Retire at 50: Should I?

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EricJ
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Joined: Sun Jan 13, 2008 3:28 pm

Retire at 50: Should I?

Post by EricJ » Mon Jun 18, 2018 5:56 pm

Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?

Long Version of the question: I am about to pull the plug and retire, but would first like some outside views on whether it’s advisable. Online calculators indicate we'll be OK, but I’d appreciate any observations or advice you might have on my situation.

Background: Married couple, no kids, no need for leaving a legacy. The goal is to spend it all. Him (me): 50, working, making big bucks at big company, but not loving it; Her: 54, not working (and loving it). No traditional pensions for either of us. His Social Security, assuming stop work now and draw at 70: $3281/month. She would get about half of that; her own earning record is smaller.

Investable assets by account type:
  • Bank accounts: $25,000
  • Post-Tax investments: $1,141,000, cost basis $739,000
  • Cash-balance pension: $294,000 (see below)
  • 401k and IRAs: $1,686,000
  • Total: $3,146,000
Investment asset allocation
  • US Stocks: 62.5%
  • Non US Stocks: 9.3%
  • Bonds: 17.6%
  • Cash-balance Pension: 10.6%
In my view, the cash-balance pension is bond-like, so I consider my bond allocation to be about 28% (I’ve wandered a little off my goal of 30%). The cash-balance pension pays interest at the 30-year T-bill rate, or 4%, whichever is higher. Four percent probably seemed like a minimal guarantee when the plan was established, but these days it looks like a fairly high guaranteed rate, so I plan to leave these funds in place for the foreseeable future. I can roll it into an IRA at any point.

Our house is paid off and valued at approx. $400,000. I do not include the house as a spendable asset. It could be a sort of a whoops fund.

Budget:
  • I have a spending budget after income tax of $90,000/year or 2.9% of investable assets. This budget is slightly higher than my actual spending for the last several years, and it’s based on decades of careful tracking of spending.
  • A big question mark is my income tax forecast. I have some ability to manipulate income with over $1M in post-tax accounts. If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500. State (NJ) is harder to estimate – I’ll estimate $2000 based on one online calculator. So my total annual withdrawal from assets is $96,500 including income tax, or 3.1% of portfolio.
  • I have priced a silver health insurance plan through the state exchange at $16,300/year unsubsidized. If my income is under 400% FPL (likely), I would save at least $10,000/year through subsidies for as long as subsidies last. COBRA would be about $14,000/year. I am not counting on subsidies so I have budgeted $22,500/year for healthcare and dental including insurance and out-of-pocket costs. This is part of the $90K budget mentioned above.
  • We have two decent cars with no loans. We might reduce to one car, but budgeted for two, replacing one car every 5 years.
Firecalc says, assuming zero SS: We can spend $100,000/year for 45 years with 100% success.

i-ORP says, assuming zero SS: Our projected, maximum, annual disposable income is $97,000 in today's, after tax dollars. When I change to “Extended ORP” it increases to $162,000 before I even change anything. I don’t understand the difference, but even the smaller number of the basic ORP says I’m OK.

Financial Engines says: "By age 51, your current investments may be worth $3,060,000 or less. That amount could produce $151,000 or less per year of income in retirement if market performance is average. If market performance is poor, it may produce $134,000 per year or less."

Downside risk:
  • I don’t plan to buy long-term care insurance. Que sera sera.
  • Healthcare costs are likely to inflate at an insane rate.
  • I’ve modeled my retirement at age 51 in i-Orp and FE to use whole numbers, but hope to get out at age 50.5.
Upside risk:
  • We can sell the house if/when needed.
  • Social Security may actually exist when I’m eligible (I’m currently modeling retirement without SS).
  • We may be eligible for ACA subsidies.
  • The budget includes $7K per year for travel, which is discretionary and probably won’t be used after we get really old.
  • We can reduce to one car.
So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half? Any advice? Thanks in advance.

Jordan4FI
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Location: Honduras

Re: Retire at 50: Should I?

Post by Jordan4FI » Mon Jun 18, 2018 6:06 pm

I would have quit about $1,000,000 ago.... Awesome job!! Great shape, I plan to retire at 43 with $800K -1Mil....

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Meaty
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Re: Retire at 50: Should I?

Post by Meaty » Mon Jun 18, 2018 6:13 pm

EricJ wrote:
Mon Jun 18, 2018 5:56 pm
Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?

Long Version of the question: I am about to pull the plug and retire, but would first like some outside views on whether it’s advisable. Online calculators indicate we'll be OK, but I’d appreciate any observations or advice you might have on my situation.

Background: Married couple, no kids, no need for leaving a legacy. The goal is to spend it all. Him (me): 50, working, making big bucks at big company, but not loving it; Her: 54, not working (and loving it). No traditional pensions for either of us. His Social Security, assuming stop work now and draw at 70: $3281/month. She would get about half of that; her own earning record is smaller.

Investable assets by account type:
  • Bank accounts: $25,000
  • Post-Tax investments: $1,141,000, cost basis $739,000
  • Cash-balance pension: $294,000 (see below)
  • 401k and IRAs: $1,686,000
  • Total: $3,146,000
Investment asset allocation
  • US Stocks: 62.5%
  • Non US Stocks: 9.3%
  • Bonds: 17.6%
  • Cash-balance Pension: 10.6%
In my view, the cash-balance pension is bond-like, so I consider my bond allocation to be about 28% (I’ve wandered a little off my goal of 30%). The cash-balance pension pays interest at the 30-year T-bill rate, or 4%, whichever is higher. Four percent probably seemed like a minimal guarantee when the plan was established, but these days it looks like a fairly high guaranteed rate, so I plan to leave these funds in place for the foreseeable future. I can roll it into an IRA at any point.

Our house is paid off and valued at approx. $400,000. I do not include the house as a spendable asset. It could be a sort of a whoops fund.

