Retiring in your 40s

[hoosier83]

My wife and I have been contemplating early retirement so we can travel the world, spend more time with family/friends, and pursue hobbies. We have been stuck in the one more year phase for the past couple years. We are apprehensive to finally take the leap and walk away from our careers, and unfortunately part-time is not an option for us. I know we can always return to work, but we would not find a future job with similar benefits and compensation.

Our projected budget provides for our current lifestyle which is comfortable plus an extra 50-60k/yr for vacations and big ticket purchases. I appreciate any insight that you have regarding our situation and FIRE. Our pertinent financial information is provided below.

Investments: total approximate 6mil
my trad 401k - 740k (vanguard federal mm)
her trad 401k - 740k (vanguard federal mm)
I bonds - 70k
taxable acct - 4.4mil (4mil in vanguard total stock market + 400k in vanguard federal mm) with long term capital gains of 1.6mil
cash - 50k

My Age - 43
Spouse Age - 45
Kids - None
Debt - None
Tax Filing Status - mfj
Lifestyle - Healthy, no medical issues
State of Residence - FL (no state income tax)
Home - paid off (value 1mil)
Annual Budget - 150k
Social Security: Full Retirement Age (67) - $30k/year combined estimate

 

[Dtail]

Welcome to the forum.
One quick question to start. Are both the 401k accounts exactly the same at 740k each?

 

[hoosier83]

Welcome to the forum.
One quick question to start. Are both the 401k accounts exactly the same at 740k each?

Yes. We each have an identical balance.

 

[Dtail]

Yes. We each have an identical balance.

Okay, overall it sounds like you are in good shape. Mid 40's is on the early side, even with this forum.
However even without SS, you have a WR% of less than 3% which conceptually could be thought of as a safe perpetual WR%.

 

[gauss]

• Taxes (income / property / etc ) are included in the budget?
• Health Insurance premiums and coinsurance (could be OOPmax some years) included in the budget?
• Do you plan to stay in FL vs considering other areas of county that may be more HCOL?

If all the expense are accounted for correctly then you are looking at a WR% of about 2.5% (ie 150k/6M).

This looks pretty good in my book if your expenses don't grow.

I personally did retire in my upper 40's and my DW in her lower 50's (her megacorp didn't stop the pension accruals and retiree health care benefits unlike mine). We were DINKs also. We also received some inheritances from the DPs (Dear parents?).

With fairly low spending on our part (ie sub 2%) and the market growth we have seen, we feel like we are in very good position after ~ 10 years into retirement.

So definitely doable in my book. We have never regretted the decision.

-gauss

p.s. Welcome to the Forum.

 

[imjustawarrior]

As gauss said, your budget has to include everything (taxes, medical insurance, new roof, ...). If it does, you are good to go.

You have ~$2M in MMFs. MMFs historically lose to inflation. I would deploy most of that $2M to something that would at least meet inflation. Beating inflation would be better. You will hopefully have a very long retirement. Inflation is something you need to be aware of. Your 66% equity should do the job, but I would not hold that much "cash".

 

[RetiredHappy]

As gauss said, your budget has to include everything (taxes, medical insurance, new roof, ...). If it does, you are good to go.

You have ~$2M in MMFs. MMFs historically lose to inflation. I would deploy most of that $2M to something that would at least meet inflation. Beating inflation would be better. You will hopefully have a very long retirement. Inflation is something you need to be aware of. Your 66% equity should do the job, but I would not hold that much "cash".

Where do you see $2M? I see $400K in OP.

 

[Dtail]

Where do you see $2M? I see $400K in OP.

That is correct. Probably added the 1.6 cap gains to the 400mm to arrive at the 2m.

 

[pjigar]

If expenses covers taxes, medical and lumpy things (travel, roof, car, HVAC, etc.) then you are good. We are planning a perpetual retirement (inter-generational) and our magic SWR is 3%.

 

[MarieIG]

Welcome to the ER Forum.

Two links that many have found helpful with their retirement planning process are Frequently Asked Questions and FireCalc. I would recommend looking them over and drilling down on the nuts and bolts of withdrawals, how you would deal with market downturns, etc.

With your available assets, it is a matter of budgeting, desired life-style, and actually being mentally ready to retire from your current positions.

 

[imjustawarrior]

Where do you see $2M? I see $400K in OP.

my trad 401k - 740k (vanguard federal mm)
her trad 401k - 740k (vanguard federal mm)

taxable acct - 4.4mil (4mil in vanguard total stock market + 400k in vanguard federal mm)

I took vanguard federal mm to mean Vanguard Federal Money Market. Seems like that is how you read it for the taxable account to get $400k. I included the amounts in the 401Ks. Then throw in the $50k cash. It comes to $1.93M which I called ~$2M.

 

[engineernerd]

Welcome! While a potential 50-year retirement is a bit scary, you are very well-funded. I vote retire now and enjoy!

 

[RetiredHappy]

I took vanguard federal mm to mean Vanguard Federal Money Market. Seems like that is how you read it for the taxable account to get $400k. I included the amounts in the 401Ks. Then throw in the $50k cash. It comes to $1.93M which I called ~$2M.

Ah, I missed the 401K part.

 

[Koolau]

I always ask if you are able to cut back if need be. If so, I'd say you're probably good to go. Still a bit scary, but HEY! This IS Retire Early Forum! Best luck and welcome to the Forum. Keep us posted.

