Should I stay or go thoughts [retire early]

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offtocolorado
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Should I stay or go thoughts [retire early]

Post by offtocolorado » Fri Mar 08, 2013 9:23 am

Just putting this out there to those that have retired and those that are almost there. One of the decisions my wife will be faced with in two years is whether or not to retire at age 50 or wait to age 52 or 55. Financially we will be good to go at age 50 but waiting until 52 or 55 increases her pension quite a bit.

With that in mind, what decision have some of you made or will be making with regards to stay or go. I realize it's more than just a financial decision but a life decision. Here's the difference her waiting would make.

50 yrs old pension $24,000 a year
52 yrs old pension $27,000 a year
55 yrs old pension $44,000 a year

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InvestorNewb
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Re: Should I stay or go thoughts

Post by InvestorNewb » Fri Mar 08, 2013 9:30 am

I would wait until 55, but that is me. 44k is almost double 24k.

You could live another 50 years.
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Re: Should I stay or go thoughts

Post by samsoes » Fri Mar 08, 2013 9:56 am

Go as soon as you can. Life's too short. You can always make more money; you can't make more time.
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Re: Should I stay or go thoughts

Post by NYBoglehead » Fri Mar 08, 2013 9:56 am

I would wait until 55 as well. 55 is still incredibly young for a person to be retiring, and the bump in pension by waiting until 55 combined with the money she'll earn in those years will change your situation from "we will be good to go at age 50" to "we are in freaking awesome shape at 55!"

Those extra 5 years will allow you bump her pension significantly, build your portfolio even higher than it is, and provide much more protection against the possibility of a down market in the next few years. I'd stick around to 55, that still leaves an awful lot of retirement years to enjoy.

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Re: Should I stay or go thoughts

Post by livesoft » Fri Mar 08, 2013 9:58 am

Too early to tell. Ask again in 2 years. You did say "we", so both of you do not have to retire at the same time.

Also you did not state if her pension starts the day she retires or if there is a delay before it starts like to age 65 or 67.
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Re: Should I stay or go thoughts

Post by EternalOptimist » Fri Mar 08, 2013 10:02 am

I've been retired for 2 years with no pension. I would think that the main questions here are: 1) is she happy with her job, 2)how much do you need the money, 3)are you/she happy with the amount of free time you have. It's really a judgement call based on your needs.
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Re: Should I stay or go thoughts

Post by Toons » Fri Mar 08, 2013 10:04 am

55 :happy
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offtocolorado
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Re: Should I stay or go thoughts

Post by offtocolorado » Fri Mar 08, 2013 10:09 am

The numbers provided would be for her to begin accepting pension distributions the day she retires. We did take a look at retiring early and than waiting to receive the benefits and there was very little difference. The beauty is in the planning and it will be nice to have the option to stay or go. If the pressures of the corporate world increase to the point of work becoming work, she knows she can walk! :D

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Re: Should I stay or go thoughts

Post by NYBoglehead » Fri Mar 08, 2013 10:21 am

^That's the way to go. Obviously deciding to keep working after 50 doesn't incur the obligation to stay until 55. If she finds she's ready to put in her walking papers and you guys are in good shape then that's the way it goes.

While obviously you would be leaving some money on the table by doing this you can't put a price tag on enjoying life.

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Re: Should I stay or go thoughts

Post by JW-Retired » Fri Mar 08, 2013 10:29 am

Contemplating 50 or 55 retirement already at age 48 may mean she really dislikes her work.
One way to weigh this might be to consider: The present value of a bump of $20000 in her pension at 55 would be about $0.40M. That doesn't count the extra salary between 50 & 55. Could she stand another 5 years in her job if somebody be would handing her a $0.40M bonus on her 55th birthday? It amounts to that.
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offtocolorado
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Re: Should I stay or go thoughts

Post by offtocolorado » Fri Mar 08, 2013 10:37 am

Hey JW....she really enjoys her job but like many of you, we have shared the dream of being totally self reliant and have lived a very modest life style for the past 25 years inorder to be in this situation financially. Being 48 and knowing what we've accomplished together is huge.

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Re: Should I stay or go thoughts

Post by Sandman62 » Fri Mar 08, 2013 11:43 am

My wife and I have been discussing a very similar situation lately, hoping to retire in our mid-50s in 5 years. We both have pensions that we'll get starting right at retirement and we're pretty sure we can live off just that (~$100k, non-COLA though).

We may have to set aside part of our portfolio to cover the effects of inflation on our pensions, but we think we'll be able to hold off taking SS til age 70 (though we also still wrestle with the "or take it at 62 in case they reduce it before we're 70"). At that point, SS would erase the pension inflation-erosion of the 15 years from 55-70, essentially putting us back to about the same buying power at which our pensions began.

