Can I retire at 50?

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Topic Author
One Day Closer
Posts: 3
Joined: Mon Apr 27, 2020 11:03 am

Can I retire at 50?

Post by One Day Closer »

Emergency Funds: 38,000 in Vanguard Prime Money Market fund
Debt: Mortgage 380,000 with 2.875% rate, just refinanced.
Tax Filing Status: Married file separately.
Tax Rate: 24% Federal, 9.3% State (California)
Age: 46, wife 43.
Desired Asset Allocation: 70% stocks / 30% Bonds, no international holdings.
Current portfolio: Roth IRA: Vanguard Total Stock Market Index Fund (280,000) as last week, Def Comp from work (720,000), Non-Retirement Account: Vanguard S&P 500 index fund 500,000, California Tax Exempt Intermediate term bond fund (80,000), California Tax Exempt Long Term bond fund (104,000), and individual stocks with TD Ameritrade with holdings in B of A, Wells Fargo, Citi Bank, Exxon Mobil totaling about (110,000). For her: Roth IRA: Vanguard Total Stock Index Fund (220,000) Def Comp from work (230,000). Non-Retirement Accounts: Vanguard S & P 500 Index Fund (150,000), Vanguard Tax-Exempt Long-Term Bond Fund (106,000).
Contributions:
Me: Max to Roth IRA & Def Comp, S & P 500 (350 per week), both bond funds (100 per week per fund). If I have extra money, I will try to buy more individual stocks for dividends.
Her: Max to Roth IRA & Def Comp, S & P 500 (300 per week), Bond fund (150 per week).
Questions:
1, If I want to retire at 50, can I do it? What kind of portfolio will work? Work will give me a pension about 36,000 a year & with medical benefits. I do plan to pay off mortgage before 50. Rental income will probably be around 3400 per month. However, my son will start college in around three years. Daughter is 9 now. I am a disabled Veteran and my kids should get free tuition for college in California. Wife will continue to work until she is 50 with income around 65,000 a year.
2, If I do retire at 50, what are some of the things I need to pay attention to.
Any ideas would be greatly appreciated. Thanks.
Outer Marker
Posts: 942
Joined: Sun Mar 08, 2009 8:01 am

Re: Can I retire at 50?

Post by Outer Marker »

That looks very lean for such an early retirement. Its not easy to see your portfolio total in paragraph style format, but eyeballing it looks to be a little north of 2M. To retire at 50, I would want to see a paid off mortgage and enough in assets to fully fund all my expenses, including heath care and taxes, while withdrawing no more than 3% of my portfolio.
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marti038
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Location: Birmingham, AL

Re: Can I retire at 50?

Post by marti038 »

Some questions that come to mind...

1) I don't think you indicated what your annual expenses are and if you've accounted for healthcare (is this covered by your disabled veteran status)?

2) I'm in the southeast, but California seems like an expensive place to retire. What is the state tax situation like on income you receive post-retirement? (rents, pensions, etc.)

3) Do you not like what you do for work or would you just rather be doing something else? I hope you live well past 50 and worry that an early retirement could produce copious amounts of boredom.

Your contribution rates ($900/week if I've read your post correctly) are stellar, but you'll only get 4 years of growth on this before you turn 50. The pension and rental income are great too, but will it be enough to get you through such a long retirement as you draw down your other balances? Personally, with a mortgage and kids in college I'd want a little more breathing room, but this is my preference and yours may be different.
bloom2708
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Location: Fargo, ND

Re: Can I retire at 50?

Post by bloom2708 »

Going to one salary is different from retiring.

What is your spending? How much does your wife make? Will her salary cover a good chunk of annual spend?

Also think about unintended animosity if you "retire" and she keeps working.

I am 49. My wife was burnt out and she has been "stay at home" for 3 years. It is working well with 3 kids.

We had no mortgage and good savings.

I think you can go to one salary. I like to frame "retiring" as when we are both no longer working. Makes it easier for me to keep slogging away.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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22twain
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Re: Can I retire at 50?

Post by 22twain »

Income and assets represent only half of the "retirement equation." The other half is expenses, which are just as important. No one here can tell you what your expenses are likely to be. Even just on this forum, people have different lifestyles, circumstances and expectations. It doesn't make sense for any of them to try to compare their expenses to your future income and assets, to try to predict your chances of success.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
heyyou
Posts: 3796
Joined: Tue Feb 20, 2007 4:58 pm

Re: Can I retire at 50?

