Please review early retirement plan

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Topic Author
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Please review early retirement plan

Post by fullplay2024 »

Below is our rough financial plan. Any input on things we're overlooking would be greatly appreciated. Thanks in advance.

Family:

Husband 45
Wife 42
Child #1 attends college 2020-2024
Child #2 attends college 2024-2028

Current income:

Husband W2 income: $250,000
Wife W2 income: $150,000
Net rental income after all expenses and taxes: $50,000

Annual expenses: $80,000

Net worth:

Taxable accounts - stocks/bonds/cash: $1,200,000
Tax deferred retirement accounts - stocks/bonds: $1,600,000
Real estate: $1,500,000
Primary home (paid off): $350,000
Total NW: $4,650,000

College Savings, not included in NW (529 + UTMA/UGMA): $600,000
Note: Plan to fully fund remaining 7 years of undergrad education. Extra funds shall be used for children’s graduate education or for nieces and nephews.

Total Debt: Zero. Home and cars paid off.

Early retirement considerations:

1. Wife wants to work another 5+ years
2. Husband would like to hang up his boots in next 6-12 months
3. We plan on keeping asset allocation at 50/50
4. Not counting a potential inheritance of $500k to $1M (current value) in next 20 years
5. Not counting social security (assume two bend points)
6. Need to fund healthcare expenses after Wife chooses to retire in 5+ years
delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: Please review early retirement plan

Post by delamer »

Assuming that the $80,000 doesn’t include health insurance premiums when neither of you is working, you’ll need to withdraw $60,000/year or so from your portfolio to cover expenses (taking into account your rental income).

That’s easily affordable indefinitely, given your level of liquid assets.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
flyingaway
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Re: Please review early retirement plan

Post by flyingaway »

You are making a combined income of $400,000 and only spending $80,000 a year?
Maybe enhancing your lifestyle a little bit so that no regrets in the future can be suggested.
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Peter Foley
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Location: Lake Wobegon

Re: Please review early retirement plan

Post by Peter Foley »

This would be more easily done if some of your savings were in a Roth and you could withdraw contributions from the Roth rather than deplete your taxable account. Getting some money in a Roth now and over the next 5 years would allow you withdrawals of those amounts in future years.
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JoeRetire
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Re: Please review early retirement plan

Post by JoeRetire »

fullplay2024 wrote: Wed May 12, 2021 3:03 pm Annual expenses: $80,000

Taxable accounts - stocks/bonds/cash: $1,200,000
Tax deferred retirement accounts - stocks/bonds: $1,600,000

1. Wife wants to work another 5+ years
Okay.
2. Husband would like to hang up his boots in next 6-12 months
Okay
3. We plan on keeping asset allocation at 50/50
4. Not counting a potential inheritance of $500k to $1M (current value) in next 20 years
5. Not counting social security (assume two bend points)
6. Need to fund healthcare expenses after Wife chooses to retire in 5+ years
Have you estimated healthcare expenses?

If your estimates are correct, if you intend to continue with your low annual expenses, and if your healthcare expenses aren't onerous, you'll be fine.
Just remember: it's not a lie if you believe it.
Topic Author
fullplay2024
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Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

flyingaway wrote: Wed May 12, 2021 3:18 pm You are making a combined income of $400,000 and only spending $80,000 a year?
Maybe enhancing your lifestyle a little bit so that no regrets in the future can be suggested.
Good observation. But, I want to clarify that our expenses used to be roughly $200K mostly due to a McMansion and kids expenses until a year ago. But, we have scaled down to a smaller and one child has left for college last year. Roughly, our current expenses are broken down as following:

Mortgage: None (0%)
Property taxes: $11,000 (14%)
Child #2 high school expenses 2021 thru 2023: $5,000 (6%)
Food, dining, grocery, clothing and shopping: $15,000 (19%)
Utilities and home maintenance: $4,000 (5%)
Travel & vacations: $30,000 (38%)
Gas and Transportation: $5,000 (6%)
Donations: $6,000 (8%)
Health and Fitness: $2,000 (3%)
Miscellaneous: $2,000 (3%)
Total: $80,000 (100%)

We can certainly raise our travel and vacation budget to not have any regrets in the future as you suggest.
Topic Author
fullplay2024
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Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

Peter Foley wrote: Wed May 12, 2021 3:24 pm This would be more easily done if some of your savings were in a Roth and you could withdraw contributions from the Roth rather than deplete your taxable account. Getting some money in a Roth now and over the next 5 years would allow you withdrawals of those amounts in future years.
Thank you for the suggestion. We currently have only about $100K in Roth IRA accounts. What are some recommended ways to get funds into Roth IRA accounts over the next 5 years? Any links or references for further reading would be appreciated.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

delamer wrote: Wed May 12, 2021 3:13 pm Assuming that the $80,000 doesn’t include health insurance premiums when neither of you is working, you’ll need to withdraw $60,000/year or so from your portfolio to cover expenses (taking into account your rental income).

That’s easily affordable indefinitely, given your level of liquid assets.
Thank you. Your assumption on health insurance premiums not included in $80K is correct. I included a rough breakdown of expenses in another response above.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

JoeRetire wrote: Wed May 12, 2021 3:24 pm
Have you estimated healthcare expenses?

