Contemplating retirement when I'm 51. Would you FIRE?

[hmrambling]

FIRE date: January 2027

Emergency Funds: $20,000 emergency fund and can access ibonds or t-bills, as necessary.

Debt: 30 year 2.25% fixed rate mortgage originated in February 2021. Original amount was $156,125. Current balance $126,102.37.

Tax Filing Status: Married Filing Jointly

Tax Rate: 12% Federal, 5% State

State of Residence: Louisiana

Age: 47

Total portfolio size: $218,000

Wife has her own career and her own retirement that is similarly structured (she can retire at any age when she has 30 years service). The figures below do not include her income or assets. She has no debt.

Current retirement assets

Taxable
17% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) .04

457b
14% BlackRock LifePath® Index 2040 Fund Institutional Shares (LIKIX) .09

Roth IRA
4% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) 0.05
25% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) 0.11
35% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) 0.04

HSA
5% Fidelity® ZERO Total Market Index Fund (FZROX) 0%
$775 company match


Contributions
New annual Contributions
$6500 Roth IRA
$23,400 457b
$3650 HSA
$12,000 iBonds
$12,000 T-Bills

Available funds
$12,000 iBonds
$7,000 in T-Bills (ladder)
$30,000 HYSA

Income $7904 monthly
$5600 monthly pension at age 51
$1804 Veteran compensation
$500 Part-time job
??? I have 40 credits with Social Security but I don't know how much that translates to since I'm a state employee.
Our state goes to the legislature for COLA increases - they are not guaranteed.

Monthly Expenses
Utility bills $375
Gas for car $200
Restaurants $300
Groceries $400
Auto insurance $100
Auto maintenance $120
Home maintenance $150
Tithe based on % of income
Donations based on % of income


Breakdown of my monthly mortgage payment:
Principal: 358.46
Interest: 238.32
Escrow: 358.19
Extra principal: 645.03


Healthcare
VA healthcare is free.
My employer offers insurance in retirement which means that I would pay 25% of the premium in retirement.
I can use the balance on my HSA in retirement, if needed.

457b fees:
The administrative fee structure is tiered and based on account balance. Participants will pay a $2.50 quarterly flat fee on the first $5,000 of their balance or $10 annually. Participants will pay a 0.20% annual fee (0.05% quarterly) on the next balance amount of $5,000.01 to $50,000. There is no fee on balances at $50,000.01 and above.

What else would you look at before you considered pulling the trigger on FIRE? The numbers look like I'd be fine, especially if I'm considering taking on a part-time or another job.

[delamer]

It’s not clear from the above when your pension can/will begin.

It would be helpful to summarize your investments into one total by allocation. Same for your monthly expenses.

[Watty]

There is a lot that we do not know about you and you post is hard to follow since it does not give any totals. You may get better responses if you edit your post to be closer to the suggested format for asking portfolio questions. You can use the icon with the pencil on it to edit your post.

viewtopic.php?t=6212

Several big unknowns for us are;

1) Is the pension adjusted for inflation?
2) When does that pension start? $5,600 at 51 is a lot different than at 65.
3) Will you get Social Security too? If so how much and when?
4) Are you married and do you have kids?

[Carl53]

It is not clear what your expenses will be once you are retired. Regardless, I don't see sufficient assets to take care of potential one-off expenses like new roof, new vehicle etc. I would suggest given your low home loan interest rate to invest the money you are putting towards the principle. Maybe just put it in a high interest savings account at more than double the interest rate you are paying on the house. Apply it toward the house if and when savings interest rates fall.

Will your spouse be able to adequately fund the house should you predecease her and vice versa?

_{edited to reflect rereading your post and noting marital status.}

[steadyosmosis]

For what it's worth, I retired early, and my annual expenses are less than 3.0% of my portfolio.
With the info you provided, I am unable to decipher the future size of your portfolio, nor what your projected burn rate will be.
Good luck with your decision.

