Would Love to Retire (or Downsize my Career)...

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LookingForward2
Posts: 3
Joined: Tue Aug 10, 2021 1:04 pm

Would Love to Retire (or Downsize my Career)...

Post by LookingForward2 »

I never thought I would write this post – but here I am. Long time reader – first time posting. I feel like I’ve read everything on this forum (but big difference between reading and understanding). Before I post my details – I wanted to say thank you to everyone who has made this forum the valuable tool it is. It’s a tremendous asset and wish I knew about it years ago.

My question is the classic: Could I retire now? If the answer is no – I have an opportunity to take a much more enjoyable job with less stress and significantly less money ($70k) if putting a few more years in would help. Any and all feedback is welcome.

Why am i asking this question? I am burned out in my career (IT Management with lots of stress and escalation) + Cancer scare. Luckily, everything turned out ok - but definitely a wake up call.

Background

My age: 54; Spouse: 56

Nestegg:
  • $3.1M total
  • $2.1M in 401k (90/10)
  • $1M in taxable accounts ($600k VTI; $200k in QQQ; and $200 in cash);
  • House is paid off (worth $750k) if we ever decided to downsize but NOT planning to do so any time soon.

Wife eligible immediately for early retirement which would provide healthcare covered at 80% and $20k annually

Income needs:
  • Feel comfortable that $160k inclusive of taxes would provide an ideal retirement;
  • Feel we could comfortably cut back to $140k or $120k in down years with minimal impact to enjoyment;
  • If push really came to shove – we could obviously go lower. But preference would be to not go below that
Additional information:
  • Kids are grown and on their own
  • Live in FL (no state income tax)
Social Security Plan
  • Wife: receives $24k in 10 years (at age 66)
  • Self: receives $44k in 16 years (age 70)
So nestegg (in today’s dollars) would need to support:
  • $140k/year ($160k total - $20k from pension) for 10 years.
  • Then $116k/year when wife’s SS kicks in for 6 years
  • Then $72k from time I’m 70 until the end
What does my gut say ”It’s possible – but not a slam dunk”. What do I wish? I wish I could at least feel comfortable in taking a $70k (which is available to me).
bloom2708
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Joined: Wed Apr 02, 2014 2:08 pm

Re: Would Love to Retire (or Downsize my Career)...

Post by bloom2708 »

What do you "buy" with spending for the last $40k to $50k?

Could you suffer it out and live off $100k to $110k to reduce stress? Play extra spend based on how things go?

Have you used iOrp or FireCalc to get a confidence level on your numbers?

I think you are in the ballpark and could easily do it with some paired back spending. We are 50-52, but if we were 54-56 with those numbers, I'd give it a whirl with a bit less spending. Buy a golf membership and use the HE double hockey sticks out of it. Travel is still a mess.
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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: Would Love to Retire (or Downsize my Career)...

Post by Watty »

LookingForward2 wrote: Wed Oct 27, 2021 3:31 pm Feel comfortable that $160k inclusive of taxes would provide an ideal retirement;
With a paid off house that is a pretty high end lifestyle if you do not have anything special going on like supporting parents or medical expenses.

People do spend that much but often when people are estimating their retirement expenses they will overestimate it then add an additional margin of safety.

It is especially important to consider what your expenses will be at different ages.

I have seen relatives naturally slow down when they were in their mid 70s even though they were in relatively good health for their age. At that point they did not want to travel much and even big evening out was a rare event. Since they lived in a paid off house there were often months when they did not spend their entire Social Security check.

Many of your other costs will stop if you need to go into long term care so your expenses could go way down if you need the lower cost level of assisted living or if only one of you is surviving when a more expensive skilled nursing facility is needed. You can get an idea of what these cost in your area on this website.

https://www.genworth.com/aging-and-you/ ... -care.html
LookingForward2 wrote: Wed Oct 27, 2021 3:31 pm So nestegg (in today’s dollars) would need to support:
$140k/year ($160k total - $20k from pension) for 10 years.
Then $116k/year when wife’s SS kicks in for 6 years
Then $72k from time I’m 70 until the end
The first thing I would do would be to play with your numbers with several of the retirement calculators like FireCalc.

https://www.bogleheads.org/wiki/Retirem ... d_spending

Most of them will give results in terms of "Success" or "Failure" and the "Failure sounds pretty dire like you spend mindlessly until you are broke and homeless. It more realistically means that you might need to reduce your spending by 10% when you are 75 of your portfolio is smaller than planned.