Post by heyyou »

Prospective retirees usually have clearly seen low expenses with kids out of the house, often through college, and paid off mortgages with the option to move to a lower cost area if necessary, which includes the harvesting of the profit from the sale of the family-sized home in a higher cost area. Yes, you have significant assets, but you also have the liabilities of college costs and staying in your higher cost location for another decade, plus 40 years of retirement that starts early.

Your potential future liabilities may not match with your desire to end additional income, so can you find easier, more pleasant, less remunerative work for a decade? Can you step down a notch at your work? Would your wife like to spend more time with your young daughter now, then work when the daughter is older?

Your investments are at a peak based on the high valuations of the FAANG businesses, not the entire economy doing well. Your bank stocks have the prospect of future problems from unpaid credit card debt that is just now occurring. Yes, you might retire today and survive, but you will likely regret it some of the time, if some of what you are juggling doesn't continue to stay airborne. The standard 4% rule for retirees is based on those aged 65.

I'm using the RMD spending method that applies the IRS's Required Minimum Distribution percentages to the entire portfolio value, as a suggestion for an age based annual spending amount. That shows 34.2 as the divisor for your age 50, so 1/34.2 is 2.9%. Is 2.9% of your current investment assets (not including the residence) a reasonable income for your family where you live now, considering your future health care costs for you (low at VA) and for one or two kids for a dozen more years, and for your spouse? The withdrawal % rises over time, but very slowly, reaching 4% near age 74. (IIRC)

You stated that you would pay off the mortgage, so deduct that amount from your savings calculations if you are want to retire now, instead of paying it off from your future work income. Consider working until the mortgage is paid off as reducing your future retirement expenses. That is a motivator to save more, which is also an experiment for you to live on less income, effectively practicing at living on your proposed retirement income. Yes, try living on an amount equal to 3% of your financial assets for a few years, to see if that spending level suits you and your family. I worked until my pension grew to equal our spending which was simple to see after each year, as it was our gross income minus our taxes, and minus our savings for that year, not precise but close enough.
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geerhardusvos
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Re: Can I retire at 50?

Post by geerhardusvos »

One Day Closer wrote: Fri Oct 16, 2020 9:32 am Emergency Funds: 38,000 in Vanguard Prime Money Market fund
Debt: Mortgage 380,000 with 2.875% rate, just refinanced.
Tax Filing Status: Married file separately.
Tax Rate: 24% Federal, 9.3% State (California)
Age: 46, wife 43.
Desired Asset Allocation: 70% stocks / 30% Bonds, no international holdings.
Current portfolio: Roth IRA: Vanguard Total Stock Market Index Fund (280,000) as last week, Def Comp from work (720,000), Non-Retirement Account: Vanguard S&P 500 index fund 500,000, California Tax Exempt Intermediate term bond fund (80,000), California Tax Exempt Long Term bond fund (104,000), and individual stocks with TD Ameritrade with holdings in B of A, Wells Fargo, Citi Bank, Exxon Mobil totaling about (110,000). For her: Roth IRA: Vanguard Total Stock Index Fund (220,000) Def Comp from work (230,000). Non-Retirement Accounts: Vanguard S & P 500 Index Fund (150,000), Vanguard Tax-Exempt Long-Term Bond Fund (106,000).
Contributions:
Me: Max to Roth IRA & Def Comp, S & P 500 (350 per week), both bond funds (100 per week per fund). If I have extra money, I will try to buy more individual stocks for dividends.
Her: Max to Roth IRA & Def Comp, S & P 500 (300 per week), Bond fund (150 per week).
Questions:
1, If I want to retire at 50, can I do it? What kind of portfolio will work? Work will give me a pension about 36,000 a year & with medical benefits. I do plan to pay off mortgage before 50. Rental income will probably be around 3400 per month. However, my son will start college in around three years. Daughter is 9 now. I am a disabled Veteran and my kids should get free tuition for college in California. Wife will continue to work until she is 50 with income around 65,000 a year.
2, If I do retire at 50, what are some of the things I need to pay attention to.
Any ideas would be greatly appreciated. Thanks.
You should be totally fine. Totally dependent on how much you spend though.

How much do you spend per year? California isn’t cheap...

If you can draw no more than 4% from your portfolio each year, then you will be totally fine given your other income, and if you have flexibility on how much you spend.
VTSAX and chill
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Watty
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Re: Can I retire at 50?

