Early retirement - hypothetical

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nwa-non
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Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 9:01 pm

Let's say this the following scenario.

I have $300k in my current 401(k). I'm 40 years old. I'm thinking about retiring tomorrow. Convert the 401(k) into a t-IRA. Then use the 72(t) SEPP rule to draw about $12,500 per year, using the Single Life Expectancy table. That would be a 4.16% withdrawal rate.

Details about me:
My job pays about $160,00 per year. Extremely hectic, high stress job with constant travel.
Have $60,000 in Roth IRA.
About $20,000 in cash.

Other details:
My spouse works. Annual income $105,000. Spouse will continue working. Health insurance for family covered by spouse's work.
Child's 529 has $25,000. Spouse will keep funding, although at slower rate.
Spouse's 401(k): $300,000 - and will continue to fund at the highest rate
Spouse's Roth IRA: $25,000 - and will continue to fund at the highest rate.
Mortgage of $1,500 monthly payment.

My current income funds the following: $3,500 towards extra mortgage every month. Funds my 401(k) fully. And a whole lot of discretionary spending!

Living expenses (mostly) all covered by the one income. The approximately $1,000/month I draw from my IRA will be just my "playing around" money extra money.

Staying at home will save expenses on: Child-care, cleaning service, bring down tax bracket significantly.

Is there anything wrong in this scenario? Can't I "retire" from my day job tomorrow? I see myself doing a lot of volunteering and maybe work part time twice a week, at lower pressure, local jobs.

Thanks in advance to those to reads this and responds!
Last edited by nwa-non on Sun Mar 24, 2019 10:49 pm, edited 2 times in total.

buckskinbowman
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Re: Early retirement - hypothetical

Post by buckskinbowman » Sun Mar 24, 2019 9:16 pm

Your first problem might be your spouse working hard earning all the money while you are 'retired'. Maybe you need to just think about switching to a less stressful job.

Thegame14
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Re: Early retirement - hypothetical

Post by Thegame14 » Sun Mar 24, 2019 9:20 pm

how can you "fund" a 401K when you have no earned income????

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 9:23 pm

Thegame14 wrote:
Sun Mar 24, 2019 9:20 pm
how can you "fund" a 401K when you have no earned income????
My spouse, who works and will continue to work, will fund the 401(k). [Not fund my 401(k)]

sailaway
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Re: Early retirement - hypothetical

Post by sailaway » Sun Mar 24, 2019 9:26 pm

As a stay at home spouse, I have never claimed to be retired.

Looking at your finances as a couple, what would be the point of drawing down your 401k now? Does it make the best option given your current tax bracket?

How stressful would it be to find a job that paid that amount, instead?

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 9:36 pm

sailaway wrote:
Sun Mar 24, 2019 9:26 pm
As a stay at home spouse, I have never claimed to be retired.

Looking at your finances as a couple, what would be the point of drawing down your 401k now? Does it make the best option given your current tax bracket?

How stressful would it be to find a job that paid that amount, instead?
That's a great question!

I saw a job post about Dominoes driver making $26/hour in the area I live in. If I work as a Dominoes driver for 4 hours/day, 3 days a week, I'll make over $1,200 a month!

pasadena
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Re: Early retirement - hypothetical

Post by pasadena » Sun Mar 24, 2019 9:43 pm

This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

You could, yes, stop working for a while, say until the end of the school year, then reassess (and in doing so, I would try to negotiate being laid off instead of just quitting. Uncommon, but sometimes it works). Isn't there jobs in your industry that would be less hectic and stressful??

4.16% as a starting point, at 40 years old, with a child and a spouse making 2/3 of your income... that's probably not going to sustain you forever. Not to mention the drag on your relationship with the working spouse. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 10:02 pm

pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.

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MP123
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Re: Early retirement - hypothetical

Post by MP123 » Sun Mar 24, 2019 10:22 pm

What are your annual expenses?

I would recast this idea as "working part-time" or "taking care of the kids" or something like that rather than early retirement. From what you've said it sounds like you could make it work if your spouse is onboard.

I'd also leave your 401k/IRA alone for the time being.

delamer
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Re: Early retirement - hypothetical

Post by delamer » Sun Mar 24, 2019 10:23 pm

Everyone with a job is making a tradeoff between time and money.

Your plan is to go from one extreme to another — little time, high income to lots of time, no income.

You are trading one problem for another, and underestimating the impact on your family of eliminating your income. Actually, not just eliminating your income but taping your savings for “playing around money.”

You can’t retire tomorrow. But you can change jobs.

sawdust60
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Re: Early retirement - hypothetical

Post by sawdust60 » Sun Mar 24, 2019 10:37 pm

Instead of using the 72(t) SEPP rule, consider Roth conversions. After 5 years, the conversion amount can be withdrawn without penalty. You control the timing of the Roth conversions. You may not need to make withdrawals, and you have not locked yourself into restrictive withdrawal plan.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 10:47 pm

MP123 wrote:
Sun Mar 24, 2019 10:22 pm
What are your annual expenses?

I would recast this idea as "working part-time" or "taking care of the kids" or something like that rather than early retirement. From what you've said it sounds like you could make it work if your spouse is onboard.

