Retire in my early 40s? Crazy or actually doable?

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yarnandthread
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Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 2:12 pm

Hi. I am looking to see if my plan is doable for an immediate retirement. Thank you for your time in reading this.

Emergency Funds: 3 months
Debt: Zero, own my home and mortgage is paid off
Tax Filing Status: Married filing jointly
Tax rate: 33% Federal/ 0% state
Age: 41, hoping to retire at any moment

Annual Expenses for me alone = 40K which includes 10K health insurance (3K premium and up to 7K OOP max), 2500 home repairs, 2500 car repairs/amortized payments on buying a new one

Wife stands on her own financially. She will retire when she is ready but she isn't ready yet. I will join her on her health plan until she decides to retire.
Total Portfolio = 2.85 million
Total Portfolio asset allocation 53% stocks/47% bonds

Taxable Account = 2 million

Taxable asset allocation 33% stocks/67% bonds

BONDS in taxable = 1.35 million broken down into

1.25 million in 46 individual municipal bonds with average maturity of 2042 and average coupon of 4.5%
100K in Vanguard high yield municipal bond fund (VWALX)

STOCKS in taxable = 650K

Total US stock market (VTI) 34%
Small Cap Value (VBR) 16.5%
Small Cap Growth (VBK) 16.5%
International Large Cap (VEU) 16.5%
International Small Cap (VSS) 16.5%

Retirement Account is all ROTH IRA which is 100% stock = 850K

Vanguard High Dividend Yield (VYM) 7.5%
Vanguard Large Cap Value (VTV) 7.5%
Vanguard Large Cap Growth (VUG) 15%
Vanguard Small Cap Value (VBR) 15%
Vanguard Small Cap Growth (VBK) 10%
Vanguard International Large Cap (VEU) 15%
Vanguard International Small Cap (VSS) 7.5%
Vanguard International Explorer (VINEX) 7.5%
Vanguard Emerging Markets (VWO) 5%
Vanguard US REIT (VNQ) 10%

Questions:

#1: Is this enough to retire right now? Would I still be okay with an annual expense of 50K/year, 75K/year?

#2: I am planning on essentially 2 different 30 year retirements with the 1st 30 years living off of the taxable account and the 2nd 30 years living off of the ROTH if needed. Planning on living to 100. The roth is 100% stocks but I don't plan to touch it for some time so I am fine with that allocation. My question involves the taxable account. I know I am heavily invested in long term municipal bonds. I would like to eventually get to a 50/50 stock/bond ratio in my taxable account, but I am considering going with a slow reverse glide path approach. I have enough interest income coming off in municipal bonds to pay for my annual living expenses FOR NOW so why do a big conversion from 33/67 to 50/50 right away? If I take it slow, I might better avoid a negative sequence of return risk, especially given the high valuations of the stock market currently which could correct at any time. Thoughts on this? On the flip side, I am aware of the current rising interest rate risk to my long term municipal bonds which certainly can drop them in value, but since the vast majority of my bonds are individual bonds, I am guaranteed to get my principal back if I hold to maturity.

#3: What to do with my long term bond positions in my taxable account. When I retire I will go from 33% tax bracket down to 15% tax bracket if I file jointly and I stick with the municipal bonds. If I convert all bonds to taxable bonds then I will go into the 25% tax bracket. Would you convert all, none or some of the municipal bonds to taxable bonds such as total bond index fund (BND)? Problem is that I know that the total bond index fund will not be giving me an interest yield of 4.5% right now like I currently have on the municipal bonds I own. AND long term inflation is only 3% so my 4.5% beats that. One line of reasoning says if it isn't broke don't fix it. Thoughts on this?

Thank you for your time! It means a lot.

livesoft
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Re: Retire in my early 40s? Crazy or actually doable?

Post by livesoft » Fri Dec 08, 2017 2:29 pm

Sure you can retire right now.

See also: https://earlyretirementnow.com/2016/12/ ... t-1-intro/
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2Birds1Stone
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Re: Retire in my early 40s? Crazy or actually doable?

Post by 2Birds1Stone » Fri Dec 08, 2017 2:36 pm

Your portfolio could sustain a 3-3.5% withdrawal date indefinitely, assuming you stick to a 50/50 allocation.

At your asset levels, that's $60-70k/yr.

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Meg77
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Meg77 » Fri Dec 08, 2017 2:37 pm

Congrats on your position!

In short, you can retire now and draw $85,500 from your portfolio indefinitely, adjusting the amount upward to account for inflation each year. A 3% withdrawal chance has a reasonably good chance of never depleting your portfolio. So does a 4% return, but given your very long time horizon, many here would recommend a more conservative 3% withdrawal rate. Keep in mind that amount will have to cover all expenses, including taxes.

Does your wife have additional retirement assets for herself which will cover her expenses when she ultimately decides to retire? I know you said she "stands on her own" but I want to clarify. If her current income simply pays her current expenses and she isn't going to provide for her own retirement, then your plan will work only while she is still working.

