46M, not sure which stage of FIRE I'm at, and also facing a big decision - help!

[malgorium]

Hello, lifelong high school teacher here, since the early 00s.

I'll get the basic numbers out of the way now:

Current income: $96k (in a mcol area in the US)

Current spending: ~$45k (may be significantly lower soon, will get to that later)

Assets (~$1.6MM):

HYSA: $20k

Taxable Brokerage: $760k

Traditional IRA: $375k

Roth IRA: $270k

403b: $50k

Crypto: $3k

Silver: $7k

Pension: $160k

So the thing about my pension is that it's my current amount were i to withdraw today. However, if i let it sit, I can transform that into an annual pension as early as 55yo that pays roughly $25k/yr, or get more the longer i wait, maxing out at about $40k/yr if i wait until 62. I assume i should not withdraw this pension?

I taught for many years in CA, whose teachers don't contribute to social security, so i only have about 8 years of social security paying years of employment, so I'm not even counting any possible SS money into my calculations, as it will be a negligible amount.

As I'm sure is the case with many of you, my parents are getting old, and they recently floated the idea of me moving in with them (they live a few miles away, i currently rent). If i were to do this, i offered to pay their property taxes and home insurance (which they were very agreeable to), which would represent roughly a 50% cut for me in housing costs, which would turn my yearly spending to closer to $35k/yr.

So I'm really not sure what to do right now. Moving in with them does seem like a good idea (i get along well with them), but if i do that, how much longer would i need to work? how far away would you say i am to retiring if i do or don't move in with them? What would you do in my shoes?

Thanks in advance!

 

[Koolau]

I always recommend that your run FIRECalc and see what it says about your ability to retire early

FIRECalc: A different kind of retirement calculator

www.firecalc.com

 

[Koolau]

By the way, welcome to the Forum.

A more crude way of determining ability to FIRE (Financially Independent Retire Early) is to use the so-called 4% rule.

Multiply your current stash (1.6MM) by 4% and you get $64000 per year that you can (probably, likely maybe?) spend per year and then adjust that for inflation.

I'd go with FIRECalc but do the 4% calculation and you'll see that you're well above your $45K spend rater already.

That doesn't even include your pension.

By the way, are you married? That complicates things in lots of ways - but so does being unmarried (just ask anyone who has lost a spouse how their taxes change the next year).

Looking forward to hearing your progress toward early retirement.

 

[malgorium]

By the way, welcome to the Forum.

A more crude way of determining ability to FIRE (Financially Independent Retire Early) is to use the so-called 4% rule.

Multiply your current stash (1.6MM) by 4% and you get $64000 per year that you can (probably, likely maybe?) spend per year and then adjust that for inflation.

I'd go with FIRECalc but do the 4% calculation and you'll see that you're well above your $45K spend rater already.

That doesn't even include your pension.

By the way, are you married? That complicates things in lots of ways - but so does being unmarried (just ask anyone who has lost a spouse how their taxes change the next year).

Looking forward to hearing your progress toward early retirement.

Thanks for the response!

i was somewhat familiar with the 4% rule but i thought I'd still be a ways short since I'd have to pay for health insurance until 65, which would be very expensive.

I'm not married, however i do have a long time girlfriend who is also good about saving (but she didn't start till later, so she has about 300k net worth). we definitely don't want kids, so marriage is just kind of up in the air right now. maybe we'll do it, maybe not.

 

[TheWizard]

Moving into your parents house at age 46?
How much separation would there be, an in-law suite?

I'm guessing you're single? What about dating and a potential partner? How would that work?

Let's address the lifestyle issues first...

 

[malgorium]

Moving into your parents house at age 46?
How much separation would there be, an in-law suite?

I'm guessing you're single? What about dating and a potential partner? How would that work?

Let's address the lifestyle issues first...

i have a longtime girlfriend who gets along really well with my parents, and it was actually her and my mom who first even talked about this being a possibility!

as to the separation, my parents have a 4br/4ba house which is far too big for just the 2 of them anyway, so that's part of the reason they want us to move in. we'd all be under the same roof, but the house is big enough to where we wouldn't be bumping into each other all the time.

 

[Koolau]

It sounds like a symbiotic relationship. I'm sure they can use the financial boost as well as the occasional changing the light bulb in the ceiling fan, etc.

All the best luck with this decision.

 

[NeilDH]

So, as said, your numbers are looking very good, especially since you’re not a big spender (and presuming your IRAs and brokerage funds are at least partly in stocks and bonds?). You probably can retire anytime, but I see you probably can get a lot more from your pension if you wait until age 55 — unless you take that lump sum now and invest it really well such that you can make that grow to exceed what you’d get in that lifetime pension. (That’s probably a stretch; I’d need a spreadsheet or custom calculator to see what’d be best.) Still, you can decide whether working that much longer would be worth it.

