flyingaway
Full time employment: Posting here.
- Joined
- May 7, 2014
- Messages
- 986
IMHO, you could do it by either working for a few more years or cutting your expenses down a little bit.
....I want to get debt free before ER and the mortgage is the only thing left that I owe on. I would be more inclined to wait for another couple years to build up my taxable reserves. ....
From all of the responses so far, it is looking like 54 or so is a more likely scenario for me than 51...
One other thing to look at-
Does your 401k have a Rule of 55 withdrawal plan? If it is part of your plan, then you can withdraw money from your 401k without penalty if you retire during the year when you turn 55.
This would give you access to the 401k money. One thing that is bothering me just a bit with this big bull market is when is the music going to stop? Sequence of returns risk is huge when you are trying to stretch your money between retirement date and age 59.5. If the market takes a big ol' dump, will you be OK? Or will you need to pull cash at a penalty form your 401k or IRA?
If you are looking at 54, then it may be only a few more months to put yourself in a position where you reach the Rule of 55 position.
The important thing now is to continue developing the plan and learning about what things should be considered. I always looked at the actual date as a series of probabilities. 25% chance of retirement at 58, 50% at 59, 90 at 60, etc. The opportunity to do something different at 57 happened, and it was easy to check the numbers and bail! If we had not been working the numbers and talking about our plan for the future, it would have been very difficult to grab onto the opportunity to do something different.
Plug your number into ESPlanner
ESPlanner Inc.
The free version uses static investment returns, but has utility in figuring out your expenses, taxes etc. Also good for what if calculations - delaying SS, picking which account to bleed first etc.
Even though most of your $s are in tax advantaged accounts and you want ~ $100K pre-tax annually, you may not end up paying a lot in income tax as long as you have your kids as dependents. But best be sure. Plug your numbers into turbo tax to be sure.
Also as some have already suggested. You need to KNOW your expenses. Start tracking every $ today if you're not already doing so and categorize. I used Quicken to do that and kept it up for 5 years before ER.
Good luck.
By law in 2034 SS will reduce it's benefit 23% if nothing is done by Congress. Likely nothing will get done.
By 2034 Millennials will outnumber boomers in terms of voting populations. Millennials already believe they are getting essentially nothing. The most expedient thing would be to just let the law do the work while the congress stands by "helplessly", and they can then offer Millennials at least something.
By 2034 the oldest Millennials will be approaching senior citizenship and join in the lynch mob with the rest of us. Maybe I can talk one of them into pushing my wheelchair for me...
By 2034 Millennials will outnumber boomers in terms of voting populations. ....
One thing I found useful was to get into "MySocialSecurity" at SSA.gov. This gives you a list of every income tax form you ever filed. You can then pretty easily project what quitting will look like compared to continue working. Using that info you get a better idea of how working another year or two or ten fits into your overall earnings in your life. I personally found it very illuminating. At 51 you are maybe 68% through a normal work life and you may see in the past 10 years your productivity has really taken off. Opting out too early may really rob yourself of pretty dramatic earning potential. For me this analysis showed me it was time to quit. Another year or two or four made NO DIFFERENCE, and getting out early gave me a chance to readjust my portfolio and do some Roth conversion at a lower tax rate (taxes matter). The opportunity presented and it was AMF. FIREcalc is a great tool but it isn't the whole story. The devil is in the details.
If your going to move have all of those expenses doped out ahead of time and keep them updated and understand how your going to pay for them. One thing I did was to move all of my expenses like a new roof and a new car into my working period so those expenses were all paid for before I pulled the trigger.
Best
....I would find out how to accumulate some LT Cap loss to pair against your post tax capital appreciation in your retirement and have a good understanding of things like RMD at age 70 and what it will do to your tax picture. The same is true of 1099 work you may think you made $1000 but by the time you pay taxes double SS and medicare it's more like $700 in your pocket and that $300 estimated tax is due quarterly. Some of that is overcome by making your 1099 wage high enough but you need to know the numbers to get someone to pay you 30% more. ....
Bradaz, Thanks for your honest input. How much of a "buffer" do you think I should have to protect against something going south?
I can reduce my expenses in ER. The $115k number includes $10k in travel/vacations and $5k for entertainment. If things were not going well, I could certainly cut way back on those areas. However, the whole reason I want to retire early is to be able to travel while we are young enough and healthy enough to do it. If the numbers do not work, I think I would rather work a couple more years than to risk having to scrimp...
If we invest $100 let's say in S&P, and it goes up to $150 and the market drops in half, I now have $75 and a $25 dollar loss, so I sell the S&P at $75, book the $25 loss and reinvest in something with a similar but not the same market segment exposure and growth. Let's say you just ride it out in the S&P. The return will be about the same in either investment but I have $25 of capital loss to use when needed. To get back to $150 takes the same 100% growth in either fund and about the same amount of time since their returns are similar. Lets say both funds grow to $200 and we want to re-balance. So we sell let's say 50% or $100 keep $100 of principal invested. Let's say our tax bracket is 25%. Cap gains are 15%. You pay $15 per hundred, I pay (100-25)*15% or $11.25 per hundred, a net saving of $3.75 which I have to reinvest and you do not.
Imagine you play this scenario with $1 mil investment (as in 2008-2009 or 2000) instead of $100. Imagine you play the scenario many smaller times over the course of 30 year market drops because LT capital loss is accumulative. You wind up with similar 30 year portfolio values but with the benefit of what I consider a separate asset class of capital loss which you can pair against cap gains. You have to understand the IRS rules.
I just sold $600,000 of appreciated stock last month to stick in a home brew annuity to live on for the next 5 years. I have an accumulated LT cap loss of about 500K. Your tax bill on the 600K of appreciated stock with your method is $90K The tax bill with my method is $0 and I still have 410K of capital loss to apply against my next sale.
Best
Is it possible to share a copy of the "Budget Plan" template? After reading this post, I feel my budget plan has lot of holes