Anxious

[lbymfire]

I have been reading the boards for a while but finally decided to register and become an active member of the community.  Before I get into my situation, I wanted to say thanks for all the great comments that are here.  I have learned a ton and managed to enjoy myself along the way.

My situation:
Financially, my wife and I have been fortunate.  We have always earned a very good living and also lived well below our means.  As a result, we now have a sizable nest egg despite only being in our mid-late 30s.  My wife is already retired and we have no kids (looks like we will not be able to have any).     Our current standard of living is a modest 1.6% of our current after-tax savings.  If I continue to work, in another year it could be as low as 1.4%.  Albeit, we would like to increase our standard of living to 2.2%.  However, our health is mixed and while none of our issues appear to life threatening at the moment, I do worry about health insurance long-term.  I also worry that our parents may need financial assistance long-term as they hopefully outlive their own reirement savings.

I have played with all the calculators and have created a ton of spreadsheets and all of them say we should be just fine.  However, I worry about the potential length of our retirement - hopefully 50-60 years and the inflation/health care risks.  I also fear future returns will be below that of the past - at least here in the States.

I'm sure some of you will read this and say what are you waiting for?  I appreciate this perspective but I still haven't been able to pull the plug.  Also, as crazy as my fears may be, my wife shares them - so for now my retirement is on hold.  I guess my question is - our we conservative to the point of ridiculousness?  Or do others have similar concerns despite being below a 3% withdrawal rate?

Thx for taking the time to read my post.

 

[brewer12345]

Welcome.

I think you shouldn't take the leap until you are comfy with the risks you will be takin, namely the risks of running out of money, having difficulty getting health insurance, and possibly having to support your parents. Having said that, a withdrawal rate of around 2% is extremely conservative, and most of your risks can be mitigated. For example, you can hedge equity market returns or simply load up on FI. With your low withdrawal rate, it won't matter so much if you have, say, 60% of your assets in TIPS. There are also ways to mitigate or solve your health insurance worries. In the extreme, you could always move to a state that does not allow insurers to reject individuals and mandates a uniform premium for everyone (NJ does this, as do several other states).

But again, I wouldn't make the leap until you have figured out what you are comfy with.

 

[lbymfire]

Thx brewer. We are prepared to move and have already identified IL as a possible location - a state that with similar laws to NJ. This is key because it is very likely we will incur significant medical expenses down the road. I should add that we will not have a pension nor will we have any health insurance other than what we fund ourselves.

Thx again

 

[shiny]

Hi there and Welcome!

DH and I sound a lot like you (same age range as well as no kids). When we look at the spreadsheets we see that we can do it, but the fear of inflation, etc. make us worried about giving up the job income.

I guess there just comes a point, and DH is almost there, that work is so frustrating that it is almost impossible to put up with since you know that you don't HAVE to. At that point you may really start assessing whether it is worth it to give up your life to the job.

What helped me make the mental shift was having an extra "bucket" apart from the "Retirement Nut" as we call it, that could be tapped for emergencies or pleasantries that in no way affect the SWR, etc in the future. Maybe it is just my cautious personality, but having that different fund caused a shift in my thinking. If it ever got to the point where that ran out, then we would have to be more careful with our spending. Maybe some type of similar "mental accounting" might work for you too.

I look forward to reading more about you and your DW's decisions.

 

[brewer12345]

Thx brewer.  We are prepared to move and have already identified IL as a possible location - a state that with similar laws to NJ.  This is key because it is very likely we will incur significant medical expenses down the road.  I should add that we will not have a pension nor will we have any health insurance other than what we fund ourselves.

Thx again

If you haven't already, check out www.healthinsuranceinfo.net for the ground rules.

BTW, if I were in your shoes, I would have retired already.

 

[Martha]

Thx brewer.  We are prepared to move and have already identified IL as a possible location - a state that with similar laws to NJ.  This is key because it is very likely we will incur significant medical expenses down the road.  I should add that we will not have a pension nor will we have any health insurance other than what we fund ourselves.

Thx again

Are you sure?  It looks like Illinois has a risk pool system for those who are turned down for individual health insurance.  http://www.healthinsuranceinfo.net/il00.html (sorry, can't get the link to work)

It looks like the premiums are roughly 125% TO 150% of the rate charged an individual of comparable age in the private market.  Rates vary based on age and location.  

My concern about very early retirement is that the time period is so long that it is difficult to make any reliable predictions about what is going to happen in your life over that many years.  What might be a fine amount of money to live on now, may be inadequate when you are 50 or 60.  I wonder what I would have estimated my future expenses at when I was 35.  Cell phones?  Laptops?  Satellite TV?  Motorhomes?  Wouldn't have crossed my mind.

 

[brewer12345]

My concern about very early retirement is that the time period is so long that it is difficult to make any reliable predictions about what is going to happen in your life over that many years.  What might be a fine amount of money to live on know, may be inadequate when you are 50 or 60.  I wonder what I would have estimated my future expenses at when I was 35.  Cell phones?  Laptops?  Satellite TV?  Motorhomes?  Wouldn't have crossed my mind.

