Seeking to retire at 50

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pdriese
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Seeking to retire at 50

Post by pdriese »

I'm a long time lurker, first time poster.

My wife and I are hoping we can retire at age 50. Let me know if you think this is doable and if there are any changes you think I should make.

Emergency funds: 3 months (I'll bring this up to 6 months very soon)
Gross income: $92,000; my wife is currently out of the work force to take care of our son
Current expenses: ~$45,000 for the next 3-4 years; ~$55,000-$60,000 after that
Debt: $235,000 15 year mortgage at 3.25%
Tax Filing Status: Married Filing Jointly
Family: we have a 1 year old and will probably have another 2 kids
Tax Rate: 25% Federal, 5.75% State
State of Residence: VA
Age: 28 & 28
Desired Asset allocation: 100% stocks (I plan on reducing this in the next couple of years)
Desired International allocation: 40% of stocks
Retirement Portfolio total: $77,000

Retirement assets:

His (traditional) TSP:
47% I Fund (International) .025%
16% S Fund (Dow Jones U.S. Completion Total Stock Market Index--small cap) .025%

His ROTH IRA
17% VSMAX (Vanguard Small Cap Index) .16%

His pension:
Federal Govt FERS pension; started work in 2007 at age 23; haven't looked into how much to expect

Her ROTH IRA
20% VFIAX (Vanguard 500 Index) .05%

Future Contributions:

I'm still working to scrounge up $10,000 to put toward our 2012 ROTH IRAs. I contribute the max toward my TSP ($17,500) and get the full company match (5% or $4,600). We're maxing our ROTH IRA contributions ($10,000 for 2012) and ($11,000 for 2013). So the total contributions for 2013 will be about $33,000.

Other Assets:

We own a $300,000 rental property that has a $235,000 mortgage. The property has a gross income of $2000 each month; but this doesn't quite cover the mortgage, and certainly not the other expenses such as management fees, repairs, and maintenance. (And I'll have questions on this property in another thread as I'm looking into the tax implications of this given that we converted it to a rental in 2012.)

We will live in Germany for another 3-4 years and our rent and utilities are all paid for by U.S. taxpayers...err I mean by my company.

Questions:

1. Are we contributing too much to retirement? Given the fact we want to retire at 50 and we can't withdraw from the TSP until I'm 59 1/2, I'm concerned that we'll be short of cash for 10 years. I do intend to start a taxable account in 2013 or 2014 but I'm not sure yet how much I'll be able to consistently contribute. Should I reduce how much I contribute to retirement accounts to instead contribute it toward a taxable account?

2 . Part of my plan to (semi) retire at age 50 is to have 3-4 rental properties by then. This could help alleviate my problem in question 1.

3. Is my tilt toward small too extreme?

4. I know the first thing that will pop out to many of you is my 100% stock allocation. Granted, I had a smaller portfolio in 2008, but I actually upped my contributions in stocks during that period. I do realize though that as my portfolio gets larger, my ability to stomach large daily losses will likely wane, but I believe I'm comfortable with a 100% stock allocation until my portfolio reaches $150,000 or around age 30. Enlighten me if you want to the error my ways.

If you have any other concerns or advice please let me know. I plan on participating more on these forums.
Last edited by pdriese on Fri Jan 25, 2013 11:40 am, edited 3 times in total.
Dave76
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Re: Seeking to retire at 50

Post by Dave76 »

I doubt it. I think having a child ruined your chances of retiring at 50.
Last edited by Dave76 on Fri Jan 25, 2013 11:00 am, edited 1 time in total.
Call_Me_Op
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Re: Seeking to retire at 50

Post by Call_Me_Op »

I don't see anything regarding your current (or projected) expenses - an important factor.
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DTSC
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Re: Seeking to retire at 50

Post by DTSC »

Dave76 wrote:I doubt it. I think having a child ruined your chances of retiring at 50.
+1

Of course, you can always find a small town in Central America to decrease your expenses.
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pdriese
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Re: Seeking to retire at 50

Post by pdriese »

Call_Me_Op wrote:I don't see anything regarding your current (or projected) expenses - an important factor.
Our current expenses: ~$45,000 for the next 3-4 years; ~70,000 after that
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Beantown85
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Re: Seeking to retire at 50

Post by Beantown85 »

~70k of expenses moving forward on a 92k salary. I haven't done the math, but I don't like your odds of retiring at 50 with those numbers. You'd need a much larger difference between the two to make this happen. Much larger.
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damjam
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Re: Seeking to retire at 50

Post by damjam »

Do we have to blame the kid for the OP's probable inability to retire at 50?
IMHO, the OP doesn't have enough savings even without the child in the picture.
dbr
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Re: Seeking to retire at 50

Post by dbr »

Running this into one of the planning calculators would be the best approach.

http://www.bogleheads.org/wiki/Retireme ... d_spending

Note that longer retirements, such as beginning at age 50 are more problematic to analyze as a lot of time and uncertainty lurks out there. That means long retirements need to be approached with a lot of flexibility in mind.

