Extreme Early Retirement

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
KingTut
Posts: 10
Joined: Sat Sep 29, 2012 11:46 am

Extreme Early Retirement

Post by KingTut » Sun Aug 04, 2013 12:42 pm

I am 36 and my wife is 37. My wife and I have amassed a total of 1.7M in investable assets. My wife and I believe we can live happily off $60K a year which is slightly less than 4% of 1.7M. I know retirees can have anxiety about outliving their money. God-willing, I'm hoping to be on this earth for another 50 years. Has anyone on this forum tried to check out of the workforce this early?

Tentatively we are looking at taking the plunge in March 2014. Should I be doing anything between now and then?

livesoft
Posts: 60980
Joined: Thu Mar 01, 2007 8:00 pm

Re: Extreme Early Retirement

Post by livesoft » Sun Aug 04, 2013 12:46 pm

I would suggest you don't retire at an all-time market high, but temper your expectations and retire when the market is doing something like it was doing in February 2009.

See also the early retirement forum for more words of encouragement: http://www.early-retirement.org/forums/f28/
Wiki This signature message sponsored by sscritic: Learn to fish.

Call_Me_Op
Posts: 6821
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Extreme Early Retirement

Post by Call_Me_Op » Sun Aug 04, 2013 1:04 pm

4% withdrawal rate would not make me comfortable over a 50 year period. I'd want it to be below 3%.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

rai
Posts: 1146
Joined: Tue Apr 06, 2010 7:11 am

Re: Extreme Early Retirement

Post by rai » Sun Aug 04, 2013 1:22 pm

No way. Health care is a big risk, do you have any idea how much you would spend to self insure?

What will future taxes or inflation do to your withdrawals?

Do you have a sizable Social Security foundation to look forward to? SS looks at the highest 25 years, it's hard to believe you have a lot of 'max years' let alone 25 full years at your ages.

I'd shoot for 2.5 to 3% withdrawal rate at such a long time till Social Security.
Last edited by rai on Sun Aug 04, 2013 1:29 pm, edited 2 times in total.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

User avatar
market timer
Posts: 5887
Joined: Tue Aug 21, 2007 1:42 am

Re: Extreme Early Retirement

Post by market timer » Sun Aug 04, 2013 1:26 pm

rai wrote:No way. Health care is a big risk, do you have any idea how much you would spend to self insure?
If OP can keep AGI low and avoid smoking, he'll qualify for state-funded health insurance. It's never been a better time to be asset rich and income poor in the US.

staustin
Posts: 120
Joined: Mon Mar 14, 2011 9:36 am

Re: Extreme Early Retirement

Post by staustin » Sun Aug 04, 2013 1:29 pm

CONGRATULATIONS! An amazing accomplishment to have those kinds of assets at 37. If you've structured your expense side to live below a 4% withdrawal rate, absolutely take the plunge. Consider various types of passive income as well... there are numerous posts on the topic, from dividend stocks to rental properties. Properly deployed, an asset base that size should support a low cost, comfortable life. You might consider reading the mr. money mustache blog. Gentlemen retired with just over 800 in assets and lives comfortable. The trick obviously is to live simply obviously.

Well done..

hicabob
Posts: 2656
Joined: Fri May 27, 2011 5:35 pm
Location: cruz

Re: Extreme Early Retirement

Post by hicabob » Sun Aug 04, 2013 1:29 pm

rai wrote:No way. Health care is a big risk, do you have any idea how much you would spend to self insure?

What will future taxes or inflation do to your withdrawals?

Do you have a sizable Social Security foundation to look forward to? SS looks at the highest 25 years, it's hard to believe you have a lot of 'max years' let alone 25 full years at your ages.

Only thing I would be comfortable with at your age would be the dividend payouts ~2% with your nest egg to be sustained and pay out those dividends.
Even worse, SSI is based on highest 35 years.

timmy
Posts: 668
Joined: Thu Jun 14, 2012 2:57 pm

Re: Extreme Early Retirement

Post by timmy » Sun Aug 04, 2013 1:32 pm

http://www.mrmoneymustache.com/

Check out the above site.

gerrym51
Posts: 1679
Joined: Sat Apr 27, 2013 1:44 pm

Re: Extreme Early Retirement

Post by gerrym51 » Sun Aug 04, 2013 1:36 pm

as long as your ok with minimum ss sounds ok :mrgreen:

rai
Posts: 1146
Joined: Tue Apr 06, 2010 7:11 am

Re: Extreme Early Retirement

Post by rai » Sun Aug 04, 2013 1:36 pm

KingTut wrote:I am 36 and my wife is 37. My wife and I have amassed a total of 1.7M in investable assets. My wife and I believe we can live happily off $60K a year which is slightly less than 4% of 1.7M. I know retirees can have anxiety about outliving their money. God-willing, I'm hoping to be on this earth for another 50 years.?
Also do you owe any taxes on your withdrawal?

