Talk to me about early retirement.

[HoneyBBQ]

Some of you know, I'm aiming for retiring at 54 or so when DD is 18. I'm 38. Spouse is 57. So I've got 15 years.

I wanted to ask y'all because you're nice and smart and I don't like Mr MM. I'm too scared to ask Bogleheads, lol. And y'all don't hate on me too much....

Might retire earlier if possible/desired. Spouse most likely will work the whole time, too. Maybe we will retire after 10 more years. We shall see. So obviously he'll take late SS withdraw and delay as much as possible. What else should we be thinking about? Or doing? Specifically (I guess) for me, since my aspects are more complicated?  I guess I'm looking for things I haven't considered or possibilities I've overlooked.

Other relevant data and or musings:

- We both make good salaries. Plan to have our stupid ridiculously expensive house paid off. Probably will sell and downsize when DD is gone. Or maybe when she is done with college? TBD.

-   not legally married but have legal domestic partnership. Can marry if we need to. Really haven't seen a reason. I don't think I will need to draw his SS since I'll have enough money and 30 years of making 6+ figures and contributions to SS.

 - currently stashing extra money in taxable/money market funds so that I can access that since I won't be able to draw on 401k at retirement age. (after normal retirement/HSA/deferred compensation plans)


 - hoping health care is still available through the state at that point? Otherwise, can contract independently I suppose. Spouse will be medicare eligible.

- spouse has significant life insurance now and I have about 2x what he has. Will probably have to drop his when he is retired. As long as DD is >18 I will probably drop my life insurance, too.

- Will probably set up a trust when DD is over 18. Have complicated issues regarding step children but don't really want to get into that too much. Will probably leave them a fixed amount and the rest to DD.

- Current NW around 2MM. Around a third is in cash/CDs/house equity. 1/3 his retirement, 1/3 her retirement.


What am I missing? Do I have a good grasp on what's necessary? I feel like For a long while I was in building mode but now I feel more like I have the right trajectory but want to make sure I'm on target.

[beergut]

Well, if you plan to retire at 54, assuming you live 20-30 more years, you're looking at 74-84 years old. Do you have enough money to pay your annual expenses for the next 30 years?

You say you make a good salary, over 6 figures. Will you be able to support the same lifestyle in your retirement?

Excluding your home equity from your net worth (it is not liquid, so I don't use it when considering retirement savings), let's say you have $1.8 million in current savings, and let's assume that will double in the next 15 years to give you $3.6 million. 

Drawing 4% annually for living expenses, that gives you $144k annually, plus your spouse's SS to live on. Is that enough to meet your annual expenses now? Given inflation, will it be enough to meet your expenses at that time?

Those are the first questions I'd look to answer.

[yogiii]

I don't have advice but my goal is to retire early too, so just consider me your stalker.

[skubikky]

You say you don't like MM, but there are a large enough group there who have FIRE'd.
With $2MM in assets......you could probably do it now. 

The other website is www.early-retirement.org.
The people there aren't tuned in to frugality like the MM group, and tend to be those with $2MM or more in assets.

[phil5185]

Current NW around 2MM. Around a third is in cash/CDs/house equity. 1/3 his retirement, 1/3 her retirement.

If you apply the Rule of 72 for 15 years, 5%/yr investing will double your $2M to $4M.  If you use 11%/yr investing, it will double more than twice, ie about $9M in 15 yrs.

You might want to split it 50/50, ie 50% in 11%/yr & 50% in 5%/yr, that gets you 8%/yr. So it doubles every 9 years. (Triples in 15 yrs).

You might want to invest that cash/CD/equity, get that $600K+ working for you?

When we retired we were surprised at how much less our costs were - no more $36,000/yr to 401k's, no $17,000/yr to SS/Med, maybe $5K or $10k less to the IRS - and we cancelled the Life Ins, those things count up more than we were expecting. Your costs will prolly go down by $60k/yr w/o any change to lifestyle.

[midjd]

Firecalc! I don't have any specific advice, but plugging in different scenarios has really helped me see what we need to be okay/good/great in retirement.

[TheHaitian]

The only thing I would worry about is the one thing you have no control over: your husband health/longevity.

Do you have long term care for him?
Will he be physically and mentally able to work till he is 60-70?
Will he need the assistance of a nursing home or all around care when he is 80 and you only been retired 5 years?
How much will it costs to provide him good quality care?

My wife aunt and uncle admitted about 3 months ago his mom into a nursing home because her aunt really couldn't do it anymore. After 5-7 years it has taken a physical and mental toll on her (she has aged) and really couldn't: MIL had memory losses and couldn't remember who she was or her kids, where she was, would get combative and 2 times left the house and was found wondering around. She is only 83...

