Hello! 51, not quite there, career doldrums, etc

[chemEguy]

Greetings everyone. I’m an active member at Bogleheads under a different username but I wanted to seek out other helpful input and like minded folks as we get closer to retirement.

Some background…

Both 51, combined salary is ~400K with variable comp that can add another 50 to 75K. My wife earns about 65% of that.

About $4.8 million total portfolio with maybe 900K of that in regular taxable or otherwise liquid accounts.

We have 11 years left on a 15 year mortgage after we refinanced four years ago, eliminating a 30 year mortgage that had 20 years left. Total equity is 250K with 150K to pay off.

One kid in college and one starting next year.

Annual spending is about 160K…that’s an all in number, excluding college costs.

I’d like to retire at 55, that would put us at all college paid for. The FIREcalc models I’ve run all look very good on the assumption we take SS at 62 at $2K per month.

My career has gone stale and stagnant as a result of family driven decisions made when our kids were small, no regrets but I am living with the inevitable outcome of that decision. My wife’s career was prioritized over mine and our mutual decision has definitely paid off. I’ve gone into a “hang in there mode” as walking from a 150K job would be silly when we are this close to hitting our number. My wife is dealing with stress rather than boredom like me because she’s got the responsibility that goes with the payday. Like me, she’s hanging in there where she’s at because we’re close.

So that’s our story, I hope to gain insight and wisdom from those that are here.

Thanks for reading!

 

[38Chevy454]

Welcome to the forum. It seems you are in pretty good shape already. Using the 4% rule you can basically make your budget expenses from current savings. So add in a few more years of savings along with investment growth and you should be good for retirement. College expenses in the rear view, and just need to get from 55 to receiving SS age, whenever you decide to take it. Once SS kicks in you are lower withdrawal required. You didn't mention any pension type income, so assuming you don't have that? Any employer provided medical insurance type benefit? That may be an expense you increase once stopping work. You can probably pay off the mortgage any time you want.

So tough it out, just like the savings over the years was keeping that retirement nestegg in mind. Keep the goal of the end of your career as a target, you are almost there!

 

[HarveyS]

A question: You said $160k, all in, expenses. Does this include income taxes? Does that include medical and dental insurance?

 

[NeilDH]

Hello and welcome! Even with some detail questions like above, you're looking very good to retire basically whenever you want. You have a big portfolio even with $160K in annual expenses. The $900K in non-retirement accounts can itself keep you going starting at age 54 give or take. You probably could wait on taking the SS beyond 62, but you'll have time to decide on that. Many here have FIREd on a lot less, so take comfort!

 

[chemEguy]

A question: You said $160k, all in, expenses. Does this include income taxes? Does that include medical and dental insurance?

So, some good questions there that I’ve kicked around. My assumption is that certain expenses will go away (kids on their own) while new expenses may come in (health insurance). Without knowing exactly what that looks like I’ve made an assumption that expenses will remain net unchanged. I’ve also assumed that mortgage payments will simply be replaced by something else.

The tax question is the one that I am most concerned about as I’m not certain what bracket we will land in….but that 160K must be an after tax value.

 

[chemEguy]

Hello and welcome! Even with some detail questions like above, you're looking very good to retire basically whenever you want. You have a big portfolio even with $160K in annual expenses. The $900K in non-retirement accounts can itself keep you going starting at age 54 give or take. You probably could wait on taking the SS beyond 62, but you'll have time to decide on that. Many here have FIREd on a lot less, so take comfort!

I’ve spent a lot of time in the FIREcalc calculator over the years. If I plug in our current situation with yearly savings, portfolio changes to cover remaining college, SS benefits at 62, live to 95, yearly expenses at 205K (not the 160K in my opening post) and run the “Investigate” tab it tells me:

2024 - 80% success rate
2025 - 91% success rate
2026 - 95.5% success rate
2027 - 100% success rate

We shall see. As noted, I’m very much in the “hang in there” phase of my career where I have to swallow my pride as younger engineers that I interviewed to hire are being promoted / jumped into management roles above me. It’s not a good feeling. I have to remind myself that we’re probably in a much better position financially then many I work with because we prioritized saving and investing in our 20s.