If your estimates are correct, if you intend to continue with your low annual expenses, and if your healthcare expenses aren't onerous, you'll be fine.
We're in fairly good health now but that can change over next one to two decades. We're currently on a high-deductible HSA family plan through one of our employers. My estimate for decent health and dental insurance coverage today for a family of 4 is $25-30K per year.
LeftCoastIV
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Re: Please review early retirement plan

Post by LeftCoastIV »

Unrelated to the finances, I’m curious how you plan to spend your time if wife is still working and a kid still in high school. Traveling will be tough with family schedules.
Wannaretireearly
Posts: 1532
Joined: Wed Mar 31, 2010 4:39 pm

Re: Please review early retirement plan

Post by Wannaretireearly »

fullplay2024 wrote: Wed May 12, 2021 3:03 pm Below is our rough financial plan. Any input on things we're overlooking would be greatly appreciated. Thanks in advance.

Family:

Husband 45
Wife 42
Child #1 attends college 2020-2024
Child #2 attends college 2024-2028

Current income:

Husband W2 income: $250,000
Wife W2 income: $150,000
Net rental income after all expenses and taxes: $50,000

Annual expenses: $80,000

Net worth:

Taxable accounts - stocks/bonds/cash: $1,200,000
Tax deferred retirement accounts - stocks/bonds: $1,600,000
Real estate: $1,500,000
Primary home (paid off): $350,000
Total NW: $4,650,000

College Savings, not included in NW (529 + UTMA/UGMA): $600,000
Note: Plan to fully fund remaining 7 years of undergrad education. Extra funds shall be used for children’s graduate education or for nieces and nephews.

Total Debt: Zero. Home and cars paid off.

Early retirement considerations:

1. Wife wants to work another 5+ years
2. Husband would like to hang up his boots in next 6-12 months
3. We plan on keeping asset allocation at 50/50
4. Not counting a potential inheritance of $500k to $1M (current value) in next 20 years
5. Not counting social security (assume two bend points)
6. Need to fund healthcare expenses after Wife chooses to retire in 5+ years
Nice job! Seems your close to $3M investable assets. Not incl property and college funds.
I'd like to be where you are in a few years. Congrats getting here by mid-40s.

Like others said, what's hubby gonna do? What hobbies does he have? Why not time retirement together in a few years? Just asking
This time next year, we'll be millionaires!
Wannaretireearly
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Re: Please review early retirement plan

Post by Wannaretireearly »

fullplay2024 wrote: Wed May 12, 2021 3:40 pm
Peter Foley wrote: Wed May 12, 2021 3:24 pm This would be more easily done if some of your savings were in a Roth and you could withdraw contributions from the Roth rather than deplete your taxable account. Getting some money in a Roth now and over the next 5 years would allow you withdrawals of those amounts in future years.
Thank you for the suggestion. We currently have only about $100K in Roth IRA accounts. What are some recommended ways to get funds into Roth IRA accounts over the next 5 years? Any links or references for further reading would be appreciated.
1. Back door Roth IRA (when over income limits).
2. Mega plan after tax 401k (thru employer).
3. Roth conversions, in low/no income years.
4. Regular Roth (when under limits).

1. And 2. I really learnt the benefits and long term tax impacts of here. Golden advice, sometimes take time to sink in.
This time next year, we'll be millionaires!
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willthrill81
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Location: USA

Re: Please review early retirement plan

Post by willthrill81 »

delamer wrote: Wed May 12, 2021 3:13 pm Assuming that the $80,000 doesn’t include health insurance premiums when neither of you is working, you’ll need to withdraw $60,000/year or so from your portfolio to cover expenses (taking into account your rental income).

That’s easily affordable indefinitely, given your level of liquid assets.
Agreed. The OP is golden to retire indefinitely starting immediately. 8-)
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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JoeRetire
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Re: Please review early retirement plan

Post by JoeRetire »

fullplay2024 wrote: Wed May 12, 2021 3:48 pm
JoeRetire wrote: Wed May 12, 2021 3:24 pm
Have you estimated healthcare expenses?

If your estimates are correct, if you intend to continue with your low annual expenses, and if your healthcare expenses aren't onerous, you'll be fine.
We're in fairly good health now but that can change over next one to two decades. We're currently on a high-deductible HSA family plan through one of our employers. My estimate for decent health and dental insurance coverage today for a family of 4 is $25-30K per year.
Perhaps. You'll be fine anyway.

