Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

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aaaaaa111111
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Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

Thanks so much to everyone for their input. I certainly won't turn down any more advice, but I also have a specific question later in this thread on the topic of asset allocations, something that has come up a lot: viewtopic.php?p=6454890#p6454890

(This came up in another thread and it was recommended that I post it as its own thread.) First things first, I've used this calculator to ballpark my plan, hope the link works:
https://engaging-data.com/will-money-la ... &mort=best

Spending set to $31k, but aiming for less. $31k just gave a clean 3.5% withdraw.
Savings $880k, not counting $42k cash in my checking/savings account (emergency fund + 2022 expenses). Savings is comprised of:
• $525k VFIAX taxable brokerage (100% domestic stock)
• $191k VFIFX traditional IRA (54% domestic stock, 36% intl stock, 6% domestic bond, 3% intl bond)
• $167k VFIFX roth IRA (54% domestic stock, 36% intl stock, 6% domestic bond, 3% intl bond)
Not exactly $880k since it fluctuates daily; I rounded down slightly.
Age/Retirement, 38 now, would take my first withdraw at 39. Ending at 100 to cover all bases.
Stock/Bond allocation reflects the overall 96/4 ratio I have right now. These funds/allocations don't reflect a conscious choice on my part, they're just what I ended up in as a 20-something who didn't know anything about investing when opening the accounts. [Edit: Mentioned it later in the thread, but I'm actively changing this. Targeting 75/25 allocation before I start, for now.]
Investment Fee for VFIAX is 0.04% and VFIFX is 0.15% though the latter is coming down to like 0.08% or so in February, I heard? So I just roughly split the difference at 0.06%.
Extra Income is currently calculated at $500/mo for social security (actual calculation says $1562 for withdraws from 67 with https://www.ssa.gov/benefits/retirement ... pplet.html when I enter my past earnings and assume 0 from 2022 onward; but I don't trust getting 100% of what's promised). It says $863/mo if I started to withdraw at 62. [Edit: Updated to include corrected numbers]

There are other things that could be tweaked I'm but not taking the calculator's results as gospel, just as a ballpark/sanity check.

2021-2022 Plan
• 2022 is all checking/savings, no job. This year is a chance to think things over, continue doing research, and finalize some medical needs. If I'm still feeling ready at the end of the year, I'll pull the trigger and take my first withdraw in Jan 2023.
• If not, I can (reluctantly) go back to work, preferably part-time. But retiring early is when, not if.
• Total 2021 expenses will have been spot on $30k, even accounting for uncharacteristically high medical spending.
• 2021 was a good test run for whether I can live on the amount I've targeted, and 2022 will provide another data point.

2023+ Plan
• $30k is the target to live comfortably (adjusting for inflation as needed).
• Initial income will come from taxable account dividends ($6-7k, usually), and selling VFIAX to generate the rest.
• Want to progress my Roth conversions (started w/$11k this year), but this would lower ACA subsidies.
• Biggest potential 5-year horizon expense: new car. Mine is good shape/very low mileage/rarely driven but is still 13+ yo.

$1.1k rent is my #1 expense, and that's already lower end here. I have limited attachment to this area other than a reluctance to change routine/desire to avoid address change headaches. I'd be open to moving to a lower cost of living area in the future, but only to solidly blue states in order to have some hope of a healthcare alternative being implemented if the ACA gets killed.

I have cheap tastes. A fast internet connection is about the only luxury I need. Tastes may change in the future, but I can't predict if and how. I'm also an intensely private person and will not be pursuing relationships or raising kids. Over the last year I've abstained from little luxuries here and there, but haven't felt like I punished myself to live on $30k.

I never found fulfillment in work, and do not get bored being home all day. My free time isn't spent differently now than when I was working, except I have far more of it, I get proper sleep, and I'm profoundly less stressed and angry. If I ever do go stir crazy, I'll just find a humanitarian program I believe in to volunteer at.

If I had to choose the three concerns I'm monitoring most closely (besides developing an enormously expensive medical condition in the future, of course):
• ACA isn't guaranteed to remain in place.
• Getting to 59½ before I need to touch anything that'd trigger a withdraw penalty.
• Somewhat limited leeway (but not zero, if I go slow) in rebalancing my portfolio without tax/ACA subsidy impacts.

Sorry this got so lengthy, I guess I had more points to cover than I thought. Any feedback/advice is deeply appreciated.
Last edited by aaaaaa111111 on Thu Jan 20, 2022 1:39 pm, edited 8 times in total.
KlangFool
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by KlangFool »

OP,

A) Do you live in a state with expanded medicaid eligibility or no? 100% FPL or 138% FPL?

https://www.healthinsurance.org/glossar ... rty-level/

B) What you spend is not necessary the same as your taxable income? You may need to Roth convert more or less money in order to meet the ACA subsidy requirement.

C) You need to look at your 2021 1099-DIV and 1099-INT in order get an estimate of your annual interest income, dividend, and distribution.

D) How much of the money inside the Roth IRA are Roth IRA contribution?

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sailaway
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by sailaway »

You mention higher medical, but other than that, how typical was 2021? Any car repairs, replacement of technology, new clothes, etc? Knowing that your car will need replaced, do you calculate in a sinking fund or other means of actually paying for it without exceeding your annual spend? I think being realistic about our spending is one of the hardest things and going off one data point seems a bit sketchy.

Are you on a sabbatical or leave for 2022? If not, what is the difference between now and a year from now besides where you pull your money from? Why do you see that dates as pulling the trigger, as opposed to not having income right now?
Topic Author
aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

KlangFool wrote: Thu Jan 13, 2022 4:09 pmA) Do you live in a state with expanded medicaid eligibility or no? 100% FPL or 138% FPL?
B) What you spend is not necessary the same as your taxable income? You may need to Roth convert more or less money in order to meet the ACA subsidy requirement.
Yes, it's 138% FPL to qualify here ($17,775). Very good point about spending vs taxable! I still need to drill the whole "capital gains are only a portion of what you sell" thing into my head.