Budget:
  • I have a spending budget after income tax of $90,000/year or 2.9% of investable assets. This budget is slightly higher than my actual spending for the last several years, and it’s based on decades of careful tracking of spending.
  • A big question mark is my income tax forecast. I have some ability to manipulate income with over $1M in post-tax accounts. If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500. State (NJ) is harder to estimate – I’ll estimate $2000 based on one online calculator. So my total annual withdrawal from assets is $96,500 including income tax, or 3.1% of portfolio.
  • I have priced a silver health insurance plan through the state exchange at $16,300/year unsubsidized. If my income is under 400% FPL (likely), I would save at least $10,000/year through subsidies for as long as subsidies last. COBRA would be about $14,000/year. I am not counting on subsidies so I have budgeted $22,500/year for healthcare and dental including insurance and out-of-pocket costs. This is part of the $90K budget mentioned above.
  • We have two decent cars with no loans. We might reduce to one car, but budgeted for two, replacing one car every 5 years.
Firecalc says, assuming zero SS: We can spend $100,000/year for 45 years with 100% success.

i-ORP says, assuming zero SS: Our projected, maximum, annual disposable income is $97,000 in today's, after tax dollars. When I change to “Extended ORP” it increases to $162,000 before I even change anything. I don’t understand the difference, but even the smaller number of the basic ORP says I’m OK.

Financial Engines says: "By age 51, your current investments may be worth $3,060,000 or less. That amount could produce $151,000 or less per year of income in retirement if market performance is average. If market performance is poor, it may produce $134,000 per year or less."

Downside risk:
  • I don’t plan to buy long-term care insurance. Que sera sera.
  • Healthcare costs are likely to inflate at an insane rate.
  • I’ve modeled my retirement at age 51 in i-Orp and FE to use whole numbers, but hope to get out at age 50.5.
Upside risk:
  • We can sell the house if/when needed.
  • Social Security may actually exist when I’m eligible (I’m currently modeling retirement without SS).
  • We may be eligible for ACA subsidies.
  • The budget includes $7K per year for travel, which is discretionary and probably won’t be used after we get really old.
  • We can reduce to one car.
So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half? Any advice? Thanks in advance.
3M plus a paid off house and 90k expenses = yes, you can retire. Congrats!
"Discipline equals Freedom" - Jocko Willink

Dancer
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Re: Retire at 50: Should I?

Post by Dancer » Mon Jun 18, 2018 6:17 pm

Financial looks taken care of (I'd have a bit more cash / bonds, but that's one of the reasons why I've got a lot less saved :).

I assume spouse taking her own Social Security at FRA.

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Sasquatch
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Re: Retire at 50: Should I?

Post by Sasquatch » Mon Jun 18, 2018 6:20 pm

Congratulations on your great success! 51 y.o. Here punching out at $2.2M. 3.5 WR including state/fed tax, a fat healthcare budget, and fund expense ratios. 50/40/10 AA. Looks like you have done your due diligence. There are many,many people on this forum smarter and more experienced than me but I say have fun fishing

ExitStageLeft
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Re: Retire at 50: Should I?

Post by ExitStageLeft » Mon Jun 18, 2018 6:20 pm

She still plans on working? Heck yeah, you can retire. Even if she gets the bug and joins you in enjoying the fruits of your combined hard labor.

Does your budget involve remaining in your existing COL location? If things end up not-so-rosy, is geographical arbitrage something to consider?

JoeRetire
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Re: Retire at 50: Should I?

Post by JoeRetire » Mon Jun 18, 2018 6:23 pm

EricJ wrote:
Mon Jun 18, 2018 5:56 pm
So if you've read this far, please take another minute and tell me what you think. Does it look like I'm in good shape for retirement at age 50 and a half?
Yes.
Any advice?
Stay flexible.

You seem to be in terrific shape, but it also appears you can expect quite a long retirement. For that long a period of time, things can change - not always for the better.

Figure out what you really want to do in retirement (other than "go fishing" and "spend it all").
Last edited by JoeRetire on Mon Jun 18, 2018 6:28 pm, edited 2 times in total.

JoeRetire
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Re: Retire at 50: Should I?

Post by JoeRetire » Mon Jun 18, 2018 6:25 pm

ExitStageLeft wrote:
Mon Jun 18, 2018 6:20 pm
She still plans on working?
"Her: 54, not working (and loving it)."

delamer
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Re: Retire at 50: Should I?

Post by delamer » Mon Jun 18, 2018 6:25 pm

It looks like you are in good shape.

Presumably as two adults with no other obligations, you could cut back on your spending, if that was needed (unlikely), to keep yourselves solvent.

With no mortgage and $75K in expenses (excluding health insurance and travel), you probably have some play in your budget.

annielouise
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Re: Retire at 50: Should I?

Post by annielouise » Mon Jun 18, 2018 6:28 pm

I'm about the most pessimistic person on here when it comes to "can I retire" posts, and even I will say "yes!"

ExitStageLeft
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Re: Retire at 50: Should I?

Post by ExitStageLeft » Mon Jun 18, 2018 6:30 pm

JoeRetire wrote:
Mon Jun 18, 2018 6:25 pm
ExitStageLeft wrote:
Mon Jun 18, 2018 6:20 pm
She still plans on working?
"Her: 54, not working (and loving it)."
Thanks JR, I parsed that as working and loving it.

bubbadog
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Re: Retire at 50: Should I?

Post by bubbadog » Mon Jun 18, 2018 6:36 pm

It looks like you are in great shape to retire. Your initial post shows that you have given the financials a lot of thought. Well done and enjoy! :sharebeer

TX_Drew
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Re: Retire at 50: Should I?

Post by TX_Drew » Mon Jun 18, 2018 6:45 pm

I’m with the others saying you can retire. Well done.

The only real gotcha could be in the long term disability. I don’t know how much that costs, but it might be nice to get a 10 or 20 year term in case of outlier situation. There are some threads here that go into the costs.

Overall though well done and take it easy on the fish.

