company does cut you loose, consider taking a long time - six months or a year - before accepting another j*b. Call it a sabbatical. You might get your second wind and decide that you weren't ready for the permanent vacation after all. Good luck!

 

[lribookend]

gamer-stu,
I agree with those that say you are still a few years away. As for being able to afford retirement, just like having kids, if you wait until you can afford it you may wait until you are dead. Financial Planners love to scare people into thinking they need millions of dollars in equity to even think about retiring. Living frugally goes a long way towards getting what you what in life. My teenage kids cost me a bundle back in the day, and actually, even after high school.
It depends a lot on your lifestyle. I live in a rural area, my mortgage payment on my 8 year old (small) house is $541. My electric is $130 a month, my water $30 a month. My wife, 3 cats and dog get by with about $130 week in groceries and household items. I only buy old vehicles and keep them as long as they will run, so no car payment. I live very comfortably with a retirement income of about $2400/month. But most people probably can't, or don't want, to live on that income. I have been in the top 10% of FAMILY income for many years way back, but have been in the bottom 30% for about 15 years now. Looking back, there is 0 correlation between how much money I made and how happy I was. If anything, I have been happier during the years when I made less money, for a variety of reasons. I just retired at age 62, and have never been happier. I like living in a cheap, rural area of Kentucky. My kids would rather die than live out here, they love the city life. In the end, the decision will be yours, all others can do is give you perspective based on their life experiences, which are all different from everyone else's.
Larry

 

[gamer-stu]

I suspect if you include or exclude Social Security benefits will have a major change on your FireCalc success if you modeled everything properly. I know in my case that definitely made the difference.

The way to get a good SS estimate is to use the "Retirement Estimator" available at the Social Security web site.

Then put in your SS number and the other info that is necessary for it to pull up your earnings record. Be sure to specify $0 for last years earnings (even if this is not the case). This will cause the estimator to assume $0 earnings for all future years.

If you have no pension income, then I would suggest running the scenario with delaying SS until age 70. This is one of the choices that the estimator will provide. Repeat the process with your wife's earnings record.

Then if you want to be conservative discount these estimates by some factor - maybe 1/4 to 1/3 to adjust for any future law changes (ie $60,000 would go down to $40,000). I think current law and demographic forecasts calls for the system to payout at about 70% of current benefits perpetually if nothing is changed.

The other issue has to do with health insurance for your family prior to Medicare. If you income is under $50,000 then I suspect that would qualify for a subsidy under current law. As such, your net cost of premiums will not increase as suggested above because the design of the ACA is that your net premiums will be capped by a percentage of your income -- not the actual cost -- assuming you qualify for the subsidy.

I would be interested in seeing your FireCalc results with $0 SS compared to the currently accrued benefit for you and your wife as described above.

I know that I did similar calculations at your age and the SS effect was enough to put me way over the top.

Even if you don't decide to leave after your reorganization, having done these calculations may result in a better state of mind knowing that you could probably leave if you really needed to.

I leave you with a quote that helped me:

"I have lived through some terrible things in my life -- Some of them actually happened" Mark Twain (attributed)


-gauss

I hadn't really even considered SS in my calculations, frankly. I've grown accustomed to thinking of it as more of a bonus if it's still around when I hit 67.5 or 70. .

Thank you very much for pointing out the calculator, and I love the Mark Twain quote!

 

[1-31-18]

Quitting for good would be pretty risky for the reasons mentioned above. I wouldn’t do it myself.

That said, your $1m+ of savings is definitely “FU money.” So you don’t need to stick around if you don’t like what you see.

Maybe you should use this opportunity to quietly look for a better job, then exercise your FU option.

Good luck.

 

[gamer-stu]

I'm in the camp that says retirement would be too risky. At age 44, you need to figure on living another 50 years. If it were me, I'd give the stash a bit more time to compound.

I'm also in the camp that says you're in a good position to withstand a RIF should your employer's merger spark one. You have low expenses and accessible assets that would cover them for a long time even without tapping tax-deferred accounts.

Also, unemployment is very low these days. There is a lot of hiring going on out there. If there ever were a "good" time to be laid off, now would be it.

Sometimes we don't need to retire so much as we just need a break. If the company does cut you loose, consider taking a long time - six months or a year - before accepting another j*b. Call it a sabbatical. You might get your second wind and decide that you weren't ready for the permanent vacation after all. Good luck!