When I first retired, our healthcare expenses were very low, due to ACA subsidies. Now we are on Medicare and our expenses are low due to our Medicare Advantage plan

We have Long Term Care insurance.
Just remember: it's not a lie if you believe it.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

LeftCoastIV wrote: Wed May 12, 2021 3:59 pm Unrelated to the finances, I’m curious how you plan to spend your time if wife is still working and a kid still in high school. Traveling will be tough with family schedules.
Taking care of finances has always been our first priority. Now that the finances are in a fairly decent shape, we need to figure out the logistics of early retirement. Wife is a kind of a person who may never retire. She gets agitated if she's off from work for more than a couple of days. On the other hand, I'm is a laid-back techie although I've been in an exec role for a decade. I never worked from home until the pandemic happened. Having worked from home for a year, I never want to go back to the office now. I can always pick up an individual contributor tech consulting role and work from home two or three days a week if I'm bored. I have some deep thinking to do to figure out an option that works best. I'm hoping that the wife will punch out in 5 years. But, we shall see.
Nohbdy
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Re: Please review early retirement plan

Post by Nohbdy »

It looks like you have plenty saved for college, but your post made me curious if you can claim the AOTC and use 529. You might be close to the income limit with wife working. Not sure, but it might be worth looking at.
gips
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Re: Please review early retirement plan

Post by gips »

fullplay2024 wrote: Wed May 12, 2021 8:23 pm
LeftCoastIV wrote: Wed May 12, 2021 3:59 pm Unrelated to the finances, I’m curious how you plan to spend your time if wife is still working and a kid still in high school. Traveling will be tough with family schedules.
can always pick up an individual contributor tech consulting role and work from home two or three days a week if I'm bored. I have some deep thinking to do to figure out an option that works best. I'm hoping that the wife will punch out in 5 years. But, we shall see.
i did just that, retired late 50s, two year non compete during which i obtained a couple of cloud certs and have been consulting 2-3 days per week, 6 months a year from home yielding a six figure income. pretty sweet: attend meetings, review docs and occasionally create an arch.
flyingaway
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Re: Please review early retirement plan

Post by flyingaway »

JoeRetire wrote: Wed May 12, 2021 5:05 pm
fullplay2024 wrote: Wed May 12, 2021 3:48 pm
JoeRetire wrote: Wed May 12, 2021 3:24 pm
Have you estimated healthcare expenses?

If your estimates are correct, if you intend to continue with your low annual expenses, and if your healthcare expenses aren't onerous, you'll be fine.
We're in fairly good health now but that can change over next one to two decades. We're currently on a high-deductible HSA family plan through one of our employers. My estimate for decent health and dental insurance coverage today for a family of 4 is $25-30K per year.
Perhaps. You'll be fine anyway.

When I first retired, our healthcare expenses were very low, due to ACA subsidies. Now we are on Medicare and our expenses are low due to our Medicare Advantage plan

We have Long Term Care insurance.
Did you actually mean high.
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JoeRetire
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Re: Please review early retirement plan

Post by JoeRetire »

flyingaway wrote: Wed May 12, 2021 11:55 pm
JoeRetire wrote: Wed May 12, 2021 5:05 pm
fullplay2024 wrote: Wed May 12, 2021 3:48 pm
JoeRetire wrote: Wed May 12, 2021 3:24 pm
Have you estimated healthcare expenses?

If your estimates are correct, if you intend to continue with your low annual expenses, and if your healthcare expenses aren't onerous, you'll be fine.
We're in fairly good health now but that can change over next one to two decades. We're currently on a high-deductible HSA family plan through one of our employers. My estimate for decent health and dental insurance coverage today for a family of 4 is $25-30K per year.
Perhaps. You'll be fine anyway.

When I first retired, our healthcare expenses were very low, due to ACA subsidies. Now we are on Medicare and our expenses are low due to our Medicare Advantage plan

We have Long Term Care insurance.
Did you actually mean high.
No. I meant Low and Low.

I've had the same insurer and basically the same plan with the same in-network doctors and same in-network hospitals as when I was employed. Just much cheaper, and lower deductibles and co-pays.

When on a subsidized ACA plan, the premiums were much lower than what I paid as an employee.
And now on a Medicare Advantage plan, the premiums are still lower than what I paid as an employee.
Just remember: it's not a lie if you believe it.
fortunefavored
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Re: Please review early retirement plan

Post by fortunefavored »

fullplay2024 wrote: Wed May 12, 2021 3:36 pm
flyingaway wrote: Wed May 12, 2021 3:18 pm You are making a combined income of $400,000 and only spending $80,000 a year?
Maybe enhancing your lifestyle a little bit so that no regrets in the future can be suggested.
Good observation. But, I want to clarify that our expenses used to be roughly $200K mostly due to a McMansion and kids expenses until a year ago. But, we have scaled down to a smaller and one child has left for college last year. Roughly, our current expenses are broken down as following:

Mortgage: None (0%)
Property taxes: $11,000 (14%)
Child #2 high school expenses 2021 thru 2023: $5,000 (6%)
Food, dining, grocery, clothing and shopping: $15,000 (19%)
Utilities and home maintenance: $4,000 (5%)
Travel & vacations: $30,000 (38%)
Gas and Transportation: $5,000 (6%)
Donations: $6,000 (8%)
Health and Fitness: $2,000 (3%)
Miscellaneous: $2,000 (3%)
Total: $80,000 (100%)

We can certainly raise our travel and vacation budget to not have any regrets in the future as you suggest.
I think either way, assuming your wife continues to work for a while, you're fine.. but I'd encourage you to use Quicken or Mint or something similar to track your expenses in detail over the next couple of years. That big "food/dining/grocery/etc" category seems low. Some categories I don't see: gifts/family support, other insurance (home/umbrella/etc), medical out of pocket expenses, sinking funds for cars or future large home expenses.

