Laid Off - Want to Retire / Am I OK

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BGeste
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Laid Off - Want to Retire / Am I OK

Post by BGeste » Wed Jul 24, 2019 12:21 pm

I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.

delamer
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Re: Laid Off - Want to Retire / Am I OK

Post by delamer » Wed Jul 24, 2019 3:38 pm

In order to net $145,000, what would you pay in federal and any state income taxes? Obviously, this would vary depending on which accounts you withdraw from, but it is an expense.

One thing to keep in mind is that your taxable account alone is throwing off interest/dividends/capital gains in the neighborhood of $90,000/year. So that’s income (and taxes) that you’ll have (and pay) regardless.

Have you figured out how you’ll get health insurance and how much it will cost? Is that amount included in the $145,000?

123
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Re: Laid Off - Want to Retire / Am I OK

Post by 123 » Wed Jul 24, 2019 3:48 pm

With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
Last edited by 123 on Wed Jul 24, 2019 3:52 pm, edited 1 time in total.
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ray.james
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Re: Laid Off - Want to Retire / Am I OK

Post by ray.james » Wed Jul 24, 2019 3:48 pm

You are in great shape to retire at 6 million. Figure out healthcare costs/some kind of part time/coasting work with health benefits if you like.

I would add providing liabilities will help. If those expenses are mortgage heavy, it will imply quite a large mortgage. Even then realistically I see ~1.0M as max mortgage in worse scenario based on expenses. You can pay off from taxable and still have 150-180K draw down to be with in 4% rule.

Irrespective, I would pay off mortgage from bonds in taxable unless the rate is much lower than net yield.
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aristotelian
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Re: Laid Off - Want to Retire / Am I OK

Post by aristotelian » Wed Jul 24, 2019 3:49 pm

You are probably in the top 1% of net worth on the planet. You will be fine.

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8foot7
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Re: Laid Off - Want to Retire / Am I OK

Post by 8foot7 » Wed Jul 24, 2019 3:50 pm

The only worry I would have is health insurance at this point- you're a long way from Medicare. You can also afford a steep premium, though, so it's a mild concern, not a keep-you-up-at-night thing. But you're all set otherwise.

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greg24
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Re: Laid Off - Want to Retire / Am I OK

Post by greg24 » Wed Jul 24, 2019 3:58 pm

You can absolutely retire.

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Wed Jul 24, 2019 3:59 pm

Welcome to the forum!

And sorry to hear about the unexpected layoff.

And congratulations for being so well prepared! :)

Yes, you can probably afford to retire now.

One potential concern is health insurance. You should be able to get at least 18 months of COBRA. I'd get the $ estimate for that ASAP. After that, you might need to find an ACA plan. I'd ballpark that at $30k worst case. Even with that, you should be in the ballpark of a 3% withdrawal rate, which most people consider safe for long periods of time.

Also, will you get a pension at some point? Social Security? If so, they give you even more breathing room.

You will probably also qualify for unemployment insurance, which can help a little.

FYI, I recently retired at age 53, with a little over half your amount, with a wife and no kids.

There is no need to consider your decision permanent either. After 6-7 months off, I'm already dabbling in the part-time market.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

delamer
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Re: Laid Off - Want to Retire / Am I OK

Post by delamer » Wed Jul 24, 2019 4:01 pm

ray.james wrote:
Wed Jul 24, 2019 3:48 pm
You are in great shape to retire at 6 million. Figure out healthcare costs/some kind of part time/coasting work with health benefits if you like.

I would add providing liabilities will help. If those expenses are mortgage heavy, it will imply quite a large mortgage. Even then realistically I see ~1.0M as max mortgage in worse scenario based on expenses. You can pay off from taxable and still have 150-180K draw down to be with in 4% rule.

Irrespective, I would pay off mortgage from bonds in taxable unless the rate is much lower than net yield.
A 4% withdrawal rate may be somewhat high for someone retiring at age 51.

OP — if you aren’t familiar with the concept of “safe withdrawal rates,” this discussion from the Boglehead wiki will be very helpful: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

Your issue is that your portfolio will have to last 40 years or more, and that will decrease the level of “safe” withdrawals.

