I want to retire

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leeroy
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I want to retire

Post by leeroy » Wed Mar 07, 2018 8:43 am

I am 54.
She is 59.
Have owned our business for 24 years.Would like to retire asap.
Cash 350,000.00 with no obligations other than emergency fund.
real estate: 2 houses One will be sold at retirement estimated gain 450,000.00 Will live in the other one.
Me 539,000.00 in VTSAX
Her 450,000.00 in VBIAX
debt 0
Tax bracket 2018 24%
would like to have 85,000.0 per year
Health insurance is my biggest concern since we are years from Medicaid.
Any advice would be appreciated as I am not very knowlegable about any of this.We have just been saving as much as we can for as long as I can remember

Wagnerjb
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Re: I want to retire

Post by Wagnerjb » Wed Mar 07, 2018 10:03 am

Once you sell the house, it looks like you will have roughly $1.8 million in assets. If you were to wait and retire at age 65, those assets would support around $72,000 of income (pretax) for the duration of your retirement.

For you to have $85k (after tax?) to spend, I am thinking you need to generate maybe $100k of pretax income from your investments, work, etc.

Does your $85k target for spending include paying for health insurance for the next 10 years?

How much will you and your spouse get in Social Security, and when do you both plan to begin drawing?

At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.

Best wishes.
Andy

ionball
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Re: I want to retire

Post by ionball » Wed Mar 07, 2018 10:09 am

Regarding the real estate sold at retirement, what matters is the total amount that you will have for your retirement spending. The gain amount doesn't tell us enough. I would not be comfortable with taking $85k annually with a beginning balance of $1.8M at your ages.

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White Coat Investor
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Re: I want to retire

Post by White Coat Investor » Wed Mar 07, 2018 10:11 am

Wagnerjb wrote:
Wed Mar 07, 2018 10:03 am


At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.
Agreed. You're not quite "there." You'll need to either get more, spend less, or wait until at least one of you qualifies for SS.

The basic rule to determine if you have enough is the 4% rule.

You take your expenses (be sure to include everything including taxes and health insurance), subtract any guaranteed income like a pension or social security, and multiply by 25. Then compare to your nest egg size.

When I do that with your assets, I get $1,789,000 vs $85K * 25 = $2,125,000. You're $336K short. If you can save $50K a year and the portfolio earns 5% real, you're about 2 1/2 years away. You might need to make some changes to have a better chance of the portfolio earning 5% real. Like investing the cash and either renting out the 2nd house or selling it and investing the proceeds aggressively.

Good luck with your choices.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

leeroy
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Re: I want to retire

Post by leeroy » Wed Mar 07, 2018 10:13 am

85,000 after tax will cover health insurance for both of us.
Will both take SS at 62 @ 1800 month for each of us.
Thanks for taking the time to offer advice

bloom2708
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Re: I want to retire

Post by bloom2708 » Wed Mar 07, 2018 10:20 am

Welcome to Bogleheads and the "I want to retire" club.

How much is your other house worth? Can you downsize and/or move to a lower cost of living area?

Do some research on your healthcare costs. Do some detailed spending analysis.

Is your wife on board with "retire now"? Is she willing to live off $50k or $60k?

Is your $539k + $450k in tax-sheltered accounts? 401k, Traditional IRA, Roth IRA?

Have you looked at your estimated social security numbers? If you spend $50k/year your $350k lasts ~7 years. That gets your spouse to Medicare and SS at 66.

I agree that you are not quite there at $85k to $100k spending. If that is flexible, you are probably good to go. It is in your court to determine what you will do to move up that target. Good luck!
Last edited by bloom2708 on Wed Mar 07, 2018 12:56 pm, edited 1 time in total.
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Sandtrap
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Re: I want to retire

Post by Sandtrap » Wed Mar 07, 2018 10:21 am

This might be helpful.
ONLINE FINANCIAL TOOLS
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
https://www.portfoliovisualizer.com

Firecalc. Retirement. How long will your money last?
https://www.firecalc.com

j

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HomerJ
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Re: I want to retire

Post by HomerJ » Wed Mar 07, 2018 10:21 am

White Coat Investor wrote:
Wed Mar 07, 2018 10:11 am
Wagnerjb wrote:
Wed Mar 07, 2018 10:03 am


At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.
Agreed. You're not quite "there." You'll need to either get more, spend less, or wait until at least one of you qualifies for SS.
Well, that depends on how much SS they'll get.