In 2023 I'd be spending dividends + VFIAX total sales, but taxes/ACA would be dividends + VFIAX cap gains. So that gives me a little bit of room to either rebalance or continue my Roth conversions, if the taxable portion comes to less than ~$19,500 (the subsidy is still maxed at that point, and only starts to decrease afterward).
C) You need to look at your 2021 1099-DIV and 1099-INT in order get an estimate of your annual interest income, dividend, and distribution.
Each year my only taxable interest/dividend income is from VFIAX. It increased modestly each year from 2011 to 2019, but has been flat from 2019 (when I stopped making contributions) to 2021: $6.4k in 2019, $6.2k in 2020, and $6.5k in 2021. I'm guessing it'll be about the same in 2022.
D) How much of the money inside the Roth IRA are Roth IRA contribution?
$65k of $167k (39%). And then I'll have available any conversions that have passed the 5 year waiting period (so, first batch available starting 2027).
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retired@50
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by retired@50 »

To have pinpoint control over the capital gains you recognize when selling shares, you should get familiar with the Spec ID cost basis method and use it (if you're not already). Cost basis method can generally be set by using your broker's website. This should allow you to keep your income within the 138% to 400% of FPL range for ACA.

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

Regards,
This is one person's opinion. Nothing more.
Topic Author
aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

sailaway wrote: Thu Jan 13, 2022 4:19 pm You mention higher medical, but other than that, how typical was 2021? Any car repairs, replacement of technology, new clothes, etc? Knowing that your car will need replaced, do you calculate in a sinking fund or other means of actually paying for it without exceeding your annual spend? I think being realistic about our spending is one of the hardest things and going off one data point seems a bit sketchy.
Fair question. 2021 wasn't that far off from what I was spending back when I was still working my high paying job. From 2013 (the first year in which I have exhaustively detailed categorization of all my transactions) to 2018 (I quit the high paying job in early 2019, switched to a lower-paying, lower-hours job in 2019-2020) my average annual expenses were $35k.

That gap sounds like a lot, but the entire difference, even after controlling for much lower healthcare costs in those years, was purely luxury spending, mostly around an expensive hobby that I don't have any interest in anymore. It was an average of $12k/yr and I'd already cut almost all of it out of my budget by mid 2019. Without that extra spending, all of those years were less expensive than 2021, even if you added 2021 healthcare costs to them.

I do still anticipate that in some years I will need to withdraw more than $28-30k. But even if I ran an inflation adjusted $5k+ over plan every single year that would only only turn my 3.5% plan into a 4% plan. Not spectacular, but not panic-inducing either. (Naturally I'd like to keep it at the lower number as often as possible!)
Are you on a sabbatical or leave for 2022? If not, what is the difference between now and a year from now besides where you pull your money from? Why do you see that dates as pulling the trigger, as opposed to not having income right now?
It's partly a matter of semantics/emotion, admittedly. But I've done all of my retirement calculations based purely on what's in my Vanguard funds. The $880k does not include my checking/savings cash on hand. So I consider the first year in which I draw down those funds as the first year in which I'm touching any money from my retirement fund (I still think of my non-retirement VFIAX as a "retirement" fund).

Making my first ever withdraw from any of those accounts feels like the start of something new, because it's the first time anything other than market returns have lowered their value. But yes it's all dollars and cents in the end.
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GerryL
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by GerryL »

Extra Income should technically be $24k/yr with $2k/mo social security at 65 according to my social security statement, but I'm planning as if I'll only get half of that, at best.
At age 39 you aren't going to have a 35-year work history, which is what SS uses to calculate your benefit at full retirement age. Any year you don't have enough eligible income is set at $0. The statement you see at on the SS site estimating your benefit at FRA assumes that you will keep working. Oh, and 65 is not full retirement age.

Is that where you got your SS estimate?
feh
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by feh »

Without getting into the details of your plan, my opinion is: no, this won't work.

3.5% for >50 years is likely to fail.
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aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

retired@50 wrote: Thu Jan 13, 2022 4:40 pm To have pinpoint control over the capital gains you recognize when selling shares, you should get familiar with the Spec ID cost basis method and use it (if you're not already). Cost basis method can generally be set by using your broker's website. This should allow you to keep your income within the 138% to 400% of FPL range for ACA.
https://www.bogleheads.org/wiki/Cost_basis_methods
Thanks will take a look. Cost basis is one of those topics I've tried to wrap my head around on multiple occasions, but keep bouncing off. I've had a hard time applying what I read to what I can actually see in my Vanguard account.

I do know that Vanguard is "average cost" by default, but since I've not done any withdraws or exchanges, I haven't definitively chosen a basis yet.
fortunefavored
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by fortunefavored »

You have enough money to take time off, no question. Call it "a pause in working of indefinite period" and people will be more enthusiastic.

The biggest variable is always expenses. At 39, things can still change a lot.. your desires.. marriage.. kids.. elderly support.. only you can know how locked in that is. With a low spend, you just don't have a lot of room to cut if things go wrong. One big change blows your 3.5% SWR right outta the water. This blog posting should be required reading for 30-something early retirees: https://livingafi.com/2021/03/17/the-20 ... nt-update/

I'm a big proponent of FIRE, because work is awful for many people, regardless of how many others claim you should be able to find something you love (or at least tolerate.) Some personalities will just never fit into work expectations. I hated work from the day I punched my first time card to the day I walked out the door as a mid level exec 30 years later.

I wish you the best of luck.
hudat2021
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by hudat2021 »

Hi, I recommend you checkout the following blog and also read their book if you are considering early retirement.

https://www.millennial-revolution.com/
Socal77
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Socal77 »

GerryL wrote: Thu Jan 13, 2022 5:45 pm
Extra Income should technically be $24k/yr with $2k/mo social security at 65 according to my social security statement, but I'm planning as if I'll only get half of that, at best.
At age 39 you aren't going to have a 35-year work history, which is what SS uses to calculate your benefit at full retirement age. Any year you don't have enough eligible income is set at $0. The statement you see at on the SS site estimating your benefit at FRA assumes that you will keep working. Oh, and 65 is not full retirement age.

Is that where you got your SS estimate?
There is a special SS calculator at SS.gov where you can put in zeros for remaining years.
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Wiggums
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Wiggums »

Here are somethings for you to investigate. I just suggesting that you work through some negative events before you pull the plug.

You don’t have much wiggle room in your plan. Rent can go up dramatically as the building ages, the market can tank and not recover for ten years, etc.

You owe taxes on your pretax balance.

3.5% withdrawal rate assumes a 60/40 portfolio for 30 year retirement.

You need a better estimate for SS. Your earning record will have lots of zeros.

My personal preference is to include taxes when talking about expenses.

Have you thought about expenses that do not occur every year? For example: a new car, new cell phone, new laptop, etc. You don’t have much wiggle room in your plan. Rent can go up as the building ages, the market can tank and not recover for ten years, etc.

