Encourage or discourage my retirement plan

[Rob Base 2.0]

Days like today I really am ready to "retire"

in 4 years when I am at 50 we should have $1 million in retirement accounts and $100 K in EF.

I have a military pension of $49K a year with COLAs and military retiree health care

After taxes and fees for my retiree health care and stuff the pension is $3,100 a month

I make $55K wife makes $42K

Only Debt is mortgage

We live in a MID / high COLA (Maryland), we do well spending $80K a year (this includes home renovations, etc.  We did a lot of home improvements and moving expenses and haven't dipped into the EF)

My plan would be if the retirement account hits a $1 Million (market depending) when I turned 50 I would quit the rat race.  My wife said she would probably work a few more years.

So my plan would be to stop all contributions to retirement accounts and live off wife's salary and my pension while my wife works (estimate 3 years).

I figure after 3 years , if all goes well, retirement accounts will be worth $1.2 M plus $100 K EF and withdraw $50 K a year (with small COLAs)

Also I wouldn't mind to do UBER or something part time to earn some money when I quit the rat race.

Our home would still have another 15 years of mortgage payments (about $1,600 per month)

What do you think of this plan from a monetary perspective?

ETA- no childrens

[ken a.k.a OMK]

My first thought is that you may get bored, especially with your wife continuing to work. I doubt Uber would be a good choice, just continue working unless you don't like your job. Any hobbies? It's a great time to pursue hobbies you never had time or money for before. Ham radio has been mine. Started at 14 but am having a ball now.

$1M has been a standard for many for years. Your numbers of income vs expenses look good. Aren't you on Tricare for health? We are and it is so cheap.

[Rob Base 2.0]

in no way am i worried about being "bored".

i am on Tricare. I said military retiree health care for those that aren't familiar.

[cronewitch]

Save in taxable accounts until you have excess as a cushion. I retired almost 4 years ago and the funny thing was not wanting to spend with no paycheck. I had more than twice what I needed yet still didn't want to spend. You will be fine with your pension and working wife but at 50 can't take retirement money. your wife might want to quit too seeing you vacation alone or even sleeping in everyday. You can quit the rat race without quitting your job. Once you can afford to quit you don't stress about being fired. Use up sick leave and vacations take long weekends.

Retirement means medical, dental and other cost are all on you and vacation expense and hobby expenses go up. One more year just coasting at work, taking days off knowing they might fire you is not that bad. Demand huge pay increases and more vacation days since the only thing they can do is fire you. Get let go collect unemployment a few months to test out the retired life.

[Rob Base 2.0]

If wife works 3 more years that gets me to 53.

EF gets me to 55.

we can always take out "principal" from Roth IRAs at any time. that should get 3 more years to 58

Eat ramen noodles for last year to get to 59 and a half :-)

worst case, u can access retirement accounts prior to 59, just have to take distributions according to life expectancy.

[souldoubt]

You may also find there's something you like to do in retirement that brings in some income, possibly something part time using your skills to help out out a company or cause you like.  I think your plan is good and while I know nothing about Tricare you seem to be comfortable with it so I'm guessing you're covered.  One thing I would do differently is beef up the EF/taxable account between now and when you retire.  I don't have any kind of a pension and the biggest gap for us to bridge when the time comes is until I reach 59.5 as I'd like to get there without having to take an early distribution or from my Roth IRA principal.  I'll also have to consider the cost of medical care until I reach medicare age but I've got a ways to go before I even reach the age I'd like to be able to walk away.   

[Lizard Queen]

You could be fine, but your spending seems a little high. I'd make sure to review your expected spending needs first.

[Rob Base 2.0]

I figure if I can make it to SS age, getting SS, house paid off......I do NOT expect FULL SS due to it's "insolvency" (I expect maybe 70%)

[Rob Base 2.0]

We just moved and I transitioned from the military to being military retired and getting a new job, etc. So I will have a better idea of expenses next year.