[hmrambling]

There is a lot that we do not know about you and you post is hard to follow since it does not give any totals. You may get better responses if you edit your post to be closer to the suggested format for asking portfolio questions. You can use the icon with the pencil on it to edit your post.

viewtopic.php?t=6212

Several big unknowns for us are;

1) Is the pension adjusted for inflation?
2) When does that pension start? $5,600 at 51 is a lot different than at 65.
3) Will you get Social Security too? If so how much and when?
4) Are you married and do you have kids?

I updated my OP. Please let me know if this helps.

[hmrambling]

It is not clear what your expenses will be once you are retired. Regardless, I don't see sufficient assets to take care of potential one-off expenses like new roof, new vehicle etc. I would suggest given your low home loan interest rate to invest the money you are putting towards the principle. Maybe just put it in a high interest savings account at more than double the interest rate you are paying on the house. Apply it toward the house if and when savings interest rates fall.

Will your spouse be able to adequately fund the house should you predecease her and vice versa?

_{edited to reflect rereading your post and noting marital status.}

I've been managing the house and other expenses for the majority of our relationship. I have $200K life insurance that she will be able to use if I die tomorrow. She's also the beneficiary on all my accounts. I have accounts that will cover a roof, vehicle, or appliances,etc.

[hmrambling]

It’s not clear from the above when your pension can/will begin.

It would be helpful to summarize your investments into one total by allocation. Same for your monthly expenses.

My pension begins at 51.

[delamer]

It’s not clear from the above when your pension can/will begin.

It would be helpful to summarize your investments into one total by allocation. Same for your monthly expenses.

My pension begins at 51.

The monthly expenses that you listed, including for your mortgage — are they the portion of expenses that you’ve agreed to carry or the total for your household?

I’m not clear on why your wife’s income/assets aren’t material to your decision to retire.

Your liquid assets are not high, but your pension makes up for that.

[Doc7]

Something is not adding up.


You list all these savings :
$6500 Roth IRA
$23,400 457b
$3650 HSA
$12,000 iBonds
$12,000 T-Bill

But not any income outside of a part time job, which I assume is a future assumption and not your current income.

If you are saving $55+K a year and have been saving consistently, it does not make sense that you only have $218K saved up, unless you only recently dramatically cut expenses and started saving a year or two ago. Are you suddenly lately living on $4K a month less fun/luxury spending that you had up until recently? How have you identified that your new less-spending lifestyle is sustainable? It seems to be a very recent mindset change for you, and may not be ingrained in your psyche enough to pull the trigger on your current projected retirement income level.

[Watty]

Debt: 30 year 2.25% fixed rate mortgage originated in February 2021. Original amount was $156,125. Current balance $126,102.37.
........
Breakdown of my monthly mortgage payment:
Principal: 358.46
Interest: 238.32
Escrow: 358.19
Extra principal: 645.03

I am a big fan of having a paid off house but when you can buy CDs that paying 5% I would have a hard time paying down a 2.25% mortgage. I would stop doing that and invest the money instead even if you just put them in CDs since you can use that money later on to pay down the mortgage if it makes sense in a few years.

What else would you look at before you considered pulling the trigger on FIRE?

I would take a hard look at the pension with different combinations of working a couple more years and also maybe delaying starting the pension at different ages. For example what would the money pension benefit be if your stopped working at 53 and then did not start getting the monthly pension check until you are 60?

Some couples keep their finances separate so that is not unusual but when looking at retiring it is important to consider your finances together.

In your expenses you also need to include income taxes and lumpy expenses like when you need to replace a car or have a big home repair like a roof. If you retire you will also have a lot more free time and might spend more on things like hobbies or travel.

Between know knowing more about your wife's numbers and the COLA for your pension not being guaranteed I am having a hard time figuring out if your numbers look OK for you to retire or not.

[hmrambling]

It’s not clear from the above when your pension can/will begin.

It would be helpful to summarize your investments into one total by allocation. Same for your monthly expenses.

My pension begins at 51.

The monthly expenses that you listed, including for your mortgage — are they the portion of expenses that you’ve agreed to carry or the total for your household?

I’m not clear on why your wife’s income/assets aren’t material to your decision to retire.