You owe taxes on your pretax balance
Last edited by Wiggums on Thu Jan 13, 2022 6:58 pm, edited 2 times in total.
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aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

GerryL wrote: Thu Jan 13, 2022 5:45 pm At age 39 you aren't going to have a 35-year work history, which is what SS uses to calculate your benefit at full retirement age. Any year you don't have enough eligible income is set at $0. The statement you see at on the SS site estimating your benefit at FRA assumes that you will keep working. Oh, and 65 is not full retirement age.
Is that where you got your SS estimate?
Got it. I wasn't totally sure how the estimates worked, but I've largely been trying to plan as if SS didn't exist anyway, just figuring I'll get some relatively small amount to help pad things out. Any more would be a bonus. Also, yes, not sure why I put 65, I meant 67.
Socal77 wrote: Thu Jan 13, 2022 6:33 pm There is a special SS calculator at SS.gov where you can put in zeros for remaining years.
Oh thanks, I found the calculator you mentioned, and it's $1562/month if I have it assume zero for 2022 onward and starting withdraws at 67. I'll call that more like $500/mo assuming it gets slashed (if it continues at all). It says $863 if I put withdraws at 62. Would not have guessed the difference is nearly 2x.
Last edited by aaaaaa111111 on Thu Jan 13, 2022 7:14 pm, edited 2 times in total.
randomguy
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by randomguy »

feh wrote: Thu Jan 13, 2022 6:13 pm Without getting into the details of your plan, my opinion is: no, this won't work.

3.5% for >50 years is likely to fail.
3.5% for 50 years is unlikely to fail. You are looking at something like a 95% success rate. SS makes it even safer. Wanting to live on 30k for the next 50 years seems like a much bigger risk..
jfave33
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by jfave33 »

I'm all for FIRE and much more than many on here.

But for me you are not thinking enough like a retiree. Sticking to 94% stocks is way too risky for somone living off a modest portfolio in my opinion.

3 years into a relatively short recession would be brutual on your figures. You'd be withdrawing $30k from something like $330k. I couldn't stomach that.

I would consider increasing your fixed income % a lot more and if that troubles you then you are not ready. I'd also think about ways of generating additional income to help you along the way during retirement. It is usually good to have a side hustle or two if you want to FIRE. Not essential but useful.

Your numbers don't look too bad. Definitely workable with some changes.

I wonder how much more would you be able to add to your portfolio if you worked a few more years? If sizeable I'd at least consider it. But I'm not.one of those a few more years kind of people.
randomguy
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by randomguy »

Wiggums wrote: Thu Jan 13, 2022 6:48 pm You owe taxes on your pretax balance

OP shouldn't be paying any federal taxes. Take out up to the deduction in Roth conversion every year and then do LTGC harvesting. Probably end up getting some refunds.....

Realistically at these spending levels you can take crazy risks. Things go bad? Work at McDonalds for a couple of years to take the stress off the portfolio.... Or just work part time doing season work and bring in 3-6k for a couple months work.
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aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

Wiggums wrote: Thu Jan 13, 2022 6:48 pm Have you thought about expenses that do not occur every year? For example: a new car, new cell phone, new laptop, etc. You don’t have much wiggle room in your plan. Rent can go up as the building ages, the market can tank and not recover for ten years, etc.
This is baked in to a moderate extent, since my bare minimum living expenses are definitely less than a 3.5% withdraw.

I'm not stressed over replacing a phone or a computer, and even a car doesn't scare me too badly. And while paying rent sucks, I see avoiding home ownership as a way to mitigate sudden huge expenses like replacing a roof or a flooded out basement. That and I'd feel a bit silly with a whole house to myself, nevermind all the ordinary maintenance I don't want to bother with. Basically, I just don't want a house.

However, yes, really huge events like a decade long market collapse is not something I am "planning" for per se, in the sense that if an event was big enough to tank my plan, I would just abandon the plan and go back to work for as long as was needed (and hate every second of it! but such is life). I may want this plan to work, but that won't stop me from being as flexible as I need to be.

(The one thing I am fairly stubborn on is preferring maybe having to go back to work in the future if circumstances dictate, over definitely going back to work right now for a few years and retiring later. Barring, again, a truly catastrophic event,)
jfave33 wrote: Thu Jan 13, 2022 7:01 pm But for me you are not thinking enough like a retiree. Sticking to 94% stocks is way too risky for somone living off a modest portfolio in my opinion.
I would consider increasing your fixed income % a lot more and if that troubles you then you are not ready.
This has been one of the more interesting debates to see play out on early retirement forums. Many swear that 100% stocks is the way to success, and many swear it's the way to failure (not always so extreme, but you get the idea). I just need to keep reading and get as many opinions as possible and determine what's best.

But you're absolutely right that my current allocation was not the result of thinking like a retiree. It was set up back when I expected to be working for the rest of my life. Recently I've been leaning towards increasing the non-stock share, though how much, and what exactly, is a whole topic on its own.

I know that exchanging funds in a taxable account is taxable, but within an IRA it appears to not be taxable. From Investopedia:
"Transactions that are not taxable in an IRA account include purchases, exchanges between mutual funds, buying and selling stocks, dividend reinvestments and capital gain distributions. Mutual fund exchanges are not taxable as long as the money is being exchanged into an account registered as an IRA."
So if I decided I wanted to go that route, I could in theory exchange my VFIFX (Target 2050) for something more conservative like the Target 2035 or even 2030 (just examples), without tax implications.
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by texasdiver »

At age 39 you have a super simple backup plan if things go bad. You can simply pick up a little work here and there to fill in any unexpected gaps. Even just picking up some simple part-time job will fill in most gaps if you are only aiming to live on $31,000 per year. Do some door-dash. Get a part-time retail job. Work as an apartment manager in exchange for rent or rent discount. That sort of thing. There are a bazillion easy options if you just need an extra $5 or 10k per year to fill in the gap or cover unexpected costs. You don't need to do some career type job. If you were elderly or disabled that might be more difficult. But that doesn't sound to be the case.
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by poker27 »

I’m around your age, and have a similar bug. However at my current savings, I know I would starve myself of somethings if I were not working. IE we’re talking about going to Hawaii this summer… No way would I feel comfortable taking a Hawaii vacation, even if I could theoretically make the #s work.

Now you’ve lived for 39 years, and you don’t like vacations, niceties or stuff, thats great. You can likely stop working for the ‘man’, just don’t acquire any expensive hobbies.
ralph124cf
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by ralph124cf »

I notice that you have the same fixed income choices in both the IRA and the Roth.