TravelforFun
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Re: Retire at 50: Should I?

Post by TravelforFun » Mon Jun 18, 2018 6:53 pm

If you can live on 3% withdrawal without depending on SS then yes, you can retire but the question is should you? What would you do with all the free times at age 50.5? Traveling and having hobbies cost money.

TravelforFun

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indexmonkey
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Re: Retire at 50: Should I?

Post by indexmonkey » Mon Jun 18, 2018 6:59 pm

Could you? Yes.

At the risk of insulting some here I must ask if some of the answers are looking through the lens of a 70-80+ year old. I respectfully submit that 50 is awfully young nowadays and your energy level and restlessness may be a lot greater at 50 than in another 10-20 years.that restlessness may cause you to increase activity, therefore increasing spending.

Just my .02

Good luck and best to you!!

BobbiInBrooklyn
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Re: Retire at 50: Should I?

Post by BobbiInBrooklyn » Mon Jun 18, 2018 7:09 pm

i did it five years ago at a similar age with very similar financial numbers to yours. i keep my drawdown under 3%. My biggest surprise was the cost of health insurance, much higher than i originally budgeted when ACA first came out. But you obviously ran the numbers (in your third bullet under budget) and they match up with my reality, so i'd join all the others saying "go for it!". :sharebeer
Last edited by BobbiInBrooklyn on Mon Jun 18, 2018 8:19 pm, edited 1 time in total.

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TxAg
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Re: Retire at 50: Should I?

Post by TxAg » Mon Jun 18, 2018 7:18 pm

Yes.

And post here about all the fun and generous things you do to fill your day. It's great motivation for the rest of us!

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MP123
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Re: Retire at 50: Should I?

Post by MP123 » Mon Jun 18, 2018 7:30 pm

With the usual caveats about unknown future health care expenses I'd say it looks good.

As I understand your plan you aren't including SS benefits or (eventual) Medicare or even ACA subsidies which makes it all the stronger. Likely you'll be getting at least some of that I think.

staythecourse
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Re: Retire at 50: Should I?

Post by staythecourse » Mon Jun 18, 2018 8:53 pm

Great job. Not that you need another nudge, but if you don't like working and are good financially as you are why are you still working?

Go find your next adventure.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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jimmyq
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Re: Retire at 50: Should I?

Post by jimmyq » Mon Jun 18, 2018 8:54 pm

Yep, I think you are good to go, especially since you've done a lot of legwork to get to this point and have good estimates for healthcare costs. I am of similar age, and estimated (after running through bunches of calculators and spreadsheets) that a 3% withdrawal is a pretty safe rate for a 50 year-old, especially if you have some flexibility should something go wrong.

marcopolo
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Re: Retire at 50: Should I?

Post by marcopolo » Mon Jun 18, 2018 8:59 pm

I was in a very similar situation a few months ago. Did a very similar analysis and retired at age 51.
As long as you have considered how you will spend your free time, and have accounted for any additional expense that will entail in your budget, I think you are in very good shape.

Best of luck to you.
Once in a while you get shown the light, in the strangest of places if you look at it right.

FoolMeOnce
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Re: Retire at 50: Should I?

Post by FoolMeOnce » Mon Jun 18, 2018 9:11 pm

TravelforFun wrote:
Mon Jun 18, 2018 6:53 pm
What would you do with all the free times at age 50.5? . . .

TravelforFun
Seems like as good an answer as any. :wink:

Jack FFR1846
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Re: Retire at 50: Should I?

Post by Jack FFR1846 » Mon Jun 18, 2018 9:22 pm

Today was your last day of work. Shut off the alarm clock and sleep in. If you feel like it, tell someone at your work sometimes that you've retired. Or not.
Bogle: Smart Beta is stupid

JBTX
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Re: Retire at 50: Should I?

Post by JBTX » Tue Jun 19, 2018 12:39 am

By any reasonable calculation it is doable. But just to play contrarian...

Is it absolutely necessary to stop working completely, right now? Go from 100mph to zero? Is there the potential for an extended "soft landing"? Restructure your job and make less work less? Part time consulting? Take extended leave of a absence? Find some arrangement where you keep your medical benefits? Negotiate a stay on bonus and extended health care. It's at least worth a conversation.

For every $100k you make net, that is $3000-$4000 of additional annual spend for the rest of your life, plus the health insurance savings. One more year could give you a lot more cushion and margin of error.

Depending on the numbers your wife may make as much with spousal SS (50% of yours) as her own. So it may pay for her to file early.

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Pajamas
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Re: Retire at 50: Should I?

Post by Pajamas » Tue Jun 19, 2018 1:00 am

EricJ wrote:
Mon Jun 18, 2018 5:56 pm
[*]I have a spending budget after income tax of $90,000/year or 2.9%
Yes, you should be fine spending under 3% of $3 million. Even if your investments only kept up with inflation over the long run, that would last for 33 years or until you are 83 and your wife is 87. That is more than your expected life spans. Congratulations! :beer

https://www.ssa.gov/oact/STATS/table4c6.html
Last edited by Pajamas on Tue Jun 19, 2018 1:07 am, edited 4 times in total.

FOGU
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Re: Retire at 50: Should I?

Post by FOGU » Tue Jun 19, 2018 1:02 am

Cool. Don't see a worry in the world about money.
~ Don't just do something. Sit there. ~

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patriciamgr2
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Re: Retire at 50: Should I?

Post by patriciamgr2 » Tue Jun 19, 2018 1:52 am

You're assuming ACA or other health coverage will be available to you at some price. That's the serious risk--together with no Long Term Care coverage--I see with your plan. Other financial aspects look fine IMO although I didn't run sensitivities for lower returns.