Very similar situation for myself minus the kids - late 40s, I quit my job in January, wife continues to work, etc. And it is awesome. :)
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

gips wrote: Wed May 12, 2021 10:53 pm
i did just that, retired late 50s, two year non compete during which i obtained a couple of cloud certs and have been consulting 2-3 days per week, 6 months a year from home yielding a six figure income. pretty sweet: attend meetings, review docs and occasionally create an arch.
This is very encouraging to hear. I would love to be able to achieve something like what you're doing. I will take a 6 month sabbatical and brush up coding/arch skills and maybe even get AWS/Azure architect certifications.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

Nohbdy wrote: Wed May 12, 2021 10:36 pm It looks like you have plenty saved for college, but your post made me curious if you can claim the AOTC and use 529. You might be close to the income limit with wife working. Not sure, but it might be worth looking at.
I haven't thought that far out yet, but I'll have to run the numbers when we get there.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

fortunefavored wrote: Thu May 13, 2021 8:26 am
I think either way, assuming your wife continues to work for a while, you're fine.. but I'd encourage you to use Quicken or Mint or something similar to track your expenses in detail over the next couple of years. That big "food/dining/grocery/etc" category seems low. Some categories I don't see: gifts/family support, other insurance (home/umbrella/etc), medical out of pocket expenses, sinking funds for cars or future large home expenses.

Very similar situation for myself minus the kids - late 40s, I quit my job in January, wife continues to work, etc. And it is awesome. :)
Congratulations on your early retirement. Thanks for sharing your experience. I use Mint extensively to keep an eye on our expenses. Last year has been an outlier due to the pandemic. Not surprisingly, our expenses significantly went down due to no travel, more cooking at home, and working from home. We will have to see how our expenses evolve post pandemic and as we become empty-nesters in 3 years.
desiderium
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Re: Please review early retirement plan

Post by desiderium »

fullplay2024 wrote: Wed May 12, 2021 8:23 pm
LeftCoastIV wrote: Wed May 12, 2021 3:59 pm Unrelated to the finances, I’m curious how you plan to spend your time if wife is still working and a kid still in high school. Traveling will be tough with family schedules.
Taking care of finances has always been our first priority. Now that the finances are in a fairly decent shape, we need to figure out the logistics of early retirement. Wife is a kind of a person who may never retire. She gets agitated if she's off from work for more than a couple of days. On the other hand, I'm is a laid-back techie although I've been in an exec role for a decade. I never worked from home until the pandemic happened. Having worked from home for a year, I never want to go back to the office now. I can always pick up an individual contributor tech consulting role and work from home two or three days a week if I'm bored. I have some deep thinking to do to figure out an option that works best. I'm hoping that the wife will punch out in 5 years. But, we shall see.
This is an insightful response. Not knowing what lies in your future is great, especially when the finances are sound (yours definitely are). On the other hand, being used to functioning at a high level in the hierarchy, you may want to maintain some connection to and human capital with the tech/business world.

Not that it matters financially, but your home maintenance budget is likely low and I would suggest finding ways to increase your spend on health and fitness.

In terms of managing your money, choices around taxation will make a difference in portfolio performance. As suggested, perform Roth conversions, especially if your wife eventually hangs up her work efforts. But also look at capital gains management. Tax loss harvest if/when you can and use a donor advised fund to offload your capital gains to fund your charitable giving.

You have an awesome plan, enjoy!
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Peter Foley
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Re: Please review early retirement plan

Post by Peter Foley »

wannaretireearly covered the basics but with the additional information you provided you are in good shape.

Both should do a backdoor Roth this year. Then do Roths for the next few years while your wife is working. Once she stops working you should be in a low tax bracket. You can withdraw 5 year old contributions from your Roth and then do a Roth conversion from your tax deferred account to replace the money in the Roth.

Work out the tax implications so that you can withdraw from taxable and Roth while staying in a low tax bracket until age 59.5. Then add tax deferred to the mix with a eye on keeping your marginal tax rate relatively stable pre SS benefits, post SS benefits, and after RMDs begin.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

desiderium wrote: Thu May 13, 2021 11:26 am
This is an insightful response. Not knowing what lies in your future is great, especially when the finances are sound (yours definitely are). On the other hand, being used to functioning at a high level in the hierarchy, you may want to maintain some connection to and human capital with the tech/business world.

Not that it matters financially, but your home maintenance budget is likely low and I would suggest finding ways to increase your spend on health and fitness.

In terms of managing your money, choices around taxation will make a difference in portfolio performance. As suggested, perform Roth conversions, especially if your wife eventually hangs up her work efforts. But also look at capital gains management. Tax loss harvest if/when you can and use a donor advised fund to offload your capital gains to fund your charitable giving.

You have an awesome plan, enjoy!
These are great pieces of advice. I would definitely like to focus more on health and fitness. But, most of my exercise includes hiking, running and walking the dog - which all cost nothing.
Topic Author
fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

Peter Foley wrote: Thu May 13, 2021 5:12 pm wannaretireearly covered the basics but with the additional information you provided you are in good shape.