This forum may or may not be helpful. The topic is right but the conversation can get bogged down in the same minutia this one does:

http://www.early-retirement.org/forums/f28/
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Boglenaut
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Re: Seeking to retire at 50

Post by Boglenaut »

I think you are way too far to be setting 50 as a date. Just save as much as you can then decide when you are closer. A lot can change by 2035.
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Taylor Larimore
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Cost to raise a healthy child

Post by Taylor Larimore »

"Simplicity is the master key to financial success." -- Jack Bogle
Quickfoot
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Re: Seeking to retire at 50

Post by Quickfoot »

Kids are expensive but certainly not retirement breakers. They do come with high out of pocket expenses but a lot of that pain is reduced through tax credits and lower tax rates. I'm 32, have 3 kids and am saving around 8K a year in taxes due to the kiddos, without kids I'd be high in the 28% bracket, with them I'm comfortably in the 15%. I do not believe the estimates of the costs to raise kids to be accurate.

It's possible to retire early and have kids, it ultimately comes down to a few things:

#1 How much you make
#2 How much you spend
#3 How much you wisely invest
#4 How well your investments perform
#5 How much you can decrease your expenses at your target date.

We are planning on retiring at 49, secondary date is 55. My minimum overall income goal for retirement is 2X current salary and the plan is to have no debt. Keep in mind no plan survives first contact with the enemy so have a couple backup plans and be agile enough to adjust to changing circumstances.

You are either going to need to increase your income, decrease your spending or ideally do both. Investment property will definitely help though you should probably look at multi family units, four-plexes in particular almost always have positive cash flow and because you depreciate the building a good portion of the income is tax free. If you properly invest your money in rental real estate you can net ~ 16% per year with stable income.

In my area a $60,000 down payment gets you an almost new fourplex (in the 300K range), after expenses that fourplex will net you between 8 and 10K per year with that income being 80 to 100% tax free. If you buy one new unit every 2 years in 10 years you'll have between 35 and 50K / year in cash flow.
Last edited by Quickfoot on Fri Jan 25, 2013 11:29 am, edited 6 times in total.
Topic Author
pdriese
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Re: Seeking to retire at 50

Post by pdriese »

Beantown85 wrote:~70k of expenses moving forward on a 92k salary. I haven't done the math, but I don't like your odds of retiring at 50 with those numbers. You'd need a much larger difference between the two to make this happen. Much larger.
I'd have to agree with you on that one. I do think my estimates were a little off. I looked back at my 2011 expenses and they were $42,000 that year. Though with 1 or more kids and some other considerations, my expenses in 3-4 years are probably a bit closer to $55,000 to $60,000 but there are a lot of unknowns. I'll try to get a better estimate, I'm still working on figuring out my 2012 expenses, perhaps my estimate there is off too.
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NYBoglehead
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Re: Seeking to retire at 50

Post by NYBoglehead »

damjam wrote:Do we have to blame the kid for the OP's probable inability to retire at 50?
IMHO, the OP doesn't have enough savings even without the child in the picture.
+1

Yeah guys take it easy on the kids. Have 2 more because you want a larger family and don't worry about the expenses that come along with kids.

I'd say you are not close to getting there by 50. You should absolutely keep maxing out the TSP and Roth IRAs. But I'm just not seeing where you're going to get the money to quit working at 50.

Is there a DB pension that we are not aware of? That obviously would be a huge piece of missing info. As to your questions.

1. No, you are not contributing too much. You should do everything in your power to max out the TSP and Roth IRAs. If you have leftover money afterwards by all means open a taxable account.

2. Having 3-4 rental properties can help you retire early, but where are you getting the money to purchase the other properties?

3. I think your tilt to small cap is unnecessary. I'd stick with the 3-fund portfolio if I were you. You might be a case where REITs aren't a good idea since you're banking on income from rental properties.

4. I don't think 100% at 30 is terrible, so long as you recognize you need to become more conservative over time. I think people get too caught up in the "roughly age in bonds" mindset. It should be about risk tolerance and preference. I wouldn't recommend 100% stocks at 40 but for a 30 year old I don't think it's that crazy, so long as you don't panic and sell if the market goes down.
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damjam
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Re: Seeking to retire at 50

Post by damjam »

pdriese wrote:1. Are we contributing too much to retirement? Given the fact we want to retire at 50 and we can't withdraw from the TSP until I'm 59 1/2, I'm concerned that we'll be short of cash for 10 years. I do intend to start a taxable account in 2013 or 2014 but I'm not sure yet how much I'll be able to consistently contribute. Should I reduce how much I contribute to retirement accounts to instead contribute it toward a taxable account?
I believe once you leave your job you can rollover your TSP funds to an IRA. Once in an IRA you can access the funds prior to 59 1/2 by using the 72t exception. 72t allows for SEPP (Substantially Equal Periodic Payments).
So I would max out all retirement plan options you have available. Once you are closer to 50 you will know what kind of position you are in as far as retirement.
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Re: Seeking to retire at 50

