54yo and thinking about in early semi-retirement...

[rj342]

New to Bogleheads -- been lurking last couple weeks.
I would like you guys' thoughts on my options these next few years given our situation, which is not ideal but better than that of a lot of people in the US. We live in a LCOL larger city in Alabama. I'm 54, wife is 52. This is maybe a bit long, as its more vague, sort of "what do I want to be when I grow up"

- I'm 10 years into my third career, currently making only $75k. I took a big hit couple years ago from losing a job where I'd recently cracked 100k.
Could make a good bit more moving but tied to this area for a bunch of reasons including two widowed mothers. Could close the gap some more even with staying here but after getting badly burned previous job am seriously cautious about company culture and stress level (last job making me sick, actually had an afib episode -- fairly healthy otherwise). Current job is tolerable, but would like more time off (was nearing 4wks at old job, now back to 2wks) Am putting 8% in 401k (company typically matches 50-75%, no cap). Family health ins is $925/mo pre-tax.

- Wife is a teacher in catholic schools, having retired from public system after 28 years (burned out on ever increasing red tape and worse students).
She already draws her teacher pension ($30k) and gets about $40k more from current job (catholic pays less than old public school job but much better quality of life). I will get all of that pension if she goes first (we picked payout option w largest survivor benefit since we're close in age). She *is* also covered by Social Security. FWIW Alabamas state teachers retirement system pension fund is in good shape compared to a lot of states. At no charge her state retirement pays for a Supplemental Medical plan that covers almost all copays and deductibles from my primary plan. When hit 65 there is a cheap Medicare supplement. Alternately IF she works at a place where *she* has no insurance option, say drops back to part time , then we can both get on the retired teachers nice primary medical for only $700 ( and I can stay on if she passes first). FWIW her insurance while still employed in public school was only $325 for family -- knew we had it good but did not realize just how sweet until she retired.

- Only son graduating from college May 2020 (computer science). I got a couple small federal loans to help cover his room and board first two years (he chose a local university, we wanted him to still have college experience - independence was really good for him), -- I have already paid off one. Son had scholarships and small loan each year in his own name for rest - would like to help him pay those off faster if can. Once he's off our health ins we could possibly have two single plans, w total cheaper than 'family' (neither of our employers has a Plus One option).

- Modest house paid off a couple years ago (~$150k). No car notes (though prob need replace one vehicle in just a few more years). No credit card debt, although (I will occasionally use a 0% offer for a bigger short term expense and pay off in the period).

- I have $335k in Schwab Rollover Trad IRA and a Prinicpal 401k (w current job). Know I should have more by now but life has happened along the way. Should be an ok amount if can leave untouched another 10 years or so, assuming so-so 4% return. What's funny, I've done the spreadsheets, and a 1% swing in average yield dwarfs what I'm likely to be able to contribute over the next 5-10 years. Not sure how to count the wifes $30k as a retirement account equivalent -- if considered as a static amount and siphoning off a fixed yield indefinitely (pension has no automatic COLA), then 5% gives $600k equivalent PV, 3% gives $1M equivalent PV (of course no leftover value once we both die).

- We have about $30k in ready cash for emergencies outside of the 401k.

Punchline...
All common sense says keep working, both of us, but {edit by Moderator Jbranx} we're both sort of burned out and don't want to keep going full steam for 10 or so more years. Her pension by itself is not enough, so quitting outright is not an option, but the guaranteed seat at the employer group health insurance table, opens up options for possibly dialing back work well before 59-1/2, 62, or 67 much less 70.
She could work part time, OTOH how easily can she make something approaching her current $38k and still have all that teacher time off?
Other option for me is to transition to remote contract work (I'm a programmer in my 3rd career) and decide how much I work, but that's scary as I've always been an FTE somewhere. Another option - I have 6 years service on the books in the state retirement system myself (taught as a full time univ CS instructor in early 2000s). If I could get back in for 4 more years again I could buy back my six years service to hit the 10 year vested mark (start drawing at 62). But that still sort of a real job, still w some different stress. OTOH I could just teach some adjunct courses if wanted to stay part time.

Your thoughts? Anybody else done anything here similar? Successfully chosen more time off and keeping expenses low? Downshifted before fully "retiring" even though nest egg not as fat? I know this is awfully vague. Thanks anyway.

[FWIW I find annoying the 'I retired in my 30s' blogs where the couple a) was each making 6 figures in their 20s, b) blew off ever having kids, and c) are still working some, just not full time in a cubicle. ]

[bloom2708]

Welcome!

Do you have a good handle on what you spend? Fixed, variable and lumpy type spending?