Your liquid assets are not high, but your pension makes up for that.

She has not consistently earned an income. I've shouldered our household expenses, mortgage, car repairs, etc. Basically, I'm not relying on her income for these projections.

[hmrambling]

Something is not adding up.


You list all these savings :
$6500 Roth IRA
$23,400 457b
$3650 HSA
$12,000 iBonds
$12,000 T-Bill

But not any income outside of a part time job, which I assume is a future assumption and not your current income.

If you are saving $55+K a year and have been saving consistently, it does not make sense that you only have $218K saved up, unless you only recently dramatically cut expenses and started saving a year or two ago. Are you suddenly lately living on $4K a month less fun/luxury spending that you had up until recently? How have you identified that your new less-spending lifestyle is sustainable? It seems to be a very recent mindset change for you, and may not be ingrained in your psyche enough to pull the trigger on your current projected retirement income level.

VA compensation is new plus I'm getting an additional stipend. This means in the past year I'm getting $2700 tax free a month that I had not before. I also took a job earning $12K more than I was earning. I will finish out this year earning $105K. Last year's income was $67K before taxes. My wife now has a job that will hopefully cover some of her expenses. We were living on just my income.

[delamer]

It’s not clear from the above when your pension can/will begin.

It would be helpful to summarize your investments into one total by allocation. Same for your monthly expenses.

My pension begins at 51.

The monthly expenses that you listed, including for your mortgage — are they the portion of expenses that you’ve agreed to carry or the total for your household?

I’m not clear on why your wife’s income/assets aren’t material to your decision to retire.

Your liquid assets are not high, but your pension makes up for that.

She has not consistently earned an income. I've shouldered our household expenses, mortgage, car repairs, etc. Basically, I'm not relying on her income for these projections.

It looks to me that you have $3200/month in expenses, excluding your tithing & donations. And your pension plus veteran’s benefit will be $7400/month.

There’s a few expenses that you didn’t mention like income taxes, clothing, vacations and hobbies, plus the added health insurance premiums (eventually).

And you need to be prepared for lumpy expenses, like fixing the roof or buying a new car.

You’ll probably double your nest egg by 2027 with the additional contributions. And your mortgage will be paid off well before 30 years, so that will be a significant drop off in expenses.

So there doesn’t seem to be an issue with your retirement in 4 years. But do a more complete assessment of your expenses to be sure.

[hmrambling]

Healthcare
VA healthcare is free.
My employer offers insurance in retirement which means that I would pay 25% of the premium in retirement.
I can use the balance on my HSA for medical expenses, if needed, however pretty much everything is covered by the VA.

[ncbill]

Healthcare
VA healthcare is free.
My employer offers insurance in retirement which means that I would pay 25% of the premium in retirement.
I can use the balance on my HSA for medical expenses, if needed, however pretty much everything is covered by the VA.

Go for it.

Other posters seem to forget OP has essentially free health care, plus a COLA military disability benefit, plus a pension that will increase, even if not a true COLA, when he is age 51.

As other posters noted, I also would probably not pay off such a low-rate mortgage, but that's OP's choice if it helps him SWAN.

[tibbitts]

It would almost be better to distill your post into just a discussion of your pension and healthcare, because the rest won't matter for you.

I don't know anything about your state. In my state the legislature has to grant COLA increases, and there has been exactly one for as many years back as I can remember. On the other hand maybe legislative approval is just a given for you; most of us don't know. Because of your age that's going to matter for you, if you get unlucky like I did and your retirement coincided with extremely high inflation. I retired when I was 14 years older than you and that inflation has already made a huge dent in my pension. You'll be at risk for many more years. So what's the political climate and how are those COLA increases looking?

[Wanderingwheelz]

Sure. Go for it.

As long as you are able to keep your expenses under control, you don’t have anything to worry about. I will say that most people have a “travel and leisure” expense in their retirement budget, and you do not. For some retirees it’s their largest expense, even those without free health insurance. Even $200/mo in gas can go up sharply for day-trips once you find yourself with more free time to fill.

