One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

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OkanePlease
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One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Mon Sep 04, 2017 2:23 pm

One year ago, I got tremendous response (much appreciated!) to my post on this amazing forum which helped me reallocate holdings in my portfolio as I assessed early retirement. I’m now hoping you can help me with next steps as I fine tune the portfolio and continue to contemplate early retirement. Can I call my work-life quits at the end of this calendar year?

Emergency funds: 6 months in 1.15% savings account (separate from what’s described below)
Debt: None
Tax Filing Status: Married filing jointly (no children)
Tax Rate: 15% Federal, 0% State
State of Residence: WA
Age: 54/51
Current Asset allocation: 50% stocks / 50% bonds
Current International stock allocation: 15% of overall portfolio
Current total portfolio: ~$1,400,000

No mortgage, with house fully paid and therefore an additional asset (figure value about $900,000).
Annual expenses are about $50,000 per year, excluding taxes. ($12,000 of that is health insurance if we retire!)
His future anticipated social security benefit (delaying until age 70): $2,503/month.
Her future anticipated social security benefit (delaying until age 67): $1,009/month. (NOTE: This is half of his age 67 amount, as it exceeds the likely benefit based on her short earnings record.)

Current retirement assets

Taxable
3% cash (does not include emergency funds, awaiting investment per any adjusted asset allocation)
33% Vanguard Total Stock Market Admiral (VTSAX)
15% Vanguard FTSE All-World ex-US Index Admiral (VFWAX)
21% Total Bond Market Admiral (VBTLX)

His SEP-IRA
18% Vanguard Total Bond Market Admiral (VBTLX) – no future contributions anticipated

His Roth IRA
2% Vanguard LifeStrategy Moderate Growth Admiral (VSMGX, 60:40 stocks:bonds) – no future contributions if no future employment income (though might consider slow conversion of SEP-IRA to Roth)

Her 401K
5% Fidelity U.S. Bond Index Institutional (FXSTX, expense ratio .04%)

Her Roth IRA
3% Vanguard Total Bond Market Admiral (VBTLX) – no future contributions if no future employment income (though might consider slow conversion of 401K to Roth)

Contributions

Would contribute to any 401K to get maximum employer match if working, but would obviously end if retire
$6,500 to his Roth IRA if working, but not if retired (unless converting SEP-IRA)
$6,500 to her Roth IRA if working, but not if retired (unless converting 401K)
$0 to taxable as no appreciable savings beyond paying current bills

More data/information:
No future inheritance expected.
Unrealized capital gains are currently quite low, so it’s a good time for any asset reallocation.

Questions:

1. With both of us currently in relatively low-paying, part-time jobs (but one job providing health insurance for both!) that basically just cover our living expenses (and job situation worsening), could we conceivably consider early retirement? I ran a couple of models and see a good potential success rate, but am open to opinions. I foresee similar living expenses in retirement, though a necessary allocation of $10,000 per year (indicated above) for combined health insurance. (I know that continuing to work, even part-time, will help ensure a higher success rate, but trying to assess early retirement as a “worst-case scenario.” Might want to work just to be active/stimulated and for more future security.)

2. If able to change course to early retirement or dramatic reduction of work, what changes would you recommend in the portfolio?
a) Change asset allocation? (I generally like 50:50 of stocks:bonds, but am nervous in the current political/economic climate and lean toward lowering stock exposure a bit and then buying more if stocks decline.)
b) Change any of the holdings?
c) Anything else with the portfolio?

3. Any other thoughts/recommendations? (Like last year, I’m still thinking that our low taxable income would afford the opportunity to incrementally convert the SEP-IRA to a Roth IRA. Our future tax rate will likely be the same or higher, so I’m thinking it’s a good reason to convert each year as much as possible—certainly up to the end of the 10% marginal tax rate, perhaps up to the end of the 15% marginal tax rate.