Both should do a backdoor Roth this year. Then do Roths for the next few years while your wife is working. Once she stops working you should be in a low tax bracket. You can withdraw 5 year old contributions from your Roth and then do a Roth conversion from your tax deferred account to replace the money in the Roth.

Work out the tax implications so that you can withdraw from taxable and Roth while staying in a low tax bracket until age 59.5. Then add tax deferred to the mix with a eye on keeping your marginal tax rate relatively stable pre SS benefits, post SS benefits, and after RMDs begin.
Thank you. I haven't thought much about tax implications yet but these are some great pointers for me to work on over the next 5 years.
bltn
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Re: Please review early retirement plan

Post by bltn »

fullplay2024 wrote: Wed May 12, 2021 3:36 pm
flyingaway wrote: Wed May 12, 2021 3:18 pm You are making a combined income of $400,000 and only spending $80,000 a year?
Maybe enhancing your lifestyle a little bit so that no regrets in the future can be suggested.
Good observation. But, I want to clarify that our expenses used to be roughly $200K mostly due to a McMansion and kids expenses until a year ago. But, we have scaled down to a smaller and one child has left for college last year. Roughly, our current expenses are broken down as following:

Mortgage: None (0%)
Property taxes: $11,000 (14%)
Child #2 high school expenses 2021 thru 2023: $5,000 (6%)
Food, dining, grocery, clothing and shopping: $15,000 (19%)
Utilities and home maintenance: $4,000 (5%)
Travel & vacations: $30,000 (38%)
Gas and Transportation: $5,000 (6%)
Donations: $6,000 (8%)
Health and Fitness: $2,000 (3%)
Miscellaneous: $2,000 (3%)
Total: $80,000 (100%)

We can certainly raise our travel and vacation budget to not have any regrets in the future as you suggest.
The budget seems low for utilities and maintenance. I Less than 350.00 monthly for utilities, cable , yard care, house cleaning, and gathering funds for home repair (hvac,roof,painting,etc). Does gas and transportation funds include savings for your future car purchases? Also, what will your income taxes be?
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fullplay2024
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Re: Please review early retirement plan

Post by fullplay2024 »

bltn wrote: Thu May 13, 2021 11:00 pm
The budget seems low for utilities and maintenance. I Less than 350.00 monthly for utilities, cable , yard care, house cleaning, and gathering funds for home repair (hvac,roof,painting,etc). Does gas and transportation funds include savings for your future car purchases? Also, what will your income taxes be?
Perhaps, you're right. But, we live in a fairly new townhouse with a $160.00 monthly HOA that includes all maintenance. Also, I feel there's enough room in other expense buckets such as child #2 expenses, vacations, etc that can be reallocated if necessary. We're not high spenders - so I feel confident that we won't go way over $80K per year. Of course, that doesn't include healthcare premiums/expenses.
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HuckFinn
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Re: Please review early retirement plan

Post by HuckFinn »

Nice job fullplay2024. I just hopped from my thread to this one that you linked. Nice job on the expenses and diverse assets.
Wish you great success and happiness in the next chapter.

One of my favorite quotes is at the end of the movie Willie Wonka and the Chocolate Factory:

“Don't forget what happened to the man who suddenly got everything he wanted…. He lived happily ever after.”

Even though your success didn't come suddenly "Happily Ever After" is sweet indeed!
Jebediah
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Re: Please review early retirement plan

Post by Jebediah »

Peter Foley wrote: Thu May 13, 2021 5:12 pm wannaretireearly covered the basics but with the additional information you provided you are in good shape.

Both should do a backdoor Roth this year. Then do Roths for the next few years while your wife is working. Once she stops working you should be in a low tax bracket. You can withdraw 5 year old contributions from your Roth and then do a Roth conversion from your tax deferred account to replace the money in the Roth.

Work out the tax implications so that you can withdraw from taxable and Roth while staying in a low tax bracket until age 59.5. Then add tax deferred to the mix with a eye on keeping your marginal tax rate relatively stable pre SS benefits, post SS benefits, and after RMDs begin.
I'm in the same boat as the OP regarding the Roth (tiny fraction of NW) and it doesn't seem to me that contributions will really move the needle. It's kind of like saying "buy ibonds" for inflation protection. Instead I'm considering somehow levering up in the Roth with commensurate risk reduction in taxable.
marcopolo
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Re: Please review early retirement plan

Post by marcopolo »

fullplay2024 wrote: Fri May 14, 2021 9:49 am
bltn wrote: Thu May 13, 2021 11:00 pm
The budget seems low for utilities and maintenance. I Less than 350.00 monthly for utilities, cable , yard care, house cleaning, and gathering funds for home repair (hvac,roof,painting,etc). Does gas and transportation funds include savings for your future car purchases? Also, what will your income taxes be?
Perhaps, you're right. But, we live in a fairly new townhouse with a $160.00 monthly HOA that includes all maintenance. Also, I feel there's enough room in other expense buckets such as child #2 expenses, vacations, etc that can be reallocated if necessary. We're not high spenders - so I feel confident that we won't go way over $80K per year. Of course, that doesn't include healthcare premiums/expenses.
I don't recall seeing what you plan to do with all the freedom early retirement will bring.