But after taxes and retirement account deductions and other stuff I make $905 every 2 weeks

For wife, same scenario she makes $1,090 twice a month

so I use that as our "spending" as we haven't touched any EF

But we had unusual expenses so far:

New AC ($7,000.00)

Flooring replaced ($5,000.00)

Retirement Party (like $1,500.00)

New furniture ($2,000.00)

New appliances ($7,000.00)

And we haven't had to dip into EF of $100K,,,,,so the spending I listed on the high side....I figured just to be safe, use that for now,,,,,

[ken a.k.a OMK]

Military pay raise 

If I was doing your plan with your pension, etc, I would be VERY VERY careful about having that one million in stocks or funds, one or two bad year could devastate your pot of money. For example 2008, your one million is suddenly down to $630,000 in only one year (sp500 down 37.02%) And, of course, without being in stocks and funds your rate of return, compounding, and growth is pretty slim.

That's where we were retiring in 2010. Although we had a big loss since 2008, we were investing max with catchup and employer matching. I figured if the DOW stayed above 8k we'd be OK. Well in 7 years we now have $2.3M, our house is paid for and we bought a MIL house. I figured we could always deal with a 30%+ correction. Now we could take a 60% correction.  

[resolution]

I think it looks reasonable, but I would probably want a more conservative withdrawal rate from investments. I know that 4% is supposed to be a safe withdrawal rate, but you are planning an extra long retirement, so I would be more comfortable with 3.5% just to reduce the chance of it running out.

[Rob Base 2.0]

It wouldn't be just one million......it would be $1.2 Million according to my OP. If the market didn't cooperate I would then go back to work

So let's assume $1.2 million at 53

-------------------------------------------------------------------------------------------------

Regardless once I get to $1.5 million in retirement accounts I plan to call it a day

I figure I value my pension at $1.25 million (doing the reverse rule of 4%.....it would take $1.25 million to withdraw $50K a year)

My military retired health care / Tricare I value at about a quarter mill (so the total is $1.5 mill so far)

And if I have another $1.5 Mill in retirement accounts that's a total of $3 Mill....if that's not enough I don't know what is.....

But don't take this the wrong way, please continue to critique, I enjoy the contrarian views in case I am not factoring / considering something (it's been a bad day, I really do NOT like people ---I am discovering this the more older I get)

thanks

[haapai]

I have no clue if Tricare also covers your spouse if she retires early, or if she is widowed.  I also know zippo about survivor benefits for military spouses.  You could teach me something here. 

[Rob Base 2.0]

Tricare covers my wife now and will if I die (as long as she don't re-marry)

If I take the dirt nap before her, she gets 55% of my retired pay (we signed up for special military / government insurance for her when I applied for retired military pay)

Also I have a $750K Term life policy on myself

[Anne_in_VA]

But will you actually get SS?  It's my understanding that SS is offset by your military pension, but someone please correct me if I'm wrong.  

[alabamagal]

My DH is semi-retired and does Uber (and Lyft).  He mostly enjoys it.  He likes talking to people.  He does not make much money, but it covers the car payment.  It also keeps him busy so that he does not have time to spend money on other things.  He sets his own hours and can take off anytime.

[Rob Base 2.0]

Aug 23, 2017 16:45:36 GMT -5 Anne_in_VA said:

But will you actually get SS?  It's my understanding that SS is offset by your military pension, but someone please correct me if I'm wrong.  

SS is NOT affected by my military pension

[zibazinski]

Aug 23, 2017 16:33:08 GMT -5 haapai said:

I have no clue if Tricare also covers your spouse if she retires early, or if she is widowed.  I also know zippo about survivor benefits for military spouses.  You could teach me something here. 

Ask Blonde Granny.

[phil5185]

"SS is NOT affected by my military pension"

Windfall Elimination Provision (WEP)

[dannylion]

Aug 23, 2017 17:53:58 GMT -5 phil5185 said:

"SS is NOT affected by my military pension"

Windfall Elimination Provision (WEP)

Someone will correct me if I am wrong, I am sure, but I think the WEP does not apply to military pensions because service members pay into Social Security.   Civilian government employees do not pay into SS, so they are affected by the WEP if they have other employment through which they qualify for SS if the other employment was less than 30 years.  

