Am I close?

[street]

333three

Congratulations on your accomplishments! Very nice and a portfolio like yours takes work and doesn't happen by accident.

I'm far from an expert on finances but but running your numbers with what you say are your expenses quoted, you should be good for 45 years in ER. Of course you have SS coming at some point also.

Health care is something you will want to explore (ACA).

I beleive you will be good to go and because you are responsible spenders and savers.

 

[333three]

333three

Congratulations on your accomplishments! Very nice and a portfolio like yours takes work and doesn't happen by accident.

I'm far from an expert on finances but but running your numbers with what you say are your expenses quoted, you should be good for 45 years in ER. Of course you have SS coming at some point also.

Health care is something you will want to explore (ACA).

I beleive you will be good to go and because you are responsible spenders and savers.

You are right – I suppose we will have some Social Security benefits, but don’t include that because I have no idea what it will actually be. Additionally, I don’t have a firm idea of what health insurance might cost. I’ve seen it discussed here with wildly varying numbers. I’ll have to figure that out.

My two concerns are sequence of return risk as it seems we are at historic highs right now. I would also like to figure out what the maximum that I could spend would be while still ensuring a safe retirement

 

[OldShooter]

... I would also like to figure out what the maximum that I could spend would be while still ensuring a safe retirement

So would the rest of us.

 

[street]

You are right – I suppose we will have some Social Security benefits, but don’t include that because I have no idea what it will actually be. Additionally, I don’t have a firm idea of what health insurance might cost. I’ve seen it discussed here with wildly varying numbers. I’ll have to figure that out.

My two concerns are sequence of return risk as it seems we are at historic highs right now. I would also like to figure out what the maximum that I could spend would be while still ensuring a safe retirement

IMO you will be just fine. Your spending is ~1.3% of portfolio money not including SS. Your low WR will help you recovery faster and sustain your curtain amount fairly well tough times.

If history repeats itself you will have a much larger amount of money as time goes on. We are all in the same boat if things go bad, then you will need to adjust and stay the course.

 

[pacergal]

I would recommend you
*check SS website to find you numbers,(making sure you put in 0 income from now until claiming)
*check healthcare.gov for your state and find some accurate healthcare costs for your family
*run Firecalc with these numbers and make sure yearly spend includes all taxes, etc.
Also under the Early Retirement FAQs is a sticky: Some Important Questions to Answer Before Asking - Can I Retire? Answer those questions honestly and thoroughly.

But, as others have mentioned, you are looking good.

 

[Bamaman]

Congratulations. You've done very well for yourself.

I'm not going to get tied up in the numbers.

But with relatively low yearly expenses, do you have any hobbies or other things to take your time after retirement? How are you going to spend your days when you realistically have 40-50 years in retirement?

I had a friend that sold his lead smelting plant when the EPA started getting tough. He had all the money he could spend. He did a little flying and a lot of soaring in gliders to start with. And he used to go to the stockbroker's office and watch the tickertape--day trading. But mostly, he sat and watched television and did not much of anything the last 30+ years.

It's one thing to prepare for retirement fiscally. One must also prepare for retirement mentally and physically.

I ER'd 12 years ago, and have never quit building--something all the time. I'm trying to finish my current projects, and go into grass cutting only mode.

 

[teetee]

Well done. I would consider converting IRA to Roth between now and RMD age while you have no income to minimize tax liability in the future.

You are both young. Are you going to travel after ER? Or you and your wife are not ER and the same time?

 

[stephenson]

You're pretty darn young - do you like whatever you do for work? Do you have a lot of associates at work? Same questions for your spouse?

 

[cnocmmz]

Consult firecalc.com and plug in your numbers. You'll also need a social security estimate (see https://www.ssa.gov) and any pension info you may have to successfully use firecalc. For your expenses be sure to include federal and state income taxes you'll need to pay, especially if/when you plan to cash out of IRAs or pay capital gains as you cash out of stocks for living expenses.

Putting in 75K for spending and no SS or pension into firecalc, you are looking good for a 45 year retirement. SS will make you look even better.

Make sure your expenses are correct though, 75K including health insurance and taxes is fairly frugal, and I commend you if it works for you, but big "one time" expenses seem to pop up on a regular basis, e.g. new roof, new car, new tires, new furnace, etc.

others on here are better at this so they will probably chime in.

Concur: 75K may be a bit frugal! Think hard about the future and what you want to do after the gig is over? You have done well and I want to be optimistic for you; just double check your numbers and how you are invested. I am of the belief that the next decade or so will be challenging for investors.

 

[RetireeRobert]

Hello all-

I just wanted to post an update and see if there are any new thoughts...

Our assets have increased and are now as follows:

1.8 mm in taxable at 60/40 (index and bond funds)

341k in cash

878k in IRA

I am still 48 and DW is 44.