You're in great shape, especially if you plan to earn a bit of side money at some point to pay for extras or push your withdrawal rate even lower.
"An investment in knowledge pays the best interest." - Benjamin Franklin

Thesaints
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Thesaints » Fri Dec 08, 2017 2:42 pm

2Birds1Stone wrote:
Fri Dec 08, 2017 2:36 pm
Your portfolio could sustain a 3-3.5% withdrawal date indefinitely, assuming you stick to a 50/50 allocation.
Why do you say so ?

To the OP advantage there is the fact that his wife is continuing to work. Her income gives them a lot more flexibility on withdrawals.
To his disadvantage is the fact that funds may have to last 60 years. a lot can happen in such a time span and volatility is the enemy of those who have to rely on investment income.

I'd say at 2% rate his portfolio generates 57k. That's the rate I'd consider safe. Lower withdrawal rates also have the advantage that income can be optimized vs. taxes more easily.

renue74
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Re: Retire in my early 40s? Crazy or actually doable?

Post by renue74 » Fri Dec 08, 2017 2:46 pm

My question to you is "why" do you want to retire?

What will you do on Monday's at 10am?
Last edited by renue74 on Fri Dec 08, 2017 2:47 pm, edited 1 time in total.

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Meg77
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Meg77 » Fri Dec 08, 2017 2:47 pm

yarnandthread wrote:
Fri Dec 08, 2017 2:12 pm
I know I am heavily invested in long term municipal bonds. I would like to eventually get to a 50/50 stock/bond ratio in my taxable account, but I am considering going with a slow reverse glide path approach. I have enough interest income coming off in municipal bonds to pay for my annual living expenses FOR NOW so why do a big conversion from 33/67 to 50/50 right away? If I take it slow, I might better avoid a negative sequence of return risk, especially given the high valuations of the stock market currently which could correct at any time. Thoughts on this? On the flip side, I am aware of the current rising interest rate risk to my long term municipal bonds which certainly can drop them in value, but since the vast majority of my bonds are individual bonds, I am guaranteed to get my principal back if I hold to maturity.
If the muni interest will pay all your expenses for now, then I would probably just live off the muni interest for now. Over time as the bonds start to mature, you can reinvest the principal in stocks to get closer to your target AA. That will happen gradually anyway as stocks rise in value and muni interest is spent, not reinvested. It might make sense to sell one or two of the lower yielding bonds though to get a bit closer from the get go - say, 40/60 at least. There's no right or wrong answer here though.
yarnandthread wrote:
Fri Dec 08, 2017 2:12 pm
#3: What to do with my long term bond positions in my taxable account. When I retire I will go from 33% tax bracket down to 15% tax bracket if I file jointly and I stick with the municipal bonds. If I convert all bonds to taxable bonds then I will go into the 25% tax bracket. Would you convert all, none or some of the municipal bonds to taxable bonds such as total bond index fund (BND)? Problem is that I know that the total bond index fund will not be giving me an interest yield of 4.5% right now like I currently have on the municipal bonds I own. AND long term inflation is only 3% so my 4.5% beats that. One line of reasoning says if it isn't broke don't fix it. Thoughts on this?
[/quote]

I wouldn't convert any munis to taxable. What would be the point? A nice long term tax free muni ladder is a great thing. Enjoy it. That said, I don't know when your bonds start maturing. There may be an argument to slowly transfer the principal to the total bond mkt index (or a muni index) as your individual munis mature. But I certainly wouldn't trade your 4.5% - 5% fixed munis for the taxable index which yields only 2.5%.
"An investment in knowledge pays the best interest." - Benjamin Franklin

randomguy
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Re: Retire in my early 40s? Crazy or actually doable?

Post by randomguy » Fri Dec 08, 2017 2:51 pm

Only I would worry about is the wife standing alone part. If she gets sick and can't work would you really hang her out to dry? And what does she feel about you retiring while she keeps working?

Is that 1.25 million in munibonds the current market value (i.e. I assume you get a nice premium for a 4.5% tax free bond) or the amount you paid for them? You are a bit bond heavy for a 41 year old retiree

But at a high level having 2.8 million and 50k/year of expense you are fine in just about any case. Get over 100k of expenses (including taxes) and we can start having debates about 3% SWR verus 4%. At 2% you are insanely safe. If it fails, you are likely to have much bigger issues. And this is even before things like SS and medicare.

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 3:03 pm

Thank you for all your help.

Meg: my wife is contributing to her own retirement and is saving nicely towards her goal.

renue74: My job is tough and stressful so to not do it would be very nice indeed.

My bond call dates are concentrated in the early to mid 2020s with maturities ranging from late 2020s all the way to the mid 2050s. If interest rates rise above 4-5% I am sure that the municipalities will not call my bonds early so I could be stuck with some/most of them for a long time. But 4.5% coupon average is okay, I believe.

BW1985
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Re: Retire in my early 40s? Crazy or actually doable?

Post by BW1985 » Fri Dec 08, 2017 3:05 pm

Do it!

:sharebeer
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 3:07 pm

randomguy: no, I would not hang her out to dry. Fortunately she spends about the same as me, so I think I have enough cushion to cover both of us if she gets sick and couldn't work anymore. She likes her job a lot more than me. She is totally okay with me retiring because she would get to see me more often :happy

I didn't plan on any social security into my plan. If it is there fine, if it is not, no big deal.

