Do you think I am ready to RE?

[rms977]

Hi!

New to this forum. Am anxiously counting the dollars until I can RE. I absolutely hate my work (engineer) and can't wait to get away from it. Here's my info - what do you all think?

ROTH IRA $36k
IRA/401k $260k
Brokerage and other cash investments $445k

Home is 4 years old, 15 year mortgage at 5.125%, owe $77k - this is my only debt. 13 years left on mortgage. House is probably worth $200k. Furniture is all brand new.

Car is 2004 model with only 12,000 miles. VW Passat (reliable & safe).

I am 47 single female. Excellent health. No children.

Will receive $711/ month from pensions after reaching retirement age (60 something?). SS could be around $1400/month but who knows what it will be when I reach the age of receiving it.

Biggest concern is health insurance. Am not concerned about keeping busy if I quit my job - I've got plenty to do. Am just concerned about financial status - am I in a place to do this? I can always look for seasonal work or work in a department store for some income. I just don't wan to deal with the politics and nonsense of this world that I work in.

Estimate living expenses to be $35k per year including the mortgage payments. Have done all kinds of calcs but again the big unknown is the medical insurance.

What do you all think? Appreciate your feedback.

 

[laurence]

What age do you want to retire? How much are you contributing to your investments per month?

Good luck with the Passat, mine has been safe, but not reliable. Latest fiasco is the Anti-Lock Brake Controller Chip malfunctioned. Not under warranty - even though I have a warranty- cost to replace is almost 3 grand. Needless to say I haven't replaced it yet and I'm driving around with plain old disc brakes until I can get a refurbished chip to my shade tree mechanic.

Last thought, life is too short to hate your work IMHO. You have almost 3/4 of a million saved up at this point, is there a job you would like more that may pay less? Even if you stopped contributing entirely, you could have 1.5 mil and a paid off house, plus SS (there will be something at the time you retire, I'm betting).

 

[Martha]

Have you used the FIRECalc retirement calculator at http://www.fireseeker.com/?
If you were looking to retire now at your young age it looks risky to me.

How is your health? Where do you live? For health insurance options in your state go to the Georgetown University guide for your state at www.healthinsuranceinfo.net.

Edit: I missed that you mentioned your health is excellent. Health insurance for the healthy can be inexpensive. One question might be whether your state allows your premiums to increase in the future based on age or bad health.

 

[REWahoo]

Estimate living expenses to be $35k per year including the mortgage payments. Have done all kinds of calcs but again the big unknown is the medical insurance.

What do you all think? Appreciate your feedback.

rms, welcome to the forum.

Yes, the medical insurance "thing" is the big question mark for many ER's and aspiring ER's. Does your $35k per year expense estimate include anything for medical coverage? Have you researched the cost of an individual policy?

Laurence asks a good question about finding a more satisfying (less hated ) job. But there are those here that will tell you that you can retire now if you have the desire and self-discipline to do so.

Me, I like a little wiggle room...

 

[retire@40]

I think you're right on the edge. If you plan to supplement your income with some part-time work, it could work. If you hate your job that much, I would figure out a way to make it work. At 47 you may have 30 more years of good living, if you believe the statistics. And the earlier years tend to be the best years. How much is each of those 30 years worth to you?

Who knows, with all the extra time you will have, you may find a like-minded guy that can help share some expenses with you.

The key is to make a realistic budget that includes an entertainment line and a miscellaneous line for unforeseen events.

 

[Dawg52]

I ran some numbers on the FIRE calculator using what info you gave, using a budget of 35k a year, and it looks like you could ER now but it would be tight. I would stick it out for another 5 years. Your portfolio should be well over a million at that point.  As for health insurance........apply for a personal policy at least  a year before you retire.  You need to get it while you are healthy. Any blimp what so ever on your health record can and will cause problems in being approved. I bought mine 2 years before my retirement date.

Good luck with your plans!

 

[Mountain_Mike]

rms,

I also agree that you seem to be on the "edge." What I would recommend is to continue your present savings and lifestyle until Age 50, and bail out on your birthday!

One more thing, if you are thinking in the future about serious relationships or marriage, please do a pre-nup. The wrong guy could shatter your dreams, and your ER.

Good luck,
Mike

 

[maddythebeagle]

My personal plan is to pay off my mortgage first to free up cash flow. Does your FIRE budget subtract out taxes (ss, medicare, and income taxes)? When you take out your money from your 401k, the first amounts of income will be tax free (standard deduction of 5k 3200 per exemption, and you could add another 2600 for a health savings account deduction if you want to pursue that for your health care). Also, it looks like a safe bet, these numbers will increase 2% or so a year).

Also, your taxable accounts, do you have a plan to take that. Qualified dividends would be taxed at 5% and go to 0% in 2008. After that hopefully it stays at 0. So again, the money you take out, could be a lot more than you think.

 

[tozz]

Apropos of nothing, I find it curious that a couple of folks made reference to future changes in rms's single status.  I'm not keeping track and I could be wrong, but I don't recall similar comments when single males introduced themselves.  (No implied criticism--just a noted oddity.)