As always, I look forward to your ideas, insights, and inspiration. Thanks!

runner540
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by runner540 » Mon Sep 04, 2017 3:06 pm

Sorry to hear that you are not happy with your work situation. However, I would not recommend retiring yet. It might work out, but it's too close for comfort for me:

I ran a spreadsheet with the following assumptions, all in real dollars for simplicity (using the primary earner's age):
Age 55-70: withdraw $75k (your post tax expenses, plus $25k for taxes and cushion). Portfolio grows at 3% real.
Age 71-90: withdraw $45k ($75k-$30k in retirement income). The $30k is $2500 x 12 months for the primary earner only, to be conservative.
End: with $180k at age 90. If the portfolio grows at 4%, you reach age 90 with $870k.

Some of these assumptions might be called conservative (only one SS income, $25k of cushion/taxes), but that is because it makes a huge difference in outcome. The same parameters, except reducing the withdrawals to $65k and $35k, results in almost $800k at age 90.

Questions:
1. How did you arrive at the $12k/year healthcare expense? If that turns out to be $5-10k higher, the math gets even tighter.
2. Are the social security estimates dependent on your working at current salary for ~10 more years, or did you customize the estimate with future years of $0 income?
3. Does your expense number include adequate funds for lumpy expenses like new roof, new car, etc.?

Edit: if you are planning to sell your $900k house and get a $300k one instead, and add the difference to your investments, that would add a lot of confidence to the retire-now plan.

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Mon Sep 04, 2017 7:02 pm

runner540 wrote:
Mon Sep 04, 2017 3:06 pm
Questions:
1. How did you arrive at the $12k/year healthcare expense? If that turns out to be $5-10k higher, the math gets even tighter.
2. Are the social security estimates dependent on your working at current salary for ~10 more years, or did you customize the estimate with future years of $0 income?
3. Does your expense number include adequate funds for lumpy expenses like new roof, new car, etc.?
Thanks, runner540. I appreciate your thoughts.

To answer your questions:
1. That's based on health insurance at $500 per person per month. My other monthly expenses include a budget for uncovered medical expenses.
2. The social security estimate is based on 35 years of income ending this year, confirmed via a social security calculator (https://www.ssa.gov/planners/retire/AnypiaApplet.html) AND a phone conversation with a worker in that government office.
3. Yes, the expense number includes allocations for major expenses in the years ahead.

JBTX
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by JBTX » Mon Sep 04, 2017 8:38 pm

maybe its mathematically possible if you are really frugal but seems unwise to me. Even if you can make it work financially you wont have any money to enjoy your early retirement.

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BolderBoy
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by BolderBoy » Mon Sep 04, 2017 8:47 pm

As with the other posters, I'm a bit nervous about the closeness of your numbers to working out quite yet.

Did you run your scenarios through FIREcalc.com or cFIREsim.com to see what it projects?
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

terran
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by terran » Mon Sep 04, 2017 8:55 pm

How willing would you be to sell that $900k house and move to a lower cost of living location? $300k (or less) will buy a plenty nice house in many parts of the country and an extra $600k in your portfolio would add a nice chunk to your safe withdrawal amount (at whatever rate you're comfortable with).

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 9:26 am

BolderBoy wrote:
Mon Sep 04, 2017 8:47 pm
As with the other posters, I'm a bit nervous about the closeness of your numbers to working out quite yet.

Did you run your scenarios through FIREcalc.com or cFIREsim.com to see what it projects?
Thanks, BolderBoy. Running my numbers through one or both of those sites is still on my to-do list, so I appreciate the reminder!

aristotelian
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by aristotelian » Tue Sep 05, 2017 10:26 am

Generally, the longer and earlier your retirement, the more you want to be invested in stock in order to maximize long term returns on the portfolio. Retiring early should not cause you to get more conservative, but rather the opposite.

I agree with the above, if you could downsize to a smaller house and/or lower cost of living area, you would be quite well set, although I am a little unclear as to what your expenses are going to be with/without health care.

