Can I call it quits now?

[itsabouttime]

Hi. Can I call it quits now? and DW call it quits at 55?
My plan is to continue to be frugal for 12 more years and let my assets grow a bit then maybe increase my allowance to 65k/yr at 60yo but I don't really buy anything. We've done $3k-$6k vacations (cruises, Disney, etc..) and we can take it or leave it.

Me:
47yo
current income 125k/yr at Megacorp
401k savings - 1,400k
investment - 600k
home loan - 150k @ 4% 15yr for 8 years left
situation - want to reclaim my time now and sing 'My Way'

DW:
48yo
current income 100k at a state job
pension - 70k/yr @55yo
401k savings - 400k
situation - working until 55 for pension and medical

No kids. We only need 24k/yr to pay the bills (not including mortgage). Mortgage is 36k/yr for 8 years. So assuming a 25% tax rate, we need to withdraw 75k/yr (1.25*(24k+36k)) for 8 years then change to 35k/yr (1.25*(24k+5k for inflation)) when 59yo or 60k/yr.

An example of my frugality. I went into Costco to buy some king crab like a boss for a meal for us. When I saw the price of $28/lb and saw them packaged between $45-$80, I instead bought a duo pack of mussels for $10 and splurged on two baguette for $5 knowing I could buy a sourdough loaf for $1 on sale at Safeway or Raleys.

Our finances has been separate as it's my job to hold the fort and keep the power on while her income is for "fun". Also, she wants me to keep working as that is ingrained of that's what people should do until official retirement age. For me, I'm letting the numbers guide me.

 

[HI Bill]

Welcome! It looks like your taxable "investment" (excluding 401(k)) is only $600K. Is this a rental, a brokerage account, or fine art? Do you have a distribution plan? Since you can only withdraw $ from the $600K (penalty-free) for the next 12 years, I'd say you were short, were it not for your wife's income. Have you factored in health care to your post-RE budget? My main concern for you would be the stability of your marriage. A divorce at any time could derail your plans. Have you developed a solid budget for retirement? Your tax rate should drop well below 25% after you retire. You might also want to run FIRECALC.

Check out the questions to ask yourself:

https://www.early-retirement.org/fo...-answer-before-asking-can-i-retire-69999.html

 

[Whisper66]

It is well worth your time to play with www.firecalc.com . It's a simple tool used by many here and will give you a good idea if you can retire today or not. I played just a bit with your numbers. I assumed:
- Both of you live to 92
- Your "investment" funds were in a typical brokerage account (so they are liquid assets)
- Your 401k and investment assets are invested in a pretty typical 75% equity / 25% fixed asset balance
- I ignored your wifes assets since you called this "play money"
- I ignored any pensions or social security income
- Assumed you paid off the remaining house mortage of 150,000 today leaving 1,850,000 in liquid assets (1,400,000 + 600,000 - 150,000 )
- Spending rate of 1.25 x 24k = 30k/yr (goes up yearly with inflation)
Using those assumptions, firecalc returns a 100% success rate if you both retired today with those expense and savings levels. And using the "investigate tab", it says you could raise yearly spending to $65,800 and have a very comfortable 95% success rate. BTW - 24k is quite a low spending level so worth considering how much room you have for "other stuff" ... the "investigate tab" is quite useful for this.

The above is just to show you what Firecalc provides and give you an idea of the ballpark you are in. Suggest you play with the tool some to test where you think you are. Note: Never just accept someone elses interpretation of your numbers. For example, mortage numbers didn't add up to me unless the $150k was just the remaining balance of a larger mortage. Just saying I can't be sure of all the numbers here so well worth you running the tool with whatever values are correct.

Another way to look at this is your spending is estimated to be $75,000 if house mortage is paid off as planned over 8 yrs, then goes to 35,000. You + your wife total savings are $2,400,000. $75k spend is only 3.3% of your combined assets and 35k is only a 1.4% rate. These rates are well within normal bounds of early retirees and should be sustainable as Firecalc shows. There are various studies by Bengen or Kitces good folks here could point you to that provide background.

 

[Katiek]

That state pension for your wife is a big incentive and I can see why she'd keep working until 55. Have you discussed how she'd feel about working if you were retired? I know some people here have said their spouse is fine because the other spouse picks up a lot of the household chores and responsibilities. But I can imagine it could also cause resentment in certain circumstances.

 

[cooch96]

You can certainly make your nest egg stretch with your spending habits. It sounds like the only difficult part will be getting DW to accept that kind of thinking. Would it satisfy her expectations if you left megacorps and took on a part time gig or did irregular consulting in a field you seriously enjoy? Maybe you could start a new career as a dive or ski instructor.

 

[Vacation4us]

You need DW on board. It could be a very long 7 years for her and you if this is not a team decision.

Personally I wouldn’t be pleased if there was an I in team.

I experienced this personally as DH’s view was if he was working I was working. I couldn’t imagine having a retired DH if I had no choice but to work 7 more years.

Just my 2 cents.

 

[HI Bill]

You need DW on board. It could be a very long 7 years for her and you if this is not a team decision.

Personally I wouldn’t be pleased if there was an I in team.

I experienced this personally as DH’s view was if he was working I was working. I couldn’t imagine having a retired DH if I had no choice but to work 7 more years.