Say she will get $20,000 in 3 years, and he'll get another $20,000 in 8 years.

So they need $85,000 for 3 years, then $65,000 for another 8 years, then $45,000 from then on.

$85,000 x 3 years = $255,000
$65,000 x 5 years = $325,000
$45,000 x 25 (4% withdrawal for 30 years) is $1.1 million.

With $1.8 million, they could put aside $600,000 to get them through the next 8 years, and still have $1.2 million left over that will grow for 8 years before they need to start pulling 4% from it.

But I maybe wouldn't recommend this if the $85,000 is a tight budget. If one spouse dies, the SS gets cut. But if there's plenty of flex in that $85,000 a year, I think retirement is possible.

If nothing else, the wife could retire and the husband could work part-time for a few years to supplement the numbers above.

leeroy
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Re: I want to retire

Post by leeroy » Wed Mar 07, 2018 10:32 am

Thank you all so much for the advice.I would like to apologize first for being a moron.I did not realize posts had to be approved so I made another one before I realized it.Please ignore it if it shows up.
the 539+ 450 is in a sep ira if we both take ss at 62 it would 18,000 a yer for each
I forgot to add that when we close our business we will get estimated 350,000 for the building and equipment which has zero debt.

smitcat
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Re: I want to retire

Post by smitcat » Wed Mar 07, 2018 10:33 am

leeroy wrote:
Wed Mar 07, 2018 10:13 am
85,000 after tax will cover health insurance for both of us.
Will both take SS at 62 @ 1800 month for each of us.
Thanks for taking the time to offer advice
Please double check to make sure that your anticipated SS payments are correct. When you look them up online for your account they are listed as if you will be working until the last day before you claim - there is another calculator at the SS.gov site that allows you to use your historical SS deductions and then add zeros (0) to any year (now of future) that you will not be working. After you do that the calculator will give you your adjusted SS benefits at a much more accurate rate.

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Sandtrap
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Re: I want to retire

Post by Sandtrap » Wed Mar 07, 2018 10:36 am

leeroy wrote:
Wed Mar 07, 2018 10:32 am
Thank you all so much for the advice.I would like to apologize first for being a moron.I did not realize posts had to be approved so I made another one before I realized it.Please ignore it if it shows up.
the 539+ 450 is in a sep ira if we both take ss at 62 it would 18,000 a yer for each
I forgot to add that when we close our business we will get estimated 350,000 for the building and equipment which has zero debt.
You can delete your post easily and should so there's no overlap and confusion.
If there are already responses, you can "click on moderator" and request to merge the threads.
j

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Lemonaid56
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Re: I want to retire

Post by Lemonaid56 » Wed Mar 07, 2018 10:38 am

Didn't have to offer any more advice than Homer but I did have a question. Maybe I missed the answer somewhere.
Are you selling your business?
Or was that where the $350K came from?
If you are selling the business or turning it over to someone else to run will there be any income from that?

leeroy
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Re: I want to retire

Post by leeroy » Wed Mar 07, 2018 10:46 am

Closing the business and selling the real estate and equipment.

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ruralavalon
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Re: I want to retire

Post by ruralavalon » Wed Mar 07, 2018 10:55 am

Welcome to the forum :) .

It's good to see that you are debt free.

Please simply add any new information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

leeroy wrote:
Wed Mar 07, 2018 8:43 am
I am 54.
She is 59.
Have owned our business for 24 years.Would like to retire asap.
Cash 350,000.00 with no obligations other than emergency fund.
real estate: 2 houses One will be sold at retirement estimated gain 450,000.00 Will live in the other one.
Me 539,000.00 in Vanguard Total Stock Market Index Fund Admiral Shares VTSAX
Her 450,000.00 in Vanguard Balanced Index Fund Admiral Shares VBIAX
What sort of accounts hold these investiments?

