Is retirement in 2 years possible?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
singlewhip2030
Posts: 4
Joined: Fri Sep 18, 2020 1:38 pm

Is retirement in 2 years possible?

Post by singlewhip2030 »

Great website, long time watcher and have learned a lot. Wife and I are looking to downshift in careers, while working in some capacity in something we really enjoy (mostly for health benefits), we are looking and seeing if early retirement is in the cards or is too risky?

Here is our situation:

**Goal- Retire in 2 years at age 55/53 and live off a gross of $135k per year (20k of which we assume for healthcare costs if we DONT work).
**Child- 12 years old $529 value of $125k and likely would support most of college
**Current income is $205k but would obviously stop in 2 years worst case scenario

**Tax rate is 24% and 3% state

**Home- Value of $400k paid off
**No debt
Current annual spend is $125k but we think it would be realistic to trim $15k annually
Total portfolio of Vanguard indexes $3,250,000
Asset allocation of 67/23/10 cash
Expense ration .12
We would put another $25k into 401k per year for the next two years (possibly up to $50k)
Social Security- Tricky as we would be retiring with only 30 years each of contributions. Our current statement says we would have $2600 each at 67.

1) Can we do it or would it be too risky?
2) How would you tweak asset allocation if at all? Firecalc gives us a 100% success if we have a portfolio of about 70-75 % equities. I assume an actual social security payment of $1350/month at 62 and 3400/month combined at 67
3) our inputs assume a lifespan to 88 years of age.
Last edited by singlewhip2030 on Fri Sep 18, 2020 3:02 pm, edited 1 time in total.
Topic Author
singlewhip2030
Posts: 4
Joined: Fri Sep 18, 2020 1:38 pm

Re: Is retirement in 2 years possible?

Post by singlewhip2030 »

Bumped
MotoTrojan
Posts: 10650
Joined: Wed Feb 01, 2017 8:39 pm

Re: Is retirement in 2 years possible?

Post by MotoTrojan »

I personally would be nervous with that withdrawal rate this early, but if you can cut back here and there it seems like it would work.

Make sure you actually know what healthcare costs are too.
FoolMeOnce
Posts: 979
Joined: Mon Apr 24, 2017 11:16 am

Re: Is retirement in 2 years possible?

Post by FoolMeOnce »

That withdrawal rate drops significantly with SS. I think your olan looks good and you will be more than fine. The only thing that could derail it is a couple horrible years in the market between now and then, which may lead you to work a bit extra until there is a recovery.
jebmke
Posts: 11382
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Is retirement in 2 years possible?

Post by jebmke »

I assume that Firecalc assumes you will rebalance in a down market. How comfortable are you rebalancing to equity during a significant downturn while having no income? It can happen.
When you discover that you are riding a dead horse, the best strategy is to dismount.
User avatar
Sandi_k
Posts: 1464
Joined: Sat May 16, 2015 11:55 am
Location: SF Bay Area

Re: Is retirement in 2 years possible?

Post by Sandi_k »

Check out Healthcare.gov for an estimate of healthcare costs. IME, $20k is way under-estimated.

We have friends in KC who are spending $35k per YEAR in premiums, co-pays, and miscellaneous medical costs, ages 56 and 58. With no kids on the plan...
chassis
Posts: 59
Joined: Tue Mar 24, 2020 4:28 pm

Re: Is retirement in 2 years possible?

Post by chassis »

@singlewhip2030

On paper your logic looks OK.

Healthcare for two people aged 50 and a 12 yr old child are less than $20k/yr.

I can't see any holes in the logic, other than to ask yourself if you can manage a lifestyle at the expense level you wrote (slightly north of $100k/yr).
JBTX
Posts: 6947
Joined: Wed Jul 26, 2017 12:46 pm

Re: Is retirement in 2 years possible?

Post by JBTX »

Your social security seems low for that income.
LeftCoastIV
Posts: 202
Joined: Wed May 01, 2019 7:19 pm

Re: Is retirement in 2 years possible?

Post by LeftCoastIV »

I didn't see a mention of what % of assets are in tax-advantaged accounts vs. taxable. Are you saying you need $135K/year AFTER taxes? Your OP said a gross of $135K year, so I'm assuming you plan to live off $135K less capital gains tax, etc...
User avatar
gwe67
Posts: 343
Joined: Mon Dec 23, 2013 9:52 pm

Re: Is retirement in 2 years possible?

Post by gwe67 »

"The average retirement savings account for a person between the ages of 50-59 in 2019 was $174,100."

https://www.msn.com/en-us/money/persona ... r-BB172T9N

You have over $3 million and a paid-off house.

If you can't retire in two years, then nobody can.
Support this site with a purchase thru Amazon: | http://www.amazon.com/s/?search-alias=aps&tag=bogleheads.org-20&field-keywords=Bogleheads
Grt2bOutdoors
Posts: 23016
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Is retirement in 2 years possible?

Post by Grt2bOutdoors »

JBTX wrote: Fri Sep 18, 2020 4:58 pm Your social security seems low for that income.
Two variables affect it - 1) how many years of zeros as it takes into account the last 35 years of earnings and 2) that is their current income today, what we don’t know is what they’ve been earning over the last 25 years. So for instance, they were making $50k each for the first 10 years, then one gets a bump in salary to $90k while the other is at $75k before they gradually move up to a combined income of $125k.