 

[Jay_Gatsby]

Apropos of nothing, I find it curious that a couple of folks made reference to future changes in rms's single status.  I'm not keeping track and I could be wrong, but I don't recall similar comments when single males introduced themselves.  (No implied criticism--just a noted oddity.)

Well, I noticed that Mountain_Mike suggested a pre-nup for the original poster, and nobody has said a word against her getting one. Mind you, when I mentioned that I was considering asking my girlfriend to sign one, many people jumped all over me as being "unromantic" and "untrusting".

 

[moghopper]

Well, I noticed that Mountain_Mike suggested a pre-nup for the original poster, and nobody has said a word against her getting one. Mind you, when I mentioned that I was considering asking my girlfriend to sign one, many people jumped all over me as being "unromantic" and "untrusting".

It takes a village to support a double standard.

 

[Mountain_Mike]

Re:  The Pre Nup

I would clarify that I think it is a wise precaution IF the two prospective partners are drastically "unequal" in the amount of assets they possess.

It may seem crass and unromantic, but it pays to deal in reality.   It is a fact that there ARE people out there who would seek to take advantage of a potentially well-heeled spouse.   Unless one is willing and able to face the possibility of "giving away" half their nest egg, a pre nup later in life is a good idea for one of either gender.

This is just my humble opinion, and of course the original poster said nothing about any of this.

 

[Jay_Gatsby]

Re:  The Pre Nup

I would clarify that I think it is a wise precaution IF the two prospective partners are drastically "unequal" in the amount of assets they possess.

It may seem crass and unromantic, but it pays to deal in reality.   It is a fact that there ARE people out there who would seek to take advantage of a potentially well-heeled spouse.   Unless one is willing and able to face the possibility of "giving away" half their nest egg, a pre nup later in life is a good idea for one of either gender.

This is just my humble opinion, and of course the original poster said nothing about any of this.

Understood. Back to the OP's original question. I agree that she's borderline on RE. Not that one can't live on $750,000, but it would be a safer idea to try and push that up to $1,000,000+ and get health insurance in place before going RE. If the OP had a working spouse with health insurance, that would allow her to RE immediately. Unfortunately, that's not the case. Overall, delaying RE for a couple of years might be a better idea.

 

[retire@40]

I agree that she's borderline on RE.  Not that one can't live on $750,000, but it would be a safer idea to try and push that up to $1,000,000+ and get health insurance in place before going RE.

I believe the OP was open to working some part-time job just to supplement her income.  That being the case, using your numbers she may be able to RE on $750K if she can earn $10K at a PT job.  $10K of earnings = $250K investments.

If the OP had a working spouse with health insurance, that would allow her to RE immediately.  Unfortunately, that's not the case.  Overall, delaying RE for a couple of years might be a better idea.

It depends on how you define RE.  If she has to depend on a spouse to RE, then is it really RE or is it leeching off her spouse to be able not to work.  One danger in this is that if she can't RE on her own, what happens if her spouse leaves her after she has quit her job?  It would be nice to share expenses with a spouse, but it could be dangerous if your RE plans depend in large part on your spouse working.

 

[Martha]

I
It depends on how you define RE. If she has to depend on a spouse to RE, then is it really RE or is it leeching off her spouse to be able not to work. One danger in this is that if she can't RE on her own, what happens if her spouse leaves her after she has quit her job? It would be nice to share expenses with a spouse, but it could be dangerous if your RE plans depend in large part on your spouse working.

Sorry RMS for continuing the hijack. I don't think people are really advising you to get married as a way to retire.

But. . . this makes me think about the marriage issue. Some here have said that others aren't really FIREd because they are dependent on a spouse's income. What about spouse's resources? If you get a divorce and you split assets half and half with your spouse, would you have to go back to work? I suppose most of us are willing to take that retirement risk.

 

[MJ]

Estimate living expenses to be $35k per year including the mortgage payments. Have done all kinds of calcs but again the big unknown is the medical insurance.

Does the $35k include your fed, state and local taxes. if it didn't, you may need another $4k or more (10%+).

 

[obryanjf]

rms, one of my options is to retire and live off of the brokerage accounts and at the same time roll $ from 401k/IRA to Roth accts. Now you are heavy in brokerage accts and could live a long time off that and for years roll pre tax $ to tax free $. Control the amount you roll to keep your tax rate to 0%, 10% or 15%, what ever you prefer. I do not remember the numbers but you can roll something like 30 or 40k while staying in the 10% bracket.

job

 

[rms977]

Well, thanks for all the responses.   I did suspect that I was on the edge.  It's just that I dread so much every day going to work and the only thing that keeps me from loosing it completely is seeing my net worth increase.  If figure that if I stick this out for a year and a half more I can put another $30k into my 401k ($15k for 2006 and 2007) and another $80k in my brokerage accounts and then I can RE.  How can I do this you ask?  I am working overseas where I have essentially given up my life now so that I can RE and have a life later.  Is that a good tradeoff?  Only time will tell.  About a year ago, I did try to find work in the "real world" at lower paying jobs and found that no one wanted to hire me because I was overqualified and they thought I would leave because I would miss the work I was doing and/or the money.  I tried to explain that I wanted something more fulfilling and wasn't that concerned about the money but I guess no one wanted to take the risk. 