I have not looked into this possibility as I am not sure what taxes are even leveled on $60K year. I do believe low rates of withdrawal and where your money is located inside or outside of a tax shelter could be important.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

timmy
Posts: 668
Joined: Thu Jun 14, 2012 2:57 pm

Re: Extreme Early Retirement

Post by timmy » Sun Aug 04, 2013 1:40 pm

Instead of retirement... think choices. You now have many, many options. Rather than think... I want to be working 5, 10, 15 and 20 years from now... think about what good looks like in the future. More education, travel, kids, giving, etc? And do more of that.

Be intentional.

Don't strive for some nirvana that doesn't exist.

Good luck.

User avatar
SimpleGift
Posts: 3005
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: Extreme Early Retirement

Post by SimpleGift » Sun Aug 04, 2013 1:54 pm

Regarding withdrawal rates with a 50-year or longer time horizon, Jim Otar has recent study you may want to peruse:

"Perpetual Withdrawal Rates for Foundations, Endowments and Charitable Trusts: A Non-Gaussian Analysis"

Though it's directed at foundations and endowments with perpetual withdrawal needs, it's findings are equally applicable to individual investors with 50 year (or multi-generational) distribution plans. His conclusion: a maximum of 2.3% annual withdrawals from portfolios with no more than 50% stock.
Cordially, Todd

mathwhiz
Posts: 752
Joined: Tue Jul 01, 2008 7:58 pm

Re: Extreme Early Retirement

Post by mathwhiz » Sun Aug 04, 2013 2:19 pm

Can you live off $40,000 and be happy? At your age, I would feel better just living off of dividends/interest until age 50 or so as insurance I wouldn't live out my assets. A diversified 60/40 portfolio tilted towards high dividend stocks would probably spit out 2.5% / year in income. The risk you have is selling equities at lows such as March 2009.

Are you able to "adjust" your lifestyle/income and avoid selling equities in poor years and just live off the $40,000 in dividends/interest?

User avatar
Watty
Posts: 13439
Joined: Wed Oct 10, 2007 3:55 pm

Re: Extreme Early Retirement

Post by Watty » Sun Aug 04, 2013 2:23 pm

Tentatively we are looking at taking the plunge in March 2014. Should I be doing anything between now and then?
It would be good to have very good physicals before you take the plunge to try to find any unknown health issues. Check with your doctor to see if there are any additional test that might be worth having done even if your insurance will not cover them.

Get any loans and credit cards in order since they will be harder to get once you stop working. Get a few extra credit cards so that you will have alternatives if some of the eventually get cancelled or have their terms changed.

Be sure that your budget includes allowances for occasional big expenses like major house repairs, replacement cars, or health issues. If you are living on $60K a year there will be some years when also have large expenses like these.

Do a dummy tax return so see how your post retirement taxes will work out.

If you don't have strong ties to the area that you are living in now, consider moving to a less expensive and more desirable area. You can start taking trips to visit these potential areas. This will take a lot of research since the "50 inexpensive places to live!" lists will weight the expenses much differently than what your expenses will be. If you relocate plan on renting for a year before you buy to learn the area and to be sure that you really like the area.

When you do retire contact your homeowners and car insurance company to have them adjust your rates which will most likely improve them. If you will be travelling expensively then check on the terms of your homeowners insurance since some companies have clauses that limit or drop your policy if the house is vacant more than 30 or 60 days. Some will allow you to buy a rider to cover the vacant house, some don't want your business if the house will be vacant for long periods of time. You may want to switch to a favorable home insurance company now.

Look into what sort of fun part time or seasonal job you can get. This will;
1) Improve your withdrawal number percentages to increase the chance of success.
2) Allow you to put money into a Roth or IRA each year, and maybe even qualify for a retirement savings credit.
3) Keep you from being put into the Medicaid pool under the affordable care act.
4) Improve your social security benefit amount. Not only will this fill in the years with zeros in the calculations but the way that it is calculated in not level with your working income and the first $10K in income counts a lot more the higher levels of income. There are several levels where the incremental income calculation changes but this is why someone that makes $70K a year will not get anywhere near double the social security check of someone make $35K a year.

livesoft
Posts: 60980
Joined: Thu Mar 01, 2007 8:00 pm

Re: Extreme Early Retirement

Post by livesoft » Sun Aug 04, 2013 2:25 pm

Watty wrote:It would be good to have very good physicals before you take the plunge to try to find any unknown health issues. Check with your doctor to see if there are any additional test that might be worth having done even if your insurance will not cover them.
Actually, I would think the opposite. If you have a great physical that discovers some pre-existing conditions, then your health insurance in the future might be lots more expensive or you may even be denied coverage. But I am not sure how the Affordable Care Act affects my statement.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
FrugalInvestor
Posts: 4723
Joined: Fri Nov 07, 2008 12:20 am