How does your state tax withdrawals from retirement accounts?

leerroy wrote:debt 0
Tax bracket 2018 24%
would like to have 85,000.0 per year
Health insurance is my biggest concern since we are years from Medicaid.
Any advice would be appreciated as I am not very knowlegable about any of this.We have just been saving as much as we can for as long as I can remember
Total investable assets seem to be $1,879k.But hat is the the sale value of the house? We need to know the total value, not just yhe gain.

If retiring at ages 54 and 59 you need to plan around the idea of about 35 years of retirement, 6-11 years before eligibility for Medicare, and perhaps 11-16 years before Social Security.

I agree with White Coat Investor and the others, it doesn't seem like you have enough yet.

I found the hardest part in planning was getting a solid number for annual expenses in retirement. What I did was start by examining current expenses looking back at spending for the last couple of years (to avoid missing expenses that did not recur monthly or on a regular basis), looking at our check register and credit card statments (rather than relying on estimates).

How much annual expense will there be for health care? In addition to premiums be sure to include deductibles, copays, and out of pocket costs for vision, dental or other items not covered by insurance. You will have to shop around for premium costs of medical insurance. That varies quite a bit in different localities. Contact a local agent who specializes in health insurance.

What will your Social Security benefits be if you start benefits at age 70? How would you describe your general health condition, for each of you? If good its likely better to start Social Security later at age 70.

As mentioned please simply add this new information to your original post using the edit button.

I suggest that you read the following articles on the Boglehead's wiki:
Preparing for Retirement;
Safe Withdrawal Rates;
Early Retirement;
Social Security;
Medicare;
Retirement Spending; and
Surveys of Retirement Spending.

Here is a calculator which you might find useful: www.firecalc.com.
Last edited by ruralavalon on Wed Mar 07, 2018 11:06 am, edited 2 times in total.
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HoosierJim
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Re: I want to retire

Post by HoosierJim » Wed Mar 07, 2018 10:56 am

Assuming your heathcare is in the $85k spend (let's say 15k premium and 5k deductible = 20k) , due to your cash holdings, you have the ability to setup your taxable income to qualify for significant heath care AND DEDUCTIBLE subsidy. Didn't see your state/city but here's a Pittsburg PA (one of the cheaper places in the country) example with $23,000 MAGI. Don't underestimate the insurance deductible costs as you get older.

This takes your required income to be about $65K ($23 drawn from wife pretax or may have penalty from yours)
with subsidy (based on ages THIS year):
Image

without subsidy ($85,000 income - based on ages THIS year)

Image
Last edited by HoosierJim on Wed Mar 07, 2018 11:02 am, edited 3 times in total.

Chris K Jones
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Re: I want to retire

Post by Chris K Jones » Wed Mar 07, 2018 10:56 am

It seems kind of tight to me, but plugging your numbers into firecalc.com and assuming 1800 per month social security at age 65 for each of you, firecalc says there is 100% success. So I guess you could do it. Play with it on firecalc and other calculators though and see what you get.

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White Coat Investor
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Re: I want to retire

Post by White Coat Investor » Wed Mar 07, 2018 11:03 am

leeroy wrote:
Wed Mar 07, 2018 10:32 am
Thank you all so much for the advice.I would like to apologize first for being a moron.I did not realize posts had to be approved so I made another one before I realized it.Please ignore it if it shows up.
the 539+ 450 is in a sep ira if we both take ss at 62 it would 18,000 a yer for each
I forgot to add that when we close our business we will get estimated 350,000 for the building and equipment which has zero debt.
There you go. Sell the business and you're probably there. Just depends on if you want a little more breathing room you do "one more year" once or twice.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

leeroy
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Re: I want to retire

Post by leeroy » Wed Mar 07, 2018 11:39 am

Thank you all for the advice and links to things I need to look into. I feel better now.