That's the ticket--a sabbatical!

I think what you're all witnessing here is a midlife crisis. I'm glad that I'm not in to motorcycles and fast cars .

 

[pb4uski]

You could but there isn't much margin for adverse events... I think you would be better with a career change or perhaps part-time employment.

 

[Jerry1]

That's the ticket--a sabbatical!

I think what you're all witnessing here is a midlife crisis. I'm glad that I'm not in to motorcycles and fast cars .

Or fast women.

Lot of good advice here. You’re in good shape but too early to fully retire. Think this through and you’ll figure out the best path to take. Once I had enough money to not really stress about losing my job, the job became more tolerable. You’d be surprised what employers will put up with. I rode the edge of doing what I was willing to do while maintaining my professionalism. It was a better balance for my last 5 years or so before I went part time.

 

[Oz investor]

Honestly, when it comes to investing, I have proven to be a horrible stock picker. I tend to panic sell (2007, I'm looking at you) and then sit out too long. A while ago I resolved to just fund invest and not pay too much attention to the noise. Outside of 1 year of expenses in savings, I pretty much dump pre and post tax money in to Vanguard Wellington, Wellesly, and Fidelity Contrafund.

Warren Buffet has plenty of ideas ( and quotes )

not all of them will work for you , but the ones ( from nearly 1000 ) that suit you best might help

like rule 1 . NEVER LOSE MONEY ( not buying a stock can still be a long term win , but that can also mean take the investment cash off the table , while you are in healthy profit )

https://www.suredividend.com/warren-buffett-quotes/ ( only 107 of them here )

also DON'T think share price rise/fall think long term income ( because that is what you will need most )

i was not interested in the markets before 2010 , but i had a windfall ( two estates i never expected to see a penny from ) and decided to make a try at a fully funded retirement by 2020 .. life has since had some unexpected twists but i still would like to see in the plan works after the extra distractions .

there is probably a crash coming ( there are plenty of opinions when )

if you have researched and studied, the next crash can give you a handy stepping stone ... my portfolio looks good because i was buying in 2011 and 2012 ( but the nest egg still has to survive a REAL crash maybe 3 if i live long enough )

also important is to not lose a lot of sleep over your investment decisions

make decisions you can live with first .

if it is any consolation i have only picked one 'good thing stock ' out of over 300 bought since early 2011 and the is MQG ( MQBKY in the US )

i hought it heavily as a 'growth stock hoping it work double in share price by now ( currently up 350% ) i have taken a fair bit of profit out of this ( sold about 70% on the original holding but it is still my second largest holding just under 5% by $value )

the rest of my successes were ( mostly ) boring little small caps that paid dividends .. and then some analyst writes a good report are off they go ... so i rescue the investment cash and let the profits run ( and invest the cash in a different boring little dividend payer )

good luck your task doesn't look easy .... but do you like a challenge

 

[mamadogmamacat]

I dabble with a small percentage of my investments in individual stocks. i have done well with it overall, more winners than losers and it is fun to some extent. Like the OP i think i do not have the patience to spend the effort using anything more than a few percent of my assets in this way.

For what its worth, among my other investments in taxable, I have been in the Fidelity Contrafund for 28 years. Starting with an initial investment of 12K, it grew, after 25 yrs, with no effort at all on my part, with reinvestment of dividends and cap gains, to just over 150K. Not bad, and it now forms a small but not insignificant part of income generation for my so far 2 1/2 yrs of ER. So it may be just fine going forward for the OP as well. YMMV

 

[Dtail]

Hi Dtail, yes, I Firecalc'd it, and concur that it is risky at 80% success rate. So it sounds like I need to lower the expenses or keep working and saving.

I have budgeted $5400 year to fund big ticket items and car replacements. Cars are ~5 years old and I expect 5 more years out of them, roof is 10, and AC is new. Furnace would probably need replaced in 5 years. So there is time for that "bucket" to fill up.

According to SS.gov, full retirement at 67 would be $3000, but I would expect that to go down if I have a lot of $0 years in between.

One other source of income could be if you currently live in a HCOL area and have built up good equity with your paid off house. If you are willing to move to a MCOL or LCOL area, you can sell the house and after buying in the new area, you can bank the differential into more portfolio investment potential.