That said, other issues to consider are what your Social Security benefits will be and when your mortgage will be paid off.

Both of those will lower your need to withdraw from your assets.

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Re: Laid Off - Want to Retire / Am I OK

Post by bloom2708 » Wed Jul 24, 2019 4:05 pm

1. Secure health coverage
2. Use taxable to get to 59.5
3. Use 401k/Rollover IRA (better funds?) to get to SS.
4. Understand spending. Keep spending "reasonable" (3 to 3.5%)
5. Enjoy retirement

If you hate it after 5 years, find something you like doing. Many good options.
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abuss368
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Re: Laid Off - Want to Retire / Am I OK

Post by abuss368 » Wed Jul 24, 2019 4:07 pm

You should be fine. One alternative would be to land a new position and put all earnings on debt and mortgage. Also gives your portfolio a little more time to compound!
John C. Bogle: "Simplicity is the master key to financial success."

student
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Re: Laid Off - Want to Retire / Am I OK

Post by student » Wed Jul 24, 2019 4:09 pm

aristotelian wrote:
Wed Jul 24, 2019 3:49 pm
You are probably in the top 1% of net worth on the planet. You will be fine.
I agree that OP should be fine. I think 800k will already be in top 1% globally. https://www.investopedia.com/articles/p ... -world.asp http://www.globalrichlist.com/With $6 million, OP should be in the top 2% in the US and top 3% in his age group. https://www.investopedia.com/articles/p ... -world.asp https://dqydj.com/net-worth-by-age-calc ... ed-states/

labguy
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Re: Laid Off - Want to Retire / Am I OK

Post by labguy » Wed Jul 24, 2019 4:09 pm

Even if I gross up your $145k by 20% to account for taxes you’d be at a 3% withdrawal rate on your 6m. I’d vote you’re golden!

JoeRetire
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Re: Laid Off - Want to Retire / Am I OK

Post by JoeRetire » Wed Jul 24, 2019 4:12 pm

BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Is it safe for me to retire now and live on my investments?
Financially it's safe. But talk to your wife first.

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8foot7
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Re: Laid Off - Want to Retire / Am I OK

Post by 8foot7 » Wed Jul 24, 2019 4:13 pm

JoeRetire wrote:
Wed Jul 24, 2019 4:12 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Is it safe for me to retire now and live on my investments?
Financially it's safe. But talk to your wife first.
His wife is really going to make him go find another job?
I understand a discussion about quitting, but that ship has sailed.

JoeRetire
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Re: Laid Off - Want to Retire / Am I OK

Post by JoeRetire » Wed Jul 24, 2019 4:17 pm

8foot7 wrote:
Wed Jul 24, 2019 4:13 pm
JoeRetire wrote:
Wed Jul 24, 2019 4:12 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Is it safe for me to retire now and live on my investments?
Financially it's safe. But talk to your wife first.
His wife is really going to make him go find another job?
I understand a discussion about quitting, but that ship has sailed.
He was laid off. How is quitting relevant here? :confused

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Watty
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Re: Laid Off - Want to Retire / Am I OK

Post by Watty » Wed Jul 24, 2019 4:18 pm

Here is the suggest format for asking portfolio questions. There is a lot of information in that which you did not include in your post. You do not need to follow it exactly but if you edit your post using the icon with the pencil on it you will likely get better responses.

viewtopic.php?f=1&t=6212
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.
Does that include income taxes too? If not you will need to add that into your calculations.

What are the details on your mortage and what would your expenses be if you paid that off?

What do you expect your expenses to be when both your kids are through college and supporting themself?

You can get your expected Social Security amount on the Social Security website but be sure to change the defaults to specify that you stop working in 2019 since it defaults to assume that you keep working until you start Social Security. You can then enter the amounts here to get a suggested claiming strategy.

https://opensocialsecurity.com/
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds.
For tax efficiency it would be best to own all your bonds in the retirement accounts so you might want to work that into your plans.
Last edited by Watty on Wed Jul 24, 2019 4:20 pm, edited 1 time in total.

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Raymond
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Re: Laid Off - Want to Retire / Am I OK

Post by Raymond » Wed Jul 24, 2019 4:20 pm

Sorry about the layoff.