How much on top of the $30k do you need each year to 1) get by or 2) do a bit more than get by?

At 59.5, 4% of $325k is ~$13k/year to supplement your income. I assume you can save more by then.

Let's say you need another $30k to get to #2 above. Can you both work part time and scrabble up $15k each? I assume you can.

The $700/month insurance is reasonable. It might be reasonable to look into an ACA plan with a lower income. With subsidies, that might be less than the $700/month retired plan. The details would determine which would make sense.

Getting to 59.5. Getting to 65 and Medicare. Plan what you will spend and your sources of income. At least one of you filing for SS at 67 or 70 will maximize your SS benefits which could be very important with lower savings amounts.

How much can you stash in a 2 or 3 more year plan? How little would you be willing to spend to work less? These are tough questions. If you step back and your wife has to keep slogging, that can be a tricky scenario.

Start with knowing your spending with intimate accuracy. Plot a course, even if it is not the course your "early retire" goals get to have right away.

Hopefully others give their thoughts. Welcome again!

[GatorFL]

New to Bogleheads -- been lurking last couple weeks.
I would like you guys' thoughts on my options these next few years given our situation, which is not ideal but better than that of a lot of people in the US. We live in a LCOL larger city in Alabama. I'm 54, wife is 52. This is maybe a bit long, as its more vague, sort of "what do I want to be when I grow up"

- I'm 10 years into my third career, currently making only $75k. I took a big hit couple years ago from losing a job where I'd recently cracked 100k.
Could make a good bit more moving but tied to this area for a bunch of reasons including two widowed mothers. Could close the gap some more staying here but after getting badly burned previous job am seriously cautious about company culture and stress level (last job making me sick, actually had an afib episode -- fairly healthy otherwise). Current job is tolerable, but would like more time off (was nearing 4wks at old job, now back to 2wks) Am putting 8% in 401k (company typically matches 50-75%, no cap). Family health ins is $925/mo pre-tax.

- Wife is a teacher in catholic schools, having retired from public system after 28 years (burned out on ever increasing red tape and worse students).
She already draws her teacher pension ($30k) and gets about $40k more from current job (catholic pays less than old public school job but much better quality of life). I will get all of that pension if she goes first (we picked payout option w largest survivor benefit since we're close in age). She *is* also covered by Social Security. FWIW Alabamas state teachers retirement system pension fund is in good shape compared to a lot of states. At no charge her state retirement pays for a Supplemental Medical plan that covers almost all copays and deductibles from my primary plan. When hit 65 there is a cheap Medicare supplement. Alternately IF she works at a place where *she* has no insurance option, say drops back to part time , then we can both get on the retired teachers nice primary medical for only $700 ( and I can stay on if she passes first). FWIW her insurance while still employed in public school was only $325 for family -- knew we had it good but did not realize just how sweet until she retired.

- Only son graduating from college May 2020 (computer science). I got a couple small federal loans to help cover his room and board first two years (he chose a local university, we wanted him to still have college experience - independence was really good for him), -- I have already paid off one. Son had scholarships and small loan each year in his own name for rest - would like to help him pay those off faster if can. Once he's off our health ins we could possibly have two single plans, w total cheaper than 'family' (neither of our employers has a Plus One option).

- Modest house paid off a couple years ago (~$150k). No car notes (though prob need replace one vehicle in just a few more years). No credit card debt, although (I will occasionally use a 0% offer for a bigger short term expense and pay off in the period).

- I have $335k in Schwab Rollover Trad IRA and a Prinicpal 401k (w current job). Know I should have more by now but life has happened along the way. Should be an ok amount if can leave untouched another 10 years or so, assuming so-so 4% return. What's funny, I've done the spreadsheets, and a 1% swing in average yield dwarfs what I'm likely to be able to contribute over the next 5-10 years. Not sure how to count the wifes $30k as a retirement account equivalent -- if considered as a static amount and siphoning off a fixed yield indefinitely (pension has no automatic COLA), then 5% gives $600k equivalent PV, 3% gives $1M equivalent PV (of course no leftover value once we both die).

- We have about $30k in ready cash for emergencies outside of the 401k.

Punchline...
All common sense says keep working, both of us, but {edit by Moderator Jbranx} we're both sort of burned out and don't want to keep going full steam for 10 or so more years. Her pension by itself is not enough, so quitting outright is not an option, but the guaranteed seat at the employer group health insurance table, opens up options for possibly dialing back work well before 59-1/2, 62, or 67 much less 70.
She could work part time, OTOH how easily can she make something approaching her current $38k and still have all that teacher time off?
Other option for me is to transition to remote contract work (I'm a programmer in my 3rd career) and decide how much I work, but that's scary as I've always been an FTE somewhere. Another option - I have 6 years service on the books in the state retirement system myself (taught as a full time univ CS instructor in early 2000s). If I could get back in for 4 more years again I could buy back my six years service to hit the 10 year vested mark (start drawing at 62). But that still sort of a real job, still w some different stress. OTOH I could just teach some adjunct courses if wanted to stay part time.