 

[BlessedLife224]

You’re not alone. We’re 43/37 and similar situation.

Agreed with others, 1.5m in money market, that too in 401k that you’re not going to touch for the foreseeable future is a bit too conservative. I wouldn’t do it.

 

[AZsniper]

Welcome!
I retired this week at 46, DW is 45 (well technically my. retirement date is Dec 3, but I don't really work anymore). We have three kids and just became empty nesters. Sold our house of 22 years and moved to our vacation cabin. I did the "one more year" for the past three years, but ultimately waited until our youngest went off to college.
Financially you look great. I am really focusing on how to spend my time and develop more hobbies now. Good luck, go for it!

 

[Dtail]

Ah, I missed the 401K part.

Hey me too if though I commented on the 401k.

 

[hoosier83]

• Taxes (income / property / etc ) are included in the budget?
• Health Insurance premiums and coinsurance (could be OOPmax some years) included in the budget?
• Do you plan to stay in FL vs considering other areas of county that may be more HCOL?

If all the expense are accounted for correctly then you are looking at a WR% of about 2.5% (ie 150k/6M).

This looks pretty good in my book if your expenses don't grow.

I personally did retire in my upper 40's and my DW in her lower 50's (her megacorp didn't stop the pension accruals and retiree health care benefits unlike mine). We were DINKs also. We also received some inheritances from the DPs (Dear parents?).

With fairly low spending on our part (ie sub 2%) and the market growth we have seen, we feel like we are in very good position after ~ 10 years into retirement.

So definitely doable in my book. We have never regretted the decision.

-gauss

p.s. Welcome to the Forum.

Thanks for the detailed response. I included one-off expenses like home repairs and new cars but did not think to add oop max for medical expenses. Do most project for this on their annual budget?

At this point in our lives we are healthy, but that can always change. I like the idea of planning for worst case scenario. I will try to load our exact budget later this weekend to see if there is anything else we are missing.

 

[imjustawarrior]

Thanks for the detailed response. I included one-off expenses like home repairs and new cars but did not think to add oop max for medical expenses. Do most project for this on their annual budget?

At this point in our lives we are healthy, but that can always change. I like the idea of planning for worst case scenario. I will try to load our exact budget later this weekend to see if there is anything else we are missing.

I do because it is a real expense. We are a family of 5. This year our oop for medical, dental, and vision is $10k. Kind of the perfect storm this year.

Looking at the max quantifies your risk. You won't always hit it, but you could.

 

[RetiredHappy]

I get no subsidies and for one person, it costs me $16K to $20K a year. 2 more years to go before I get to Medicare age. When you are younger, it is cheaper. It goes up as you get towards 65.

 

[Mulligan]

Thanks for the detailed response. I included one-off expenses like home repairs and new cars but did not think to add oop max for medical expenses. Do most project for this on their annual budget?

At this point in our lives we are healthy, but that can always change. I like the idea of planning for worst case scenario. I will try to load our exact budget later this weekend to see if there is anything else we are missing.

I retired in my mid 40s about 15 years ago, though I have a nice pension and basically live off that and lets investments grow. I never inputed in my monthly costs those “big expenses”, but I mentally segregated off some of my investment money as “down the drain” before the costs occur. And believe me they will. Finally some of mine hit all within a month this summer (HVAC System, Water Heater, and Fridge). No smoothing out the monthly budget there, ha.

 

[RetiredHappy]

We have never worried about lump sum expenses. As long as the portfolio is large enough, which is what OP has, it can survive the ad-hoc $50K to $100K withdrawals.

 

[pacergal]

Welcome to the forum!
initial review looks good.
Did you make sure your SS $ is factored with no further income from now until draw?

I recommend you answer the questions and run Firecalc that are referenced by MarielG in post 10.
Those questions really gave me some insights before I retired.
Come back and let us know your thoughts afterwards.

 

[audreyh1]

We retired - me 39, DH 44, no kids. Well funded investment nest egg, no debt. But no pensions either and SS a very long time in the future. Our motivations were doing a lot of leisure travel plus other things we wanted to do and our time being our own.

It’s been 26 years now, I started Medicare last year and DH just started SS this year at 70.

You look well funded to me based on your annual budget. I assume that includes income taxes. I think you’ll find your federal income taxes will drop once you are both not employed. Welcome to the forum and I encourage you to take that leap.

ETA: having so much in taxable accounts means that you can easily fund such an early retirement since you won’t be able to tap into retirement accounts until age 59.5 without penalty. At the same time you have a lot of flexibility to do Roth conversions before RMD age which for you will be 75!

 

[Koolau]

I retired in my mid 40s about 15 years ago, though I have a nice pension and basically live off that and lets investments grow. I never inputed in my monthly costs those “big expenses”, but I mentally segregated off some of my investment money as “down the drain” before the costs occur. And believe me they will. Finally some of mine hit all within a month this summer (HVAC System, Water Heater, and Fridge). No smoothing out the monthly budget there, ha.

It seems everything comes in "threes." It never seems to fail that we go for weeks, months, even years with no major out-lays and then BOOM! Last year we had to pay for water damage - our HOA rules demand it, even though "their" insurance would have covered it. Same year our HOA dues went up 40% then niece doubled our rent on the Old Homestead. Total easily exceed $15K and $10K of that are now baked in to yearly expenses. It happens.