I'd also leave your 401k/IRA alone for the time being.
This is a great angle. I really would like to spend more time with my kid. Get involved with PTC, coaching sports, getting homework done, not have before and after school care ...

Main annual expenses:
Mortgage: $18k
Food/Grocery: $6k
Heath Insurance prem/deductible: $6k
Life Insurance prem: $1k
Childcare: $3k
Child Activities: $4k
Utilities: $4k
Gas/Car related costs: $6k
Eating out: $3k
Vacation: $6k
Cleaning service: $3k
Total: $60k

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Sun Mar 24, 2019 10:52 pm

sawdust60 wrote:
Sun Mar 24, 2019 10:37 pm
Instead of using the 72(t) SEPP rule, consider Roth conversions. After 5 years, the conversion amount can be withdrawn without penalty. You control the timing of the Roth conversions. You may not need to make withdrawals, and you have not locked yourself into restrictive withdrawal plan.
But you pay tax on the amount converted to Roth in the year that is converted, right?

randomguy
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Re: Early retirement - hypothetical

Post by randomguy » Sun Mar 24, 2019 11:17 pm

buckskinbowman wrote:
Sun Mar 24, 2019 9:16 pm
Your first problem might be your spouse working hard earning all the money while you are 'retired'. Maybe you need to just think about switching to a less stressful job.
That would be my first thought:) You are talking about a pretty drastic drop off in living style (i.e. you are on pace to pay off your mortgage in like 7 years right now. How will it feel to stretch that out to 20?) and it is only going to work if both parties are on board. I would definitely trying living on your imaginary budget for 6 months to see how you like it.

Not sure that contributing money to a 401(k) while taking out of another actually does anything. Maybe when you divorce but you would have to review your states laws on marital versus property

gamboolman
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Re: Early retirement - hypothetical

Post by gamboolman » Mon Mar 25, 2019 12:10 am

Your in the make hay while the sun is shining mode - imho

Kids and babies.....You have expenses coming in big chunks.....

Save now, work hard for the next 15 to 20 years. Then look at it again

Take some long weekends, some nice vacations....

Go back to work

sawdust60
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Re: Early retirement - hypothetical

Post by sawdust60 » Mon Mar 25, 2019 12:16 am

nwa-non wrote:
Sun Mar 24, 2019 10:52 pm
sawdust60 wrote:
Sun Mar 24, 2019 10:37 pm
Instead of using the 72(t) SEPP rule, consider Roth conversions. After 5 years, the conversion amount can be withdrawn without penalty. You control the timing of the Roth conversions. You may not need to make withdrawals, and you have not locked yourself into restrictive withdrawal plan.
But you pay tax on the amount converted to Roth in the year that is converted, right?
Yes, converting pretax IRA to Roth is taxed.

HEDGEFUNDIE
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Re: Early retirement - hypothetical

Post by HEDGEFUNDIE » Mon Mar 25, 2019 12:55 am

nwa-non wrote:
Sun Mar 24, 2019 10:02 pm
pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.
Maybe a new job with a humane manager would solve your problems.

Glasgow
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Re: Early retirement - hypothetical

Post by Glasgow » Mon Mar 25, 2019 12:57 am

nwa-non wrote:
Sun Mar 24, 2019 10:47 pm
MP123 wrote:
Sun Mar 24, 2019 10:22 pm
What are your annual expenses?

I would recast this idea as "working part-time" or "taking care of the kids" or something like that rather than early retirement. From what you've said it sounds like you could make it work if your spouse is onboard.

I'd also leave your 401k/IRA alone for the time being.
This is a great angle. I really would like to spend more time with my kid. Get involved with PTC, coaching sports, getting homework done, not have before and after school care ...

Main annual expenses:
Mortgage: $18k
Food/Grocery: $6k
Heath Insurance prem/deductible: $6k
Life Insurance prem: $1k
Childcare: $3k
Child Activities: $4k
Utilities: $4k
Gas/Car related costs: $6k
Eating out: $3k
Vacation: $6k
Cleaning service: $3k
Total: $60k
Once you stay home, you can probably shave off $7K from your annual expense ($1K on gas, $3k on childcare and and $3K on cleaning service).
If I were in your shoes, I'd look for different job instead of drastically reducing income from paper crusher at $80/hr to pizza pusher at $26/hr.

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Re: Early retirement - hypothetical

Post by mrspock » Mon Mar 25, 2019 1:15 am

I'd take a deep breath. $160k/yr is a really good paying job, and if the stress is getting to you then maybe try a new job paying slightly less money.