We still own our home with no mortgage and I assume the value has gone up during this real estate frenzy, but I don’t count its value in my numbers since I need a place to live.

Our spending is still low.... last year I ended up spending about $40k and this year we are on track for the same. That includes property tax, but not income tax or health insurance. I don’t count income tax because if I retire, it will be substantially less than we pay now. I don’t include health insurance because it is paid 100% by my company (both of us).

If I retire, I think I may spend slightly more than I spend now because I would hope to travel more....maybe another 10-12k. Also, I would have to pay health insurance and some income tax, although I don’t know how much if I’m not working.

So... where do you think I stand? Am I close?

It is enough. $3 million assets and no debt. At very conservative 3% withdrawal rate with annual inflation adjustments, that $3 million will produce $90,000 annual income. Or way, way ultra conservative withdrawal rate of 2% will produce income of $60,000. You stated annual spend level of $45k to $50k. So you are good to go.

Congratulations on positioning yourself so advantageously.

 

[flintnational]

Congratulations. You have done a great job with your savings. At your age, I would keep my WR at or below 3% for several years. In your late 50's or early 60's it could be increased to around 4%. At your young ages, I would be concerned about SORR and longevity risk. 3% during the early years should get you past both risks. But, plan to be flexible.One or both of you could be retired for 50+ years.

 

[pb4uski]

.... Am I close?

No, you're not close... you're over by a lot. You worked too long.

 

[RetireeRobert]

No, you're not close... you're over by a lot. You worked too long.

+1 This is certainly another way to look at it!

 

[corn18]

No, you're not close... you're over by a lot. You worked too long.

Winner, winner chicken dinner! Retire now and figure out the next phase of your life.

 

[cfran]

This is a complete no-brainer, well done you are more than ready to pull the plug. Up you budget if need be, plenty of wiggle room even at your young age!

 

[Exchme]

At your high asset/spending ratio, I expect you will end up with a really happy heirs.

One small thought - to optimize your lifetime taxes, you will want to fill your IRA with your bonds to minimize that account's growth to avoid a tax torpedo when RMDs happen while you are drawing SS.

Enjoy your well deserved retirement!

 

[333three]

UPDATE 3:

First, the financials:

We are at 3.5 mil (ish) 1.9 is in a taxable account, 420k is in cash and 230k of the total is our paid off home and 900k is in retirement accounts. We invest in index funds through vanguard and have a conservative asset allocation. That does not include money in my business, which I would estimate to be another 150k.

We have spent $37k so far this year. That number does not include income tax and it does not include health insurance because my business pays 100% of that for my wife and me. It does include property tax for our home. I have some larger expenses coming up (windows and a furnace). Also, in the future I may like to upgrade to a nicer house (maybe spend another 150k) and spend a little more money.

I’m really struggling to keep going. Mentally I am done with my business. However, I am really worried about leaving because I am making good money and once I turn the faucet off- that’s it. I am also anxious because i wonder about the risk of leaving work when the market is at all time highs and because everything feels pretty chaotic and uncertain right now. Further- I would consider myself pretty risk adverse, financially.

What is your assessment? How much longer should I go? How risky would it be to pull the plug?

 

[teetee]

The firecalc showed you and your wife are ok to retire with 50k annual expense of 3.5M net worth.

You may want to look into the extra expense of health insurance and anything you will need to pay out of pocket after you sold / close / leave your business.

What are you going to do after retirement? If it is anything that costs money and cause the predicted annual expense to change, take that into consideration.

I don't think anyone can say for sure if you are ready until you have all the hard numbers (income tax for one) laid out. It is not always possible.

 

[HI Bill]

So would the rest of us.

Yes, this whole ER thing would be a piece of cake, if we just knew the SOR, future inflation rates, and our date of death! Like many here, trying to maximize spending in ER, and using the Bogleheads' Variable Percentage Withdrawal spreadsheet.

 

[427Vette]

UPDATE 3:


I’m really struggling to keep going. Mentally I am done with my business. However, I am really worried about leaving because I am making good money and once I turn the faucet off- that’s it. I am also anxious because i wonder about the risk of leaving work when the market is at all time highs and because everything feels pretty chaotic and uncertain right now. Further- I would consider myself pretty risk adverse, financially.

What is your assessment? How much longer should I go? How risky would it be to pull the plug?

I have not read through the whole thread but I am only guessing that you have received positive feedback on your financial condition. Seeing is how you have a healthy taxable account and a nice amount of cash it looks fine at a glance for you to be able to flip the closed sign around on your business.

