Hoping to semi-retire at 56.

[kirkhaven]

Hello, (long time reader, 1st time posting, I have gotten great value from this site)
Hoping I can get a new set of eyes on my situation, as I have run numerous calculations to see if I can semi-retire now.
I am 56, wife 54. I was laid off (1st time for me last year, at 55) from my executive position at a large company. I knew I did not want to go back to my life of long hours, constant travel and managing large teams. So i began to really think if I could retire or at least downshift.

I have run numerous Firecalc scenarios all of which SEEM to put us at high safety. So I am wondering if I missing something. I am hoping someone can help me find a blindspot or red flag.

Here is our situation:
Assets: $1.475 Million Liquid, + $500,000 home equity
Schwab Traditional IRA: $830,000 (of which $80,000 is in a MM account) 80/20 allocation
Schwab Brokerage Account: $370,000 ($45,000 of which is in cash/MM here) 80/20 allocation
Schwab Roth IRA: $10,000
Old Fidelity 401K: $215,000 (this is from the job I was laid off at 55)
Old Vanguard 401k: $10,000
Fidelity ROTH IRA (from current "side gig" job): $2000 (adding 1K month)
Cash: $20,000 ($65,000 if you count what is in the brokerage MM)
Pension: Receive a small $285/month pension for life, no COLA
Wife: Small $10,000 IRA from old job, and now contributing $1000 month to new 401K.

- goal would be to slowly convert some of my large traditional IRA to a ROTH to equalize my IRA/Roth/Brokerage buckets more evenly)

We have a home with $320K mortgage at 3.5% and the current home value is $850,000, our goal is to stay for now. (Mortgage-Tax-ins) $2800 month

Family:
3 kids: 1 launched and out of college/working, #2 in college with 2 years to go but optimistic about his independence and job potential, #3 HS Senior
(We have a 529 to cover kid #2, but not #3, as he is indicated a different path, military, or trade school, etc.)

Wife (stayed at home for 15 years) decided to go back to work after kids were older, get masters degree and is now employed with no plans to retire. Also has good health insurance I could choose to go on when needed. (her income $70,000 year and will certainly rise as she gains more medical licensures)
After my layoff, I decided (5 months ago) to take a MUCH lower level job in phone sales which give me freedom to work from home part time.
(My pay is now $55,000 base + $30,000-45,0000 commission). <<-- This is the job I would like to leave soon. But also ok staying if needed. It's easy and keeps me from drawing down right now.
It has been a drastic change going to much lower pay and responsibility but it has worked out so far. But more for the ego if I am being honest.

Base Living expenses are around $7,000 month (mortgage, bills, subscriptions, car insurance, maintenance etc).
Debt free other than mortgage, own both cars. No credit card or loans elsewhere.

Knowing that my wife will have her income, if I did leave my job, I could draw a smaller amount (say $5,000 month) added to her income and would exceed our base needs and give us money to have some fun and flexibility.

SS says I should receive around $3800 month in 2035.

Firecalc says 100% success starting next year (2025) if I want $100,000/year taking SS in 2035 (+$3883/month) and her in 2039. This would be 170K annually (100K draw + her 70 income). I feel like I am doing something wrong on Firecalc, I did NOT expect 100%.

Any big red flags here? THANK YOU

 

[MichaelB]

Hi kirkhaven and welcome. You should get some helpful observations and suggestions. In the meantime, you may find this post by Gumby useful Some Important Questions to Answer Before Asking - Can I Retire?

 

[Morgan22]

I see failures in firecalc after 8 or 9 years in. I'm inputting 1,475,000 for your portfolio, 100k spend, plus added yearly SS for you of 45,600 starting 2035, and I'm guessing 1/2 that, or 22,800 (since you didn't mention an amount for her) for your wife starting in 2039.

I'm guessing you're seeing 100% success since you may be adding in your 500k of home equity? You can't spend it, unless you do a reverse mortgage, or sell and rent. Is that the plan?

Another item to think about, what if your wife gets laid off? Will she be able to find a job making the same amount? Or maybe she will want to quit soon seeing that you aren't working and wants to early retire herself.

Just a few things to think about.

 

[kirkhaven]

I see failures in firecalc after 8 or 9 years in. I'm inputting 1,475,000 for your portfolio, 100k spend, plus added yearly SS for you of 45,600 starting 2035, and I'm guessing 1/2 that, or 22,800 (since you didn't mention an amount for her) for your wife starting in 2039.

I'm guessing you're seeing 100% success since you may be adding in your 500k of home equity? You can't spend it, unless you do a reverse mortgage, or sell and rent. Is that the plan?

Another item to think about, what if your wife gets laid off? Will she be able to find a job making the same amount? Or maybe she will want to quit soon seeing that you aren't working and wants to early retire herself.