Post by prudent »

Boglenaut wrote:I think you are way too far to be setting 50 as a date. Just save as much as you can then decide when you are closer. A lot can change by 2035.
Not just because of the uncertainty, but psychologically also. I know when I first set a target date for retirement, as I got closer I began to focus on it more and more. Started to mentally detach from the stuff I would not have to worry about after retirement. But then reality turned out that I have to work a few more years - and after thinking I was so close, it is harder to get through it, you tend to think "if only..." then I could have pulled it off. It's not disabling but I wish now I would not have "planned" for a date so far in advance.
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pdriese
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Re: Seeking to retire at 50

Post by pdriese »

Sorry for having to keep putting new information in, I didn't think of some of the stuff that you have all brought up. Some additional points to consider:

I can get a full federal government pension if I stay until 55. Though I haven't done the math to figure out how much to expect, nor do I know if I would receive this as soon as I retired or would have to wait until age 65.

Second, my wife would likely return to the workforce when the kids are in kindergarten (~2020). She quit her job 2011 and was making roughly $35,000 as a graphic designer.

My wife and I are not opposed to retiring somewhere in central america to reduce the cost of living (and to be by a beach).
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NYBoglehead
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Re: Seeking to retire at 50

Post by NYBoglehead »

pdriese wrote:Sorry for having to keep putting new information in, I didn't think of some of the stuff that you have all brought up. Some additional points to consider:

I can get a full federal government pension if I stay until 55. Though I haven't done the math to figure out how much to expect, nor do I know if I would receive this as soon as I retired or would have to wait until age 65.

Second, my wife would likely return to the workforce when the kids are in kindergarten (~2020). She quit her job 2011 and was making roughly $35,000 as a graphic designer.

My wife and I are not opposed to retiring somewhere in central america to reduce the cost of living (and to be by a beach).
If you get a full govt pension at 55 it would be silly not to work until 55. 55 is still incredibly young to retire. Even if you had to wait until 65 to receive the pension you would be in far better shape than if you weren't going to get it. Also, with the pension now in play you can alter your the locations of your investments. Instead of maxing out the TSP maybe you only put $1,000/mo into it and direct the remaining $5,500 into a taxable account to pay for the years between ages 55 and 59.5. Something to think about.
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Re: Seeking to retire at 50

Post by Quickfoot »

Absolutely work to 55 if you can get a full pension. Just because you aren't retired prior to 55 doesn't mean you can't have fun. Our last kid will graduate college when we are 48, 49-55 will be fun years where we are able to enjoy more disposable income prior to retirement. Currently we get new cars ~ every 3 years, we will time it where we pay off cars and house just before 55 and skip a car upgrade cycle.

Also remember that you can withdraw contributions from a Roth before 60. So if you start maxing two Roth IRAs out at 30 at 55 you should have at least $275,000 in contributions you can take out between 55 and 60.

Even if you retire in country keep an eye on cost of living and also taxation rates in the different states, if you live in a high cost of living state your expenses could go down 20-35% if you relocate to a more affordable state at retirement.
Last edited by Quickfoot on Fri Jan 25, 2013 12:08 pm, edited 1 time in total.
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pdriese
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Re: Seeking to retire at 50

Post by pdriese »

I appreciate all your thoughts. A retirement age of 50 is aspirational. Sure I might want to work for a few years, and I certainly would look into the pension issue further.

But here's where I'm confused. Assuming I can max out my retirement accounts for the next 22 years, which I don't think will be that difficult seeing as I do that now with one income, I calculate that I'll have $1.5 million in inflation adjusted dollars, assuming I'm getting a 7% return on investment minus a 3.24% average inflation rate. If I had a 4% withdrawal rate, my inflation adjusted withdrawal would be about $61,000 at age 50. That's not too far from my current expenses. And if I get lucky and the stock market has a great run in the 2020s or 2030s I'm even in better shape.

So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
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Call_Me_Op
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Re: Seeking to retire at 50

Post by Call_Me_Op »

pdriese wrote: You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
You are asking a conservative group of folks - so you are receiving conservative responses.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: Seeking to retire at 50

Post by Grt2bOutdoors »

Dave76 wrote:I doubt it. I think having a child ruined your chances of retiring at 50.
Having 1 child didn't ruin his chances, but his plan of having 3 will certainly put a damper on it. OP - may I inquire what is the pre-occupation of being retired at 50? Is your health debilitating in any shape or form that will not permit you to enjoy a normal lifespan? I feel that many on here with these types of questions like living in a higher than normal pressure cooker, as normal life is not significant enough to put one in the grave early enough. :oops: Enjoy your life, you are 28 - you haven't even hit the prime of it yet.
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Re: Seeking to retire at 50

Post by Grt2bOutdoors »

pdriese wrote:I appreciate all your thoughts. A retirement age of 50 is aspirational. Sure I might want to work for a few years, and I certainly would look into the pension issue further.

