Thinking of retiring early!

[Tetto]

Hello all,

Love this forum; full of very good information and knowledgeable folks!

Me-51 y/o, wife 54, No kids, owe $60K on house. One car payment (3 more years@$350)

I have $550k in my 401K, $40K in IRA(trad) and stock account and $20k in regular savings account.

Wife has $185K in 401K acct. and about $9K in IRA (roth)

Our house is worth about $350K +- in current market, so about ~$270-280K equity there.

We would like to retire at 62 respectively, but have been toying with the idea recently of going earlier. Since the lions share of our retirement $$$ are tied up until 59.5 years old, we are kind of scratching our heads how we could manage this. We live in CT ($$$ COL) and would move to a warmer, lower cost state, so the sale of our house could help us there. But it looks like if we did that, we'd still have to work. Health insurance is another big one as well...Our monthly spend is about $3800.

Thanks!

 

[Walt34]

Welcome to the forum! Have your run your numbers in firecalc? On the surface it looks like you're a little short to support a $3,800/month spending rate with a sustainable withdrawal rate.

Here's list of questions to consider: http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[rodi]

Welcome!!!

Do you have any pensions? Have you looked at how SS will be effected if you stop working? (It's usually less than you'd think if you have a few decades of good SS income.) You can get the SS data on the ssa.gov site - create an account and use their calculator. Put $0 in for the years you'll be retired prior to collecting.

If you relocate - you'll still need to live somewhere... so the home equity you have now would be rolled over (at least partially) into the new home in the warmer climate.

Have you run firecalc? Make sure you fill out all the tabs. The key is that the spending number includes taxes and health insurance.

 

[bclover]

another run firecalc. the great thing is that you can run lots of different scenarios.
Healthcare insurance is a big factor. Do you have any figures on what it would cost
lol, I'm supposedly one of the lucky people who had an employer that offers retiree insurance and the cost of that nearly knocked me off the chair.

good luck

 

[Johanson]

Just a quick data point, you can start withdrawing from the 401K of the company that you retired from at 55 without the 10% penalty. You don't have to wait until you are 59 1/2.

 

[Tetto]

Thanks for the replies; I have run the firecalc several times, but with an official retirement age at 62. This would mean that we would continue to be maxed out for another 10-11 years on the 401k's. When i run that scenario and include our SS at 62- we are fine. I was just trying to see if there was a reasonable way to check out early, perhaps it isn't the way to go...

 

[bclover]

Thanks for the replies; I have run the firecalc several times, but with an official retirement age at 62. This would mean that we would continue to be maxed out for another 10-11 years on the 401k's. When i run that scenario and include our SS at 62- we are fine. I was just trying to see if there was a reasonable way to check out early, perhaps it isn't the way to go...

run it at various ages, see what happens.

 

[pb4uski]

+1 or run with the earliest age and solve for spending and then decide if you can live with that level of spending.

 

[Tetto]

Alright; so I ran multiple dates of retirement and in order to receive maximum percentage, it looks like 62 is the magic number. SS is a big helper and key to making it work. Firecalc is a very powerful tool, a great gut check. I'm hoping that Trump modifies ACA to make it much more affordable. This will allow a lot of folks to retire earlier and not worry about the health care.

 

[tmm99]

You may be able to get into your 401K if you terminate employment after Age 55 (depending upon the 401K provider - I can with my 401K.) I thought I would have to work until 62 or even longer, but I got into a serious saving mode for several years (and getting promotions with more pay) sped things up for me (and the market was kind). It doesn't look like you will be ready for several years, but yours may happen sooner than you are thinking today. Save, save and save some more!

Good luck!

 

[kimcdougc]

We did an NUA to cover our living expenses till 62. DH was able to retire at 57. Our portfolio was a little higher than yours but we have downsized the house and are renting our daughters house. It is a lock and leave. We do have our health insurance through the ACA. It is the most expensive bill we currently have.

We have been spending way less than we thought we would. Traveling across the country twice in the last year and a half in our RV.

You can make it work if you are willing to modify your bills and LBYM.

Good luck with it all!

 

[Al18]

Some things to look into, now that you're a few years from retirement:
1. Make yearly contributions into a Roth IRA - this will help reduce your taxes once you start collecting SS.
2. Make automatic monthly contributions to a regular brokerage account. You don't need to invest the money in stocks right now, but you'll have money for investments once the stock market drops 10-20%.
3. Start a 5 year CD ladder at a bank. A good source of CD rates is https://www.depositaccounts.com/blog/
4. Consider you or your wife collecting SS early (lower earner), while the other waits longer to collect for a larger benefit.

Items 2 and 3 can provide income prior to age 59 1/2.