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Pajamas
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by Pajamas » Tue Sep 05, 2017 10:37 am

$12,000 could be a low estimate of health care costs as there is so much uncertainty surrounding them.

One thing to consider is exactly when to retire. A lot of people seem to retire at the end of the year. Working just a few months into the next year could allow for another year's worth of maxing out contributions to tax-advantaged accounts and sometimes other benefits such as a bonus for the previous year that might otherwise be forfeited. If you work a few more months, that might reduce some costs like health coverage, as well.

Steve723
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by Steve723 » Tue Sep 05, 2017 10:41 am

I think that you can make it work, but as others said, it doesn't leave a lot of room for one-off big expenses that may come up (unless your baseline essentials are super low and you already have 25+K for one-off items like cars, trips, home repairs, etc. I would think a 900K home needs a lot of updating/maintenance!). Plus the healthcare budget feels low. If I were you, I'd pad that 50K expense further....

goingup
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by goingup » Tue Sep 05, 2017 11:38 am

I'm not optimistic about a comfortable retirement for you if you retire now. Property taxes on a $900K home could exceed $10K per year, depending on where in WA you live. (Our assessment just increased by $100,000 so that means $1,000+ more on our King County tax bill.) Health care may well exceed your estimates of $10K per year.

To me, you're young and the nest egg isn't big enough. Selling your house and downsizing to something less expensive would help. Are you anticipating some other windfall, possibly inheritance?

KlangFool
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by KlangFool » Tue Sep 05, 2017 11:43 am

goingup wrote:
Tue Sep 05, 2017 11:38 am
I'm not optimistic about a comfortable retirement for you if you retire now. Property taxes on a $900K home could exceed $10K per year, depending on where in WA you live. (Our assessment just increased by $100,000 so that means $1,000+ more on our King County tax bill.) Health care may well exceed your estimates of $10K per year.

To me, you're young and the nest egg isn't big enough. Selling your house and downsizing to something less expensive would help. Are you anticipating some other windfall, possibly inheritance?
+1.

KlangFool

KlangFool
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by KlangFool » Tue Sep 05, 2017 11:44 am

OP,

IMHO, if you could sell your house (900K) and move into something cheaper (450K or less), you could retire early. Tweaking your portfolio would not help.

KlangFool

chuppi
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by chuppi » Tue Sep 05, 2017 12:21 pm

Very trivial comment in the grand scheme of things.
If I were to retire and if I had a choice, I would work for at-least a couple of months into the following year to earn money at no tax or at minimal tax.

A follow-up question to other posters. Would it work if the OP keep the house for another 10-15 years and downsize depending on the financial situation then?

KlangFool
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by KlangFool » Tue Sep 05, 2017 12:28 pm

chuppi wrote:
Tue Sep 05, 2017 12:21 pm
Very trivial comment in the grand scheme of things.
If I were to retire and if I had a choice, I would work for at-least a couple of months into the following year to earn money at no tax or at minimal tax.

A follow-up question to other posters. Would it work if the OP keep the house for another 10-15 years and downsize depending on the financial situation then?
chuppi,

1) OP loose the portfolio growth from part of the 900K.

2) The danger zone financially for OP is between now and when he withdraws social security. He needs the money now.

3) What if the house worth a lot less than 900K in the future?

OP has a lot of money tied up with the house. And, he cannot afford that if he wants to retire early.

KlangFool

CnC
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by CnC » Tue Sep 05, 2017 1:29 pm

I'm young yet so take my opinions with a grain of salt, but it seems like you could make it. Could being the issue. I plan to retire at 50, but I will have a pension and around 3 mil in the bank as well as 2 decent social security checks coming in.
Unless you sell your home it will be pretty tight.

$70,000 a year is a 5% withdrawal rate. You should be able to make that work for the 15 years untill 70 but you won't be doing much big spending.