When I was deciding if it was OK for me to retire I ran my numbers through at least a half dozen of these calculators and they all said I would be OK, but some of the details were different.

A few things to consider;

1) With $3.1 million dollars you would have at least 1% in dividends and interest, that is $31,000 a year. That would initially mean that you could spend $31K a year without drawing down your portfolio.

2) When you are 70 and need $72K a year you can use the 4% safe withdrawal rate assumption to see that you would need a portfolio of $1.8 million dollars then. (4% of $1.8 million is $72,000).

3) Your current $3.1 million - $1.8 million is $1.3 million that you could draw down your portfolio in the 16 years until you are 70.
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Wiggums
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Re: Would Love to Retire (or Downsize my Career)...

Post by Wiggums »

I also had a health scare that included three surgeries. I retired at age 56 from a great IT job. We reduced our AA from aggressive to 65/35.

If $160k less your $20k pension is an accurate retirement budget for the first ten years, working few years longer, will allow you to enjoy your current lifestyle with a lot less worry over your portfolio.
"I started with nothing and I still have most of it left."
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

Re: Would Love to Retire (or Downsize my Career)...

Post by marcopolo »

LookingForward2 wrote: Wed Oct 27, 2021 3:31 pm I never thought I would write this post – but here I am. Long time reader – first time posting. I feel like I’ve read everything on this forum (but big difference between reading and understanding). Before I post my details – I wanted to say thank you to everyone who has made this forum the valuable tool it is. It’s a tremendous asset and wish I knew about it years ago.

My question is the classic: Could I retire now? If the answer is no – I have an opportunity to take a much more enjoyable job with less stress and significantly less money ($70k) if putting a few more years in would help. Any and all feedback is welcome.

Why am i asking this question? I am burned out in my career (IT Management with lots of stress and escalation) + Cancer scare. Luckily, everything turned out ok - but definitely a wake up call.

Background

My age: 54; Spouse: 56

Nestegg:
  • $3.1M total
  • $2.1M in 401k (90/10)
  • $1M in taxable accounts ($600k VTI; $200k in QQQ; and $200 in cash);
  • House is paid off (worth $750k) if we ever decided to downsize but NOT planning to do so any time soon.

Wife eligible immediately for early retirement which would provide healthcare covered at 80% and $20k annually

Income needs:
  • Feel comfortable that $160k inclusive of taxes would provide an ideal retirement;
  • Feel we could comfortably cut back to $140k or $120k in down years with minimal impact to enjoyment;
  • If push really came to shove – we could obviously go lower. But preference would be to not go below that
Additional information:
  • Kids are grown and on their own
  • Live in FL (no state income tax)
Social Security Plan
  • Wife: receives $24k in 10 years (at age 66)
  • Self: receives $44k in 16 years (age 70)
So nestegg (in today’s dollars) would need to support:
  • $140k/year ($160k total - $20k from pension) for 10 years.
  • Then $116k/year when wife’s SS kicks in for 6 years
  • Then $72k from time I’m 70 until the end
What does my gut say ”It’s possible – but not a slam dunk”. What do I wish? I wish I could at least feel comfortable in taking a $70k (which is available to me).
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Once in a while you get shown the light, in the strangest of places if you look at it right.
dstac
Posts: 187
Joined: Sun Jun 02, 2013 5:12 pm

Re: Would Love to Retire (or Downsize my Career)...

Post by dstac »

Watty wrote: Wed Oct 27, 2021 6:17 pm
A few things to consider;

1) With $3.1 million dollars you would have at least 1% in dividends and interest, that is $31,000 a year. That would initially mean that you could spend $31K a year without drawing down your portfolio.

2) When you are 70 and need $72K a year you can use the 4% safe withdrawal rate assumption to see that you would need a portfolio of $1.8 million dollars then. (4% of $1.8 million is $72,000).

3) Your current $3.1 million - $1.8 million is $1.3 million that you could draw down your portfolio in the 16 years until you are 70.
I like your thoughts, and would a couple more calcs that I’m oversimplifying:
2.a) For years 10-15, you need ($116k - $72k more)/yr x 6yrs is ~$264k (straight liability match)
3.a) $1.3 - $0.264 leaves about $1M for yrs 1-9. With $72k + $20k pension you need another $68k/yr or $600k.

