Hello from Bay Area CA

[QG67PK00]

Hello Folks,

I would like to share my early retirement story and get your comments and feedback on our plan.

We took early retirement this year.

We are in our early fifties. We were both employed in the tech industry in the Bay area, California.

We have been fortunate to have good retirement plans from our employers, which currently stand at 1.5M+ combined. Most of it is in traditional 401k, remaining in Roth. We also have a 2.5M+ in taxable accounts (brokerages, bank/CD/savings bonds).

We have 2 mortgages, one for our current home and the other for a rental property. The rental is almost net cash flow neutral (rental income almost equals rental expenses). Recently we refinanced both mortgages for 30 years.

We have some dividend income that we no longer reinvest. We also have a bank savings/CD and I bonds portfolio. These should cover expenses for the next 4 years, then we will pull some LT capital gains from stocks. During the first 5-8 retirement years we plan to do some Roth conversions while minimizing the tax impact. We do not plan to touch Roth accounts for as long as possible.

For medical insurance, we signed up for COBRA. Insurance under ACA is an option after COBRA expires. At age 55, one of our employer's Retirement Health Insurance Plans becomes available as bridge insurance until we become eligible for Medicare at 65. We are looking into Long Term Care Insurance, not sure if it is worth it.

We hope to live comfortably in the Bay area for the foreseeable future.

 

[RobbieB]

That shouldn't be a problem.

I used COBRA also, was cheaper than buying myself.

Welcome to the party and have fun!

 

[EastWest Gal]

I spent my first 40 years in the Bay Area. Congratulations on your ER!

 

[captain3d]

If you have no income ($25k) ACA is free

 

[ut2sua]

Welcome. OP, without knowing your expenses, it still sounds like you are in good shape.

 

[daylatedollarshort]

We also retired from tech jobs in in our early / mid fifties in the Bay Area. It has been a great place to be retired between the weather, parks, day trips, wine country and arts and culture. After starting out on COBRA, we managed our income to have a $2 a month ACA plan many years.

Enjoy your early retirement!

 

[F.I.R.E User]

Where in BA?

 

[wingfooted]

40 year plus retirement horizon, no income, self funded medical, mortgages on all real estate, expensive cost of living area.

$4MM is an impressive amount to have saved over your careers to be sure. Plus social security in another fifteen years or so.

Personally I think it’s not enough by itself and you need to look at a supplemental income stream other than your rental.

 

[FIREd_2015]

Welcome to the forum. I've been in the Bay Area (Peninsula) most of my life. Other than traffic getting worse because most people are going back to the office, it's been a great place to live and have a home base. Depending on your health situation, might want to take a look at ACA coverage. The Inflation Reduction Act of 2022 extended health insurance subsidies to reduce monthly premium expenses for the next three years. If you're relatively healthy and select the higher deductible Bronze plan, it could be virtually free.

 

[pacergal]

Welcome to the forum.
Your savings of $4 million is impressive. Have you run firecalc and are you comfortable with the results?
Curious as to why you keep, and just refinanced, a rental that is net neutral, that doesn't seem to add to your income flow?

 

[Sojourner]

If you wouldn't mind sharing, what is your current annual spending? Have you run FIRECalc to see how your projected spending holds up over your planned retirement (or, would have held up historically) given your net worth? I know the Bay Area is one of (if not THE) most expensive areas in the entire country. Having a net worth of $4M+ is certainly a great position to be in, but it's only "enough" if your spending is sustainable. Using a 3% withdrawal rate, for example, you should be fine spending up to about $120k/year, which I'd imagine isn't much above average for the Bay Area.

 

[daylatedollarshort]

The main expense of living in the Bay Area, and many other HCOL areas, is really all about housing. If you have a paid for home, or a strategic, arbitrage mortgage with a low fixed rate loan, I don't see it costing much more to live here than other locations. We ran the numbers quite a bit after we retired and decided to stay. Our house has more than doubled in price since we retired so we've come out ahead by not relocating.

I have some widowed friends with paid off houses and low property taxes due to Prop 13 who told me they had a hard time spending more than $35K a year or so. That was around 10 years ago, so even inflation adjusted, their current spending wouldn't be that high. We have a strategic mortgage that makes more money in investments than it costs, had a $2 a month ACA plan most years, and our kids went to in state, public colleges tuition free because of the generous CAL grant program. Despite the fake news narrative, income taxes for middle and upper middle class households are pretty low.