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 3:16 pm

randomguy: Taxable bond principal amount of 1.25 million out of the current value of 1.35 million.

randomguy
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Re: Retire in my early 40s? Crazy or actually doable?

Post by randomguy » Fri Dec 08, 2017 3:22 pm

yarnandthread wrote:
Fri Dec 08, 2017 3:07 pm
randomguy: no, I would not hang her out to dry. Fortunately she spends about the same as me, so I think I have enough cushion to cover both of us if she gets sick and couldn't work anymore. She likes her job a lot more than me. She is totally okay with me retiring because she would get to see me more often :happy

I didn't plan on any social security into my plan. If it is there fine, if it is not, no big deal.
So that gives you expenses of like 80k which is still well in the safety zone (especially if she has any type of assets). Obviously you can ignore SS but it is also one more safety factor. 1500 or so a month at 65 would cover a good chunk of 30k/year of expenses (i.e. medical is medicare at that point).

Unless you plan on some crazy lifestyle inflation (i.e. 80k is fine. 150k is probably not), go enjoy retirement. Or find some job that you enjoy more but doesn't pay well.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by GmanJeff » Fri Dec 08, 2017 3:49 pm

randomguy wrote:
Fri Dec 08, 2017 3:22 pm
Or find some job that you enjoy more but doesn't pay well.
I suggest reflecting on this advice rather than planning to just withdraw from the workforce altogether.

As others have responded, your potential income from investments appears sufficient to sustain your current level of expenses, but consider that those expenses correspond to your working lifestyle. If you retire, you may reduce some expenses, such as commuting, work clothing, and so on, but are your recreational expenses going to increase because you now have much more free time to fill? Are you confident that you can accurately predict your income needs for potentially the next 50+ years, rather than just assuming your current needs will not increase for any reason? Will your proposed income address your potential future needs for long-term care?

I'd argue that you're not giving yourself much financial cushion with which to deal with circumstances you don't currently anticipate, and that maintaining an income stream, even a smaller one, for some additional time into the future would be prudent. You could increase your eventual retirement income, increase your potential Social Security income, and reduce the risk that at some point in the future you just won't have enough income to have the retirement you envision.

IMO
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Re: Retire in my early 40s? Crazy or actually doable?

Post by IMO » Fri Dec 08, 2017 3:55 pm

randomguy wrote:
Fri Dec 08, 2017 2:51 pm
Only I would worry about is the wife standing alone part. If she gets sick and can't work would you really hang her out to dry? And what does she feel about you retiring while she keeps working?

But at a high level having 2.8 million and 50k/year of expense you are fine in just about any case. Get over 100k of expenses (including taxes) and we can start having debates about 3% SWR verus 4%. At 2% you are insanely safe. If it fails, you are likely to have much bigger issues. And this is even before things like SS and medicare.
I bolded and highlighted that the part in red. There's the "theoretical acceptance" and the "reality acceptance" when day after day, week after week, month after month where she's going to work (assume not working from home). Now with that said, I suppose that can be said about any SAH (male or female). However, I still say in today's society, it's still more socially accepted for a female vs. a male to be at home (either with or without kids at home).

Anyhow, congrats doing so well.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by soccerrules » Fri Dec 08, 2017 4:02 pm

Assume no kids ? It feels different to me because my wife and I have combined finances and we have 3 kids.

On paper it looks like you are ready. NOW figure out what you are going to do with all that time.

Congrats and best of luck. Check in and let us know who you are doing.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by DanMahowny » Fri Dec 08, 2017 4:03 pm

I retired at 42 with a lower net worth. Do it.

GCD
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Re: Retire in my early 40s? Crazy or actually doable?

Post by GCD » Fri Dec 08, 2017 4:06 pm

People ran the numbers above and yes, you can retire.

RE whether you should retire and whether it is crazy: Yes you should and no it isn't. If you are smart and disciplined enough to have accomplished what you have already you won't have any trouble thinking of something to do. My wife retired at 50 and I retired at 52. Not as young as you, but I don't have any trouble filling my day with productive, rewarding activities.

Go love your retirement.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by randomguy » Fri Dec 08, 2017 4:19 pm

GmanJeff wrote:
Fri Dec 08, 2017 3:49 pm
randomguy wrote:
Fri Dec 08, 2017 3:22 pm
Or find some job that you enjoy more but doesn't pay well.
I suggest reflecting on this advice rather than planning to just withdraw from the workforce altogether.

As others have responded, your potential income from investments appears sufficient to sustain your current level of expenses, but consider that those expenses correspond to your working lifestyle. If you retire, you may reduce some expenses, such as commuting, work clothing, and so on, but are your recreational expenses going to increase because you now have much more free time to fill? Are you confident that you can accurately predict your income needs for potentially the next 50+ years, rather than just assuming your current needs will not increase for any reason? Will your proposed income address your potential future needs for long-term care?