You seem pretty organized, so have no reason to doubt you have a good handle on current spending. If you plan to live just the way are now then projecting that as future expenses is a reasonanle starting point.

But, at your young ages, it seems possible you may have desire to do more things that may cost more money. You are obviously doing quite well, and can afford increased discretionary spending. I would just suggest you think about what you want to do with your time so associated expenses do not come as a surprise. Our expenses nearly doubled after we retired, but it is what we planned on doing, so it was not a shock to our portfolio.

Good luck to you.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Topic Author
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

marcopolo wrote: Fri May 14, 2021 8:14 pm
I don't recall seeing what you plan to do with all the freedom early retirement will bring.

You seem pretty organized, so have no reason to doubt you have a good handle on current spending. If you plan to live just the way are now then projecting that as future expenses is a reasonanle starting point.

But, at your young ages, it seems possible you may have desire to do more things that may cost more money. You are obviously doing quite well, and can afford increased discretionary spending. I would just suggest you think about what you want to do with your time so associated expenses do not come as a surprise. Our expenses nearly doubled after we retired, but it is what we planned on doing, so it was not a shock to our portfolio.

Good luck to you.
You're absolutely right. As you could see from the thread, we're not psychologically ready to take the plunge yet. However, knowing that we don't have to worry about our jobs or finances is a comfortable feeling. I personally see three possible outcomes going forward:

1. I left my MegaCorp job 2 years ago and took my current demanding job at a startup. While my current job is rewarding compared to the Megacorp job, there are many startup growth demands that keep me up at night. Therefore, I can quit from the job and take a sabbatical for 6-12 months to unwind. Then, I can transition to a low stress, part time, lesser pay, 100% wfh, and intellectually challenging tech job. I can ride it out until I get bored and figure out a full retirement plan or until wife decides to join me.

2. Do nothing on the career front for another 3 years. Both children will move out for college and we will be empty-nesters. In the meantime, we'll loosen the purse strings and raise our spending as well as charitable donations. There's a low percentage chance of a low 7 figure payout at the current startup job in the next 3 years - in which case our NW will significantly grow to high 7 figures.

3. On the flip side, there's also a high chance of me losing the current exec job at startup because of high expectations in the current role. While I love the challenge, I don't particularly like the thought of getting "fired".

Option 1 is a conscious decision I have to make but option 2 and 3 are decisions made for me. I can't yet figure out which option I'll end up taking though. I have some deep thinking to do over the next few months.
desiderium
Posts: 1051
Joined: Sat Jan 04, 2014 11:08 am

Re: Please review early retirement plan

Post by desiderium »

fullplay2024 wrote: Sat May 15, 2021 1:54 pm
marcopolo wrote: Fri May 14, 2021 8:14 pm
I don't recall seeing what you plan to do with all the freedom early retirement will bring.

You seem pretty organized, so have no reason to doubt you have a good handle on current spending. If you plan to live just the way are now then projecting that as future expenses is a reasonanle starting point.

But, at your young ages, it seems possible you may have desire to do more things that may cost more money. You are obviously doing quite well, and can afford increased discretionary spending. I would just suggest you think about what you want to do with your time so associated expenses do not come as a surprise. Our expenses nearly doubled after we retired, but it is what we planned on doing, so it was not a shock to our portfolio.

Good luck to you.
You're absolutely right. As you could see from the thread, we're not psychologically ready to take the plunge yet. However, knowing that we don't have to worry about our jobs or finances is a comfortable feeling. I personally see three possible outcomes going forward:

1. I left my MegaCorp job 2 years ago and took my current demanding job at a startup. While my current job is rewarding compared to the Megacorp job, there are many startup growth demands that keep me up at night. Therefore, I can quit from the job and take a sabbatical for 6-12 months to unwind. Then, I can transition to a low stress, part time, lesser pay, 100% wfh, and intellectually challenging tech job. I can ride it out until I get bored and figure out a full retirement plan or until wife decides to join me.

2. Do nothing on the career front for another 3 years. Both children will move out for college and we will be empty-nesters. In the meantime, we'll loosen the purse strings and raise our spending as well as charitable donations. There's a low percentage chance of a low 7 figure payout at the current startup job in the next 3 years - in which case our NW will significantly grow to high 7 figures.

3. On the flip side, there's also a high chance of me losing the current exec job at startup because of high expectations in the current role. While I love the challenge, I don't particularly like the thought of getting "fired".

Option 1 is a conscious decision I have to make but option 2 and 3 are decisions made for me. I can't yet figure out which option I'll end up taking though. I have some deep thinking to do over the next few months.
1 is actually a short term plan with many unknown and potentially exciting possibilities after your sabbatical. With your NW, holding out for 2 guarantees a negative personal experience for 3 years for…momentum’s sake? 3 also passive. Do the odds of losing the position reflect your ambivalence about giving everything to the company? Do your deep thinking and make your own decision. You’re free.
Topic Author
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

desiderium wrote: Sun May 16, 2021 10:10 am
fullplay2024 wrote: Sat May 15, 2021 1:54 pm
marcopolo wrote: Fri May 14, 2021 8:14 pm
I don't recall seeing what you plan to do with all the freedom early retirement will bring.