It is usually recommended to keep your fixed income money in the IRA, and more stocks in the Roth.

Ralph
zuma
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by zuma »

I think your numbers look good, especially since you're willing to work again if things turn sour. As others have mentioned, even a part-time job can help a lot if you need some extra income.

I'm in a similar position as you: FIRE'ed in my mid 40s, living on roughly $30k/year, and I would rather work later if necessary instead of working now as a means to pad my portfolio and feel safer. I think it's a very personal decision. (Also, many Bogleheads seem to think $30k/year means barely scraping by, which is simply not true for some of us with cheap hobbies and no car.)

I'm also expecting $21k/yr in SS at age 70. Like you, my planning doesn't assume this money will be there, but there's a good chance that it will.

My concerns now would be:

- Asset allocation. I'd feel more comfortable at 60/40 or 70/30.
- Rent is 40% of your total spend, which seems high to me. And if that's already low for the area, moving to a LCOL area might be a good idea at some point. I'm also a renter but it's only ~20% of my annual spend.
- Healthcare expenses. I live in a country with a strong social safety net, so I'm not worried about catastrophically high medical bills. Sounds like you are as prepared as possible, though.

I wish you all the best!
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langelgjm
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by langelgjm »

I think Mr. Money Mustache's original nut was about $800k. Indefinitely, it would be a bit too lean for me (at least in the US), but for five years of grad school I lived in the DC area on roughly $30k to $35k annually and had a pretty good life - a lot of free time, learned a lot about maintaining my motorcycle, bicycle commuted almost year round, trivia night at at pub with friends once a month, conference and research travel in the US and abroad.

I'd be nervous about rent. Most of this country has an allergy to building sufficient (and sufficiently dense) housing, and also looks down on renting (both culturally and in terms of housing and tax policy). I just don't see that situation improving anytime soon, which means to constrain housing costs, you will likely need to be prepared to move to a cheaper location every so often, or live with roommates, etc.

Re: Social Security, many folks on this board make unrealistically negative assumptions about it. The current (2021) intermediate-cost long-term actuarial projection for 2095 is the Social Security will be able to cover 72% of scheduled benefits with its current annual tax take (refer to Table IV.B4). So if you want to use a realistic number for future benefits, multiply your project benefit (assuming no further years of work) by 72%. (By comparison, the 2011 projection for 2085 was 74%). This assumes no action is taken over the next 70 years either to reduce benefits or increase taxes.

Social security issued its first check in 1940. It's been around for 80 years already. It's changed over time, and there will be more changes, but I have no doubt that it will be around in some meaningfully similar form for another 60 years, which is the time horizon you care about.
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Tamalak
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Tamalak »

Your plan as stated looks doable. I just am concerned that your priorities or perspective will shift as you age. Maybe don't think of yourself as "retired" but "free" and keep an eye out for ways to make money that ARE fulfilling and don't destroy your week (maybe 10-20 hours instead of 40)

I'm almost exactly where you are.. 38, hit 1 mil net worth at the start of the year, frugal (40k expenses even with 1.6k/mo rent), planning ~3.5% ww and hungrily eyeballing the door.
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by 59Gibson »

texasdiver wrote: Thu Jan 13, 2022 8:12 pm At age 39 you have a super simple backup plan if things go bad. You can simply pick up a little work here and there to fill in any unexpected gaps. Even just picking up some simple part-time job will fill in most gaps if you are only aiming to live on $31,000 per year. Do some door-dash. Get a part-time retail job. Work as an apartment manager in exchange for rent or rent discount. That sort of thing. There are a bazillion easy options if you just need an extra $5 or 10k per year to fill in the gap or cover unexpected costs. You don't need to do some career type job. If you were elderly or disabled that might be more difficult. But that doesn't sound to be the case.
+1. This is very much true for nearly all the FIRE posts spending $50k/yr or less. Finding a gig to make $5-20k/yr is not that difficult for people who've been able to build a portfolio relatively young. There really isn't that much risk.
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WoodSpinner
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by WoodSpinner »

fortunefavored wrote: Thu Jan 13, 2022 6:28 pm You have enough money to take time off, no question. Call it "a pause in working of indefinite period" and people will be more enthusiastic.

The biggest variable is always expenses. At 39, things can still change a lot.. your desires.. marriage.. kids.. elderly support.. only you can know how locked in that is. With a low spend, you just don't have a lot of room to cut if things go wrong. One big change blows your 3.5% SWR right outta the water. This blog posting should be required reading for 30-something early retirees: https://livingafi.com/2021/03/17/the-20 ... nt-update/

I'm a big proponent of FIRE, because work is awful for many people, regardless of how many others claim you should be able to find something you love (or at least tolerate.) Some personalities will just never fit into work expectations. I hated work from the day I punched my first time card to the day I walked out the door as a mid level exec 30 years later.

I wish you the best of luck.
Great link! It’s an interesting read!

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EnjoyIt
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by EnjoyIt »

A few comments if I may.

1) As others have said, as you state your proposition, your math is sound and your numbers will work. Frankly, 4% would likely work as well if you add some flexibility to your spending during bad times.

2) I am a big FIRE proponent, particularly the FI part. Early financial independence buys freedom. Since we hit FI not that far from your age, we have found ourselves wanting to spend a bit more. With additional free time and freedom you have more opportunities to explore and enjoy life which does cost money. My advice for you is to consider some part time work if possible. It could be a very nice transition into retirement. It would pad your portfolio, and let you experience what your spending could be like if fully retired. Just something to think about. I can promise you this. Your desires and wants today at 39 will change when you are 49, 59,69,79, etc. Just think back 10 years ago about your life and how different it is today.

3) I am a little fearful of full retirement today. The only time 4% withdrawal has failed over 30 years was 1966-1996. Early during that timeframe we had very high inflation. I am fearful that we may be in the process of repeating some of that over the next few years which would concern me retiring on such a tight budget.

4) Health insurance: My biggest concern is health insurance. Although the government has made it as easy as ever for early retirement thanks to the ACA, who knows what it will look like even 10 years from now. Generally, once the government provides a benefit, it is very unlikely it will take it away, but the concern still bothers me some where I budget in the need to pay for healthcare. I do not know your area, but when I look at ACA insurance I find that some of the better/best specialists that one may need are out of network. As an example If I need surgery, I prefer a surgeon with a good track record of success, low complications, and low surgical site infection rates. Not all physicians are the same and I am willing to pay a bit more when it comes to the health of myself and my family.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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WoodSpinner
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by WoodSpinner »

OP,

Have you checked out the EarlyRetirement Safe Withdrawal Series?

https://earlyretirementnow.com/safe-wit ... te-series/

If not, it’s well worth your time to review and validate your plan.