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Watty
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Re: I want to retire

Post by Watty » Wed Mar 07, 2018 12:49 pm

This board tends to be VERY conservative about giving a green light and saying that is OK to retire.

I think you may be in better shape than some of the posts indicated, but the big question is still about what healthcare will be available five years from now and what it will cost.
leeroy wrote:
Wed Mar 07, 2018 10:13 am
85,000 after tax will cover health insurance for both of us.
An alternative way of looking at this.

So after you both start Medicare you might need $60,000 a year in after tax income.

If you both do start Social Security at 62 (see more on that below) and each get $1,800 a month that is $43,200 so you would only need $16,800 a year in income from your investments.

With a 4% safe withdrawal rate you would need $420,000 to be left in your portfolio in 11 years when the younger of you turns 65.

With over $1.8 million dollars now that should not be a problem.

One concern would be what your income needs would be if one of you dies and you only have one Social Security check.


A couple of comments.
leeroy wrote:
Wed Mar 07, 2018 8:43 am
would like to have 85,000.0 per year
If that means that you want to be able to spend $85K a year then you would likely need over $100K a year in income to have $85K left after paying income taxes.

You also need to consider your income needs at different ages. When you first retire you may be doing a lot of things like traveling and remodeling but I have seen relatives reach their mid 70s or so and naturally slow down even though their health was still relatively good. At that point they didn't travel much their expenses were pretty low since they lived in a paid off house.
leeroy wrote:
Wed Mar 07, 2018 10:13 am
Will both take SS at 62 @ 1800 month for each of us.
....
I am 54. She is 59.

It almost always makes sense for one spouse to delay starting Social Security until they are 70 since not only will that give you a inflation adjusted income as long as one of you lives, but it can also help you save money on taxes in the long run since the way Social Security is taxed is screwy.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

To help avoid taxes on Social Security many people find that doing Roth conversions before they start Social Security makes sense. If you delay starting Social Security you may be able to do more Roth conversions in a low tax bracket.

When looking at your number you really need to calculate them three ways, as a couple and as if one of you survives the other. When only one person is surviving they will be filing tax returns in the higher single tax brackets so doing Roth conversion while you are both still alive may be to your advantage.

I did not try to crunch the numbers but if you delayed starting Social Security for 11 years until you are 70 and 65 then that might be in the ballpark of $6,000 a month which would cover most of your retirement budget. Take the time play with different starting dates to see what income you would get then.

I suspect that both of you starting Social Security early is part of why the numbers in some of the other posts don't look that good.
leeroy wrote:
Wed Mar 07, 2018 8:43 am
Would like to retire asap.
Some questions to consider would be;

1) If you retired and your investments did poorly then what could you live on and still be comfortable? When I retired a few years ago I know how much I wanted to spend but if I needed to I could still be very comfortable if I needed to cut my spending back by 10 or more.

2) Could you cut back your hours and run your business as a part time or seasonal job? Think outside the box too, there was a post a while back by someone who was some sort of mechanic and he worked at a ski resort so he only worked part of the year, and he got to ski when he had time off.

3) With your skills could you go back to work in a few years if you needed to?

A lot of times when someone does not have a bulletproof plan the next step it to look at what "failue" would mean. A lot of times it just means that you have to adjust your plans and you will be still be OK.

Zero Alpha
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Re: I want to retire

Post by Zero Alpha » Wed Mar 07, 2018 2:13 pm

Is the $450,000 gain on the house capital gains? If you have not been living in the house to be sold, it may be worth up to ~$75,000 in tax savings to live there for 2 years before selling to get the tax exemption.

curmudgeon
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Re: I want to retire