Given that, we struggle with:
1) But now that there's no mortgage and college costs will be done by 55, we could really ramp up our savings quite a bit if we work til 60+. But couldn't we say the same thing for working til 66, 70, 75? Why EVER stop working if the only goal is more :moneybag?
vs.
2) When is enough enough? If we have enough to live the life we want, why not check out and spend more time with each other, doing hobbies, volunteering, watching eventual grand kids, etc.?
:?

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Re: Should I stay or go thoughts

Post by ResNullius » Fri Mar 08, 2013 11:50 am

If she doesn't hate her job, she should seriously consider working until 55. You never know what might happen in the future, but a solid pension can't be beat. If she's a teacher, you already get more than 3 months off a year, counting holidays during the school year.

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Re: Should I stay or go thoughts [retire early]

Post by Alex Frakt » Fri Mar 08, 2013 11:59 am

There's not really enough information to give an answer. What are your other sources of income and what are your income requirements? What will you be doing for medical insurance?

IMO, if you will just be squeaking by at 50, you should wait a couple more years unless the job becomes unbearable. On the other hand, if you have a comfortable cushion and want to quit at 50, there's little point in waiting.

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Re: Should I stay or go thoughts [retire early]

Post by chaz » Fri Mar 08, 2013 12:30 pm

Does she like her job? If so, 55.

I liked my job so much, I worked till 74.
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Re: Should I stay or go thoughts [retire early]

Post by Skiffy » Fri Mar 08, 2013 1:02 pm

Speaking from the inlaws perspective--they retired the second they could (at 62). Now in their 80's they are running out of money. A few trips to the hospital, utilities that keep going up (more than they ever thought), car repairs etc.

And you're considering retiring 10 years earlier, so tack on greater uncertainty and unknown expense increases.

I guess we already have made a choice to keep working as we older than your wife with a pension that would pay all our expenses, but we keep maxing out all the Roths, deferred comp and not drawing the pension. . .

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Re: Should I stay or go thoughts [retire early]

Post by Grt2bOutdoors » Fri Mar 08, 2013 1:06 pm

If someone offered me $1 million to stay an extra 5 years, I'd stay. You walk out at 55 and that's what you'll get between your upfront taxable savings and that pension. On the other hand, if the doctors told me I have exactly 10 years to live, I'd walk out today.
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Re: Should I stay or go thoughts [retire early]

Post by cherijoh » Fri Mar 08, 2013 1:07 pm

I will have a pension from a previous job that I left at age 45. I could start drawing the pension at 55 but would then take a 20% haircut. It will ramp up to the full amount by age 60 (the actual amount of pension I would get changes monthly during the ramp up period). I am currently employed at another company and have a 401k plan only (company makes a small contribution outright and matches 100% up to first 5% of my salary).

I'm single, so there is just me to think about. I will probably continue working at least until 60 because (a) I like my current job (at least usually :wink:) and (b) I am NOT eligible for retiree medical benefits from either company. Aside from the health care wild card, I am comfortably positioned for retirement. I am currently taking full advantage of 401k and Roth IRA (including catch-up contributions) to provide more of a cushion. But I have to say that knowing I could soon start drawing a pension if my current job goes south is a great comfort to me in these economic times of uncertainty. If I did leave this job, I would begin drawing it and probably do consulting and or contracting rather than trying to find another F/T position.

OP - would part-time work or contracting be an option for your wife?

C

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Re: Should I stay or go thoughts [retire early]

Post by crowd79 » Fri Mar 08, 2013 1:17 pm

I'd retire. Life's too short. I also don't understand the need not to take SS at age 62 vs 67 or 70. The benefits of waiting can't be that great when you have shortened your retirement years.

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Re: Should I stay or go thoughts [retire early]

Post by david99 » Fri Mar 08, 2013 1:40 pm

Alex Frakt wrote:There's not really enough information to give an answer. What are your other sources of income and what are your income requirements? What will you be doing for medical insurance?

IMO, if you will just be squeaking by at 50, you should wait a couple more years unless the job becomes unbearable. On the other hand, if you have a comfortable cushion and want to quit at 50, there's little point in waiting.

I agree with Alex, there isn't enough information to give an answer. How much do you have saved? What are your other sources of income? What are your expenses?

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SteveNet
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Re: Should I stay or go thoughts [retire early]

Post by SteveNet » Fri Mar 08, 2013 2:26 pm

I retired at 50, so I'm a bit biased. :wink:
I had enough to live on plus some extra.
I am 59 now and have NEVER regretted leaving one bit...but thats just my opinion.

Yes I could have had more money if I worked longer, key word being work.
My blood pressure medication was cut in half which amazed my Dr. as he said he almost never lowers BP meds.
Stress and all.

