Retire by 55?

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speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Retire by 55?

Post by speksynder » Sat Feb 08, 2014 9:57 pm

Hi! I’m new to the Bogleheads forum and style of investing and would really appreciate any advice on how to improve my portfolio. I fear it’s haphazard, redundant and inefficient, despite the fact I’ve tried to save for retirement as best I could (always maxed my 401k when I had one, as well as my IRA when I could afford to). I know I’ve made mistakes, which I’m hoping can be corrected, or at least mitigated.

I’m currently unemployed (for almost 2 years now). I’m going for a promising interview and hope to get the job; if not, it’s back to freelancing for a fraction of my previous salary (which was never all that much to begin with). Prior to being laid off, I was exceedingly unhappy with my career and always dreamed of retiring by age 55 at the latest.

Is there any chance of improving my portfolio so I might be able to retire at 55, or am I living in a dream world? If it were possible, I realize it would mean living on a limited income, moving to a less expensive part of the country, and staying on a tight budget, but it would be worth it to me because I’m so burned out. I wouldn’t be averse to working in some capacity during retirement (freelancing or exploring other income streams); I just don’t want to remain in my current career or work full-time in a cubicle after age 55, if I can possibly help it.

I would really appreciate any advice you could give!

I tried to provide as much informaiton as possible. If I gave too much or not enough, just let me know and I’ll gladly edit.

Emergency fund:
$20,419.98 money market savings account

Debt:
Credit card: $2,400 on a 0% interest credit card. I will pay this off gradually, hopefully before interest kicks in (I have a year at 0%). I use this card as a delay technique to pay monthly bills because my current income is irregular.

Mortgage: Balance-$143.027. Interest rate-5.5%.
I looked into refinancing/modification but didn’t qualify because of my layoff. I also didn’t qualify for HARP because my lender didn’t accept TARP funds. Since I’ve been laid off, I’ve had my house on the market for much less than I paid for it, with no luck.
Home equity: @$30K

Tax Filing Status: Single
Tax Rate: Federal 15% (? I haven’t done my 2013 taxes yet; this may be lower) State: 6.5%
State of Residence: CT
Age: 49
Estimated SS benefits: ~$1100-$1200/month at age 65
Health care: If I don't land a job that provides it, I'll probably have to look into purchasing a plan on the Health Insurance Marketplace (likely a higher deductible plan) until Medicare kicks in at 65. I currently have no health insurance.
Desired Asset allocation: I’m not sure
Desired International allocation: I’m not sure

Current Retirement Assets

Taxable

Individual brokerage account at Fidelity
Fbalx Fidelity Balanced
$14,883.99
Gross Exp Ratio: 0.58%
Turnover: 244%

Fdvlx Fidelity Value
$4,279.02
Gross Exp. Ratio: 0.67%
Turnover: 99%

Ficnx Fidelity Connecticut Municipal Income
$11,483.56
Gross Exp. Ratio: 0.48%
Turnover: 14%

Fvdfx Fidelity Value Discovery
$8,337.53
Gross Exp. Ratio: 0.74%
Turnover: 55%

Account total: $43,067.96

Bank account
$37,780.06 in a checking account I’d like to invest in a Vanguard taxable account

Roth IRA at Fidelity
FBGRX Fidelity Blue Chip Growth
$38,080.31
Gross Exp Ratio: 0.76%
Turnover: 75%

FCNTX Fidelity Contrafund
$104,069.64
Gross Exp Ratio: 0.74%
Turnover: 42%

FSEVX Spartan Extended Mkt Index Fid Adv Class
$22,026.28
Gross Exp Ratio: 0.07%
Turnover: 9%

FSITX Spartan US Bond Indx Fidelity Adv Class
$16,851.80
Gross Exp Ratio: 0.17%
Turnover: 118%

FSMEX Fidelity Select Medical Equipment &Systems
$5,689.76
Gross Exp Ratio: 0.83%
Turnover: 68%

FSTVX Spartan Total Mkt Indx Fid Advantage Class
$21,764.97
Gross Exp Ratio: 0.07%
Turnover: 2%

FTBFX Fidelity Total Bond
$11,724.53
Gross Exp Ratio: 0.45%
Turnover: 201%

Total balance: $220,217.43

NOTE: I planned to move FTBFX into FSITX, and am considering moving FBGRX between Fstvx & FSITX.

Rollover IRA at Fidelity
Fcntx Fidelity Contrafund
$121,658.74
Gross Exp Ratio: 0.74%
Turnover: 42%

Fsgdx Spartan Global Ex Us Index Fid Adv Cl
$11,765.93
Gross Exp Ratio: 0.28%
Turnover: 6%

Fsitx Spartan US Bond Indx Fidelity Adv Class
$30,001.07
Gross Exp Ratio: 0.17%
Turnover: 118%

Fsmex Fidelity Select Medical Equip&System
$15,299.46
Gross Exp Ratio: 0.83%
Turnover: 68%

Fstvx Sprtn Total Mkt Indx Fid Advantage Class
$37,047.28
Gross Exp Ratio: 0.07%
Turnover: 2%

Total balance: $215,772.51

401(k) plan (previous employer) at Vanguard
VGHAX Vanguard Health Care Fund Admiral Shares, Fund #0552
$2,144.62
Gross Exp Ratio: 0.30%
Turnover: 8.1%

VIPIX Vanguard Inflation-Protected Securities Fund Institutional, Fund #1190
$12,610.51
Gross Exp Ratio: 0.07%
Turnover: 44.3%

VBMPX Vanguard Total Bond Market Index Fund Institutional Plus, Fund #0850
Gross Exp Ratio: 0.05%
Turnover: 73.3%
$19,285.94

VTPSX Vanguard Total International Stock Index Fund Institutional Plus, Fund #1870
$35,817.28
Gross Exp Ratio: 0.10%
Turnover: 4.9%

VITSX Vanguard Total Stock Market Index Fund Institutional, Fund #0855
$37,713.86
Gross Exp Ratio: 0.04%
Turnover: 4.3%

Total balance: $107,572.21

401(k) plan (previous employer) at Fidelity
DSPIX Dreyfus Basic S&P 500 Stock Index Fund
$12,087.13
Gross Exp. Ratio: 0.21%
Turnover: 3.45%

ACITX American Century Investments Inflation Adjusted Bond Fund Investor Class
$3,987.28
Gross Exp. Ratio: 0.47%
Turnover: 27%

VEVIX Victory Established Value Fund Class I
$3,057.74
Gross Exp. Ratio: 0.68%
Turnover: 46%

MALOX BlackRock Global Allocation Fund Institutional Shares
$2,022.32
Gross Exp. Ratio: 0.88%
Turnover: 50%

FSCIX Fidelity Advisor Small Cap Fund - Institutional Class
$1,757.22
Gross Exp. Ratio: 0.71%
Turnover: 34%

FIADX Fidelity Advisor International Discovery Fund - Class I
$1,537.11
Gross Exp. Ratio: 1.00%
Turnover: 65%

MHYIX Mainstay Hi Yld Bd I MainStay High Yield Corporate Bond Fund Class I
$760.51
Gross Exp. Ratio: 0.75%
Turnover: 40%

MAGRX Blkrk Nat Resource I
$256.95
Gross Exp. Ratio: 0.80%
Turnover: 1%

Total balance: $25,466.26

Previous employer pension
Distributions at age 62(?)
$12,300

Portfolio totals (not including pension):
Taxable: $80,848.02 (brokerage & checking acct money to invest; I'm not including my "emergency fund")
Retirement: $569,028.41

Contributions
I hope to contribute something to my Roth for 2013. Other than that, future contributions will depend upon future income.