Post by curmudgeon » Wed Mar 07, 2018 2:49 pm

leeroy wrote:
Wed Mar 07, 2018 8:43 am
I am 54.
She is 59.
Have owned our business for 24 years.Would like to retire asap.
Cash 350,000.00 with no obligations other than emergency fund.
real estate: 2 houses One will be sold at retirement estimated gain 450,000.00 Will live in the other one.
Me 539,000.00 in VTSAX
Her 450,000.00 in VBIAX
debt 0
Tax bracket 2018 24%
would like to have 85,000.0 per year
Health insurance is my biggest concern since we are years from Medicaid.
Any advice would be appreciated as I am not very knowlegable about any of this.We have just been saving as much as we can for as long as I can remember
You could count me on the "manageable, with care" side of the column. If you've been running a small business, I'm sure you have an appreciation for some of the challenges around health care costs and availability. There is a lot of variation in the health care situation by state and locality. I live in an area known generally for high cost of living (often abbreviated HCOL on this board), but we have a lot of competition in the health care sector which helps to control costs. I'm not sure I would have high confidence in ACA holding together for 10 years, but while it lasts, it can provide a lot of help to early retirees if you have the ability to manage your gross income. Spend some time looking at your ACA exchange to understand what is going on, and maybe look for news articles on how it has changed over the past few years to get an idea of whether your specific area options are somewhat stable. In my case, I do my budget as if I will NOT get a subsidy, and then treat the subsidy as a bonus.

A couple of "yellow lights" that I noticed in your post, which may want some thought and planning...

1) You mention selling the second house for a large gain. Just make sure that you've allowed for the tax consequences. If it was a rental, there may be large depreciation recapture and cap gains tax owed, along with various other "high earner" tax gotchas that you may not have previously encountered. These can nibble away at your net. If it was your primary residence, then you may slide through. Similar issues could apply to selling the business assets.

2) One nice thing about retiring with a large chunk of cash and a paid off house, is that drawing from the cash doesn't count as gross income for ACA subsidy purposes. If you live mostly off of that cash for the next few years, your MAGI (ACA gross income) will be fairly low, mostly interest. If you have taxable gains from the sale of house or business, you will want to think about whether you want to split them into separate years (or maybe stretch out in an installment sale) to keep your tax bracket down, or take the big lump so that future years will be eligible for ACA subsidy. Magic number for ACA income is about $65K gross (not taxable). Missing this can be an expensive mistake. You also want to be aware of what happens on the lower side, which you might hit with just interest income. You can end up in the state MedicAid welfare health program (this is not Medicare), which might, or might not, be what you would want; there are significant variations between states on this as well. Drawing some money out of retirement accounts (after age 59.5) or doing Roth conversions are ways that some folks keep income above that bottom tier. Sometimes there is a "sweet spot" for gross income.

3) If you have the stomach for drawing down more of your assets while waiting, it can be worth considering holding off on claiming SS for at least one of you. That's in my own plan, though I don't consider it to be a risk-free decision; it could backfire if congress does further means testing/taxing of SS benefits.

4) It's worth doing some budget planning, both "bottom up" and "top down". By "bottom up" I mean building a budget based on adding up all the basic and discretionary expenses you expect to have in retirement. For "top down", look at your current cash flows and adjust for taxes or other items that you know will drop. If there are large differences, spend some time to understand them.

MrPotatoHead
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Re: I want to retire

Post by MrPotatoHead » Wed Mar 07, 2018 3:25 pm

Uh,you don't mention children or legacy considerations so...have you considered leaving the U.S. for a lower cost of living, especially healthcare? It is a big world out there.

PartIrish
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Re: I want to retire

Post by PartIrish » Wed Mar 07, 2018 3:37 pm

smitcat wrote:
Wed Mar 07, 2018 10:33 am


Please double check to make sure that your anticipated SS payments are correct. When you look them up online for your account they are listed as if you will be working until the last day before you claim - there is another calculator at the SS.gov site that allows you to use your historical SS deductions and then add zeros (0) to any year (now of future) that you will not be working. After you do that the calculator will give you your adjusted SS benefits at a much more accurate rate.
+1 ^