Now I'm deciding on taking my SS at 66 instead of my original plan of at 62.
Lots of 'free' time to weigh the choices....on everything.

You can always make more money...You can't make more time. :beer
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Re: Should I stay or go thoughts [retire early]

Post by Austintatious » Fri Mar 08, 2013 2:28 pm

If you are certain that you'll have sufficient income to live the lifestyle you'll want to live, then getting out early may be a reasonable option to consider. If you're not sure, if you just "think" you'll have enough, then I'd recommend staying at least until you know. That extra $20K a year in pension income, not to mention whatever additional money you might be able to put aside between now and then, could make a very big difference in the lifestyle you enjoy in retirement. As you mentioned, just knowing that you can bail out if you feel you have to do to keep from going crazy (and, yes, that really can occur) can be enough to help you stick it out a while longer. And 55 y.o. is plenty young to retire. Good luck.

offtocolorado
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Re: Should I stay or go thoughts [retire early]

Post by offtocolorado » Fri Mar 08, 2013 2:55 pm

A few of you have asked for some additional info, so let's keep this going just for fun. "If nothing changes" and we maintain the course and the market returns 6% annually we will have approximately $1,100,000 total in our SEP, 401k and roths at age 52. I do not have a pension so our sole source of income will by my wife's pension and withdraws from the money above. Her company does continue to provide medical benefits to their retired employee and spouse until medicare is available. We do contribute a small % towards medical and understand that we may be responsibile for a larger part of the pie in the future. That is our big concern, the medical benefit being discontinued.

So let's look at it again. If you are debt free and can comfortably live on $50-60k a year would the numbers above work?

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Re: Should I stay or go thoughts [retire early]

Post by EdwardL007 » Fri Mar 08, 2013 4:40 pm

If she likes her job, then why leave so very much extra security on the table?? Why "run away"? Your assumptions about a 6% market return may turn out too high. Do not forget the potential for high medical expenses. Have you guys figured out what the heck you are going to do with your time? I know from experience you will spend MORE in retirement than you ever did before on recreation/dinner/plays/lunches/vacations. And unless you have very specific identified interests to pursue, retirement can be somewhat boring. And do not think you can just go out and get another job that you enjoy and that pays anything worthwhile. Think hard before leaping.

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Re: Should I stay or go thoughts [retire early]

Post by Watty » Fri Mar 08, 2013 5:06 pm

A few factors that were not mentioned;

1) Are the numbers you gave based on her final salary? Is so then she might receive some raises over the extra five years that would make an additional difference.

2) If she will be getting Social Security then she may not have a full 35 years of work history at the age of 50 so working a few additional years could help fill in some zero's in her Social Security calculations and give additional income too.

3) She might see if she could arrange to take something like a six week sabbatical to get a break from work to make the last few years more tolerable.

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Re: Should I stay or go thoughts [retire early]

Post by Marmot » Fri Mar 08, 2013 5:12 pm

Someone above mentioned leaving money on the table. When ever you leave you are going to probably leave money on the table whether it be options, accruing more attractive pension benefits, etc. The difference between 44K and 24K is large to me.That will buy a lot of flexibilty down the road, hard to say no to it. In my situation if I had the "magic number" achieved (as you seem to) I would probably bolt. I have a "frozen pension" that my company is adding 15% of my pay to for each of the next five years. I am considering bailing prior to that time...same tug of war. Money on the table or off the table, I think most every leave situation probably has a hint of this.
Last edited by Marmot on Fri Mar 08, 2013 5:36 pm, edited 1 time in total.

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Re: Should I stay or go thoughts

Post by bmelikia » Fri Mar 08, 2013 5:25 pm

gooch wrote:Go as soon as you can. Life's too short. You can always make more money; you can't make more time.
Agreed.

You just said that financially you are good to go at 50. . .so why would you postpone retirement past age 50 simply to get a larger pensions payout? You're already fine at 50, right? Get outta there!!!
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Re: Should I stay or go thoughts [retire early]

Post by bottlecap » Fri Mar 08, 2013 5:48 pm

offtocolorado wrote:Just putting this out there to those that have retired and those that are almost there. One of the decisions my wife will be faced with in two years is whether or not to retire at age 50 or wait to age 52 or 55. Financially we will be good to go at age 50 but waiting until 52 or 55 increases her pension quite a bit.

With that in mind, what decision have some of you made or will be making with regards to stay or go. I realize it's more than just a financial decision but a life decision. Here's the difference her waiting would make.

50 yrs old pension $24,000 a year
52 yrs old pension $27,000 a year
55 yrs old pension $44,000 a year
I would have to absolutely LOATHE my job, have a terminal illness and/or have absolutely no use for an additional $20k a year not to stay until I was 55.