So yes, my $35K includes an estimate for health insurance (catastrophic so low cost) and it does include fed taxes. No state taxes in FL except intangibles tax.

Anyway, a prenup is definitely a consideration, but first I have to get back to the "real world".  And I admit that marrying for health insurance is an option but I will run the household, do all the cooking cleaning, yardwork, etc so I offer something in exchange including a nice home and a nice nest egg.  But  do have some standards.....

 

[bosco]

Anyway, a prenup is definitely a consideration, but first I have to get back to the "real world". And I admit that marrying for health insurance is an option but I will run the household, do all the cooking cleaning, yardwork, etc so I offer something in exchange including a nice home and a nice nest egg. But do have some standards.....

Lemme get this straight....your offer is we get married and you will run the household, do the cooking cleaning, yardwork, provide nice home, nest egg....

and all I have to do is provide you health insurance?

geez, too bad I'm already married Well, I take that back--I'm happily married.

But still--hell of an offer. I'm an engineer too--maybe that would put me below your standards

 

[retire@40]

Lemme get this straight....your offer is we get married and you will run the household, do the cooking cleaning, yardwork, provide  nice home, nest egg....

and all I have to do is provide you health insurance?

geez, too bad I'm already married      Well, I take that back--I'm happily married.

But still--hell of an offer.  I'm an engineer too--maybe that would put me below your standards   

She wasn't under oath when she made that statement.

 

[Dawg52]

Hey baby I'm single.   Kind of set in my ways tho. 

 

[REWahoo]

Hey baby I'm single. Kind of set in my ways tho.

Sounds too good to be true, Dog. Be darned sure you sample the cooking before you commit to anything.

 

[justin]

rms977,

I'm sort of interested in doing the overseas engineering thing for some big $$. I'm currently a civil engineer most talented in transportation/traffic. Can you expand on where/how you got started (experience you had before starting the overseas work). How much more the pay is relative to the average stateside for the same type of work? Is it a 40 hr/wk job with paid housing/expenses? What field or fields do you work in and is there an international market for civil/transportation engineers from your experience?

 

[rms977]

Yep, you got me right on the offer. Well, you do have to pay for some of the food and the utilities too and your own car. But I will do all the cooking and cleaning and yardwork. And I am a damn good cook! And I can rebuild a carburetor, too.

To Justin... working overseas. Kind of just fell into it. I work in a very specialized field and I am on a project for the US gov. (I work for a gov contractor). Most work is construction work and I suspect that your skills would be in demand. Just start searching the major construction firms websites, look at all the jobs that could possibly be related and apply, apply, apply..... Americas Job Bank has an overseas section. Typically you will wait around and wait around regarding an opportunity and then all of a sudden they want you there yesterday. So if you are serious about doing this start getting your ducks in a row - set up a POA, set up online banking, make sure your ATM card can be used internationally, check your credit card expiration dates, set up things with your bank so that you can make international wire transfers, start getting Hepatitis A and B shots and some others that I can't think of right now. Get your passport, if you don't already have one - make sure it is still good for a few years. Get any dental work done before you go. Figure out what you will do with your house if you go. Some companies will pay to put your stuff in storage. Or maybe you will want a housesitter.

I can't speak for all overseas positions but mine is as follows: Base pay (that would be your wage in the US) plus 50% hardship uplift (this will vary based on location - my previous location was 25% uplift) plus 15% completion bonus (after one year, on base pay, based on 40 hour week - again based on location and company), housing is typically provided or paid for, I get COLDA - cost of living differential allowance (varies based on location and base pay). You also get some travel allowances and that depends on the company too - so you get to travel and see the world on the company's dime. And the biggie - foreign tax exclusion of $80,000 if you become a bona fide resident of another country or meet the physical presence test, which is to be out of the US 330 out of 365 days in a year. This is a big advantage because if your annual income is say $150k, you exclude $80k and then start from there with your other deductions. And more than likely you will have a 401k available to you. This is a big reduction in taxable income. But I can tell you that a lot of these jobs are in pretty awful places and the isolation can be tough and you may end up working 12 hour days (doesn't bother me because I am doing this to make money). It can be a pretty sweet deal financially but depending on where you go, you can give up a lot of your life. Hope this helps.

Good luck.

 

[justin]

rms,

Thanks for the response. I think I get the general idea - you can make a lot of money, and you will have to put your "life" on hold till you fulfill the contract. Could one bring their wife and kid along to the overseas job location and live in the provided housing (or do people actually do this)? I think being away from my family would be a deal breaker for me. Otherwise, I think I'd be open to a new experience, at least for a year or two. Kind of like the peace corp, except you get a lot of cash.

What sort of countries/areas have you been in or are there typically jobs in? Just all over the world?