WoodSpinner
zuma
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by zuma »

langelgjm wrote: Fri Jan 14, 2022 9:38 am Re: Social Security, many folks on this board make unrealistically negative assumptions about it. The current (2021) intermediate-cost long-term actuarial projection for 2095 is the Social Security will be able to cover 72% of scheduled benefits with its current annual tax take (refer to Table IV.B4). So if you want to use a realistic number for future benefits, multiply your project benefit (assuming no further years of work) by 72%. (By comparison, the 2011 projection for 2085 was 74%). This assumes no action is taken over the next 70 years either to reduce benefits or increase taxes.
Agreed. My negative assumption is more about being extra conservative when planning a long retirement. I'll include SS more explicitly in my withdrawal plan when I'm closer to age 55 or so.
EnjoyIt
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by EnjoyIt »

zuma wrote: Fri Jan 14, 2022 10:34 am
langelgjm wrote: Fri Jan 14, 2022 9:38 am Re: Social Security, many folks on this board make unrealistically negative assumptions about it. The current (2021) intermediate-cost long-term actuarial projection for 2095 is the Social Security will be able to cover 72% of scheduled benefits with its current annual tax take (refer to Table IV.B4). So if you want to use a realistic number for future benefits, multiply your project benefit (assuming no further years of work) by 72%. (By comparison, the 2011 projection for 2085 was 74%). This assumes no action is taken over the next 70 years either to reduce benefits or increase taxes.
Agreed. My negative assumption is more about being extra conservative when planning a long retirement. I'll include SS more explicitly in my withdrawal plan when I'm closer to age 55 or so.
We are in our 40s. We are semi-retired. Although I fully expect SS to be there for me and my spouse in some shape or other. We do not include SS in our calculations because SS is more than 2 decades away. We need to survive till then. I see one of 2 extremes in our future.
1) We had a good sequence of returns and SS will basically cover RMD taxes, IRMAA, and taxes on SS with a little bit extra spending money.
2) If Sequence of returns are against us, taxes wont be much of an issue and SS will cover our portfolio shortfall.
3) Something in between.

Maybe when I am getting closer to 55 or 60, I will start adding SS to our math. Just no advantage in doing so today.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
quantAndHold
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by quantAndHold »

Okay, I’ll be that person. I’m all for retiring early. I retired at 52, leaving at least 7 figures on the table. But it sounds like the plan is to retire on a poverty budget and sit at home alone playing video games for the next 50 years. I’m having trouble figuring out how that would be fulfilling for more than a year or two. When I left my job, I had an accumulation of things I wanted to do (travel and working with people on things that were fulfilling, but didn’t necessarily pay money) that were incompatible with working full time.

“I just don’t like to work, at any job” sounds like depression, not a justification to stay home all day for the rest of your life.

As far as finances, your numbers work today, but 50+ years is a long time. Things change. Desires change. Risks nobody ever saw coming become reality. I wouldn’t do it with your numbers, because you have no margin for error. And the longer you go without working, the harder it is to find good paying work in the future.
Yes, I’m really that pedantic.
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by randomguy »

quantAndHold wrote: Fri Jan 14, 2022 2:13 pm Okay, I’ll be that person. I’m all for retiring early. I retired at 52, leaving at least 7 figures on the table. But it sounds like the plan is to retire on a poverty budget and sit at home alone playing video games for the next 50 years. I’m having trouble figuring out how that would be fulfilling for more than a year or two. When I left my job, I had an accumulation of things I wanted to do (travel and working with people on things that were fulfilling, but didn’t necessarily pay money) that were incompatible with working full time.

“I just don’t like to work, at any job” sounds like depression, not a justification to stay home all day for the rest of your life.

As far as finances, your numbers work today, but 50+ years is a long time. Things change. Desires change. Risks nobody ever saw coming become reality. I wouldn’t do it with your numbers, because you have no margin for error. And the longer you go without working, the harder it is to find good paying work in the future.
I fail to see how spending retirement sitting on airplanes, living in hotels, and driving around would be remotely fulfilling compared to getting to explore hundreds of well put together virtual worlds with my friends:) I have lived long enough to realize what other people want can have no relation to what I want. But I accept they know what will make them happy. Obviously the risk of them being wrong is always there.

30k/year isn't remotely close to a poverty level budget. It as about 2x above it and pretty much at the bottom of the middle class for a single person in most states. Personally I think that life is much better up at the top of the middle class or even lower upper middle class but that is definitely a personal choice. If you are a rich person (more than 100k of income gets you in the rich category:)), you can lose touch with how most of middle class america lives. I know I sure don't understand the idea of a 3k expense being some life threatening emergency anymore.

To some extent there is always the risk that more money would be useful. To some extent you have to accept it and get on living the life you want and have faith you will adapt as things change. Odds are our OP will have like a 5% SWR and the account value will increase over time. (i.e. they will be able to spend 40k/year when they are 50) but you definitely can't count on that.
dboeger1
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by dboeger1 »

To add to the previous comment, not wanting to work is one thing, but I think people who hate work often forget the flip side of why people work, which is that most people hate financial insecurity just as much, if not more. Relying on $880k to last you the rest of your life on an already modest budget is going to eat at your nerves, if not from day 1, certainly at some point within the next few years. All it would take is 1 year of negative stock returns to start seriously doubting the plan, because there's just not much room for error.

The good news is that if you go back to the basic principles that got you started on this investing journey in the first place, the gap between where you are mentally and an abundance mindset is not very big. If you're anything like me, you probably got excited about investing when the power of compound interest finally clicked in your head. You finally understood that saving early was much more powerful than waiting until old age. For me, it was watching a recording of one of Dave Ramsay's FPU lectures with the classic example of somebody saving for 10 years and then stopping still outperforming somebody who waited 10 years and then saved for the rest of their career. The lesson here is that time is extremely powerful because of exponential returns. In other words, what you do in the next 5 years has the potential to make significantly more impact than what you did in the last 5 years. That only increases with time, but of course, at some point, we all reach "enough" and call it quits, or our bodies and minds do it for us.