I think they are underestimating the cost of healthcare- they have a young child and at their ages I’d say a lower withdrawal rate is preferred- 3-3.25 percent rather than the 3.85 percent. A few bad years could affect their outcomes.
Last edited by Grt2bOutdoors on Fri Sep 18, 2020 5:24 pm, edited 1 time in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
Posts: 23016
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Is retirement in 2 years possible?

Post by Grt2bOutdoors »

gwe67 wrote: Fri Sep 18, 2020 5:20 pm "The average retirement savings account for a person between the ages of 50-59 in 2019 was $174,100."

https://www.msn.com/en-us/money/persona ... r-BB172T9N

You have over $3 million and a paid-off house.

If you can't retire in two years, then nobody can.
It’s not a question of Can they? It’s a question of a sustainable withdrawal rate for a projected 30 year plus retirement give or take. Twenty five percent of spend will be on healthcare for years 1-10 of retirement. Bonds yield low, equities are richly valued. Seems tight at $125k.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
singlewhip2030
Posts: 4
Joined: Fri Sep 18, 2020 1:38 pm

Re: Is retirement in 2 years possible?

Post by singlewhip2030 »

Grt2bOutdoors wrote: Fri Sep 18, 2020 5:21 pm
JBTX wrote: Fri Sep 18, 2020 4:58 pm Your social security seems low for that income.
Two variables affect it - 1) how many years of zeros as it takes into account the last 35 years of earnings and 2) that is their current income today, what we don’t know is what they’ve been earning over the last 25 years. So for instance, they were making $50k each for the first 10 years, then one gets a bump in salary to $90k while the other is at $75k before they gradually move up to a combined income of $125k.

I think they are underestimating the cost of healthcare- they have a young child and at their ages I’d say a lower withdrawal rate is preferred- 3-3.25 percent rather than the 3.85 percent. A few bad years could affect their outcomes.
We will have 5 years of zeros for SS. Our current statement says at our current level of income we would be in good shape, but 5 years of zeros won’t help.
SchruteB&B
Posts: 360
Joined: Mon Jul 02, 2018 7:48 am

Re: Is retirement in 2 years possible?

Post by SchruteB&B »

singlewhip2030 wrote: Fri Sep 18, 2020 6:02 pm
Grt2bOutdoors wrote: Fri Sep 18, 2020 5:21 pm
JBTX wrote: Fri Sep 18, 2020 4:58 pm Your social security seems low for that income.
Two variables affect it - 1) how many years of zeros as it takes into account the last 35 years of earnings and 2) that is their current income today, what we don’t know is what they’ve been earning over the last 25 years. So for instance, they were making $50k each for the first 10 years, then one gets a bump in salary to $90k while the other is at $75k before they gradually move up to a combined income of $125k.

I think they are underestimating the cost of healthcare- they have a young child and at their ages I’d say a lower withdrawal rate is preferred- 3-3.25 percent rather than the 3.85 percent. A few bad years could affect their outcomes.
We will have 5 years of zeros for SS. Our current statement says at our current level of income we would be in good shape, but 5 years of zeros won’t help.
If you’re past the second bend point it won’t impact it too much:

Social Security calculates benefits using your average earnings over 35 years. If you work less than 35 years, the rest of the years will be filled with zero. Therefore, up to 35 years, the more years you work, the higher your average earnings. Retiring early, before you have 35 years of working history, means that your Social Security benefits will be lower.

However, it’s not a straight line. You get more credit for your earnings at the lower end than you do at the higher end. The points at which the crediting percentage changes are called bend points. There are two bend points. The first one is set low ($926/month in 2019). For most people, the second point is the more meaningful one ($5,583/month in 2019). After your average earnings over 35 years reaches the second bend point, for each dollar in additional average earnings, you get less than half as much in Social Security benefits as before (15% vs 32%). If you stop working after you reach the second bend point, even if your future earnings are zero, you are not losing much in Social Security benefits.



https://thefinancebuff.com/early-retire ... efits.html
toocold
Posts: 156
Joined: Sun Jul 23, 2017 9:17 am

Re: Is retirement in 2 years possible?

Post by toocold »

I think you'll be fine. In the worse case scenario, how difficult would it be to reduce your expenses? If you can get it down to 75k for couple of years, you'll are set. If you absolutely need to spend $125k, things may be tight for couple of years.
Wannaretireearly
Posts: 1095
Joined: Wed Mar 31, 2010 4:39 pm

Re: Is retirement in 2 years possible?

Post by Wannaretireearly »

gwe67 wrote: Fri Sep 18, 2020 5:20 pm "The average retirement savings account for a person between the ages of 50-59 in 2019 was $174,100."

https://www.msn.com/en-us/money/persona ... r-BB172T9N

You have over $3 million and a paid-off house.

If you can't retire in two years, then nobody can.
+1
Enjoy your retirement!
Buy Low, Sell High
KlangFool
Posts: 17624
Joined: Sat Oct 11, 2008 12:35 pm

Re: Is retirement in 2 years possible?

