Can I really retire at 55 yrs old

[PaPa-T]

Hello, running through the numbers and think we are going to pull the trigger in Dec. 2021. We are both 55 yes old. We have 1.2m in 401k and 200k cash from sale of our lake house. Our kids bought a investment property on lake norman NC. We will become renters for the first time in our lives. Thought this would stabilize our costs of home repair...we are planning on doing a72t which amounts to 44k and supplement with cash from house for the 5 years required. This will give us a total of 76k to live on. Rent is 1800 and we have two car payment of 650 combined. Concerned about if this is enough especially with the healthcare wildcard. Can't get price until we are retired. Estimating 1000 a month.

 

[REWahoo]

PaPa-T, if you haven't already done so, please take a look at this:

Some Important Questions to Answer Before Asking - Can I Retire?

 

[pb4uski]

Hello, running through the numbers and think we are going to pull the trigger in Dec. 2021. We are both 55 yes old. We have 1.2m in 401k and 200k cash from sale of our lake house. Our kids bought a investment property on lake norman NC. We will become renters for the first time in our lives. Thought this would stabilize our costs of home repair...we are planning on doing a72t which amounts to 44k and supplement with cash from house for the 5 years required. This will give us a total of 76k to live on. Rent is 1800 and we have two car payment of 650 combined. Concerned about if this is enough especially with the healthcare wildcard. Can't get price until we are retired. Estimating 1000 a month.

It is hard to say not knowing what you have coming in social security whether $1.4m is enough to support $76k a year of inflation adjusted spending. You should run you situation through FIRECalc.

On the last part, you should be able to get a price before you retire. Check out healthsherpa.com

 

[DireWolf]

Plugging in your 44k of MAGI and your ages into the KFF ACA calculator for a random zip code on Lake Norman gives me $154/mo for 2nd lowest price Silver plan. Your $1000/mo estimate looks very high. Also worth noting that $44K puts you at 255% of the FPL, so you just miss out on the CSR benefits.

If I were concerned about expenses, I’d probably look at the car payments. How much longer to pay? How much equity? Could I sell now in this crazy market and do without or get a reliable beater? Could we get by with one auto for awhile?

I’m going to assume you’ve got enough once you factor in SS/pensions down the road.

 

[Biker_on_FIRE]

Do you have your 401k with your current employer? If so, you might be able to take advantage of the Rule of 55 where you can make 401k withdrawals without penalty.

 

[RetiredHappy]

Do you have pension(s)? What will be your SS, with shortened work years? Note that estimated SS on statement asumes that you will continue to work and contribute until SS starts, so you need to use their SS calculator like anypia to get actual amount which you would input past contributions and when you will stop contributions.

My solo health insurance premium costs me 1K per month but I do not make use of ACA. As long as your income remains low, your ACA premiums will be low with ACA subsidies. You can go to healthcare.gov to get the amount. I play with it sometimes to help friends who would like to retire to figure out ACA subsidized premium and cost sharing. You don't need to be retired to find out ACA cost.

 

[PaPa-T]

Thank you for all of the replies. Fire calc says 100% ,so looks like we are good to go! Can't wait for every day to be saturday!

 

[Koolau]

Be sure to keep us posted on your progress. Best of luck!

 

[BeachOrCity]

Something doesn't sound right. You have car payments? Two? If you have 1.2M in the bank, why have you been financing cars (unless 0% interest)? Since you will be 1.4 w/ cash for the house and are renting, a flat 4% of 1.4M is 56K / yr at 4% w/d per year. Unsubsidized ACA will run you WAY more than 1K / mo, but if you keep you magi under 72K you can safely bet on 6K a year or much less (with a crap deductible).

here is what you need to do. Track all your spending for past few years. Add in extra health care, sub out commuting and work expense, and add in expense for all the fun stuff you will do to fill your days. That is your budget. Does it fit? Sounds like "lean fire" to me. No judgement, if that is what you want, more power to you.