Post by Watty »

One Day Closer wrote: Fri Oct 16, 2020 9:32 am Current portfolio: Roth IRA: Vanguard Total Stock Market Index Fund (280,000) as last week, Def Comp from work (720,000), Non-Retirement Account: Vanguard S&P 500 index fund 500,000, California Tax Exempt Intermediate term bond fund (80,000), California Tax Exempt Long Term bond fund (104,000), and individual stocks with TD Ameritrade with holdings in B of A, Wells Fargo, Citi Bank, Exxon Mobil totaling about (110,000). For her: Roth IRA: Vanguard Total Stock Index Fund (220,000) Def Comp from work (230,000). Non-Retirement Accounts: Vanguard S & P 500 Index Fund (150,000), Vanguard Tax-Exempt Long-Term Bond Fund (106,000).
What does that add up to?
One Day Closer wrote: Fri Oct 16, 2020 9:32 am I am a disabled Veteran ......
I might have missed it but do you get a disability payment? If so how much? Will it continue beyond the age of 65?
One Day Closer wrote: Fri Oct 16, 2020 9:32 am 2, If I do retire at 50, what are some of the things I need to pay attention to.
......
Tax Filing Status: Married file separately.
I would assume that you filing separately is because you get some tax advantages by doing this and you are not in the process of splitting up. It would be good to do dummy tax returns to see what your taxes will look like if you stop working but your wife keeps working. Your tax situation will look a lot different.

Your Social Security is calculated on your highest 35 years of inflation adjusted earnings. If either of you stops working at 50 then you will have some zeros years in those 35 years. When you look at estimates of what Social Security benefit be sure to change the defaults to indicate that you would stop working at 50, otherwise it assumes that you would work until you are 65(ish). You might want to consider cutting back to part time or seasonal work when you reach 50 for a few years just to fill in the zero years, even if the amount is low. That would help your Social Security calculations and having some income would also help limit your withdrawals. If you have some income then you could also make IRA contributions.
chassis
Posts: 60
Joined: Tue Mar 24, 2020 4:28 pm

Re: Can I retire at 50?

Post by chassis »

One Day Closer wrote: Fri Oct 16, 2020 9:32 am Emergency Funds: 38,000 in Vanguard Prime Money Market fund
Debt: Mortgage 380,000 with 2.875% rate, just refinanced.
Tax Filing Status: Married file separately.
Tax Rate: 24% Federal, 9.3% State (California)
Age: 46, wife 43.
Desired Asset Allocation: 70% stocks / 30% Bonds, no international holdings.
Current portfolio: Roth IRA: Vanguard Total Stock Market Index Fund (280,000) as last week, Def Comp from work (720,000), Non-Retirement Account: Vanguard S&P 500 index fund 500,000, California Tax Exempt Intermediate term bond fund (80,000), California Tax Exempt Long Term bond fund (104,000), and individual stocks with TD Ameritrade with holdings in B of A, Wells Fargo, Citi Bank, Exxon Mobil totaling about (110,000). For her: Roth IRA: Vanguard Total Stock Index Fund (220,000) Def Comp from work (230,000). Non-Retirement Accounts: Vanguard S & P 500 Index Fund (150,000), Vanguard Tax-Exempt Long-Term Bond Fund (106,000).
Contributions:
Me: Max to Roth IRA & Def Comp, S & P 500 (350 per week), both bond funds (100 per week per fund). If I have extra money, I will try to buy more individual stocks for dividends.
Her: Max to Roth IRA & Def Comp, S & P 500 (300 per week), Bond fund (150 per week).
Questions:
1, If I want to retire at 50, can I do it? What kind of portfolio will work? Work will give me a pension about 36,000 a year & with medical benefits. I do plan to pay off mortgage before 50. Rental income will probably be around 3400 per month. However, my son will start college in around three years. Daughter is 9 now. I am a disabled Veteran and my kids should get free tuition for college in California. Wife will continue to work until she is 50 with income around 65,000 a year.
2, If I do retire at 50, what are some of the things I need to pay attention to.
Any ideas would be greatly appreciated. Thanks.
@One Day Closer

What is your total net worth today?
What are your monthly living expenses today?

With a $380k mortgage and dependent children, it seems questionable to me that you can retire early. Is there a reason you are considering retiring? Difficult to deal with boss? Unenjoyable work? There are alternatives to these challenges, other than retiring.
Outer Marker
Posts: 942
Joined: Sun Mar 08, 2009 8:01 am

Re: Can I retire at 50?

Post by Outer Marker »

One Day Closer wrote: Fri Oct 16, 2020 9:32 am
... If I have extra money, I will try to buy more individual stocks for dividends.