I personally am having a bit of trouble understanding your finances. A paid off $900,000 home seems a bit of the outlier with only 1.4 mil in total investments.

I am astonished at how low property taxes are where you are from. Taxes on a $900,000 house would be over $20,000 a year here.

Edit: please don't take offense by "only 1.4 mil investment" that is a that is a substantial amount of money. I just meant it in relation to how much money is tied up in your home.

marcopolo
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by marcopolo » Tue Sep 05, 2017 2:24 pm

CnC wrote:
Tue Sep 05, 2017 1:29 pm

Edit: please don't take offense by "only 1.4 mil investment" that is a that is a substantial amount of money. I just meant it in relation to how much money is tied up in your home.
I also thought that the relative values seemed a bit unusual, as did a $50k spending profile in area of $900k homes. But, everyone has different lifestyles.

If your $50k estimate is correct, and it includes healthcare (your estimate for that seems a bit low), then $1.4M seems like it should be enough. That is a 3.5% Withdrawal rate, a little higher that i would be comfortable with, but many discussions here indicating that might be too conservative. But, in any case it does not seem completely unreasonable. Plus, you would have SS in addition to that in 10 years or so.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Oak&Elm
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by Oak&Elm » Tue Sep 05, 2017 3:36 pm

OP,
I'm still trying to figure out how you paid off a 900k home, accumulated 1.4 mil in investments while being in the 15% tax bracket and a 50/50 AA???? Regardless, congrats and IMHO work a little longer.

goingup
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by goingup » Tue Sep 05, 2017 3:56 pm

^ I'd imagine the $900K home was a $400-500K home 20 years ago and is now paid off, depending where in WA the OP resides. (Just a guess.) Often the assessed value hasn't caught up with the market value, but believe me the taxing authorities are working overtime to catch up!

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 5:37 pm

terran wrote:
Mon Sep 04, 2017 8:55 pm
How willing would you be to sell that $900k house and move to a lower cost of living location? $300k (or less) will buy a plenty nice house in many parts of the country and an extra $600k in your portfolio would add a nice chunk to your safe withdrawal amount (at whatever rate you're comfortable with).
Thanks, terran. We're quite likely to downsize our home sometime soon, though our desire to stay in this general area means realistically paying about $600,000 for the next home. Expensive area!

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 6:35 pm

aristotelian wrote:
Tue Sep 05, 2017 10:26 am
Generally, the longer and earlier your retirement, the more you want to be invested in stock in order to maximize long term returns on the portfolio. Retiring early should not cause you to get more conservative, but rather the opposite.

I agree with the above, if you could downsize to a smaller house and/or lower cost of living area, you would be quite well set, although I am a little unclear as to what your expenses are going to be with/without health care.
Aristotelian, I appreciate your thoughts. And wish I could be less conservative with my portfolio. It's contrarian to my views about market timing, but I'm so skeptical about the market in this political/economic climate. If I can't be more aggressive, I realize I might have to work longer.

Annual expenses are $38,000 per year. If we retire and lose the health insurance we currently have from employment, expenses will rise to $50,000 per year.

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 6:37 pm

Pajamas wrote:
Tue Sep 05, 2017 10:37 am
$12,000 could be a low estimate of health care costs as there is so much uncertainty surrounding them.

One thing to consider is exactly when to retire. A lot of people seem to retire at the end of the year. Working just a few months into the next year could allow for another year's worth of maxing out contributions to tax-advantaged accounts and sometimes other benefits such as a bonus for the previous year that might otherwise be forfeited. If you work a few more months, that might reduce some costs like health coverage, as well.
Good points, Pajamas! Definitely agree about health care uncertainty. Just estimating for now.

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 6:39 pm

goingup wrote:
Tue Sep 05, 2017 11:38 am
I'm not optimistic about a comfortable retirement for you if you retire now. Property taxes on a $900K home could exceed $10K per year, depending on where in WA you live. (Our assessment just increased by $100,000 so that means $1,000+ more on our King County tax bill.) Health care may well exceed your estimates of $10K per year.