I'd argue that you're not giving yourself much financial cushion with which to deal with circumstances you don't currently anticipate, and that maintaining an income stream, even a smaller one, for some additional time into the future would be prudent. You could increase your eventual retirement income, increase your potential Social Security income, and reduce the risk that at some point in the future you just won't have enough income to have the retirement you envision.
I agree with that to some extend but we are not talking about someone that is even close to their financial limits. We are talking about about a 1.4% SWR without taking things like SS into account. He could double his spending and still be very safe. And tripling it wouldn't be totally crazy (i.e. something like an 80% success rate). Retiring in 10 years with 8 million isn't going to make you any happier if you want to live on 40k/year. Just leaves a bigger estate.

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Watty
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Watty » Fri Dec 08, 2017 4:34 pm

If you get a 401k match then one thing to check on is if it is fully vested or not.

Retirement does not need to be a permanent choice. You could plan to take a year off and then decide if you want to fully retire or not.

If you find that you need or want to go back to work the you can find something to do even if you don't get back into your prior career at the same level.

With only needing $40K a year if you eventually get a part time "fun" job even bringing in $1,000 a month can make a big difference in making your numbers work.
yarnandthread wrote:
Fri Dec 08, 2017 3:03 pm
My job is tough and stressful so to not do it would be very nice indeed.
It would be best to have a plan on something to retire to, instead of just not working. This is especially true since your wife will still be working which would make things like travel more difficult.

That said I retired just before I turned 59 and in the first year I lost a lot of weight, cooked and ate better, and started getting a lot more exercise and my job was not particularly "tough and stressful". My situation was much different but I am pretty sure that by retiring I likely added lots of years, or at least better quality years, to my life.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by WhiteMaxima » Fri Dec 08, 2017 4:41 pm

Yes. Just do it. 3% withdraw rate for living+roth coversion if you can limit to 15% bracket.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by sky jumper » Fri Dec 08, 2017 5:04 pm

yarnandthread wrote:
Fri Dec 08, 2017 3:03 pm
... My job is tough and stressful so to not do it would be very nice indeed.
you have worked hard and done an awesome job building your nestegg. if you have constructive things you'd like to do with your time, like restore a '66 GTO, or run marathons, or build an addition to your house... things that are time sensitive (you will not be able to do them when you're 60) then by all means "retire" now and live your life. you can always pick up part time work in a few years if you need/want to. but money can't buy time and it can't buy youth... once that's gone its gone.

I am mid 40's and my passion (outside of family/work) is pole vaulting (actually doing it, not watching).... which is extremely time sensitive. If I could retire now and spend 40 hours a week on staying in shape/practicing/competing/coaching, etc I would do it in a hearbeat... because in 10 years I will be lucky to get over 10ft. by 60 I'll need double knee replacement and will never jump again... and then I'll sit around wishing I could be 45 again jumping 14ft crossbars.... I will have a couple $mil more, but so what?

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Re: Retire in my early 40s? Crazy or actually doable?

Post by Raybo » Fri Dec 08, 2017 5:13 pm

I retired in my 40s (at 48). I didn't have your level of assets but I did sell into a housing bubble and rebalanced into the 2007-8 crash. Both helped a lot.

While one important issue about such early retirement is money, another equally important question is what will you do with your time? I found this to be a difficult problem to solve. First off, everyone you know will still work. Also, the amount of time your friends/wife might have to do things (i.e. travel) will be greatly reduced from yours. Thus, while you appear to have all the financial resources you need, do you have the lifestyle to go 100% unscripted by yourself?

Do you have hobbies? A life passion? Non-monetary goals?

Being retired is so much more than simply not working. Since you have plenty of money, maybe ask your work for leave of absence for, say a couple months, and see how you like having an unending number of unplanned days.

It may be easy for you or a real burden. Best to find out before you pull the plug.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by HJG0989 » Fri Dec 08, 2017 6:26 pm

Yes, come on in the water is great!

I didn't retire until I was 56, I would have gone sooner but needed 20 years of service to get subsidized health care.

I was worried I wouldn't have friends to do things with but I joined a meet up group and met a lot of great people. Most of them still work, but some have week days off. Also we hike and backpack typically four day trips Thursday thru Sunday when the weather is good.

During the week I go to the gym and have met great people in the yoga classes. My spouse retired a year after I did and we've been taking off to warmer climates in the winter. This year we are spending 2.5 months in Australia then will take a 40 day cruise home.

My stress level has dropped and my health is much better. I have not been bored for a minute.

Here is another great website for you to visit if you haven't already:

http://www.early-retirement.org/forums/f21/

Best of luck to you!

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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 7:35 pm

No kids. Expenses should stay roughly the same in retirement (adjusted for inflation obviously). I am already accounting for travel expenses each year in my previous numbers; we typically take about 4-5 vacations per year.

Regarding what I will do in retirement: my friends will still be working but they have the means and time to do some fun things with me. I do ponder how I will fill the time though, but I would like to pursue more creative endeavors.

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randomizer
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Re: Retire in my early 40s? Crazy or actually doable?

Post by randomizer » Fri Dec 08, 2017 7:36 pm

Do it now!

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Re: Retire in my early 40s? Crazy or actually doable?