Moving in with your parents could get you into the caregiving realm, and that’s another big life decision. As TheWizard suggests, what lifestyle would you like in retirement?

You ask how far away are you from FIRE; you’re in the position where you’re really free to decide for yourself. That can be a curse as well as a blessing, though clearly a lot of us here got to the blessing side quickly or eventually. Hopefully you don’t have to rush a decision and you can get your head around it. (BTW, do you like teaching/your career or are you getting tired of it?)

 

[malgorium]

So, as said, your numbers are looking very good, especially since you’re not a big spender (and presuming your IRAs and brokerage funds are at least partly in stocks and bonds?). You probably can retire anytime, but I see you probably can get a lot more from your pension if you wait until age 55 — unless you take that lump sum now and invest it really well such that you can make that grow to exceed what you’d get in that lifetime pension. (That’s probably a stretch; I’d need a spreadsheet or custom calculator to see what’d be best.) Still, you can decide whether working that much longer would be worth it.

Moving in with your parents could get you into the caregiving realm, and that’s another big life decision. As TheWizard suggests, what lifestyle would you like in retirement?

You ask how far away are you from FIRE; you’re in the position where you’re really free to decide for yourself. That can be a curse as well as a blessing, though clearly a lot of us here got to the blessing side quickly or eventually. Hopefully you don’t have to rush a decision and you can get your head around it. (BTW, do you like teaching/your career or are you getting tired of it?)

Thanks for the response!

Yes my IRAs and brokerage account are about 90/10 stocks/bonds, which seems a bit aggressive, but i figure the pension I'll get will effectively act as a fixed income portion of my retirement?

speaking of the pension, the way i understand it is that that $160k was produced from solely my forced pension contributions through my career, which was also effectively matched by my employer/the state. In other words, there's an 'invisible' portion of my pension amount that i forfeit if i withdraw as a lump sum, whereas if i take the annuity at 55+, that annuity amount is based off of the full amount. Given that I'm close to retirement, i figure i should leave it alone, right?

That's a good point about the caregiver thing, though my parents are still quite active right now. As they get older and less mobile though, i think between my parents' nest egg and my savings and also my sister pitching in, we can probably hire a part time caregiver to come by, if it comes to that.

I definitely don't need to rush a decision, and i wouldn't say i love my job, but i don't hate it either. I'd say on a scale of 0-10 of job satisfaction I'm at about a 7.

If i did stop working as a teacher though, I'm fairly confident i could make decent money tutoring if i chose to do so. Obviously not as much as teaching, but definitely at least enough to pay for necessities.

 

[Koolau]

Thanks for the response!

Yes my IRAs and brokerage account are about 90/10 stocks/bonds, which seems a bit aggressive, but i figure the pension I'll get will effectively act as a fixed income portion of my retirement?

speaking of the pension, the way i understand it is that that $160k was produced from solely my forced pension contributions through my career, which was also effectively matched by my employer/the state. In other words, there's an 'invisible' portion of my pension amount that i forfeit if i withdraw as a lump sum, whereas if i take the annuity at 55+, that annuity amount is based off of the full amount. Given that I'm close to retirement, i figure i should leave it alone, right?

That's a good point about the caregiver thing, though my parents are still quite active right now. As they get older and less mobile though, i think between my parents' nest egg and my savings and also my sister pitching in, we can probably hire a part time caregiver to come by, if it comes to that.

I definitely don't need to rush a decision, and i wouldn't say i love my job, but i don't hate it either. I'd say on a scale of 0-10 of job satisfaction I'm at about a 7.

If i did stop working as a teacher though, I'm fairly confident i could make decent money tutoring if i chose to do so. Obviously not as much as teaching, but definitely at least enough to pay for necessities.

I think I'd be tempted to get my 40 quarters for Social Security eligibility. It would likely be a pretty good pay off but it's probably not necessary in your situation.

 

[malgorium]

I think I'd be tempted to get my 40 quarters for Social Security eligibility. It would likely be a pretty good pay off but it's probably not necessary in your situation.

oh it's funny you mention that because i just passed that 40 quarter mark i think early this year.

 

[Koolau]

oh it's funny you mention that because i just passed that 40 quarter mark i think early this year.

Super!!

 

[bada bing]

Definitely worthwhile to make sure you get 40+ quarters of SS credits. Since the passage of the Fairness Act, you will get the benefit of the highly subsidized contribution credit below the first SS bend point. The payback on SS is an fantastic deal for the dollars below the first bendpoint.

 

[Morgan22]

oh it's funny you mention that because i just passed that 40 quarter mark i think early this year.

How do you already have 40 quarters in? You said in your first post you have 8 years in so far. I believe you need 2 more years to be able to collect SS.

Personally, if needed, I would work long enough to get in all of my quarters to be able to collect SS in the future. I would also hold off on collecting the pension to maximize the benefit. (You probably have enough to tide you over until 62 if you can keep your expenses to a minimum.)