My SS is affected by WEP because I only have about 15 years worth of jobs where I paid into SS (which included military service).  My federal pension is quite substantial, so I lose the maximum WEP amount from my SS payments.  Even with the pension, if I had 30 years of creditable SS history, I would not lose anything to the WEP.            

[Rob Base 2.0]

Service members pay in to SS

Usually so do most government civilians

[dannylion]

Aug 23, 2017 19:53:24 GMT -5 Rob Base 2.0 said:

Service members pay in to SS

Usually so do most government civilians

Current government civilians are under FERS, which has a SS component.  I'm old. I'm under CSRS. We didn't pay into SS (but we did pay 7% toward our pensions), so our civilian government employment doesn't count toward SS, and our pensions are taken into account when the amount of the WEP is determined. The higher the pension, the more we lose to the WEP, even though the SS we should be getting comes from work we did in which we paid into SS.  

[haapai]

My concerns regarding your wife's ability to survive your untimely dirt-napping have been somewhat appeased, even though I know nothing about term life insurance or the size of your mortgage and how well 55% of your pension will cover it.  I encourage you to do the simple or tedious, no-shortcuts math involved in making sure that this is covered or hiring someone else to do it for you.  I sure as hell don't know the tax treatment of numbers like yours.  Getting someone who actually knows what they are doing to look it over and examine it for weaknesses might be well worth what it costs you, even if they try to sell you something.  You're in a much better position to say FU to an unwarranted sales pitch now than you will be in the future. 

On another snarky note, have you ever considered learning how to cook?  I can't help but notice that your thread about not being bored gets vague about mid-afternoon.  Learning how to cook just about anything will do wonders for your fitness and your marriage if you choose to retire early,  What you cook doesn't need to be fancy or cheap,  My dad learned to do an awful lot with not-exactly-cheap beef tenderloin in the last couple of years that my mom worked.  (She needed to get her social security "quarters" in to qualify for social security on her own after years of being a stay-at-home or trailing spouse, and she hated every day of it.)  Having my dad cook, prep, or even plan any kind of meal really helped her get through this period.  I don't really want to think much of what they would have eaten from 1995 to 2005 or what that diet would have done to their bodies and their marriage if my dad hadn't learned to cook -- something. 

[Shooby]

  It sounds like you are on a good track.  I think it really depends on your lifestyle.  If you are enamored with stuff, eating out all the time, traveling and expensive hobbies, then probably not.  If you have simple pleasures and inexpensive hobbies, then I think it is doable.  However i think it is very important that your wife is on board.  And, if she is truly on board, versus just saying she is, then fine.  And, I also think that if you do that, then part of your mission every day should be getting up to do some things that really ease her burden as she continues to work.  Cooking is a great example of that.  Or, making  sure her car is filled with gas, packing her lunch, ironing her clothes in the evening, etc.  Maybe you do some of those things now but you know what i mean.  Step it up in a way that makes it a win win for both of you if you then have that free time.

[skubikky]

Rob....go and read the forum at forum.mrmoneymustache.com/
They'll probably ask why you're still working.

[Deleted]

A few more thoughts:

How close are you to paying off your mortgage?  That could help future cash flow if it's within the next 5-10 years.

How will the cost of replacing a car every once in awhile affect your numbers? I know it depends on whether your idea of a replacement car is a reliable beater or a current model year Lexis SUV.

How quickly are property taxes increasing in your area?  I know in NNJ when I lived there they increased way faster than the rate of inflation.  No way I would have been able to retire at 61 if I were still there.

You don't mention kids- I'm assuming no one whose college education you have to fund.

As someone else said, the government can mess with your benefits.  I hope they don't but you need to be aware of the possibility.  They can also increase the tax burden on Social Security and Medicare B premiums for high earners.  This will be a bigger risk during the years your wife is still working.  I was MOST unhappy to find after DH and I married that his SS was taxable because of our joint income (I was 15 years younger and still working).