I’ll edit to add that “considering taking on a part-time or another job” isn’t retirement as much as it’s quitting your job to find one you might like more.

[gtrplayer]

With that pension and free to cheap healthcare, I don’t see why not, as long you don’t drastically increase your standard of living. My opinion - you did your service and retiring at 51 is a pretty good benefit.

That said, it might get boring since 51 is young to retire and you might run out of things to do at home so most likely you’ll look for work to bring in some income, just to have something to do, and that will make it even easier.

[mouth]

Healthcare
VA healthcare is free.
My employer offers insurance in retirement which means that I would pay 25% of the premium in retirement.
I can use the balance on my HSA for medical expenses, if needed, however pretty much everything is covered by the VA.

CAVEAT: I'm a user of TricarePrime as a 51 yo military retiree (but still working as a contractor) so I'm not fully read up on what VA does and doesn't cover.

You will want to confirm what your health insurance and healthcare options and expenses will be once you hit 65 and are Medicare eligible. You might, or might not, be surprised.

https://www.aarp.org/health/medicare-qa ... -coverage/
https://www.va.gov/health-care/about-va ... insurance/

At your Pension and possible SS level (you REALLY need to dig into that) you might be at risk of hitting IRMAA (if you sign up for Medicare). Not quite a factor in when you FIRE per say, but something to make sure you've modeled out so you're fully aware.

I'm guessing you'll have access to VA long-term care options, just make sure they will meet your expectations in the state you plan to retire in, be it Louisiana, or otherwise.

Then take everything I just said above and apply it to your wife who I don't see you mentioning is VA eligible for healthcare.

[Fishing50]

I think chances of FIRE looks pretty good for you.

We retired with a manageable mortgage payment.

Focus on Roth IRAs in the 12% bracket, it’s a great option for tax free compound growth. You don’t list your spouses Roth IRA contributions, so I think you should decrease 457b contributions if necessary. Choose Roth 457b if available.

Total portfolio size: $218,000 seems a little low for a lifetime of unexpected expenses. If you don’t need withdrawals, it can be ok. I think it gives you room to look for a job you prefer, instead of grinding it out every day. My biggest fear is leaving the workforce during my peak earning years, and regretting the decision as a broke old man. Highly unlikely, with a military pension…but I’ll never make that much money again. I do have a side gig that I enjoy, and it keeps me busy. Extra money doesn’t change much, but I’m not spending during those hours.

[hmrambling]

Sure. Go for it.

As long as you are able to keep your expenses under control, you don’t have anything to worry about. I will say that most people have a “travel and leisure” expense in their retirement budget, and you do not. For some retirees it’s their largest expense, even those without free health insurance. Even $200/mo in gas can go up sharply for day-trips once you find yourself with more free time to fill.

I’ll edit to add that “considering taking on a part-time or another job” isn’t retirement as much as it’s quitting your job to find one you might like more.

The part time job that is listed in my OP is a current moonlighting position. I'm currently working at a desk in the evenings which basically allows me to do my homework and assignments. I'm working on my Master's and two certifications. Even though I am close to being eligible to retire from state government (30 years state service at any age), I'm trying to get my education and certifications in order so I have plenty of options in retirement. By the end of next year, I should have my Master's in Library Science, Project Management Certification, and Certification for Records Management. (Education courtesy of the VA. I will have to pay to sit for the records management certification test but should not have to pay to sit for the PMP.) I'll be graduating with a dual degree. Even though I'm inquiring about FIRE, I should be situated to take on project management and records consulting jobs.

I do not see contract work as permanent work so I've not factored potential earnings into my FIRE income. I've been a permanent employee for the state for over 26 years straight with no breaks in service, which gives me a definite perspective on permanent jobs. If I choose not to do contract work, I can take on more hours sitting at the desk moonlighting.

Additionally, I might need to look at when I leave the state if I should take a $42K lump sum for leave I accumulated (I took very few vacations & leave) or let them roll it into my pension, which would equal less than $300 a month. We are not paid hour for hour for leave when we leave state government. It is actuarily reduced, which is why the leave is $42K. I believe there are tax implications to the tune of 10% if I take the lump sum. From their literature, "Lump-sum payments are subject to mandatory 20 percent federal income tax withholding. You may also be subject to a 10 percent federal early withdrawal penalty." OUCH!!