This is one of the easiest miscalculations to make if you are using your online Social Security account. Someone posted the calculator below on this forum, and I think it provides a more exact estimate of my estimated social security using variables I can control. The program allows you to copy and paste your earnings data from your online SS account, but you do not input your SS# or any other identifying information. Once your earnings data are in, you can add in 0s (or any amount) to your remaining years and see the estimate in current dollars, not the future dollars that I think SS uses. The program does not keep your data so if you want the information you generate you will have to print or screenshot it.

https://socialsecurity.tools/app.html

TG2
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Re: I want to retire

Post by TG2 » Wed Mar 07, 2018 3:53 pm

It is certainly doable, but I don't think I would be terribly confident. For me it would boil down to whether you can be flexible with the $85-100,000 or not. I'd have no problem saying "Go for it!" with a $60-75,000 number which would allow you to bump up if you felt able to do that. And yes, you would both get SS at some point which would solidify your plan. Those benefits would be taxable, so cut the number by about 20%, but SS would make up most or all of the shortfall. For now, though, there are an awful lot of variables that could have a very big impact on you. Health care is only one. (And it's Medicare, not Medicaid.)

invst65
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Re: I want to retire

Post by invst65 » Wed Mar 07, 2018 4:32 pm

would like to have 85,000.0 per year
I'd like to have that in retirement too but we're doing fine right now on $70k/year even before collecting SS (to start next year @ age 70) and that's still with a mortgage of $1k/month (took a trip to Australia and Hawaii last year too and just bought a brand new Honda CR-V). I figure if we can make it this well without SS we'll be fine when it kicks in next year (@ pretty close to the max benefit).

Sounds to me like you are in great shape for doing it ASAP if you really want to. So go for it and have fun. If the money is going too fast for your comfort level, just cut back on your spending but I doubt that you will really have to.

Happy2BeFree
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Re: I want to retire

Post by Happy2BeFree » Thu Mar 08, 2018 11:47 pm

White Coat Investor wrote:
Wed Mar 07, 2018 10:11 am
Wagnerjb wrote:
Wed Mar 07, 2018 10:03 am


At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.
Agreed. You're not quite "there." You'll need to either get more, spend less, or wait until at least one of you qualifies for SS.

The basic rule to determine if you have enough is the 4% rule.

You take your expenses (be sure to include everything including taxes and health insurance), subtract any guaranteed income like a pension or social security, and multiply by 25. Then compare to your nest egg size.

When I do that with your assets, I get $1,789,000 vs $85K * 25 = $2,125,000. You're $336K short. If you can save $50K a year and the portfolio earns 5% real, you're about 2 1/2 years away. You might need to make some changes to have a better chance of the portfolio earning 5% real. Like investing the cash and either renting out the 2nd house or selling it and investing the proceeds aggressively.

Good luck with your choices.
WCI, may I ask...why would you use the 4% rule (rather than, say, 3% or 3.5%) for people who are rather young, at 54 and 59? Do you not subscribe to the more-conservative view of lowering percentage based on a longer (assumed) retirement?

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White Coat Investor
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Re: I want to retire

Post by White Coat Investor » Sun Mar 11, 2018 9:53 pm

Happy2BeFree wrote:
Thu Mar 08, 2018 11:47 pm
White Coat Investor wrote:
Wed Mar 07, 2018 10:11 am
Wagnerjb wrote:
Wed Mar 07, 2018 10:03 am


At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.
Agreed. You're not quite "there." You'll need to either get more, spend less, or wait until at least one of you qualifies for SS.

The basic rule to determine if you have enough is the 4% rule.

You take your expenses (be sure to include everything including taxes and health insurance), subtract any guaranteed income like a pension or social security, and multiply by 25. Then compare to your nest egg size.

When I do that with your assets, I get $1,789,000 vs $85K * 25 = $2,125,000. You're $336K short. If you can save $50K a year and the portfolio earns 5% real, you're about 2 1/2 years away. You might need to make some changes to have a better chance of the portfolio earning 5% real. Like investing the cash and either renting out the 2nd house or selling it and investing the proceeds aggressively.

