Hi! 46, married, no kids, homeowner, with investments. New!

[later_riser]

Hi,

I am 46, married, no kids, and we are homeowners in a dream home on a dream island, already. We live on Martha's Vineyard. People may think it's only rich people here, but my wife and I actually live and work here year round and work hard! But I am looking into early retirement for us and this forum is a new thing. Since this is anonymous, my resources are:


-Approx 60K basic annual expenses, with are generally fixed, including mortgage, car, cell, food, etc. and travel, but health insurance always could fluctuate. And inflation, of course!

- Net worth of close to 800K, exclusively in investments and savings, some securities and mostly various retirement funds over the years. Assets over a million. No debt other than mortgage.

-Looking to partially retire early, i.e. go down to part-time job for my wife is the main goal, as early as available, since we already count ourselves as extremely fortunate with where and how we live. This means one or two regular part-time jobs between us, perhaps worth 40K/year?

-We are not high earners. We have a joint income for two of about 90K gross a year. That said, we max out our retirement accounts every year, but frankly they don't let you add much per year. The limit of $6500/year per person is not a lot. The excess we sometimes invest elsewhere, or it goes into a savings account - the "emergency fund".



So...say you want to go down to part-time, from 90K to, I don't know 40K/year, to start with...how do you begin the process if your retirement income isn't available until 59 1/2 for example! And Social Security isn't available until later, either? How do people get around all that, if they want to bow out of the system ten years early!?



Apologies in advance for not being well aware in this area, maybe these are basic questions, but I (we) would love to know where to begin to explore how to partially (and then fully) retire in a rational and safe way. That's what an "introduce yourself" forum is for, I guess, to get started from not knowing anything at all about this game.


I suppose there are best books and sites, so any of those are welcome, as are all thoughts that are friendly and realistic.

 

[Bigdawg]

Welcome. I won't ry to answer everything for you but here are 2 things: First, get an exact handle on expenses. That is how much you need to fund ER. So let's say 70K. You say you(or your wife) want to work PT for maybe 40k/yr. That means you would only need to find 30K per year. You could do that by starting to fund a taxable account. Sounds like most of your $ is in tax sheltered /retirement accounts. Start putting extra or any earned money into taxable accounts. Also there is a 72t rule. That irs rule let's you take an equal amount from your retirement acccounts every year (for at least 5 years). There are plenty of forum threads on the specifics and limitations of using that strategy.

Good luck.

 

[Luvtoride]

Hey Later_riser, welcome and congrats on your finding ER and exploring the right way to do it. I'm new here myself and just starting to read, ask questions and learn from this community. I'm sure you will get lots of advice and direction to point you to great resources here and elsewhere.
Hey, hope you did ok with the Tropical Storm Henri. We were spared any damage at our beach home at the Jersey shore.
Best of luck,
Brian

 

[pb4uski]

Hi,

I am 46, married, no kids, and we are homeowners in a dream home on a dream island, already. We live on Martha's Vineyard. People may think it's only rich people here, but my wife and I actually live and work here year round and work hard! But I am looking into early retirement for us and this forum is a new thing. Since this is anonymous, my resources are:


-Approx 60K basic annual expenses, with are generally fixed, including mortgage, car, cell, food, etc. and travel, but health insurance always could fluctuate. And inflation, of course!

- Net worth of close to 800K, exclusively in investments and savings, some securities and mostly various retirement funds over the years. Assets over a million. No debt other than mortgage.

-Looking to partially retire early, i.e. go down to part-time job for my wife is the main goal, as early as available, since we already count ourselves as extremely fortunate with where and how we live. This means one or two regular part-time jobs between us, perhaps worth 40K/year?

-We are not high earners. We have a joint income for two of about 90K gross a year. That said, we max out our retirement accounts every year, but frankly they don't let you add much per year. The limit of $6500/year per person is not a lot. The excess we sometimes invest elsewhere, or it goes into a savings account - the "emergency fund".



So...say you want to go down to part-time, from 90K to, I don't know 40K/year, to start with...how do you begin the process if your retirement income isn't available until 59 1/2 for example! And Social Security isn't available until later, either? How do people get around all that, if they want to bow out of the system ten years early!?



Apologies in advance for not being well aware in this area, maybe these are basic questions, but I (we) would love to know where to begin to explore how to partially (and then fully) retire in a rational and safe way. That's what an "introduce yourself" forum is for, I guess, to get started from not knowing anything at all about this game.