... If I want to retire at 50, can I do it? What kind of portfolio will work? Work will give me a pension about 36,000 a year & with medical benefits. I do plan to pay off mortgage before 50. Rental income will probably be around 3400 per month. However, my son will start college in around three years. Daughter is 9 now. I am a disabled Veteran and my kids should get free tuition for college in California. Wife will continue to work until she is 50 with income around 65,000 a year.

... If I do retire at 50, what are some of the things I need to pay attention to.
On second read, you're probably closer than I initially thought. The Pension, Medical, and Tuition benefits are significant. Does the medical cover your spouse and kids as well?

I would focus most on paying off the mortgage vs. buying individual stocks for dividends.

What is the source of the new $3,400 stream of rental income, and what is the overhead to generate it?

As many other has noted, expenses are key. What is your monthly spending?
Topic Author
One Day Closer
Posts: 3
Joined: Mon Apr 27, 2020 11:03 am

Re: Can I retire at 50?

Post by One Day Closer »

Thanks for everyone's reply and I am new here & don't know how to reply to each person.

My original plan was to to do it at age 55. That way I will be closer to 60 & the pension gets a little bigger. It is the grind of every day at work looking at the laziest co-workers makes me depress. Nothing wrong with my job, it pays me a lot of money for what I do. I even think I am over paid. It is the helpless & hopeless feeling that gets me.

My portfolio is probably a little small, I was hoping the bond funds will provide me around $2500 a month of income but with the interest rate at a all time low, that is not possible. So I tried to look for individual stocks with dividends and that did not work out too well.

Our biggest expenses are the property taxes. They are getting bigger each year, this coming year, it will get to about $20,000. Then the auto & home insurances, around 5000, 2000 a year for life insurance, plus the gas for the cars. Wife is very good at shopping & she takes care of the food. No, I am not leaving her until she gets rid of me. She has health insurance for the kids & herself. Work will provide health insurance until I am 65, plus the VA will cover my health care because I am service-connected.

My 10% disabled Veteran status gets me $145 a month, so not much. We own two homes, my in-laws live at the other house. The basement is rented out to a friend, so I couldn't charge them too much. There are not much maintenance needed to collect the 3400 a month. Maybe replacing light bulbs, clear the clogged drains, repaint the house if they move out. We do that ourselves. Wife will continue to work and she will have to work until she is 54 to make 20 years to retire with a pension (I made a mistake on the original post). Her take home pay is about 1200 every two weeks. My friends are calling me crazy for trying to leave my job at such young age. They said how can you have your wife who makes way less to continue to work & you retire?

I am paying extra each month into the mortgage. Once it gets to a small enough sum, I will pay it off by selling some of my funds.

My plan in retirement is to pick up & drop off my daughter at school, at swim practices & watch my son playing soccer. I even joked with wife saying I will enroll the same college that my daughter goes to. I am a pretty active person, jogging, weight lifting, hiking, traveling are on my mind.

It is probably not likely to retire at 50, I would like to do it before 55. But 10 years jus seem too long to wait. If I can't retire at 50 with what I am doing now, what else should I try to accomplish that goal?
Outer Marker
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Re: Can I retire at 50?

Post by Outer Marker »

One Day Closer wrote: Sat Oct 17, 2020 10:24 am Nothing wrong with my job, it pays me a lot of money for what I do. I even think I am over paid. It is the helpless & hopeless feeling that gets me.

I was hoping the bond funds will provide me around $2500 a month of income but with the interest rate at a all time low, that is not possible. So I tried to look for individual stocks with dividends and that did not work out too well.

The basement is rented out to a friend, so I couldn't charge them too much. There are not much maintenance needed to collect the 3400 a month. My friends are calling me crazy for trying to leave my job at such young age.

I am paying extra each month into the mortgage. Once it gets to a small enough sum, I will pay it off by selling some of my funds.

My plan in retirement is to pick up & drop off my daughter at school, at swim practices & watch my son playing soccer. I even joked with wife saying I will enroll the same college that my daughter goes to. I am a pretty active person, jogging, weight lifting, hiking, traveling are on my mind.
A few observations based on your feedback . . .

1. Take more time for yourself and dial it back a bit, to semi-retire in place. Don't slack off, but don't be a "gunner" and look for the most challenging assignments. Take more and better vacations, and recognize that it is "just a job." No need to feel helpless and hopeless if you are slightly overpaid and are not under duress.