Good luck with your choices.
WCI, may I ask...why would you use the 4% rule (rather than, say, 3% or 3.5%) for people who are rather young, at 54 and 59? Do you not subscribe to the more-conservative view of lowering percentage based on a longer (assumed) retirement?
4% ish is about the right number. Best to start somewhere around there and adjust as you go. If you feel better about 3-3.5%, then knock yourself out. But keep this in mind, on average, after 30 years, those withdrawing 4% had 2.7X what they retired with. Most of the time, 4% is TOO LOW for a 30 year period. You just need to have a plan in place in case you're one of those unlucky few for whom 4% is too high. The usual plan is cutting back a bit if you get a bunch of bad years early in retirement.

There are people on here who are so conservative they make Mike Lee and Ted Cruz look like liberals. If you listened to them, you'd think 1% is the SWR. I mean, you can get a guaranteed >3.33% 30 year withdrawal rate with nothing but a TIPS ladder. If you're so paranoid that you're looking at sub 3% SWRs, you need to spend a big chunk of your money on SPIAs.

But sure, the way the math works out, the longer your retirement, the lower WR you should use. How low is up to you.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Happy2BeFree
Posts: 169
Joined: Sat Aug 03, 2013 12:26 pm

Re: I want to retire

Post by Happy2BeFree » Mon Mar 12, 2018 12:53 am

White Coat Investor wrote:
Sun Mar 11, 2018 9:53 pm
Happy2BeFree wrote:
Thu Mar 08, 2018 11:47 pm
White Coat Investor wrote:
Wed Mar 07, 2018 10:11 am
Wagnerjb wrote:
Wed Mar 07, 2018 10:03 am


At this point - without any additional information - I don't see how you can retire today and spend $85k (without running a huge risk of running out of money long before your retirement is over). You can certainly retire if you wish, but I think you will need to scale back your spending target dramatically.
Agreed. You're not quite "there." You'll need to either get more, spend less, or wait until at least one of you qualifies for SS.

The basic rule to determine if you have enough is the 4% rule.

You take your expenses (be sure to include everything including taxes and health insurance), subtract any guaranteed income like a pension or social security, and multiply by 25. Then compare to your nest egg size.

When I do that with your assets, I get $1,789,000 vs $85K * 25 = $2,125,000. You're $336K short. If you can save $50K a year and the portfolio earns 5% real, you're about 2 1/2 years away. You might need to make some changes to have a better chance of the portfolio earning 5% real. Like investing the cash and either renting out the 2nd house or selling it and investing the proceeds aggressively.

Good luck with your choices.
WCI, may I ask...why would you use the 4% rule (rather than, say, 3% or 3.5%) for people who are rather young, at 54 and 59? Do you not subscribe to the more-conservative view of lowering percentage based on a longer (assumed) retirement?
4% ish is about the right number. Best to start somewhere around there and adjust as you go. If you feel better about 3-3.5%, then knock yourself out. But keep this in mind, on average, after 30 years, those withdrawing 4% had 2.7X what they retired with. Most of the time, 4% is TOO LOW for a 30 year period. You just need to have a plan in place in case you're one of those unlucky few for whom 4% is too high. The usual plan is cutting back a bit if you get a bunch of bad years early in retirement.

There are people on here who are so conservative they make Mike Lee and Ted Cruz look like liberals. If you listened to them, you'd think 1% is the SWR. I mean, you can get a guaranteed >3.33% 30 year withdrawal rate with nothing but a TIPS ladder. If you're so paranoid that you're looking at sub 3% SWRs, you need to spend a big chunk of your money on SPIAs.

But sure, the way the math works out, the longer your retirement, the lower WR you should use. How low is up to you.
Thanks so much for your reply. I've read many of your posts, and in addition to your financial wisdom, as a physician you have much greater understanding of people's mortality, and I appreciate your point of view in that respect as well.

gotester2000
Posts: 549
Joined: Sun Nov 12, 2017 1:59 am

Re: I want to retire

Post by gotester2000 » Mon Mar 12, 2018 1:34 am

You can retire with close to 2M and a house. Once you step into retirement you will learn to manage your expenses.

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