But here's where I'm confused. Assuming I can max out my retirement accounts for the next 22 years, which I don't think will be that difficult seeing as I do that now with one income, I calculate that I'll have $1.5 million in inflation adjusted dollars, assuming I'm getting a 7% return on investment minus a 3.24% average inflation rate. If I had a 4% withdrawal rate, my inflation adjusted withdrawal would be about $61,000 at age 50. That's not too far from my current expenses. And if I get lucky and the stock market has a great run in the 2020s or 2030s I'm even in better shape.

So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
My thoughts on this is to do what we practice - control the things you can: 1)savings rate, 2)allocation selection 3)risk - rebalance according to your tolerance levels, 4)monitor and re-appraise - track your performance vs. goals, then adjust your expectations. 22 years is too far off into the future to gauge today whether you can afford retirement, however unless you are prepared to abandon your children (future) before having provided them with a way to fish (earn money to live on successfully) I would say revisit that "50" number. Enjoy your family and you'll enjoy your life better.
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Christine_NM
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Re: Seeking to retire at 50

Post by Christine_NM »

All you can do is keep saving and investing for retirement. You can't pin an age on it yet. Keep it at it, live below your means, and you will know when you can retire.

If this is really a serious aspiration, quit having kids. Otherwise forget the exact retirement age and enjoy the journey.

Count on expenses doubling every 20 years. This is partly inflation and partly raising your living standard as you advance in your career.

I am one person, no kids, no parents, and I have way more than $1.5 million. Would not feel comfortable retired with less.
16% cash 49% stock 35% bond. Retired, w/d rate 2.5%
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Re: Seeking to retire at 50

Post by NYBoglehead »

You also have to either rent a home or buy one when you get back to the states, since you are currently renting out the piece of property you own. That or kick the renters out and live their yourself. You have also left out any savings for children's educations (if they want to go to college).

Roofs need to be replaced, boilers, etc. Cars need to replaced periodically, etc etc etc. All things to keep in mind. Leaving the workforce too early can be very dangerous. A lot of people in their 50s have found themselves involuntarily retired after having lost their jobs and being out of a job for a few years.

I respect your desire to retire early and do not think it is impossible. But that said I think retiring early and then later finding out that you don't have enough can be absolutely devastating. Particularly since you would be leaving a pension on the table by leaving prior to 55 (is there a lower DB pension benefit if you leave at 50?).
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Re: Seeking to retire at 50

Post by Grt2bOutdoors »

Quickfoot wrote:Kids are expensive but certainly not retirement breakers. They do come with high out of pocket expenses but a lot of that pain is reduced through tax credits and lower tax rates. I'm 32, have 3 kids and am saving around 8K a year in taxes due to the kiddos, without kids I'd be high in the 28% bracket, with them I'm comfortably in the 15%. I do not believe the estimates of the costs to raise kids to be accurate.
Get rid of the tax credits and there goes your savings. :greedy
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Mitchell777
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Re: Seeking to retire at 50

Post by Mitchell777 »

Call_Me_Op wrote:
pdriese wrote: You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
You are asking a conservative group of folks - so you are receiving conservative responses.
I would agree that we are generally conservative folks. Also, many of us have lived long enough to see huge changes that we did not foresee. I had a plan to be in a position to retire befroe age 50, although not necessarily to do it. Then shortly before that a job loss came along with major cut in any future pension and loss of retirement health care. If you have a govt job and govt pension you may be able to make 50, but who knows what may change. If you take a pessimistic or worse case view of it, you will be that much better off, with more choices, when you hit that age
dbr
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Re: Seeking to retire at 50

Post by dbr »

pdriese wrote:I appreciate all your thoughts. A retirement age of 50 is aspirational. Sure I might want to work for a few years, and I certainly would look into the pension issue further.

But here's where I'm confused. Assuming I can max out my retirement accounts for the next 22 years, which I don't think will be that difficult seeing as I do that now with one income, I calculate that I'll have $1.5 million in inflation adjusted dollars, assuming I'm getting a 7% return on investment minus a 3.24% average inflation rate. If I had a 4% withdrawal rate, my inflation adjusted withdrawal would be about $61,000 at age 50. That's not too far from my current expenses. And if I get lucky and the stock market has a great run in the 2020s or 2030s I'm even in better shape.

So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
No I don't think you are really "missing" anything exactly, if a back of the envelope calculation says you might get there. I would be optimistic that you can make life be whatever you want it to be, but I would be pessimistic that you can set it all in motion right now.

What happens is that you are six or seven years into a productive phase of life that is close to the starting point of 22 years of further productive life and a potential 50 years of retired life. That is too little already traveled and too much to go to try to engineer the future in detail. The largest effects will probably not be financial one's but simply life events. You can start now saving as much as you can while thinking about what your lifestyle can look like in retirement and go from there. Continue to set your target and see as you go what you might need to do to continue to approach that target.
Quickfoot
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Re: Seeking to retire at 50

Post by Quickfoot »

Get rid of the tax credits and there goes your savings.
They aren't going to go away, with the population aging the government needs to encourage population growth and thus reward people for having kids. By the time they age out of the tax credits child related expenses will also be lower.