2. Don't look at your "bond" and "stock" funds separately in terms of producing "income" for your retirement. They are all part of one big pot. You can generate income either from selling equities or from dividend and interest income. It doesn't matter. (Apart from some tax considerations.) I don't think you've posted your holdings in detail, but hope they are part of a diversified 3-fund TSM, TISM, TBM portfolio.

3. $3,400 a month for renting out your basement?! Damn. If that's a good number, its a goldmine.

4. Check the mega-refinance thread. There are (or very recently were) discount lenders in CA offering rates as low as 1.99% on 15 year refi's with no points. That will generate some savings and accelerate your goal of paying off the mortgage. Shovel any extra money at it. Consider it your gateway to retirement.

5. Due to a few of bizarre and unexpected twists, I found myself out of work for several years in my early 50s. I was comfortably financially independent and was ready to retire before giving away more than half to my ex wife. Thing is, I found out I really missed working. Back in the saddle again now, and could afford to retire again if I wanted to, but not. Revised plan is to work at my rewarding and relatively low stress job to 65, but take more time and money along the way to fully enjoy life in the moment including expensive vacations, nice cars, and airplanes.
chassis
Posts: 60
Joined: Tue Mar 24, 2020 4:28 pm

Re: Can I retire at 50?

Post by chassis »

One Day Closer wrote: Sat Oct 17, 2020 10:24 am Thanks for everyone's reply and I am new here & don't know how to reply to each person.

My original plan was to to do it at age 55. That way I will be closer to 60 & the pension gets a little bigger. It is the grind of every day at work looking at the laziest co-workers makes me depress. Nothing wrong with my job, it pays me a lot of money for what I do. I even think I am over paid. It is the helpless & hopeless feeling that gets me.

My portfolio is probably a little small, I was hoping the bond funds will provide me around $2500 a month of income but with the interest rate at a all time low, that is not possible. So I tried to look for individual stocks with dividends and that did not work out too well.

Our biggest expenses are the property taxes. They are getting bigger each year, this coming year, it will get to about $20,000. Then the auto & home insurances, around 5000, 2000 a year for life insurance, plus the gas for the cars. Wife is very good at shopping & she takes care of the food. No, I am not leaving her until she gets rid of me. She has health insurance for the kids & herself. Work will provide health insurance until I am 65, plus the VA will cover my health care because I am service-connected.

My 10% disabled Veteran status gets me $145 a month, so not much. We own two homes, my in-laws live at the other house. The basement is rented out to a friend, so I couldn't charge them too much. There are not much maintenance needed to collect the 3400 a month. Maybe replacing light bulbs, clear the clogged drains, repaint the house if they move out. We do that ourselves. Wife will continue to work and she will have to work until she is 54 to make 20 years to retire with a pension (I made a mistake on the original post). Her take home pay is about 1200 every two weeks. My friends are calling me crazy for trying to leave my job at such young age. They said how can you have your wife who makes way less to continue to work & you retire?

I am paying extra each month into the mortgage. Once it gets to a small enough sum, I will pay it off by selling some of my funds.

My plan in retirement is to pick up & drop off my daughter at school, at swim practices & watch my son playing soccer. I even joked with wife saying I will enroll the same college that my daughter goes to. I am a pretty active person, jogging, weight lifting, hiking, traveling are on my mind.

It is probably not likely to retire at 50, I would like to do it before 55. But 10 years jus seem too long to wait. If I can't retire at 50 with what I am doing now, what else should I try to accomplish that goal?
@One Day Closer what is your net worth today?
Topic Author
One Day Closer
Posts: 3
Joined: Mon Apr 27, 2020 11:03 am

Re: Can I retire at 50?

Post by One Day Closer »

Me: 1.7 to 1.8 Million
Her: around 700,000
chassis
Posts: 60
Joined: Tue Mar 24, 2020 4:28 pm

Re: Can I retire at 50?

Post by chassis »

@One Day Closer Thanks, $1.8 + $0.7 = $2.5m net worth today. Is that figure when mortgage debt is deducted from assets?

If your net worth is $2.5m, and this accounts for debt, and you believe in the "4% rule", then your living expenses need to be below $100,000 per year, at least until your income increases through Social Security or other income stream.

1. Can you live according to your standards and obligations on $100,000 per year?
2. Is the $2.5m net worth figure after debt is deducted?
3. Do you have access to all of your funds, without early withdrawal penalty?
4. What is the driving factor motivating you to consider retiring by age 50 when, on the surface, it doesn't appear that you easily do so?
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