However, is what you have really "enough" at this point? Don't you feel like you could do far better with just a little more margin? Isn't it encouraging that the next few years will arguably be more important to your long-term financial security than the previous ones? After all, it's not just the potential for compound returns, but also removing the uncertainty of a few more years from a very long time horizon, thereby reducing sequence-of-returns risk and clarifying whether it's worth it for you to work longer. The biggest red flag to me is that you are a renter. I know some people defend renting as a perfectly valid lifestyle choice, but when you're talking about living on a shoestring budget over a 50-year retirement, any core life expense that is subject to increase beyond your control sounds awful. How long would it take for you to save enough money from income just to buy a place that would cost you the same as your rental payments going forward? That would be my bare minimum requirement for feeling safe with this portfolio, because it would make your housing costs relatively more fixed (not 100% fixed, but not subject to huge sudden increases either). If all you did was continue working to buy such a place, even if it was a small condo or trailer home or something, that would make a huge difference.

If you absolutely need to quit your current job now, that's one thing. There are many valid reasons for doing so. Not every job is wonderful (I'm convinced most are far from it). Take some time to relax, recharge, and discover your life's next step. But I would not plan for permanent retirement in your shoes. It's really not a safe bet. And while nobody knows exactly what the future holds, "safe" withdrawal rate figures are inherently far less reliable at all-time market highs than lows. I know, I know, SWRs are based on historically bad times, but that ignores the possibility of even worse future outcomes, not to mention that they assume consistent spending profiles that don't necessarily reflect the impact of your spending distribution (for example, if you have a sudden large medical expense during a deep market crash, that could have outsized impact on your overall SWR).

The last point I'll make is regarding your insistence on moving to blue states. I am not making a political statement at all, and it sounds like you weren't either, but the idea of picking a state based on hypothetical response to a hypothetical future change in legislation would be ridiculous on its own, and is even more ridiculous when you consider that the ACA or hypothetical equivalent plans might not be free, either directly or indirectly through associated costs like housing or taxes in those states. For all you know, you could live a very healthy, long life and be way better off spending less money in a red state with no health insurance than in a blue state with nothing but the hope of an ACA alternative (or you might just find a job you like with health insurance). There are just way too many future unknowns with regards to this issue to even think about making concrete permanent decisions right now. It's like trying to pick a state because of who you think will be governor 20 years from now. It makes no sense. Now, if you're generally blue-leaning when it comes to politics, sure, that'd be a different story, but you didn't really insinuate that in your post.
quantAndHold
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by quantAndHold »

randomguy wrote: Fri Jan 14, 2022 2:40 pm I fail to see how spending retirement sitting on airplanes, living in hotels, and driving around would be remotely fulfilling compared to getting to explore hundreds of well put together virtual worlds with my friends:) I have lived long enough to realize what other people want can have no relation to what I want. But I accept they know what will make them happy. Obviously the risk of them being wrong is always there.

30k/year isn't remotely close to a poverty level budget. It as about 2x above it and pretty much at the bottom of the middle class for a single person in most states. Personally I think that life is much better up at the top of the middle class or even lower upper middle class but that is definitely a personal choice. If you are a rich person (more than 100k of income gets you in the rich category:)), you can lose touch with how most of middle class america lives. I know I sure don't understand the idea of a 3k expense being some life threatening emergency anymore.
I actually agree with you about traveling for 50 years. That would get old. Actually, doing any one thing, especially a leisure activity, for multiple decades would likely get old to most people. But the people who have factored a healthy travel budget into their post-work plans are easily capable of retooling and doing something else when travel gets old. Someone who had budgeted for nothing except fast internet and a few cases of Red Bull is going to be watching a lot of TV.

$30k/year is $15/hour, fast food wages in a lot of places now. It may not, technically, be poverty for a single person, but it is clearly very limiting. I had a 35 year old living in my motorhome for several months last year. She is on disability from the military, makes just under $30k, and was in my motorhome because she couldn’t find an apartment that would take her, because her income wasn’t high enough to meet the 3x rent or whatever it is now that landlords want. She’s living with her parents for now. She’ll make do and make it work because she has to. But someone who is capable of making decent money intentionally limiting themselves to barely getting by seems like it would cause more problems than it would solve.

OP has enough money, and their needs are simple enough, that they don’t have to take just any job that comes along. They can be choosy and pick something they *want* to do, even if it doesn’t pay a lot. But in their financial situation, to look at every possible job and just say “I would prefer not to” seems self defeating.
Yes, I’m really that pedantic.
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aaaaaa111111
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by aaaaaa111111 »

zuma wrote: Fri Jan 14, 2022 10:34 am
langelgjm wrote: Fri Jan 14, 2022 9:38 am Re: Social Security, many folks on this board make unrealistically negative assumptions about it.
Agreed. My negative assumption is more about being extra conservative when planning a long retirement. I'll include SS more explicitly in my withdrawal plan when I'm closer to age 55 or so.
Yep, I'm being very bearish on SS, somewhat intentionally so. If I'm getting closer to SS age and everything still looks good, then awesome! But I personally wouldn't want to retire with numbers that required SS for the math to check out. Not at my current age, at least.
dboeger1 wrote: Fri Jan 14, 2022 3:15 pm Now, if you're generally blue-leaning when it comes to politics, sure, that'd be a different story, but you didn't really insinuate that in your post.
It is that as well, and my feelings encompass a much broader range of priorities than just healthcare, though that's the most immediately relevant issue from a retirement perspective. I just didn't want to get too detailed and break any politics rules. (btw thank you for your very thoughtful reply)
Charon
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Charon »

aaaaaa111111 wrote: Thu Jan 13, 2022 3:56 pm • Total 2021 expenses will have been spot on $30k, even accounting for uncharacteristically high medical spending.
This is what leapt out at me. At 39-year-old talking about "uncharacteristically high medical spending" sets off alarm bells, because as you get into your 40s, then 50s, then 60s... your medical spending tends to increase. Often a lot. What was "uncharacteristically high" to your 20s and 30s self might start sounding uncharacteristically low.

The other thing that worried me was your talk of "an expensive hobby that I don't have any interest in anymore". As you note, interests change. And sometimes you lose interests in expensive hobbies... and sometimes you gain those interests.

So I'm not going to argue with your math, but I personally would find your plan extremely risky because of the lack of flexibility on spending. And for all the people saying that it's super easy to find a job to add some income - no, it's not always. Right now it's super easy, at extremely low unemployment rates (though one reason it's easy to find a McJob is because they are so terrible people keep quitting them). But sometimes it's very difficult to find a job, and those periods are often also times when the market is substantially down (March 2020, 2008-9).