In a recent lawsuit, it APPEARS our federal government sought to invalidate the "mandated coverage for pre-existing conditions" portion of ACA. Weirdly, some analysts believe this could also impact guaranteed coverage for sick people who get their health coverage through work (remember the bad old days when people would stay at a job because they couldn't get their conditions covered if they switched jobs & insurers???) I've linked to a reputable site's discussion of this lawsuit because I am not an expert in this area. https://theincidentaleconomist.com/word ... -coverage/

Politics is beyond this Forum plus I don't have my crystal ball handy--so I can't predict future litigation, legislation or the future health of you & spouse. If you're both in absolutely perfect health now, have no family history of cognitive disease & will remain engaged & flexible enough to go back to work if the private market for health insurance collapses--perhaps it's not much of a risk. Any early retiree should look at ACA networks in the area he will live in during retirement; don't just look at the premiums (some states only have HMOs & have no physicians (vs PAs, NPs) in the rural areas which many retirees love).

I have worked hard to maintain my health & been lucky. I was able to obtain private (non-ACA) BCBS insurance--the cost of which has grown astronomically since my retirement. But, until ACA, I was at risk for my policy being non-renewed had I ever been in--for example--an accident.

I retired at 42 & have loved every minute of it--except for issues concerning healthcare coverage. I probably would not retire early in today's environment of uncertainty if I had to rely on ACA. Million dollar hospital bills for people who don't get insurer-negotiated prices mean that having healthcare coverage is necessary. I had hoped the ACA had eliminated this awful uncertainty for early retirees but that may not be the case.

Good Luck. Whatever you decide, you should be very proud of what you & your spouse have accomplished.

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Top99%
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Re: Retire at 50: Should I?

Post by Top99% » Tue Jun 19, 2018 7:09 am

Congratulations and I think most of us will agree that with a 2.9% WR (withdrawal rate) you are good to go. I
Adapt or perish

Dandy
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Re: Retire at 50: Should I?

Post by Dandy » Tue Jun 19, 2018 8:03 am

I think you need to take a look at your allocation. No pension, no SS for a long time, buy health insurance, fund retirement longer than you have worked. How would you fare if/when the equity market takes a big hit and stays down for a few years while you are withdrawing? Do you have skills that you could likely get decent reemployment?

I was forced out in 2008 and watched my nest egg plunge as I was withdrawing -- not a good time and I had a modest pension and health insurance.

Allocation is always an issue -- too conservative and you risk running out of money too aggressive and you might run out of money earlier. :happy I don't have a good answer but I am a more conservative investor and would not sleep well in your position.

I think you likely will be ok but the longer the potential retirement the more unknowns and greater risk.

Good luck with the always difficult when should I / can I retire decision.

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Raybo
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Re: Retire at 50: Should I?

Post by Raybo » Tue Jun 19, 2018 9:18 am

I retired at 48 with not enough money. I was able to fix that by a) selling my house and moving in with, my now, wife. b) taking "advantage" of the 2008 plunge to profitably double down on stocks.

But, money aside, how are you going to fill your time? You say nothing about what you are retiring to. Not working is a fine thing, but how will you spend the 16 hours you now have to fill every day, day after day? Without some kind of plan, you can easily be overwhelmed by an avalanche of free time.

Post-retirement is a multifaceted time. Don't just look at one dimension.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

TonyDAntonio
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Re: Retire at 50: Should I?

Post by TonyDAntonio » Tue Jun 19, 2018 10:06 am

I "got" retired by IBM at 55, 3 years ago. My numbers were sort of like yours (less money but a pension that covered retiree healthcare and then some). I have loved everyday of retirement. The market going up has not hurt. 😎

mancich
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Re: Retire at 50: Should I?

Post by mancich » Tue Jun 19, 2018 10:25 am

You've won, nice job. I'd quit today. :beer

bhsince87
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Re: Retire at 50: Should I?

Post by bhsince87 » Tue Jun 19, 2018 10:44 am

I was in a similar situation when I turned 50 (DW was 48), but only had about $2mil in assets. No kids, no debt, etc. But my wife was still working at about $50k per year, and she has an online business that nets about $20k, with no plans to stop either until she's around 55.
I had always targeted age 55 for myself. But the company I worked for offered a severance deal that year. It was a one time payout of $150k, plus a couple years of free health insurance, plus the ability to stay on their health insurance till 65 (I'd pay full price though).

I didn't take that offer, but sometimes wish I had. But what I've learned since then might be useful for you.

As others have mentioned, I really didn't have anything to "retire too". And I followed "The Time Lords" posts intently since then. He had the fortune to get a severance package and a year off. And during that time, he decided he liked working better. So back to work he went!

Now I'm 53, and our assets have grown to about $3.3 mil. I think that is enough, targeting a budget much like yours. However, i am still concerned about health insurance.

In our case ACA policies were about $18k per year three years ago. Now they are $28k, with a 4k deductible. So we need to budget $32k per year. If we stay under the $64k ish cap, that would drop to $2k in premiums and the $4k out of pocket, or a $6k healthcare budget.

If i can stay on the companies plan, it would be about $14k per year. So I have run budgets at all of those levels. I think we're OK even at the $32k per year level.

So then I started working on the "what do I do in retirement thing". I've got some ideas, but not much time to experiment. So I tried to convert to a part time position to give me some time to experiment. Well, that fell through when business boomed and we entered an "all hands on deck" environment. And that also means no severance for the time being.

So I am still biding my time. I don't hate my job, but I don't love it. I work on interesting things, and the environment is low stress most of the time. In the meantime, our networth is growing at $300-400k per year. My salary is up (bonuses are high because of the good environment) , so if I can get a severance in the next year or two, that should be in the $200k range.

So our plan now is to hold on a few more years, but stop our "investments" at $3.3m. We're considering buying a beach house wit whatever we end with above that number. Crazy as it sounds, I believe the ACA subsidy situation actually encourages that!

We also have very little in Roth IRA/401k ($10k). Our company recently started the after tax/megabackdoor roth option, so I am contributing the max to that. I'm currently at about $60k, but would like to get that up to $100k. Those funds will function as my "ACA cliff" insurance, in case we have a large expense.