Congratulations on having enough "Foxtrot Uniform" money :D

What is the remaining mortgage amount and the interest rate? Consider refinancing or recasting if the interest is high enough.

Or maybe just pay it off entirely.

If you want more advice on your investments, you might want to use the format in the following link:

"Asking Portfolio Questions"

Consider part-time work in something you'd enjoy.
"Ritter, Tod und Teufel"

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8foot7
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Re: Laid Off - Want to Retire / Am I OK

Post by 8foot7 » Wed Jul 24, 2019 4:21 pm

JoeRetire wrote:
Wed Jul 24, 2019 4:17 pm
8foot7 wrote:
Wed Jul 24, 2019 4:13 pm
JoeRetire wrote:
Wed Jul 24, 2019 4:12 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Is it safe for me to retire now and live on my investments?
Financially it's safe. But talk to your wife first.
His wife is really going to make him go find another job?
I understand a discussion about quitting, but that ship has sailed.
He was laid off. How is quitting relevant here? :confused
That is what I meant. What is the discussion with the wife about? Is she really going to say, "no, honey, I don't want you to retire, I want you to go find another job?" The way you phrased it sounded like he needed his wife's approval to not have a job anymore, and my point was that I could understand why you would have a discussion about potentially quitting a job in order to retire, but since he already was laid off and doesn't have a job, there's very little to discuss.

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sperry8
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Re: Laid Off - Want to Retire / Am I OK

Post by sperry8 » Wed Jul 24, 2019 4:24 pm

greg24 wrote:
Wed Jul 24, 2019 3:58 pm
You can absolutely retire.
I agree. With $6mm in assets and only $145k expenses you can retire easily. Congratulations! :beer
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JoeRetire
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Re: Laid Off - Want to Retire / Am I OK

Post by JoeRetire » Wed Jul 24, 2019 4:28 pm

8foot7 wrote:
Wed Jul 24, 2019 4:21 pm
JoeRetire wrote:
Wed Jul 24, 2019 4:17 pm
8foot7 wrote:
Wed Jul 24, 2019 4:13 pm
JoeRetire wrote:
Wed Jul 24, 2019 4:12 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
Is it safe for me to retire now and live on my investments?
Financially it's safe. But talk to your wife first.
His wife is really going to make him go find another job?
I understand a discussion about quitting, but that ship has sailed.
He was laid off. How is quitting relevant here? :confused
That is what I meant. What is the discussion with the wife about? Is she really going to say, "no, honey, I don't want you to retire, I want you to go find another job?" The way you phrased it sounded like he needed his wife's approval to not have a job anymore, and my point was that I could understand why you would have a discussion about potentially quitting a job in order to retire, but since he already was laid off and doesn't have a job, there's very little to discuss.
Marriage is a partnership, IMHO. And all important decisions need to be discussed between partners (again IMHO). Choosing to retire is an important decision, IMHO.

I would never suggest anyone, without regard to their wealth, go to their spouse and say "I've decided that I am now retired. End of discussion."

Your mileage may vary.

Bfwolf
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Re: Laid Off - Want to Retire / Am I OK

Post by Bfwolf » Wed Jul 24, 2019 4:29 pm

You are more than fine. Don't let anybody worry you about healthcare costs, etc etc. You're golden.

Keep in mind that you will get Social Security at some point. That will increase your income. Also keep in mind that your mortgage will be completed at some point. That will reduce your expenses.

So yes, you do need to figure out health care, but don't let that make you think this might not all work out. It will.

Congrats on your retirement!!!! Your diligent saving has paid off handsomely.

visualguy
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Re: Laid Off - Want to Retire / Am I OK

Post by visualguy » Wed Jul 24, 2019 5:38 pm

You're almost certainly able to retire now from a financial perspective. What scenario worries you?

From a non-financial perspective, there's the question of whether you really want to retire that early, but that's a different discussion...