Post by CnC » Fri Dec 08, 2017 7:38 pm

renue74 wrote:
Fri Dec 08, 2017 2:46 pm
My question to you is "why" do you want to retire?

What will you do on Monday's at 10am?
Honestly I wonder about people who have trouble figuring out what to do with their lives without work.

The simple fact that someone would rather sacrifice 8-10 hours a day of their life in exchange for money they don't need is just beyond my realm of understanding.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by timmy » Fri Dec 08, 2017 7:40 pm


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Re: Retire in my early 40s? Crazy or actually doable?

Post by timmy » Fri Dec 08, 2017 7:41 pm

CnC wrote:
Fri Dec 08, 2017 7:38 pm
renue74 wrote:
Fri Dec 08, 2017 2:46 pm
My question to you is "why" do you want to retire?

What will you do on Monday's at 10am?
Honestly I wonder about people who have trouble figuring out what to do with their lives without work.

The simple fact that someone would rather sacrifice 8-10 hours a day of their life in exchange for money they don't need is just beyond my realm of understanding.
I agree with your sentiment. However, I'm not sure what I'd do with my time. I acknowledge that it is from a lack of imagination.

GCD
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Re: Retire in my early 40s? Crazy or actually doable?

Post by GCD » Fri Dec 08, 2017 9:00 pm

OK, I'll try not to take a holier than thou attitude toward filling post-retirement days...

In full transparency, my wife could not do everything she wanted before I retired a few years later. We still cannot devote ourselves to selfish retirement because we have kids in middle and high school. The working spouse and kids do impinge on your options in retirement. For both me and DW, we focus a lot on our kids and try to avoid helicopter parenting with our newfound time.

Nevertheless, my wife worked out more, focused on the kids more and spent a few more hours on her hobbies. You do have hobbies right?

You make new friends. I think you need to realize that very few people can be friends in every sphere of your life. Some friends who still have to work (and I have many) will remain your friends. However, you will see them less because you only see them outside work and not at work. If you are pursuing all the new hobbies and activities you now have time for you will meet plenty of new people and they will be friends in that sphere.

Don't limit yourself because your friends aren't as thrifty as you and didn't plan as well as you.

I started back in a PhD program in my field, decided I was no longer interested, and then started completely over working on BA level classes in a field I had no experience in. I will never use this education to earn a living, but I do hope to earn a PhD in it and publish research. The world is literally your playground. Don't waste this opportunity. Not working doesn't mean unproductive.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by staythecourse » Fri Dec 08, 2017 9:08 pm

yarnandthread wrote:
Fri Dec 08, 2017 7:35 pm
No kids. Expenses should stay roughly the same in retirement (adjusted for inflation obviously). I am already accounting for travel expenses each year in my previous numbers; we typically take about 4-5 vacations per year.

Regarding what I will do in retirement: my friends will still be working but they have the means and time to do some fun things with me. I do ponder how I will fill the time though, but I would like to pursue more creative endeavors.
With no kids and the future liabilities associated with them, i.e. college education, weddings, buying cars for them, helping with downpayment on house, etc... you can absolutely retire now.

The big UH OH I see is the last part of your sentence. I learned a valuable piece of advice on this board when someone said, "One should not run away from work, but to something else". It seems you have no real interest. Trust me, you will find yourself outside looking in when all your other friends are working. There is sure to be some jealousy from your other friends.

Find something you want to do and not just because you are burned out from your current gig. If you can do it. If you can't work on finding something ASAP then retire.

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

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Re: Retire in my early 40s? Crazy or actually doable?

Post by 2comma » Fri Dec 08, 2017 9:52 pm

sky jumper wrote:
Fri Dec 08, 2017 5:04 pm
yarnandthread wrote:
Fri Dec 08, 2017 3:03 pm
... My job is tough and stressful so to not do it would be very nice indeed.
you have worked hard and done an awesome job building your nestegg. if you have constructive things you'd like to do with your time, like restore a '66 GTO, or run marathons, or build an addition to your house... things that are time sensitive (you will not be able to do them when you're 60) then by all means "retire" now and live your life. you can always pick up part time work in a few years if you need/want to. but money can't buy time and it can't buy youth... once that's gone its gone.

I am mid 40's and my passion (outside of family/work) is pole vaulting (actually doing it, not watching).... which is extremely time sensitive. If I could retire now and spend 40 hours a week on staying in shape/practicing/competing/coaching, etc I would do it in a hearbeat... because in 10 years I will be lucky to get over 10ft. by 60 I'll need double knee replacement and will never jump again... and then I'll sit around wishing I could be 45 again jumping 14ft crossbars.... I will have a couple $mil more, but so what?
I can see where pole vaulting would have an "use by" date but look here sonny, I'm 62 and I still water ski, sail big boats in the Caribbean, scuba dive... I'm currently laying 4' plank tile throughout the house but the really hard work is leveling the concrete slab that isn't ever flat enough for large tiles. Yeah, it hurts more now but I'm still able to work on my knees several hours a day. My idol has always been "Banana" George Blair - in his late 80's he was still jumping off of 12' bridges and barefoot skiing.