[Fishing50]

Sure. Go for it.

As long as you are able to keep your expenses under control, you don’t have anything to worry about. I will say that most people have a “travel and leisure” expense in their retirement budget, and you do not. For some retirees it’s their largest expense, even those without free health insurance. Even $200/mo in gas can go up sharply for day-trips once you find yourself with more free time to fill.

I’ll edit to add that “considering taking on a part-time or another job” isn’t retirement as much as it’s quitting your job to find one you might like more.

The part time job that is listed in my OP is a current moonlighting position. I'm currently working at a desk in the evenings which basically allows me to do my homework and assignments. I'm working on my Master's and two certifications. Even though I am close to being eligible to retire from state government (30 years state service at any age), I'm trying to get my education and certifications in order so I have plenty of options in retirement. By the end of next year, I should have my Master's in Library Science, Project Management Certification, and Certification for Records Management. (Education courtesy of the VA. I will have to pay to sit for the records management certification test but should not have to pay to sit for the PMP.) I'll be graduating with a dual degree. Even though I'm inquiring about FIRE, I should be situated to take on project management and records consulting jobs.

I do not see contract work as permanent work so I've not factored potential earnings into my FIRE income. I've been a permanent employee for the state for over 26 years straight with no breaks in service, which gives me a definite perspective on permanent jobs. If I choose not to do contract work, I can take on more hours sitting at the desk moonlighting.

Additionally, I might need to look at when I leave the state if I should take a $42K lump sum for leave I accumulated (I took very few vacations & leave) or let them roll it into my pension, which would equal less than $300 a month. We are not paid hour for hour for leave when we leave state government. It is actuarily reduced, which is why the leave is $42K. I believe there are tax implications to the tune of 10% if I take the lump sum. From their literature, "Lump-sum payments are subject to mandatory 20 percent federal income tax withholding. You may also be subject to a 10 percent federal early withdrawal penalty." OUCH!!

Moonlighting and short term contract work with certification are perfect opportunities to take the work you prefer instead of the daily grind.

More research is required on paid leave. If there is a 10% penalty, roll it into your pension to avoid the penalty.

[jeffyscott]

Healthcare
VA healthcare is free.
My employer offers insurance in retirement which means that I would pay 25% of the premium in retirement.
I can use the balance on my HSA for medical expenses, if needed, however pretty much everything is covered by the VA.

Go for it.

Other posters seem to forget OP has essentially free health care, plus a COLA military disability benefit, plus a pension that will increase, even if not a true COLA, when he is age 51.

As other posters noted, I also would probably not pay off such a low-rate mortgage, but that's OP's choice if it helps him SWAN.

Agree, there's $88,848 per year in income for life, plus some unknown future SS benefits.

I didn't look at or add up all the expenses, but can't see how that's not enough to live comfortably on in flyover country. So as long as the OP doesn't dream of moving to someplace like SF or NYC, doing extensive luxury travel, or something else like that, I don't see a reason not to retire other than if you are someone that just likes to work.

Of course, there's always the option to use LTC costs and fear of same to argue in favor or working longer and, perhaps, forever.

[michaeljc70]

Sure. You'd be getting $7400/mo in pension/veteran comp. However, your expenses are pretty broad and I'd be a little worried you are missing things. Do you buy clothes? Go on vacation? Ever plan on getting a new car? Ever give gifts (other than tithe/donations)? New furniture? Ever get a haircut? $150 home maintenance? How old is the house? Houses need roofs and other expensive repairs over time.

[JBTX]

Your projected expenses (which seem really low) are about a 1/3 or your projected income. If they are anywhere close to accurate seems like you will be fine, assuming you plan to continue your modest spending into retirement.

I agree paying off / down a 2% mortgage is really a suboptimal decision. You can earn more in interest and it gives you extra liquidity that you may need at some point.