Your finances seem on track and you are putting a good portion away.

[teen persuasion]

I can see where Mr MM is too extreme for some, I LOVE the MMM forum.  You don't have to post a case study if you don't want to, just lurk.  They just added a post-fire category.

Some of the things they'd tell you: you can access your retirement accounts before age 59.5 thru either SEPP72 or thru a Roth conversion ladder.  You can also use your taxable accounts as you mentioned (also useful for the Roth conversions).  You need to figure out what your budget looks like to know when you have enough to FIRE.  It is also not all or nothing, you and spouse can step down to part time if you like, or retire completely and pick up a side gig as needed or desired to supplement in one or just for fun.

Another blog you could check out is Mad Fientist, especially his retire even earlier posts.

[Deleted]

Man, how I would love to retire early, or at least just be able to get a job I enjoyed even if it didn't pay much.  One of the big obstacles I see would be medical insurance pre-65. 

[azucena]

What's FIRE?

[yogiii]

FIRE

[teen persuasion]

Feb 25, 2015 8:24:51 GMT -5 azucena said:

What's FIRE?

FI= financially independent
RE = retired early

[Deleted]

I retired last year at 61; not planned, but it's working out well.  Right now we've got $2.8 million in invested assets and I think we can keep the withdrawal rate to 3%.  That will decrease a bit when I get a $12K/year pension in 3 years, and a lot more when I get SS at age 70.  DH is 15 years older and semi-retired at 65, but did some freelance work till just recently.  A few things that come to mind:

1.  If you're saving a lot you don't need that magical 80% of pre-retirement income to live on.  Our %  is much lower. We were investing over half of DH's SS, maxing out my 401(k) and saving another $25K/year in after-tax accounts. 

2.  Health insurance has been a shock.  I didn't even try for coverage on the exchanges; we called in a husband and wife team of agents.  She deals with Medicare supplements, he deals with private plans.  We're spending about $800/month on my policy with Coventry, DH's Medicare supplement and prescription plan and his Medicare B premiums and his dental coverage.  I didn't buy dental; it didn't seem to cover much for what you paid.  Oh, yeah- DH has a high-deductible prescription plan and I have a $6K medical deductible!

3.  Downsizing costs money.  We had our realtor walk through the house and make recommendations about what might make the house more marketable.  (In our area the standard is move-in condition.)  We've kept it in good repair, have added granite countertops and some bamboo floors and put in energy-efficient windows, but much of the house is covered with builder's-grade beige carpeting and some is grungy and will need to be replaced.  Ugh.  We're talking major $$$.  Repair cracks in the patio around the pool:  $5,000.    I'm just finishing up tiling two bathroom floors; one had the nasty beige carpet and the other had tacky plastic linoleum.  That will run $1,000 even though I did everything but take out and remove the toilets- left that to the pros.  A few more walls need to be painted.

And we're not even into the costs of moving.  I'm not sure if our cash flow will be much better in the new place other than possible savings on property taxes and utilities; I just think these 4 BR/3 full baths/2 half-baths are going to become less and less popular as my generation decides they want something with most of the living on one floor and fewer bathrooms to clean.

I highly recommend the FIRE board; there are people who have already pulled the plug as well as people who are decades away from it. 

But, my advice is "go for it".  As long as you're having some fun with your money along the way, saving large amounts of money is always a good thing because it gives you more options down the road.  I had planned to work till 65 but when things went sour at work I just walked.  I've never looked back.

[bookkeeper]

Structure your investments so that you have cash available for expenses, whether it is from retirement accounts or taxable accounts, at the age you want to retire.  Learn how much income tax you will pay as you begin to pull money out of your investments.

Track your yearly income and expenses with quicken or other accounting software so you know exactly what you are bringing in and what you are spending. Budget college expenses for your child as well, including health insurance and vehicles.

Decide how much house you want before you retire. It is much easier to change properties/acquire a mortgage while you are still working.

Think about where you want to live and how you want to live in retirement. Start making plans for the life you want, because one day after plugging along the day will actually come. The transition is easier if you already have goals and plans for a life outside of work.

DH and I retired this past year. He is 55 and I am 50.  It is awesome!!

[yogiii]

Feb 25, 2015 9:07:39 GMT -5 @athena53 said:

I just think these 4 BR/3 full baths/2 half-baths are going to become less and less popular as my generation decides they want something with most of the living on one floor and fewer bathrooms to clean.