My future projects include replacing a storage shed, rebuilding a wood fence (replacing posts and all), heck I might even pour a new concrete driveway, who knows!
If I am stupid I will pay.

umk
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Re: Retire in my early 40s? Crazy or actually doable?

Post by umk » Fri Dec 08, 2017 9:59 pm

sky jumper wrote:
Fri Dec 08, 2017 5:04 pm
yarnandthread wrote:
Fri Dec 08, 2017 3:03 pm
... My job is tough and stressful so to not do it would be very nice indeed.
you have worked hard and done an awesome job building your nestegg. if you have constructive things you'd like to do with your time, like restore a '66 GTO, or run marathons, or build an addition to your house... things that are time sensitive (you will not be able to do them when you're 60) then by all means "retire" now and live your life. you can always pick up part time work in a few years if you need/want to. but money can't buy time and it can't buy youth... once that's gone its gone.

I am mid 40's and my passion (outside of family/work) is pole vaulting (actually doing it, not watching).... which is extremely time sensitive. If I could retire now and spend 40 hours a week on staying in shape/practicing/competing/coaching, etc I would do it in a hearbeat... because in 10 years I will be lucky to get over 10ft. by 60 I'll need double knee replacement and will never jump again... and then I'll sit around wishing I could be 45 again jumping 14ft crossbars.... I will have a couple $mil more, but so what?
I agree. That's the reason I recently did Inca Trail to Machu Picchu because I figured that I won't be able to do it after 5 more years. You have done wonderful job managing your nest-egg. Now it is time to enjoy the fruits of your hard-work. If you are worried about how to spend your time in retirement, let me share my list with you.
1. Open source software development
2. Reading
3. Take online courses - 1 hour daily
4. Exercise - 1 hour daily
5. Learn cooking
6. Learn to play piano
7. Gardening - 1 hour daily
8. Visit national parks
9. Volunteer/Charity work
10. Pursue my hobby of Photography
(I am not retired yet, but plan to do it after 5 years when my pension benefits increase substantially. There is too much money involved to walk away from.) All the best.

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Fri Dec 08, 2017 10:31 pm

I appreciate all of your thoughts. It seems like the majority here think I can go ahead and pull the trigger now.

What do you guys think about questions #2 and #3 from my original post? These would apply to my taxable account only as my ROTH retirement accounts are 100% stocks.

#2 Thoughts regarding executing a slow reverse glide path to transition from 33%/67% stock/bond towards a 50%/50% split given the possible extra income cushion I might have from the municipal bond interest versus an immediate transition to 50/50 by selling bonds for stocks?

#3 Thoughts regarding possible exchange of municipal bonds towards a total bond market index fund or total bond market/corporate bond fund mix given my expected drop in tax bracket from currently 33% to 15% or 25% depending on the choice made?

Personally, I can see valid arguments for and against these propositions. How do you guys feel?

TG2
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Re: Retire in my early 40s? Crazy or actually doable?

Post by TG2 » Fri Dec 08, 2017 10:31 pm

staythecourse wrote:
Fri Dec 08, 2017 9:08 pm
yarnandthread wrote:
Fri Dec 08, 2017 7:35 pm
No kids. Expenses should stay roughly the same in retirement (adjusted for inflation obviously). I am already accounting for travel expenses each year in my previous numbers; we typically take about 4-5 vacations per year.

Regarding what I will do in retirement: my friends will still be working but they have the means and time to do some fun things with me. I do ponder how I will fill the time though, but I would like to pursue more creative endeavors.
With no kids and the future liabilities associated with them, i.e. college education, weddings, buying cars for them, helping with downpayment on house, etc... you can absolutely retire now.

The big UH OH I see is the last part of your sentence. I learned a valuable piece of advice on this board when someone said, "One should not run away from work, but to something else". It seems you have no real interest. Trust me, you will find yourself outside looking in when all your other friends are working. There is sure to be some jealousy from your other friends.

Find something you want to do and not just because you are burned out from your current gig. If you can do it. If you can't work on finding something ASAP then retire.

Good luck.
Very true. I didn't know if I was ready to be totally retired with no real structure in my life, so went part-time a couple years ago. My thought was that, "You either retire FROM something, or you retire TO something" and I didn't really have anything to retire to. 168 hours per week is an awful lot or time to fill when you only sleep about four hours a night, so I worked a couple days a week both to stay busy and to pay expenses without having to sell investments yet. I no longer work, and the transition was easier having done it in steps.

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weltschmerz
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Re: Retire in my early 40s? Crazy or actually doable?

Post by weltschmerz » Fri Dec 08, 2017 11:07 pm

Wow...only on Bogleheads do we get clowns with almost 3 million dollars asking if they can retire. The answer is 'yes', regardless of age. You are a clown....and I mean that in a good way! Congrats on your success so far.

aristotelian
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Re: Retire in my early 40s? Crazy or actually doable?

Post by aristotelian » Fri Dec 08, 2017 11:36 pm

weltschmerz wrote:
Fri Dec 08, 2017 11:07 pm
Wow...only on Bogleheads do we get clowns with almost 3 million dollars asking if they can retire. The answer is 'yes', regardless of age. You are a clown....and I mean that in a good way! Congrats on your success so far.
And only on Bogleheads would 40% of the posters advise against it.

