Retire in 2 years at 55 - Can I do it

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multiham
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Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 3:10 pm

Would like to understand if the group believes I can retire in 2 years at 55

Situation

$1.7 million in 401K
$400,000 in Taxable Accounts
Will contribute another $60,000 to 401K before retirement and additional $30,000 to taxable
Pension worth $56,000 per year (NO COLA) if I start taking in 2020 and $60,000 per year if I wait until January 2022
Estimate my expenses in retirement at $75,000 and will add another $35,000 per year for Medical for my wife and myself. Brings total to $110,000
Estimate Social Security at 62 at $24,000 per year.
Married and spouse is also 53.

Appreciate the thoughts. I tend to be more glass half full, so I think it looks good! Ready for my dose of reality!

Bacchus01
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Re: Retire in 2 years at 55 - Can I do it

Post by Bacchus01 » Sun Jun 10, 2018 3:13 pm

Yes you can

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Alexa9
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Re: Retire in 2 years at 55 - Can I do it

Post by Alexa9 » Sun Jun 10, 2018 3:20 pm

The largest factor is your budget and lifestyle.
Do you want to sail the Caribbean or tour Europe?
Do you go out to fancy restaurants or play golf everyday?
Living below your means is as important as ever in retirement.

HornedToad
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Re: Retire in 2 years at 55 - Can I do it

Post by HornedToad » Sun Jun 10, 2018 3:29 pm

multiham wrote:
Sun Jun 10, 2018 3:10 pm
Would like to understand if the group believes I can retire in 2 years at 55

Situation

$1.7 million in 401K
$400,000 in Taxable Accounts
Will contribute another $60,000 to 401K before retirement and additional $30,000 to taxable
Pension worth $56,000 per year (NO COLA) if I start taking in 2020 and $60,000 per year if I wait until January 2022
Estimate my expenses in retirement at $75,000 and will add another $35,000 per year for Medical for my wife and myself. Brings total to $110,000
Estimate Social Security at 62 at $24,000 per year.
Married and spouse is also 53.

Appreciate the thoughts. I tend to be more glass half full, so I think it looks good! Ready for my dose of reality!
Rough calculations.

You'll have $2.2 million in 2 years. Let's say you use your assets first 2 years so you have $60k pension. That'll cost $220k. Now you have ~$2mil with a 60k/year pension. For 5 more years until SS you need to withdrawal $50k/year. That's $250k total so now you are at 1.75mil (Assuming zero growth).

Now with SS you have $84k/yr in "income" and need to get $26k/yr from your portfolio. That's a ~1.5% withdrawal rate, which is effectively indefinite considering growth and should make up for the first pension not being COLA'ed.

As long as your estimate of expenses are accurate and there's not too many splurges, you should be fine. I'd make sure your current portfolio is a good mix of stocks/bonds so if market crashes then you have bonds to leverage the first part of retirement.

FireHorse
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Re: Retire in 2 years at 55 - Can I do it

Post by FireHorse » Sun Jun 10, 2018 6:47 pm

You are good to go.
:sharebeer

ychuck46
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Re: Retire in 2 years at 55 - Can I do it

Post by ychuck46 » Sun Jun 10, 2018 7:01 pm

To net things out - Yes.

WhiteMaxima
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Re: Retire in 2 years at 55 - Can I do it

Post by WhiteMaxima » Sun Jun 10, 2018 7:05 pm

House paid off? Medical insurance covered from former employer. To be safe, work extra years more even part-time with medical insurance coverage.

JoeRetire
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Re: Retire in 2 years at 55 - Can I do it

Post by JoeRetire » Sun Jun 10, 2018 7:16 pm

multiham wrote:
Sun Jun 10, 2018 3:10 pm
Would like to understand if the group believes I can retire in 2 years at 55

Situation

$1.7 million in 401K
$400,000 in Taxable Accounts
Will contribute another $60,000 to 401K before retirement and additional $30,000 to taxable
Pension worth $56,000 per year (NO COLA) if I start taking in 2020 and $60,000 per year if I wait until January 2022
Estimate my expenses in retirement at $75,000 and will add another $35,000 per year for Medical for my wife and myself. Brings total to $110,000
Estimate Social Security at 62 at $24,000 per year.
Married and spouse is also 53.

Appreciate the thoughts. I tend to be more glass half full, so I think it looks good! Ready for my dose of reality!
Maybe.

Is the pension single life or joint and survivor?
Is your Social Security estimate a total for both of you? What is your share? What is her share?
What longevity do each of you expect?

I'd suggest you run the numbers for delaying your pension until 2022 and for various claiming strategies between you and your wife - in particular having at least the higher earner delay until 70.