In the mean time, I've dialed back the intensity at work, and feel good knowing that I can walk away at any minute!
Retirement: When you reach a point where you have enough. Or when you've had enough.

uncaD
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Re: Retire at 50: Should I?

Post by uncaD » Tue Jun 19, 2018 10:54 am

EricJ wrote:
Mon Jun 18, 2018 5:56 pm
If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500.
How did you come up with this estimate? You should be able to manage your fed taxes down $0 at this income level

CnC
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Re: Retire at 50: Should I?

Post by CnC » Tue Jun 19, 2018 11:11 am

Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?



Short answer is yes. You have planned things very well and with no children there is no need for a legacy. You are very well set.

Ben Mathew
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Re: Retire at 50: Should I?

Post by Ben Mathew » Tue Jun 19, 2018 12:12 pm

Assume:

1. Real bond return: 1%
2. Real stock return: 4%
3. Current savings: $3,146,000
4. Current age: 50
5. Retirement age: 50
6. Annual savings between now and retirement (inflation adjusted): $0
7. Retirement draw (inflation adjusted): $96,500
8. Starting stock allocation (today's allocation): 70%
9. Ending stock allocation at age 100: 30%

Under these assumptions, you would have $1,853,031 left at age 100. So, yes, you can retire with a high degree of confidence. Congratulations!

Here's the spreadsheet I used to calculate this in case you want to see a graph of your wealth trajectory or change any of the above assumptions: Weatlh Trajectory Calculator

This calculation doesn't take into account differences in the types of accounts (taxable, traditional, and Roth). So it's meant to be used only as a first approximation. If you want a more precise model, you can create a separate spreadsheet for each account type and add them up using a summary spreadsheet.

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hand
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Re: Retire at 50: Should I?

Post by hand » Tue Jun 19, 2018 1:54 pm

EricJ wrote:
Mon Jun 18, 2018 5:56 pm

[*]Cash-balance pension: $294,000 (see below)
[*]Cash-balance Pension: 10.6%[/list]

In my view, the cash-balance pension is bond-like, so I consider my bond allocation to be about 28% (I’ve wandered a little off my goal of 30%). The cash-balance pension pays interest at the 30-year T-bill rate, or 4%, whichever is higher. Four percent probably seemed like a minimal guarantee when the plan was established, but these days it looks like a fairly high guaranteed rate, so I plan to leave these funds in place for the foreseeable future. I can roll it into an IRA at any point.
Is the cash balance pension really worth $294k when you are 50? I've seen plans where the "value at retirement / 62 / 65" is publicized, but where actual liquidation value is substantially less if accessed prior to a predefined date or age aligned with a more traditional retirement.

EricJ
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Re: Retire at 50: Should I?

Post by EricJ » Tue Jun 19, 2018 2:56 pm

Thank you so much for all the responses, encouragement, cautions and questions. I suppose I'll have to work on a resignation letter! Seriously, I thank the Bogleheads who responded here and those who posted info and advice in the past. Though I rarely post, I have been an avid reader of this forum for over 10 years, and I have read and re-read several Boglehead books. While I was always inspired to "live below my means," the Boglehead community gave me several specific ideas on money management. And the community gave me the confidence to keep pouring money into the market when it crashed.

Some asked what I plan to do in retirement. I don't have any grand plan but I am certain I won't be bored. There are a lot of things I want to do: Exercise more. Spend more time with my wife and my aging parents. Re-learn (or actually learn) history. Work on family genealogy. Travel (it's already in the budget). Put a lot more miles on my motorcycle (I just upgraded to a lightly used Goldwing). Spend time floating in my pool. Do deferred projects around the house. Sell accumulated crap on eBay. Maybe set up an eBay business or other hobby business for beer money. Read the rest of the internet. Really go fishing. Be that sweet old couple that goes to McDonald's once a week to split a hamburger and coffee.

Some specific responses to comments/questions:
ExitStageLeft wrote:
Mon Jun 18, 2018 6:20 pm
Does your budget involve remaining in your existing COL location? If things end up not-so-rosy, is geographical arbitrage something to consider?
My existing budget assumes we stay in place -- so it covers a living in a high Cost of Living area. In reality I think we may eventually move to a lower COL area, but I want to enjoy this place for a few years. We might move to a condo-like place where we'll have fees that we don't have now, but our property tax will likely never be higher than it is here.
bubbadog wrote:
Mon Jun 18, 2018 6:36 pm
It looks like you are in great shape to retire. Your initial post shows that you have given the financials a lot of thought. Well done and enjoy! :sharebeer
Yes, I've given this a lot of thought. I spent all day yesterday gathering my data and writing the original post. Early retirement morphed from a dream into a plan when I got a layoff scare about 10 years ago. The scare made me realize early retirement was doable, and I've been pretty focused on the goal ever since.
TX_Drew wrote:
Mon Jun 18, 2018 6:45 pm
... The only real gotcha could be in the long term disability. I don’t know how much that costs, but it might be nice to get a 10 or 20 year term in case of outlier situation. There are some threads here that go into the costs.
By "disability," did you mean Long-Term Care? Over time, I'll re-examine the decision not to take Long Term Care insurance.
BobbiInBrooklyn wrote:
Mon Jun 18, 2018 7:09 pm
i did it five years ago at a similar age with very similar financial numbers to yours. i keep my drawdown under 3%. My biggest surprise was the cost of health insurance, much higher than i originally budgeted when ACA first came out. But you obviously ran the numbers (in your third bullet under budget) and they match up with my reality, so i'd join all the others saying "go for it!". :sharebeer
That's an especially useful data point. Thank you. Same to jimmyq and marcopolo and many others.
Jack FFR1846 wrote:
Mon Jun 18, 2018 9:22 pm
Today was your last day of work. Shut off the alarm clock and sleep in. If you feel like it, tell someone at your work sometimes that you've retired. Or not.
LOL! Also made my wife laugh. Thanks! Responses from mancich and others also made me laugh.
JBTX wrote:
Tue Jun 19, 2018 12:39 am
By any reasonable calculation it is doable. But just to play contrarian...