GCD
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Re: Retire in my early 40s? Crazy or actually doable?

Post by GCD » Fri Dec 08, 2017 11:51 pm

TG2 wrote:
Fri Dec 08, 2017 10:31 pm
My thought was that, "You either retire FROM something, or you retire TO something" and I didn't really have anything to retire to.
I see this sentiment a lot, but I think people worry about it too much. I had a plan when I retired and it involved going back to school for a post-retirement career. I was really eager for it and threw myself into school. After the finances firmed up, and it became clear I never needed to work again, I completely changed paths. I really completely reinvented what I thought retirement was going to be.

I think I'm pretty normal when I say I went into retirement wondering if it was really going to work. You can run the numbers all you want, but unless you have 100X portfolio on sub-X expenses you always wonder. So I had a plan. Once I saw the numbers really worked, and I became intrinsically disenchanted with my original plan, I reworked things. If you are creative enough to achieve FI in your 40s you are creative enough to reinvent yourself on the fly.

GCD
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Re: Retire in my early 40s? Crazy or actually doable?

Post by GCD » Fri Dec 08, 2017 11:55 pm

weltschmerz wrote:
Fri Dec 08, 2017 11:07 pm
Wow...only on Bogleheads do we get clowns with almost 3 million dollars asking if they can retire. The answer is 'yes', regardless of age. You are a clown....and I mean that in a good way! Congrats on your success so far.
LOL. Don't hold it against a BH that he doesn't want his lunch to come from the left over birdseed after he's done feeding the pigeons in the park...
Last edited by GCD on Sat Dec 09, 2017 7:13 am, edited 1 time in total.

heyyou
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Re: Retire in my early 40s? Crazy or actually doable?

Post by heyyou » Fri Dec 08, 2017 11:56 pm

http://www.early-retirement.org/forums/f21/ +1 and register to reduce the advertising.
Posters there, do not suggest that working for money that you don't need, is better than the alternatives.

I retired at 55 into the best years of my life. First there were months of euphoria about my new life of leisure, followed by my finding what suited me. It was some specialized volunteer work that older retirees couldn't physically do, but I had both the time and the ability. Later, I received significant recognition at an annual state conference for the organization. That was reward for time and labor, but not measured in money.

It saddens me to report that my wife said I became a nicer person after getting away from the stress at MegaCorp.

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patriciamgr2
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Re: Retire in my early 40s? Crazy or actually doable?

Post by patriciamgr2 » Sat Dec 09, 2017 12:45 am

I retired at 42. I strongly disagree with a suggested 3-4% withdrawal rate. I'm not sure what Monte Carlo or other analysis would support those strategies. At the time I did ER (with much higher prevailing interest rates and higher forecast equity returns than exist today), I ran a number of analyses and the safe withdrawal rate for 57 years of retirement was slightly under 2%. A very long retirement is more like funding an endowment than running a standard SWR calculation IMO Personally, I'd use something close to 2% unless you're in poor health and unlikely to live long. I may have been too conservative using 99 y o, but life expectancies are increasing for people in good condition.

I thought I had health insurance under a contract with my employer. After about 3 years, that ended abruptly (company discontinued for all). Luckily, I was in perfect health (I mean no prescriptions, no doctor visits other than well woman checkups, etc.--absolutely no pre-existing conditions). I obtained an individual policy through BC/BS which has high deductibles, high copays and while it cost $220 initially it now costs about $1100 month. The policy renews each year & I have no doubt the insurer would cancel it if I became ill or seriously injured if it were legally allowed to do so. Luckily, my health remains good; my nightmare scenario--if the ACA (Obamacare) is gone--is being hit by an uninsured driver while I'm out biking and having my policy cancelled before my surgeries/rehab are complete.

And I'm one of the lucky ones. If ACA goes away, you have many years for you and your wife to be forced to find health insurance. If she's willing, and remains employable and physically able, to work to obtain employer coverage until you both reach Medicare age, no problem. That's a big if. Don't even consider early retirement until you've worked out a "Plan B" health insurance strategy.

Other than the health insurance mess, all of my costs have been well below my estimates. Luckily, because of favorable Sequence Of Returns, my returns, despite a few losing years [which the investment community apparently now calls "drawdowns"], have been better than I expected. I keep about 2 years of expenses in cash to avoid selling into a drawdown.

I LOVE ER. Best decision I ever made. Intellectually curious and active people can always find things to do that don't involve paid employment. That's never been a concern for me. Best Wishes.

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Sat Dec 09, 2017 5:14 am

patriciamgr2:

My health insurance plans:

Plan A: Join my wife's health insurance plan through her employer
Plan B: Buy into the ACA exchange. I have looked into it and annual premiums would be around 3K with OOP maximum of 7K
Plan C: If ACA goes away and we don't have a nationalized health care system, buy private insurance, roughly same cost as above from what I have researched
Plan D: If I can't afford private health insurance in the gap years before Medicare then I believe there will be a LOT more people in the USA uninsured than there currently is. I believe this country would then be at a serious tipping point, and something will give. If not, I would either find a job with health insurance benefits or consider moving to another country.
Plan E: find a warm jacket, find a nice cozy bridge to go under and hang out with all the rest!