 

[purplesky]

Hello, running through the numbers and think we are going to pull the trigger in Dec. 2021. We are both 55 yes old. We have 1.2m in 401k and 200k cash from sale of our lake house. Our kids bought a investment property on lake norman NC. We will become renters for the first time in our lives. Thought this would stabilize our costs of home repair...we are planning on doing a72t which amounts to 44k and supplement with cash from house for the 5 years required. This will give us a total of 76k to live on. Rent is 1800 and we have two car payment of 650 combined. Concerned about if this is enough especially with the healthcare wildcard. Can't get price until we are retired. Estimating 1000 a month.

You are great savers and close to the finish line.
But that 200k of cash cannot be touched because you need liquidity.

A CFP will say NO to your early retirement plan.

But if you are super frugal it could work.

 

[mrfeh]

Something doesn't sound right. You have car payments? Two? If you have 1.2M in the bank, why have you been financing cars (unless 0% interest)? Since you will be 1.4 w/ cash for the house and are renting, a flat 4% of 1.4M is 56K / yr at 4% w/d per year. Unsubsidized ACA will run you WAY more than 1K / mo, but if you keep you magi under 72K you can safely bet on 6K a year or much less (with a crap deductible).

here is what you need to do. Track all your spending for past few years. Add in extra health care, sub out commuting and work expense, and add in expense for all the fun stuff you will do to fill your days. That is your budget. Does it fit? Sounds like "lean fire" to me. No judgement, if that is what you want, more power to you.

+1

Being able to FIRE and having car payments is an unusual combination. Having to use 72t also makes me wonder if you are really FI.

I haven't looked at your numbers, and I'm not saying you can't make it work, but there are some yellow flags here.

 

[pb4uski]

Something doesn't sound right. You have car payments? Two? If you have 1.2M in the bank, why have you been financing cars (unless 0% interest)? Since you will be 1.4 w/ cash for the house and are renting, a flat 4% of 1.4M is 56K / yr at 4% w/d per year. Unsubsidized ACA will run you WAY more than 1K / mo, but if you keep you magi under 72K you can safely bet on 6K a year or much less (with a crap deductible). ...

+1

Being able to FIRE and having car payments is an unusual combination. Having to use 72t also makes me wonder if you are really FI. ...

WADR, those who view the OPs $650/mo car payments as a big problem are likely making a mountain out of a molehill. We don't know the interest rate (could be 0% or low rate) or could be just a couple years of payments left. Even if they had 60 months left then thats only $39k and given that the OP says that they are 100% on FIRECalc, I doubt that $39k less assets if they just wrote a check and paid the car loans off would make a difference, so I think you two are off base.

I took on a car loan after I retired, simply because it was such a low rate.... how foolish I was!

Having to use a 72t is a liquidity issue, not an FI issue, and is an issue that we see occasionally for those looking to ER before 55 with substantial 401ks or before 59-1/2 for those with substantial tIRAs.

 

[JRon]

+1

Being able to FIRE and having car payments is an unusual combination. Having to use 72t also makes me wonder if you are really FI.

I haven't looked at your numbers, and I'm not saying you can't make it work, but there are some yellow flags here.

+1

 

[armor99]

Just a few things…

I understand others may feel differently, but I would worry about long term renting. It puts way too much control and uncertainty into the hands of others. There is no guarantee rents will not go through the roof in 30 years time. Once you own your home free and clear, it is your forever. Not sure why you would sell the lake house, rather than just live there.

Also, being 55 you should not need to do a 72t at all to my understanding. You should be able to to use the rule of 55 to have access to all of your 401k money the day after you retire.

 

[PaPa-T]

The cars are leases and with interest rates and availability of cars today we plan on buying them out next September when they end lease. If I get 5% or less for financing I will leave the cash in the market making better than 8% instead of paying of cars. We are renting from our daughter and so. In law so no worries of rent going up. I will do all the upgrades for their investment house so it's a pretty good arangment. We will have same income when we retire once you factor in not going to work and reduced taxes in NC as compared to NYS.