Is it absolutely necessary to stop working completely, right now? Go from 100mph to zero? Is there the potential for an extended "soft landing"? Restructure your job and make less work less? Part time consulting? Take extended leave of a absence? Find some arrangement where you keep your medical benefits? Negotiate a stay on bonus and extended health care. It's at least worth a conversation.
Thanks for the contrarian view. I am in management of big ticket engineering contracts, and in a customer-facing position. It will be hard to re-define my job as a lower stress or part-time job. I do plan to offer to continue part-time, but I doubt my boss will be interested. I think I have to do 30 hours to be eligible for health care and to me that's not much of a retirement.
patriciamgr2 wrote:
Tue Jun 19, 2018 1:52 am
You're assuming ACA or other health coverage will be available to you at some price. That's the serious risk--together with no Long Term Care coverage--I see with your plan. Other financial aspects look fine IMO although I didn't run sensitivities for lower returns.
Yeah, it's a real risk. Mitigation is difficult. Choice 1: Work longer now to accumulate bigger nest egg in case ACA goes away. Choice 2: Wait and see if ACA goes away and if it does and there are no alternatives, go back to work (at lower pay) to be eligible for insurance. Choice 1 means work for indeterminate amount of time, whether or not ACA goes away. Choice 2 means more work only if ACA goes away. I'll begrudgingly choose Choice 2. And I'll vote.
Dandy wrote:
Tue Jun 19, 2018 8:03 am
I think you need to take a look at your allocation. No pension, no SS for a long time, buy health insurance, fund retirement longer than you have worked. How would you fare if/when the equity market takes a big hit and stays down for a few years while you are withdrawing? Do you have skills that you could likely get decent reemployment?
I do get uncomfortable when the stock market drops, but I know I can stick to the plan, and the plan should accommodate large drops. In the worst case, I am sure I could get a job, probably at half my current pay, which is still good money. Thanks for sharing your thoughts.
bhsince87 wrote:
Tue Jun 19, 2018 10:44 am
I was in a similar situation when I turned 50 (DW was 48), but only had about $2mil in assets. ... In our case ACA policies were about $18k per year three years ago. Now they are $28k, with a 4k deductible. So we need to budget $32k per year. If we stay under the $64k ish cap, that would drop to $2k in premiums and the $4k out of pocket, or a $6k healthcare budget. ...
Wow! Just wow! I will do more research on unsubsidized premiums, but probably won't change my plan.
uncaD wrote:
Tue Jun 19, 2018 10:54 am
EricJ wrote:
Mon Jun 18, 2018 5:56 pm
If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500.
How did you come up with this estimate? You should be able to manage your fed taxes down $0 at this income level
That was from a the taxfoundation.org online calculator. I think 4x FPL for a couple is just under $65,000, so I used $64K as my income goal. I anticipate about $20K in dividends and cap gains and I would probably do Roth conversions up to $65K. Online calculators are fairly simple, so I plugged $64,000 in as wages. I just did that using the TaxAct calculator and it estimates a $3800 federal tax bill. Taxfoundation.org estimates $4400 for the same scenario. I haven't spent much time on tax strategy. Do you have a hint or pointer?
Ben Mathew wrote:
Tue Jun 19, 2018 12:12 pm
Assume: [...snipped for brevity...] Under these assumptions, you would have $1,853,031 left at age 100. So, yes, you can retire with a high degree of confidence. Congratulations!
I like your conclusion and I like your tool. Thanks for running the scenario for me! I also like how firecalc shows so many scenarios where I die filthy rich. But I have to plan for the worst and re-evaluate in a decade or so if I want to live like a filthy rich person.
hand wrote:
Tue Jun 19, 2018 1:54 pm
Is the cash balance pension really worth $294k when you are 50? I've seen plans where the "value at retirement / 62 / 65" is publicized, but where actual liquidation value is substantially less if accessed prior to a predefined date or age aligned with a more traditional retirement.
Thanks for checking. Yes, I'm certain of it. Due to a divestiture, the pension is not with my current employer, so there are no recent contributions, but the balance continues to grow at 4%. They keep trying to persuade me to roll it into an IRA but I like their terms.

A big thank you again to everyone who responded. I actually teared up reading the encouraging messages. I can't believe I'm at this point in life. I was not born with a silver spoon in my mouth. I've been working since age 12 (paper route) and age 15 (in retail) to pay my own way through college and grad school, I busted my hump to get ahead in the professional world ever since college, invested methodically, and now I'm rich. Rich enough anyway. I took a few action items from your collective wisdom (double check health insurance assumptions, check income tax forecast, re-visit LTC insurance, be sure not to get bored), but I will probably be packing things from my office into a cardboard box next week. Well, at least I'll tell my boss my intentions and work out a date. Thank you!

uncaD
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Re: Retire at 50: Should I?

Post by uncaD » Tue Jun 19, 2018 3:26 pm

EricJ wrote:
Tue Jun 19, 2018 2:56 pm
uncaD wrote:
Tue Jun 19, 2018 10:54 am
EricJ wrote:
Mon Jun 18, 2018 5:56 pm
If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500.
How did you come up with this estimate? You should be able to manage your fed taxes down $0 at this income level
That was from a the taxfoundation.org online calculator. I think 4x FPL for a couple is just under $65,000, so I used $64K as my income goal. I anticipate about $20K in dividends and cap gains and I would probably do Roth conversions up to $65K. Online calculators are fairly simple, so I plugged $64,000 in as wages. I just did that using the TaxAct calculator and it estimates a $3800 federal tax bill. Taxfoundation.org estimates $4400 for the same scenario. I haven't spent much time on tax strategy. Do you have a hint or pointer?
For Married Filing Jointly, the standard deduction is $24,000, so your first $24k of income of any type is tax-free (this could be Roth conversions, for example). Any long term capital gains and qualified dividend income above the standard deduction up to $77,400 falls into the 0% tax bracket. So if you could limit your Roth conversions to $24k and generate $40k from dividends and LTCG you could get your federal tax bill down to zero.