Re: Extreme Early Retirement

Post by FrugalInvestor » Sun Aug 04, 2013 2:33 pm

livesoft wrote:
Watty wrote:It would be good to have very good physicals before you take the plunge to try to find any unknown health issues. Check with your doctor to see if there are any additional test that might be worth having done even if your insurance will not cover them.
Actually, I would think the opposite. If you have a great physical that discovers some pre-existing conditions, then your health insurance in the future might be lots more expensive or you may even be denied coverage. But I am not sure how the Affordable Care Act affects my statement.
The ACA eliminates insurance companies considering pre-existing conditions when issuing coverage. However, I wouldn't count on the ACA surviving unchanged for the next few years.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

User avatar
ClevrChico
Posts: 1188
Joined: Tue Apr 03, 2012 8:24 pm

Re: Extreme Early Retirement

Post by ClevrChico » Sun Aug 04, 2013 2:35 pm

KingTut wrote:I am 36 and my wife is 37. My wife and I have amassed a total of 1.7M in investable assets. My wife and I believe we can live happily off $60K a year which is slightly less than 4% of 1.7M. I know retirees can have anxiety about outliving their money. God-willing, I'm hoping to be on this earth for another 50 years. Has anyone on this forum tried to check out of the workforce this early?

Tentatively we are looking at taking the plunge in March 2014. Should I be doing anything between now and then?
I'm working towards a similar situation. Congrats! Worse case scenario, if you don't like it, you can always go back to work. (Or part-time, etc.)

User avatar
Ged
Posts: 3535
Joined: Mon May 13, 2013 1:48 pm
Location: Roke

Re: Extreme Early Retirement

Post by Ged » Sun Aug 04, 2013 2:36 pm

Given expected market returns are fairly low right now and that you are planning to be retired for 50 years I think you are being overly optimistic about that withdrawal rate being sustainable.

Jim180
Posts: 322
Joined: Wed Jun 26, 2013 9:47 pm

Re: Extreme Early Retirement

Post by Jim180 » Sun Aug 04, 2013 2:50 pm

I think it's very risky to use a 4% withdrawal rate with 40+ years of retirement. Either find a way to get by with less, or work a while yet.

User avatar
Kalo
Posts: 479
Joined: Sat May 25, 2013 1:01 pm

Re: Extreme Early Retirement

Post by Kalo » Sun Aug 04, 2013 2:55 pm

If you don't like your jobs, you could consider finding work you like better but that may pay less. Being retired is not always as great as it sounds imo.

Another possibility, depending on your profession, is to go to work through an agency, and only work 3 or 6 months per year. I've been doing that for about 7 years or so now. Some years I work 10 months, other years only about 3. The agency doesn't care. All I have to do is finish out any assignment I agree to, although even that would be negotiable (I don't have to work for a client where I don't like the job, but that's only happened once so far). When an assignment ends, I usually tell the agency I'll let them know when I'm ready to work again, as I'm usually ready for a break by then.

Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.

The Wizard
Posts: 11790
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Extreme Early Retirement

Post by The Wizard » Sun Aug 04, 2013 4:07 pm

livesoft wrote:I would suggest you don't retire at an all-time market high, but temper your expectations and retire when the market is doing something like it was doing in February 2009.
This may be the most pertinent advice of all so far.
You'll need a percentage of stocks to get growth over the next 50 years, but counting on gains of 20%+ per year like we've had recently isn't gunna work.
If your $1.7M was down to $1.4M in six months, would that matter?
Attempted new signature...

User avatar
englishgirl
Posts: 2471
Joined: Thu Mar 01, 2007 5:34 pm
Location: FL

Re: Extreme Early Retirement

Post by englishgirl » Sun Aug 04, 2013 4:10 pm

I wouldn't do it. However, I would look into training for a job that you could do extremely part time. For example - yoga teacher, personal trainer, massage therapist, tai chi instructor, ski instructor. Whatever. Teaching two or three yoga classes a week is not a big time commitment, although you'd have to commit to a daily practice (but hey, you'd be super healthy) and might net you enough to pay for your health insurance or some other expense. When you want to go and travel, get someone to sub for you, or quit for a while, or pick a place to live that is very seasonal, so you only work 6 months a year. Or become a successful blog author.

Get your expenses down to $40k, and if both of you get jobs that bring in $10-15k each, you don't have to have such a high withdrawal rate.
Sarah

rai
Posts: 1146
Joined: Tue Apr 06, 2010 7:11 am

Re: Extreme Early Retirement

Post by rai » Sun Aug 04, 2013 4:35 pm

The thing I find interesting about retirement planning, is that it's something of a catch-22, meaning the sooner want to retire the more mone you will need. More years to spend, longer time periods for tax changes, inflation, younger people may be more active or have more things to see and do, longer time to wait for SS etc..

But if you wait longer and longer you will save more but paradoxically need less, since you will receive SS sooner, less years to spend etc..