 

Why did you buy the 4BR?  Was it hard to find something smaller in the area you were looking to live?  Were you thinking it would be easy to sell later on?   Were you planning on needing the extra rooms but then didn't?

[The Captain]

HoneyBBQ

Based on your post there is an appreciable age difference between you and your SO.  When you retire (if as planned) you will be 54 and your SO will be 73.  Understand this is TOTALLY not judging in any way but you need to plan for and take into consideration those differences.

What are yours, his, and your(s) (both of you together) mutual hopes for retirement?  There is a lot you can do in your 50's and 60's that's a lot more difficult logistically in your 70's. 

What do you envision retirement looking like for yourself, and you as a couple.  The same needs to be understood from him.

I guess financially it may not be possible (especially with a kid to support - I get it) for you to retire even earlier so you two can do some things together (I'm being honest here) before he starts to be limited in some of his abilities. 

I've seen it with some couples I know.  By the time the younger is able to retire the older one can't do the things they always wanted to do (hike the Grand Canyon, go on a biking tour of Paris, you get the idea).

Not to say retirement can't be wonderful without physically demanding activities, but it's something to give some consideration to.

[Deleted]

Feb 25, 2015 9:45:14 GMT -5 yogiii said:

Why did you buy the 4BR?  Was it hard to find something smaller in the area you were looking to live?  Were you thinking it would be easy to sell later on?   Were you planning on needing the extra rooms but then didn't?

DH and I were coming from NJ and were stunned at how much house we could afford out here. It cost half what my little 3 BR cape in NJ sold for. It's worked out well for the last 10 years except that DH isn't the most meticulous housekeeper (he was a househusband while I worked FT till last year). My standards are higher but I've got more interesting things to do than clean house and I'm too cheap to hire it out. Two of the bedrooms are set up as offices, one for DH and one for me, and the finished basement is DH's Man Cave. So, we use most of it, but can live with less. I don't use the pool that much, either, and DH doesn't use it at all. So, it's been a great house but we want to simplify.

Feb 25, 2015 10:03:09 GMT -5 The Captain said:

I've seen it with some couples I know.  By the time the younger is able to retire the older one can't do the things they always wanted to do (hike the Grand Canyon, go on a biking tour of Paris, you get the idea).

Not to say retirement can't be wonderful without physically demanding activities, but it's something to give some consideration to.

Very important.  I wanted to go to Australia after retirement but realistically it would be way too hard on DH, even in business class.  Fortunately, we've traveled to wonderful places over the years and have some good trips ahead of us- just not Australia.

[midjd]

Not to say retirement can't be wonderful without physically demanding activities, but it's something to give some consideration to.

This is a good point. I know you're very highly compensated, but I'm not sure how quickly you become "outdated" once you've been out of the FT workforce for a few years... but would it be possible to retire or go PT in your mid 40s and then go back to work in your late 50s? Maybe work during DD's college years and then retire for good? Or is that even something you'd want to do?

[Lizard Queen]

I think the first step is to figure out your living expenses.  You need to save up 25-30x your annual expenses.
I don't know you or your expenses, but, on the surface, it seems like 10 years is very do-able for you, if you so desire.
I would also consider maybe retiring before your DD turns 18, so that the EFC for college doesn't kill you.  (Although I suspect that you really don't have to worry about that, but it's something to look into.)

[Deleted]

If you retire the year you turn 55 I understand you can withdraw from your 401k without penalty.

[Bonny]

Feb 25, 2015 10:29:14 GMT -5 @aj said:

If you retire the year you turn 55 I understand you can withdraw from your 401k without penalty.

You also do the substantially equal payments. DH retired at age 53 and if he wanted to access his 401k he would have to go this route.

When we did our retirement planning in 2010 we planned on accessing my 457 first since there is no penalty for early withdrawal since I'm separated from service. My administrator tacks on another 1% asset fee which irks me to no end. So far we haven't dipped into my 457 because our oil royalty income was so high. That's changed over the last few months.

[HoneyBBQ]

Feb 25, 2015 2:23:47 GMT -5 beergut said:

Well, if you plan to retire at 54, assuming you live 20-30 more years, you're looking at 74-84 years old. Do you have enough money to pay your annual expenses for the next 30 years?

You say you make a good salary, over 6 figures. Will you be able to support the same lifestyle in your retirement?

Excluding your home equity from your net worth (it is not liquid, so I don't use it when considering retirement savings), let's say you have $1.8 million in current savings, and let's assume that will double in the next 15 years to give you $3.6 million. 

Drawing 4% annually for living expenses, that gives you $144k annually, plus your spouse's SS to live on. Is that enough to meet your annual expenses now? Given inflation, will it be enough to meet your expenses at that time?