To me, you're young and the nest egg isn't big enough. Selling your house and downsizing to something less expensive would help. Are you anticipating some other windfall, possibly inheritance?
Goingup, per my top post, no future inheritance expected.

Addressing your later post, home (relatively new construction) was about $650,000 purchased 8 years ago. Now paid off.

victw
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by victw » Tue Sep 05, 2017 6:42 pm

aristotelian wrote:
Tue Sep 05, 2017 10:26 am
Annual expenses are $38,000 per year. If we retire and lose the health insurance we currently have from employment, expenses will rise to $50,000 per year.
Are you relying on ACA? Have you checked priced at different age levels - particularly 60-65.
We are expecting to FIRE in our early 50s and I'm projecting about 12k in health insurance expense for the first couple of years. But I expect it to double before we both hit 65. Again - your spending numbers are raising red flags.

I do have empathy for the desire to leave the rat raise. But it would not be fun to create a different kind of stress.

Vic

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Tue Sep 05, 2017 6:49 pm

CnC wrote:
Tue Sep 05, 2017 1:29 pm
I personally am having a bit of trouble understanding your finances. A paid off $900,000 home seems a bit of the outlier with only 1.4 mil in total investments.

I am astonished at how low property taxes are where you are from. Taxes on a $900,000 house would be over $20,000 a year here.
marcopolo wrote:
Tue Sep 05, 2017 2:24 pm
I also thought that the relative values seemed a bit unusual, as did a $50k spending profile in area of $900k homes. But, everyone has different lifestyles.
Oak&Elm wrote:
Tue Sep 05, 2017 3:36 pm
OP,
I'm still trying to figure out how you paid off a 900k home, accumulated 1.4 mil in investments while being in the 15% tax bracket and a 50/50 AA???? Regardless, congrats and IMHO work a little longer.
Thanks for these replies.

CnC, I had good equity in previous homes I sold, so I was fortunate to have a small mortgage when I purchased the current home for $650,000 eight years ago. Taxes are about 1% of property value. House was assessed about $500,000 before my purchase, so it's taking time for taxes to be 1% of true value as the value keeps climbing.

marcopolo, I do not live a $900,000 lifestyle! Fairly frugal.

Oak&Elm, In addition to my comment to CnC just above, I was lucky to have a fairly recent inheritance, and I was investing more aggressively until going 50:50 this past year.

flyingaway
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by flyingaway » Tue Sep 05, 2017 7:07 pm

If the OP's $50K annual expenses estimate is accurate, there is likely 0 income taxes at both federal and state levels.

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Wed Sep 06, 2017 11:26 am

flyingaway wrote:
Tue Sep 05, 2017 7:07 pm
If the OP's $50K annual expenses estimate is accurate, there is likely 0 income taxes at both federal and state levels.
Thanks, flyingaway. If choosing not to work, I agree that there should be no income tax upon taking deductions. And no state tax in WA.

GmanJeff
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by GmanJeff » Wed Sep 06, 2017 1:15 pm

The math is only a part of the answer, as it disregards quality of life. As others have said, you could perhaps make this work mathematically, if your assumptions about future expenses prove accurate (eg., cost of health insurance, real estate taxes, personal income taxes, investment taxes, maintenance expenses for home and autos, etc.). That's a big "maybe", inasmuch as your assets are not so large as to allow much elasticity if your expenses rise faster than your income. States without income taxes have other taxes upon which they rely; those cannot be disregarded.

I'd think you'd want to be confident that living on the income you project will be satisfying. That is, that you'll have the financial resources needed to meet your ambitions for recreation, periodic new cars and electronics, travel, philanthropy, dining out, etc. You may also want some degree of assurance that you'll be able to meet potential needs for long-term care, as I see no reference to insurance or other resources upon which you'll be able to rely for that purpose, and your assets may be too low to confidently self-insure in that direction.