On the other hand, if you want to stay home to take care of the kids, that's a different story. This isn't 1920, and men can be stay-at-home fathers just the same as women, talk this over with your spouse and see if you are both on the same page (and can make the finances work), but I wouldn't dress this up as retired (you aren't even close).

chipperd
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Re: Early retirement - hypothetical

Post by chipperd » Mon Mar 25, 2019 4:54 am

Interesting idea.
As a dad who stayed home with 3 kids while wife worked full time, I will tell you I was really psyched to go to drop off the kids at childcare for 2 hours a day and go to work p.t. ( I worked for a private practice from about 3-7pm 4 days / week). Wife would pick them up on her way home. Worked for us for about 10 years, then I add back in time until now (age 52 and kids are late teens) as I am considering another downshift in work. Saved a but load on childcare (about 1k/month and those are post tax dollars. Not sure who was saying 3k/year, but depending on age and number of kids, 1-1.5k/month isn't unheard of in my part of the country) YMMV.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 5:11 am

THIS!
chipperd wrote:
Mon Mar 25, 2019 4:54 am
Interesting idea.
As a dad who stayed home with 3 kids while wife worked full time, I will tell you I was really psyched to go to drop off the kids at childcare for 2 hours a day and go to work p.t. ( I worked for a private practice from about 3-7pm 4 days / week). Wife would pick them up on her way home. Worked for us for about 10 years, then I add back in time until now (age 52 and kids are late teens) as I am considering another downshift in work. Saved a but load on childcare (about 1k/month and those are post tax dollars. Not sure who was saying 3k/year, but depending on age and number of kids, 1-1.5k/month isn't unheard of in my part of the country) YMMV.
Maybe touching the 401(k) isn't the greatest idea but this could/should work! Work 3-4 hours/day, 3-4 days/week.

rich126
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Re: Early retirement - hypothetical

Post by rich126 » Mon Mar 25, 2019 6:44 am

delamer wrote:
Sun Mar 24, 2019 10:23 pm
Everyone with a job is making a tradeoff between time and money.

Your plan is to go from one extreme to another — little time, high income to lots of time, no income.

You are trading one problem for another, and underestimating the impact on your family of eliminating your income. Actually, not just eliminating your income but taping your savings for “playing around money.”

You can’t retire tomorrow. But you can change jobs.
Too many people get caught up in the rat race and often mix up what they truly need vs. what they want. While this isn't true for everyone, it is true for too many. I hear things like "we need a 4 bedroom, 3 bathroom house" but they don't need it, they want it. And there are consequences for buying those items such as having to work long hours in stressful jobs. Its like people who say "I deserve a nice car", sure if you can afford it and are aware of the consequences of paying an extra $30K/50K for that item.

You only live once and most people have to decide what is enough.

harvestbook
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Re: Early retirement - hypothetical

Post by harvestbook » Mon Mar 25, 2019 7:33 am

People get real weird one way or another when you use the word "retirement," like you're getting out from under the yoke they're still tethered to, or you're not meeting their personal definition of it. Well, I'd just use a different word and try to shape your life as you want it to be. We're all so twisted up with societal expectations and brainwashing that it's hard to imagine a different way to live, yet plenty of people still manage it just fine.

Develop a plan with your wife. She might want to work a long time, or maybe she wants a turn out from under the wheel at some point. It really comes down to how much you're willing to give up to make it happen. And, of course, it's one thing to sacrifice for your own dream, but when you have kids and a spouse, you made a separate bargain that doesn't allow you to do that. I've always made happiness the primary goal, and all else is in service of that (including the illusion of security, living up to what other people expect, and chasing some bank-account number). But paying the bills comes first. Take your time. It's possible that just imagining a different life and moving toward it will have you smiling at the boss in no time.
I'm not smart enough to know, and I can't afford to guess.

renue74
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Re: Early retirement - hypothetical

Post by renue74 » Mon Mar 25, 2019 8:04 am

I own a small business and am always "working," in terms of thinking about my clients and employees. It's not stressful...but I'm always "on."

I remember I once had an employee whose boyfriend worked for a large bank in the city. We live near Charlotte,NC.

She said he worked 70-80 hours per week and it was super stressful. The guy's team was tasked with putting together IPO proposals for clients considering going public. She said that people with families would typically go home about 6ish...watch their kids at whatever sports they were doing and then go back to the office and work until 11 or so. The environment actually produced that type of stressful work. Everybody on the team would criticize and make fun of folks who didn't work that way.

To me...that's not a way to live.

It sounds like you're scapegoating retirement for the need to have a less stressful job.

Pull back from your situation and look at the overall picture...then make a plan.

fasteddie911
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Re: Early retirement - hypothetical

Post by fasteddie911 » Mon Mar 25, 2019 11:08 am

Interesting perspective, sounds like you're quitting or going part-time to be a stay at home parent, not sure that's retiring and certainly not out of the ordinary. In any case, you have ~700k b/w the two of you, your expenses will be 55k or less. With your spouses salary of 105k you should be more than able to meet your expenses and max their 401k and both of your IRAs. In 20yrs you could have a portfolio over >2M which is more than enough with your expenses. Early retirement can be an option. Funding college will not be an issue either. You don't need to draw from your 401k, just do odd jobs for fun money or to add a buffer. If your spouse is on board you are, and will be, in good shape.

Hockey10
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Re: Early retirement - hypothetical

Post by Hockey10 » Mon Mar 25, 2019 2:14 pm

Read this blog:

https://retireby40.org/

Joe retired around your age, which was several years ago. His wife still works full time, but he has some side gigs that bring in money. He is a very honest and down to earth writer who has posted his life experiences for all to see. Maybe you will get some ideas from him.

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Re: Early retirement - hypothetical

Post by bloom2708 » Mon Mar 25, 2019 4:17 pm

Is your spouse on board?