Post by KlangFool »

singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm
**Current income is $205k but would obviously stop in 2 years worst case scenario

**Home- Value of $400k paid off

**No debt
Current annual spend is $125k but we think it would be realistic to trim $15k annually

singlewhip2030,

You may want to re-verify your number. Your annual expense and annual income number do not add up. It is possible that it is accurate but it is unlikely. What is your annual saving?

<<but we think it would be realistic to trim $15k annually >>

I do not think so. The 15K may be eaten up by additional medical insurance costs.

KlangFool
livesoft
Posts: 73338
Joined: Thu Mar 01, 2007 8:00 pm

Re: Is retirement in 2 years possible?

Post by livesoft »

It seems that when you stop working is when your income tax rate will go to 0%. If not, why not?

Also, I am going to guess that your portfolio gained about million dollars since March 23. Is that right?
Wiki This signature message sponsored by sscritic: Learn to fish.
Hiker8
Posts: 20
Joined: Mon Sep 23, 2019 11:09 am

Re: Is retirement in 2 years possible?

Post by Hiker8 »

FireCalc says that its 100% probable, without SS, correct? Doesn't that answer your question about it being possible??

Your expenses are anticipated to be $100K+, which seems fairly high with a paid off house and no college costs to account for. What are you spending so much money on, aside from healthcare? Worst case scenario, it seems like you have a pretty large buffer to cut back on if needed.

Is it possible to retire? Yes. You're doing better than 90-95% of the population.

Are there risks? Sure. I don't think anybody here is going to be able to calm those anxieties you may have when retiring young.

Goodluck.
User avatar
Watty
Posts: 20645
Joined: Wed Oct 10, 2007 3:55 pm

Re: Is retirement in 2 years possible?

Post by Watty »

singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm **Goal- Retire in 2 years at age 55/53 ......

3) our inputs assume a lifespan to 88 years of age.
88 is too low, using the age of 95 is a pretty common target.
singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm Current annual spend is $125k but we think it would be realistic to trim $15k annually
Your spending will not be constant since it will be different at different stages of retirement.

I have seen relatives get to be in their mid 70s and naturally slow down even though they were in relatively good health. At that point there spending went way down since they did not want to travel much and even an evening out was a rare event. They were more interested in downsizing than buying new stuff.

They lived in a paid off house so there were often months when they did not spend their entire Social Security check.

Your spending could even go down when you need long term care if only one of you is surviving then.
singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm 1) Can we do it or would it be too risky?
2) How would you tweak asset allocation if at all? Firecalc gives us a 100% success if we have a portfolio of about 70-75 % equities.
One of the problems with Firecalc and most of the other retirement calculators is that they talk about success or failure. The reason that this is a problem is that "failure" does not mean that you spend according to plan until you are broke and homeless. For most people "failure" means something like when you are 75 you might have to cut your spending by 10 or 20 percent if your portfolio is doing a lot worse than planned for. That would hardly be a hardship since with a paid off house living on "just" $100K would still be pretty plush.

It would be good to figure out what your minimum budget would be for a more modest but still comfortable lifestyle if you had to once you are both getting Medicare. One you play around with that number you may feel better about your ability to make your retirement work.
Exchme
Posts: 26
Joined: Sun Sep 06, 2020 3:00 pm

Re: Is retirement in 2 years possible?

Post by Exchme »

Really review your spending, maybe some of those savings are applicable now? The extra savings will help firm up your plan and you can test whether they are painless enough to continue.

Our pre-retirement cuts have been painless so far:
Life insurance - $2K (if I'm not working I'm just another mouth to feed)
Charities - $2K (they can have a piece of my estate, but until then, I'm saving up)
Cell Phone plan -$0.6K, (just for the asking)
TV- $1.4K (getting rid of all the DVR's and DirecTV and going Youtube.tv)
Eliminate land line phone - $0.6K (had it for the old house alarm)
Upgrade alarm system - $0.6K (Went with Ring, cheaper and I love the camera)
Commuting costs - $3k (gas, maintenance, wear and tear)
DW doing my haircut- $0.6K (mostly COVID fears, but turns out she's good!)
BernardShakey
Posts: 155
Joined: Tue Jun 25, 2019 10:52 pm
Location: CA

Re: Is retirement in 2 years possible?

Post by BernardShakey »

Exchme wrote: Fri Sep 18, 2020 10:07 pm Really review your spending, maybe some of those savings are applicable now? The extra savings will help firm up your plan and you can test whether they are painless enough to continue.

Our pre-retirement cuts have been painless so far:
Life insurance - $2K (if I'm not working I'm just another mouth to feed)
Charities - $2K (they can have a piece of my estate, but until then, I'm saving up)
Cell Phone plan -$0.6K, (just for the asking)
TV- $1.4K (getting rid of all the DVR's and DirecTV and going Youtube.tv)
Eliminate land line phone - $0.6K (had it for the old house alarm)
Upgrade alarm system - $0.6K (Went with Ring, cheaper and I love the camera)
Commuting costs - $3k (gas, maintenance, wear and tear)
DW doing my haircut- $0.6K (mostly COVID fears, but turns out she's good!)
Wow, you went to a fancy barber :o
An important key to investing is having a well-calibrated sense of your future regret.
BernardShakey
Posts: 155
Joined: Tue Jun 25, 2019 10:52 pm
Location: CA

Re: Is retirement in 2 years possible?