Also realistically if people that had kids didn't have kids they would still spend the same amount of money, it would just be on different things and they would miss out on getting to hear "Daddy I love you!" and grand kids.
So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
Also consider SPIAs for at least part of your income needs, they dramatically increase your chances of not out living your money while at the same time letting you spend more. I have a 401K (maxed), HSA (maxed) and a Roth (sheltering bonds and reits for my taxable account). When I do my retirement calculations I don't include my HSA because I plan to max it at until 65 and then buy a SPIA and ALDA with that money (should be around $1,200,000) and also plan to wait to claim SS until 70 (~3K / month at current benefit levels, will probably be 75% of that at retirement). With that in mind my 401K only has to last until 65 though at planned income rates it will last until at least 70. The ALDA will kick in around 80 and boost income by 50-75K / year to pay for assisted living / nursing care (SPIA / ADLA combined income should be around 130K a year plus anything SS kicks in which should be around another 27K a year or so).

I run my income generation using only 401K from 55-70 but should also have a very nice taxable account at that time to help as well.
Last edited by Quickfoot on Fri Jan 25, 2013 12:46 pm, edited 1 time in total.
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kenyan
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Re: Seeking to retire at 50

Post by kenyan »

pdriese wrote:I appreciate all your thoughts. A retirement age of 50 is aspirational. Sure I might want to work for a few years, and I certainly would look into the pension issue further.

But here's where I'm confused. Assuming I can max out my retirement accounts for the next 22 years, which I don't think will be that difficult seeing as I do that now with one income, I calculate that I'll have $1.5 million in inflation adjusted dollars, assuming I'm getting a 7% return on investment minus a 3.24% average inflation rate. If I had a 4% withdrawal rate, my inflation adjusted withdrawal would be about $61,000 at age 50. That's not too far from my current expenses. And if I get lucky and the stock market has a great run in the 2020s or 2030s I'm even in better shape.

So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
One thing you are missing - a 4% safe withdrawal rate (SWR) is a rule of thumb for someone retiring at 65. For someone retiring at 50, the rate would be much closer to something like 2.5%.

Do you plan to pay or contribute to college for the 3 kids? That will make a big difference as well.
Retirement investing is a marathon.
dbr
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Re: Seeking to retire at 50

Post by dbr »

pdriese wrote:
So am I missing something? You all seem very pessimistic. I agree that there would be a fair amount of risk at retiring so early, but would I really be that far off?
Have you investigated any of the planning tools I suggested? That might be helpful in pinning down more of the issues at question, keeping in mind previous comments.
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Re: Seeking to retire at 50

Post by bkslainte »

Looking at the numbers for your rental property, it seems that you are losing money on this property each month. I think you should consider gettting out of this negative cash flow property and into a property with positive cash flow(or refinance the current property to get into a positive cash flow position). To me, holding a property with negative cash flow would decrease your chances of retiring that early.
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Re: Cost to raise a healthy child

Post by Grt2bOutdoors »

Taylor Larimore wrote:PD:

Cost to Raise a Child: Around $300,000, Not Including College

Best wishes.
Taylor
Are you available to adopt? :wink:
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Re: Seeking to retire at 50

Post by Grt2bOutdoors »

Deleted!
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Watty
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Re: Seeking to retire at 50

Post by Watty »

It sounds like some people are a bit grumpy this morning. Try to ignore them.
On the comments about trying to retire at 50 and having kids it is very doable since you are starting young but you will make a lot of tradeoffs that might not be worthwhile. It might be better to budget some money to actually enjoy the time and money that you have with the kids while they are young instead of being an ultra-saver and spending a lot of your time managing rental property.
It is also hard to retire while you still have kids that are dependent on you so you might target retiring when you last kid will be out on their own.

Questions:

1. Are we contributing too much to retirement? Given the fact we want to retire at 50 and we can't withdraw from the TSP until I'm 59 1/2, I'm concerned that we'll be short of cash for 10 years. I do intend to start a taxable account in 2013 or 2014 but I'm not sure yet how much I'll be able to consistently contribute. Should I reduce how much I contribute to retirement accounts to instead contribute it toward a taxable account?

There are ways to get money out of an IRA early (Google 72t SEPP) and I would assume that they would also apply to the TSP or that the money could be rolled out to an IRA.

Before you can figure out just how much you need you really need to get a handle on just what the terms of your pension will be and also be prepared for a "plan B" it does not happen because of pension changes, you leave government work, etc.


2 . Part of my plan to (semi) retire at age 50 is to have 3-4 rental properties by then. This could help alleviate my problem in question 1.

Having that many rental properties could be a half time job, but the amount of work will vary unpredictably from month to month. I did not add up the numbers but it looks like you already have around 200% of your net worth in real estate so I don't know if buying that many more rental houses, along with a house to live in, would be good from a diversification standpoint.