Groceries are cheaper here than they are for our relatives in a rural area because they only have one grocery store with monopoly pricing. We have a mecca of most of the big discount grocery chains all within a few miles of our house.

There are many services and community programs for seniors here, too, like subsidized ride share programs and deeply discounted senior fares for the trains and ferries. The libraries have free passes to most of the major tourist attractions, like a couple of thousand of dollars worth of passes per year per person, if you used them all. Many of the tourist attractions have discounts for locals and seniors. One year I bought a Costco gift card for 30 Napa wineries for $100. I'm in three seat filler programs so there are more free and discounted live event tickets available from those each week than we have time to attend. The list goes on and on, but we find it actually pretty easy to live very well here without spending a fortune.

In our experience $4M is more than enough for most retirees to live very comfortably here.

 

[QG67PK00]

If you wouldn't mind sharing, what is your current annual spending? Have you run FIRECalc to see how your projected spending holds up over your planned retirement (or, would have held up historically) given your net worth? I know the Bay Area is one of (if not THE) most expensive areas in the entire country. Having a net worth of $4M+ is certainly a great position to be in, but it's only "enough" if your spending is sustainable. Using a 3% withdrawal rate, for example, you should be fine spending up to about $120k/year, which I'd imagine isn't much above average for the Bay Area.

Our annual expenses are around 100k, and we also get dividends of around 30k, so net expenses are closer to 70-75K. FireCalc and other online tools showed >95% chance of success.

 

[Alex The Great]

If you're relatively healthy and select the higher deductible Bronze plan, it could be virtually free.

This is for Kaiser, correct? Or some other HMO? From my observation, those virtually free plans are useless because they are not accepted by doctors in descent networks in SF Bay Area. On my opinion, the only ACA plan worth to check is Blue Cross of California PPO which is not free by any means. But it is still not accepted by Stanford Health which I can manage but some other folks may have a problem with it.

 

[Major Tom]

The main expense of living in the Bay Area, and many other HCOL areas, is really all about housing. If you have a paid for home, or a strategic, arbitrage mortgage with a low fixed rate loan, I don't see it costing much more to live here than other locations. We ran the numbers quite a bit after we retired and decided to stay. Our house has more than doubled in price since we retired so we've come out ahead by not relocating.

I have some widowed friends with paid off houses and low property taxes due to Prop 13 who told me they had a hard time spending more than $35K a year or so. That was around 10 years ago, so even inflation adjusted, their current spending wouldn't be that high. We have a strategic mortgage that makes more money in investments than it costs, had a $2 a month ACA plan most years, and our kids went to in state, public colleges tuition free because of the generous CAL grant program. Despite the fake news narrative, income taxes for middle and upper middle class households are pretty low.

Groceries are cheaper here than they are for our relatives in a rural area because they only have one grocery store with monopoly pricing. We have a mecca of most of the big discount grocery chains all within a few miles of our house.

There are many services and community programs for seniors here, too, like subsidized ride share programs and deeply discounted senior fares for the trains and ferries. The libraries have free passes to most of the major tourist attractions, like a couple of thousand of dollars worth of passes per year per person, if you used them all. Many of the tourist attractions have discounts for locals and seniors. One year I bought a Costco gift card for 30 Napa wineries for $100. I'm in three seat filler programs so there are more free and discounted live event tickets available from those each week than we have time to attend. The list goes on and on, but we find it actually pretty easy to live very well here without spending a fortune.

In our experience $4M is more than enough for most retirees to live very comfortably here.

A big +1. For folk in other states, the relatively high gas prices in CA are the other main item that costs more here - and it's even more expensive in some of the more remote and rural areas. Housing is the big one though. As you say, smaller communities often have higher grocery prices, along with less selection. Often, the difference in selection is substantial. Large metro areas in CA are spoiled for the sheer diversity of fresh produce (whether from regular markets or farmers markets). Greater selection, and lower prices than the small towns.

Also, as you say, there are often many options for cheap and free things to do in big cities. Museums often have free days. Movie theaters have low-priced matinees. Our local independently-owned theater in Oakland has $7.50 matinees, with matinees on Tuesdays costing only $6. One of our library branches has a tool lending library which will allow you to borrow a variety of tools, including power tools, for free, as long as you have a library card. The list goes on.

But, as you say, the big one is housing. Find a way around that, and you've got it made - as long as you like big cities, that is!

 

[ut2sua]

The main expense of living in the Bay Area...