Post by BernardShakey »

singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm Great website, long time watcher and have learned a lot. Wife and I are looking to downshift in careers, while working in some capacity in something we really enjoy (mostly for health benefits), we are looking and seeing if early retirement is in the cards or is too risky?

Here is our situation:

**Goal- Retire in 2 years at age 55/53 and live off a gross of $135k per year (20k of which we assume for healthcare costs if we DONT work).
**Child- 12 years old $529 value of $125k and likely would support most of college
**Current income is $205k but would obviously stop in 2 years worst case scenario

**Tax rate is 24% and 3% state

**Home- Value of $400k paid off
**No debt
Current annual spend is $125k but we think it would be realistic to trim $15k annually
Total portfolio of Vanguard indexes $3,250,000
Asset allocation of 67/23/10 cash
Expense ration .12
We would put another $25k into 401k per year for the next two years (possibly up to $50k)
Social Security- Tricky as we would be retiring with only 30 years each of contributions. Our current statement says we would have $2600 each at 67.

1) Can we do it or would it be too risky?
2) How would you tweak asset allocation if at all? Firecalc gives us a 100% success if we have a portfolio of about 70-75 % equities. I assume an actual social security payment of $1350/month at 62 and 3400/month combined at 67
3) our inputs assume a lifespan to 88 years of age.
At first glance it seems you could pull the trigger any time. However, your expenses seem kind of high for having a paid off house and college mostly funded. Couple that with uncertainty of health care costs and the fact that you probably have to plan for a 35-year retirement (not just 30), and it's not as clear cut. I think if you could research healthcare costs some more, and take another stab at your projected budget, you could make this work. Seems like a little more due diligence is in order. Congrats on that nest egg :sharebeer
An important key to investing is having a well-calibrated sense of your future regret.
snowox
Posts: 408
Joined: Wed Nov 08, 2017 9:17 am

Re: Is retirement in 2 years possible?

Post by snowox »

Wannaretireearly wrote: Fri Sep 18, 2020 8:50 pm
gwe67 wrote: Fri Sep 18, 2020 5:20 pm "The average retirement savings account for a person between the ages of 50-59 in 2019 was $174,100."

https://www.msn.com/en-us/money/persona ... r-BB172T9N

You have over $3 million and a paid-off house.

If you can't retire in two years, then nobody can.
+1
Enjoy your retirement!
+2 Be gone! 4% WR on 3 Mil is 120k... with no mortgage1? Heck I wouldn't even wait two years. If HC is a problem one of you work for now till you figure that out.
Freddobbs
Posts: 31
Joined: Sun Mar 03, 2019 1:25 pm

Re: Is retirement in 2 years possible?

Post by Freddobbs »

I tend to agree, but they spend a lot annually. I’m not judging, simply stating I wouldn’t be comfortable retiring with 35+ years left with that much spending and needing healthcare out of pocket for the next 12 years or so.
User avatar
wander
Posts: 3241
Joined: Sat Oct 04, 2008 9:10 am

Re: Is retirement in 2 years possible?

Post by wander »

The key is spending. $3M is large for a family who needs $60k annually but not so much for a family who operates with twice or 3 times that much. But most families operate much less than $125k, so it is possible if the OP is willing to adjust if needed.
User avatar
PoultryMan
Posts: 100
Joined: Fri Feb 02, 2018 3:12 pm

Re: Is retirement in 2 years possible?

Post by PoultryMan »

Agree it is all about spending.

Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Exchme
Posts: 26
Joined: Sun Sep 06, 2020 3:00 pm

Re: Is retirement in 2 years possible?

Post by Exchme »

BernardShakey wrote: Fri Sep 18, 2020 11:17 pm
Exchme wrote: Fri Sep 18, 2020 10:07 pm Really review your spending, maybe some of those savings are applicable now? The extra savings will help firm up your plan and you can test whether they are painless enough to continue.

Our pre-retirement cuts have been painless so far:
Life insurance - $2K (if I'm not working I'm just another mouth to feed)
Charities - $2K (they can have a piece of my estate, but until then, I'm saving up)
Cell Phone plan -$0.6K, (just for the asking)
TV- $1.4K (getting rid of all the DVR's and DirecTV and going Youtube.tv)
Eliminate land line phone - $0.6K (had it for the old house alarm)
Upgrade alarm system - $0.6K (Went with Ring, cheaper and I love the camera)
Commuting costs - $3k (gas, maintenance, wear and tear)
DW doing my haircut- $0.6K (mostly COVID fears, but turns out she's good!)
Wow, you went to a fancy barber :o
Not to distract from the thread, but there is a funny hair story there. I kept going to more and more expensive places to get my hair cut as it kept sticking out oddly in certain spots. Once COVID hit and I asked DW to do it (she's never cut hair before), she put her comb through it and said, "you are parting it wrong and cutting it too short". She was right and it now looks better, but no barber ever told me that and she hadn't either - we've only been married 39 years, so I can see why she never noticed.

Anyway, I would be a bit nervous retiring in the OP's situation until the nest egg was bigger or the expenses lowered.
NancyABQ
Posts: 299
Joined: Thu Aug 18, 2016 3:37 pm

Re: Is retirement in 2 years possible?