JBTX
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Re: Retire at 50: Should I?

Post by JBTX » Tue Jun 19, 2018 4:47 pm

https://www.google.com/amp/s/amp.tennes ... /988260001

As to ACA with the individual mandate gone in 2019 it is entirely probable that the ACA plans will become unaffordable and the markets eventually unravel. People will move towards non ACA compliant plans, which kind of puts us back before ACA. Those plans will typically be only available to the young and healthy.

ACA doesnt have to be repealed for it to become effectively neutered in the insurance markets.

merr14
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Re: Retire at 50: Should I?

Post by merr14 » Tue Jun 19, 2018 5:10 pm

If I had those assets at 50 I would have done it then. I finally got there at 54 (last week) and my last day was last Friday! It was the company's decision (re-org) and the timing was perfect, just under a year of severance so I'm good for a while. Just a couple days into my ER but so far so good. :sharebeer Now I have the time to read all the posts here!

J295
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Re: Retire at 50: Should I?

Post by J295 » Tue Jun 19, 2018 5:36 pm

Yes, you can "retire."

We transitioned 5 years ago at age 53. Very glad we did.

Health care .... we have coverage under the affordable care act and can manage our MAGI (modified adjusted gross income) and thus qualify for PTC (premium tax credits) that pay for nearly all of our otherwise $24k premiums.

As for predictions on the future of ACA and health care generally .... it was not and still is not materially important to us in terms of our "retirement" decision/status. I'm not trying to be flippant here, but health care is a fluid situation and we are not going to let the tail wag the dog in terms of our lifestyle choices (we were not willing to work just for insurance coverage). Sure, things could get "ugly," but if they do we will adjust and manage financially and otherwise (barista at Starbucks to get on their health plan if needed). Actually, when I transitioned I was planning to stay on my firm's policy as a retired owner and pay the full premiums, and then BC/BS decided a month or so before I transitioned to pull that option due to uncertainty in health care. Well, as it turns out we went on to ACA and ended up basically having health insurance with hardly any premium cost.

TravelGeek
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Re: Retire at 50: Should I?

Post by TravelGeek » Tue Jun 19, 2018 5:57 pm

OP’s post is very similar in many details to the one I have me mentally written many times when reading ER threads here in recent months. While health insurance is a big unknown, we are simply not willing to let it completely dictate our lives, and so we are planning for a significant health care budget. Spending another X years working simply for the sake of retaining employer coverage while being miserable might by itself necessitate more healthcare.

It is not clear that I could later easily get a similar job again once I pull the plug. My wife on the other hand could likely return to her profession and get a job with healthcare benefits, so that is one fallback option.

Time to get crackin’ on my own detailed plan. Congratulations and best of luck for your ER, EricJ!

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Hawaiishrimp
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Re: Retire at 50: Should I?

Post by Hawaiishrimp » Tue Jun 19, 2018 6:13 pm

EricJ wrote:
Mon Jun 18, 2018 5:56 pm
Short Version: $3.1M invested at age 50. Can I quit and go fishing now? Please?

Yes, please go buy some nice fishing rods and start fishing. You are done. And, come back and let us know some good fishing spots. Thanks! :sharebeer
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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MP123
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Re: Retire at 50: Should I?

Post by MP123 » Tue Jun 19, 2018 6:49 pm

uncaD wrote:
Tue Jun 19, 2018 3:26 pm
EricJ wrote:
Tue Jun 19, 2018 2:56 pm
uncaD wrote:
Tue Jun 19, 2018 10:54 am
EricJ wrote:
Mon Jun 18, 2018 5:56 pm
If I aim for $64,000 of income through dividends, Roth conversions and capital gains, I think my federal taxes will be about $4500.
How did you come up with this estimate? You should be able to manage your fed taxes down $0 at this income level
That was from a the taxfoundation.org online calculator. I think 4x FPL for a couple is just under $65,000, so I used $64K as my income goal. I anticipate about $20K in dividends and cap gains and I would probably do Roth conversions up to $65K. Online calculators are fairly simple, so I plugged $64,000 in as wages. I just did that using the TaxAct calculator and it estimates a $3800 federal tax bill. Taxfoundation.org estimates $4400 for the same scenario. I haven't spent much time on tax strategy. Do you have a hint or pointer?
For Married Filing Jointly, the standard deduction is $24,000, so your first $24k of income of any type is tax-free (this could be Roth conversions, for example). Any long term capital gains and qualified dividend income above the standard deduction up to $77,400 falls into the 0% tax bracket. So if you could limit your Roth conversions to $24k and generate $40k from dividends and LTCG you could get your federal tax bill down to zero.
This is correct. I'd suggest going back to TaxAct and plugging in dividends and capital gains rather than W2 wages (as it sounds like you did) and Roth conversions up to $24k.

You'll be pleasantly surprised.

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patriciamgr2
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Re: Retire at 50: Should I?

Post by patriciamgr2 » Tue Jun 19, 2018 8:44 pm

OP has made his decision, but for others reviewing this post, I want to emphasize two points about health coverage in early retirement.

1. If--as the source I cited contends the Administration is urging--ACA's mandated coverage for pre-existing conditions ends, that may apply to employer coverage as well as individual marketplace coverage. In other words, the "go get a job" alternative only works if the new employer's insurer accepts new employees' pre-existing conditions or if you & yours are in perfect health when you go looking for a job to plug the coverage hole left by ACA folding [still only hypothetical at this stage]. Remember, pre-ACA, all those people stuck in jobs because they were sick or had a sick spouse, etc.???