Regardless, you need to save enough for a possible future that you could be/want to be living. What do you want to do when you retire? Do you have activities/hobbies that will fill your day? Living in your parents home may not last your whole lifetime. Do you inherit the house when they pass? Sound like you have at least one sibling, will you need to buy her out? What if one or both parents require 24/7 care or nursing home care? Will the house need to be sold to fund those costs. If so you'll need to pay for probably more expensive housing.

You're still young, you may live another 50 years, so you need to make sure you have the possible future covered. You also need to have fun along the way, have enough funds to blow on fun stuff in the future too. (travel, other hobbies?)

 

[NeilDH]

Thanks for the response!

Yes my IRAs and brokerage account are about 90/10 stocks/bonds, which seems a bit aggressive, but i figure the pension I'll get will effectively act as a fixed income portion of my retirement?

speaking of the pension, the way i understand it is that that $160k was produced from solely my forced pension contributions through my career, which was also effectively matched by my employer/the state. In other words, there's an 'invisible' portion of my pension amount that i forfeit if i withdraw as a lump sum, whereas if i take the annuity at 55+, that annuity amount is based off of the full amount. Given that I'm close to retirement, i figure i should leave it alone, right?

That's a good point about the caregiver thing, though my parents are still quite active right now. As they get older and less mobile though, i think between my parents' nest egg and my savings and also my sister pitching in, we can probably hire a part time caregiver to come by, if it comes to that.

I definitely don't need to rush a decision, and i wouldn't say i love my job, but i don't hate it either. I'd say on a scale of 0-10 of job satisfaction I'm at about a 7.

If i did stop working as a teacher though, I'm fairly confident i could make decent money tutoring if i chose to do so. Obviously not as much as teaching, but definitely at least enough to pay for necessities.

It sounds like you’d indeed be better letting the pension sit. You don’t have to keep working to let it sit, right?

 

[Time2]

speaking of the pension,

Regarding the pension and 55 or 62, my calculator says is will grow at 7% per year compounded for the 7 years wait. That not terrible!

 

[malgorium]

It sounds like you’d indeed be better letting the pension sit. You don’t have to keep working to let it sit, right?

ya as far as I understand it, the pension amount is only based on 3 things:

- how long you were teaching

- what age you retire

- the average of your 3 most recent years salary.

 

[malgorium]

How do you already have 40 quarters in? You said in your first post you have 8 years in so far. I believe you need 2 more years to be able to collect SS.

Personally, if needed, I would work long enough to get in all of my quarters to be able to collect SS in the future. I would also hold off on collecting the pension to maximize the benefit. (You probably have enough to tide you over until 62 if you can keep your expenses to a minimum.)

Regardless, you need to save enough for a possible future that you could be/want to be living. What do you want to do when you retire? Do you have activities/hobbies that will fill your day? Living in your parents home may not last your whole lifetime. Do you inherit the house when they pass? Sound like you have at least one sibling, will you need to buy her out? What if one or both parents require 24/7 care or nursing home care? Will the house need to be sold to fund those costs. If so you'll need to pay for probably more expensive housing.

You're still young, you may live another 50 years, so you need to make sure you have the possible future covered. You also need to have fun along the way, have enough funds to blow on fun stuff in the future too. (travel, other hobbies?)

Thanks for the thorough response!

For the SS, I've only had 8 years of full time SS work, but I had other various part time jobs throughout the years to put me over 40 altogether.

For retirement, I just envision hanging out with my niece and nephew, doing a bit of light travel, and doing some tutoring on the side for a bit of extra cash.

My parents have enough to where their paid off house won't even be half of their assets, so when they pass, I'll take the house and whatever extra gets me to half of their assets, and my sister (who already has her own house) will get the other half.

My parents are pretty active people even now. They take daily walks, my mom's always playing with her grandkids, and my dad is constantly puttering around the house doing random projects. When they get older I don't know how much caregiving they'll require, but I'm hoping that between the combined nest eggs of me, my parents, and my sister, we can work that out.

 

[aaronc879]

It looks like you are financially able to retire. I would get those last 2 years of SS credits even if it means tutoring and filing as self employed. Even the minimum is close to $1000/mo. Over 20+ years that is a lot of money to not take. I would wait on taking the pension until you can get monthly payments. Health insurance may not be as expensive as you think. You would be living off your taxable account and possible tutoring income until your pension kicks in. Assuming you work very little and you don't have really high dividends, your income should be at a level to give you very good subsidies on the ACA.

 

[EastWest Gal]

The 40 quarters is also important for Medicare part A, so you are good to go there.