Your thoughts? Anybody else done anything here similar? Successfully chosen more time off and keeping expenses low? Downshifted before fully "retiring" even though nest egg not as fat? I know this is awfully vague. Thanks anyway.

[FWIW I find annoying the 'I retired in my 30s' blogs where the couple a) was making 6 figures in their 20s, b) blew off ever having kids, and c) are still working some, just not full time in a cubicle. ]

Hi there, we are similar in age and in circumstances. My wife also retired from public school up north, but her pension is much smaller as she was a teacher's assistant. She gets about 10K a year, non-COLA. However, we also have access to the Medicare gap coverage as well as pre-65 health benefit as you describe for about the same amount of pocket. That certainly helps.

I'm 55. I downshifted back when I turned 50 from a megacorp job to something much less stressful and enjoyable. I took a good sized pay cut, but I look back and am happy I did it. We moved to a LCOL area and I work remotely from home for the most part, so the stress is almost zero for me. My plan is to retire in 3 years. My retirement savings then will be close to 1M and I also have a non-COLA pension (100% joint survivor) waiting worth 25K per year when I turn 59.5. That also helps.

My advice is create a detailed spreadsheet showing expenses. My first year budget in 3 years will be $5000 per month, which is more than enough for our lifestyle. My draw will likely exceed the 4% guidance for the first 2 years, but then my pension kicks in and I will also supplement with social security at age 67 of approx 40K per year.

I plugged all of my info into FIREcalc and it comes back at 100%, so I figure we are good to go. A big part of my plan is bringing cost down. For example, we reduced to 1 car, which is fine since I work from home. Also, my property/school tax bill went from 8K up north down to 1.3K here in rural Florida. At the end of the day, retirement is about balancing spend with happy. Some need more, some need less. I am on the lower part of the spectrum, so I think we will be OK.

Another recommendation is to keep an eye on the ACA health care plans. Its actually cheaper for me to go ACA right now vs the teacher plan. That may go away however...

Best of luck to you, you are not alone..
Gator

[rj342]

Thanks, Bloom and gator

I've been working on the spending aspect, more TBD.
Taking a bottom-up approach, first pass: all set monthly expenses (incl insurance), all fixed annual expenses (incl property taxes, termite bond, hurricane insurance etc), plus allocating some to set aside each year for expenses that are not necessarily every year(bigger repairs on house or older cars -- what bloom calls "lumpy"?).
Looking at maybe $45-50k as a core.

We DO of course spend more than that, but a most of that is discretionary, easily dialed back if needed. We are not truly "'frugal", and should have saved more, but have always been fairly cautious: no boat, timeshare, stupidly fancy new cars. House is only 1770 sq feet. Wifes Honda Pilot is 10 years old (90k miles), my F-150 just hit 20 years (139k). Bought both new, got factory extended wty on hers which did pay for itself FWIW. Don't see myself ever getting a new truck again at todays prices.

Is interesting to look at going from 25% bracket on upper part of our income to having all fall within 12% rate or less.

A few other things:
- From my understanding SS looks at 35 years of work history, averaging in zeroes if you have less. We both have 35 years (nonzero) if you count working during college. Not quite there yet on 35 years of working full time.
- Small but non-trivial risk of neighborhood declining longer term, so a full time income would help there if had to move and borrow some (while still could).
- Have not looked at Long Term Care insurance much, just know age is a factor when you start -- any thoughts there? Also there is something about state LTC Partnership Insurance in conjunction w Medicaid to research.
- Have 150k life insurance through work (plus 50 on wife, 10 on son, god forbid). Have 150k 10 year term life (+ extra 150 accidental) on own thru Farmers that I would keep paying on for remaining term (hav eto check, i think would carry thru to 62). Have LTD and STD thru work - guess those would go away in any part time scenario. No idea how either would work if self employed or contractor.
- Hope to have grandkids in the mix in next ten years (hopefully soon but not too soon re 20yo son!) SO possibly relocation risk if son ended up elsewhere a no sign of coming back. That would be a tough one - family vs the rest of your support network and known low costs etc.
- I am assuming that SS *will* survive in some fashion, even if there are cuts.