2. Spousal coverage is not a given in many lower-level insurance plans. If that's an early retiree's Plan B, check to see if the spouse's likely employers actually guarantee coverage for a spouse and how many hours of employment is required for any coverage. Also, I assume the spouse is ok with working in "retirement". [In my old career, many of the people I worked with had married nurses. In the bad old pre-ACA days, some of those nurses I knew were less than thrilled with having to rush to get their certifications/credentials current & then start at the bottom of the food chain (bad shifts, assignments, etc.) in a new hospital in order to get their spouse coverage].

I wish everyone the best in navigating early retirement. As I mentioned, I have enjoyed mine tremendously--save this insanity about obtaining health insurance (and I'm actually quite healthy). On a positive note, all of my other cost assumptions proved to be too high & I outperformed on returns (the latter results from luck of the SOR draw, of course). Best Wishes!

marcopolo
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Re: Retire at 50: Should I?

Post by marcopolo » Tue Jun 19, 2018 9:25 pm

patriciamgr2 wrote:
Tue Jun 19, 2018 8:44 pm
OP has made his decision, but for others reviewing this post, I want to emphasize two points about health coverage in early retirement.

1. If--as the source I cited contends the Administration is urging--ACA's mandated coverage for pre-existing conditions ends, that may apply to employer coverage as well as individual marketplace coverage. In other words, the "go get a job" alternative only works if the new employer's insurer accepts new employees' pre-existing conditions or if you & yours are in perfect health when you go looking for a job to plug the coverage hole left by ACA folding [still only hypothetical at this stage]. Remember, pre-ACA, all those people stuck in jobs because they were sick or had a sick spouse, etc.???

2. Spousal coverage is not a given in many lower-level insurance plans. If that's an early retiree's Plan B, check to see if the spouse's likely employers actually guarantee coverage for a spouse and how many hours of employment is required for any coverage. Also, I assume the spouse is ok with working in "retirement". [In my old career, many of the people I worked with had married nurses. In the bad old pre-ACA days, some of those nurses I knew were less than thrilled with having to rush to get their certifications/credentials current & then start at the bottom of the food chain (bad shifts, assignments, etc.) in a new hospital in order to get their spouse coverage].

I wish everyone the best in navigating early retirement. As I mentioned, I have enjoyed mine tremendously--save this insanity about obtaining health insurance (and I'm actually quite healthy). On a positive note, all of my other cost assumptions proved to be too high & I outperformed on returns (the latter results from luck of the SOR draw, of course). Best Wishes!
What is your proposed alternative? Should we all work (for the same employer) until Medicare age?
Why stop there, since we are talking about proposed new changes, the latest budget proposal unveiled today proposes changing Medicare to a voucher program, so maybe that is not a "safe" alternative either. So, keep working (to get healthcare) for the same employer until you die? What if they stop providing coverage? Employer based healthcare is not some immutable right either.

IMHO, at some point, one has to stop cowering in the corner out of fear, and get on with the business of living. We only get one shot at this life, I refuse to live it paralyzed by fears, imagined or otherwise. I can understand why others might choose a different path.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Caligal
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Re: Retire at 50: Should I?

Post by Caligal » Wed Jun 20, 2018 12:06 am

If I may - marcopolo

We are at a somewhat unstable time for the early retiree when it comes to the future of health insurance - both in terms of affordability and availability. While bogleheads delight in running monte carlo simulations and spreadsheets and debate endlessly how much is enough, the fact is that if you retire many years before traditional Medicare age, you run the risk of getting sick or injured and having all of your well calculated dreams go up in smoke if you do not have health insurance. Patriciamgr2 is merely pointing out something that many of us need to take very seriously, as the possibility of going back to the pre-ACA days where insurance companies could deny coverage based on pre-existing conditions is just as much a risk to a successful early retirement as a bad sequence of returns.

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corn18
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Re: Retire at 50: Should I?

Post by corn18 » Wed Jun 20, 2018 5:55 am

What did we do before the ACA was around? Just get private health insurance from ER to 65?

marcopolo
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Re: Retire at 50: Should I?

Post by marcopolo » Wed Jun 20, 2018 6:52 am

Caligal wrote:
Wed Jun 20, 2018 12:06 am
If I may - marcopolo

We are at a somewhat unstable time for the early retiree when it comes to the future of health insurance - both in terms of affordability and availability. While bogleheads delight in running monte carlo simulations and spreadsheets and debate endlessly how much is enough, the fact is that if you retire many years before traditional Medicare age, you run the risk of getting sick or injured and having all of your well calculated dreams go up in smoke if you do not have health insurance. Patriciamgr2 is merely pointing out something that many of us need to take very seriously, as the possibility of going back to the pre-ACA days where insurance companies could deny coverage based on pre-existing conditions is just as much a risk to a successful early retirement as a bad sequence of returns.

If the point is that early retirees need to think about this carefully in their planning, I completely agree with you.

I see in another thread that you are budgeting ~$20k/yr for pre-medicare Health insurance. The OP stated upfront that they are budgeting $22.5k/yr. I am using a $30k/yr number. Do you know of any early retirees that are taking the leap without thinking about this very seriously? Almost every thread I see about early retirement plans lists that as the top concern.

Perhaps I read too much into it, but it seemed to me that Patriciamgr2 went beyond saying people should think about this risk.
The OP provided this detail:
I have priced a silver health insurance plan through the state exchange at $16,300/year unsubsidized. If my income is under 400% FPL (likely), I would save at least $10,000/year through subsidies for as long as subsidies last. COBRA would be about $14,000/year. I am not counting on subsidies so I have budgeted $22,500/year for healthcare and dental including insurance and out-of-pocket costs. This is part of the $90K budget mentioned above.
To which Patriciamgr2 responded:
OP has made his decision, but for others reviewing this post, I want to emphasize two points about health coverage in early retirement.
Came across as condescending disapproval, as if the OP had just cavalierly made a foolish decision without thinking about these risks.
And if you do disapprove (very legitimate opinion), what is the alternative course of action you would recommend?
My apologies if i misread the meaning here.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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