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ChowYunPhat
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Re: Laid Off - Want to Retire / Am I OK

Post by ChowYunPhat » Wed Jul 24, 2019 6:15 pm

Bgeste, you're in excellent shape and it is safe for you to retire. Based on how much you've saved and the asset allocation selected, you probably know a lot more than you're letting on too :wink:

Only recommendation I'd make is spend some time with a fee-only advisor on withdrawal strategies for the first 2-3 years. You have plenty in taxable to weather this time period and can get through the shock and awe of the layoff. You may elect to reenter the workforce or not. However, it's money well spent to understand tax efficient withdrawals (Roth laddering, SS income, pension draws, 72T, etc...) if you don't have the inclination to DIY. This person can also help provide some guidance on estate planning and other questions you might have to maximize income replacement.

Congrats on a job well done to this point BGeste. Hopefully, the layoff has little impact to your health, ego, and happiness.
A wise man and his money are friends forever...

skime
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Re: Laid Off - Want to Retire / Am I OK

Post by skime » Wed Jul 24, 2019 6:25 pm

BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.

trustquestioner
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Re: Laid Off - Want to Retire / Am I OK

Post by trustquestioner » Wed Jul 24, 2019 6:26 pm

You can easily retire. Congratulations!

delamer
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Re: Laid Off - Want to Retire / Am I OK

Post by delamer » Wed Jul 24, 2019 6:28 pm

ChowYunPhat wrote:
Wed Jul 24, 2019 6:15 pm
Bgeste, you're in excellent shape and it is safe for you to retire. Based on how much you've saved and the asset allocation selected, you probably know a lot more than you're letting on too :wink:
With all due respect to the OP, we have no way of determining how much the accumulated assets reflect savings from his income versus an inheritance. Or whether he manages the investments for that matter.

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Re: Laid Off - Want to Retire / Am I OK

Post by Grt2bOutdoors » Wed Jul 24, 2019 6:40 pm

You can retire AND if funds start running lower than expected you will adjust just as IF you were working and were told you had to take a pay cut!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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8foot7
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Re: Laid Off - Want to Retire / Am I OK

Post by 8foot7 » Wed Jul 24, 2019 6:42 pm

skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
Even at 2.5% he has 5,000 a year leftover and at some point his mortgage will be paid off. That doesn’t seem tight when you are on a 2.5% withdrawal rate.

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birdog
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Re: Laid Off - Want to Retire / Am I OK

Post by birdog » Wed Jul 24, 2019 6:59 pm

You can easily retire! Congratulations! A 2.5 % withdrawal rate is very conservative. Since you'll be living off your taxable account initially, you'll also enjoy a 0% tax rate on long term capital gains and qualified dividends as long as your taxable income remains below 78k, respectively. Short term capital gains (which you should be able to limit to zero) and ordinary dividends count as ordinary income so house your holdings as tax-efficiently as possible.

unstartable
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Re: Laid Off - Want to Retire / Am I OK

Post by unstartable » Wed Jul 24, 2019 7:09 pm

Can you move to a lower cost of living area to maintain lifestyle while reducing expenses?

capjak
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Re: Laid Off - Want to Retire / Am I OK

Post by capjak » Wed Jul 24, 2019 7:13 pm

You can retire financially.

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LiveSimple
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Re: Laid Off - Want to Retire / Am I OK

Post by LiveSimple » Wed Jul 24, 2019 7:17 pm

if you cannot retire, I am not sure, if I even can think of retiring :D

Bacchus01
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Re: Laid Off - Want to Retire / Am I OK

Post by Bacchus01 » Wed Jul 24, 2019 7:36 pm

I would

As mentioned above in a few cases, don’t think about retirement in one big chunk. Think about it in stages.

Plan to get to 59.5
Plan to get the kids through college and off the payroll (what do expenses look like then?)
Plan for medical until Medicare
Plan for SS - when and how much
Plan until mortgage paid off (what do expenses look like then?)

Any pension?

Any part-time work interests?

You’ll find that several of the timelines and events above obviously overlap. Planning something like “the next 40 years” just doesn’t make sense. As a barometer, using the 4% “rule” as a starting point makes sense and suggests you are fine. I think once you break it down into major buckets, I think you’ll find you are WELL ready for retirement financially.

I-orp is a great tool that helps simulate some of these events as well. Using open social security first helps you understand SS strategy. Then plug that and others into I-orp. I would think it’ll tell you you can spend north of $200K/yr early and be just fine.