Post by NancyABQ »

I have a similar size portfolio with a couple important differences:

1) I am a few years older (58 now) (so shorter withdrawal period, shorter time to pension/SS)
2) My SS is a bit more -- close to the max (but only for 1 person). This year I will replace a low earning (10% of max) year with a close to max year.
3) I have a pension at 65 for ~$30K/yr (no COLA)
4) Just one of me, so Healthcare will be less expensive. I budget ~$20K.
5) I am thinking my budget would be around $90K, and a lot of it is discretionary.

I am completely comfortable that I could retire now -- still working part time, but knowing that I could quite any time I want.

Anyway, I think most of the parameters I mention above are tighter for the OP, so I feel their retirement plan is more risky than mine, but probably still doable. Expenses and healthcare are the wildcards, as others have mentioned.
seratoninman
Posts: 2
Joined: Thu Aug 20, 2020 10:00 am

Re: Is retirement in 2 years possible?

Post by seratoninman »

Yes. But spending and asset allocation are huge. My advice would be to understand there will be a year or two where you may need to really cut back.

You will also need a decent portion of equities to provide long term growth. 40 years is a long time.
mdd
Posts: 6
Joined: Sat Jul 25, 2020 4:54 pm

Re: Is retirement in 2 years possible?

Post by mdd »

Our scenario is similar to yours currently $3M investments and no debt. Current expenses plus $25k health ins till 65 are $134k/yr. this includes 20% tax rate. Based on this, I estimate our min portfolio number required (25X expenses) at $3.36M (which we hit back in Aug :-). Max (35X expenses) is $4.7M.

Like you, firecalc reports that we’ll be fine to retire in as little as 2-3 years. I believe the math but something still bothers me. Part being the unknown with future healthcare cost as others have pointed out.

In reality for us we are targeting 55 YO minimum since most of our retirement is in defined contribution plans and this age makes access easier. Plus we may buy another house in the meantime which would impact savings.

My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately. That said, in another 7 years we should have plenty of buffer to reduce the anxiety.
User avatar
Watty
Posts: 20645
Joined: Wed Oct 10, 2007 3:55 pm

Re: Is retirement in 2 years possible?

Post by Watty »

mdd wrote: Sun Sep 20, 2020 8:20 am My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately.
You also need to watch out about being too careful. If you delay your retirement until you are 60 then you might not actually live that long or you could be having health problems by then.

When I was going through my 50s I saw a lot more people than I would have expected have major health problems, die, or lose a spouse in their 50s. There was one year in my 50s when I went to three funerals of people that were about my age. They were not real close to me but it does get you thinking when you start seeing acquaintances and coworkers dying before they retired.

I have also seen people get to be about 70 and have to naturally slow down even if they are otherwise in good health. I hope to have an active healthy retirement long beyond that but in a lot of ways the time before you are about 70 are the best retirement years. You only have a very limited number of those "good years" so you need to be careful about missing out on them by working too long.

I retired a bit over 5 years ago when I was almost 59. I only had a fraction of what the OP has, but my spending was also a lot lower.

The great thing was that gave us 4.5 years when we did a lot of traveling and local activities before the pandemic hit and we had to go into self isolation mode.

My "play it safe" plan was to wait until I turned 63.5 so that 18 months of COBRA could have been used until I could have started Medicare. That would have meant that I would have retired about the time when the pandemic started and we would have missed out on being able to spend those years traveling.

For the OP the financial "worst case scenario" is really not all that bad so I would be real careful about being too careful.
PoultryMan wrote: Sat Sep 19, 2020 11:54 am Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Even if their healthcare cost is double what they are budgeting for the OP could afford it until they can get on Medicare. They will be be 55 and 53 then so that would only be for 10 and 12 years. The critical thing is that there is something that is available even if it is expensive.

It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.

The OPs situation is not like some of the posts where people who are 40 are trying to figure out how to pay for healthcare for the next 25 years so they can retire very early.
msj16
Posts: 286
Joined: Tue Oct 19, 2010 1:16 am

Re: Is retirement in 2 years possible?

Post by msj16 »

Watty wrote: Sun Sep 20, 2020 10:49 am It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.
Without being political, I would just say that on a factual basis, the ACA is coming up for review by the Supreme Court in the beginning of 2021. There is now uncertainty as to this issue for retirees and of course all of us who have preexisting conditions and need to get insurance in the marketplace.
User avatar
Nestegg_User
Posts: 1546
Joined: Wed Aug 05, 2009 1:26 pm

Re: Is retirement in 2 years possible?

Post by Nestegg_User »

singlewhip2030 wrote: Fri Sep 18, 2020 1:49 pm Great website, long time watcher and have learned a lot. Wife and I are looking to downshift in careers, while working in some capacity in something we really enjoy (mostly for health benefits), we are looking and seeing if early retirement is in the cards or is too risky?