Available Funds
Alternate fund choices within old Vanguard 401(k) plan:
1461 Target Retire Income Tr I
1462 Target Retire 2010 Tr I
1463 Target Retire 2015 Tr I
1464 Target Retire 2020 Tr I
1465 Target Retire 2025 Tr I
1466 Target Retire 2030 Tr I
1467 Target Retire 2035 Tr I
1468 Target Retire 2040 Tr I
1469 Target Retire 2045 Tr I
1470 Target Retire 2050 Tr I
1488 Target Retire 2055 Tr I
VMRXX Vanguard Prime Money Mkt Fund Inst
VIPIX Vanguard Infla-Protected Sec Inst
VBMPX Vanguard Total Bond Mkt Ix Ist Pls
VITSX Vanguard Total Stock Mkt Idx Inst
VTPSX Vanguard Tot Intl Stock Ix Inst Pl
0340 Vanguard Retire Savings Trust III
PREMX T. Rowe Price Emerging Markets Bond
RPIBX T. Rowe Price International Bond
PRCIX T. Rowe Price New Income
VWEAX Vanguard High-Yield Corp Fund Adm
TRSGX T. Rowe Price Personal Strat Growth
VBAIX Vanguard Balanced Index Fund Inst
VCVSX Vanguard Convertible Securities
VWIAX Vanguard Wellesley Income Fund Adm
VWENX Vanguard Wellington Fund Admiral
DGAGX Dreyfus Appreciation Investor
DREVX Dreyfus Fund Incorporated
DMCVX Dreyfus Opportunistic Midcap Value A
DSCVX Dreyfus Opportunistic Small Cap
DWOAX Dreyfus Research Growth A
DRGVX Dreyfus Strategic Value I
TRBCX T. Rowe Price Blue Chip Growth
PRGFX T. Rowe Price Growth Stock
PRNEX T. Rowe Price New Era
VDIGX Vanguard Dividend Growth Fund
VEIRX Vanguard Equity Income Fund Adm
VEXRX Vanguard Explorer Fund Admiral
VIGIX Vanguard Growth Index Fund Inst
VIIIX Vanguard Inst Index Fund Inst Plus
VMCPX Vanguard Mid-Cap Index Inst Plus
VPMAX Vanguard PRIMECAP Fund Admiral
VSGIX Vanguard Small-Cap Growth Idx Inst
VSCIX Vanguard Small-Cap Index Fund Inst
VSIIX Vanguard Small-Cap Value Idx Inst
VIVIX Vanguard Value Index Fund Inst
PRMSX T. Rowe Price Emerging Markets Stock
PRIDX T. Rowe Price International Discovery
PRASX T. Rowe Price New Asia
TROSX T. Rowe Price Overseas Stock
VIDMX Vanguard Developed Markets Idx Ist
VEMIX Vanguard Emerging Mkts Stk Ix Inst
VESIX Vanguard European Stock Index Inst
VFSNX Vanguard FTSE AW xUS Sm-Cp Idx Ist
VHGEX Vanguard Global Equity Fund
VWILX Vanguard International Growth Adm
VPKIX Vanguard Pacific Stock Index Inst
PRISX T. Rowe Price Financial Services
PRMTX T. Rowe Price Media & Telecommunications
TRREX T. Rowe Price Real Estate
PRSCX T. Rowe Price Science & Tech
VGELX Vanguard Energy Fund Admiral
VGHAX Vanguard Health Care Fund Adm
VGSNX Vanguard REIT Index Fund Inst

Alternate fund choices within old Fidelity 401(k) plan:
RS Partners Fund Class Y (RSPYX), 1.2% gross expense ratio
Fidelity Advisor® Leveraged Company Stock Fund - Class I (FLVIX), 0.84%
Fidelity Advisor® New Insights Fund - Institutional Class (FINSX), 0.74%
AllianzGI NFJ Dividend Value Fund Institutional Class (NFJEX), 0.71%
Fidelity Advisor® Stock Selector All Cap Fund Institutional Class (FBRNX), 0.79%
Oppenheimer Main Street Select Fund Class Y (OMSYX), 0.89%
Lord Abbett Fundamental Equity Fund Class I (LAVYX), 0.74%
Heartland Value Fund Class Institutional (HNTVX), 0.9%
Fidelity Advisor® Mid Cap II Fund - Institutional Class (FIIMX), 0.90%
American Century Investments Equity Income Fund Investor Class (TWEIX), 0.94%
Nuveen Real Estate Securities Fund Class I (FARCX), 1.03%
Fidelity Advisor® Asset Manager® 70% - Class I (FAAIX), 0.80%
Fidelity Advisor® Freedom 2045 Fund® - Institutional Class (FFFIX), 0.81%
Fidelity Advisor® Freedom 2050 Fund® - Institutional Class (FFFPX), 0.81%
Fidelity Advisor® Freedom 2040 Fund® - Institutional Class (FIFFX), 0.80%
Fidelity Advisor® Freedom 2035 Fund® - Institutional Class (FITHX), 0.80%
Fidelity Advisor® Freedom 2030 Fund® - Institutional Class (FEFIX), 0.78%
Fidelity Advisor® Asset Manager® 50% - Institutional Class (FFIMX), 0.73%
Fidelity Advisor® Freedom 2025 Fund® - Institutional Class (FITWX), 0.73%
Fidelity Advisor® Freedom 2020 Fund® - Institutional Class (FDIFX), 0.69%

Questions

1. Regarding my Bank of America money market savings account (“emergency fund”), would it make sense to invest any of these assets elsewhere, or would that be craziness?

2. My Fidelity brokerage account contains inefficient funds I should probably sell. I’d greatly appreciate suggestions re taking the hit considering my tax/cap gains/employment situation. Fund suggestions would be warmly welcomed.
Unrealized cap gains in this account would be mainly long-term (short-term negligible):
Fbalx Fidelity Balanced = $2033.83 LTCG
Fdvlx Fidelity Value = $931.55 LTCG
Ficnx Fidelity Connecticut Municipal Income = $211.30 LTCG
Fvdfx Fidelity Value Discovery = $1462.25 LTCG
FYI: I recently sold out of my position in Fidelity Strategic Income (FSICX) within this account. Realized LTCGs were only $68.71, so I figured it was worth selling.

3. The assets I’d like to invest from my checking account are the result of selling out of a high expense (0.90%) mutual fund I held for too many years (LTCG was ~$90 so I thought getting out made sense). I was thinking of opening a taxable Vanguard brokerage account with this money, but would appreciate advice re investment suggestions and allocation strategy.

4. I feel the funds in my old Fidelity 401(k) are expensive. Are there better options within the choices available to me? Is it possible to roll it into a Vanguard IRA, for ie, and would that be a better option?

Thank you so much,
Lisa
Last edited by speksynder on Sun Feb 09, 2014 1:14 am, edited 3 times in total.

lawman3966
Posts: 1119
Joined: Sun Aug 10, 2008 12:09 pm
Location: Tacoma WA

Re: Retire by 55?

Post by lawman3966 » Sat Feb 08, 2014 11:07 pm

I haven't come up with a final answer, but have identified some additional information that would be helpful here:

1) What are your future social security benefits?

2) How do you intend to pay for health care?

I suspect many here will be inclined to say that your assets are on the light side to retire at 55. However, the answer ultimately depends (in addition to supplying the info in points 1 and 2 above) on your own planning, your willingness to annuitize (using immediate annuities), and critically how you will pay for health care.

I recall seeing posters on this forum with assets comparable to yours insisting they would retire at 42 or so. (I think one was a RV "boondoker," intent on living cheaply off the grid).

If you fill the additional info, you will get more productive feedback.

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

Re: Retire by 55?

Post by livesoft » Sat Feb 08, 2014 11:11 pm

If you have been unemployed for 2 years and your portfolio has grown (that is, income has exceeded outgo), then are you not for all practical purposes already retired?
Wiki This signature message sponsored by sscritic: Learn to fish.

speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Re: Retire by 55?

Post by speksynder » Sat Feb 08, 2014 11:34 pm

lawman3966 wrote: 1) What are your future social security benefits?
2) How do you intend to pay for health care?
Great suggestions, lawman; thanks for your reply.
I edited my post to include your suggestions. Because the SS site is down right now I can't access exact figures, so I estimated my monthly SS payment for now. I'll update my post with the exact figure asap.

stlutz
Posts: 4835
Joined: Fri Jan 02, 2009 1:08 am

Re: Retire by 55?

Post by stlutz » Sat Feb 08, 2014 11:43 pm

1. Regarding my Bank of America money market savings account (“emergency fund”), would it make sense to invest any of these assets elsewhere, or would that be craziness?
A $20K or so emergency fund is a reasonable amount. Using an online savings account for the money (e.g. Ally, Amex etc.) could net you a couple hundred additional bucks per year. You can invest the rest.
2. My Fidelity brokerage account contains inefficient funds I should probably sell. I’d greatly appreciate suggestions re taking the hit considering my tax/cap gains/employment situation. Fund suggestions would be warmly welcomed.
You aren't sitting on gigantic gains here, so I would personally sell and move into lower cost Spartan index funds at Fidelity.
4. I feel the funds in my old Fidelity 401(k) are expensive. Are there better options within the choices available to me? Is it possible to roll it into a Vanguard IRA, for ie, and would that be a better option?
Yes, you can roll this over to an IRA--you could move this to VG, an IRA at Fidelity, wherever.

In terms of constructing a portfolio, the so-called "Three Fund Portfolio" is a great place to start. http://www.bogleheads.org/wiki/Three-fund_portfolio.

The key question to determine is what percentage of your portfolio should be held in bonds. There isn't a perfect formula for determining this. A "default" place to start is always 60% stocks, 40% bonds.

In terms of whether you have enough to retire, it really depends on what your annual expenses are and what you mean by "retire." Given that you still have a mortgage, doing nothing at age 55 is probably not an option. However, you do have enough to do anything. Working part time/part of the year/freelancing or just otherwise earning less at a job you dislike less are all options that are available to you that would involve less "threading the needle" financially than just cutting off all income.

speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Re: Retire by 55?