 

[purplesky]

WADR, those who view the OPs $650/mo car payments as a big problem are likely making a mountain out of a molehill. We don't know the interest rate (could be 0% or low rate) or could be just a couple years of payments left. Even if they had 60 months left then thats only $39k and given that the OP says that they are 100% on FIRECalc, I doubt that $39k less assets if they just wrote a check and paid the car loans off would make a difference, so I think you two are off base.

I took on a car loan after I retired, simply because it was such a low rate.... how foolish I was!

Having to use a 72t is a liquidity issue, not an FI issue, and is an issue that we see occasionally for those looking to ER before 55 with substantial 401ks or before 59-1/2 for those with substantial tIRAs.

The car payment issue is a red flag. Because they do not have substantial 401k wealth. Not even close when retiring at age 55 with healthcare costs unknown.

I assume you have much more wealth accumulated so yes a car payment for you is no big deal. Writing a 39k check for them is real money.

Renting from your kids to FIRE is also part of the same red flag.

 

[rodi]

PaPa-T, if you haven't already done so, please take a look at this:

Some Important Questions to Answer Before Asking - Can I Retire?

^^^^ This is the best advice you've gotten in this thread. ^^^^

Make sure you have thought of everything with spending. Note the details - like Firecalc assumes GROSS spending - inclusive of taxes, health insurance, and other things commonly 'forgotten' when figuring out what your spending is.

I agree with others that your health insurance costs are probably on the high side. I think renting is fine - from a relative even better since they will likely be nicer about rent increases. Just make sure you keep that relationship healthy since it would suck to get booted out of your rental.

Since you are renting from your kids 'vacation house' - do you have to vacate when they want to vacation?

 

[PaPa-T]

I feel pretty good about our budget. Worked it bottom up and top down. We will have more to spend than we have when working because of tax changes. Our kids actually enjoy vacationing with us, so it will be awesome.

 

[PaPa-T]

I am having a hard time understanding why a car payment is a red flag. Can you explain a little more? We are a little concerned about renting from our kids but we have had extensive talks about and believe it will work out great for bot of us.

 

[PaPa-T]

When I run the ss numbers on government site it says I have the 40 credits. Taking it 62 gives me 2024 a month. How do you change it for retiring at 55? Thought once you have the credits the number is good.

 

[camfused]

@PaPa-T, you cannot get SS any earlier than 62. At 62, you can start taking it, but will get quit a bit less than if you wait until FRA (Full Retirement Age), and you would get even more if you want until age 70. There are lots if discussions here about whether to take "early" or "later".

You have to live off your investments or some other form of income until you take SS.

 

[teetee]

+1



Being able to FIRE and having car payments is an unusual combination. Having to use 72t also makes me wonder if you are really FI.



I haven't looked at your numbers, and I'm not saying you can't make it work, but there are some yellow flags here.

For some who don't mind risks and like to sleep thinking they owe money to some mega corp, it makes perfect sense.

It is a life style choice in this modern era. It used to be a big no-no but time has changed. What used to be a common sense is no longer common.

 

[Golden sunsets]

What was the cost of the vacation home that you will be paying $1,800/mo to rent?

 

[Exchme]

When I run the ss numbers on government site it says I have the 40 credits. Taking it 62 gives me 2024 a month. How do you change it for retiring at 55? Thought once you have the credits the number is good.

The 40 credits just means you had earned income for at least 40 quarters (10 years). The benefit is based on a complicated formula that starts with the earnings in 35 years. By stopping work at 55, you are likely to have some zeroes averaged in, which will hurt you some.

To get the estimate of what you will receive without working longer, log in to SSA.gov and scroll down to Plan For Retirement and click on Future Earnings. Set those to zero. The graph will show you your benefits at different claim ages. Do this for both spouses. Even if your spouse never worked, a spousal benefit up to one half of the benefit you would get at age 67 is available on your earning record, though the amounts also vary with age spousal can't be collected until you claim on your record. Note that on the death of either spouse, the spousal benefit disappears.

It's often not the best plan to claim at 62 unless you have known health problems. Between you and your spouse, it's quite complicated; use opensocialsecurity.com to get a calculation of you and your spouse's best plan.

 

[PaPa-T]

Thank you I will check it out