3. Is my tilt toward small too extreme?

At 47% you international looks too high.

4. I know the first thing that will pop out to many of you is my 100% stock allocation. Granted, I had a smaller portfolio in 2008, but I actually upped my contributions in stocks during that period. I do realize though that as my portfolio gets larger, my ability to stomach large daily losses will likely wane, but I believe I'm comfortable with a 100% stock allocation until my portfolio reaches $150,000 or around age 30. Enlighten me if you want to the error my ways.

Do some research, you really don't gain much return, if any, with 100% stocks compared to 80% but it is a lot more volatile. the probem is that will be missing out on the the automatic selling of the over performing asset and buying the underperforming asset. I know that bonds look bad right now but you can keep them in shorter term bonds if you want.
Quickfoot
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Re: Seeking to retire at 50

Post by Quickfoot »

[response to a now-deleted off-topic comment removed by admin alex]

Back to the original topic, a positive cash flow rental is preferred but a slightly negative cash flow is not necessarily overly harmful. Because the OP can depreciate the rental he can lower his overall effective tax rate and in the end is likely to wind up with higher net income than without the rental. Of course it would still most likely be better to have positive cash flow and have that income sheltered through depreciation.

As far as number of rentals my goal is to own ~ 9 fourplex units by 49 as well as maintaining a portfolio in equities and fixed income. My time is far better spent with my wife and kids than managing properties so cash flow estimates include professional management.
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greg24
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Re: Seeking to retire at 50

Post by greg24 »

Life gets in the way. Keep living below your means and contributing as much as you can. But you may have a child with a health problem. You or your wife could have a health problem. A car accident, tornado, aging parent, etc. etc. etc. At 50, your perspective in life will be a whole lot different and retiring may not be as important as it seems now.

Enjoy life.
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Re: Seeking to retire at 50

Post by Calm Man »

I am glad this was posted as it helps young people look out to the future. We have a 30ish year old person making less than 100K with a non-working spouse who plans to have 3 kids. And he is talking of retiring at 55 --- no, make that 50. Fair enough, He thinks that having 3 kids will minimally increase his expenses. He is simply young and how can he know what kids really cost? Forgetting the stuff growing up, what about college for 3 kids? The spouse will be out of work about 10 years as a graphic designer with a salary in the 30K range currently and then she plans to return to work. Who will hire her? And last, it is unlikely that the current pension system for anybody, federal or else, will be the same in 25 years.

I would suggest that you try to enjoy life and recognize that you cannot possibly plan for 25 years from now except to save and invest properly. I would reconsider, especially if I were your wife and did want to work again, leaving the work force for 10 years as she likely will be unemployable at any skilled job. (She will walk in for an interview and the next interviewee will be a new graduate with a year or two of experience -- who do you think gets the job?) And although I wouldn't necessarily scale back on plans for the kids, I would recognize that it could seriously or permanently delay retirement plans.

Good luck in all your decisions. I would make it less than 5% that you could retire at age 55 given what you told us. If the goal is 50, I would say zero without large possible work-related bonuses or stock options, neither of which is available to you as a federal employee.
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Re: Seeking to retire at 50

Post by German Expat »

I am 48 now and when I was your age 50 sounded old and ready to retire. Also life tends to get in its way. With 28 I was in Germany, just got married. Now I am in the US, 2nd time married and have a 7 year old son so still a couple more years of child expenses.
What I am trying to say is don't get too hung up on it. Obviously save and if you have enough money to retire by 50 the better but don't make it an absolute priority. I would rather live some before turning 50 then moving all my fun expenses to that age.
We really enjoy travelling and this is our largest discrete expense (apart from mortgage) but it creates a lot of nice memories and our son sees a lot of different things. My current retirement goal is 60 but who knows I might still enjoy working too much by then.
My boss is retiring this August with 65 but he decided to stay on in a consulting role working between 50 and 75% because he just enjoys work too much.
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Re: Seeking to retire at 50

Post by AQ »

Boglenaut wrote:I think you are way too far to be setting 50 as a date. Just save as much as you can then decide when you are closer. A lot can change by 2035.
+1
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pdriese
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Re: Seeking to retire at 50

Post by pdriese »

damjam wrote:I believe once you leave your job you can rollover your TSP funds to an IRA. Once in an IRA you can access the funds prior to 59 1/2 by using the 72t exception. 72t allows for SEPP (Substantially Equal Periodic Payments).
So I would max out all retirement plan options you have available. Once you are closer to 50 you will know what kind of position you are in as far as retirement.
Great advice to you and the other posters who mentioned this. I wasn't aware of this.