I tend to vote on the side of Over-saving, in the theory that its better to have too much money or safety net than too little. As a consequence extreme early retirement while something to consider is not for me.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

User avatar
ofcmetz
Posts: 2299
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: Extreme Early Retirement

Post by ofcmetz » Sun Aug 04, 2013 4:51 pm

I agree with the other posters who say that you would want to use a much smaller withdrawal rate than the one you have proposed. Any kind of employment for one of you on the side would greatly improve your odds of making it. My wife who is a part time nurse does side work for a non-profit that brings her in about $10,000 a year. The hours are flexible and the work is extremely rewarding for her. These are the kinds of things I'd be doing while drawing down my portfolio.

The thing I'm curious is why you would want to retire totally from work and live off of your portfolio at such a young age. I understand changing jobs, cutting back, and having more time for the family, but I could not understand hanging it up at age 37 voluntarily if I had good health. To me, having this kind of money saved up at your age gives you options to do what you want to do. I just don't see that having it means it's a good thing to do nothing.
Never underestimate the power of the force of low cost index funds.

scrabbler1
Posts: 2140
Joined: Fri Nov 20, 2009 2:39 pm

Re: Extreme Early Retirement

Post by scrabbler1 » Sun Aug 04, 2013 5:19 pm

KingTut wrote:I am 36 and my wife is 37. My wife and I have amassed a total of 1.7M in investable assets. My wife and I believe we can live happily off $60K a year which is slightly less than 4% of 1.7M. I know retirees can have anxiety about outliving their money. God-willing, I'm hoping to be on this earth for another 50 years. Has anyone on this forum tried to check out of the workforce this early?

Tentatively we are looking at taking the plunge in March 2014. Should I be doing anything between now and then?
I retired in late 2008 at age 45 and have been quite happy since then. My SWR has been around 2.5% which enables me to live off dividends only without touching principal. I agree with the others that your SWR may be a little high.

I split my early retirement (ER) plan into two parts - the first part is getting to age ~60 using only my current, non-retirement investments while the second part is getting passed age ~60, the easier part becasue I will gain access to my "reinforcements" such as my frozen company pension, Social Security (albeit reduced about 11% with a bunch of zeroes in the earnings calculation), and unfettered acess to my IRA. King Tut, how does your ER plan look when you split it up this way? There is an ER calculator called FIRECALC which will help you plan out your ER plan. You can also download a SS benefit calculator to help you figure out what your future SS benefit will be, even with a bunch of zeroes.

Individual health insurance was a big concern when I began my ER but with the ACA exchanges starging next year I can now more easily afford a good plan with those subsidies. Be careful about how the income level affects those subsidies because there is a steep cliff rather than a gradual phaseout.

I would also ask you, King Tut, do you have children or plan to start a family? If so, then your future expenses will rise quite a bit. If you and your wife are childfree, then you will be in better shape there. Do you have any debts such as home mortgage, car loans, or student loans? It is helpful to be debt-free when you begin ER.

As Livesoft mentioned, you should visit the Early Retirement forum which I have been a member of for most of the time I have been an early retiree. They (and I) will be able to give you good advice there.

User avatar
kramer
Posts: 1608
Joined: Wed Feb 21, 2007 2:28 am
Location: Philippines

Re: Extreme Early Retirement

Post by kramer » Sun Aug 04, 2013 8:44 pm

Your joint life expectancy is probably 55 years or more. Your social security is not built up to much yet, as least not as much as you would want (?). You are pushing a high SWR at a time of market highs. I think it is prudent to work a few more years. Personally, in your situation, I would want a SWR of 2.5% or less with plenty of margin in the budget and I could not recommend someone doing so at higher than 2.75% with the understanding they are assuming some risk.

I retired (single) at age 41 and have no regrets. I hate to mention this, but don't forget about the possibility of divorce. I cringe when I see married bogleheads deciding on 97% or 99% safety and they don't consider this possibility which is far, far greater than running out of money as a couple.

freebeer
Posts: 1975
Joined: Wed May 02, 2007 8:30 am
Location: Seattle area USA

Re: Extreme Early Retirement

Post by freebeer » Sun Aug 04, 2013 8:52 pm

what is situation wrt kids? if none yet, you are not too old to decide in a year or so to have them and that could significantly change your financial requirements.

User avatar
goodenyou
Posts: 1204
Joined: Sun Jan 31, 2010 11:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: Extreme Early Retirement

Post by goodenyou » Sun Aug 04, 2013 8:54 pm

Flex retire. Do something you enjoy and make a little money. It does the mind good. ~30 years before you are Medicare eligible is LONG time. When you get to 65, who knows what the minimum age for Medicare will be or if it will be viable at all. Health care is the game-changer.

KingTut
Posts: 10
Joined: Sat Sep 29, 2012 11:46 am

Re: Extreme Early Retirement

Post by KingTut » Sun Aug 04, 2013 11:39 pm

All good advice. Before I resign I think I need to make sure I can get to $2M or a 3% SWR. I am still very young and we are at a market high. I'm also not against part time or a more rewarding job. I just don't now how to get there I'm a 70 hour week office rat right now (middle management). I'll spend some time trying to find a second career. Worst case, I'll be the first millionaire barista at the local coffee shop.