 

[Whisper66]

Try running firecalc with retirement at your desired date and test how much you need to earn after retiring to have an acceptable success rate (80-100% depending on who you talk to...I'm an 80% person). The goal would be to decide if you could move to lower COL area and take on just some part time work that you might enjoy more just to make up the funding shortage. Be sure that you have a SS estimate correct which includes the lower income in the final years of working. (see detailed calculator on government website here)

Alternatively, consider if you want to live VERY frugally for a few years to allow retirement. Not my cup of tea but others are very happy doing this - see Mr Money Mustache for ideas of that kind of life.

 

[Tetto]

We did an NUA to cover our living expenses till 62. DH was able to retire at 57. Our portfolio was a little higher than yours but we have downsized the house and are renting our daughters house. It is a lock and leave. We do have our health insurance through the ACA. It is the most expensive bill we currently have.

We have been spending way less than we thought we would. Traveling across the country twice in the last year and a half in our RV.

You can make it work if you are willing to modify your bills and LBYM.

Good luck with it all!

Thanks! The ACA scares the hell out of me with the deductibles and potential costs; this is a big nut to overcome in order to retire early (for anyone). My wife and i are pretty low maintenance and i'm certain we'll be under withdrawing as well; it's psychological for me...! We are currently living below our means, as best possible in CT!

 

[Tetto]

Some things to look into, now that you're a few years from retirement:
1. Make yearly contributions into a Roth IRA - this will help reduce your taxes once you start collecting SS.
2. Make automatic monthly contributions to a regular brokerage account. You don't need to invest the money in stocks right now, but you'll have money for investments once the stock market drops 10-20%.
3. Start a 5 year CD ladder at a bank. A good source of CD rates is https://www.depositaccounts.com/blog/
4. Consider you or your wife collecting SS early (lower earner), while the other waits longer to collect for a larger benefit.

Items 2 and 3 can provide income prior to age 59 1/2.

Good advice. I like the brokerage acct idea; I currently have Fidelity as mine and will take a look at how i can bolster my cash account there. I'm not a big fan of CD's, but its worth a look- never considered the ladder concept. My wife will def pull the plug before me- she's 4 years older than me so its a given. I make about 3X what she does, so i'll be the one taking it for the team until the end...

 

[Tetto]

Try running firecalc with retirement at your desired date and test how much you need to earn after retiring to have an acceptable success rate (80-100% depending on who you talk to...I'm an 80% person). The goal would be to decide if you could move to lower COL area and take on just some part time work that you might enjoy more just to make up the funding shortage. Be sure that you have a SS estimate correct which includes the lower income in the final years of working. (see detailed calculator on government website here)

Alternatively, consider if you want to live VERY frugally for a few years to allow retirement. Not my cup of tea but others are very happy doing this - see Mr Money Mustache for ideas of that kind of life.

I did that with the calc tool and it looks like i'm in good shape with the numbers we have now. However, its tied up in 401K for another 10 years, so its a feel good thing at best, but useful. I'm going to double down on saving and eliminating any remaining debt soon; this will free up even more cash to save.

 

[Markola]

OP, as savings grow, FIRE is not an either/or question but "How radical do we want to be?" You could retire now and live in parts of Asia or Latin America, and overcome the absurdities of US health care, too (see Panama, etc). Or live like Mr. Money Mustache, as noted above, or live super-cheap in rural America. We're exactly your ages and, for us, though I'd be comfortable with one of the above scenarios, DW is not on that wavelength at all, and I figure it is more important to stay married than retire early. However, at least she's increasingly on board with taking a year off and traveling when I hit 55, which is progress. Anyway, a big part of this is frame of mind and having shared lifestyle goals as much as math.

 

[Tetto]

OP, as savings grow, FIRE is not an either/or question but "How radical do we want to be?" You could retire now and live in parts of Asia or Latin America, and overcome the absurdities of US health care, too (see Panama, etc). Or live like Mr. Money Mustache, as noted above, or live super-cheap in rural America. We're exactly your ages and, for us, though I'd be comfortable with one of the above scenarios, DW is not on that wavelength at all, and I figure it is more important to stay married than retire early. However, at least she's increasingly on board with taking a year off and traveling when I hit 55, which is progress. Anyway, a big part of this is frame of mind and having shared lifestyle goals as much as math.

DW, fortunately, is on board with whatever (few caveats..) She will not live like a monk, in a tent (no camping) scrabbling through dumpsters (kidding). We have a low key lifestyle for sure, make good dough and have some options. One of the things we've been tossing around is sell our house and buy a place in SW Fla. we could probably work PT, I can certainly consult as well. We're interested in poking around the southern half of the country on our Goldwing, hitting the beach and investing time in my woodworking side biz. I think another 5 years to pad everything, and we can comfortably pull the trigger.