Grt2bOutdoors wrote:
Dave76 wrote:I doubt it. I think having a child ruined your chances of retiring at 50.
Having 1 child didn't ruin his chances, but his plan of having 3 will certainly put a damper on it. OP - may I inquire what is the pre-occupation of being retired at 50? Is your health debilitating in any shape or form that will not permit you to enjoy a normal lifespan? I feel that many on here with these types of questions like living in a higher than normal pressure cooker, as normal life is not significant enough to put one in the grave early enough. :oops: Enjoy your life, you are 28 - you haven't even hit the prime of it yet.
Perhaps I gave the impression that I'm unhappy with my life and my job and I'm counting down the days until I retire. That's not true at all for me. I have a great life, a good job that can be very rewarding but on the other hand I really can't see myself working in an office environment for the next 37 years either. My wife and I spend a good portion traveling on vacations and seeing family which is what we enjoy most. I don't plan on delaying all gratification so I can retire early.

It's hard to pin down what my pre-occupation with retiring at 50 is. 50 is an arbitrary number. I just know I don't want to retire at 65 unless I really love my job. Part of it also is because I see my father being forced to work in his 60s and maybe even 70s. I want flexibility and choices. I'd rather go to work because I want to rather than to have to.

And like presumably many other posters on here, I'm very goal oriented. Having a goal to shoot for dramatically increases my chances of reaching that goal; though maybe I should have a dollar amount as a goal rather than an age. Still, I've got many years to go and my goals certainly could and probably will change.

And I'm not going to let my retirement goals stop me from having 3 kids or however many we decide on having. If having more kids delays my retirement goals, so be it.

bkslainte wrote:Looking at the numbers for your rental property, it seems that you are losing money on this property each month. I think you should consider gettting out of this negative cash flow property and into a property with positive cash flow(or refinance the current property to get into a positive cash flow position). To me, holding a property with negative cash flow would decrease your chances of retiring that early.
I'm fully aware of this. When we bought this house in 2009, we weren't planning on renting it in 2012, but an opportunity came up for me to work in Germany so I took it. We would not have a negative cash flow on this property if I kept a 30 year mortgage, but I refinanced it to 15 years for a great interest rate and to force myself to pay the extra principle. It's not difficult at all to cover the negative cash flow, and it gives me some experience as an investment property owner seeing as how I'm looking to get into that in future years. And really, it's not all that bad an investment. I'm putting $1100 of principle toward the mortgage each month and the tax benefits are good as well. I admit it's not the greatest investment either, but I'm not ready to get seriously involved in investment properties yet and we might move back into this house if/when we return to D.C.
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Re: Seeking to retire at 50

Post by BuckyBadger »

kenyan wrote:One thing you are missing - a 4% safe withdrawal rate (SWR) is a rule of thumb for someone retiring at 65. For someone retiring at 50, the rate would be much closer to something like 2.5%.
I think this bears repeating.
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Re: Seeking to retire at 50

Post by NYBoglehead »

^Well said. I think if you do plan on retiring at 50 and save/invest with that goal in mind, while you may not be able to retire at 50 it should mean a very secure retirement a little later on.

I also wouldn't worry about being $100/mo in the red on the rental property. You are building equity in the house each month for $100 is the way I look at it.

Keep in mind that all of the posters were not trying to discourage you in anyway, we just wanted you to know that retiring at 50 is a very tall task and not to get too hung up on it or deny yourself some of life's more enjoyable experiences in the meantime.
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Re: Seeking to retire at 50

Post by Balance »

To the OP, have you read the Mr. Money Moustache blog? He retired at 28 I believe and has a wife and child He wrote a few times about raising a child and the potential costs involved. http://www.mrmoneymustache.com/2011/05/ ... -children/

MMM still makes money off of his blog and his construction projects which he considers fun. But he will mention that he does not have to work for a pay check ever again to be able to provide for his family. Also, he does not live an extremely frugal life where he deprives himself of anything. He is actually quite resourceful, eats organic (which some people say is an indulgence), takes family vacations whenever he wants to, and does pretty much everything that him and his family wants to do. It is a great blog and I would think that it would relate to your situation nicely.
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pdriese
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Re: Seeking to retire at 50

Post by pdriese »

kenyan wrote:
One thing you are missing - a 4% safe withdrawal rate (SWR) is a rule of thumb for someone retiring at 65. For someone retiring at 50, the rate would be much closer to something like 2.5%.

Do you plan to pay or contribute to college for the 3 kids? That will make a big difference as well.
Another good point, this is something I hadn't thought about. Ideally, rental properties would help me cover a lower withdrawal rate.

And with college, yes I do intend to help my kids pay for college. With that said, I'm of the belief that they pay a considerable amount toward it too. Depending on the personalities of my kids, I think generally they would take their education more seriously if they have to work during college and if they have to pay for part of college themselves. I'm not sure what that means for me in how much I want to contribute, perhaps 50/50 or something. But I know I took my education very seriously because I had to pay 100% of the remaining bill after scholarships and grants.