Here is our situation:

**Goal- Retire in 2 years at age 55/53 and live off a gross of $135k per year (20k of which we assume for healthcare costs if we DONT work).
**Child- 12 years old $529 value of $125k and likely would support most of college
**Current income is $205k but would obviously stop in 2 years worst case scenario

**Tax rate is 24% and 3% state

**Home- Value of $400k paid off
**No debt
Current annual spend is $125k but we think it would be realistic to trim $15k annually
Total portfolio of Vanguard indexes $3,250,000
Asset allocation of 67/23/10 cash
Expense ration .12
We would put another $25k into 401k per year for the next two years (possibly up to $50k)
Social Security- Tricky as we would be retiring with only 30 years each of contributions. Our current statement says we would have $2600 each at 67.

1) Can we do it or would it be too risky?
2) How would you tweak asset allocation if at all? Firecalc gives us a 100% success if we have a portfolio of about 70-75 % equities. I assume an actual social security payment of $1350/month at 62 and 3400/month combined at 67
3) our inputs assume a lifespan to 88 years of age.

my "random response":

(first, you should enter your income numbers into the SS anypia to get a better handle on your SS benefits... as others noted above you are likely above the second bend point so extra years don't have that much effect)

I'd also agree that you need a better handle on your "basic" expenses (true needs like home insurance, property taxes, vehicle taxes, health insurance (direct costs and deductibles, general food costs (at home, not restaurants)). You need a good idea how much of your "budget" is discretionary and therefore how much flexibility you would have in your numbers. I also think that a 60/40 allocation is probably appropriate or even dropping to 50/50 until starting SS as SOR is definitely a real concern.

I suspect that you might actually have a slightly higher joint SS, based on current income, but again... run the numbers on the SS site. It seems, based on state tax rate, that you're probably in PA... so you might want to see if any costs drop off (reduced school taxes after 62 or 65?, property tax stabilization after 65?, etc) to see if there's extra flexibility in somewhat later retirement.

I would say that you would likely have no difficulty with your plan; I would segregate a portion of your nest egg (equivalent to N years of SS expected payout (again as calculated above, including the existing cuts that are noted by SS in 2034) and then use 3.5% of the residual value (and add in the one year of SS expected payout) as a reasonable upper income... with an expected retirement of greater than thirty years.

[ for reference, we're just shy of three large but have a pension and I'm already deferring start of SS (earlier sixties), also have a paid off house and no debt... and we haven't even hit $100 k in any year of retirement (even with HVAC and vehicle replacement (just shy that year). So I don't know what other expenses are driving your income requirements; your fed taxes should drop into the 12% bracket (or lower, depending upon how you structure your portfolio/taxable accounts) even after loosing the "extra deduction" in college years.]
mdd
Posts: 6
Joined: Sat Jul 25, 2020 4:54 pm

Re: Is retirement in 2 years possible?

Post by mdd »

Watty wrote: Sun Sep 20, 2020 10:49 am
mdd wrote: Sun Sep 20, 2020 8:20 am My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately.
You also need to watch out about being too careful. If you delay your retirement until you are 60 then you might not actually live that long or you could be having health problems by then.

When I was going through my 50s I saw a lot more people than I would have expected have major health problems, die, or lose a spouse in their 50s. There was one year in my 50s when I went to three funerals of people that were about my age. They were not real close to me but it does get you thinking when you start seeing acquaintances and coworkers dying before they retired.

I have also seen people get to be about 70 and have to naturally slow down even if they are otherwise in good health. I hope to have an active healthy retirement long beyond that but in a lot of ways the time before you are about 70 are the best retirement years. You only have a very limited number of those "good years" so you need to be careful about missing out on them by working too long.

I retired a bit over 5 years ago when I was almost 59. I only had a fraction of what the OP has, but my spending was also a lot lower.

The great thing was that gave us 4.5 years when we did a lot of traveling and local activities before the pandemic hit and we had to go into self isolation mode.

My "play it safe" plan was to wait until I turned 63.5 so that 18 months of COBRA could have been used until I could have started Medicare. That would have meant that I would have retired about the time when the pandemic started and we would have missed out on being able to spend those years traveling.

For the OP the financial "worst case scenario" is really not all that bad so I would be real careful about being too careful.
PoultryMan wrote: Sat Sep 19, 2020 11:54 am Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Even if their healthcare cost is double what they are budgeting for the OP could afford it until they can get on Medicare. They will be be 55 and 53 then so that would only be for 10 and 12 years. The critical thing is that there is something that is available even if it is expensive.

It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.

The OPs situation is not like some of the posts where people who are 40 are trying to figure out how to pay for healthcare for the next 25 years so they can retire very early.
Agreed about being too careful. We are trying to loosen up and spend some more money now but it is still weird and that makes it a little difficult. In addition take more vacation/time to do some things we want to. My analysis shows that we can coast on what we have saved and reach our retirement goal by 57. Our goal right now is live a little more and target 55 by continuing savings. In reality if our jobs aren’t too stressful (I don’t think so) we’ll probably stay working till 59.5 provided health stays good and there is no other reason to stop.
Montgomery
Posts: 35
Joined: Sun Nov 17, 2019 1:11 pm

Re: Is retirement in 2 years possible?

Post by Montgomery »

I would love to hear from those who were in a similar financial position pre 2008 and hear how they were able to 1) trim spending and 2) recover assets.

If the 15 year or greater equity returns have always been pretty good, recovering from any short term drops, I wonder how important it would actually be to reduce spending in down times, if at all.
Wannaretireearly
Posts: 1095
Joined: Wed Mar 31, 2010 4:39 pm

Re: Is retirement in 2 years possible?