JT

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Re: Should I stay or go thoughts [retire early]

Post by cherijoh » Fri Mar 08, 2013 6:08 pm

offtocolorado wrote:A few of you have asked for some additional info, so let's keep this going just for fun. "If nothing changes" and we maintain the course and the market returns 6% annually we will have approximately $1,100,000 total in our SEP, 401k and roths at age 52. I do not have a pension so our sole source of income will by my wife's pension and withdraws from the money above. Her company does continue to provide medical benefits to their retired employee and spouse until medicare is available. We do contribute a small % towards medical and understand that we may be responsibile for a larger part of the pie in the future. That is our big concern, the medical benefit being discontinued.

So let's look at it again. If you are debt free and can comfortably live on $50-60k a year would the numbers above work?
Traditionally the "rule of thumb" has been if you retire at a normal retirement age (65 or 66) you can take 4% of your kitty the first year and then index that amount to inflation in subsequent years and have a low risk of running out of money. But I recall some recent posts suggesting that is overly optimistic even at a normal retirement age - it will certainly be overly optimistic for retirement at 52. So I personally would not do it with a $24K pension - I assume without a COLA - and just $1.1M in a retirement nest egg. It looks a whole lot more promising when you wait to 55 and get $44K a year in pension and a presumably bigger nest egg.

If you want to dig into the "rules of thumb" search for SWR (safe withdrawal rate).

C

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Re: Should I stay or go thoughts [retire early]

Post by Babakhani » Fri Mar 08, 2013 6:46 pm

1.1M at age 50 and you are insecure about the medical costs. Given your life expectancy is 30+ years, I would not be comfortable retiring at the prospect of the situation you mentioned. I also wouldn't count on 6% return, since you will be moving towards fixed income if you haven't already. If you still feel ready, work till 52-53 and take out pension at 55.
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Re: Should I stay or go thoughts [retire early]

Post by YDNAL » Fri Mar 08, 2013 6:48 pm

offtocolorado wrote:Just putting this out there to those that have retired and those that are almost there. One of the decisions my wife will be faced with in two years is whether or not to retire at age 50 or wait to age 52 or 55. Financially we will be good to go at age 50 but waiting until 52 or 55 increases her pension quite a bit.
Colorado,

We lost 2 friends in 2011 at age 55 - one totally unexpected, another quite. If we had a crystal ball, and we could see that you/wife are around another 40 years, cash-flowing another $20K extra annually could be a HUGE deal financially. For some other people, $20K may be just a drop in the bucket.
offtocolorado wrote:50 yrs old pension $24,000 a year
52 yrs old pension $27,000 a year
55 yrs old pension $44,000 a year
[edit to add]So you see, "financially we will be good to go" may put in the "drop in the bucket category"... does it?
Last edited by YDNAL on Sat Mar 09, 2013 8:36 am, edited 1 time in total.
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Re: Should I stay or go thoughts [retire early]

Post by user5027 » Fri Mar 08, 2013 8:59 pm

Grt2bOutdoors wrote: On the other hand, if the doctors told me I have exactly 10 years to live, I'd walk out today.
If the doctors are wrong and you live longer can you sue them for malpractice? :twisted:

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Re: Should I stay or go thoughts [retire early]

Post by LadyGeek » Fri Mar 08, 2013 9:03 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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Re: Should I stay or go thoughts [retire early]

Post by Grt2bOutdoors » Fri Mar 08, 2013 9:20 pm

user5027 wrote:
Grt2bOutdoors wrote: On the other hand, if the doctors told me I have exactly 10 years to live, I'd walk out today.
If the doctors are wrong and you live longer can you sue them for malpractice? :twisted:
I would get a multitude of opinions - when you're life is on the line, money becomes almost no object since I won't be taking it with me and life insurance will take care of the rest.
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Re: Should I stay or go thoughts [retire early]

Post by kramer » Fri Mar 08, 2013 10:08 pm

An additional important factor is that you don't say whether the pension is adjusted for inflation. Without knowing that, it cannot be properly valued. Also, is there a survivor benefit for yourself?

For a couple 50 years old, I would prefer not to take more than 2.5% per year from the nest egg initially. That is because your medical insurance expenses will probably rise until you are age 65 and could potentially rise a lot, as you stated.

You also didn't mention either of your situations with respect to social security. Will you both be getting it? This makes a huge difference in the calculation. A high earning couple might get almost all of your required income by taking social security at age 70. That would allow you take a somewhat higher percentage from the nest egg and at least reduce pension inflation worries if it is not adjusted.

Finally, one should consider taxes. A higher pension is not all win because you will paying more of the additional pension in income taxes.

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Re: Should I stay or go thoughts [retire early]

Post by Sbashore » Sun Mar 10, 2013 11:25 am

I was faced with a similar decision. In fact the pension percentages were similar. I waited. I'm glad I did. It fit my situation better.
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