Post by speksynder » Sat Feb 08, 2014 11:52 pm

livesoft wrote:If you have been unemployed for 2 years and your portfolio has grown (that is, income has exceeded outgo), then are you not for all practical purposes already retired?
I'm unemployed in the sense I was laid off from my full-time job and have been getting by on income from freelancing. Not sure how long I could continue on what I've earned over the past two years without making even more drastic lifestyle changes (moving, downsizing even further, etc), which is why I was wondering if anyone could offer specific portfolio advice.

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Watty
Posts: 14572
Joined: Wed Oct 10, 2007 3:55 pm

Re: Retire by 55?

Post by Watty » Sun Feb 09, 2014 12:00 am

With all the detail I'm not sure the total of all your investments is not clear but it looks like around half a million which hopefully would grow some while invested until you are 55. At 55 a safe withdrawal rate from that might be 3% or less you might be able to spend $15,000 or so from that portfolio.

And you have a small pension, probably social security(how much?), and probably some home equity(how much?), but your overall situation really isn't clear from your post so if you could summarize it that would help a lot.


A lot really depends on what your vision of retirement looks like.

There are places where you could buy a small house or mobile home $50K and live on $25K a year.

The median household income in the US is only about $55,000 a year so lots of people make do surprisingly small amounts.

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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: Retire by 55?

Post by Watty » Sun Feb 09, 2014 12:00 am

With all the detail I'm not sure the total of all your investments is not clear but it looks like around half a million which hopefully would grow some while invested until you are 55. At 55 a safe withdrawal rate from that might be 3% or less you might be able to spend $15,000 or so from that portfolio.

And you have a small pension, probably social security(how much?), and probably some home equity(how much?), but your overall situation really isn't clear from your post so if you could summarize it that would help a lot.


A lot really depends on what your vision of retirement looks like.

There are places where you could buy a small house or mobile home $50K and live on $25K a year.

The median household income in the US is only about $55,000 a year so lots of people make do surprisingly small amounts.

freebeer
Posts: 1997
Joined: Wed May 02, 2007 8:30 am
Location: Seattle area USA

Re: Retire by 55?

Post by freebeer » Sun Feb 09, 2014 12:00 am

You don't explain what equity you have in your home, but if negative then you could conceivably walk away (if you are in a non-recourse state) esp. if you became an expat your credit-worthiness might not matter.

Overall with $26K/year in expected SS+pension then if you can live on that the question is can you bridge from 55 until you start collecting if you work 5 more years. If I'm understanding your post you have about $100K in taxable assets and about $680K in tax-advantaged retirement accounts (of which $220K is Roth). So I think the answer is surely "yes". In fact you could probably do it right now ($26K is 4% of $680K and you don't need it to last 30 years) and even bridge until a deferred start to SS at age 70 to maximize your benefits. But if you work 5 more years and save aggressively then you can probably have a higher standard of spending in retirement.

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BolderBoy
Posts: 4173
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Retire by 55?

Post by BolderBoy » Sun Feb 09, 2014 12:16 am

speksynder wrote:Emergency fund:
$20,419.98 money market savings account

Debt:
Credit card: $2,400

Mortgage: Balance-$143.027.

State of Residence: CT
Age: 49
Estimated SS benefits: ~$1100-$1200/month at age 65
Health care: If I don't land a job that provides it, I'll probably have to look into purchasing a plan on the Health Insurance Marketplace (likely a higher deductible plan) until Medicare kicks in at 65. I currently have no health insurance.

Taxable
Account total: $43,067.96

Bank account
$37,780.06 in a checking account I’d like to invest in a Vanguard taxable account

Roth IRA at Fidelity
Total balance: $220,217.43

Rollover IRA at Fidelity
Total balance: $215,772.51

401(k) plan (previous employer) at Vanguard
Total balance: $107,572.21

401(k) plan (previous employer) at Fidelity
Total balance: $25,466.26

Previous employer pension
Distributions at age 62(?)
$12,300
If I did the math correctly, you have $101k in taxable holdings, $460k in retirement plans, a $12k/yr (?) pension at age 62 and $1100/month SS at age 65, is that right?

IMO, your biggest threat at the moment is lack of health insurance - a significant illness could cost you big (uncomplicated gallbladder surgery ~ $25k in Colorado without insurance; vastly higher in CT). Retiring with mortgage is worrisome, but doable. You live in one of the HIGHEST tax states in the country and it takes no mercy with retirees.

Back of the envelope, you need to muddle 6 more years, then retire at 55 completely? It'll be close. Can you continue with with some freelancing after that?

You need to SIMPLIFY your portfolio holdings per the recommendations in the wiki. You've done amazingly well with what you have, but the complexity is bewildering when it could be as simple as a 3-fund portfolio. I would combine some of the retirement accounts as well - little need to keep open former employer 401k plans, for example.

Good luck with the interview!

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

Re: Retire by 55?

Post by 22twain » Sun Feb 09, 2014 12:18 am

Is the $12,300 pension distribution a lump sum or an annual payout?

You might try playing with Firecalc (http://www.firecalc.com/) a bit. On the first page/tab, enter 45 years (which will take you to age 99), your total savings, and a guess as to your annual spending rate, including taxes. On the second tab (Other Income/Spending), enter your estimated Social Security and the year you plan to start taking it; also your pension and when it starts. Then vary the annual spending rate and and see what is sustainable.

All figures are in current dollars, so don't inflate numbers for future inflation. One of the other tabs allows you to vary things like the inflation rate and return on investments. At least take a look at them to see what Firecalc assumes.

Assuming $600K in current savings, and that your pension is not inflation-adjusted (unchecking the inflation-adjusted box), I get a 100% success rate at a spending rate of $25K per year, and about 92% at $30K per year. This gives you a starting point for thinking about expenses, additional income, etc.

Don't think of this as a precise tool, but rather as a rough indicator of whether you're more or less "in the ballpark" as far as overall success is concerned.
My investing princiPLEs do not include absolutely preserving princiPAL.

speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 12:35 am

Watty wrote:With all the detail I'm not sure the total of all your investments...
...and probably some home equity (how much?).
...A lot really depends on what your vision of retirement looks like.

Hi Watty, thanks for your reply.
I probably included too much information and confused everyone. :oops: I've added the totals of my taxable & retirement investments at the end of my portfolio holdings (under the red headline), so hopefully that makes things clearer.

I estimated SS at @$1100-$1200/month. My home equity is hard to determine since my house hasn't been appraised by a bank (it's for sale but hasn't reached the appraisal stage with any of the offers I've had so far), but judging by what I have it on the market for (which I've lowered considerably from initial asking price), I'd estimate equity would be @$30K.

I'd envision my retirement to be pretty humble; I can make do on very little, so it's good to know I have a chance. Thanks!

speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 12:45 am

freebeer wrote:You don't explain what equity you have in your home, but if negative then you could conceivably walk away (if you are in a non-recourse state)
Thanks for your reply, freebeer. I would estimate my equity at be @$30K (I'll have to edit my post to include that).
freebeer wrote:If I'm understanding your post you have about $100K in taxable assets and about $680K in tax-advantaged retirement accounts (of which $220K is Roth).
My portfolio totals are $80,848.02 taxable (not including my "emergency fund") and $569,028.41 retirement; I've updated my post to include.

Regarding my pension, there is $12,300 total in it (that is not a monthly amount, unfortunately). Sorry for the confusion.
freebeer wrote:But if you work 5 more years and save aggressively then you can probably have a higher standard of spending in retirement.
Thanks;, I'm hoping I can make that happen. Anything specific you would do with my portfolio to maximize the good and minimize the bad?
Last edited by speksynder on Sun Feb 09, 2014 3:33 am, edited 2 times in total.

dstac
Posts: 60
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Re: Retire by 55?

Post by dstac » Sun Feb 09, 2014 12:48 am

Can you retire at 55? Absolutely... Depending on what that means to you.

This is not a retirement of intercontinental cruises.

If work doesn't pan out, I'd encourage you to continue freelance & similar as long as possible. It is amazing how much of your savings even $1k a month can preserve.

The biggest question I have is what do your expenses look like. If you are accustomed to $100k/yr, retirement is not really an option until you figure that out. If you're comfortable with $25-$35k that's a different story. If you're willing to have expenses below $30k, you could just call yourself retired and do the occasional freelance thing when desired. (expenses, not income, is the key here)

The other expenses that would make me a little nervous are health insurance (mostly because I don't know ACA costs for 55-65 year olds) & not having your housing nailed down. I think renting provides some great values, but selling your home if your market is weak can be rough.