Those are the first questions I'd look to answer.

Thanks for the reply.

I'm half considering the house because a)It's a huge asset in a HCOLA and we plan on selling it when we retire and buying something 1/2, 1/3 the price not so close to work. So a lot of money will come out of there. But I understand the comment.  We only own it to be in commuting distance, which will disappear when we're done.

We would absolutely not be able to fund the same lifestyle in retirement, but then again our expenses will be no where near the same. My mortgage alone is $3400/month. That will be gone. Daycare (lol) is $1700/month. Gone. So, yes and no. We don't mind driving old cars. We like hiking and camping. We'd probably buy an RV and putz around the world. Which can be expensive but not overly so. In general, I'd say we do not have expensive tastes. Both our cars are over 10 years old.

The doubling comparisons also don't consider we are still contributing at the moment. We put away over 100k/yr right now combined. 

Feb 25, 2015 7:40:03 GMT -5 midjd said:

Firecalc! I don't have any specific advice, but plugging in different scenarios has really helped me see what we need to be okay/good/great in retirement.

I have run firecalc. It seems to give me 99% chances with a 100k withdrawl, given current (sustained) levels of contribution. So I feel pretty comfortable in the 'brute' number but not so comfortable in the minutia, if that makes sense.

[Bonny]

Feb 25, 2015 10:03:09 GMT -5 The Captain said:

HoneyBBQ

Based on your post there is an appreciable age difference between you and your SO.  When you retire (if as planned) you will be 54 and your SO will be 73.  Understand this is TOTALLY not judging in any way but you need to plan for and take into consideration those differences.

What are yours, his, and your(s) (both of you together) mutual hopes for retirement?  There is a lot you can do in your 50's and 60's that's a lot more difficult logistically in your 70's. 

What do you envision retirement looking like for yourself, and you as a couple.  The same needs to be understood from him.

I guess financially it may not be possible (especially with a kid to support - I get it) for you to retire even earlier so you two can do some things together (I'm being honest here) before he starts to be limited in some of his abilities. 

I've seen it with some couples I know.  By the time the younger is able to retire the older one can't do the things they always wanted to do (hike the Grand Canyon, go on a biking tour of Paris, you get the idea).

Not to say retirement can't be wonderful without physically demanding activities, but it's something to give some consideration to.

If you don't already do this I suggest doing DH and I outings and Honey BBQ and girlfriend outings. Statistically you are likely to outlive your DH by about 20 years. You will need to build some strong friendship bonds. Also and not to be mean, you will resent spending most of your retirement dealing with his health issues if you don't build in a "fun" break for yourself.

[HoneyBBQ]

Feb 25, 2015 7:11:59 GMT -5 skubikky said:

You say you don't like MM, but there are a large enough group there who have FIRE'd.
With $2MM in assets......you could probably do it now. 

The other website is www.early-retirement.org.
The people there aren't tuned in to frugality like the MM group, and tend to be those with $2MM or more in assets.

There's no way we could retire now with our current expenses. I guess that's not true. But not meeting our other objectives... Our daughter is only 3. We have college to fund, would like "more" money in retirement... and we like our jobs. If we retired when our daughter is still in elementary school, I'm not sure what we would do with ourselves since we couldn't travel, etc.

[HoneyBBQ]

Feb 25, 2015 7:12:40 GMT -5 phil5185 said:

Current NW around 2MM. Around a third is in cash/CDs/house equity. 1/3 his retirement, 1/3 her retirement.

When we retired we were surprised at how much less our costs were - no more $36,000/yr to 401k's, no $17,000/yr to SS/Med, maybe $5K or $10k less to the IRS - and we cancelled the Life Ins, those things count up more than we were expecting. Your costs will prolly go down by $60k/yr w/o any change to lifestyle.

Definitely. I anticipate our expenses being under 6 figures.

Regarding making my stagnant money work for me... I know what you're saying. I feel like contributing 100k a year already to retirement accounts, etc. this is the balance we need. I consider my equity my real estate investment.

[HoneyBBQ]

Feb 25, 2015 7:43:14 GMT -5 TheHaitian said:

The only thing I would worry about is the one thing you have no control over: your husband health/longevity.

Do you have long term care for him?
Will he be physically and mentally able to work till he is 60-70?
Will he need the assistance of a nursing home or all around care when he is 80 and you only been retired 5 years?
How much will it costs to provide him good quality care?