User avatar
tc101
Posts: 2981
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Re: Extreme Early Retirement

Post by tc101 » Sun Aug 04, 2013 11:52 pm

If you have that much money and don't love your work, at least quit and take a few years off. You can always go back to work.
. | The most important thing you should know about me is that I am not an expert.

Swampy
Posts: 741
Joined: Fri Aug 31, 2012 7:16 am

Re: Extreme Early Retirement

Post by Swampy » Mon Aug 05, 2013 3:07 am

Has anyone on this forum tried to check out of the workforce this early?
I had amassed enough (or so I thought) in my mid-40's. Unfortunately, due to bad advice from a broker (my account was in a 3% wrap fee managed account), I was financially devastated before I could even announce my decision. It took 13 years to get even somewhat close to where I was financially. 13 long years of regret!
Should I be doing anything between now and then?
1. Make sure you have five years of cash on hand to cover living expenses.
2. Don't have all of your eggs in one basket. Certainly no more than 50% in equity index funds.
3. Cut back on work hours. Being on a never ending treadmill does not give you time to think clearly without interruptions. When you can glimpse at life outside the box is when you begin to see things in a clearer perspective.
4. Try to see if you can realistically live on less than 3.5% or (better yet) 3% annually.
5. Consider doing what few Americans ever do - live in a foreign land where the cost of living and healthcare is often a LOT less. Not only will you be spending less, you will have a mind expanding epiphany.
6. If you have kids, or plan to, realize that they are little money vacuums. Always more expensive than you think!
7. Depending on your line of work, what is the worst that can happen if you are out of the work force for 2-5 years? Can you live with that?
8. ALWAYS look at worst case scenarios. Imagine the market dropping 50% the day after you tell your boss to take a flying leap, does it cause you anxiety? It should. If you have five years worth of cash on hand, you have breathing room.
9. The real rate of inflation is between 6-10%. The government is lying about CPI and inflation at 1-2%.
10. You only have to plan for a higher withdrawal rate till age 62-65. Social Security (if it still exists) ought to provide at least 20-25% of your annual cash needs after that.
11. Move out of high expense areas like NYC. Florida has a 0% state income tax and is less expensive 10-25 miles away from coastal waters. Plus, you don't have to worry about sky high flood insurance policies or hurricanes as much.
12. Run a test. You've got nine months by your calculations. Put 9/12's of your expected yearly living expenses in a bank and live off of that while continuing to work. Any and all other cash flow should not be accessed for any reason other than to adjust your ratios to a comfortable level. You mentioned $60K, so the number would be $45K for that 9 month time frame.
13. Bite your tongue at work. NOBODY needs to know your financial situation, not coworkers, not your boss, not even relatives.
14. Educate yourself on low cost investing. I came late to the 'game' of indexing after spending decades paying so-called advisors their high fee's (>1%-3%). When I realized I could invest in index funds, a sickening reality hit home. I was paying these clowns the equivalent of 3-5 months worth of yearly living expenses just to mis-manage my money. Cutting out that one expense alone put me well over the top, otherwise I would have consigned myself to years of additional work. MOST managers and advisors are very good at misleading clients like me into thinking we can't do the proper job. I still have a manager. But at a <0.3% management fee, I can deal with it.
15. As you get older, your ability to travel and do things will diminish. Your wants will become fewer and you will spend less. Do not expect that your cost of living will continue at the same rate from age 40 to 80, even after you adjust for inflation. Your needs will consume more of the annual budget (medical care).
16. Devote extra time to calculating your chances of financial success to age 100 from as many different angles as possible. It's a pretty safe bet that you won't live to 100, but it's more comforting to know you have a 90%+ chance of not running out of money in your 90's than to realize, due to bad luck/miscalculations, you've got to get a job as a grocery bagger in your 70's (like one of my neighbors).
17. At your age, I would quit the 70 hour a week rat race, take an extended sanity break and go do something I really enjoy part time, either volunteering or even going back to work, just to keep my mind active. One of the biggest drawbacks to early retirement is boredom. The best way I can describe it is to compare it to a cross country drive. After driving all day long at 70MPH, getting on a side street at 30MPH feels like your just crawling and not even moving. It's a dangerous illusion.

I wish I was in your shoes.

Forget the naysayers. You're obviously capable of doing the right thing.
Your net worth is a significant multiple of what most people in their 50's have.
If you fail to plan, you plan to fail. | Failure is not an option. | If I have seen further, it is because I was carried on the shoulders of giants.

User avatar
HomerJ
Posts: 11197
Joined: Fri Jun 06, 2008 12:50 pm

Re: Extreme Early Retirement

Post by HomerJ » Mon Aug 05, 2013 3:22 am

KingTut wrote:My wife and I believe we can live happily off $60K a year
Are you living off $60k now?