Happy to walk through numbers a bit more if appropriate.

speksynder
Posts: 17
Joined: Sat Feb 08, 2014 7:29 pm

Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 1:43 am

BolderBoy wrote: If I did the math correctly, you have $101k in taxable holdings, $460k in retirement plans, a $12k/yr (?) pension at age 62 and $1100/month SS at age 65, is that right?
Hi BolderBoy; thank you for your help and reply!
I updated my post with the totals for my holdings, though I didn't add in my emergency fund (maybe I should have?): taxable=$80,848.02 (not including emergency fund in money market savings account); retirement plans=$569,028.41.
BolderBoy wrote:IMO, your biggest threat at the moment is lack of health insurance - a significant illness could cost you big (uncomplicated gallbladder surgery ~ $25k in Colorado without insurance; vastly higher in CT). Retiring with mortgage is worrisome, but doable. You live in one of the HIGHEST tax states in the country and it takes no mercy with retirees.
I agree with you about health insurance; it's something I definitely need to make a priority. Hopefully I'll land a full-time job that will provide it. If not, with luck my house will sell and free up some funds for it. Otherwise, I'll have to dip into savings or investment accounts to pay for it.
BolderBoy wrote:Back of the envelope, you need to muddle 6 more years, then retire at 55 completely? It'll be close. Can you continue with with some freelancing after that?
Yes, I could continue with freelancing, or possibly work part-time if I had to. What I was hoping to avoid was the necessity of working full-time in a profession I no longer enjoy. I'm willing to sacrifice in order to avoid that.
BolderBoy wrote:You need to SIMPLIFY your portfolio holdings per the recommendations in the wiki. You've done amazingly well with what you have, but the complexity is bewildering when it could be as simple as a 3-fund portfolio. I would combine some of the retirement accounts as well - little need to keep open former employer 401k plans, for example.
I agree. The complexity has to go. Re combining retirement accounts, how would you suggest doing that? I'm pretty convinced now that I should roll the old 401(k)s into IRAs with better choices (ie into Vanguard), but could I further combine them after that?

Thanks so much for your advice; I really appreciate it.
Last edited by speksynder on Sun Feb 09, 2014 3:19 am, edited 1 time in total.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 2:31 am

dstac wrote:Can you retire at 55? Absolutely... Depending on what that means to you.
Thanks! I'm used to living "like a college student" and can get by without any niceties. I only wish I had moved long ago to cut expenses further, but alas, family obligations and a stubborn attachment to my place of birth (NY tri-state area) prevented that.
dstac wrote:This is not a retirement of intercontinental cruises.
:D No, indeed. I've never been on one, so at least I'll never know what I'm missing!
dstac wrote:If work doesn't pan out, I'd encourage you to continue freelance & similar as long as possible. It is amazing how much of your savings even $1k a month can preserve.
I will. It's not even the freelancing I mind; at least there I have some autonomy and ability to prioritize my time. I'm weary of the 8:30 to 5:30 cubicle grind (what they used to call "working for the Man"), wondering where all my time has gone, time I'll never get back. I agree about an extra $1K a month; I'd welcome it under any circumstances. I've learned not to take any income for granted.
dstac wrote:The biggest question I have is what do your expenses look like. If you are accustomed to $100k/yr, retirement is not really an option until you figure that out. If you're comfortable with $25-$35k that's a different story. If you're willing to have expenses below $30k, you could just call yourself retired and do the occasional freelance thing when desired. (expenses, not income, is the key here)
My expenses are cut as close to the bone as I can get them right now. I haven't been able to cut anything from my mortgage (don't qualify for a refi without full-time income, etc). Freelance income has been adequate to cover most monthly bills so far; the rest I delay using my 0% interest credit card, since I know I have the cash in my emergency fund to pay the balance off, which I will do before the card reverts to high interest. If/when I can sell my house, that will free up more income.

I've always assumed I'd be living on a yearly income of @$24k, so that's a figure I'm comfortable with. My question though, is how to arrange a steady $24K income? The only method I'm aware of to get income out of 401k accounts before 59 1/2 is the Roth pipeline (rolling $ from my trad IRA into my Roth, to be withdrawn after 5 years); do you think that would be viable option in my situation?
dstac wrote:The other expenses that would make me a little nervous are health insurance (mostly because I don't know ACA costs for 55-65 year olds) & not having your housing nailed down. I think renting provides some great values, but selling your home if your market is weak can be rough.
True enough, I'm finding that out. If I decided to retire, I would try like the dickens to sell and move somewhere cheaper, then probably rent, I guess.
dstac wrote:Happy to walk through numbers a bit more if appropriate.
Thank you for the offer; I think that would be very helpful. If you would require more numbers from me, please just let me know! I really appreciate your help and sound advice.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 3:18 am

22twain wrote:Is the $12,300 pension distribution a lump sum or an annual payout?
$12,300 is the total balance in the pension.
22twain wrote:You might try playing with Firecalc (http://www.firecalc.com/) a bit...Assuming $600K in current savings, and that your pension is not inflation-adjusted (unchecking the inflation-adjusted box), I get a 100% success rate at a spending rate of $25K per year, and about 92% at $30K per year.
Great suggestion; I'll definitely check it out and see what I come up with. I appreciate you running the numbers as well--thank you for making that effort. And thank you for your comment, 22twain.
Last edited by speksynder on Sun Feb 09, 2014 10:34 am, edited 1 time in total.

DonDraper
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Re: Retire by 55?

Post by DonDraper » Sun Feb 09, 2014 7:36 am

I recommend the website and book called Early Retirement Extreme. If you follow his methods and lifestyle, you have enough money to retire.

22twain
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Re: Retire by 55?

Post by 22twain » Sun Feb 09, 2014 10:53 am

speksynder wrote:$12,300 is the total balance in the pension.
Aha, I assumed it was an annual payout in my Firecalc runs. That will definitely make a difference. :( But as I said, you can experiment with it to figure out how much income you'll need to come up with from other sources in order to maintain whatever spending rate you'll need to cover.
My investing princiPLEs do not include absolutely preserving princiPAL.

DouglasDoug
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Re: Retire by 55?

Post by DouglasDoug » Sun Feb 09, 2014 11:30 am

Not knowing your lifestyle, its impossible to say. Go for it; enjoy what remains.

berntson
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Re: Retire by 55?

Post by berntson » Sun Feb 09, 2014 1:02 pm

Hi Lisa! I think you're in great shape for early retirement. Forget retirement by 55, retirement by 50 is very doable.

Early retirement doesn't need to mean lounging by the pool. It means that you don't have to work at a job you don't love. You're financially independent and can live off your savings. You get to work, when you do, on your own terms. If I were in your situation, I would just declare myself retired now, then work out the details as they came along.

An earlier poster said that you won't have "a retirement of international cruises." Cruises are bland and pedestrian, ways for the affluent to burn off excess cash without really seeing the world. If travel interests you, you could instead engage in some geographic arbitrage. Find an interesting part of the world with a lower cost of living and then live there for a few months. Or longer. Not only do you get to experience a new place as a local, you can stretch your retirement income.

As a previous poster pointed out, you need to simplify your portfolio. And the expense ratios need to be lower. Why not move all of your funds to Vanguard? Then you can setup a three-fund portfolio suitable to your retirement strategy. I would lean towards a healthy allocation to equities. You're looking at a long retirement and, for the time being, can rely on freelancing to supplement your retirement income.

I'm sure you know that you can withdraw ROTH contributions penalty free. With freelance work and your taxable investments and your emergency fund, that is likely enough for the next five years. If you haven't already, you might look into using SEPP to withdraw funds early from your ROTH IRA. The ROTH pipeline sounds like the way to go once you hit 55.

Depending on the details, finding a beautiful part of the country with a lower cost of living is a great idea. Selling the house and reducing housing expenses seems like the way to go.

For more on extreme early retirements, I really like Mr. Money Mustache.
Last edited by berntson on Sun Feb 09, 2014 4:52 pm, edited 1 time in total.

tj
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Re: Retire by 55?

Post by tj » Sun Feb 09, 2014 2:25 pm

Since you have been unsuccessful in selling your house, have you considered renting out the spare rooms? If you had some low-maintenance roommates, such as graduate students, that might be a way to increase your income for a few years without the stress of a job....

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Watty
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Re: Retire by 55?

Post by Watty » Sun Feb 09, 2014 5:36 pm

speksynder wrote:
Watty wrote:With all the detail I'm not sure the total of all your investments...
...and probably some home equity (how much?).
...A lot really depends on what your vision of retirement looks like.

Hi Watty, thanks for your reply.
I probably included too much information and confused everyone. :oops: I've added the totals of my taxable & retirement investments at the end of my portfolio holdings (under the red headline), so hopefully that makes things clearer.

I estimated SS at @$1100-$1200/month. My home equity is hard to determine since my house hasn't been appraised by a bank (it's for sale but hasn't reached the appraisal stage with any of the offers I've had so far), but judging by what I have it on the market for (which I've lowered considerably from initial asking price), I'd estimate equity would be @$30K.

I'd envision my retirement to be pretty humble; I can make do on very little, so it's good to know I have a chance. Thanks!
You might consider college towns as a place to move to.

I was raised in the mid-west and there are college towns there that have a pretty low cost of living. With the colleges they have a lot more activities going on than other towns of similar sizes so you are less likely to get bored if you get involved with the local community. Some college towns are even marketing themselves as retirement destinations.

College towns typically have more stable economies and lower unemployment rates that can make finding part time or seasonal work while school is in session easier. They sometimes have a decent, or at least usable, public transportation systems too so if you live in the right location you might be able to get buy without owing a car.