My wife aunt and uncle admitted about 3 months ago his mom into a nursing home because her aunt really couldn't do it anymore. After 5-7 years it has taken a physical and mental toll on her (she has aged) and really couldn't: MIL had memory losses and couldn't remember who she was or her kids, where she was, would get combative and 2 times left the house and was found wondering around. She is only 83...

Your finances seem on track and you are putting a good portion away.

Yeah, nobody knows how life will turn out. He'll have Medicare and all that jazz. He's very healthy at this point in his life and comes from a family with looong life expectancy. Obviously things will change at different rates for the two of us. I'm sure I'd be able to afford whatever nursing care he needs. Shit happens. All I can do is hope it doesn't come sooner rather than later.

[HoneyBBQ]

Feb 25, 2015 9:20:41 GMT -5 bookkeeper said:

Structure your investments so that you have cash available for expenses, whether it is from retirement accounts or taxable accounts, at the age you want to retire.  Learn how much income tax you will pay as you begin to pull money out of your investments.

Track your yearly income and expenses with quicken or other accounting software so you know exactly what you are bringing in and what you are spending. Budget college expenses for your child as well, including health insurance and vehicles.

Decide how much house you want before you retire. It is much easier to change properties/acquire a mortgage while you are still working.

Think about where you want to live and how you want to live in retirement. Start making plans for the life you want, because one day after plugging along the day will actually come. The transition is easier if you already have goals and plans for a life outside of work.

DH and I retired this past year. He is 55 and I am 50.  It is awesome!!

Great suggestions, thanks.

I hope to not have a mortgage. I could buy a very nice house in a lot of places (even the suburbs) with the downpayment we put on our house here in Seattle. It's an ends to a means, not my 'forever' home.  But you're right, it should be something we consider. 

[Bonny]

HoneyBBQ,

Would you stay in the same area?

In our (useless) drill looking at houses for my MIL, I'm not sure that the main goal of downsizing is to save money. In our little SF Bay Area town we could downsize from our $1.1M 2500 sq.ft. house on 1/2 acre view lot to a $800k 1500 sq.ft. 5000 sq.ft. view lot. Since sales costs will likely exceed $100k that will give us less than $200k or less than 20% savings.

I've told DH we should seriously consider installing an elevator rather than moving because it might be cheaper!

Prop 60 or 90 allows us a one time transfer of our current property tax basis to a replacement home worth the same or less in the same (or participating) counties. Does the greater Seattle area do the same?

[HoneyBBQ]

Feb 25, 2015 10:03:09 GMT -5 The Captain said:

HoneyBBQ

Based on your post there is an appreciable age difference between you and your SO.  When you retire (if as planned) you will be 54 and your SO will be 73.  Understand this is TOTALLY not judging in any way but you need to plan for and take into consideration those differences.

What are yours, his, and your(s) (both of you together) mutual hopes for retirement?  There is a lot you can do in your 50's and 60's that's a lot more difficult logistically in your 70's. 

What do you envision retirement looking like for yourself, and you as a couple.  The same needs to be understood from him.

I guess financially it may not be possible (especially with a kid to support - I get it) for you to retire even earlier so you two can do some things together (I'm being honest here) before he starts to be limited in some of his abilities. 

I've seen it with some couples I know.  By the time the younger is able to retire the older one can't do the things they always wanted to do (hike the Grand Canyon, go on a biking tour of Paris, you get the idea).

Not to say retirement can't be wonderful without physically demanding activities, but it's something to give some consideration to.

I get what you're saying, and you're totally right. He will be limited. Maybe I will be, who knows how my health will be in 15 years? No crystal ball here.

I can see us just traveling and enjoying ourselves in beautiful places outdoors. If I go for a hike, he can wait at a cafe or bring a book; lol. I'm not really sure what else I can say. I know lots of these old guys that can still hike up and down mountains at 80 something faster than I can... I can hope that he is one of them. 

There's really nothing I can "do" about the age difference other than manage it and hopefully keep expectations in line. Most people think he's at least 10 years younger than he is; and I have more grey hair than him.    But yeah, if he's very ill than obviously I won't get to traipse around the universe willy-nilly.

I'd love to retire the spring before my daughter graduates from high school and we could spend the whole summer hiking the pacific crest trail. H can bring up the rear and supplies for us and meet us in towns, etc.

[yogiii]

Feb 25, 2015 10:52:41 GMT -5 HoneyBBQ said:

Feb 25, 2015 2:23:47 GMT -5 beergut said:

I put in a withdrawal I think is about 1.5x what we'd actually take out and what I think we'll have by the time we're both about 50, saying I want it to last 40 years.  It says 100% sucesss rate but I still can't trust it