 

[perez99]

I also "hanged in there" for about 2-3 years due to new management that was driving the department into the ground. It will be worthwhile at the end of your wait.

 

[Koolau]

Welcome to the Forum.

It sounds from your figures that you are on top of your FIRE game. One thing that might help with your decision of when to go would be to experiment with FIRECalc, reducing your retirement spend level and see what it would take to get say 95% success at each year. With your good salaries and relatively low mortgage, there should be some play in there someplace. Is 160K spend "inviolate?"

One thing I sorta questioned in your opening was the $2K SS payment at 62. With your current salaries, that seems low. Have you explored that completely? For instance, maximum SS at 62 is about $2700 per person.

Other things to consider cutting:

Once kids successfully launched, how much life insurance do you need (might be able to cut significantly.) Depending on your current insurance, you might even be able to get some cash from insurance you don't need.

We spend virtually "nothing" for clothes now that we're retired. We have great, practical wardrobes by purchasing at Goodwill/thrift stores. If that's something you and DW can countenance, there should be significant savings in retirement.

Food prepared at home instead of eating out has been a major saving for us. When w*rking with kids, we spent a bundle on eating out. Since Covid, we rarely eat out. The savings are in the thousands.

Cars: We don't drive a lot so we don't buy new and we keep our cars "forever." Since retirement, 19 years ago, I've spent a total of $33K on our cars and I still have 2 very viable cars, each with less than 100K miles on them (a 2000 and a 2012.) They w*rk just fine for our needs. We're all very different on this subject, so just a suggestion.

Vacations: Can you cut back since retirement is a permanent vacation and you may no longer need to spend top dollar to crowd vacation experiences into just a few weeks.

Memberships: Golf/country club/gym, etc. Lots of available savings there if you are willing.

Location: Are you locked into where you now live/house? In retirement, you can move to lower cost housing or even state if need be.

I'm not suggesting a life of privation. I'm only suggesting that you may have options to make FIRE more attainable. It's really a matter of priorities. Is keeping current life style more important than FIRE at 55? No problem if it is, but that is a decision that you need to talk over with DW.

Heh, heh, I completely understand how you feel about being the "old guy" and watching people you brought in "rise" to the top more quickly. Been there, done that, got the T-shirt. "Official" age discrimination is illegal, but after 50, Megacorp shoves you into a box labeled "open in case of emergency" or gives you a sign that says "kick me." It's the way of the world and and inducement to FIRE though they don't call it that.

Best luck and please check back often. My gut says your golden, but YMMV.

 

[chemEguy]

Yes, rounded down on SS to be conservative. Actual should be 2150 and 2500 per month in today’s dollars on the assumption we’ve already stopped working.

If I rerun with those SS figures:

2024 - 84.5%
2025 - 94.5%
2026 - 98%
2027 - 100%

The timing doesn’t change but the percentages improve.

Insurance…we took out 20 year terms when our first was born, a solid choice I think. That goes away soon.

No memberships. I want to stay in our house, we like it here.

Vacations chew up a lot, my wife and I will continue to spend here as we both enjoy them.

Cars, nothing big going on there.

 

[Diogenes]

Greetings everyone. I’m an active member at Bogleheads under a different username but I wanted to seek out other helpful input and like minded folks as we get closer to retirement. ...

My career has gone stale and stagnant as a result of family driven decisions made when our kids were small, no regrets but I am living with the inevitable outcome of that decision. ...

ChemEguy, I'm also a poster on Bogleheads, and was pointed to this Forum from BH. We have similar situations, except that I don't have a family and have been earning a much smaller income. My career field isn't as lucrative, and some combination of poor judgment and bad luck, has launched me into unexpected Early Retirement. The chief obstacle hasn't been percentage probabilities in FireCalc, but the psychology of dealing with unfinished business, and embracing "prematurely" a life-stage for which one has been planning with some effort for decades.