You could certainly go to one income, lower expenses and save less if everyone is on board.

It is nuance if you are retired or not. I think you are more a stay at home parent with a working spouse. Doesn't matter which is which.

I wouldn't do the 72t. You need that money for future "deferred spending" when you both are retired. I would back off saving to just pre-tax 401k and 2 x Roth IRAs. I would not to Roth Conversions when one spouse is working. Do those when income is low and both are not working and before SS.

I would downsize the house, lower the mortgage or have no mortgage and live off one income. Oh wait, we did that about 5 years ago. I work and my wife stays at home. Even though our kids are 19, 15 and 11 and are in school much of the day. It is working. We save less, but much lower stress levels.

I took 1 year off when my wife had a good/high paying job. We tested out the waters and determined that I had the "work" temperament and she had the "stay at home" temperament. We power saved, paid off the mortgage in 2007 and got ahead of the game. Now we are just riding the game. I guess.

Good luck!
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 5:48 pm

fasteddie911 wrote:
Mon Mar 25, 2019 11:08 am
Interesting perspective, sounds like you're quitting or going part-time to be a stay at home parent, not sure that's retiring and certainly not out of the ordinary. In any case, you have ~700k b/w the two of you, your expenses will be 55k or less. With your spouses salary of 105k you should be more than able to meet your expenses and max their 401k and both of your IRAs. In 20yrs you could have a portfolio over >2M which is more than enough with your expenses. Early retirement can be an option. Funding college will not be an issue either. You don't need to draw from your 401k, just do odd jobs for fun money or to add a buffer. If your spouse is on board you are, and will be, in good shape.
Thanks, some sage advice in your response.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 5:49 pm

Hockey10 wrote:
Mon Mar 25, 2019 2:14 pm
Read this blog:

https://retireby40.org/

Joe retired around your age, which was several years ago. His wife still works full time, but he has some side gigs that bring in money. He is a very honest and down to earth writer who has posted his life experiences for all to see. Maybe you will get some ideas from him.
Yeah, I know about the FIRE crowd. Thanks.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 5:55 pm

bloom2708 wrote:
Mon Mar 25, 2019 4:17 pm
Is your spouse on board?

You could certainly go to one income, lower expenses and save less if everyone is on board.

It is nuance if you are retired or not. I think you are more a stay at home parent with a working spouse. Doesn't matter which is which.

I wouldn't do the 72t. You need that money for future "deferred spending" when you both are retired. I would back off saving to just pre-tax 401k and 2 x Roth IRAs. I would not to Roth Conversions when one spouse is working. Do those when income is low and both are not working and before SS.

I would downsize the house, lower the mortgage or have no mortgage and live off one income. Oh wait, we did that about 5 years ago. I work and my wife stays at home. Even though our kids are 19, 15 and 11 and are in school much of the day. It is working. We save less, but much lower stress levels.

I took 1 year off when my wife had a good/high paying job. We tested out the waters and determined that I had the "work" temperament and she had the "stay at home" temperament. We power saved, paid off the mortgage in 2007 and got ahead of the game. Now we are just riding the game. I guess.

Good luck!
At our current rate of accelerated paying down the mortgage, we're less than 4 years away. If we went that route, it would be a total of 9 years in which we paid down off the house.

My spouse has no intention of retiring early. Loves the work and would continue to work. I thought I did not have the temperament of a stay at home parent, but last year I took off 6 weeks between jobs and loved it. The absolute maximum that I would work is till the mortgage is paid off. But my thinking is, is putting in 4 more years worth missing out on seeing my kid grow up.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 5:58 pm

harvestbook wrote:
Mon Mar 25, 2019 7:33 am
People get real weird one way or another when you use the word "retirement," like you're getting out from under the yoke they're still tethered to, or you're not meeting their personal definition of it. Well, I'd just use a different word and try to shape your life as you want it to be. We're all so twisted up with societal expectations and brainwashing that it's hard to imagine a different way to live, yet plenty of people still manage it just fine.

Develop a plan with your wife. ..
Right, retirement and especially early retirement has a negative connotation associated with it. Are you going to spend all your time at the golf course?!

Who said I was the man in this scenario? :)

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 6:05 pm

renue74 wrote:
Mon Mar 25, 2019 8:04 am
I own a small business and am always "working," in terms of thinking about my clients and employees. It's not stressful...but I'm always "on."

I remember I once had an employee whose boyfriend worked for a large bank in the city. We live near Charlotte,NC.

She said he worked 70-80 hours per week and it was super stressful. The guy's team was tasked with putting together IPO proposals for clients considering going public. She said that people with families would typically go home about 6ish...watch their kids at whatever sports they were doing and then go back to the office and work until 11 or so. The environment actually produced that type of stressful work. Everybody on the team would criticize and make fun of folks who didn't work that way.

To me...that's not a way to live.

It sounds like you're scapegoating retirement for the need to have a less stressful job.

Pull back from your situation and look at the overall picture...then make a plan.
I used to travel to Charlotte, NC for the last 3 months of 2018! I know what you mean. Even though I don't work in the IPO or investment banking field, I put in at least 12 hours of work every week day. Plus travel. Plus sometimes working in the weekend sometime.