One “plan B” that I have considered if I ended up short of funds was to move to a college town and buy an inexpensive duplex where I could rent out the other half. Being a landlord would be a part time job in itself and isn’t not for everyone but if it worked out then renting the duplex might be enough to cover all the costs of owning a home and a bit more.

You would of course want to rent for at least a year in any place that you might move to before buying to make sure that you like the area and to learn the area better.

dstac
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Re: Retire by 55?

Post by dstac » Sun Feb 09, 2014 6:04 pm

So the first big question is how much is enough for you to cover your expenses long term...

Your annual need: $24k/yr.
Anticipated Freelance income: $12k/yr (this can be swapped for SS Benefits/pension when you tire of part time freelancing in another 15-20yrs)
Remainder from investments: $12k/yr

In order to draw $12k/yr from your investments, the 4% rule says you need 25x this amount, or $300k. Seeing that your total between all your accounts is $670k, you should have no problem covering that. If you flipped that around to see what you could withdraw using the 4% rule, you're looking at $26.8k/yr - plenty to cover all your expenses without freelancing (but I'd still recommend it over the short term to keep you engaged "just in case" and provide a cushion).

(Note that many of this board do question the wisdom of the 4% rule and are suggesting some lower withdrawal rate. Remember that the 4% rule is intended to provide a guide of how much you might withdraw without effectively ever running out of money. If the market crashes the first year of your withdrawal period, you'll clearly need to reevaluate. In other words, be flexible if everything goes to hell. But historically even when things do go mostly to hell, 4% still works. If you decide 3% feels more comfortable to you, that's still withdrawing $20k/yr.)

This would be easy if you were 59.5 since then you'd be able to access all of your retirement funds and it just becomes a question of how to do so most efficiently, but you're not, so then the question is, can you stretch your other funds from 49.5 to 59.5?

In short, yes.

Current Non-Retirement Balance:
Emergency fund: $20k
Taxable Account: $43k
Bank account $38k
Total Non-Retirement: $101k

If we assume nothing fancy and no appreciation beyond inflation, at your stated need of $12k/yr, your non-retirement accounts would last you ~8.5yrs taking you to 58. This is still 18mos shy ($18k shy) of your 59.5 needed to be home free. So here's where things get interesting and you can pick and choose what works best for you:

Roth IRA @ Fidelity: $220k - Contributions made to a Roth IRA can be withdrawn penalty free at any time. (Are there $18k of contributions in there?)
401k Plan @ Fidelity: $25k - Retirees 55 & older may withdraw from an employers 401k plan (though your employer may make restrictions on how)
401k Plan @ Vanguard: $108k - same as above (Also note, that the 55yo withdrawal option goes away if you roll a 401k over into an IRA.)

Also of note, you can also withdraw from your tIRA to pay health insurance premiums while unemployed (so I'd recommend tapping that option now to preserve cash on hand). For these fun options: http://www.irs.gov/pub/irs-pdf/p5036.pdf

So the reality is if you wanted to quit altogether, 55 is your sweet spot, since your 401ks are plenty to carry you through to 59.5 when you can gain full access to your IRAs.

Honestly, if you like where you live and can get more permanent employment for a bit in the same field, you may want to consider taking it just to refinance your house because I think you could hold onto the house if you were so inclined. (30yr at $700/mo PI, 15yr at $1000/mo PI)

You do need to clean up your holdings to make them more efficient, but that's another post.

Calm Man
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Re: Retire by 55?

Post by Calm Man » Sun Feb 09, 2014 7:36 pm

Lisa,
Do you really want to voluntarily live like a pauper and hope your assets last a second longer than you live? Now if you can't get a job, so be it. But if you can I would suggest you do so. There just isn't enough there for any margin of comfort and every year that you work and save at least something is one less year of drawdown. I think you recognized that as I read your initial post. Good luck.

berntson
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Re: Retire by 55?

Post by berntson » Sun Feb 09, 2014 8:34 pm

Calm Man wrote:Do you really want to voluntarily live like a pauper and hope your assets last a second longer than you live? Now if you can't get a job, so be it. But if you can I would suggest you do so. There just isn't enough there for any margin of comfort and every year that you work and save at least something is one less year of drawdown. I think you recognized that as I read your initial post.
This is silly.

With income from her savings and freelancing, Lisa can count on ~$30,000 a year leaving a bit of margin. Eventually, she can replace her freelancing with social security and medicare. Obviously, you can't rent a penthouse in Manhattan with $30,000 a year, but so what? You could travel the world indefinitely on $30,000 a year. You could buy a small farm and raise your own food. You could (as a previous poster pointed out) buy a home in a midwestern college town if you especially like classes and lectures. You could go back to school as a graduate student to a top university, studying something you love, and use the modest stipend to supplement the income from investments.

Giving up unnecessary consumer luxuries is a small price to pay to leave work that you hate and do work that you love.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 8:49 pm

DonDraper wrote:I recommend the website and book called Early Retirement Extreme. If you follow his methods and lifestyle, you have enough money to retire.
Hi DonDraper, I checked out the Early Retirement Extreme website and found it very interesting and compelling; I'll definitely look into it more. Thanks for the suggestion!

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 8:51 pm

22twain wrote:
speksynder wrote:$12,300 is the total balance in the pension.
Aha, I assumed it was an annual payout in my Firecalc runs. That will definitely make a difference. :( But as I said, you can experiment with it to figure out how much income you'll need to come up with from other sources in order to maintain whatever spending rate you'll need to cover.
I know. I wish it were an annual payout. :( :annoyed
But I intend to run the Firecalc numbers anyway; sounds like it could be a helpful tool.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 8:57 pm

DouglasDoug wrote:Not knowing your lifestyle, its impossible to say. Go for it; enjoy what remains.
I hear ya. I'd need to give more detail about my lifestyle/budget/expenses to accurately say, but then my post would have been 10x longer than it already is and 100x more confusing. :D
Enjoying what remains is really all any of us can do, I guess. I could do worse, I suppose. Thanks for commenting on my post, Douglas.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 9:42 pm

berntson wrote:Hi Lisa! I think you're in great shape for early retirement. Forget retirement by 55, retirement by 50 is very doable.
Thanks so much for your encouraging and wise post; this made my day!
berntson wrote:Early retirement doesn't need to mean lounging by the pool. It means that you don't have to work at a job you don't love. You're financially independent and can live off your savings. You get to work, when you do, on your own terms. If I were in your situation, I would just declare myself retired now, then work out the details as they came along.
Your comment really gave me a lift and encouragement, so I thank you for that. I entirely agree with your vision of early retirement. I've never had a problem finding interesting things to do with my time, learning new things, exploring new ideas or tackling new challenges. I just didn't tend to find that same stimulation in my career. 27 years of doing something relatively unimportant (in my view) and uninteresting has been draining, and I was hoping I might be approaching the end of that phase so I could move onto my next phase, one of delving into projects and learning and doing interesting work (if that makes me additional income, great). I can't thank you enough for your broadminded analysis; it's been very inspiring to me.
berntson wrote:An earlier poster said that you won't have "a retirement of international cruises." Cruises are bland and pedestrian, ways for the affluent to burn off excess cash without really seeing the world. If travel interests you, you could instead engage in some geographic arbitrage. Find an interesting part of the world with a lower cost of living and then live there for a few months. Or longer. Not only do you get to experience a new place as a local, you can stretch your retirement income.
:D Never been on a cruise myself; sounds like they could be relaxing and serene, but it wouldn't be my chosen form of traveling, no. At the same time, I know what dstac was getting at: there ain't no way I could sustain luxuries like that on my assets. As I said to him/her, however, it's a good thing I've never become accustomed to them. A really stimulating conversation (which is free) over an affordable glass of wine is as good as it gets, entertainment-wise, for me. I love your idea of geographic arbitrage--I traveled through Europe a bit right after college and really loved it, just hadn't had the opportunity or ability to do it since I've worked full time, but your adventurous idea really appeals to me.
berntson wrote:As a previous poster pointed out, you need to simplify your portfolio. And the expense ratios need to be lower. Why not move all of your funds to Vanguard? Then you can setup a three-fund portfolio suitable to your retirement strategy. I would lean towards a healthy allocation to equities. You're looking at a long retirement and, for the time being, can rely on freelancing to supplement your retirement income.
Thank you for this practical advice as well. Believe it or not, I wasn't aware I could transfer a Roth or trad IRA (from Fidelity to Vanguard); thought they had to remain where they are. Good to know. And I will definitely work on simplifying my convoluted and too-expensive portfolio.
berntson wrote:I'm sure you know that you can withdraw ROTH contributions penalty free. With freelance work and your taxable investments and your emergency fund, that is likely enough for the next five years. If you haven't already, you might look into using SEPP to withdraw funds early from your ROTH IRA. The ROTH pipeline sounds like the way to go once you hit 55.
I did know I could withdraw Roth contributions, but just curious why the Roth pipeline would be better at 55? I have looked into SEPP payments but need to reacquaint myself with the concept.
berntson wrote:Depending on the details, finding a beautiful part of the country with a lower cost of living is a great idea. Selling the house and reducing housing expenses seems like the way to go.
I think so, too. If I don't get the job, that's probably the way I'm going to play it.
berntson wrote:For more on extreme early retirements, I really like Mr. Money Mustache.
I love the Mr. Money Mustache website! He's something of an inspiration to me.
Thank you again, berntson, for taking the time and effort to reply to my post and offering such inspirational advice.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 9:48 pm

tj wrote:Since you have been unsuccessful in selling your house, have you considered renting out the spare rooms? If you had some low-maintenance roommates, such as graduate students, that might be a way to increase your income for a few years without the stress of a job....
Hi tj--yes, I have actually considered that. If the house sits unsold much longer I may actually pursue the idea. There are colleges and universities nearby so I'm sure there's a chance grad students might be interested. My house is pretty small--I bought below my means, at least according to when I was working full time--so it might be a tad cramped, but the rental market is booming. I definitely haven't ruled out any possibility. Thanks for your suggestion!