I retired with $2.6 million (and it's increased over the past  3 years) and have kept the withdrawal rate under 4%, even with an expensive downsizing (which, fortunately, DID result in lower housing costs going forward).  This year it was a hair under 3%, even with a pretty extravagant travel budget.  You definitely need to keep it under 4% with such a long retirement ahead of you.

Finally, I highly recommend the Early Retirement Board.  It's not just for people who HAVE retired early but also those who aspire to. It's a good mix of people whose actual or planned retirements are cheerful, bare-basics living and this of us who think the only way to go on a long-haul flight is Business Class.  (There's one guy on the Board who's wondering if the $5.6 million he has is enough to retire on.)  I've learned a lot from them.

www.early-retirement.org/

[resolution]

I am finding this thread very interesting, so I appreciate you posting it.

Part of me is going - the man has a guarantee of over the median salary for the rest of his life, cheap health insurance, and a million dollars. If he can't retire, then no one in the entire country can retire!!

The other part of me is going, 4% withdrawal rate is kind of risky! He needs more money!!

Anyway, when my dad retired, the plan was for my mom to keep working another 5 years or so, until she qualified for medicare. Instead, she lasted 3 or 4 months. She got tired of getting up early and sitting in her cold office at work while he was at home and comfy. The trigger was her boss taking away her space heater, but I don't think she would have stayed much longer anyway.

I would recommend an alternative budget plan where you can just plan to reduce expenses for a few years if your wife surprises you (and herself) and decides that she is done.

[buystoys]

To add to @athena53's recommendation, run your numbers through FIRECalc and i-ORP.  Both planners will let you play with your numbers to determine what your best and potential worst case scenarios are.

[movingforward]

Well, I can only speak for myself but if I were in your situation I would probably feel comfortable retiring at 50 but would work a few years longer. For me just knowing I CAN walk out the door would take a great deal of stress out of the job. I would probably work another 3-5 years to build a little more in a taxable account since you can't touch your IRA until 59.5 years of age.

I think not having children helps a lot in terms of finances. A lot of people with children want to leave them an inheritance, which is fine, but not necessary. I have never understood the concept of not touching the principle. Why? So the money can sit there for 20 years and someone else can reap the benefits of it when you die...I don't see anything wrong with dipping into your principle if needed.

As with most everything, a lot of it depends on your lifestyle. My dad retired with $600,000, a small pension and SS about 10 years ago (paid off condo). He was taking a 2% withdrawal for several years. He is now 71 and takes whatever the minimum is that he has to take out. He has approximately the same amount of money he had when he retired. He spends about 10K a year on traveling.

I guess what I am saying it that a lot of people on this board think someone needs a crazy amount of money to retire and, in general, that isn't true for many.

[tskeeter]

I did some rough number tumbling and it looks like your plan would work.  

There is some risk, though.  I think the biggest is a significant market decline in the early years of your retirement.  To manage that risk, a person could increase the amount of cash they hold so they have about three years or so of cash on hand so you don't have to sell investments while they are down in order to fund your living expenses.  It looks like you need about $30K a year in addition to your pension.  So, your $100K EF would cover your cash needs.  But, you still need an EF.  I think I would push the EF/cash reserves to about $150K.

You do have some safety nets.  You haven't talked about how much SS for you and your wife will add to your income.  (Don't forget that 85% of your SS will be subject to federal, and possible state, income taxes.). The other thing is that your mortgage wil be paid off in 16 years.  This will increase your taxes, but it will also reduce your housing expenses.

Some comments about the 4% Rule.  The 4% Rule assumes a 30 year retirement.  Retiring at 50, your retirement (you and DW) is likely to be about 50 years.  Based on a study by retirement expert Wade Pfau (IIRC), a withdrawal rate of 2.5% will sustain a 50 year retirement.  So, it will require about $1,200,000 to fund the $30K a year you will need after your pension.  

As with other posters, I think it is worth running your retirement info through a couple of good retirement planners to see how your numbers work out.  Then I'd add a few $100K to the required retirement funds to provide some cushion.