My personal recommendation would be to take a year or two off work, then look for a fulfilling, low-stress job that provides a little income. Sure, it can be challenging to find such a job, but you have lots of time and are willing to move anywhere. Such jobs do exist.
Socal77
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Socal77 »

aaaaaa111111 wrote: Thu Jan 13, 2022 6:55 pm
Socal77 wrote: Thu Jan 13, 2022 6:33 pm There is a special SS calculator at SS.gov where you can put in zeros for remaining years.
Oh thanks, I found the calculator you mentioned, and it's $1562/month if I have it assume zero for 2022 onward and starting withdraws at 67. I'll call that more like $500/mo assuming it gets slashed (if it continues at all). It says $863 if I put withdraws at 62. Would not have guessed the difference is nearly 2x.
Glad you found it. I'm in a similar position,

47 yo, 730k NW,
130k accessible now, rest @ 59.5 yo.
Pension @ 50 for $980 mo, wait till 60, $1980 mo, no COLA
$1644 SS @ 62 or @ 70 $2895 -- Zeros filled in rest of years.

I'm trying to figure out how to retire/semi retire with minimal work form here out due to injury related mobility issues.
GuyInFL
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by GuyInFL »

Socal77 wrote: Sat Jan 15, 2022 11:51 am 47 yo, 730k NW,
130k accessible now, rest @ 59.5 yo.
Pension @ 50 for $980 mo, wait till 60, $1980 mo, no COLA
$1644 SS @ 62 or @ 70 $2895 -- Zeros filled in rest of years.

I'm trying to figure out how to retire/semi retire with minimal work form here out due to injury related mobility issues.
Take a look at 72t withdrawals for access prior to 59.5.
ivgrivchuck
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by ivgrivchuck »

aaaaaa111111 wrote: Thu Jan 13, 2022 3:56 pm Sorry this got so lengthy, I guess I had more points to cover than I thought. Any feedback/advice is deeply appreciated.
What is your backup plan if the stock market crashes 50%? Such an event has happened every 15-20 year or so. Although nobody can know the future, I'd say that the risk is somewhat elevated now when CAPE is near all time high.

If you stay ~100% of stocks, it means that your $880k becomes $440k.

Do you just carry on counting on the market recovery? Do you go back to work?

It would be good to plan your strategy in advance...
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
Socal77
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Socal77 »

GuyInFL wrote: Sat Jan 15, 2022 12:13 pm
Socal77 wrote: Sat Jan 15, 2022 11:51 am 47 yo, 730k NW,
130k accessible now, rest @ 59.5 yo.
Pension @ 50 for $980 mo, wait till 60, $1980 mo, no COLA
$1644 SS @ 62 or @ 70 $2895 -- Zeros filled in rest of years.

I'm trying to figure out how to retire/semi retire with minimal work form here out due to injury related mobility issues.
Take a look at 72t withdrawals for access prior to 59.5.
Thanks, will do, I believe those are hardship withdrawals.

I thought it depended on the individual private 401k policy rules and I called Fidelity yesterday and asked them if I could access 401k for lump sum, like 100k, no penalty (only pay taxes) and they said no. My plan was to possibly use small lump sum withdrawal and buy cheap condo to keep housing costs low.

I said I think you are wrong, what about hardships? They said no you have to pay 10% penalty always. Since this was not my preferred plan A I just left it at that.
Marseille07
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Marseille07 »

The math might work but it's too close to aim for 31K/year when you're spending 30K/year today.

Also, where's your discretionary spending budget such as travel & visiting places? You might be able to stay at home all day on 30K/year but that won't be terribly fun in retirement.
sailaway
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by sailaway »

Socal77 wrote: Sat Jan 15, 2022 12:24 pm
GuyInFL wrote: Sat Jan 15, 2022 12:13 pm
Socal77 wrote: Sat Jan 15, 2022 11:51 am 47 yo, 730k NW,
130k accessible now, rest @ 59.5 yo.
Pension @ 50 for $980 mo, wait till 60, $1980 mo, no COLA
$1644 SS @ 62 or @ 70 $2895 -- Zeros filled in rest of years.

I'm trying to figure out how to retire/semi retire with minimal work form here out due to injury related mobility issues.
Take a look at 72t withdrawals for access prior to 59.5.
Thanks, will do, I believe those are hardship withdrawals.

I thought it depended on the individual private 401k policy rules and I called Fidelity yesterday and asked them if I could access 401k for lump sum, like 100k, no penalty (only pay taxes) and they said no. My plan was to possibly use small lump sum withdrawal and buy cheap condo to keep housing costs low.

I said I think you are wrong, what about hardships? They said no you have to pay 10% penalty always. Since this was not my preferred plan A I just left it at that.
Hardship withdrawals are a reason your employer would allow you to make a partial withdrawal, it is still an early withdrawal with the taxes and penalties that implies. There were some pandemic exceptions, which may cause confusion to some folks.

The 72t, or SEPP, is a plan to make regular withdrawals over time, at least 5 years and until age 59.5 (so it could be a very long time for an early retiree). This plan does not incur a penalty, but is pretty strict about following the plan: unallowed deviations could result in penalties on all the withdrawals, invalidating the whole plan.
Socal77
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Socal77 »

sailaway wrote: Sat Jan 15, 2022 12:53 pm
Socal77 wrote: Sat Jan 15, 2022 12:24 pm
GuyInFL wrote: Sat Jan 15, 2022 12:13 pm
Socal77 wrote: Sat Jan 15, 2022 11:51 am 47 yo, 730k NW,
130k accessible now, rest @ 59.5 yo.
Pension @ 50 for $980 mo, wait till 60, $1980 mo, no COLA
$1644 SS @ 62 or @ 70 $2895 -- Zeros filled in rest of years.

I'm trying to figure out how to retire/semi retire with minimal work form here out due to injury related mobility issues.
Take a look at 72t withdrawals for access prior to 59.5.
Thanks, will do, I believe those are hardship withdrawals.

I thought it depended on the individual private 401k policy rules and I called Fidelity yesterday and asked them if I could access 401k for lump sum, like 100k, no penalty (only pay taxes) and they said no. My plan was to possibly use small lump sum withdrawal and buy cheap condo to keep housing costs low.

I said I think you are wrong, what about hardships? They said no you have to pay 10% penalty always. Since this was not my preferred plan A I just left it at that.
Hardship withdrawals are a reason your employer would allow you to make a partial withdrawal, it is still an early withdrawal with the taxes and penalties that implies. There were some pandemic exceptions, which may cause confusion to some folks.