My intention is not to "scapegoat" my retirement. There have been studies done to show a 4% withdrawal rate would *last forever*. The simple logic is, your investments would earn around 6% per year, on average, and you're drawing less than your return, your principal would, in theory, last forever.

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nwa-non
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Re: Early retirement - hypothetical

Post by nwa-non » Mon Mar 25, 2019 6:07 pm

rich126 wrote:
Mon Mar 25, 2019 6:44 am

Too many people get caught up in the rat race and often mix up what they truly need vs. what they want. While this isn't true for everyone, it is true for too many. I hear things like "we need a 4 bedroom, 3 bathroom house" but they don't need it, they want it. And there are consequences for buying those items such as having to work long hours in stressful jobs. Its like people who say "I deserve a nice car", sure if you can afford it and are aware of the consequences of paying an extra $30K/50K for that item.

You only live once and most people have to decide what is enough.
Thanks, that's the perspective I need!

fasteddie911
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Re: Early retirement - hypothetical

Post by fasteddie911 » Tue Mar 26, 2019 9:02 am

Also consider having a good life and disability policy on the working spouse. Certainly you could go back to work but you might have a difficult time re-entering the workforce or just may not want to. If you can afford it, it maybe be worth it. If you already have it, maybe re-evaluate your needs.

JGoneRiding
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Re: Early retirement - hypothetical

Post by JGoneRiding » Tue Mar 26, 2019 9:10 am

nwa-non wrote:
Sun Mar 24, 2019 10:02 pm
pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.
Excellent. Look the manager in the eye and say "are you saying I can't use my legally contracted pto?"

Repeat as needed and take as much vacation time even if it is just to spend Friday afternoon at home that you are entitled too. Eventually they will let you go most likely with severance or at least unemployment.

On your plan it really depends on your spouse. It wouldn't fly well in our house. In the event of divorce you could be screwed as she could show you quit work but had the ability to make 160k

printer86
Posts: 124
Joined: Mon Apr 25, 2016 8:45 am

Re: Early retirement - hypothetical

Post by printer86 » Tue Mar 26, 2019 10:04 am

nwa-non wrote:
Mon Mar 25, 2019 6:05 pm
My intention is not to "scapegoat" my retirement. There have been studies done to show a 4% withdrawal rate would *last forever*. The simple logic is, your investments would earn around 6% per year, on average, and you're drawing less than your return, your principal would, in theory, last forever.
You're going to need to cite a real source for the above statement. I find it to be a very optimistic view of SWR.

Topic Author
nwa-non
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Contact:

Re: Early retirement - hypothetical

Post by nwa-non » Tue Mar 26, 2019 11:09 am

printer86 wrote:
Tue Mar 26, 2019 10:04 am
nwa-non wrote:
Mon Mar 25, 2019 6:05 pm
My intention is not to "scapegoat" my retirement. There have been studies done to show a 4% withdrawal rate would *last forever*. The simple logic is, your investments would earn around 6% per year, on average, and you're drawing less than your return, your principal would, in theory, last forever.
You're going to need to cite a real source for the above statement. I find it to be a very optimistic view of SWR.
https://www.madfientist.com/safe-withdrawal-rate/

I view the above article to be a seminal one on SWR. 3.5% can be an absolute floor on SWR, for perpetuity.

GeoffD
Posts: 93
Joined: Tue Mar 20, 2018 1:31 pm

Re: Early retirement - hypothetical

Post by GeoffD » Tue Mar 26, 2019 5:26 pm

JGoneRiding wrote:
Tue Mar 26, 2019 9:10 am
nwa-non wrote:
Sun Mar 24, 2019 10:02 pm
pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.
Excellent. Look the manager in the eye and say "are you saying I can't use my legally contracted pto?"

Repeat as needed and take as much vacation time even if it is just to spend Friday afternoon at home that you are entitled too. Eventually they will let you go most likely with severance or at least unemployment.

On your plan it really depends on your spouse. It wouldn't fly well in our house. In the event of divorce you could be screwed as she could show you quit work but had the ability to make 160k
I see this as a work-life balance problem. Keep it at exactly 40 hours and take all of your entitled vacation until you find a better job. Just make sure you’re competent and fully engaged for those 40 hours.

SoonerD
Posts: 241
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Re: Early retirement - hypothetical

Post by SoonerD » Tue Mar 26, 2019 10:28 pm

If I were in the situation the OP described I would do the following:

1) have my wife stay home to care for the kids, help with homework, sports, school projects, etc. She is by far the lower earner so this would accomplish a less stressful environment with lower financial impact

2) I would look for an employer that treats employees with compassion and respect. I would do so with the intent of making more not less money. Many professionals increase income by moving to competitors. I would look to do this.

delamer
Posts: 9299
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Re: Early retirement - hypothetical

Post by delamer » Tue Mar 26, 2019 11:16 pm

SoonerD wrote:
Tue Mar 26, 2019 10:28 pm
If I were in the situation the OP described I would do the following:

1) have my wife stay home to care for the kids, help with homework, sports, school projects, etc. She is by far the lower earner so this would accomplish a less stressful environment with lower financial impact
Why are you assuming the OP is not the wife? Nowhere does the OP indicates their gender or their spouse’s gender.