You need to keep detailed track of all your expenses for at least a year to be sure of your budget.

User avatar
HomerJ
Posts: 11197
Joined: Fri Jun 06, 2008 12:50 pm

Re: Extreme Early Retirement

Post by HomerJ » Mon Aug 05, 2013 3:29 am

KingTut wrote:I'm a 70 hour week office rat right now (middle management). I'll spend some time trying to find a second career. Worst case, I'll be the first millionaire barista at the local coffee shop.
Or look for a job in the same field where you only work 40 hours a week.

It's a tough decision... Gut through 3 more years of hell and maybe retire forever? Or take a 30%-50% cut in pay, but work reasonable hours for another 6-8 years.

At your age, I'd go for the second choice probably.

User avatar
englishgirl
Posts: 2471
Joined: Thu Mar 01, 2007 5:34 pm
Location: FL

Re: Extreme Early Retirement

Post by englishgirl » Mon Aug 05, 2013 6:15 am

KingTut wrote:All good advice. Before I resign I think I need to make sure I can get to $2M or a 3% SWR. I am still very young and we are at a market high. I'm also not against part time or a more rewarding job. I just don't now how to get there I'm a 70 hour week office rat right now (middle management). I'll spend some time trying to find a second career. Worst case, I'll be the first millionaire barista at the local coffee shop.
While not in the same financial situation as you, I did decide at about your age to quit a stressful job that required long hours and go for something more rewarding. It took me a few years to figure out what I really wanted to do (as you know, it's hard to think when you're that busy). When I was at the point of announcing that I was going to school to change career, I was prepared for my employer to fire me instead of allowing me to go part time, but figured I might as well ask. My plan was to work 20 hours in somewhere like Starbucks or Costco where I could get health insurance while going to school (although that was probably an unrealistic plan as most part time retail jobs don't allow you to work a set schedule). Luckily for me, my employer let me go to 30 hours per week. It was hard going to school and still working at a stressful job even if for only 30 hours. But it was worth it. And it wasn't 70 hours! After graduation, when I had a little money coming in from my new career and no tuition going out the door, I went down to 20 hours (dropping health insurance). It's still hard although a lot less stressful these days as I don't take on the "exciting" projects, just the boring steady ones that I can do quickly. I'm hoping to drop the old job completely this year, but right now still need the money. Anyway, I just wanted to say that a) I don't think being a barista would be so bad necessarily, b) sometimes your employer can surprise you if you have a good reason for going part time, and c) you might surprise yourself with how low your expenses can drop when you're not miserable at work or expected to keep up with coworkers with clothing/fancy dinners/whatever.
Sarah

lwfitzge
Posts: 311
Joined: Sun Jun 12, 2011 8:01 am

Re: Extreme Early Retirement

Post by lwfitzge » Mon Aug 05, 2013 7:04 am

Congrats on your accomplishment at such young ages. I reached a similar milestone at 48 years of age. For me, the choice is not work full FT or retire, it was to jump off the corporate rat race and have more time to do what I want to do. That's quite an empowered position and you should use it. This is what I did. I work PT (as a consultant, teacher) and volunteer as a BOD member for two nonprofits. I also am an entrepreneur so if my current venture takes off I will work FT perhaps for a period of time as founder and then give the reins to someone else. I spend more time than ever with my children and their activities and its paying off in terms of my relationships. My wife works full-time and covers health insurance for the family. Good luck w your decisions. Just remember the possibilities are numerous when you are in this financial position and it not simply a matter of stopping work all completely and debating whether a 3 or 4 % SWR is best. :D

staythecourse
Posts: 5694
Joined: Mon Jan 03, 2011 9:40 am

Re: Extreme Early Retirement

Post by staythecourse » Mon Aug 05, 2013 8:43 am

I'm in a similar situation financially and age (my wife is a few years younger though).

Few questions come to mind:

Do you want or have kids?
What about health insurance costs?
What are you guys going to do spending only 60k WITHOUT work everyday for the next 40 years?
This is not meant as a joke, but would be concerned spending that much time with the spouse and not being afraid of fighting and divorcing.

I would suggest instead hit 2mill. then go and find a different job that is more palatable.

For me it is not retiring early that interests me, but having the ability to do it if I wanted. Of course, those plans changed with the our first kid, but wouldn't change that for anything. :D

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

KyleAAA
Posts: 6520
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Extreme Early Retirement

Post by KyleAAA » Mon Aug 05, 2013 10:23 am

I, too, would be more comfortable with a 3% withdrawal rate for a retirement that long. But that's assuming you won't be doing any part-time work. If you can pull in even just $10-15k per year working part time, you could probably make it work.