Just my 2 cents.

+1! Maybe you can buy the groceries, clean the house, do the laundry, care for the yard and cars, and cook the meals.....might just work!

 

[Dtail]

What is her pension if she retires before 55?

 

[RetireeRobert]

home loan - 150k @ 4% 15yr for 8 years left

No kids. We only need 24k/yr to pay the bills (not including mortgage). Mortgage is 36k/yr for 8 years. So assuming a 25% tax rate, we need to withdraw 75k/yr (1.25*(24k+36k)) for 8 years then change to 35k/yr (1.25*(24k+5k for inflation)) when 59yo or 60k/yr.

Also, she wants me to keep working as that is ingrained of that's what people should do until official retirement age. For me, I'm letting the numbers guide me.

Couple of comments:
1) Why not refinance that mortgage right now to a 2%'s range mortgage (less than 3%)? Then can shave some money off monthly payments and put into savings instead. Or keep up same monthly payment on mortage and pay it off faster.

2) With no kids and stated expense levels for retirement, you two are in great shape.

3) Wife wants "you to keep working"? She just not ready to pull the plug, or she would retire but you keep working?

 

[pb4uski]

You seem like a sharp dude so I think you already know the answer.... you just need to get her around to it.

It sounds like if you stopped working that her take home pay from her $100k job will easily take care of $24k of expenses and the $36k mortgage.

I'm skeptical of your 25% tax assumption, especially once you are both retired. Use the dinkytown tax calculator or TurboTax's What-If worksheet to look at your tax situation 1) if you stopped working with no withdrawals, 2) if you stop working with different levels of withdrawals and 3) if neither of yuor were working. I think you'll be pleasantly surprised.

 

[RetireeRobert]

I'm skeptical of your 25% tax assumption, especially once you are both retired. Use the dinkytown tax calculator or TurboTax's What-If worksheet to look at your tax situation 1) if you stopped working with no withdrawals, 2) if you stop working with different levels of withdrawals and 3) if neither of yuor were working. I think you'll be pleasantly surprised.

Could be he is rolling both federal "and" state income taxes into that effective 25% rate he states, as a "total" tax rate. But he can easily enough check things out with the links you provided.

 

[pb4uski]

Could be... I now see he is from California... so in that case 25% might not be enough!

In any event worth doing a few simulations to confirm or deny it.

 

[itsabouttime]

@Bill
Thank you everyone for the input. Especially Bill to point out my blind spot as I didn't consider divorce as an outcome. Maybe I did as she reads this, jk.

Yeah, living 12 year on that 600k is a single point of failure; most likely medical expense(s). I need the market to return 8% average (but but the market has been delivering 11% for a while.. yeah yeah past performance doesn't predict the future) before I have to beg my wife for a little financial help from the "fun" money. There are options out there too such as getting a HELOC loan to hold us over until I turn 59.5 then the reinforcements from my 401k can show up.

@cooch96
dive or ski instructor.. . More like web surfing instructor. I think I would learn how to read a financial statement and try to reverse engineer how Warren Buffett digest information. But this world is much more different than assuming assembly lines are where the company value is at. It's much more complicated with services and how do you value that? The market has done that some how but that can also be fickle. I'm looking forward to rambling more during retirement! I just need to find my donut or coffee shop to settle into my imaginary office cubicle.

@Dtail
not sure. I would guesstimate 40k. Seems acceptable to me as my entertainment is definitely <$5k/year.

@RetireeRobert
3) She can't really retire now due to needing long term insurance so she might just be feeling envious. I may have to throw in some tangibles. So far she has a personal lunch provider while she works checked off.


off to play with more FireCalc.

 

[cyber888]

Looks like it will work with $2 milllion and your wife working till 55. The problem may not be the money as some say - it's your arrangement with wife still working.

 

[davebarnes]

I think, for marital harmony, you should work for 5 more years.

 

[viking111]

she wants me to keep working as that is ingrained of that's what people should do until official retirement age.

This statement could be the most important thing you said in your post.
Will this issue cause you to have significant tension in your combined life?

 

[dak2018]

Unless I missed it - does her state retirement include medical coverage? My wife and I are on ACA coverage, and at a modest 80K income level in California, the monthly cost for a Silver plan in out area is $850. If there is no medical coverage, I think you need to consider the impact of bridging until Medicare age.

But I think a couple of the other posters are right - this needs to be a family decision. I was involuntarily retired while my wife kept working for a couple of additional years. That worked out o.k. as I took over all of the household duties that I was deemed competent to perform. She got extra time, I had extra time, so it all worked out.

 

[cnocmmz]

You need DW on board. It could be a very long 7 years for her and you if this is not a team decision.

Personally I wouldn’t be pleased if there was an I in team.

I experienced this personally as DH’s view was if he was working I was working. I couldn’t imagine having a retired DH if I had no choice but to work 7 more years.

Just my 2 cents.

Agree...Normally that approach will not work out if you want harmony. I would recommend continue working until DW is ready to quit as well. That pension will be the key, because I can only assume the state pension comes with medical Benefits as well.

 

[Mr._Graybeard]

If you're sick of working at megacorp, maybe you could find a new job that's more personally rewarding (but probably less remunerative). You don't have to continue slaving away at something you hate.