If your jobs are unsatisfying, it's understandably tempting to look for ways to leave them, but doing so leaves you exposed to risk that your assets may not sustain your desired future lifestyle, while you progressively become less and less employable the longer you're out of the workforce. It might be preferable to seek different employment rather than to focus on whether you can/should just stop working altogether.
Last edited by GmanJeff on Wed Sep 06, 2017 5:28 pm, edited 3 times in total.

goingup
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by goingup » Wed Sep 06, 2017 1:39 pm

GmanJeff wrote:
Wed Sep 06, 2017 1:15 pm
The math is only a part of the answer, as it disregards quality of life. As others have said, you could perhaps make this work mathematically, if your assumptions about future expenses prove accurate (eg., cost of health insurance, real estate, personal income taxes, investment taxes, maintenance expense for home and autos, etc.). That's a big "maybe", inasmuch as your assets are not so large as to allow much elasticity if your expenses rise faster than your income. States without income taxes have other taxes upon which they rely; those cannot be disregarded.

I'd think you'd want to be confident that living on the income you project will be satisfying. That is, that you'll have the financial resources needed to meet your ambitions for recreation, periodic new cars and electronics, travel, philanthropy, dining out, etc. You may also want some degree of assurance that you'll be able to meet potential needs for long-term care, as I see no reference to insurance or other resources upon which you'll be able to rely for that purpose, and your assets may be too low to confidently self-insure in that direction.

If your jobs are unsatisfying, it's understandably tempting to look for ways to leave them, but doing so leaves you exposed to risk that your assets may not sustain your desired future lifestyle, while you progressively become less and less employable the longer you're out of the workforce. It might be preferable to seek different employment rather than to focus on whether you can/should just stop working altogether.
Excellent cogent thoughts. I hope the OP gives proper consideration to your post. :beer

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Wed Sep 06, 2017 6:14 pm

GmanJeff wrote:
Wed Sep 06, 2017 1:15 pm
The math is only a part of the answer, as it disregards quality of life. As others have said, you could perhaps make this work mathematically, if your assumptions about future expenses prove accurate (eg., cost of health insurance, real estate taxes, personal income taxes, investment taxes, maintenance expenses for home and autos, etc.). That's a big "maybe", inasmuch as your assets are not so large as to allow much elasticity if your expenses rise faster than your income. States without income taxes have other taxes upon which they rely; those cannot be disregarded.

I'd think you'd want to be confident that living on the income you project will be satisfying. That is, that you'll have the financial resources needed to meet your ambitions for recreation, periodic new cars and electronics, travel, philanthropy, dining out, etc. You may also want some degree of assurance that you'll be able to meet potential needs for long-term care, as I see no reference to insurance or other resources upon which you'll be able to rely for that purpose, and your assets may be too low to confidently self-insure in that direction.

If your jobs are unsatisfying, it's understandably tempting to look for ways to leave them, but doing so leaves you exposed to risk that your assets may not sustain your desired future lifestyle, while you progressively become less and less employable the longer you're out of the workforce. It might be preferable to seek different employment rather than to focus on whether you can/should just stop working altogether.
Thanks so much, GmanJeff. I account for the factors you've listed, but appreciate that there's always room for more cushion. While my quest in this post is to see whether early retirement is feasible, the reality is that one or both of us will work part-time (or more) in new jobs that do good for the world to keep ourselves stimulated. I'm employable in education/human services, and even a low-paying job will pay off for us in the long run.

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Tamarind
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by Tamarind » Thu Sep 07, 2017 6:15 am

I think your math would work out much better if one or both of you kept working part time for a few more years, or you were able to pocket the equity from your current house. What would rent cost you in your area?