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 9:53 pm

Watty wrote: You might consider college towns as a place to move to.
One “plan B” that I have considered if I ended up short of funds was to move to a college town and buy an inexpensive duplex where I could rent out the other half.
You would of course want to rent for at least a year in any place that you might move to before buying to make sure that you like the area and to learn the area better.
You're reading my mind, Watty. :) That's exactly the type of locale I'd consider moving to and would enjoy living in. I like your plan b--being a landlord--but would be afraid I couldn't swing it financially (ie qualify for a mortgag on whatever my income would be at that time), but if I could, I think it would be a very smart way to go.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 10:34 pm

dstac wrote: If you flipped that around to see what you could withdraw using the 4% rule, you're looking at $26.8k/yr - plenty to cover all your expenses without freelancing (but I'd still recommend it over the short term to keep you engaged "just in case" and provide a cushion).
I definitely agree with you there; better to play it safe and supplement with freelancing.
dstac wrote:be flexible if everything goes to hell
Those are words to live and invest by if I've ever heard any! :D
dstac wrote:But historically even when things do go mostly to hell, 4% still works. If you decide 3% feels more comfortable to you, that's still withdrawing $20k/yr.)
Believe it or not, despite my jumbled portfolio and aspirations of retiring :shock:, I actually try to play most financial issues safely and follow the "worst case scenario" rule, so I would likely try the 3%.
dstac wrote:Roth IRA @ Fidelity: $220k - Contributions made to a Roth IRA can be withdrawn penalty free at any time. (Are there $18k of contributions in there?)
401k Plan @ Fidelity: $25k - Retirees 55 & older may withdraw from an employers 401k plan (though your employer may make restrictions on how)
401k Plan @ Vanguard: $108k - same as above (Also note, that the 55yo withdrawal option goes away if you roll a 401k over into an IRA.)
This is awesome information, dstac; thank you so much for taking the time out of your day to share it with me. I knew I could withdraw contributions from my Roth (and I have well over 8K of them, yes!), but I wasn't aware of the options with the 401ks. And thank you for making the distinction that these disappear when 401ks are rolled into IRAs (something to think about).
dstac wrote:Also of note, you can also withdraw from your IRA to pay health insurance premiums while unemployed (so I'd recommend tapping that option now to preserve cash on hand)
Very wise suggestion; I need to take care of this.
dstac wrote:For these fun options: http://www.irs.gov/pub/irs-pdf/p5036.pdf
:D Ah, the effervescent fun of IRA publications. (Actually, I've spent more time than I care to admit with them, since I attempt to do my own taxes as well).
dstac wrote:Honestly, if you like where you live and can get more permanent employment for a bit in the same field, you may want to consider taking it just to refinance your house because I think you could hold onto the house if you were so inclined. (30yr at $700/mo PI, 15yr at $1000/mo PI)
Yes, if i get this latest job I can definitely refinance and keep the house, muddle through 6 more years, then move somewhere much less expensive so my money would go further. If I get the job, I can do it if I have to.
dstac wrote:You do need to clean up your holdings to make them more efficient, but that's another post.
I'm thinking of composing a second post, limited to just my account positions (so folks can actually make head/tail of what I have), and requesting clean up suggestions. I need "The Sweeper" for sure.
I want to thank you again. I hesitated over posting, but your kind response and your efforts to share your knowledge and suggestions with me--as well as the efforts of the other kind folks who replied--not only made me realize there was nothing to fear; they astonished me with their generosity.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 10:51 pm

Calm Man wrote:Lisa,
Do you really want to voluntarily live like a pauper and hope your assets last a second longer than you live? Now if you can't get a job, so be it. But if you can I would suggest you do so. There just isn't enough there for any margin of comfort and every year that you work and save at least something is one less year of drawdown. I think you recognized that as I read your initial post. Good luck.
Hi Calm Man: I don't want to live like a pauper, but I honestly didn't consider that I would be. I'm used to living on $20K-$25K a year; I had to, in order to max out my 401ks and IRAs while I was working full-time. I've learned to develop inexpensive but enjoyable options and take full advantage of them, and really don't need more. But it sounds like you're talking about safety margins, in case things were to hit the fan, and I agree. I don't want to find myself in a position where I can't weather a crisis, but hopefully with sound advice and planning, even at 20K a year, I could avoid one. That said, I agree with you about the job; if I'm offered it (and this is by no stretch of the imagination the first interview I've been on since I was laid off, not by a long shot), I'll take it, despite the fact that I've fallen out of love with my career. It's the safer thing to do, you're absolutely correct; nothing wrong with one less year of drawdown.

speksynder
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Re: Retire by 55?

Post by speksynder » Sun Feb 09, 2014 10:54 pm

berntson wrote: Giving up unnecessary consumer luxuries is a small price to pay to leave work that you hate and do work that you love.
Very, very well said.

lawman3966
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Location: Tacoma WA

Re: Retire by 55?

Post by lawman3966 » Sun Feb 09, 2014 11:41 pm

speksynder wrote: . . . I like your plan b--being a landlord--but would be afraid I couldn't swing it financially (ie qualify for a mortgag on whatever my income would be at that time), but if I could, I think it would be a very smart way to go.
I have some indirect experience here. Though not a student, I currently rent a room in a home. Most of the other tenants over the last couple of years have been students. Our landlord has benefitted enormously by renting out three rooms in a home worth about $500K here in NJ. One skill that has benefitted her is picking tenants who don't cause trouble and who get along with each other. I don't know if you'd rent to more than one person at a time. But, if you're going to do this at all, you have to learn something about roommate screening. (there are some bad characters out there).

Our landlady could not qualify for a mortgage on this home given her current salary and the current home price. However, she has now owned the home for a long time.

There may be a way for you swing getting a mortgage using your assets as collateral. I don't know all the details, but it could be worth looking into.

22twain
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Re: Retire by 55?

Post by 22twain » Mon Feb 10, 2014 12:00 am

speksynder wrote:
tj wrote:Since you have been unsuccessful in selling your house, have you considered renting out the spare rooms? If you had some low-maintenance roommates, such as graduate students, that might be a way to increase your income for a few years without the stress of a job....
Hi tj--yes, I have actually considered that. If the house sits unsold much longer I may actually pursue the idea. There are colleges and universities nearby so I'm sure there's a chance grad students might be interested.
New or temporary faculty are also likely customers. My first teaching job after grad school was a two-year temporary position at a small college. I rented the ground floor of a two-story house across the street from campus. It was owned by a woman who lived upstairs and was an instructor at a nearby university. When a tenant left, she let the HR people at the college know that the flat was available, and they would steer another incoming faculty member her way.
My investing princiPLEs do not include absolutely preserving princiPAL.

J295
Posts: 1718
Joined: Sun Jan 01, 2012 11:40 pm

Re: Retire by 55?

Post by J295 » Mon Feb 10, 2014 8:08 pm

Hi Lisa.

There are a lot of good comments, so I'll restrict mine to just a couple for your consideration.

Health care. If you haven't already done so go through the process for Affordable Care Act coverage. You may be eligible for subsidies and reduced co-pay/deductibles.

Fidelity vs. Vanguard. We have accounts at both, and are satisfied with both; although I find the Fidelity site much easier to navigate and the 24 hour in person help available to be very handy. You can easily construct a 3 fund portfolio with Fidelity mutual funds or with ETFs purchased through Fidelity. See the wiki http://www.bogleheads.org/wiki/Three-fund_portfolio

Overall. Best of luck!

Calm Man
Posts: 2917
Joined: Wed Sep 19, 2012 9:35 am

Re: Retire by 55?