In your case, the psychology looks to be solidly resolved, with the main impediment financial. That being so, one supposes that every additional year of working and saving, much advances your case. If you can steel yourself to working say another 24 months, making for yourself a calendar where you cross-off each successive month, then you might find felicitous compromise between struggle in working-life and struggle to make the numbers for FIRE work out.

 

[RetiredHappy]

I think he said he has about $5.7M in his investment portfolio, so I believe there is no financial impediment.

 

[turbo89]

$4.8m, but I agree it doesn’t seem like a financial impediment.

3.5% withdrawal rate yields $168k / year (more than the OPs $160k goal). It seems like the OP could retire today with a little bit of planning… especially with some sweet talking to DW, whom could cover all expenses with her salary for a few years.

 

[chemEguy]

$4.8m, but I agree it doesn’t seem like a financial impediment.

3.5% withdrawal rate yields $168k / year (more than the OPs $160k goal). It seems like the OP could retire today with a little bit of planning… especially with some sweet talking to DW, whom could cover all expenses with her salary for a few years.

My wife endures a lot of stress to collect the paycheck she does. It would be unfair for me to retire first and place the full burden on her. We will continue to pull together until FIREcalc says 100%…after that it’s a different ballgame.

We could cut back and retire tomorrow, but there’s a guy at my office who started a year ago after getting pushed out of his executive role who summed it up when we chatted:

“I worked a lot of years for a good retirement and I intend to retire well, I don’t mind an extra year or two to make it happen.”

I should probably keep his mindset in my own head. He went from executive manager to engineering liaison in order to put the finishing touches on his portfolio.

 

[Diogenes]

...there’s a guy at my office who started a year ago after getting pushed out of his executive role who summed it up when we chatted:

“I worked a lot of years for a good retirement and I intend to retire well, I don’t mind an extra year or two to make it happen.”

I should probably keep his mindset in my own head. He went from executive manager to engineering liaison in order to put the finishing touches on his portfolio.

That is a positive spin on the oft-maligned "One More Year" (OMY) syndrome. OMY is panned, because it feels self-limiting. It's a sign of dissatisfaction, that enough isn't quite enough... so that one yearns for more, and more, and more. It feels like unbridled consumption, except that instead of consuming in the conventional sense, it's a form of self-denial in favor of more savings.

The rationale behind the positive-spin, is a sense that one's career, even if diminished and no longer fun, remains a form of self-identity... and simultaneously, one feels oh-so-close to some retirement goal, be it a dollar amount, a number of years of service, or an age. There is something particularly defeatists to give up, when running a marathon, at the 24th or 25th mile. Had it happened at say the 15th mile, OK, one wasn't sufficiently fit to run the race. But so close to the finish line, feels like a crime against oneself, to exit right then and there... even if the remainder of the race is painful, even if one has burning spasms in one's chest-cavity, and thumping pain in one's joints.

Of course, with a formal marathon, there is a definite end. It would be stupid to run 27 or 28 miles! OMY ends when one has set a clear goal, and achieved it. Let's hope that all of us, whether already retired, nearly-so, or not quite, have sufficiently mulled such a goal.

 

[Exchme]

You are doing really well. A couple comments and questions -
Your SS claiming plan needs to be examined, typically the higher earner would wait to claim until 70, see opensocialsecurity.com.

How much is in tax deferred? My math says you have $3.9M in some combination of Roth vs. tax deferred. If most of that is in tax deferred, you have a serious tax burden upcoming and will want to do Roth Conversions once you retire. The need to do Roth Conversions also plays into the date for claiming SS as waiting to claim gives you more low tax space for conversions. Roth Conversions also compete vs. keeping income low to get ACA premium credits. A big enough balance in tax deferred will drive all those decisions.

When it comes time to work out those details, use a detailed calculator, engineers seem to want to cobble together their own tool, but the tax code is complex and you will undermine your analysis with your blind spots. Others have put in many thousands of hours of work to capture the important parts of the tax code, don't reinvent the wheel.

It seems like your taxable account should be filing up faster as your savings rate outstrips the maximum you can sock away in 401ks? Maybe you are able to do mega-backdoor Roths?

