Retiring Early

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xshrthr
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Retiring Early

Post by xshrthr » Thu Mar 01, 2018 6:06 am

Hello,

My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. I'm 55 and wife is 51. No debt. No kids. I plan to quit my job soon to pursue other interests. Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.

AlohaJoe
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Re: Retiring Early

Post by AlohaJoe » Thu Mar 01, 2018 6:38 am

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
Hello,

My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. I'm 55 and wife is 51. No debt. No kids. I plan to quit my job soon to pursue other interests. Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.
Is a low maintenance lifestyle $15,000 a year or $75,000 a year?

We aren't mind readers :mrgreen:

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nativenewenglander
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Re: Retiring Early

Post by nativenewenglander » Thu Mar 01, 2018 6:53 am

I'd go to https://firecalc.com/ and run your numbers. What are your expenses? My wife and I are in a similar circumstance, but own a small home based business that generates $30K plus great write offs. We buy our HC insurance through the ACA keeping our income under the 64K threshold. What is your ratio of stocks to bonds. Ours is 40/60 at this time.

amitb00
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Re: Retiring Early

Post by amitb00 » Thu Mar 01, 2018 7:01 am

If your expense is less than 60k and your investments are properly diversified in say 60:40 AA (this allocation is a guideline ), you are in good shape.

smitcat
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Re: Retiring Early

Post by smitcat » Thu Mar 01, 2018 8:20 am

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
Hello,

My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. I'm 55 and wife is 51. No debt. No kids. I plan to quit my job soon to pursue other interests. Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.
What are your current plans for healthcare between now and 65?

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Watty
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Re: Retiring Early

Post by Watty » Thu Mar 01, 2018 8:44 am

There have bee academic studies about what sort of withdrawal rate is relatively safe. There are all sorts of assumptions and limitations but you should read up on that.

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

This is just for a reality check though since most people's expenses are not constant at different ages and most people will also get Social Security too someday.

This is usually calculated for a 30 year retirement but since you are younger your retirement planning would be longer so you would be looking at something like a 3% "safe withdrawal" rate or $60,000 a year, but that ignores that you will get Social Security someday so you could be a looking at an amount a bit higher than that.

If you use $60K as your budget that need to include taxes, any investment advisor fees, expensive mutual fund costs, and sportatic expenses like when you need a replacement car, a new roof, have a large dental bill, etc. Your medical insurance costs are of course a big unknown and even if things don't change when you are in your 60s but not on medicare yet the cost will be a lot higher than now.

If you have looked at your Social Security estimates one thing to keep in mind is that those often default to assuming that you work until you are 65. Your Social security is based on your 35 highest income years, adjusted for inflation. You or your wife may not have the full 35 years yet so that could reduce your Social Security some.

As others have said we don't know enough to say if you can retire or not. Sure people can easily retire with $2 million but if you post more of your information in this suggested format(more or less), including your best guess about your expenses then you will get more useful responses

viewtopic.php?f=1&t=6212

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privatefarmer
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Re: Retiring Early

Post by privatefarmer » Thu Mar 01, 2018 8:57 am

you didn't include the value of your home. I am not saying you should do a cash-out refi, per say, but you should at least consider the value of it. Worst case, you could always sell it and live in a small apartment if you needed more cash.

I would think for the vast majority of people, 2Mil w/ a paid off home is plenty. This forum is more conservative than most, many here don't support even a 4% SWR, however I think most CFPs would be comfortable with 4% before investment costs. That's 80k/year... w/o a mortgage... I think you will be just fine but if you are worried about it then do something you enjoy and make a small income doing it, that could easily add another 5-10k/year.

Jack FFR1846
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Re: Retiring Early

Post by Jack FFR1846 » Thu Mar 01, 2018 9:12 am

Too many wild cards.

What's in taxable? And what cap gains are there? If zero cap gains and 1.9M is in taxable, then you have a clear understanding of what can be pulled out. (0.04 * 1.9M)

Next.....what will your health insurance cost. Another post here lamented that a couple went over the cap for receiving subsidies by some small amount and after paying $6k for health insurance were hit with a bill for $28k to pay back the subsidies. I have no idea what you'd pay, but if I just take their numbers and say $34k, you'd need to pull that out of your savings. So now after health insurance, you'd live off of (0.04 * 1.9M)-$34k.

That's in the neighborhood of $45k. If you're under, congrats, you won.

Having no kids is the financial win here. If you had college expenses ahead, they could make health insurance costs look like nothing in comparison.
Bogle: Smart Beta is stupid

rob65
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Re: Retiring Early

Post by rob65 » Thu Mar 01, 2018 9:36 am

First, welcome to the forum.