Post by Calm Man » Mon Feb 10, 2014 9:31 pm

speksynder wrote:
Calm Man wrote:Lisa,
Do you really want to voluntarily live like a pauper and hope your assets last a second longer than you live? Now if you can't get a job, so be it. But if you can I would suggest you do so. There just isn't enough there for any margin of comfort and every year that you work and save at least something is one less year of drawdown. I think you recognized that as I read your initial post. Good luck.
Hi Calm Man: I don't want to live like a pauper, but I honestly didn't consider that I would be. I'm used to living on $20K-$25K a year; I had to, in order to max out my 401ks and IRAs while I was working full-time. I've learned to develop inexpensive but enjoyable options and take full advantage of them, and really don't need more. But it sounds like you're talking about safety margins, in case things were to hit the fan, and I agree. I don't want to find myself in a position where I can't weather a crisis, but hopefully with sound advice and planning, even at 20K a year, I could avoid one. That said, I agree with you about the job; if I'm offered it (and this is by no stretch of the imagination the first interview I've been on since I was laid off, not by a long shot), I'll take it, despite the fact that I've fallen out of love with my career. It's the safer thing to do, you're absolutely correct; nothing wrong with one less year of drawdown.
Indeed Lisa. I have been criticized on this thread by Bermnstrom (? spelling). It is the the safety factor, the margin, the unexpected that I am worried about. Many people work in jobs they don't like for purely financial reasons and if need be for another year (or 2 or 3) so be it. I prefer people to die with +$1 rather than -$1.

cherijoh
Posts: 4989
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Retire by 55?

Post by cherijoh » Mon Feb 10, 2014 10:15 pm

I've always assumed I'd be living on a yearly income of @$24k, so that's a figure I'm comfortable with. My question though, is how to arrange a steady $24K income? The only method I'm aware of to get income out of 401k accounts before 59 1/2 is the Roth pipeline (rolling $ from my trad IRA into my Roth, to be withdrawn after 5 years); do you think that would be viable option in my situation?
Lisa,

You should look into a 72-t distribution from your IRA after rolling over your old retirement plans. It is a loop hole to the 59 1/2 rule. The wiki has a good discussion on this method: http://www.bogleheads.org/wiki/Substant ... c_payments. Another exception is that if you retire at 55 with an active 401-k plan (i.e., at the company from which you are retiring), you can withdraw those assets as soon as you retire without penalties.

freddie
Posts: 920
Joined: Sat Feb 08, 2014 11:06 pm

Re: Retire by 55?

Post by freddie » Mon Feb 10, 2014 11:19 pm

You have way too many accounts and funds to manage effectively. There are a lot of funds that pretty much do the same thing. A couple of the choices seem odd (do muni bonds really provide better return for someone in the 10% tax bracket?) and too niche (5k in medical systems?) but some of that might be personal taste.

As far as selling stuff and rebalancing, you should be in the 0% capital gains tax bracket right now given your lack of income. Figure out your income and see how much capital gains you can realize each year without having to pay tax. Note this might affect ACA subsidies.


You have ~650k. That is good for ~24k/yr with the standard 4% which it sounds like you could live on. You can use various tools like roth rollovers and 72(t) to get access to that retirement money. Personally I would really try and find some type of income for the next 10+ years to cover half your living costs.

I also would be a bit concerned about your SS calculations. Does that number account for 0's in earning from the early retirement years or is it the number the IRS sends you every year?
speksynder wrote:Hi! I’m new to the Bogleheads forum and style of investing and would really appreciate any advice on how to improve my portfolio. I fear it’s haphazard, redundant and inefficient, despite the fact I’ve tried to save for retirement as best I could (always maxed my 401k when I had one, as well as my IRA when I could afford to). I know I’ve made mistakes, which I’m hoping can be corrected, or at least mitigated.

I’m currently unemployed (for almost 2 years now). I’m going for a promising interview and hope to get the job; if not, it’s back to freelancing for a fraction of my previous salary (which was never all that much to begin with). Prior to being laid off, I was exceedingly unhappy with my career and always dreamed of retiring by age 55 at the latest.

Is there any chance of improving my portfolio so I might be able to retire at 55, or am I living in a dream world? If it were possible, I realize it would mean living on a limited income, moving to a less expensive part of the country, and staying on a tight budget, but it would be worth it to me because I’m so burned out. I wouldn’t be averse to working in some capacity during retirement (freelancing or exploring other income streams); I just don’t want to remain in my current career or work full-time in a cubicle after age 55, if I can possibly help it.

I would really appreciate any advice you could give!

I tried to provide as much informaiton as possible. If I gave too much or not enough, just let me know and I’ll gladly edit.

Emergency fund:
$20,419.98 money market savings account

Debt:
Credit card: $2,400 on a 0% interest credit card. I will pay this off gradually, hopefully before interest kicks in (I have a year at 0%). I use this card as a delay technique to pay monthly bills because my current income is irregular.

Mortgage: Balance-$143.027. Interest rate-5.5%.
I looked into refinancing/modification but didn’t qualify because of my layoff. I also didn’t qualify for HARP because my lender didn’t accept TARP funds. Since I’ve been laid off, I’ve had my house on the market for much less than I paid for it, with no luck.
Home equity: @$30K

Tax Filing Status: Single
Tax Rate: Federal 15% (? I haven’t done my 2013 taxes yet; this may be lower) State: 6.5%
State of Residence: CT
Age: 49
Estimated SS benefits: ~$1100-$1200/month at age 65
Health care: If I don't land a job that provides it, I'll probably have to look into purchasing a plan on the Health Insurance Marketplace (likely a higher deductible plan) until Medicare kicks in at 65. I currently have no health insurance.
Desired Asset allocation: I’m not sure
Desired International allocation: I’m not sure

Current Retirement Assets

Taxable

Individual brokerage account at Fidelity
Fbalx Fidelity Balanced
$14,883.99
Gross Exp Ratio: 0.58%
Turnover: 244%

Fdvlx Fidelity Value
$4,279.02
Gross Exp. Ratio: 0.67%
Turnover: 99%

Ficnx Fidelity Connecticut Municipal Income
$11,483.56
Gross Exp. Ratio: 0.48%
Turnover: 14%

Fvdfx Fidelity Value Discovery
$8,337.53
Gross Exp. Ratio: 0.74%
Turnover: 55%

Account total: $43,067.96

Bank account
$37,780.06 in a checking account I’d like to invest in a Vanguard taxable account

Roth IRA at Fidelity
FBGRX Fidelity Blue Chip Growth
$38,080.31
Gross Exp Ratio: 0.76%
Turnover: 75%

FCNTX Fidelity Contrafund
$104,069.64
Gross Exp Ratio: 0.74%
Turnover: 42%

FSEVX Spartan Extended Mkt Index Fid Adv Class
$22,026.28
Gross Exp Ratio: 0.07%
Turnover: 9%

FSITX Spartan US Bond Indx Fidelity Adv Class
$16,851.80
Gross Exp Ratio: 0.17%
Turnover: 118%

FSMEX Fidelity Select Medical Equipment &Systems
$5,689.76
Gross Exp Ratio: 0.83%
Turnover: 68%

FSTVX Spartan Total Mkt Indx Fid Advantage Class
$21,764.97
Gross Exp Ratio: 0.07%
Turnover: 2%

FTBFX Fidelity Total Bond
$11,724.53
Gross Exp Ratio: 0.45%
Turnover: 201%

Total balance: $220,217.43

NOTE: I planned to move FTBFX into FSITX, and am considering moving FBGRX between Fstvx & FSITX.

Rollover IRA at Fidelity
Fcntx Fidelity Contrafund
$121,658.74
Gross Exp Ratio: 0.74%
Turnover: 42%

Fsgdx Spartan Global Ex Us Index Fid Adv Cl
$11,765.93
Gross Exp Ratio: 0.28%
Turnover: 6%

Fsitx Spartan US Bond Indx Fidelity Adv Class
$30,001.07
Gross Exp Ratio: 0.17%
Turnover: 118%

Fsmex Fidelity Select Medical Equip&System
$15,299.46
Gross Exp Ratio: 0.83%
Turnover: 68%

Fstvx Sprtn Total Mkt Indx Fid Advantage Class
$37,047.28
Gross Exp Ratio: 0.07%
Turnover: 2%

Total balance: $215,772.51

401(k) plan (previous employer) at Vanguard
VGHAX Vanguard Health Care Fund Admiral Shares, Fund #0552
$2,144.62
Gross Exp Ratio: 0.30%
Turnover: 8.1%

VIPIX Vanguard Inflation-Protected Securities Fund Institutional, Fund #1190
$12,610.51
Gross Exp Ratio: 0.07%
Turnover: 44.3%

VBMPX Vanguard Total Bond Market Index Fund Institutional Plus, Fund #0850
Gross Exp Ratio: 0.05%
Turnover: 73.3%
$19,285.94

VTPSX Vanguard Total International Stock Index Fund Institutional Plus, Fund #1870
$35,817.28
Gross Exp Ratio: 0.10%
Turnover: 4.9%

VITSX Vanguard Total Stock Market Index Fund Institutional, Fund #0855
$37,713.86
Gross Exp Ratio: 0.04%
Turnover: 4.3%