And having the spouse — whatever gender — stay home puts even more pressure on the OP financially in an already high stress job.

SoonerD
Posts: 241
Joined: Tue Jul 21, 2015 8:28 pm

Re: Early retirement - hypothetical

Post by SoonerD » Wed Mar 27, 2019 10:57 am

delamer wrote:
Tue Mar 26, 2019 11:16 pm
SoonerD wrote:
Tue Mar 26, 2019 10:28 pm
If I were in the situation the OP described I would do the following:

1) have my wife stay home to care for the kids, help with homework, sports, school projects, etc. She is by far the lower earner so this would accomplish a less stressful environment with lower financial impact
Why are you assuming the OP is not the wife? Nowhere does the OP indicates their gender or their spouse’s gender.

And having the spouse — whatever gender — stay home puts even more pressure on the OP financially in an already high stress job.
I wrote "If I were in the situation the OP described..." This means, at least in my mind, that if I (a man) were in a high stress situation where I made $160,000 and my spouse (a woman) made $105,000 and the other details about work, assets, expenses, children, etc. I would have my wife stay home, etc., etc. So there is no gender warfare going on here, at least not by me.

It does not matter if I assume the OP is male (or female)? It does not make my comments more (or less) valid?

We seem to be in a time where Western civilizations are increasingly (hyper) sensitive. Not saying this about you or your comment. I've noticed on BHs and elsewhere people get upset if someone suggests a wife do _____ (fill in the blank), when that something can be considered an old-fashioned "gender role".

To your point of more pressure when one spouse stays home; I recommended the OP seek a new employer. The stress seemed to me to be driven by the boss or the company culture. Go work for a competitor, for a higher salary.

Those who have 2 working spouses with young children might reduce, not increase, stress when they switch to having one person staying home. So my recommendation addresses stress from two ways - seek employment from a compassionate employer and create a less hectic more family centric lifestyle with one spouse working.

cherijoh
Posts: 6357
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Early retirement - hypothetical

Post by cherijoh » Wed Mar 27, 2019 12:02 pm

nwa-non wrote:
Mon Mar 25, 2019 6:05 pm
My intention is not to "scapegoat" my retirement. There have been studies done to show a 4% withdrawal rate would *last forever*. The simple logic is, your investments would earn around 6% per year, on average, and you're drawing less than your return, your principal would, in theory, last forever.
Not sure what studies you're thinking about, but IIRC the Trinity study said you have a 95% chance of not depleting your retirement money over a 30 year retirement at a 4% safe withdrawal rate (SWR) based on historical data with an adjustment for inflation. (Without an inflation adjustment your might not run out of money money but your purchasing power would decline dramatically!) I'm pretty sure the rule for never running out of money is closer to 3.5%, if not lower.

I'm also not sure where you got the idea that the single life expectancy method would allow you to withdrawal 4.16%. That would be a life expectancy factor of ~24 which corresponds to an age of ~ 74! :oops: In the example found here for 72-t calculations they are using a factor of 34.2 for a 50 yo. This is equivalent to 2.92%. A 40 yo would be able to withdrawal a lot less.

I also don't think you have the total picture on the 72-t. Once you start it you are obligated to keep doing it for a minimum of 5 years or until you hit 59.5 - whichever period is longer. For you that would be a long time. You must follow the rules for the amount that must be withdrawn. If you deviate from that plan, you owe to 10% penalty for all withdrawals going back to when you started the 72-t.

So if the stock-market tanks, you don't have the option to stop the bleeding by not taking a distribution, unless you are willing to let the IRS recapture all the penalties you would have so far avoided. A friend of mine retired right before the dot com bubble burst at age 49 and was accessing her retirement stash using a 72-t plan. It turns out her FA had her in a portfolio that was far to aggressive for a retiree. She ended up having to go back to work because she very quickly decimated her retirement savings. (I think she was using one of the more aggressive withdrawal schedules). If I'm not mistaken the single life expectancy method is the most conservative. But that doesn't mean that you cannot make a serious dent in your balances if the economy tanks at the wrong time (i.e., sequence of return risk).

Also, I think you are underestimating the burden you would be putting on your spouse to build sufficient retirement savings for the both of you if you start spending your 401k down.

I think your only viable options are (1) to take a hit in salary and find a less stressful job or (2) trim enough from spending that you can still cover spending and save sufficiently towards retirement and your kid's education without touching your current retirement.

Jordan4FI
Posts: 190
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Location: Honduras

Re: Early retirement - hypothetical

Post by Jordan4FI » Wed Mar 27, 2019 12:10 pm

I would save up to 50K cash and then go get a part-time, no responsibility job, that maybe can get 15-20K a year for while.. or do the part time after winding down for a few months...
Last edited by Jordan4FI on Wed Mar 27, 2019 12:17 pm, edited 1 time in total.