Most likely you will be okay, but without knowing answers to my questions above I'd worry if one of you passed early. And of course we need to cross our fingers and hope the market doesn't tank in the next year or two.

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Sandtrap
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Re: Retire in 2 years at 55 - Can I do it

Post by Sandtrap » Sun Jun 10, 2018 8:44 pm

Looks great!
Congratulations on your hard earned successes.
1 Would you be able to survive any "personal or financial black swans" that come your way?
2 Are you considering moving from HCOL to LCOL and/or downsizing to cut expenses?
3. Search the archives/threads for "sequence of returns risk".
4. Health care and health expenses can sink a ship. From age 55 to medicare eligibility, are you prepared?

Some thoughts,
aloha
j

multiham
Posts: 164
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 9:46 pm

WhiteMaxima wrote:
Sun Jun 10, 2018 7:05 pm
House paid off? Medical insurance covered from former employer. To be safe, work extra years more even part-time with medical insurance coverage.
House will be paid off. If I make 55 at the megacorp I work for, I get to buy benefits at current employee rates. This will be about 15% of the $35,000 I put in for medical. Did that just so I can be conservative. Even if things do not go as planned, I can buy Health Insurance from my company for less than $10,000 for my wife and I.

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MP123
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Re: Retire in 2 years at 55 - Can I do it

Post by MP123 » Sun Jun 10, 2018 9:48 pm

That's a nice pension even without the COLA. I'd say your health care estimate is about right considering the state of ACA.

Housing costs, kid's college (or boomerang), aging parents needing support?

Looks good to me and I'm more glass half empty.

The breakdown by Hornedtoad above is a good way to approach it. I'll add that once 65 your $35k/yr for health care will hopefully be lower. You'll also want to figure out the best strategy for taxable vs 401k spending considering your tax situation.

multiham
Posts: 164
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 9:54 pm

Alexa9 wrote:
Sun Jun 10, 2018 3:20 pm
The largest factor is your budget and lifestyle.
Do you want to sail the Caribbean or tour Europe?
Do you go out to fancy restaurants or play golf everyday?
Living below your means is as important as ever in retirement.
Many would call my lifestyle a little boring! I definitely do not live a life of extravagance and that does not have much to do with my income level. Best way I can describe myself:

Would rather have a great pizza and birch beer at a family pizzeria than eat at any fancy restaurant
My bucket list is all in the US and contains items such as seeing a college football game at LSU, going to the Indy 500, seeing every major league baseball park.
Strong desire to move from the N/E (PA) to the South and find a nice college town where we can walk to events
Learning to fly a remote control airplane
Learning the guitar

multiham
Posts: 164
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 10:01 pm

JoeRetire wrote:
Sun Jun 10, 2018 7:16 pm
multiham wrote:
Sun Jun 10, 2018 3:10 pm
Would like to understand if the group believes I can retire in 2 years at 55

Situation

$1.7 million in 401K
$400,000 in Taxable Accounts
Will contribute another $60,000 to 401K before retirement and additional $30,000 to taxable
Pension worth $56,000 per year (NO COLA) if I start taking in 2020 and $60,000 per year if I wait until January 2022
Estimate my expenses in retirement at $75,000 and will add another $35,000 per year for Medical for my wife and myself. Brings total to $110,000
Estimate Social Security at 62 at $24,000 per year.
Married and spouse is also 53.

Appreciate the thoughts. I tend to be more glass half full, so I think it looks good! Ready for my dose of reality!
Maybe.

Is the pension single life or joint and survivor?
Is your Social Security estimate a total for both of you? What is your share? What is her share?
What longevity do each of you expect?

I'd suggest you run the numbers for delaying your pension until 2022 and for various claiming strategies between you and your wife - in particular having at least the higher earner delay until 70.

Most likely you will be okay, but without knowing answers to my questions above I'd worry if one of you passed early. And of course we need to cross our fingers and hope the market doesn't tank in the next year or two.

1. The numbers I provided on pension is joint and survivor at 100%
2. My Social Security estimate is just for me. I need to figure out my spouses share, so it will actually be higher than I provided
3. Unfortunately, both my parents passed away in their early 60's and never had a chance to retire. That is what has driven me to save and to focus on having the option to retire at 55. I'm also focusing now on getting healthier and exercising more.
4. I have run all the numbers on the pension and it increases about $3,000 a year for every year I delay taking it.

multiham
Posts: 164
Joined: Sun Jan 08, 2017 11:28 am

Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 10:15 pm

Sandtrap wrote:
Sun Jun 10, 2018 8:44 pm
Looks great!
Congratulations on your hard earned successes.
1 Would you be able to survive any "personal or financial black swans" that come your way?
2 Are you considering moving from HCOL to LCOL and/or downsizing to cut expenses?
3. Search the archives/threads for "sequence of returns risk".
4. Health care and health expenses can sink a ship. From age 55 to medicare eligibility, are you prepared?