Yeah, but how many of these things are necessities? And us yunguns (those without kids, anyway) have many ways to reduce expenses if necessary, provided you are willing to think creatively.

Oh, and OP is talking about a 2% withdrawal rate. Even hosuc would allow that to be safe.

 

[shiny]

My concern about very early retirement is that the time period is so long that it is difficult to make any reliable predictions about what is going to happen in your life over that many years. What might be a fine amount of money to live on know, may be inadequate when you are 50 or 60. I wonder what I would have estimated my future expenses at when I was 35. Cell phones? Laptops? Satellite TV? Motorhomes? Wouldn't have crossed my mind.

You are tapping into my fear of the unknown for the future. Not just inflation on what we spend now, but expenses on things that we haven't even thought of yet!

But, I just read in another thread that you quit going to meetings. I think if DH could do that then he could still work. Its all those dang meetings that are making his job miserable! So, he thinks about getting a different job, but that leads to the "but why?"

 

[lbymfire]

my mistake - i think I was confusing the IL rules with the MA rules. Thx for the link - the website is very helpful!

 

[SteveR]

...You are tapping into my fear of the unknown for the future.  Not just inflation on what we spend now, but expenses on things that we haven't even thought of yet!...

Padding your budget with an "other" category should cover some of the "toys" in the future. After all, how long do you think your TV, stereo and other electronic gear is going to be compliant with changing media standards? HD, DSS, DD, THX, mp3, etc. are all moving targets for media in the home. 10 years ago I was buying Laser discs because VHS sucked. My grandkids get a kick out of them now....huge DVDs.

Stuff breaks or wears out. If you don't have a paycheck for 30-40+ years you really need to dial these things into your budget...even if you don't have a crystal ball on the exact technology...just assume you will need some of level of it in the future.

 

[Martha]

I don't have any idea as to the OP's assets or expenses, so I am only speaking in generalities.  I don't want to be a poopy pants, but on occasion I have seen young people on this board who say they can easily live on $20,000, to $25,000 a year.  Maybe that is 2% of their portfolio, so they feel quite safe.  But when I was young I could and did live on very little money.  I like (I don't have to have) a different life style now.  I wouldn't say that I spend a pile of money but I do spend more than what I would have imagined I would have spent some years ago.  But I like my motorhome, dish tv, cell phones, high speed internet, etc.  And I have family obligations as well that were unexpected and large. 

OTOH, the OP may have plenty of money so it is no issue for them.

 

[Billy]

Martha

My concern about very early retirement is that the time period is so long that it is difficult to make any reliable predictions about what is going to happen in your life over that many years. What might be a fine amount of money to live on now, may be inadequate when you are 50 or 60. I wonder what I would have estimated my future expenses at when I was 35. Cell phones? Laptops? Satellite TV? Motorhomes? Wouldn't have crossed my mind.

Shiny

You are tapping into my fear of the unknown for the future. Not just inflation on what we spend now, but expenses on things that we haven't even thought of yet!

We have a chapter in our book called, uh... The Fear Chapter (brilliant, eh?) We discuss the nature of Fear, and how it simply finds someplace to hang onto. You might have every conceivable base covered... then you start worrying and fretting over what you must have forgotten.

The truth, is that none of us knows the future. And... it doesn't always play out like we planned.

Money is important in retirement, there is no doubt. What is equally important is doing things that build one's self-confidence, finding people and interests that are life supporting, and learning a measure of self trust.

In my experience, all the money in the world can't buy those above mentioned things. You can be a gazillionaire and still be scared s*%&less inside, be afraid to take a chance, or not really know who you are and what is important to you in life.

Fear finds a way to erode even the best laid plans if one allows it.

Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[lbymfire]

Thx for all the comments. No worries Martha, we definitely don't think we can live on $25K/yr. However, the fact that we do have a sizable nest egg in taxable accounts makes me worry about the after-tax returns I should be using when I do my calcs. Frankly, I'm uncomfortable using returns higher than 4%. I may be like some of you. When I do calcs - I tend to add extra expenses, use low returns and assume some portion of my portfolio just disappears day one. I know it sounds crazy but it helps us get comfortable with the decision to pull the plug. For those of you that have already retired, I tip my hat to you.

 

[Mountain_Mike]

I say, retire now! 2% is ultra conservative, but even if things fall apart, consider working part time. Everyone seems to think that there is no turning back from a decision to retire. This isn't true, it is your life and you can choose to do something to make some money if your needs and wants change in the future.

 

[Billy]

MountainMike, well said, and I completely agree.

After a period of time passes in retirement, one starts to chomp at the bit wanting a creative project, stretch the brain or have a committed social activity. Part time work, making $$ from hobbies or exchange for your skilled services, or volunteering is very satisfying. That little bit of extra cash, should it come your way in exchange is always welcomed.

Remember, lbymfire, you will be retiring your job, not your life. You only put your job on the shelf, not your future options. 

2% is fabulous. Enjoy! and Congratulations!

Akaisha
Author, The Adventurer's Guide to Early Retirement