My wife and I were in your exact position for the last number of years.we are your age, our portfolio is very close to yours, own our home, no debt etc. Our business was absolutely wearing us out and like you I was struggling with the idea of walking away for all of the same reasons. It’s like I could have written your post word for word. I think it’s more difficult for business owners to hang it up and walk away than if you were just an employee cashing a paycheck. It will likely be impossible to get back to where you are once you quit.... I had the same EXACT worry. I finally got to the point that our business and people in general were sucking the life out of me. We wrapped it up almost six months ago so I am by no means an expert with such little time under my belt but will offer my opinion anyway. I say you are good to go. You are obviously very smart and resourceful to get into the position you are in and if a bump in the road pops up you will figure it out. Do you think you will ever be more healthy, more energetic and younger than you are today? If you can do it do it now before your business takes away the rest of your health, energy and good years.

Have you thought about trying to sell your business? I never in a million years thought our business was something that was marketable. After hiring a business broker and listing it for sale we had many buyers come forward. I ended up giving an absolute sweet deal to our employees so the business ended up staying in tact pretty much the way it was. This made it easier for me to walk away. Maybe it’s something you could look into.

Regarding your concerns of quitting when the market is at an all time high- all of us certainly hope that this not truly an all time high or none of us investors will do well going forward. Would you feel better if the market was in the toilet?

Good luck in your decisions!

 

[EastWest Gal]

I think you are close, maybe there financially.

Even if you sell equities in the taxable account, remember you will only be taxed on the gains, as well as capital gains distributions and dividends. And if your investment income is under $80K, and you have no other income, your capital gains tax is zero. Of course there are state, local, and property taxes, but you have accounted for these.

Regarding the ACA, the cliff returns in 2023. If you stay under the cliff, insurance premiums can be reasonable. Don’t forget to include actual health care expenses.

If your MAGI is close to the cliff, currently about $69K, get HSA compatible insurance, and put some cash into you HSA accounts to keep you under the ACA premium cliff.

You can get an idea of your reportable income by looking at your brokerage statements on your taxable portfolio. Add in the capital gains on the equities you may sell when you start withdrawing.

Our 70/30 taxable portfolio is about $2.5M and throws off about $55K of income each year. I’m slowly selling the only single stock we own first, as it throws off dividends instead of gaining in value, and drags down the portfolio value while increasing tax exposure.

Check out healthcare.gov or your state exchange and browse around to see what your premium expenses could be. You can shop without registering.

Estimating federal income tax can be done at dinkytown.com.

The after tax portfolio helps a lot in early retirement.

 

[333three]

UPDATE 4:

I did it.

Sorta….

I’m finally backing off, but not quitting completely. I met with my business partner and let him know I need to get out.

We need to figure it out, but the tentative plan is that he will buy me out and I will continue working there part time as a consultant. I will take a small salary and the company will take care of health insurance for me and The Spouse.

Our spending for 2021 came out to 48k, including everything but health insurance. We have about 3.3m invested and after the business sale, should be around 3.5. (Roughly 2.5 taxable and 1 in retirement) We still have a paid off house and zero debt. No kids.

I’m so nervous about turning off the faucet- we have been making so much money (at least in the context of my life). But I am 49 and The Spouse is 45. Even a 3% WD rate gives us about 100k a year- double what we spend. Logically, that should be plenty safe, I think. However, I’m still really nervous- I don’t know why.

However, because I am so burnt out, I am forcing myself to do this. I think I should be okay, but if not, I suppose I will just have to figure it out.

Thanks for all the input and advice. It was definitely a factor in my decision making [emoji16]

 

[Kork13]

You're in a great position! Even better that you'll keep a small consulting role to retain health coverage & a small salary.(how much? That of course reduces what you'll need to draw from your assets.) I think you need to ease your mind about starting to live off of your assets. Maybe start building detailed plans for exactly how/when/from where you'll draw your living expenses. Build specific plans for what you're going to do post-FIRE, how you'll spend your time, what you'll be involved with, and so on. Plan out your future, dream it in detail, and I think that'll help you to see how viable & reasonable your retirement path really is. All of us see it. You just need to see it yourself.

 

[someguy]

Congrats!

It's naturally hard to go from money coming in and the pot growing to no money coming in and the pot (potentially) shrinking. Nothing wrong with taking the path to full retirement in incremental steps. A small salary and PIF HI gives you a nice cushion against a sequence of return risks -- if the market tanks at any point in the next few years, you can always stay on a bit longer and have no worries at all.

I don't think you gave specifics, but I'm a little surprised a business that got you to over $3mm in net worth is only worth $200K. Although, that's not critical to your being financially in the clear to quit completely whenever you want.

 

[teetee]

Congrats.
You are nervous for a good reason but not good enough to make yourself more anxious about the future (until the SS benefits kicks in).

Play some golf, do some small hobby projects, and go on a road trip for a while and then see if your spending after ER is what you anticipated, then decide if you wish to get a part time job to fill your day.