You seem pretty organized, so have no reason to doubt you have a good handle on current spending. If you plan to live just the way are now then projecting that as future expenses is a reasonanle starting point.

But, at your young ages, it seems possible you may have desire to do more things that may cost more money. You are obviously doing quite well, and can afford increased discretionary spending. I would just suggest you think about what you want to do with your time so associated expenses do not come as a surprise. Our expenses nearly doubled after we retired, but it is what we planned on doing, so it was not a shock to our portfolio.

Good luck to you.
You're absolutely right. As you could see from the thread, we're not psychologically ready to take the plunge yet. However, knowing that we don't have to worry about our jobs or finances is a comfortable feeling. I personally see three possible outcomes going forward:

1. I left my MegaCorp job 2 years ago and took my current demanding job at a startup. While my current job is rewarding compared to the Megacorp job, there are many startup growth demands that keep me up at night. Therefore, I can quit from the job and take a sabbatical for 6-12 months to unwind. Then, I can transition to a low stress, part time, lesser pay, 100% wfh, and intellectually challenging tech job. I can ride it out until I get bored and figure out a full retirement plan or until wife decides to join me.

2. Do nothing on the career front for another 3 years. Both children will move out for college and we will be empty-nesters. In the meantime, we'll loosen the purse strings and raise our spending as well as charitable donations. There's a low percentage chance of a low 7 figure payout at the current startup job in the next 3 years - in which case our NW will significantly grow to high 7 figures.

3. On the flip side, there's also a high chance of me losing the current exec job at startup because of high expectations in the current role. While I love the challenge, I don't particularly like the thought of getting "fired".

Option 1 is a conscious decision I have to make but option 2 and 3 are decisions made for me. I can't yet figure out which option I'll end up taking though. I have some deep thinking to do over the next few months.
1 is actually a short term plan with many unknown and potentially exciting possibilities after your sabbatical. With your NW, holding out for 2 guarantees a negative personal experience for 3 years for…momentum’s sake? 3 also passive. Do the odds of losing the position reflect your ambivalence about giving everything to the company? Do your deep thinking and make your own decision. You’re free.
Thank you for chiming in. Writing these three options out certainly helped me look at things clearly. I never thought it would be this hard to switch gears to early retirement life. I know I’m making it harder than it actually is. But, that’s where I have to some deep thinking on what’s holding me from making a go-forward decision.
desiderium
Posts: 1051
Joined: Sat Jan 04, 2014 11:08 am

Re: Please review early retirement plan

Post by desiderium »

fullplay2024 wrote: Sun May 16, 2021 12:03 pm
desiderium wrote: Sun May 16, 2021 10:10 am
fullplay2024 wrote: Sat May 15, 2021 1:54 pm
marcopolo wrote: Fri May 14, 2021 8:14 pm
I don't recall seeing what you plan to do with all the freedom early retirement will bring.

You seem pretty organized, so have no reason to doubt you have a good handle on current spending. If you plan to live just the way are now then projecting that as future expenses is a reasonanle starting point.

But, at your young ages, it seems possible you may have desire to do more things that may cost more money. You are obviously doing quite well, and can afford increased discretionary spending. I would just suggest you think about what you want to do with your time so associated expenses do not come as a surprise. Our expenses nearly doubled after we retired, but it is what we planned on doing, so it was not a shock to our portfolio.

Good luck to you.
You're absolutely right. As you could see from the thread, we're not psychologically ready to take the plunge yet. However, knowing that we don't have to worry about our jobs or finances is a comfortable feeling. I personally see three possible outcomes going forward:

1. I left my MegaCorp job 2 years ago and took my current demanding job at a startup. While my current job is rewarding compared to the Megacorp job, there are many startup growth demands that keep me up at night. Therefore, I can quit from the job and take a sabbatical for 6-12 months to unwind. Then, I can transition to a low stress, part time, lesser pay, 100% wfh, and intellectually challenging tech job. I can ride it out until I get bored and figure out a full retirement plan or until wife decides to join me.

2. Do nothing on the career front for another 3 years. Both children will move out for college and we will be empty-nesters. In the meantime, we'll loosen the purse strings and raise our spending as well as charitable donations. There's a low percentage chance of a low 7 figure payout at the current startup job in the next 3 years - in which case our NW will significantly grow to high 7 figures.

3. On the flip side, there's also a high chance of me losing the current exec job at startup because of high expectations in the current role. While I love the challenge, I don't particularly like the thought of getting "fired".