The 72t, or SEPP, is a plan to make regular withdrawals over time, at least 5 years and until age 59.5 (so it could be a very long time for an early retiree). This plan does not incur a penalty, but is pretty strict about following the plan: unallowed deviations could result in penalties on all the withdrawals, invalidating the whole plan.
Ahh, I forgot about SEPP which I did know a little about when I crossed it during research years ago. At this point that would be 12 years of SEPP. It would probably work since I can get a small non cola work pension at 50 for $980 rest of life and SS @ 62 for $1687, no further work.'

I would be in a better position not to do this esoteric finance had I placed myself in a small mortgage by now locking in housing costs. But I am really unable to get a job to qualify for a mortgage right now and not sure if I have the energy any time soon to do that. On the side I'm working on VA compensation but it is far from guaranteed due to circumstances. I'll hope for the best.
Last edited by Socal77 on Sat Jan 15, 2022 1:55 pm, edited 1 time in total.
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tvubpwcisla
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by tvubpwcisla »

I think you are too young to retire. Look for a job that you love and keep working is my vote.
Marseille07
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Marseille07 »

tvubpwcisla wrote: Sat Jan 15, 2022 1:52 pm I think you are too young to retire. Look for a job that you love and keep working is my vote.
I don't think the age matters. There was a poster who amassed 8M and walked at 35 yo.

The question here is whether 880K@3.5% is enough. Imo it's very tight and depends heavily on good markets to continue. If we walk into another 2008-type situation then they'll be hit by SORR too.
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GerryL
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Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by GerryL »

Charon wrote: Sat Jan 15, 2022 11:42 am
So I'm not going to argue with your math, but I personally would find your plan extremely risky because of the lack of flexibility on spending. And for all the people saying that it's super easy to find a job to add some income - no, it's not always. Right now it's super easy, at extremely low unemployment rates (though one reason it's easy to find a McJob is because they are so terrible people keep quitting them). But sometimes it's very difficult to find a job, and those periods are often also times when the market is substantially down (March 2020, 2008-9).
And in case no one has mentioned it yet: age discrimination is real.
When you're in your 30s and have never had much trouble landing a job, it's hard to imagine being ignored by hiring managers because you are older than them. Being out of the job market for an extended period AND being visibly older than other candidates can put you at a real disadvantage if/when you decide you need to go back to work.
stoptothink
Posts: 10707
Joined: Fri Dec 31, 2010 9:53 am

Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by stoptothink »

We, a family of 4, actually live off of <$30k/yr and have ~1.5x the retirement assets of OP, a paid of home in a really low property tax area, and kids' college is done and paid for in 529s, and there is no way we'd feel comfortable retiring now (at 40 and 35). We're very simple people and don't have a lot of interest in increasing our spending, but I can think of a zillion ways that $1.4M (about what we have) let alone $880k could get wiped out really fast when you may have 50+ years to live. OP, best of luck, you have WAY more guts than I do.
Houdini563
Posts: 87
Joined: Sat Oct 09, 2021 3:50 pm

Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Houdini563 »

You’re too young to retire. You do not have enough retirement assets in place.

You are nearly “all in” the stock market. What is the plan when a major market correction takes place which could last years? You could be down 50% and forced to continue to withdraw.

Health insurance is a big issue.

Also Social security uses your top 35 years of salary history to determine annual benefits. You may only have 20 of these 35 years in place which will dramatically reduce your payout.

There is a solution. Move down to Costa Rica where the cost of living is cheap. You can live like a king with $2000 monthly.
calwatch
Posts: 836
Joined: Wed Oct 02, 2013 1:48 am

Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by calwatch »

I would be concerned that the cash buffer is too low. Now is the time to start accumulating I Bonds if you haven't yet. You can buy $10,000, create a sole proprietorship to buy $10,000, and buy $5,000 through the tax refund method. If you have a friend or relative you trust you could pre-purchase 2023's I Bond allocation as well and have it gifted to you.

When I had a similar asset value a few years ago, and a few years younger than you are now, I considered myself financially independent, in the sense that I could meet everyday needs and wants without having to work another day in my life. I still work because I feel that I am doing something important and would feel bad karma to just drop it on my boss's lap if I don't complete my tasks, but if ever things turned south I could walk away without issue. The main thing I had at the time, though, was being a home owner and the stash of equity that it provided. While you may not want to own a single family house and a plot of land, I think that having a fully paid off abode would help provide some floor of living. Or, rent an apartment in a rent controlled area. Some states like Oregon and California have effective state wide rent control, although those are mostly circuit breakers (7% or 5% above inflation, respectively). Other jurisdictions have stricter rent control. That would help prevent some of the risk of your area becoming the next big thing and double digit rent increases year after year eroding your cushion.

To fulfill any income gap, there are plenty of odd jobs you can do which might get you out of the house. You may feel like Uber or Lyft driving, or food delivery services, as not work because you get to explore the city and chat with strangers. I would sometimes do that as recreation on the weekends and at night, and with an efficient car is a flexible way of earning some money. Being younger, you could also sell plasma (if your health condition allowed); work during the holiday surges at the delivery companies, post office, or retail stores; work during tourist surges at these destinations; substitute teach or do temp work; or work during the spring doing taxes. In my almost-fully-baked FI plan I was planning on doing the latter as that already aligned with my skills and interest while not being a full year commitment. I certainly recognize not feeling like you want to leave the house now but that is going to change, much more likely than entering into a relationship or having kids would be.

I think you should be fine getting before 59 1/2 given the high amount of money in taxable brokerage. You will have access to ACA although quality can be variable. Kaiser is the same throughout the country although their mental health care is notoriously lacking. Others have narrower ACA networks than the full employer one.

Bottom line, start taking some profits and move a few years basic expenses into I Bonds and other less volatile investments. Be prepared to do some exploration find out if there's something you like to do that you might be able to get some compensation for, even if you don't necessarily want to do it for compensation now. And try to angle yourself to a place with rent control so that you won't have to move unexpectedly.
Wannaretireearly
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Joined: Wed Mar 31, 2010 4:39 pm

Re: Early retirement plan advice (39yo, $880k, ~3.5% withdraw)

Post by Wannaretireearly »

Could you set your goal slightly higher, and work a part time job for a few years?

I’m thinking $30k times 40 = $1.2M is a good target for you.
40X is sometimes a popular target here for early retirement (40s/50s).
25X a popular target for a more regular retirement age (60+).

Good luck
Death and taxes. Only one is under your control!
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