The wiki has lots of useful information about a wide range of topics:

https://www.bogleheads.org/wiki/Getting_started

Some things to thing about. What are your projected spending needs? Make sure to include health care costs. Will you eventually draw social security and/or a pension? Note that the default social security estimate from the Social Security Administration assumes you continue working until retirement, but one of the calculators on the social security website allows you to run an estimate based on retiring early with 0 dollar earning years until age 62.

The general view is that a 4% withdrawal rate is safe for a 30 year retirement; at your age 3% is probably safer. You will get some on this site that go as low as 2% or 2.5%, but that seems conservative to me. For a contrasting view, Mr. Money Mustache argues that 4% is safe at any age - great site, lots of good information, but a little too optimistic in my personal opinion. A couple of places to read about safe withdrawal rates:

https://www.bogleheads.org/wiki/Safe_withdrawal_rates

https://earlyretirementnow.com/2016/12/ ... t-1-intro/

One of your biggest decisions will be your asset allocation. See:

https://www.bogleheads.org/wiki/Asset_allocation

You mentioned earning enough interest to live on. Vanguard, and most of the folks here, advocate for a total-return approach to investing:

https://personal.vanguard.com/pdf/s352.pdf

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BigFoot48
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Re: Retiring Early

Post by BigFoot48 » Thu Mar 01, 2018 10:46 am

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. ... Can $2M generate enough monthly interest to support our very low maintenance lifestyle?
My 40/60% 3-fund portfolio is somewhat below yours and I don't re-invest distributions of dividends, capital gains and interest. Over the past 5 years I have been getting total distributions of about 2.4% of the beginning year balance in each year. Except for years when we buy a car these distributions exceed our somewhat low $40k living expenses. Since 2008 the annual distributions have ranged from 3.07% to 2.20%. In 2017 it was 2.28%.

You should just add up your portfolio's distributions and you'll have your answer!

And now that we have SS benefits, I never have to sell investments to fund our living costs, so the 4% rule is somewhat moot for us.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 12-time loser

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HomerJ
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Re: Retiring Early

Post by HomerJ » Thu Mar 01, 2018 10:51 am

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
Hello,

My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. I'm 55 and wife is 51. No debt. No kids. I plan to quit my job soon to pursue other interests. Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.
How much you do you spend each year? Without that information, no one can answer your question.

How much Social Security does ssa.gov say you're going to get?

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Sandtrap
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Re: Retiring Early

Post by Sandtrap » Thu Mar 01, 2018 3:30 pm

This might help you do some projections based on your assets and annual need.

ONLINE FINANCIAL TOOLS
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
https://www.portfoliovisualizer.com
Firecalc. Retirement. How long will your money last?
https://www.firecalc.com
Morningstar Instant Xray
https://members.morningstar.com/Registe ... L100&vUrl=

j :D

delamer
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Re: Retiring Early

Post by delamer » Thu Mar 01, 2018 4:17 pm

Most Bogleheads do not endorse the idea of living off monthly income from a portfolio, but rather taking an approach that involves withdrawing a percentage of your total portfolio value (adjusted for inflation) each year. If the percentage is low enough, you are highly unlikely to spend down your savings.

At your ages, you could withdraw about 3% of your portfolio value annually. So about $60,000 in the first year and then adjust for inflation. If inflation is 2%, then next year you withdraw $61,200. Same for the next year, regardless of market conditions. (These withdrawals can be funded through interest and dividends, but some years they may be too much and some years may not be enough. So some years you’ll reinvest earnings and some years you’ll have to sell shares.)

One big caveat — if you are expecting to get Social Security or a pension later, then you can afford to withdraw more now without running out of money.

If you provide information on expected expenses and expected SS/pension then we can give you a more precise answer.

Sandi_k
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Re: Retiring Early

Post by Sandi_k » Fri Mar 02, 2018 3:32 pm

If you don't have healthcare covered, the answer is no.

btenny
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Re: Retiring Early

Post by btenny » Fri Mar 02, 2018 7:04 pm

Yes you can retire now IF and ONLY IF you have a paid for home and no mortgage. But if you are still paying off a home mortgage you need to keep working. The issue is you will need to spend big $$$ for health insurance for many years until Medicare so that will reduce what you can spend. So I think a $60K or so budget only works if you own your home.

Good Luck.

Iliketoridemybike
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Re: Retiring Early

Post by Iliketoridemybike » Fri Mar 02, 2018 7:30 pm

The best advice in this thread is in post #3. The details of your situation will make all the difference and a calculator like Firecalc will give you the best answer. Make sure you fill out all the tabs. If you are a Fidelity customer they also have a good retirement calculator called RPM. It helps you build a retirement budget and gives you estimates on items that you may not have a good feel for the cost on. You can overlook all kinds of things, so have a framework to plug your individual details into will give you the most accurate answer. Telling someone they can’t retire if they have a mortgage is silly. It depends on too many other factors.