I suppose there are best books and sites, so any of those are welcome, as are all thoughts that are friendly and realistic.

I think the first thing you need to do is to determine whether you "have enough" to change to part-time without jeopardizing your financial future. Spend some time with FIRECalc, including the Not Retired? tab and see if you have enough. A lot will depend on what you have earned in SS benefits that you will input in the Other Income/Spending tab.

Also, don't include your mortgage P&I in spending since it you do FIRECalc will never stop that spending and will increase it for inflation. Rather, include your annual mortgage P&I as on-inflation adjusted off-chart spending starting in 2021 on the Other Income/Spending tab and then enter an offsetting Pension Income for the same amount beginning in the year that your mortgage is paid off.

Then if you do have enough, there are some limited ways to access retirement savings before 59-1/2. One would be a 72t/SEPP plan. Another would be a Roth conversion ladder. Another possibility is to do a cash-out refinance of your house and use the proceeds for both mortgage payments and living expenses until you have penalty-free access to that tax-deferred money. Another possibility, albeit expensive, is to just pay the 10% penalty.

 

[later_riser]

Start putting extra or any earned money into taxable accounts.


Good luck.

All great suggestions thank you! Nice! We do have a taxable account, I did not make it explicit. One issue with it is that there are very successful stocks in it that I may prefer to hold for potential growth rather than sell or potentially sell. But could be changed over to a "conservative" funds or ETFs.

 

[later_riser]

I think the first thing you need to do is to determine whether you "have enough" to change to part-time without jeopardizing your financial future. Spend some time with FIRECalc, including the Not Retired? tab and see if you have enough. A lot will depend on what you have earned in SS benefits that you will input in the Other Income/Spending tab.

Also, don't include your mortgage P&I in spending since it you do FIRECalc will never stop that spending and will increase it for inflation. Rather, include your annual mortgage P&I as on-inflation adjusted off-chart spending starting in 2021 on the Other Income/Spending tab and then enter an offsetting Pension Income for the same amount beginning in the year that your mortgage is paid off.

Then if you do have enough, there are some limited ways to access retirement savings before 59-1/2. One would be a 72t/SEPP plan. Another would be a Roth conversion ladder. Another possibility is to do a cash-out refinance of your house and use the proceeds for both mortgage payments and living expenses until you have penalty-free access to that tax-deferred money. Another possibility, albeit expensive, is to just pay the 10% penalty.

Totally agree, pb4uski. Thank you for the wealth of suggestions in your reply.

 

[pb4uski]

All great suggestions thank you! Nice! We do have a taxable account, I did not make it explicit. One issue with it is that there are very successful stocks in it that I may prefer to hold for potential growth rather than sell or potentially sell. But could be changed over to a "conservative" funds or ETFs.

You can sort of have your cake and eat it too. Let's say that you have stock A in your taxable account and you like the stock and want to keep it but need money for spending from your taxable account.... just sell stock A in your taxable account and sell something else in your tax-deferred accounts and use the proceeds to buy stock A in your tax-deferred account. At the end of the day you still own stock A and have the cash that you need for spending.

Works as long as your taxable account sale is a gain.... if it is a loss then you would have a wash sale but I presume that you wouldn't be keen to keep a loser anyway.

 

[RxMan]

Would you still be eligible for health insurance benefits working that part time schedule?

 

[marko]

I won't try to answer everything for you but here are 2 things: First, get an exact handle on expenses. That is how much you need to fund ER.

Be sure to include taxes; your actual 'expenses' is your after tax amount. Fed income and Mass income tax may take ~10%-20% before you even get to spend a nickle.

 

[teetee]

With 60k annual expense and with current net worth of 800k and current age 46. I think you have no problem to fully retire when you are around 54.

Highlights:

Avg investment annual return of 7% on net worth of 800k with 30k annual contribution and compound annually.

Need 1.7M by 54 to handle 60k/yr expense for the next 30 yrs (based on historical data via firecalc).

Worst case scenario you have no money at age of 84 and have to live on SS/pension income.

If you take tax into consideration, maybe 57 for full retirement age.

 

[later_riser]

Would you still be eligible for health insurance benefits working that part time schedule?

The classic "it depends" - on the job my wife may or may not be working at that time. Currently, no. This would have to be a calculation at the time, for sure. Glad you asked.

 

[later_riser]

To all: thank you for the responses, I was helped greatly on this thread! In particular, I recommend, to some, looking into the Roth conversion ladder suggested, an early retirement strategy that appears best for us at this time.