Post by Wannaretireearly »

Watty wrote: Sun Sep 20, 2020 10:49 am
mdd wrote: Sun Sep 20, 2020 8:20 am My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately.
You also need to watch out about being too careful. If you delay your retirement until you are 60 then you might not actually live that long or you could be having health problems by then.

When I was going through my 50s I saw a lot more people than I would have expected have major health problems, die, or lose a spouse in their 50s. There was one year in my 50s when I went to three funerals of people that were about my age. They were not real close to me but it does get you thinking when you start seeing acquaintances and coworkers dying before they retired.

I have also seen people get to be about 70 and have to naturally slow down even if they are otherwise in good health. I hope to have an active healthy retirement long beyond that but in a lot of ways the time before you are about 70 are the best retirement years. You only have a very limited number of those "good years" so you need to be careful about missing out on them by working too long.

I retired a bit over 5 years ago when I was almost 59. I only had a fraction of what the OP has, but my spending was also a lot lower.

The great thing was that gave us 4.5 years when we did a lot of traveling and local activities before the pandemic hit and we had to go into self isolation mode.

My "play it safe" plan was to wait until I turned 63.5 so that 18 months of COBRA could have been used until I could have started Medicare. That would have meant that I would have retired about the time when the pandemic started and we would have missed out on being able to spend those years traveling.

For the OP the financial "worst case scenario" is really not all that bad so I would be real careful about being too careful.
PoultryMan wrote: Sat Sep 19, 2020 11:54 am Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Even if their healthcare cost is double what they are budgeting for the OP could afford it until they can get on Medicare. They will be be 55 and 53 then so that would only be for 10 and 12 years. The critical thing is that there is something that is available even if it is expensive.

It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.

The OPs situation is not like some of the posts where people who are 40 are trying to figure out how to pay for healthcare for the next 25 years so they can retire very early.
Great post, Watty
Buy Low, Sell High
Turkishcoffee
Posts: 47
Joined: Sat May 25, 2019 5:16 pm

Re: Is retirement in 2 years possible?

Post by Turkishcoffee »

Wannaretireearly wrote: Sun Sep 20, 2020 5:52 pm
Watty wrote: Sun Sep 20, 2020 10:49 am
mdd wrote: Sun Sep 20, 2020 8:20 am My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately.
You also need to watch out about being too careful. If you delay your retirement until you are 60 then you might not actually live that long or you could be having health problems by then.

When I was going through my 50s I saw a lot more people than I would have expected have major health problems, die, or lose a spouse in their 50s. There was one year in my 50s when I went to three funerals of people that were about my age. They were not real close to me but it does get you thinking when you start seeing acquaintances and coworkers dying before they retired.

I have also seen people get to be about 70 and have to naturally slow down even if they are otherwise in good health. I hope to have an active healthy retirement long beyond that but in a lot of ways the time before you are about 70 are the best retirement years. You only have a very limited number of those "good years" so you need to be careful about missing out on them by working too long.

I retired a bit over 5 years ago when I was almost 59. I only had a fraction of what the OP has, but my spending was also a lot lower.

The great thing was that gave us 4.5 years when we did a lot of traveling and local activities before the pandemic hit and we had to go into self isolation mode.

My "play it safe" plan was to wait until I turned 63.5 so that 18 months of COBRA could have been used until I could have started Medicare. That would have meant that I would have retired about the time when the pandemic started and we would have missed out on being able to spend those years traveling.

For the OP the financial "worst case scenario" is really not all that bad so I would be real careful about being too careful.
PoultryMan wrote: Sat Sep 19, 2020 11:54 am Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Even if their healthcare cost is double what they are budgeting for the OP could afford it until they can get on Medicare. They will be be 55 and 53 then so that would only be for 10 and 12 years. The critical thing is that there is something that is available even if it is expensive.

It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.

The OPs situation is not like some of the posts where people who are 40 are trying to figure out how to pay for healthcare for the next 25 years so they can retire very early.
Great post, Watty
Agreed, great post Watty. If healthcare is the biggest wildcard I just dont see a situation where one couldnt find some job with flexibility and healthcare, even if the pay was low.
am
Posts: 3524
Joined: Sun Sep 30, 2007 9:55 am

Re: Is retirement in 2 years possible?

Post by am »

Turkishcoffee wrote: Mon Sep 21, 2020 7:58 am
Wannaretireearly wrote: Sun Sep 20, 2020 5:52 pm
Watty wrote: Sun Sep 20, 2020 10:49 am
mdd wrote: Sun Sep 20, 2020 8:20 am My take away is the if we had to and were careful (I.e. reduce expenses significantly if needed) we could probably mathematically retire in the next two years; maybe even immediately.
You also need to watch out about being too careful. If you delay your retirement until you are 60 then you might not actually live that long or you could be having health problems by then.

When I was going through my 50s I saw a lot more people than I would have expected have major health problems, die, or lose a spouse in their 50s. There was one year in my 50s when I went to three funerals of people that were about my age. They were not real close to me but it does get you thinking when you start seeing acquaintances and coworkers dying before they retired.