Some thoughts,
aloha
j
Thank you! I've worked hard all my life and have appreciated the ability to provide for my family. I do not take this for granted. I was the first person in my family to go to college. After only 2 years of working, my yearly salary was higher than my dad had ever made in 30+ years working with 1 company. I can remember thinking that I had a great childhood and it wasn't because of $. We always ate together as a family, we always talked, and my parents were always there to support me.

Hopefully, I will be as okay as you can be on the medical front. I have the ability to buy relatively cheap (<$10,000 per year) medical insurance from my employer and as long as I don't cancel it, it will carry on until I am medicare eligible.

As mentioned in another reply, we are looking forward to moving south (in PA now) to a college town where events are walkable. My plan is to use the proceeds from the sale of our current house to buy our next home. This might actually generate additional cash which I have not accounted for as my numbers do not include the equity in our house.

multiham
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Sun Jun 10, 2018 10:22 pm

MP123 wrote:
Sun Jun 10, 2018 9:48 pm
That's a nice pension even without the COLA. I'd say your health care estimate is about right considering the state of ACA.

Housing costs, kid's college (or boomerang), aging parents needing support?

Looks good to me and I'm more glass half empty.

The breakdown by Hornedtoad above is a good way to approach it. I'll add that once 65 your $35k/yr for health care will hopefully be lower. You'll also want to figure out the best strategy for taxable vs 401k spending considering your tax situation.
I agree on the pension! I feel so lucky to be at a company that still offers that benefit. I realized after 10 years on the job how important the pension would be and it has been the deciding factor in me staying with the company when I've had other offers.

Kids college is pretty much taken care of. They will each have enough to go to a 4 year state college. So happy I started saving the day they were born.

I've been blessed to have had a great life so far and really looking forward to the next stage in a couple of years! We have prioritized savings and our children for so long that it will be very strange when we change course (although I will still find a way to save $!)

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Alexa9
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Re: Retire in 2 years at 55 - Can I do it

Post by Alexa9 » Sun Jun 10, 2018 10:25 pm

multiham wrote:
Sun Jun 10, 2018 9:54 pm
Many would call my lifestyle a little boring! I definitely do not live a life of extravagance and that does not have much to do with my income level. Best way I can describe myself:

Would rather have a great pizza and birch beer at a family pizzeria than eat at any fancy restaurant
My bucket list is all in the US and contains items such as seeing a college football game at LSU, going to the Indy 500, seeing every major league baseball park.
Strong desire to move from the N/E (PA) to the South and find a nice college town where we can walk to events
Learning to fly a remote control airplane
Learning the guitar
That is great! I am similar. I prefer a frugal lifestyle and luckily find travel stressful. I love to cook and rarely go to restaurants. I like to read and exercise and enjoy inexpensive hobbies. Free festivals nearby are fun and I do splurge on a concert once in a while. This is important to realize when retirement planning. Some people work hard their entire life to live it up in retirement while some keep a similar lifestyle or even become more frugal. There are simple joys in life. :beer

22twain
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Re: Retire in 2 years at 55 - Can I do it

Post by 22twain » Mon Jun 11, 2018 12:54 am

multiham wrote:
Sun Jun 10, 2018 9:54 pm
Strong desire to move from the N/E (PA) to the South and find a nice college town where we can walk to events
... and work up a nice sweat, at least during late spring through early fall. :wink: My wife and I worked for many years at a small-town small college in the South and still live there in retirement. This morning I went out for a walk (about an hour) and was drenched in sweat when I came back.

However, I'm glad I don't have to shovel snow like my father and I used to do in Ohio. My parents fled to Florida when they retired. 8-)
My investing princiPLEs do not include absolutely preserving princiPAL.

JoeRetire
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Re: Retire in 2 years at 55 - Can I do it

Post by JoeRetire » Mon Jun 11, 2018 6:03 am

multiham wrote:
Sun Jun 10, 2018 10:01 pm
1. The numbers I provided on pension is joint and survivor at 100%
Nice!
2. My Social Security estimate is just for me. I need to figure out my spouses share, so it will actually be higher than I provided
Yes, you really should do that as you estimate. It's seldom optimal for the higher earner to start benefits at 62.
A terrific site for coming up with a social security claiming strategy is https://maximizemysocialsecurity.com/
3. Unfortunately, both my parents passed away in their early 60's and never had a chance to retire. That is what has driven me to save and to focus on having the option to retire at 55. I'm also focusing now on getting healthier and exercising more.
One of the nice aspects of retirement is having the time to focus on the things that are important to you. For many, getting healthier and exercising more is near the top of that list.
4. I have run all the numbers on the pension and it increases about $3,000 a year for every year I delay taking it.
Seems like you are in great shape financially.
If you haven't already done so and feel the need, now would be a great time to spend a few hours with a fee-only fiduciary financial planner. They could take a holistic view of your goals, plans, and assets and help you come up with a financial plan that you could carry out confidently.