JTColton
Posts: 93
Joined: Wed Jun 20, 2018 7:41 pm

Re: Early retirement - hypothetical

Post by JTColton » Wed Mar 27, 2019 12:15 pm

This is all mindset. Honestly I think you'd be better off reading the MMM forums to get a new perspective, most of the advice you will get here is to avoid risk and work until your 60's which may work for some but not others. It seems like you realize that time isn't something you can get back no matter how big your 401k is. The term you're thinking of is called "downshifting", working less or taking a lower stress but lower paying job. I myself am leaving a good paying but very stressful job (mil) early with a reduced pension rather than put myself through 5-10 more years of stress/travel/danger for a bigger payout. Actionable advice to follow in no particular order:

1) Bump up emergency fund to 12 mo expenses. That will give you much more flexibility both real and imagined to make a change without fretting over the next month's bills.

2) Talk with spouse about your thoughts and the direction you both want to go, their concurrence is key to success. The changes you are proposing can lead to a lower cost but more fulfilling life for your entire family.

3) Polish up your resume and start looking for a new job, one with a better culture and work/life balance. It's ok to say "no" at work and take the PTO that you've earned.

4) Consider consulting in your field instead to work at your own pace but keep your skills and network relevant, that way if you fall on hard times you could more easily ramp up work/income rather than if you just walked away from your field to deliver pizza.

5) Slash expenses, by cutting out the cleaning service, eating out and 50% of vacation you can save $10k/yr right off the bat. Think hard about wants vs needs, or freedom vs slavery to pay for "stuff".

6) Don't touch your retirement savings. I would try and find a lower stress job that would allow me to fully fund all tax advantaged space, pay the bills, and maybe 1 vacation a year. Then re-evaluate when you get used to a lower stress job, you're not in the right frame of mind to make life changing decisions right now.

7) Go read the "Epic FU money stories" thread on MMM for some inspiration.

Good luck!

delamer
Posts: 9299
Joined: Tue Feb 08, 2011 6:13 pm

Re: Early retirement - hypothetical

Post by delamer » Wed Mar 27, 2019 1:19 pm

SoonerD wrote:
Wed Mar 27, 2019 10:57 am
delamer wrote:
Tue Mar 26, 2019 11:16 pm
SoonerD wrote:
Tue Mar 26, 2019 10:28 pm
If I were in the situation the OP described I would do the following:

1) have my wife stay home to care for the kids, help with homework, sports, school projects, etc. She is by far the lower earner so this would accomplish a less stressful environment with lower financial impact
Why are you assuming the OP is not the wife? Nowhere does the OP indicates their gender or their spouse’s gender.

And having the spouse — whatever gender — stay home puts even more pressure on the OP financially in an already high stress job.
I wrote "If I were in the situation the OP described..." This means, at least in my mind, that if I (a man) were in a high stress situation where I made $160,000 and my spouse (a woman) made $105,000 and the other details about work, assets, expenses, children, etc. I would have my wife stay home, etc., etc. So there is no gender warfare going on here, at least not by me.

It does not matter if I assume the OP is male (or female)? It does not make my comments more (or less) valid?

We seem to be in a time where Western civilizations are increasingly (hyper) sensitive. Not saying this about you or your comment. I've noticed on BHs and elsewhere people get upset if someone suggests a wife do _____ (fill in the blank), when that something can be considered an old-fashioned "gender role".

To your point of more pressure when one spouse stays home; I recommended the OP seek a new employer. The stress seemed to me to be driven by the boss or the company culture. Go work for a competitor, for a higher salary.

Those who have 2 working spouses with young children might reduce, not increase, stress when they switch to having one person staying home. So my recommendation addresses stress from two ways - seek employment from a compassionate employer and create a less hectic more family centric lifestyle with one spouse working.
Of course you are saying that I am being overly sensitive. I can live with it. When I perceive a sexual stereotype on the forum and then call it out, I frequently am told to “lighten up.”

But I do take your point that you were saying what you would do in the OP’s situation. However, do you see that you posed it as “ I would have my wife stay home” like that is your unilateral decision to make?

If one spouse is unhappy with work/life balance, then s/he and spouse need to come up with a mutual solution.

pasadena
Posts: 333
Joined: Sat Jul 02, 2016 1:23 am
Location: Washington State

Re: Early retirement - hypothetical

Post by pasadena » Wed Mar 27, 2019 1:23 pm

delamer wrote:
Wed Mar 27, 2019 1:19 pm
SoonerD wrote:
Wed Mar 27, 2019 10:57 am
delamer wrote:
Tue Mar 26, 2019 11:16 pm
SoonerD wrote:
Tue Mar 26, 2019 10:28 pm
If I were in the situation the OP described I would do the following:

1) have my wife stay home to care for the kids, help with homework, sports, school projects, etc. She is by far the lower earner so this would accomplish a less stressful environment with lower financial impact
Why are you assuming the OP is not the wife? Nowhere does the OP indicates their gender or their spouse’s gender.

And having the spouse — whatever gender — stay home puts even more pressure on the OP financially in an already high stress job.
I wrote "If I were in the situation the OP described..." This means, at least in my mind, that if I (a man) were in a high stress situation where I made $160,000 and my spouse (a woman) made $105,000 and the other details about work, assets, expenses, children, etc. I would have my wife stay home, etc., etc. So there is no gender warfare going on here, at least not by me.

It does not matter if I assume the OP is male (or female)? It does not make my comments more (or less) valid?