Just a few things to think about.

Thanks, I am not adding home value. I also do not NEED 100K, we need much less than that. With her 70,000 we really only need an additional 30K a year to give us flexibility. She could get laid off but she is in a medical field with very very high demand. It's unlikely (but possible).
I am using firecalc with the assumptions of 70/30 portfolio and a gradual decline in spending for 35 years.
Even at a safe 4% withdraw we would have around 50-60,000 + her 70,000.

 

[AZsniper]

Have you thought about your day to day life if you are a soon to be empty nester and your wife will still be working? I only ask because I am in a VERY similar situation - to include same ages and stages of kids, savings etc, and am looking at early retiring this next year. I am just waiting until my 17 year old graduates HS next May. I think your situation could work financially, while your wife still works and the insurance is a great plus!

 

[Koolau]

Welcome to the FIRE Forums. Glad you chose to join us. We look forward to your inputs.

 

[kirkhaven]

I see failures in firecalc after 8 or 9 years in. I'm inputting 1,475,000 for your portfolio, 100k spend, plus added yearly SS for you of 45,600 starting 2035, and I'm guessing 1/2 that, or 22,800 (since you didn't mention an amount for her) for your wife starting in 2039.

I'm guessing you're seeing 100% success since you may be adding in your 500k of home equity? You can't spend it, unless you do a reverse mortgage, or sell and rent. Is that the plan?

Another item to think about, what if your wife gets laid off? Will she be able to find a job making the same amount? Or maybe she will want to quit soon seeing that you aren't working and wants to early retire herself.

Just a few things to think about.

As an FYI:
This is what Firecacl spit out for me, (I dropped to 85,000 year)

FIRECalc looked at the 119 possible 35 year periods in the available data (since 1900), starting with a portfolio of $1,375,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $710,256 to $15,017,073, with an average at the end of $4,765,913. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 35 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Inputs: $85,000 year
Retirement: Now
Additional Income: $3000 year pension (now)
Additional Income SS in 2035: $42,000 year
Additioanl Income SS in 2039: $20,000 year
Bernicke Spending (reducing small percentage annually)
Portfolio Balance 75/25

 

[kirkhaven]

Have you thought about your day to day life if you are a soon to be empty nester and your wife will still be working? I only ask because I am in a VERY similar situation - to include same ages and stages of kids, savings etc, and am looking at early retiring this next year. I am just waiting until my 17 year old graduates HS next May. I think your situation could work financially, while your wife still works and the insurance is a great plus!

I have, I will most likely want to work part time, in a job of my choosing (and not driven by pay rate). I am an avid runner, and for instance would love to work at a running store. I also love art, so I would look forward to dedicating time to this. The real reason is to not feel the NEED to have earn a high income (as I did for many years, and the stress, travel and sleepless nights that came with it).

 

[pb4uski]

I prefer to use FIRECalc's Investigate tab to solve for safe spending.

I got $119k a year of safe spending at 95.6% success using the following parameters:

• Portfolio of $1,475,000
• Period of 40 years (56 to 96)
• $45,600 per year/$3,800 per month of his SS starting in 2035
• $22,800 per year of her SS starting in 2039 (assumed that hers would be at least half of his)
• Her earnings... $70,000 inflation adjusted pension starting in 2024 offset by $70,000 inflation adjusted off-chart spending starting in 2034 (she retires)
• $3,420 per year/$285 per month fixed pension starting in 2024
• All other asumptions default

A spending level of $118,792 provided a success rate of 95.6% (114 total cycles, of which 5 failed). This spending level is 8.05% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)

 

[BlessedLife224]

Does your annual expenses include taxes you’ll owe?

 

[pb4uski]

Does your annual expenses include taxes you’ll owe?

According to IRS & State Tax Calculator | 2005 -- 2024 a married filing jointly couple both under 65 with $120,000 of ordinary income would pay $10,432 in federal income tax in 2024. Theirs would likely be lower since some withdrawals for spending will be principal and some income will be tax preferenced qualified dividends or LTCG. If the mix is $100,000 of ordinary income and $20,000 or preferenced income then tax will be $8,032.

No state income taxes since they are based in Texas. Bottom line is that there is plenty of room between $119k of safe spending and what they need for living to cover their income taxes.

 

[CaliKid]

I love your idea of working at a running store. Doing something like that you enjoy, make a few bucks, socialize and you're busy so not spending money. I do a similar part-time job and it truly is one of my best moves in my semi-retirement.

 

[kirkhaven]

I prefer to use FIRECalc's Investigate tab to solve for safe spending.