Morgan Dollar 1921
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Re: Laid Off - Want to Retire / Am I OK

Post by Morgan Dollar 1921 » Wed Jul 24, 2019 7:42 pm

Everyone is concerned about health insurance, sad that is the trap we deal with, set by our employer's and the, oh wait, my post cannot be political.

How is your health? How about genetics, are your parents & in-laws still living. Would it not be nice to take a 2-3 week vacation with the girls while we all have our health? Time with parents, a cruise, etc. None of us know how long our lives will be, hope for the best and plan for less than that.

The 16 year old will be out of high school before you turn around three times, enjoy this opportunity! Yeah, a lay off sucks, but you must have had good skills in the job market. Would, could you move after youngest is out of high school, lower cost of living area, possibly?

Yes, "you will probably also qualify for unemployment insurance, which can help a little." Can your wife work, does she want to work, full, part time or volunteer once you are empty nester's? This could be a test flight as others said, to find out about how retirement feels. I think you should tune up your resume, just in case a perfect opportunity jumps in front of you.

As far as becoming young "old" couple, do you both have hobbies, activities you enjoy together and individually. Time is the train that leaves the station as we age, you are in a position to enjoy a scenic trip.

This might be a good time to find a fee based, financial planner, who will act as a fiduciary to take a look at your special options for this year and the next eight years. I would request recommendations from others. Is your estate planning and will set up and updated. Finally how is the wife taking this? You don't have to answer to me, but think about this and get your arms around this before you make a lot of decisions. Good luck.

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BGeste
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Re: Laid Off - Want to Retire / Am I OK

Post by BGeste » Wed Jul 24, 2019 7:54 pm

thanks to all for the excellent replies. Here is some additional information requested from some.

1) I plan to buy a high deductible health insurance plan.

2) I live in a state with no income tax

3) Dividend income is currently projected to be $130K annually. The 400K in individual stocks are all above average dividend payers.

4) I am considering moving some of my index funds to vanguard dividend ETFs. However, I do not want to take on too much risk.

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Wiggums
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Re: Laid Off - Want to Retire / Am I OK

Post by Wiggums » Wed Jul 24, 2019 7:59 pm

Welcome to the forum.

You can easily retire based on your savings. Congratulations on having enough already saved. Sorry about the unexpected layoff.

You’ll need to figure out healthcare for your family.

Good luck to you.

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HomerJ
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Re: Laid Off - Want to Retire / Am I OK

Post by HomerJ » Wed Jul 24, 2019 8:04 pm

8foot7 wrote:
Wed Jul 24, 2019 6:42 pm
skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
Even at 2.5% he has 5,000 a year leftover and at some point his mortgage will be paid off. That doesn’t seem tight when you are on a 2.5% withdrawal rate.
And Social Security and Medicare someday.

3% has never failed. Where is 2.5% coming from? Then you say.. "I retired early. It was the best decision I ever made."

At the same time you bring up a random 2.5% number and talk about it being scary tight.

Posts are so weird here.
The J stands for Jay

Bacchus01
Posts: 3127
Joined: Mon Dec 24, 2012 9:35 pm

Re: Laid Off - Want to Retire / Am I OK

Post by Bacchus01 » Wed Jul 24, 2019 8:06 pm

BGeste wrote:
Wed Jul 24, 2019 7:54 pm
thanks to all for the excellent replies. Here is some additional information requested from some.

1) I plan to buy a high deductible health insurance plan.

2) I live in a state with no income tax

3) Dividend income is currently projected to be $130K annually. The 400K in individual stocks are all above average dividend payers.