Your situation is very similar to my parents (though they are a few years older) in that essentially all of their expenses will be covered by SS, but they have to get there first and it's a bit of a stretch. They are selling their home and moving to a rental apartment about half the size.

Regarding social security, does your spouse have enough credits to claim on their own record? If not, are they close enough to get there with a bit more part time work? If they could they could claim on their own record at 62, then switch to spousal benefit when you claim.

lostdog
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by lostdog » Thu Sep 07, 2017 8:44 am

You could semi-retire but I would sell the house and down size. The difference from the house sale can be added to your portfolio. Take a part time job you enjoy.
Financial Independence is the best revenge. | "Our life is frittered away by detail. Simplify, simplify." -Thoreau

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Thu Sep 07, 2017 1:31 pm

goingup wrote:
Wed Sep 06, 2017 1:39 pm
GmanJeff wrote:
Wed Sep 06, 2017 1:15 pm
The math is only a part of the answer, as it disregards quality of life. As others have said, you could perhaps make this work mathematically, if your assumptions about future expenses prove accurate (eg., cost of health insurance, real estate, personal income taxes, investment taxes, maintenance expense for home and autos, etc.). That's a big "maybe", inasmuch as your assets are not so large as to allow much elasticity if your expenses rise faster than your income. States without income taxes have other taxes upon which they rely; those cannot be disregarded.

I'd think you'd want to be confident that living on the income you project will be satisfying. That is, that you'll have the financial resources needed to meet your ambitions for recreation, periodic new cars and electronics, travel, philanthropy, dining out, etc. You may also want some degree of assurance that you'll be able to meet potential needs for long-term care, as I see no reference to insurance or other resources upon which you'll be able to rely for that purpose, and your assets may be too low to confidently self-insure in that direction.

If your jobs are unsatisfying, it's understandably tempting to look for ways to leave them, but doing so leaves you exposed to risk that your assets may not sustain your desired future lifestyle, while you progressively become less and less employable the longer you're out of the workforce. It might be preferable to seek different employment rather than to focus on whether you can/should just stop working altogether.
Excellent cogent thoughts. I hope the OP gives proper consideration to your post. :beer
goingup, I'm absolutely giving consideration to everyone's posts. With great appreciation!

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Thu Sep 07, 2017 11:12 pm

Tamarind wrote:
Thu Sep 07, 2017 6:15 am
I think your math would work out much better if one or both of you kept working part time for a few more years, or you were able to pocket the equity from your current house. What would rent cost you in your area?

Your situation is very similar to my parents (though they are a few years older) in that essentially all of their expenses will be covered by SS, but they have to get there first and it's a bit of a stretch. They are selling their home and moving to a rental apartment about half the size.

Regarding social security, does your spouse have enough credits to claim on their own record? If not, are they close enough to get there with a bit more part time work? If they could they could claim on their own record at 62, then switch to spousal benefit when you claim.
Tamarind, rents are pretty outrageous where I live. Hard to find anything for under $2,000 per month. But always keeping my eyes open for a bargain!

My wife has 13 years of income production. Social security would be about $500 per month at age 62. Better than nothing before switching to spousal benefit...

OkanePlease
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Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Fri Sep 08, 2017 6:55 pm

lostdog wrote:
Thu Sep 07, 2017 8:44 am
You could semi-retire but I would sell the house and down size. The difference from the house sale can be added to your portfolio. Take a part time job you enjoy.
Thanks, lostdog. Downsizing is something I'll continue to consider!

OkanePlease
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Joined: Tue Apr 21, 2015 12:05 pm

Re: One Year Later: Hmm...how would you tweak this portfolio? Can I consider early retirement?

Post by OkanePlease » Mon Sep 11, 2017 1:54 pm

Just in case I missed anyone with a personal thank you, I want to appreciate everyone who helped with this inquiry. Being a bit old-fashioned, I'm printing out the entire thread so I can read it now while tweaking my portfolio, as well as to review in the future!

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