We seem to be in a time where Western civilizations are increasingly (hyper) sensitive. Not saying this about you or your comment. I've noticed on BHs and elsewhere people get upset if someone suggests a wife do _____ (fill in the blank), when that something can be considered an old-fashioned "gender role".

To your point of more pressure when one spouse stays home; I recommended the OP seek a new employer. The stress seemed to me to be driven by the boss or the company culture. Go work for a competitor, for a higher salary.

Those who have 2 working spouses with young children might reduce, not increase, stress when they switch to having one person staying home. So my recommendation addresses stress from two ways - seek employment from a compassionate employer and create a less hectic more family centric lifestyle with one spouse working.
Of course you are saying that I am being overly sensitive. I can live with it. When I perceive a sexual stereotype on the forum and then call it out, I frequently am told to “lighten up.”

But I do take your point that you were saying what you would do in the OP’s situation. However, do you see that you posed it as “ I would have my wife stay home” like that is your unilateral decision to make?

If one spouse is unhappy with work/life balance, then s/he and spouse need to come up with a mutual solution.
+1

lostdog
Posts: 2044
Joined: Thu Feb 04, 2016 2:15 pm

Re: Early retirement - hypothetical

Post by lostdog » Wed Mar 27, 2019 1:34 pm

just sem-retire and spend more time with the kids. If you can successfully do this, congrats!

It doesn't matter what other people think. This is huge and will set you free.
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

Glockenspiel
Posts: 952
Joined: Thu Feb 08, 2018 1:20 pm

Re: Early retirement - hypothetical

Post by Glockenspiel » Wed Mar 27, 2019 1:41 pm

nwa-non wrote:
Sun Mar 24, 2019 10:02 pm
pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.
Sounds like you have a terrible manager. I'd quit tomorrow or make them lay you off, and re-assess, with your wife's blessing of course. Your expenses are low enough that you can take a couple months to figure things out.

lostdog
Posts: 2044
Joined: Thu Feb 04, 2016 2:15 pm

Re: Early retirement - hypothetical

Post by lostdog » Wed Mar 27, 2019 2:10 pm

Glockenspiel wrote:
Wed Mar 27, 2019 1:41 pm
nwa-non wrote:
Sun Mar 24, 2019 10:02 pm
pasadena wrote:
Sun Mar 24, 2019 9:43 pm
This all sounds like an emotional response to a stressful job. I wouldn't make life-altering decisions based on that.

..

.. This probably requires some planning, reducing of expenses, reshuffling of household responsibilities, and a lot of discussions.

You sound like you need a vacation, tbh.
I took a 5-day vacation 2 months ago, that was planned for over 2 months prior. Got an earful from my manager after I came back that I'm not "pulling for the team". I have no vacation planned for the foreseeable future.
Sounds like you have a terrible manager. I'd quit tomorrow or make them lay you off, and re-assess, with your wife's blessing of course. Your expenses are low enough that you can take a couple months to figure things out.
+1
Total World Stock and Total World Bond. The simple two fund diversified portfolio. "Simplicity is the master key to financial success."

StealthRabbit
Posts: 436
Joined: Sat Jun 13, 2009 1:25 am

Re: Early retirement - hypothetical

Post by StealthRabbit » Wed Mar 27, 2019 2:23 pm

lostdog wrote:
Wed Mar 27, 2019 1:34 pm
just sem-retire and spend more time with the kids. If you can successfully do this, congrats!

It doesn't matter what other people think. This is huge and will set you free.
I'm in this camp. Retire Early, retire often (You can go back to work later (if you must). Kids are home for a very short time of your life.

Consider getting involved in community volunteer tasks including kid(s). We did senior care, and volunteered in public Schools as a family (We were homeschoolers). + we designed and built a few homes as a family. + teaching kids 'lifelong' skills is a good investment of your time. We gardened and preserved food, ran a u-pick farm, and taught kids to build furniture and weld and fix cars, and handle livestock and accounting (4H). Kids also planned our travel & budgets (extensive / USA and international, lived in 4 different countries)

What are your 2 - 3 biggest concerns?
For increased cash flows I like the idea up thread of doing Roth rolls and taking principle contributions 5 yrs down the road (if you must take any - try to avoid touching your 'qualified' funds... let them grow) ).

For PT gigs.. consider night shift opportunities (pay better and no bosses). I keep a CDL (Truck / bus driver's license) pays well for weekend / PT gigs.



Start a home business with your kid(s), set them up for life (growing a business that is self supporting).

Many of our homeschoolers had businesses and employees. (covered college expenses).
Other families did various enterprises and farms. Often construction, IT, design, marketing, companies.

We had a farm, and our kids designed and built their own homes during Jr high school. That was good training and added $80k to each of their NW. The best deal ... was manual labor kept them engaged to finish college, they didn't want to operate hammers and shovels the rest of their life. (They also had Roths since age 12 ~ $20k by age 18). I matched their wages 100% into Roths. age 12 - age 18 - but they paid 100% for college. And got a lot out of it. They each did high risk employment during college (AK fishing and firefighting) Paid well, (~$30k for short summer) and they learned a lot.

Enjoy your retirement(?)


retire early, retire often!

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