22twain
Posts: 1372
Joined: Thu May 10, 2012 5:42 pm

Re: Extreme Early Retirement

Post by 22twain » Mon Aug 05, 2013 11:16 am

Swampy wrote:5. Consider doing what few Americans ever do - live in a foreign land where the cost of living and healthcare is often a LOT less.
If you currently live in the urban areas of the Northeast or California, moving to a small or medium-sized town in "flyover country" (the Midwest or South) can also reduce your cost of living, although maybe not quite as dramatically as moving to Thailand or Costa Rica.
My investing princiPLEs do not include absolutely preserving princiPAL.

freebeer
Posts: 1975
Joined: Wed May 02, 2007 8:30 am
Location: Seattle area USA

Re: Extreme Early Retirement

Post by freebeer » Mon Aug 05, 2013 11:30 am

lwfitzge wrote:Congrats on your accomplishment at such young ages. I reached a similar milestone at 48 years of age. For me, the choice is not work full FT or retire, it was to jump off the corporate rat race and have more time to do what I want to do. That's quite an empowered position and you should use it. This is what I did. I work PT (as a consultant, teacher) and volunteer as a BOD member for two nonprofits. I also am an entrepreneur so if my current venture takes off I will work FT perhaps for a period of time as founder and then give the reins to someone else. I spend more time than ever with my children and their activities and its paying off in terms of my relationships. My wife works full-time and covers health insurance for the family. Good luck w your decisions. Just remember the possibilities are numerous when you are in this financial position and it not simply a matter of stopping work all completely and debating whether a 3 or 4 % SWR is best. :D
+1. After we reached a financial independence milestone I went from corporate position to nonprofit Exec Dir - less than 50% the salary but also less than 50% the stress... and 3x the flexibility as well as impact on things I care about.

User avatar
artthomp
Posts: 327
Joined: Tue Feb 20, 2007 4:44 pm
Location: Ballwin Missouri

Re: Extreme Early Retirement

Post by artthomp » Mon Aug 05, 2013 1:35 pm

First of all congratulations on you financial success but as you plan your future I think you need to take possible inflation as well as unforseen events more into account before leaving the workforce so early.

Of course no one knows the future but at your present ages one or both of you might approach 100 years of age, 60 years or so from now.

Using this inflation calculator http://www.davemanuel.com/inflation-calculator.php and entering 1953 as the year (60 years ago), we see that
$1,000 of 1953 dollars would be worth: $8,771.93 in 2013 and $1,000 of 2013 dollars would be worth $114.00 in 1953.

If we experienced similar inflation the $1,700,000 would have to grow to almost $15M to have equivalent purchasing power in 60 years.

I started working after college in 1963. The same calculator shows that $1,000 of 1963 dollars would be worth: $7,633.59 in 2013 and $1,000 of 2013 dollars would be worth $131.00 in 1963.

Many things can happen during such a long period of time besides inflation to hinder your investment plans.
Art

RobInCT
Posts: 393
Joined: Sun Dec 09, 2012 2:58 pm

Re: Extreme Early Retirement

Post by RobInCT » Mon Aug 05, 2013 2:54 pm

Are you accounting for inflation? $60k/year will be worth less than $35k 20 years from now at 3% annual inflation.

rai
Posts: 1146
Joined: Tue Apr 06, 2010 7:11 am

Re: Extreme Early Retirement

Post by rai » Mon Aug 05, 2013 4:44 pm

'What if' you needed an operation in the future but that procedure was phased out by your government insurance? what if there became a two teir system of medicine where you can accept government offered coverage or if you had more means you could pay for private coverage or pay out of pocket for a treatment not covered by public assistance health care?

This is one example I can think of where your 50 year plan could backfire.

I am not predicting this will happen, but I am a doctor and I can tell you if government reimbursements get slashed much more, there will be lots of docs that no longer will accept Medicare Medicaid type insurance payments.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

TheExMexican
Posts: 32
Joined: Wed Aug 29, 2012 3:46 pm

Re: Extreme Early Retirement

Post by TheExMexican » Mon Aug 05, 2013 5:21 pm

rai wrote:'What if' you needed an operation in the future but that procedure was phased out by your government insurance? what if there became a two tier system of medicine where you can accept government offered coverage or if you had more means you could pay for private coverage or pay out of pocket for a treatment not covered by public assistance health care?
I am mostly a lurker, but this warranted a reply...

Rai's 'what if' above is NOT a hypothetical. This is EXACTLY how it is in many countries with government-sponsored healthcare. Yes, you are guaranteed 'some' healthcare, but if you don't want to stand in line with 500 other people in the morning for your doctor assignment, or don't want to wait 3 months for your CAT scan to see if that lump is benign or not, then you buy private health insurance and go to a 'first tier' facility that provides top notch care.

I am not suggesting this will happen here in the US, but it is one of the major arguments that convinces me to not call it quits just yet.

Good luck with your decision!

TheExMex

rai
Posts: 1146
Joined: Tue Apr 06, 2010 7:11 am

Re: Extreme Early Retirement

Post by rai » Mon Aug 05, 2013 5:33 pm

I don't mean to make this political, just medical and financial. I saw a person today who had cornea transplants, 'what if' this was not offered by health coverage but was available in a pay to play facility? You pay money or you are blind? What if this procedure costs $40k?