I got $119k a year of safe spending at 95.6% success using the following parameters:

• Portfolio of $1,475,000
• Period of 40 years (56 to 96)
• $45,600 per year/$3,800 per month of his SS starting in 2035
• $22,800 per year of her SS starting in 2039 (assumed that hers would be at least half of his)
• Her earnings... $70,000 inflation adjusted pension starting in 2024 offset by $70,000 inflation adjusted off-chart spending starting in 2034 (she retires)
• $3,420 per year/$285 per month fixed pension starting in 2024
• All other asumptions default

Thank you. This is helpful. This gives me some confidence in our situation

 

[kirkhaven]

I love your idea of working at a running store. Doing something like that you enjoy, make a few bucks, socialize and you're busy so not spending money. I do a similar part-time job and it truly is one of my best moves in my semi-retirement.

That’s good to know. It will be a difficult transition potentially after being in corporate positions for many years. But looking forward to it

 

[kirkhaven]

I prefer to use FIRECalc's Investigate tab to solve for safe spending.

I got $119k a year of safe spending at 95.6% success using the following parameters:

• Portfolio of $1,475,000
• Period of 40 years (56 to 96)
• $45,600 per year/$3,800 per month of his SS starting in 2035
• $22,800 per year of her SS starting in 2039 (assumed that hers would be at least half of his)
• Her earnings... $70,000 inflation adjusted pension starting in 2024 offset by $70,000 inflation adjusted off-chart spending starting in 2034 (she retires)
• $3,420 per year/$285 per month fixed pension starting in 2024
• All other asumptions default

I will start using the investigate tab. Seems to be more helpful than the default way I was using.

 

[CO-guy]

Congrats and welcome to the forum!

I also like your idea of getting something part-time in your area of interest. This might also be an opportunity to get more involved with running in other ways such as coaching or volunteering for running events.

 

[Markola]

DW (61) and I (58) are on the semi retirement track too. We both left full time gigs at age 54 using the Rule of 55.

Are we certain of success? Heck, I don’t know. But we rarely have to wake up to an alarm and we mostly do what we want to. We should have plenty to each get to age 70 before claiming SS, and I suspect we’ll still have a portfolio and even more home equity. So we’re enjoying life now.

Here’s what is not in the retirement calculators: The Power to Adapt to Changing Circumstances.

 

[Diogenes]

It will be a difficult transition potentially after being in corporate positions for many years. But looking forward to it

This is an important point! It's one thing, to descend from the lofty heights of senior management, to a sole-contributor role, say as a private consultant. It's quite another to be a floor-employee, answering to some store manager, and dealing with customers directly. It would take considerable poise and magnanimity of character, to abide such a reduction in prestige and seniority, while staying cheerful, prompt and productive.

Speaking as a person now going through "Barista FIRE" - not entirely by choice! - I would have, if given the option, rather have spent another year or two continuing the high-stress full-time job, and then quit cold-turkey, than to be trying to cobble together some minimal semi-job, whether for incremental earnings, or amusement.

 

[kirkhaven]

This is an important point! It's one thing, to descend from the lofty heights of senior management, to a sole-contributor role, say as a private consultant. It's quite another to be a floor-employee, answering to some store manager, and dealing with customers directly. It would take considerable poise and magnanimity of character, to abide such a reduction in prestige and seniority, while staying cheerful, prompt and productive.

Speaking as a person now going through "Barista FIRE" - not entirely by choice! - I would have, if given the option, rather have spent another year or two continuing the high-stress full-time job, and then quit cold-turkey, than to be trying to cobble together some minimal semi-job, whether for incremental earnings, or amusement.

This is exactly how I’m feeling. I was hoping I could get two more years, but our company (publicly held) , had revenue losses and all but two of the senior managers were laid off. My current role is definitely a hit to the ego, and I’m working for people far less experienced, but I focus on the positive for me (wfh, easy, not overly time consuming). I’d like to build the nest egg a little higher so this role allows me to not withdraw/ and wife still working and wants to work. Then I’ll transition to a role of my choosing (like a running store).
I’ll tell you though there is tremendous freedom in knowing you can walk from a job anytime you want.

 

[kirkhaven]

Congrats and welcome to the forum!

I also like your idea of getting something part-time in your area of interest. This might also be an opportunity to get more involved with running in other ways such as coaching or volunteering for running events.

This is EXACTLY my plan and hope!

 

[Koolau]

This is an important point! It's one thing, to descend from the lofty heights of senior management, to a sole-contributor role, say as a private consultant. It's quite another to be a floor-employee, answering to some store manager, and dealing with customers directly. It would take considerable poise and magnanimity of character, to abide such a reduction in prestige and seniority, while staying cheerful, prompt and productive.