I guess part of this is just thinking out loud. Even if I just keep working w/o a definite early end date, good to know we're in reach of sky not falling if something goes haywire w the full time jobs.

[DanMahowny]

welcome rj

Perhaps I'm oversimplifying things, but I would ask myself, "Can I get to age 70 with what I have now?" If yes, then retire.

Also, Auburn or Alabama?

[Tamarind]

One thing I would recommend is to try to get your expenses down enough that you can afford to max out your 401k. That uncapped match from your employer, if I've understood you correctly, is a rare benefit and represents a way to get a lot of "free money" into your retirement stash - at least $9500 a year as long as you continue to work. That makes a difference even if you only work a couple more years.

This exercise has double benefit in that reducing your expenses makes it easier to retire sooner.

[rj342]

Dan,
I think the answer re 70 is nominally yes, but there's always the question of an uncertainty cushion.
And I would rather be semi-retired in a couple more years or so, than fully retired and have an oh sh** issue and being looking for work when 65 or later. I would actually be willing to keep working *some* longer as long as I could work less than full time sooner.

re Roll Tide vs War Eagle.... I'm an apostate, with the answer "Don't really care", which is funny because that makes people's heads spin much worse than being for the 'wrong' team . I'm born and raised down in Mobile which is kind of neutral territory anyway - lots of both types of fans - but I was never a big football fan growing up. I played soccer in Catholic school in the 70s when it was new to the area and some Irish priests got a parochial league going. The redneck football players made fun of us, even though they couldn't do a fraction of the running we did almost continuously in our games. Even stranger, I went to college a few years in upstate NY where main sport was ice hockey (RPI).

Tamarind,
Get what you're saying. The 401k is a bit unusual in that there is no set match, but whatever amount they come up with in a given year (for last 10 years or more its been reliably 50-75%), it is not capped. Everywhere else I've worked it was something like a "guaranteed" (w fine print saying board could do otherwise if needed to) 50% up to your first 6%. I doubt I can go much higher than 10% - but maybe be able to just put the next couple generic annual raises into it. Of course sooner is always better than later -- and its easier to no waste money if you've already allocated it out of sight.

One thing I need to do is get into more nitty gritty with the wifes spending. We always found it easier to divvy up the bills and and do things separately with us both working, instead of having a joint account. It helped us never argue about money... but time for some tighter coordination now.

[GatorFL]

RJ,

Regarding your question on LTC. I have not pursued it, but I have talked to a few long term care places here locally that offer various terms by signing up with them (write them a check, they promise not to throw you out kind of thing). I am most likely not going to do that for a decade or so, but I encourage you to talk to a few local places to see what they offer. Getting a LTC policy is not something I have taken a serious look at, but I probably should. I hear the challenges, and I am suspicious of insurance companies by default.

I like your idea of going back to teach to get vested. My part-time transition when I "retire" from my full time 2nd career is to teach adjunct and remotely. I only have a Masters degree, but I have 30 years in I.T. which is in demand, and there is always demand for side teaching gigs. I have taught a few remote courses that I picked up through higheredjobs.com, The pay isn't the greatest typically, but I actually enjoyed being able to teach from my home office. I plan on doing that to pay for my golf when I retire from full time to part time. I also like the idea that teaching keeps the mind active.

Upstate NY? I'm also from that part of the country, finger lakes region. Great place to visit on July 4th

Lastly, I put 3 kids through university, and I totally get your comment about the no kids 30 something early retirees. I also have close friends who married later and are in their mid 50's with 10 year olds. They have no hope of retiring until they are 70.

Gator

[rj342]

No Gator, I'm not a yankee
I'm from Alabama, born and living in Mobile actually, but I did spend better part of 3 years, including the winters in Troy at RPI -- until I botched a scholarship and couldn't afford to stay. Back in the mid 80s you couldn't get student loans at the drop of a hat.

I will check higheredjobs.com. I didn't think about the remote teaching angle. Getting back in at local university where I taught before depends on a lot of things lining up. Public high school or community college would count toward state vesting -- but certainly the former would be way to much PITA, maybe the latter too. Of course the 4yr school BS program would have a better pool of students than either of the other two. I do remember when I was the full time instructor (only an MS here too), I would occasionally get hit up by University of Phoenix. Guess I should look into all that again.

re LTC insurance, I guess we have some more exposure to needing it since wife and I so close in age. If she was 5-10 years younger then home health might be sufficient in a lot more scenarios. If you're not worried about protecting some big inheritance, surviving spouse ending up on Medicaid just isn't a big deal -- but it is a bitch if both are still alive, the set aside is tiny. But yes, that market doesn't seem real stable.