 

[chemEguy]

I went into Quicken this weekend and added things up. Of our $4.8 mil portfolio, $1.2 is regular taxable or otherwise liquid holdings and the other $3.6 is Roth, regular IRA, and 401k.

 

[Exchme]

I went into Quicken this weekend and added things up. Of our $4.8 mil portfolio, $1.2 is regular taxable or otherwise liquid holdings and the other $3.6 is Roth, regular IRA, and 401k.

The regular IRA and 401K (the tax deferred accounts) are big players in your future taxes - can you share what the regular IRA and 401k total up to?

Also, is it that both of you have a Roth or just one? If only one, the other should start a Roth even if just to make a small Roth Conversion - that starts a 5 year clock on the tax status of withdrawals.

 

[chemEguy]

Roths are 210k
401k are 1.7 million
Regular IRAS are 1.7 million

We are not eligible to contribute to Roths and have not been for quite some time. Each of us have the accounts noted above.

 

[Exchme]

Roths are 210k
401k are 1.7 million
Regular IRAS are 1.7 million

We are not eligible to contribute to Roths and have not been for quite some time. Each of us have the accounts noted above.

You have a serious tax liability in your IRA & 401k accounts. When doing "can I retire" type calculations with tools like FireCalc that are not estimating your taxes, you should derate the value of those accounts. Here, since the accounts are so large, I would derate them by, say, 20-25%. You will be taxed on withdrawals/RMDs at a blend of rates, but the last $ to come out will be in higher brackets.

When you are finally ready to pull the ripcord, you will want to do detailed planning. The paradigm shifts for detailed planning from "can I survive the worst case" to "how to optimize for the more likely cases". In those (hopefully more likely cases) where markets act kindly, your tax deferred balance could more than double by the time you need to start taking RMDs, so your RMDs could be nearly $300K.

With those large tax deferred balances, it will probably be more advantageous to do Roth Conversions than chase ACA premium credits (or possibly alternate years of ACA credits vs. Roth Conversions). Also, deferring SS claiming for at least the larger earner will likely make sense to make room for Roth Conversions.

You should still maximize contribution to your 401ks as you are in a high tax bracket currently. One thing you can do to start the process of slowing down your tax deferred account growth without hurting your overall returns is to optimize asset location. If you put your bond holdings in tax deferred and stocks in Roth & taxable, that will start to slow down the growth of tax deferred. It will also help lower your current tax bill by getting bond dividends/CD interest (which would be taxed as ordinary income) into your tax deferred and ensuring that your taxable has only stocks, which will have mostly qualified dividends and capital gains (taxed at the lower LTCG rates).

 

[chemEguy]

I’m running FIREcalc for withdrawals that are spend + 20%. Since I want 165K, I’m using 205K yearly.

 

[pacergal]

Even when kids are "launched", there may be extra expenses, if you wish too--weddings, help with house down payment, grand babies!

Have you answered the Questions under Early Retirement FAQ's
Some Important Questions to Answer Before Asking - Can I Retire?

Congratulations on your savings. You are well on your way.

 

[2029FIREaway]

I think you’re ready now. Well done!

 

[Koolau]

My wife endures a lot of stress to collect the paycheck she does. It would be unfair for me to retire first and place the full burden on her. We will continue to pull together until FIREcalc says 100%…after that it’s a different ballgame.

We could cut back and retire tomorrow, but there’s a guy at my office who started a year ago after getting pushed out of his executive role who summed it up when we chatted:

“I worked a lot of years for a good retirement and I intend to retire well, I don’t mind an extra year or two to make it happen.”

I should probably keep his mindset in my own head. He went from executive manager to engineering liaison in order to put the finishing touches on his portfolio.

Yeah, as long as "OMY" is specific to a goal (such as 100% result on FIRECalc) I see nothing wrong with it. I suppose a lot of us w*rked longer than we had to. We could have left earlier and accepted a "lean FIRE" existence. As long as we have a goal in mind and stay to meet said goal, OMY doesn't really apply IMHO. I think of OMY being about other things than reaching an actual goal.

I think you have it figured out. You understand that you need a bit more in your stash to meet your retirement goals and you're unwilling to settle for less. Good on you!