Five years after my graduation (last year), I paid off my last student loan.
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Re: Seeking to retire at 50

Post by NYBoglehead »

Balance wrote:To the OP, have you read the Mr. Money Moustache blog? He retired at 28 I believe and has a wife and child He wrote a few times about raising a child and the potential costs involved. http://www.mrmoneymustache.com/2011/05/ ... -children/

MMM still makes money off of his blog and his construction projects which he considers fun. But he will mention that he does not have to work for a pay check ever again to be able to provide for his family. Also, he does not live an extremely frugal life where he deprives himself of anything. He is actually quite resourceful, eats organic (which some people say is an indulgence), takes family vacations whenever he wants to, and does pretty much everything that him and his family wants to do. It is a great blog and I would think that it would relate to your situation nicely.
I like Mr. Money Mustache a lot as well, but he just posted his expenses for 2012:

http://www.mrmoneymustache.com/2013/01/ ... -spending/

$25,046. I would say that meets the very definition of frugal. Yeah, he goes on vacations and seems to do what he wants, but he does it on the cheap.
Balance
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Re: Seeking to retire at 50

Post by Balance »

NYBoglehead wrote:
Balance wrote:To the OP, have you read the Mr. Money Moustache blog? He retired at 28 I believe and has a wife and child He wrote a few times about raising a child and the potential costs involved. http://www.mrmoneymustache.com/2011/05/ ... -children/

MMM still makes money off of his blog and his construction projects which he considers fun. But he will mention that he does not have to work for a pay check ever again to be able to provide for his family. Also, he does not live an extremely frugal life where he deprives himself of anything. He is actually quite resourceful, eats organic (which some people say is an indulgence), takes family vacations whenever he wants to, and does pretty much everything that him and his family wants to do. It is a great blog and I would think that it would relate to your situation nicely.
I like Mr. Money Mustache a lot as well, but he just posted his expenses for 2012:

http://www.mrmoneymustache.com/2013/01/ ... -spending/

$25,046. I would say that meets the very definition of frugal. Yeah, he goes on vacations and seems to do what he wants, but he does it on the cheap.
Agreed. I track our spending and we are shy of his for 2012. As a couple we did everything we wanted and never felt that we deprived ourselves of anything. So you can say that we are frugal but definitely not cheap. We just make smart spending choices. The good thing about MMM is that many young families can relate to his situation. Unlike Jacob from Early Retirement Extreme who was living on a yearly budget ot $8,000/yr but he would regularly eat beans and rice for meals day in and out. (Jacob is back to being employed as a Quant trader, but not because he has to work, it was because he got bored and wanted a challenge at such a young age).
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kenyan
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Re: Seeking to retire at 50

Post by kenyan »

pdriese wrote:
kenyan wrote:
One thing you are missing - a 4% safe withdrawal rate (SWR) is a rule of thumb for someone retiring at 65. For someone retiring at 50, the rate would be much closer to something like 2.5%.

Do you plan to pay or contribute to college for the 3 kids? That will make a big difference as well.
Another good point, this is something I hadn't thought about. Ideally, rental properties would help me cover a lower withdrawal rate.

And with college, yes I do intend to help my kids pay for college. With that said, I'm of the belief that they pay a considerable amount toward it too. Depending on the personalities of my kids, I think generally they would take their education more seriously if they have to work during college and if they have to pay for part of college themselves. I'm not sure what that means for me in how much I want to contribute, perhaps 50/50 or something. But I know I took my education very seriously because I had to pay 100% of the remaining bill after scholarships and grants.

Five years after my graduation (last year), I paid off my last student loan.
As others have noted, you are well on your way to financial independence, further along than most people your age. There are lots of roadbumps, and I don't think you'll quite make your goal of retiring by 50 without a lot of luck or cost-cutting/income & savings increases. Nevertheless, you should be doing very well, and probably won't have to wait too long after 50.

I think you have the right idea on children: having kids is not a financial decision; it's a lifestyle decision that has significant financial ramifications.
Retirement investing is a marathon.
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Re: Seeking to retire at 50

Post by Nestegg_User »

If OP is 28 -- they can't be in CSRS , must be in FERS-- so earliest pension would be 56 or later ("MRA") and if not 30 year, then the MRA+10 does not
give as large a payout (significant reduction before 62).

savings is currently way too low, housing not onerous -- and, as noted above, at 50 need a much lower SWR -- probably 2.5%.
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Re: Seeking to retire at 50

Post by pc95 »

I wouldn't count on a pension - I would not factor it into your retirement estimates for various reasons .....retiring early depends on what sort of lifestyle you want vs can afford. To be conservative, that is, not factoring in bleak world events/unforeseen problems, if you want to have mid-range retirement income, you better be saving in the neighborhood of $1 to $2 million dollars in assets to generate much of the income you would need to live and keep a the safe withdrawal rate. It's good to start thinking about it early anyway.
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Re: Seeking to retire at 50

Post by og15F1 »

Based on the data you have available today I would say that you're not retiring at 50 unless you and your wife earn and save a lot more money

Don't take that negatively. Most of us won't retire at 50 but will hopefully enjoy life anyway.
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