My 33 year old son (only child) still lives with us, having completed college out of state and unable to find a job related to his major, and has no intention of marrying or having children. We have a 4 bedroom house, and our finished basement was designed with two smaller rooms and a larger area. My husband and son have their "man-caves" in those rooms, which makes his living with us a piece of cake. We also do some things together, and help each other in that regard-for example, our van is used to transport his marimba and vibraphone on occasion.

It sounds like a win-win situation, especially if your girlfriend and parents on board. You might try spending some time "living" with them before you give up your rental, to see how that works out for you all, and before you make a decision.

Morgan brought up good points regarding long term care costs, and the house may need to be sold for that purpose.

Last, welcome to the forum! We are a friendly bunch and have great moderators.

 

[Dtail]

Welcome to our wonderful forum.
Normally I would say not to move in with your parents. However, your situation with your girlfriend and the overall relationship with your parents appears to be a good one. Thus, it could make sense.
As to working longer in order to receive a bigger pension, if your satisfaction number goes to 5 or below, then I would consider retiring.
I don't think in your situation I would wait until 62. However at 55 as long as the job satisfaction remains decent appears to be a happy medium.

 

[1242Vintage]

Your post caught me attention …

Dear wife was a public school teacher in CA. She worked private sector for 9 years, paying into Social Security for those years before becoming a public sector teacher in CA.

If you are up to it, suggest you look into a very part-time job of some sorts so that you can get up to 40 quarters. And read about windfall elimination repeal.

Dear wife is clearing only $282/mo from SocSec now based on her meager private sector earning history, but our understanding is that’ll go way up next Spring when I start SS and her benefit is calculated as a percentage of my robust earning history.

 

[malgorium]

It looks like you are financially able to retire. I would get those last 2 years of SS credits even if it means tutoring and filing as self employed. Even the minimum is close to $1000/mo. Over 20+ years that is a lot of money to not take. I would wait on taking the pension until you can get monthly payments. Health insurance may not be as expensive as you think. You would be living off your taxable account and possible tutoring income until your pension kicks in. Assuming you work very little and you don't have really high dividends, your income should be at a level to give you very good subsidies on the ACA.

Thanks for the response!

I haven't been keeping up too much with the ACA news, but aren't the subsidies going away or up in the air or something like that?

As for the SS, I actually did just cross the required 40 quarters threshold earlier this year, as even though I've only worked 8 full time years, I had various part-time jobs throughout the year that got me enough to get over the 40q mark. I haven't even really looked into that part since I figured it wouldn't amount to much, but if the min really is close to $1k, that's certainly not insignificant - I'll definitely have to look more into that.

 

[malgorium]

The 40 quarters is also important for Medicare part A, so you are good to go there.

My 33 year old son (only child) still lives with us, having completed college out of state and unable to find a job related to his major, and has no intention of marrying or having children. We have a 4 bedroom house, and our finished basement was designed with two smaller rooms and a larger area. My husband and son have their "man-caves" in those rooms, which makes his living with us a piece of cake. We also do some things together, and help each other in that regard-for example, our van is used to transport his marimba and vibraphone on occasion.

It sounds like a win-win situation, especially if your girlfriend and parents on board. You might try spending some time "living" with them before you give up your rental, to see how that works out for you all, and before you make a decision.

Morgan brought up good points regarding long term care costs, and the house may need to be sold for that purpose.

Last, welcome to the forum! We are a friendly bunch and have great moderators.

Thanks for the response!

I moved into this area just a few years ago from California, and when we first moved, we hadn't secured an apartment yet, so my gf and I were living with the parents for about 6 weeks. It went well (though pretty cramped with all of my belongings packed into the house), which made me somewhat optimistic that it could work long-term if it came to that.

My parents definitely don't have any sort of emotional attachment to the house (they only moved into it in the mid 00's), so if it comes down to selling it to downsize, while it would be a pain in the ass, I'm fairly certain they wouldn't be opposed to it otherwise.

 

[malgorium]

Your post caught me attention …

Dear wife was a public school teacher in CA. She worked private sector for 9 years, paying into Social Security for those years before becoming a public sector teacher in CA.

If you are up to it, suggest you look into a very part-time job of some sorts so that you can get up to 40 quarters. And read about windfall elimination repeal.

Dear wife is clearing only $282/mo from SocSec now based on her meager private sector earning history, but our understanding is that’ll go way up next Spring when I start SS and her benefit is calculated as a percentage of my robust earning history.

Wow it seems like your wife and I are in somewhat similar situations!

As to SS, I just barely passed the 40q mark earlier this year due to 8 full time SS jobs, along with some part-time jobs throughout the years. So right now if I were to retire and collect at 62 or whatever, I'd be getting more or less the minimum.

I did read about the WEP repeal, and believe me, there was no one happier than me and my public school colleagues! Granted, for me it won't be much money, but I did have a couple of coworkers who worked for a while in the private sector before switching to teaching, so they were ecstatic.

Thanks for the response!