I have also seen people get to be about 70 and have to naturally slow down even if they are otherwise in good health. I hope to have an active healthy retirement long beyond that but in a lot of ways the time before you are about 70 are the best retirement years. You only have a very limited number of those "good years" so you need to be careful about missing out on them by working too long.

I retired a bit over 5 years ago when I was almost 59. I only had a fraction of what the OP has, but my spending was also a lot lower.

The great thing was that gave us 4.5 years when we did a lot of traveling and local activities before the pandemic hit and we had to go into self isolation mode.

My "play it safe" plan was to wait until I turned 63.5 so that 18 months of COBRA could have been used until I could have started Medicare. That would have meant that I would have retired about the time when the pandemic started and we would have missed out on being able to spend those years traveling.

For the OP the financial "worst case scenario" is really not all that bad so I would be real careful about being too careful.
PoultryMan wrote: Sat Sep 19, 2020 11:54 am Health care is the wild card, I believe for all of us wanting to retire early without a health care or pension guarantee.

It could be $20k per year, it could be more but it likely won’t be less
Even if their healthcare cost is double what they are budgeting for the OP could afford it until they can get on Medicare. They will be be 55 and 53 then so that would only be for 10 and 12 years. The critical thing is that there is something that is available even if it is expensive.

It was common before the ACA for people in their 50s and 60s to not have any credible healthcare available at any price but I have a hard time seeing a situation where we would go back to that.

The OPs situation is not like some of the posts where people who are 40 are trying to figure out how to pay for healthcare for the next 25 years so they can retire very early.
Great post, Watty
Agreed, great post Watty. If healthcare is the biggest wildcard I just dont see a situation where one couldnt find some job with flexibility and healthcare, even if the pay was low.
Are there any low paying non competitive jobs that have real good health care coverage? I dont know, something like Home Depot, costco etc?
User avatar
Watty
Posts: 20645
Joined: Wed Oct 10, 2007 3:55 pm

Re: Is retirement in 2 years possible?

Post by Watty »

am wrote: Mon Sep 21, 2020 3:09 pm Are there any low paying non competitive jobs that have real good health care coverage? I dont know, something like Home Depot, costco etc?
It was before the ACA but I know two people that were laid off from IT jobs in their 50s who worked as school bus drivers and they got the same health care coverage as all the other workers in the school district but I don't know any of the details about what it cost them. They also got summers and school holidays off to it worked out really well from them as a bridge job to retirement since they financially OK but they just needed health insurance. At least around here, in normal times, they are always looking for school bus drivers since it does not pay enough for someone that needs a full time job. You would also have drug test and background checks would would also eliminate a lot of potential job applicants which makes it harder to fill those positions.

I also know someone who had a spouse that had a consulting company which had an upper middle class income. She worked in a school cafeteria mainly just to get the benefits which would have been significant since they had three kids. That job was a lot harder to get though since it was ideal for someone who was otherwise a stay at home parent.

Another strategy is to do serial COBRA. I know someone that had some health issues so he was real concerned about what would happen with the ACA. He was retired and had used COBRA then ACA but then he found a job and went back to work for a while so that he could get on the employer health insurance then he quit as soon as he turned 63.5 years old. That way 18 months of COBRA would cover him until he could get on Medicare.
Bfwolf
Posts: 2050
Joined: Thu Oct 14, 2010 11:19 am

Re: Is retirement in 2 years possible?

Post by Bfwolf »

If the OP limits how much they withdraw from their pre-tax accounts in early retirement, they can also take advantage of ACA subsidies to reduce their health care costs.

I have difficulty imagining they don't have enough to retire. Human beings are very adaptable and in a bad case scenario, I'm sure they will find ways to trim their expenses a bit. It's not worth working several more years just to avoid the possibility of a reasonable expense haircut in a relatively unlikely scenario.
visualguy
Posts: 2079
Joined: Thu Jan 30, 2014 1:32 am

Re: Is retirement in 2 years possible?

Post by visualguy »

Bfwolf wrote: Mon Sep 21, 2020 4:09 pm It's not worth working several more years just to avoid the possibility of a reasonable expense haircut in a relatively unlikely scenario.
That really depends on your job and how demanding/annoying it is, and also on how painful the potential expense haircut might be. For example, if this haircut would require you to move, it might be very disruptive to the life you planned or envisioned.
JHU ALmuni
Posts: 210
Joined: Tue Jan 20, 2015 12:40 pm

Re: Is retirement in 2 years possible?

Post by JHU ALmuni »

Most retired people don't have half what you have, you should be good to retire. Just keep expenses down.
Bfwolf
Posts: 2050
Joined: Thu Oct 14, 2010 11:19 am

Re: Is retirement in 2 years possible?

Post by Bfwolf »

visualguy wrote: Mon Sep 21, 2020 4:16 pm
Bfwolf wrote: Mon Sep 21, 2020 4:09 pm It's not worth working several more years just to avoid the possibility of a reasonable expense haircut in a relatively unlikely scenario.
That really depends on your job and how demanding/annoying it is, and also on how painful the potential expense haircut might be. For example, if this haircut would require you to move, it might be very disruptive to the life you planned or envisioned.
OP has already stated they believe they can realistically trim $15K of expenses off. It's very unlikely they'd have to trim more than that.
Post Reply