Total balance: $107,572.21

401(k) plan (previous employer) at Fidelity
DSPIX Dreyfus Basic S&P 500 Stock Index Fund
$12,087.13
Gross Exp. Ratio: 0.21%
Turnover: 3.45%

ACITX American Century Investments Inflation Adjusted Bond Fund Investor Class
$3,987.28
Gross Exp. Ratio: 0.47%
Turnover: 27%

VEVIX Victory Established Value Fund Class I
$3,057.74
Gross Exp. Ratio: 0.68%
Turnover: 46%

MALOX BlackRock Global Allocation Fund Institutional Shares
$2,022.32
Gross Exp. Ratio: 0.88%
Turnover: 50%

FSCIX Fidelity Advisor Small Cap Fund - Institutional Class
$1,757.22
Gross Exp. Ratio: 0.71%
Turnover: 34%

FIADX Fidelity Advisor International Discovery Fund - Class I
$1,537.11
Gross Exp. Ratio: 1.00%
Turnover: 65%

MHYIX Mainstay Hi Yld Bd I MainStay High Yield Corporate Bond Fund Class I
$760.51
Gross Exp. Ratio: 0.75%
Turnover: 40%

MAGRX Blkrk Nat Resource I
$256.95
Gross Exp. Ratio: 0.80%
Turnover: 1%

Total balance: $25,466.26

Previous employer pension
Distributions at age 62(?)
$12,300

Portfolio totals (not including pension):
Taxable: $80,848.02 (brokerage & checking acct money to invest; I'm not including my "emergency fund")
Retirement: $569,028.41

Contributions
I hope to contribute something to my Roth for 2013. Other than that, future contributions will depend upon future income.

Available Funds
Alternate fund choices within old Vanguard 401(k) plan:
1461 Target Retire Income Tr I
1462 Target Retire 2010 Tr I
1463 Target Retire 2015 Tr I
1464 Target Retire 2020 Tr I
1465 Target Retire 2025 Tr I
1466 Target Retire 2030 Tr I
1467 Target Retire 2035 Tr I
1468 Target Retire 2040 Tr I
1469 Target Retire 2045 Tr I
1470 Target Retire 2050 Tr I
1488 Target Retire 2055 Tr I
VMRXX Vanguard Prime Money Mkt Fund Inst
VIPIX Vanguard Infla-Protected Sec Inst
VBMPX Vanguard Total Bond Mkt Ix Ist Pls
VITSX Vanguard Total Stock Mkt Idx Inst
VTPSX Vanguard Tot Intl Stock Ix Inst Pl
0340 Vanguard Retire Savings Trust III
PREMX T. Rowe Price Emerging Markets Bond
RPIBX T. Rowe Price International Bond
PRCIX T. Rowe Price New Income
VWEAX Vanguard High-Yield Corp Fund Adm
TRSGX T. Rowe Price Personal Strat Growth
VBAIX Vanguard Balanced Index Fund Inst
VCVSX Vanguard Convertible Securities
VWIAX Vanguard Wellesley Income Fund Adm
VWENX Vanguard Wellington Fund Admiral
DGAGX Dreyfus Appreciation Investor
DREVX Dreyfus Fund Incorporated
DMCVX Dreyfus Opportunistic Midcap Value A
DSCVX Dreyfus Opportunistic Small Cap
DWOAX Dreyfus Research Growth A
DRGVX Dreyfus Strategic Value I
TRBCX T. Rowe Price Blue Chip Growth
PRGFX T. Rowe Price Growth Stock
PRNEX T. Rowe Price New Era
VDIGX Vanguard Dividend Growth Fund
VEIRX Vanguard Equity Income Fund Adm
VEXRX Vanguard Explorer Fund Admiral
VIGIX Vanguard Growth Index Fund Inst
VIIIX Vanguard Inst Index Fund Inst Plus
VMCPX Vanguard Mid-Cap Index Inst Plus
VPMAX Vanguard PRIMECAP Fund Admiral
VSGIX Vanguard Small-Cap Growth Idx Inst
VSCIX Vanguard Small-Cap Index Fund Inst
VSIIX Vanguard Small-Cap Value Idx Inst
VIVIX Vanguard Value Index Fund Inst
PRMSX T. Rowe Price Emerging Markets Stock
PRIDX T. Rowe Price International Discovery
PRASX T. Rowe Price New Asia
TROSX T. Rowe Price Overseas Stock
VIDMX Vanguard Developed Markets Idx Ist
VEMIX Vanguard Emerging Mkts Stk Ix Inst
VESIX Vanguard European Stock Index Inst
VFSNX Vanguard FTSE AW xUS Sm-Cp Idx Ist
VHGEX Vanguard Global Equity Fund
VWILX Vanguard International Growth Adm
VPKIX Vanguard Pacific Stock Index Inst
PRISX T. Rowe Price Financial Services
PRMTX T. Rowe Price Media & Telecommunications
TRREX T. Rowe Price Real Estate
PRSCX T. Rowe Price Science & Tech
VGELX Vanguard Energy Fund Admiral
VGHAX Vanguard Health Care Fund Adm
VGSNX Vanguard REIT Index Fund Inst

Alternate fund choices within old Fidelity 401(k) plan:
RS Partners Fund Class Y (RSPYX), 1.2% gross expense ratio
Fidelity Advisor® Leveraged Company Stock Fund - Class I (FLVIX), 0.84%
Fidelity Advisor® New Insights Fund - Institutional Class (FINSX), 0.74%
AllianzGI NFJ Dividend Value Fund Institutional Class (NFJEX), 0.71%
Fidelity Advisor® Stock Selector All Cap Fund Institutional Class (FBRNX), 0.79%
Oppenheimer Main Street Select Fund Class Y (OMSYX), 0.89%
Lord Abbett Fundamental Equity Fund Class I (LAVYX), 0.74%
Heartland Value Fund Class Institutional (HNTVX), 0.9%
Fidelity Advisor® Mid Cap II Fund - Institutional Class (FIIMX), 0.90%
American Century Investments Equity Income Fund Investor Class (TWEIX), 0.94%
Nuveen Real Estate Securities Fund Class I (FARCX), 1.03%
Fidelity Advisor® Asset Manager® 70% - Class I (FAAIX), 0.80%
Fidelity Advisor® Freedom 2045 Fund® - Institutional Class (FFFIX), 0.81%
Fidelity Advisor® Freedom 2050 Fund® - Institutional Class (FFFPX), 0.81%
Fidelity Advisor® Freedom 2040 Fund® - Institutional Class (FIFFX), 0.80%
Fidelity Advisor® Freedom 2035 Fund® - Institutional Class (FITHX), 0.80%
Fidelity Advisor® Freedom 2030 Fund® - Institutional Class (FEFIX), 0.78%
Fidelity Advisor® Asset Manager® 50% - Institutional Class (FFIMX), 0.73%
Fidelity Advisor® Freedom 2025 Fund® - Institutional Class (FITWX), 0.73%
Fidelity Advisor® Freedom 2020 Fund® - Institutional Class (FDIFX), 0.69%

Questions

1. Regarding my Bank of America money market savings account (“emergency fund”), would it make sense to invest any of these assets elsewhere, or would that be craziness?

2. My Fidelity brokerage account contains inefficient funds I should probably sell. I’d greatly appreciate suggestions re taking the hit considering my tax/cap gains/employment situation. Fund suggestions would be warmly welcomed.
Unrealized cap gains in this account would be mainly long-term (short-term negligible):
Fbalx Fidelity Balanced = $2033.83 LTCG
Fdvlx Fidelity Value = $931.55 LTCG
Ficnx Fidelity Connecticut Municipal Income = $211.30 LTCG
Fvdfx Fidelity Value Discovery = $1462.25 LTCG
FYI: I recently sold out of my position in Fidelity Strategic Income (FSICX) within this account. Realized LTCGs were only $68.71, so I figured it was worth selling.

3. The assets I’d like to invest from my checking account are the result of selling out of a high expense (0.90%) mutual fund I held for too many years (LTCG was ~$90 so I thought getting out made sense). I was thinking of opening a taxable Vanguard brokerage account with this money, but would appreciate advice re investment suggestions and allocation strategy.

4. I feel the funds in my old Fidelity 401(k) are expensive. Are there better options within the choices available to me? Is it possible to roll it into a Vanguard IRA, for ie, and would that be a better option?

Thank you so much,
Lisa

tj
Posts: 2236
Joined: Thu Dec 24, 2009 12:10 am

Re: Retire by 55?

Post by tj » Tue Feb 11, 2014 12:25 am

I also would be a bit concerned about your SS calculations. Does that number account for 0's in earning from the early retirement years or is it the number the IRS sends you every year?
If you want to check actual numbers for yoru social security benefit, use the folllowing linked PDF with data from your earnings record. There comes a point where working more doesn't give you much more of a benefit, but if you want to work for other reasons, obviously you should. Those who worked throughout the 1980s got a pretty sweet inflation boost!


http://www.socialsecurity.gov/pubs/EN-05-10070.pdf

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