I am just using cornea transplant as an example but could be anything like artificial heart (?) in the future etc..

What medical breakthroughs are on the horizon? In the next 30 years? I don't know, but I do know that the latest and greatest treatments probably won't be cheap.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

livesoft
Posts: 60980
Joined: Thu Mar 01, 2007 8:00 pm

Re: Extreme Early Retirement

Post by livesoft » Mon Aug 05, 2013 6:41 pm

I think folks need to relax about King Tut. Some are acting like he is going to follow through on his plan and not ever go back to work. Maybe so, but he will have lots of opportunities time to change his mind in case his plans don't turn out the way he wants them to.
Wiki This signature message sponsored by sscritic: Learn to fish.

jingo
Posts: 36
Joined: Mon May 13, 2013 4:29 pm

Re: Extreme Early Retirement

Post by jingo » Mon Aug 05, 2013 7:46 pm

I don’t know what the actual likelihood is, but say if one had more money to pay for stuff not covered by government health insurance, there is a 5% of chance that one could live 10 years longer, then the expected value is 6 months. The question then becomes how much longer are you willing to work for the extra 6 months.
rai wrote:I don't mean to make this political, just medical and financial. I saw a person today who had cornea transplants, 'what if' this was not offered by health coverage but was available in a pay to play facility? You pay money or you are blind? What if this procedure costs $40k?

I am just using cornea transplant as an example but could be anything like artificial heart (?) in the future etc..

What medical breakthroughs are on the horizon? In the next 30 years? I don't know, but I do know that the latest and greatest treatments probably won't be cheap.

lwfitzge
Posts: 311
Joined: Sun Jun 12, 2011 8:01 am

Re: Extreme Early Retirement

Post by lwfitzge » Mon Aug 05, 2013 8:28 pm

Agree w Livesoft... as with my case... no one restricted from ever working again if need, one can adapt either in spending or income to accommodate what life presents you with. The way I looked at it is that I can always find a way to get more money if needed, it's time I can't get back or added to my ledger. The sad reality is longevity is not always in the cards.... people die prematurely and don't make it to 65. One should factor that in their personal analysis with the same weighting as the possibility of living long enough to get Alzheimers or cataracts.

JW-Retired
Posts: 6756
Joined: Sun Dec 16, 2007 12:25 pm

Re: Extreme Early Retirement

Post by JW-Retired » Mon Aug 05, 2013 8:36 pm

rai wrote:No way. Health care is a big risk, do you have any idea how much you would spend to self insure?

What will future taxes or inflation do to your withdrawals?

Do you have a sizable Social Security foundation to look forward to? SS looks at the highest 25 years, it's hard to believe you have a lot of 'max years' let alone 25 full years at your ages.

I'd shoot for 2.5 to 3% withdrawal rate at such a long time till Social Security.
SS looks at the highest 35 years, not 25. OP SS won't amount to much at all.
JW
Retired at Last

DoWahDaddy
Posts: 290
Joined: Sat Jul 02, 2011 9:32 am

Re: Extreme Early Retirement

Post by DoWahDaddy » Mon Aug 05, 2013 9:58 pm

To put this simply, you are looking to be retired for a significantly longer period than you were working. Heck you are looking to have more time from retirement to death, than you had from birth to retirement. This is a recipe for a fundamentally unsound life. Consider how the mental aspect would affect you. Work should be a much more fulfilling facet of life than it is for many people. It is part of who we are, and a rather large part, our most productive part. Our children are shaped significantly by our attitudes toward work, and what we've accomplished, and our own minds are continually shaped by this as well.

You've got a tremendous head start, expand on that or at least maintain it by pondering a potential next step that would bring as much long term satisfaction as possible.
Me: 75/25 stocks/bonds | Son: 45/45/10 matchbox/hotwheels/thomas & friends

jdilla1107
Posts: 588
Joined: Sun Jun 24, 2012 8:31 pm

Re: Extreme Early Retirement

Post by jdilla1107 » Mon Aug 05, 2013 9:59 pm

I'm in an almost identical situation to you (age and finances). I left a highly stressful 60 hour a week job that I hated and took a job I would enjoy. Work is now entirely different to me and I think of it almost as a hobby. In my new role, I was quickly offered a management position and found it incredibly liberating to turn it down. I don't care about the money or title and just do what will make me happy. I'll turn down projects if I don't find them interesting.

I would have thought that being picky like this would make me an annoying employee, but it's actually made me incredibly productive and therefore valuable. When you enjoy what you do, you do a much better job than someone who doesn't, and you are happier. Win, win.

You have freedom. Find something you enjoy. Think of the money you have as financial freedom and find something you enjoy doing. Work doesn't have to be a binary thing as in hate/leave it. Find a happy a medium.

BTW, You don't have enough to retire yet.

Post Reply