Option 1 is a conscious decision I have to make but option 2 and 3 are decisions made for me. I can't yet figure out which option I'll end up taking though. I have some deep thinking to do over the next few months.
1 is actually a short term plan with many unknown and potentially exciting possibilities after your sabbatical. With your NW, holding out for 2 guarantees a negative personal experience for 3 years for…momentum’s sake? 3 also passive. Do the odds of losing the position reflect your ambivalence about giving everything to the company? Do your deep thinking and make your own decision. You’re free.
Thank you for chiming in. Writing these three options out certainly helped me look at things clearly. I never thought it would be this hard to switch gears to early retirement life. I know I’m making it harder than it actually is. But, that’s where I have to some deep thinking on what’s holding me from making a go-forward decision.
Maybe the hangup is that you think you are making a decision to "switch gears to early retirement life". Actually, the decision you are talking about is simply quitting your job after reassuring yourself that you have enough to not work for money in the future. Don't overcomplicate it by thinking you have to plan the rest of your life. You are young. You might find another startup, you might start a business, you might like to work part time as a consultant, maybe you will write a book. Don't pretend you know anything about the future, other than seeing that it looks good from a financial standpoint.
MrCheapo
Posts: 175
Joined: Tue Dec 22, 2020 3:43 pm

Re: Please review early retirement plan

Post by MrCheapo »

@FullPlay2024

Let me give you a different perspective. I am almost in your same situation but am 5 years older (I'm 50). A little bit more in stocks and retirement plans but about the same.

I decided to stay on an extra 5 years to bolster my retirement and health plan coverage in retirement. Why? Because who knows what will happens in the future and in my career once you retire you can't come back very easily at all (huge bias against hiring older people).

You'll need to draw at 3% of your $2.8M in savings to make it last longer so your looking at about $90K a year but after tax closer to your annual expense of $80K.

A few reasons why I'd hang on a bit longer:

a) $80K may sound like a lot now, but rememberyou are going to have much more time to travel, relax etc. I'm planning on spending at 1.5 X my current annual expenditure in retirement. No point having all this time and no money to do stuff with it.

b) Things can go wrong. How do you plan to handle those things? Maybe you need health treatments not covered by your insurance? Maybe you need assisted care or something else.

c) Do you have social security? If you do plan on taking Ian at 70. This forum has taught me that SS is a great long term life insurance policy.


fullplay2024 wrote: Wed May 12, 2021 3:03 pm Below is our rough financial plan. Any input on things we're overlooking would be greatly appreciated. Thanks in advance.

Family:

Husband 45
Wife 42
Child #1 attends college 2020-2024
Child #2 attends college 2024-2028

Current income:

Husband W2 income: $250,000
Wife W2 income: $150,000
Net rental income after all expenses and taxes: $50,000

Annual expenses: $80,000

Net worth:

Taxable accounts - stocks/bonds/cash: $1,200,000
Tax deferred retirement accounts - stocks/bonds: $1,600,000
Real estate: $1,500,000
Primary home (paid off): $350,000
Total NW: $4,650,000

College Savings, not included in NW (529 + UTMA/UGMA): $600,000
Note: Plan to fully fund remaining 7 years of undergrad education. Extra funds shall be used for children’s graduate education or for nieces and nephews.

Total Debt: Zero. Home and cars paid off.

Early retirement considerations:

1. Wife wants to work another 5+ years
2. Husband would like to hang up his boots in next 6-12 months
3. We plan on keeping asset allocation at 50/50
4. Not counting a potential inheritance of $500k to $1M (current value) in next 20 years
5. Not counting social security (assume two bend points)
6. Need to fund healthcare expenses after Wife chooses to retire in 5+ years
Topic Author
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

desiderium wrote: Mon May 17, 2021 12:15 pm
Maybe the hangup is that you think you are making a decision to "switch gears to early retirement life". Actually, the decision you are talking about is simply quitting your job after reassuring yourself that you have enough to not work for money in the future. Don't overcomplicate it by thinking you have to plan the rest of your life. You are young. You might find another startup, you might start a business, you might like to work part time as a consultant, maybe you will write a book. Don't pretend you know anything about the future, other than seeing that it looks good from a financial standpoint.
You're right. I'm certainly overcomplicating the situation. I'll make the decision over the next few months. Thanks so much for your input.
Topic Author
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Re: Please review early retirement plan

Post by fullplay2024 »

MrCheapo wrote: Mon May 17, 2021 1:01 pm @FullPlay2024

Let me give you a different perspective. I am almost in your same situation but am 5 years older (I'm 50). A little bit more in stocks and retirement plans but about the same.

I decided to stay on an extra 5 years to bolster my retirement and health plan coverage in retirement. Why? Because who knows what will happens in the future and in my career once you retire you can't come back very easily at all (huge bias against hiring older people).

You'll need to draw at 3% of your $2.8M in savings to make it last longer so your looking at about $90K a year but after tax closer to your annual expense of $80K.

A few reasons why I'd hang on a bit longer:

a) $80K may sound like a lot now, but rememberyou are going to have much more time to travel, relax etc. I'm planning on spending at 1.5 X my current annual expenditure in retirement. No point having all this time and no money to do stuff with it.

b) Things can go wrong. How do you plan to handle those things? Maybe you need health treatments not covered by your insurance? Maybe you need assisted care or something else.

c) Do you have social security? If you do plan on taking Ian at 70. This forum has taught me that SS is a great long term life insurance policy.
Thanks for your comments.

1. You may not have noticed that I have a $50k (conservative estimate) net cash flow after all expenses and taxes. Therefore, at 3% withdrawal of liquid portfolio, I would be looking at around $140K per year if I were to retire today. There's plenty of buffer in $140K to cover health insurance and other expenses in my opinion.

2. Both wife and I have social security. I estimate both of us will have 2 bend points. But, we may not draw on until 70.
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