Isn't this the first positive post regarding living in the Bay area ever ?
Daylatedollarshort was correct on all counts based on my personal experience living in the Bay area.

 

[Major Tom]

Isn't this the first positive post regarding living in the Bay area ever ?
Daylatedollarshort was correct on all counts based on my personal experience living in the Bay area.

Daylatedollarshort has often mentioned this fact - that it's the cost of housing that makes living in many large metro areas expensive for a lot of people - and they're right. Nailed it. There are lots of positives to living in big cities (if you like that sort of thing). The cost of housing is usually the main (often the only) hurdle to overcome.

 

[daylatedollarshort]

This is for Kaiser, correct? Or some other HMO? From my observation, those virtually free plans are useless because they are not accepted by doctors in descent networks in SF Bay Area. On my opinion, the only ACA plan worth to check is Blue Cross of California PPO which is not free by any means. But it is still not accepted by Stanford Health which I can manage but some other folks may have a problem with it.

We had a Blue Shield Bronze plan for $2 a month for premiums when we kept our income under the pre-pandemic ACA cliff. Our local hospital and doctor network associated with it were all in network.

When our kids were in college the Cal Grant limit was close to the ACA cliff, so by managing our income we had free college tuition and almost free medical premiums. (The Cal Grant option only worked because most of our assets were in FAFSA exempt asset classes like retirement accounts, personal residence and small businesses.)

 

[daylatedollarshort]

Also, as you say, there are often many options for cheap and free things to do in big cities. Museums often have free days. Movie theaters have low-priced matinees. Our local independently-owned theater in Oakland has $7.50 matinees, with matinees on Tuesdays costing only $6. One of our library branches has a tool lending library which will allow you to borrow a variety of tools, including power tools, for free, as long as you have a library card. The list goes on.

There's always a ton of free and low cost things to do just on the Johnny Fun Cheap list alone - San Francisco Events & Free Things to Do | Funcheap.

 

[Irishgirlyc58]

Some places on the edge of the Bay Area think their housing is worth as much as S. F. I’m looking at you Davis, CA [emoji102]
Their housing prices are ridiculous- for that kind of money I’m going to need a beach close by.

 

[ut2sua]

Some places on the edge of the Bay Area think their housing is worth as much as S. F. I’m looking at you Davis, CA [emoji102]
Their housing prices are ridiculous- for that kind of money I’m going to need a beach close by.

That is a side effect of UC Davis, I believe.

 

[daylatedollarshort]

That is a side effect of UC Davis, I believe.

I think so, too. Fairfield is closer to SF and less expensive.

 

[FIREd_2015]

This is for Kaiser, correct? Or some other HMO? From my observation, those virtually free plans are useless because they are not accepted by doctors in descent networks in SF Bay Area. On my opinion, the only ACA plan worth to check is Blue Cross of California PPO which is not free by any means. But it is still not accepted by Stanford Health which I can manage but some other folks may have a problem with it.

I'm went with Palo Alto Medical Foundation (PPO) which is now part of Sutter Health. I've been with them since the late 80's when I was a wage slave. It was more expensive than Kaiser but with the extended subsidy last year I believe I got back almost all or all of my premiums when I filed my tax return (I pay the full premiums up front each month). I've only used it twice over the last 10 years. Once to get a wellness check and a referral for a colonoscopy and the second time for the colonoscopy. I pretty much use it as catastrophic health insurance because of the high deductible (Bronze Plan). For routine vaccinations I go to a local CVS Minute Clinics which is fully covered by Blue Shield of CA. For routine health checks I volunteer for various healthy patient studies at Stanford and UCSF where I can get paid for MRIs and blood tests. I saw a post on this forum about ordering blood work using Jason Health. I'll probably use Jason Health this year since I want to get an Advanced Lipid Panel (lipoprotien and apolipoprotein) plus other tests that would not be covered by a wellness check.

 

[Irishgirlyc58]

That is a side effect of UC Davis, I believe.

It is. There is a housing shortage in Davis even for rentals.
At least there was when I worked there.

 

[GoBears]

I think so, too. Fairfield is closer to SF and less expensive.

But, Fairfield isn’t comparable to Davis. Davis has all of the attributes (mostly good, some bad) of a college town and is just a Yolo Causeway outside of Sacramento. Fairfield has an Air Force base and is still at least an hour from San Francisco with no traffic. And another 30 miles or more from Sacramento than Davis.