J295
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Re: Retiring Early

Post by J295 » Sat Mar 03, 2018 6:51 am

For healthcare, you will want to take a look at the affordable care act. Keep your modified adjusted income below approximately 64,000, and your premium costs will be subsidized with a premium tax credit. Go to the Kaiser foundation website for a good calculator.


Would need to drill down with more specifics to give you a decent answer on your question about retiring now, but based on a view from 30,000 feet and recognizing that you seem to have lower expenses and flexibility on future spending, I would say go for it.

We are biased. We transitioned to me part time at 53 and love it ...... Although after that my wife decided to transition from not working to start working in real estate and in a hot market generated lots of income .... just lucky for us really, but your future could very well be “lucky “also… this whole thing is not a dress rehearsal so follow your own path is my advice

TravelforFun
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Re: Retiring Early

Post by TravelforFun » Sat Mar 03, 2018 6:06 pm

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
Hello,

My wife and I have a combined $2M worth of investment spread across 401K, IRA, and taxable account. I'm 55 and wife is 51. No debt. No kids. I plan to quit my job soon to pursue other interests. Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.
I'm going to make some assumptions so I can calculate the amount you could safely withdraw from your investment if you were to quit your job tomorrow. Assumptions:

1) Your wife is not working.

2) You will wait until your full retirement age (FRA) or 12 years from now to file for your social security benefits which would give you $30K a year.

3) Your wife will wait until her FRA or 16 years from now to file for her social security spousal benefits which would give her $15K a year.

Let X be your safe annual withdrawal.

$2,000,000 = 12X + 4(X-$30,000) + (X-$30,000-$15,000)/0.3
$2,000,000 = 12X + 4X -$120,000 + 33X - $1,500,000
$2,000,000 + $120,000 +$1,500,000 = 12X + 4X + 33X
$3,620,000 = 49X
X = $73,878

You could withdraw $74K a year for 12 years, then withdraw $44K after your SS benefits kick in for 4 years, then withdraw $29K a year from then on after your wife SS spousal benefits kick in. Your money should last forever.

TravelforFun

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VictoriaF
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Re: Retiring Early

Post by VictoriaF » Sun Mar 04, 2018 8:10 pm

Beware that when you are retired you have more time to do the things you like, and some of these things are expensive. At the ages of 51 and 55 you have the energy to try new activities, join new groups, and to travel domestically and internationally. Be realistic about potential increases in your budget.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

StealthRabbit
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Re: Retiring Early

Post by StealthRabbit » Sun Mar 04, 2018 8:29 pm

Consider leaving the USA until age 65, there are many ways to do this and some countries gladly accept USA 'medical coverage refugees'

Sure, you can do it (retire) on a budget.
Track spending... worse case... get a PT J-o-B
Retire early, retire often (Practice makes perfect) too much fun to do only once or twice per lifetime.

Best option... designate a LT inflation protected income plan to replace 'wage-income'. (I should of done this at age 16...) :oops:

HC is the biggy (or not)
options:

inside USA Outside USA:
Travel (travel insurance is CHEAP, but not really 'primary' for BIG stuff)
Use other countries options (several sell CHEAP, others let you go on national HC, others have affordable options (~1/10th USA costs)
Care can be excellent (or not) usually excellent (better than in USA from my experience, certainly FASTER!!!)

xshrthr
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Re: Retiring Early

Post by xshrthr » Tue Mar 06, 2018 12:54 pm

Dear Bogleheads,

I'm sorry for the late reply (just got back from visiting my parents). Wow! I am overwhelmed by the amount of reply and information. I do appreciate your time to provide questions and advice to my post. Please give me time to ponder on your questions, suggestions, and visit various websites you shared. Thank you very, very much

ionball
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Re: Retiring Early

Post by ionball » Tue Mar 06, 2018 1:08 pm

Know your spending needs in great detail. New hobbies and adventures may have costs you've never considered before. Health care costs are difficult to project.

DesertDiva
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Re: Retiring Early

Post by DesertDiva » Tue Mar 06, 2018 1:10 pm

xshrthr wrote:
Thu Mar 01, 2018 6:06 am
Can $2M generate enough monthly interest to support our very low maintenance lifestyle? Thank you, Bogleheads.
Where do you live? Hawaii, Manhattan or San Francisco? Or L.A. (lower Alabama)? Wouldn't last too long in a HCOL area.
♫ Stocks go up ♫ Stocks go down ♫ Stocks go up ♫ Stocks go down ♫

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