bltn
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Re: Retire in 2 years at 55 - Can I do it

Post by bltn » Mon Jun 11, 2018 7:06 am

From the numbers you provide, I think you could retire in 2 years, based on a 4% withdrawal rate of your retirement assets. This will allow payment of taxes and provide enough for your living expenses.
But, if I were in your place, I would work four more years rather than two to provide a security cushion. For me , security means having a little more than I need, to take care of unexpected financial problems. This will add to your savings and your pension and give your retirement a cushion that may be hard to add to later in life after retirement. This might also allow you to delay taking Social Security , another good thing.
These are my thoughts when thinking about retirement.
Good job so far.
Last edited by bltn on Mon Jun 11, 2018 11:24 am, edited 1 time in total.

Flora
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Re: Retire in 2 years at 55 - Can I do it

Post by Flora » Mon Jun 11, 2018 7:28 am

Enough for 4 years of college at in state rates for the kids? How does moving to a new state affect this since your state of residency will change?

multiham
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Mon Jun 11, 2018 7:50 am

Flora wrote:
Mon Jun 11, 2018 7:28 am
Enough for 4 years of college at in state rates for the kids? How does moving to a new state affect this since your state of residency will change?
Have put away enough for most state schools that my kids are interested in going to. Does not have to be in-state. My first is looking at the State Colleges in South Carolina and Florida. He has worked hard enough that he will most likely qualify for in-state tuition based on his SAT scores. It will actually be cheaper to go there, than to go to Penn State here in PA. There are quite a few State Colleges in the Southeast that offer in-state tuition based solely on SAT/ACT test scores. We have had the conversation and they understand exactly what is saved. If they go above it, they are on the hook for the difference.

carolinaman
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Re: Retire in 2 years at 55 - Can I do it

Post by carolinaman » Mon Jun 11, 2018 8:03 am

Congratulations! You have done well with your savings. You should be in great shape financially.

Now the important question. Once you retire, what will you do after breakfast? This is a serious question. Some young retirees thrive in retirement and others have trouble adjusting to a life without work. It is important to think this through carefully so you will have a good game plan for retirement. Best wishes.

Glockenspiel
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Re: Retire in 2 years at 55 - Can I do it

Post by Glockenspiel » Mon Jun 11, 2018 8:16 am

Yes. I think you can do it, without even being nervous about it. So the only reason to work until 55 is to be able to buy health insurance at current employee rates? That is a great reason to work until that age and will save you a lot of money until you can get Medicare.

ExitStageLeft
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Re: Retire in 2 years at 55 - Can I do it

Post by ExitStageLeft » Mon Jun 11, 2018 7:25 pm

Have you looked at FIRECalc to see how your retirement savings would fare against historical market returns?
https://www.firecalc.com/

Based on the numbers in your original post you could reasonably spend $123k per year.

multiham
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Mon Jun 11, 2018 9:05 pm

Thank you everyone for your comments! I’ve learned so much on this site.

I don’t know if everyone else feels the same, but it seems only yesterday that I was in college and thinking about 1st job. Now, I’m thinking about next phase of life. Just seems strange.

While it’s still a couple of years away, I’m already planning my volunteer projects and looking forward to owning my own schedule for the first time in 40 years!

multiham
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Mon Jun 11, 2018 9:08 pm

ExitStageLeft wrote:
Mon Jun 11, 2018 7:25 pm
Have you looked at FIRECalc to see how your retirement savings would fare against historical market returns?
https://www.firecalc.com/

Based on the numbers in your original post you could reasonably spend $123k per year.
Thank you. I did run and it’s a hard to believe that it’s looking like I can make this happen. Always good to get feedback from others to verify what I was seeing.

multiham
Posts: 164
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Re: Retire in 2 years at 55 - Can I do it

Post by multiham » Mon Jun 11, 2018 9:12 pm

Glockenspiel wrote:
Mon Jun 11, 2018 8:16 am
Yes. I think you can do it, without even being nervous about it. So the only reason to work until 55 is to be able to buy health insurance at current employee rates? That is a great reason to work until that age and will save you a lot of money until you can get Medicare.
The medical is definitely the biggest thing keeping me working. I also still enjoy many elements of my job. It’s just nice to know that all the savings and choices we made will now pay off.

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