4) I am considering moving some of my index funds to vanguard dividend ETFs. However, I do not want to take on too much risk.
I’m general, taking cap gains to buy your way into dividends would not likely be the best approach. Just tap the cap gains when needed for income.

smitcat
Posts: 3932
Joined: Mon Nov 07, 2016 10:51 am

Re: Laid Off - Want to Retire / Am I OK

Post by smitcat » Wed Jul 24, 2019 8:13 pm

skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
2.5% is tight ? In what scenarios does anyone thing that 2.5% is tight?

harrychan
Posts: 1554
Joined: Sun Nov 14, 2010 9:37 pm
Location: Pasadena

Re: Laid Off - Want to Retire / Am I OK

Post by harrychan » Wed Jul 24, 2019 8:15 pm

I'm 39 and even I would retire (or at least semi retire) with that amount!
This is not legal or certified financial advice but you know that already.

bradshaw1965
Posts: 759
Joined: Tue Jul 31, 2007 9:36 pm

Re: Laid Off - Want to Retire / Am I OK

Post by bradshaw1965 » Wed Jul 24, 2019 8:18 pm

aristotelian wrote:
Wed Jul 24, 2019 3:49 pm
You are probably in the top 1% of net worth on the planet. You will be fine.
Being completely pedantic...but the worldwide 1% is a paltry $871,320.

https://www.cnbc.com/2018/11/01/how-muc ... dwide.html

skime
Posts: 122
Joined: Fri Nov 10, 2017 6:24 pm

Re: Laid Off - Want to Retire / Am I OK

Post by skime » Thu Jul 25, 2019 7:49 am

smitcat wrote:
Wed Jul 24, 2019 8:13 pm
skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
2.5% is tight ? In what scenarios does anyone thing that 2.5% is tight?
It's a bit high of a withdrawal rate for my comfort level. However, like I said, I've never seen data to validate my thoughts about it. I tend to steer away from common knowledge to err on the side of safety. But that's just my own strategy. That doesn't mean it has to be everyone's.

smitcat
Posts: 3932
Joined: Mon Nov 07, 2016 10:51 am

Re: Laid Off - Want to Retire / Am I OK

Post by smitcat » Thu Jul 25, 2019 7:56 am

skime wrote:
Thu Jul 25, 2019 7:49 am
smitcat wrote:
Wed Jul 24, 2019 8:13 pm
skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
2.5% is tight ? In what scenarios does anyone thing that 2.5% is tight?
It's a bit high of a withdrawal rate for my comfort level. However, like I said, I've never seen data to validate my thoughts about it. I tend to steer away from common knowledge to err on the side of safety. But that's just my own strategy. That doesn't mean it has to be everyone's.
2.5% is way out there on the low side - specifically since there has been no consideration for SS and other given payments in the numbers.
If everyone was required to utilize 2.5% then 90+% of the population would never be retired.

skime
Posts: 122
Joined: Fri Nov 10, 2017 6:24 pm

Re: Laid Off - Want to Retire / Am I OK

Post by skime » Thu Jul 25, 2019 8:00 am

HomerJ wrote:
Wed Jul 24, 2019 8:04 pm
8foot7 wrote:
Wed Jul 24, 2019 6:42 pm
skime wrote:
Wed Jul 24, 2019 6:25 pm
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
Life is not a dress rehearsal. At 2.5% withdrawal, it's a bit tight for my personal comfort. That being said, I've never seen any study that that withdrawal rate ever runs out of money at any asset allocation.

It doesn't seem like it would be a foolish thing to do from a financial perspective.

I retired early. It was the best decision I ever made.
Even at 2.5% he has 5,000 a year leftover and at some point his mortgage will be paid off. That doesn’t seem tight when you are on a 2.5% withdrawal rate.
And Social Security and Medicare someday.

3% has never failed. Where is 2.5% coming from? Then you say.. "I retired early. It was the best decision I ever made."

At the same time you bring up a random 2.5% number and talk about it being scary tight.

Posts are so weird here.
2.5% wasn't random. OP said expenses were $145k. I rounded to $150k. That's 2.5% of assets. I never mentioned anything about the rate being scary.

And yes, retiring early was the best decision I ever made.

ponyboy
Posts: 747
Joined: Fri Feb 06, 2015 10:39 am

Re: Laid Off - Want to Retire / Am I OK

Post by ponyboy » Thu Jul 25, 2019 8:15 am

123 wrote:
Wed Jul 24, 2019 3:48 pm
With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
Yeah...what a terrible example that father is setting. Saving $6 million by the age of 51. What ever will his kids think of him!?

ponyboy
Posts: 747
Joined: Fri Feb 06, 2015 10:39 am

Re: Laid Off - Want to Retire / Am I OK

Post by ponyboy » Thu Jul 25, 2019 8:16 am

harrychan wrote:
Wed Jul 24, 2019 8:15 pm
I'm 39 and even I would retire (or at least semi retire) with that amount!
Im 36 and wife is 35...we wouldnt think about work ever again with those kinds of numbers, even at our age. Then again, our expenses are significantly lower than OP's.

Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?

sc9182
Posts: 288
Joined: Wed Aug 17, 2016 7:43 pm

Re: Laid Off - Want to Retire / Am I OK

Post by sc9182 » Thu Jul 25, 2019 8:31 am

Couldn’t possibly plan or do better than what you’ve done. Plenty of Taxable to cover till a few logical breaks: age 55 from employer 401k withdrawal, age 59 1/2 for Ira withdrawals, able to get SS (age 62-70, depending on health and other needs/circumstances).

If you (or spouse) wish to share your knowledge and wisdom for future generations- may be one of you can get part time or substitute credentials at local county/community college or school-districts., and possibly get (or buy into) the excellent group health insurance - until Medicare kicks-in.

You was doing good !

marcopolo
Posts: 2231
Joined: Sat Dec 03, 2016 10:22 am

Re: Laid Off - Want to Retire / Am I OK

Post by marcopolo » Thu Jul 25, 2019 9:03 am

123 wrote:
Wed Jul 24, 2019 3:48 pm
With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
Why do you think belt tightening is required?
Once in a while you get shown the light, in the strangest of places if you look at it right.

marcopolo
Posts: 2231
Joined: Sat Dec 03, 2016 10:22 am

Re: Laid Off - Want to Retire / Am I OK

Post by marcopolo » Thu Jul 25, 2019 9:10 am

BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.

Sorry to hear about the unexpected layoff.
Congratulations on being so well prepared for things like this.
Hopefully, a couple years down the road you will view this as a positive thing.
Based on info provided, i think you are in great shape to retire right now and look forward to the next phase of your life.

Here is a post i wrote recently in answer to a similar inquiry about being financially ready to retire. I hope you find it helpful.

welcome to the forum, and congratulations on your success so far.

I will preface my comments by saying that i retired about a year and a half ago at the age of 51 with similar somewhat lower numbers as you.

There are no guarantees in the future, so all you can rely on on is looking at how things have worked out in the past, and then decide for yourself where you are comfortable on the conservative to aggressive spectrum, and try to balance the risk of running out of money against the risk of running out of time.

Everybody falls on a different portion of that spectrum, so you will get a similar diversity of responses to the question of "can I safely retire?"
This question, in various forms, gets asked quite regularly on this forum, and the answers almost invariably fall into several categories:

1) A small number will tell you that you are good to go

2) A larger portion will be cautiously optimistic and point out a few (hopefully helpful) things that you should consider. I would probably put myself in to this category, and ask if your budget includes plans for how to pay for health insurance/expense between now and Medicare eligibility.

3) A significant portion will say that you are close, but due to a variety of possible risks, you may want to consider working just a little longer to get your withdrawal rate (WR) a little lower and/or provide a little more cushion. You want will have about a 3% WR, they might suggest to work a couple more years to get to 2.5% WR. But, i suspect if you had come here proposing a 2.5% WR, they would give you the same answer and suggest a 2.0% WR.

4) A number of people will say you do not have nearly enough resource given all the risks that are out there for a 50 year retirement, and how are you going to handle the millions it is going to take to pay for Health Care, Long Term Care, Aging parents, boomerang kids, etc.

5) A small number of people will tell you that you are way too young to retire, what will you do? you can't possibly be a productive member of society without working for a paycheck.

I have to admit, I never understood the last one, but we do have that discussion more often than i would have expected. All the rest lie on various points along the spectrum i mentioned above, and quite often really say more about the person answering the question than your particular situation.

All you can really do is look at the historical data, consider the current environment, and where that fits in relative to historical norms, and considers the various risks that need to be balanced. Based on historical outcomes, you appear to be in a great position to pull the trigger, but only you can decide how comfortable you feel with that decision. The answers here will give you lots of perspective and useful information, and if you need more specific analysis, etc. there are some very knowledgeable people here always willing to help.


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.

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