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Soul.in.Progress
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Soul.in.Progress » Sat Dec 09, 2017 2:08 pm

I support your choice. Of course I’m biased because I did ER this year and have loved every minute of it :D

Enjoy what you’ve worked and saved for!
Start by doing what is necessary; | then do what is possible; | and suddenly you are doing the impossible. | -- Francis of Assisi

Benton Bair
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Re: Retire in my early 40s? Crazy or actually doable?

Post by Benton Bair » Sat Dec 09, 2017 5:02 pm

59 years is alooong time. If changes occur as the last 59 years have we won't recognize our world. I don't know the right answer for you.

I would choose to continue contributing and be paid for it. That's me.

GmanJeff
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Re: Retire in my early 40s? Crazy or actually doable?

Post by GmanJeff » Sat Dec 09, 2017 6:37 pm

Benton Bair wrote:
Sat Dec 09, 2017 5:02 pm
59 years is alooong time. If changes occur as the last 59 years have we won't recognize our world
To me, this is the central issue - the uncertainty of what the future may bring. The longer you may live into that future, the greater the risk you take that your resources will turn out to be insufficient.

Can you retire and live on some modest sum? Of course you can. The real question is whether it's prudent to do so. The longer you are out of the workforce, the more likely it will be that your decision will be effectively irrevocable, as your ability to return to employment in case of need decreases the longer you remain unemployed.

I suspect that one reason most people do not retire early is that they prefer to maximize their retirement resources rather than risk later not having enough if life throws them a curve ball they presently do not anticipate. If you're comfortable that the investment income you can expect will address everything you'll need or want in life, including come what may in terms of health, family needs, or long-term care, you're good to go.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by Lynette » Sat Dec 09, 2017 6:49 pm

yarnandthread wrote:
Sat Dec 09, 2017 5:14 am
patriciamgr2:

My health insurance plans:

Plan A: Join my wife's health insurance plan through her employer
Plan B: Buy into the ACA exchange. I have looked into it and annual premiums would be around 3K with OOP maximum of 7K
Plan C: If ACA goes away and we don't have a nationalized health care system, buy private insurance, roughly same cost as above from what I have researched
Plan D: If I can't afford private health insurance in the gap years before Medicare then I believe there will be a LOT more people in the USA uninsured than there currently is. I believe this country would then be at a serious tipping point, and something will give. If not, I would either find a job with health insurance benefits or consider moving to another country.
Plan E: find a warm jacket, find a nice cozy bridge to go under and hang out with all the rest!
I'm sure you can afford to retire but don't discount that Medicare may not be there in its present form. Medical costs are rising and Medicare is under stress. There is no guarantee that it will continue in its present form.

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Re: Retire in my early 40s? Crazy or actually doable?

Post by cfs » Sat Dec 09, 2017 7:56 pm

Retire at 40? YES, it is doable--but why do it? On my side of the house my most productive years were from 40 to 60. But that was me, and everyone is different. Wishing YOU good luck with your decision, have a Merry Christmas, and thanks for reading.
~ Your Money, Your Portfolio, Your Decision ~

yarnandthread
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Re: Retire in my early 40s? Crazy or actually doable?

Post by yarnandthread » Sat Dec 09, 2017 11:23 pm

Lynette: I agree that the current cost of medical care is unsustainable for this country. Hence, I believe we are at or very near a tipping point where something will have to change. The 2 things that have greatly outpaced general inflation in recent years are college tuition and healthcare costs. Imagine if we get to a point in healthcare where costs meant that the majority of people in this country had no medical insurance??

cfs: why do it? I have a stressful job with a lot of responsibility. Not having that would make my life much more enjoyable. I would definitely take some level of boredom over the chaos, but I believe I have enough avocational interests to keep me occupied.

Does anyone have any recommendations regarding question #2 and #3 from my original post?

34Leon
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Re: Retire in my early 40s? Crazy or actually doable?

Post by 34Leon » Sat Dec 09, 2017 11:48 pm

Retiring is a mistake, until you have nothing more to contribute. That is not a moral statement, but an individualistic one. Over the course of my career I have met many mentally and physically men aged well before their time do to early retirement. People think how nice it would be not to answer to anyone, but depression is the rule and alcoholism is not uncommon. Life is finite and you need to use it well.

WildBill
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Re: Retire in my early 40s? Crazy or actually doable?

Post by WildBill » Sat Dec 09, 2017 11:54 pm

Howdy

Just saw this. Neither here nor there, but I was in a similar position to you and retired for the first time at 42. I got bored after 2 years and went back to work. I really enjoyed work a lot more the second time around and I’m really glad I did it.

Re your questions - I really don’t see any particular reason to change the bond allocation in your taxable portfolio. You have the opportunity to earn more interest vs opportunity to pay less taxes. Do the math and see which works out better, or convert a fraction to taxable bonds which will still keep you in the 15% bracket.

Hard to figure out how to optimize without knowing the future. It is useful that you hold a lot of individual issues.

Good luck

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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