Speaking as a person now going through "Barista FIRE" - not entirely by choice! - I would have, if given the option, rather have spent another year or two continuing the high-stress full-time job, and then quit cold-turkey, than to be trying to cobble together some minimal semi-job, whether for incremental earnings, or amusement.

Yeah, when I repositioned cars my first year after FIRE, I found more politics than when I w*rked at Megacorp and almost as many as when I w*rked in academia. And repositioning cars only paid about $6/hour (15 cents per mile!)

The "boss" constantly opined his philosophy while driving the "chase van" with us drivers returning from the auction. His favorite expression was "Answering machines don't drive cars."

The "lead" driver (82 year old with most "seniority") insisted that we all drive the same speed and stay in our assigned order on the way to the auction. (Try that with a marginal car that can barely keep up on a good day.) He'd speed up and we'd spread out and he'd be all bent out of shape when we got to the auction - hey we all knew the way and the chase van was at the tail end, so no one was gonna get lost.

If we (DW and I) were taking a car/picking up a car at another dealership, the sales guy or sales manager would be all bent out of shape if we stopped to eat. Some round trips approached 250 miles. We couldn't do that without at least a break.

The dealerships often didn't have the cars ready or weren't ready for us to drop off a car. So we had to wait. Since we got paid by the mile, not by the hour, the delay was on us.

I got a call one night at 9PM to go 140 miles one-way to reposition a car. I decided to go and then had to wait an hour at the dealership while the owner got sales materials ready to go with us to the other dealership.

The worst repositioning j*b was moving every car in the dealership to a "Tent Sale" at the Country Fair grounds. That j*b paid one price for the day - no matter how many cars, no matter how many drivers. They assigned us a route so cars tended to bunch up and it took longer to get to or from the dealership. I took a short cut and one of my fellow drivers "turned me in!" for doing so. THAT was the day I decided to quit.

It all sounded like fun, driving cars, here there and yon. It turned out to be the same old politics - without the decent money for the hassle. Who knew?

 

[Diogenes]

... My current role is definitely a hit to the ego, and I’m working for people far less experienced, but I focus on the positive for me (wfh, easy, not overly time consuming). I’d like to build the nest egg a little higher so this role allows me to not withdraw/ and wife still working and wants to work. Then I’ll transition to a role of my choosing (like a running store).
I’ll tell you though there is tremendous freedom in knowing you can walk from a job anytime you want.

My cunning plan is to eventually leverage the barista job (adjunct professorship at the local U) into something full-time. The ambition is less about increasing the nest-egg, than in having play-money and to reduce withdrawals from the portfolio, perhaps until defined-benefit income kicks in. This is speculative, because as a lifelong aggressive saver, I prioritized investment over material comforts, living like a college-student. So, whereas others might have a paid-off house and a fancy shop in which to engage in hobbies, I... well, I need to eventually catch-up.

One positive aspect of full-time employment, is that having a cushy office and a schedule of business-travel, one can abide a crummy domestic situation without complaint. If one sleeps in hotel bedrooms many nights a year, then dealing with an incommodious bedroom in one's own domicile, is no great burden. I'm thinking of the book and movie, "Up in the Air", about the suave business traveler who's own apartment is... disappointing. But once retired, we find ourselves "nesting, meaning that our domestic environment matters more. If we neglected it for decades, suddenly we feel behind and out of sorts.

 

[Koolau]

^^^^^^^^^^

I really enjoyed "Up in the Air" movie and did notice the sort of incongruous living quarters. I guess that was intentional in the movie (didn't read the book.)

I found myself wondering how Ryan eventually resolved (or didn't) his mixed feelings and new w*rk paradigm. He seemed to have mentally turned a corner, but we never find out (in the movie) how that changed him (or didn't.) YMMV

 

[Diogenes]

^^^^^^^^^^

I really enjoyed "Up in the Air" movie and did notice the sort of incongruous living quarters. I guess that was intentional in the movie (didn't read the book.)

I found myself wondering how Ryan eventually resolved (or didn't) his mixed feelings and new w*rk paradigm. He seemed to have mentally turned a corner, but we never find out (in the movie) how that changed him (or didn't.) YMMV

I don't recall how the movie concluded, by in the book (spoiler alert!) the protagonist admitted that his car accident had resulted in lingering and acute mental illness. His job was a ruse and a salve... it allowed him to act "normal" and to hide (from himself and from others) his pathologies. One supposes that in retirement, the mask comes off, and we're left to face the formerly hidden.

 

[Aerides]

What is your cash position, or taxable position? IE, until 59.5, besides your wife's income, where will you draw from?

I see far too many folks here who are financially ready in the big picture, but fall down on this detail.

Also, with 10 years till SS, have you modelled it with a substantial haircut (say, -30%) to be safe in case of potential changes?