You’ve got a margin of $600k if today
A) you set aside $900k for liability matching through yr 15
B) use $1.8M as a 4% forever portfolio. (aka 3% of a $2.4M forever portfolio if you role the $600k into it.)

Big decision OP. Good luck.
dstac
Posts: 187
Joined: Sun Jun 02, 2013 5:12 pm

Re: Would Love to Retire (or Downsize my Career)...

Post by dstac »

marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
marcopolo
Posts: 8446
Joined: Sat Dec 03, 2016 9:22 am

Re: Would Love to Retire (or Downsize my Career)...

Post by marcopolo »

dstac wrote: Thu Oct 28, 2021 12:42 am
marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
Because 4% is not a perpetual rate.
"4% rule" only studied 30 yr time periods.
That would only take OP to mid 80's.
Once in a while you get shown the light, in the strangest of places if you look at it right.
revhappy
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Location: Singapore

Re: Would Love to Retire (or Downsize my Career)...

Post by revhappy »

marcopolo wrote: Thu Oct 28, 2021 12:57 am
dstac wrote: Thu Oct 28, 2021 12:42 am
marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
Because 4% is not a perpetual rate.
"4% rule" only studied 30 yr time periods.
That would only take OP to mid 80's.
Interesting! What would be a perpetual rate? If not perpetual, something that works for 50 years.
LeftCoastIV
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Re: Would Love to Retire (or Downsize my Career)...

Post by LeftCoastIV »

revhappy wrote: Thu Oct 28, 2021 2:22 am
marcopolo wrote: Thu Oct 28, 2021 12:57 am
dstac wrote: Thu Oct 28, 2021 12:42 am
marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
Because 4% is not a perpetual rate.
"4% rule" only studied 30 yr time periods.
That would only take OP to mid 80's.
Interesting! What would be a perpetual rate? If not perpetual, something that works for 50 years.
ERN has an article that looks at longer withdrawal periods, withdrawal rates, and associated success/failure rates. Scroll down to the "heat map" table.

https://earlyretirementnow.com/2016/12/ ... t-1-intro/
Zeno
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Re: Would Love to Retire (or Downsize my Career)...

Post by Zeno »

revhappy wrote: Thu Oct 28, 2021 2:22 am
marcopolo wrote: Thu Oct 28, 2021 12:57 am
dstac wrote: Thu Oct 28, 2021 12:42 am
marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
Because 4% is not a perpetual rate.
"4% rule" only studied 30 yr time periods.
That would only take OP to mid 80's.
Interesting! What would be a perpetual rate? If not perpetual, something that works for 50 years.
There are a couple of sources for studying perpetual withdrawal rates. Here is another one: https://portfoliocharts.com/2016/12/09/ ... etirement/. Like SWRs, PWRs are a function of AA.

The Mad Fientist blog also has some interesting commentary (you need to create a free account though): https://www.madfientist.com/safe-withdrawal-rate/
Zeno
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Re: Would Love to Retire (or Downsize my Career)...

Post by Zeno »

LookingForward2 wrote: Wed Oct 27, 2021 3:31 pm I never thought I would write this post – but here I am. Long time reader – first time posting. I feel like I’ve read everything on this forum (but big difference between reading and understanding). Before I post my details – I wanted to say thank you to everyone who has made this forum the valuable tool it is. It’s a tremendous asset and wish I knew about it years ago.

My question is the classic: Could I retire now? If the answer is no – I have an opportunity to take a much more enjoyable job with less stress and significantly less money ($70k) if putting a few more years in would help. Any and all feedback is welcome.

Why am i asking this question? I am burned out in my career (IT Management with lots of stress and escalation) + Cancer scare. Luckily, everything turned out ok - but definitely a wake up call.

Background

My age: 54; Spouse: 56

Nestegg:
  • $3.1M total
  • $2.1M in 401k (90/10)
  • $1M in taxable accounts ($600k VTI; $200k in QQQ; and $200 in cash);
  • House is paid off (worth $750k) if we ever decided to downsize but NOT planning to do so any time soon.

Wife eligible immediately for early retirement which would provide healthcare covered at 80% and $20k annually

Income needs:
  • Feel comfortable that $160k inclusive of taxes would provide an ideal retirement;
  • Feel we could comfortably cut back to $140k or $120k in down years with minimal impact to enjoyment;
  • If push really came to shove – we could obviously go lower. But preference would be to not go below that
Additional information:
  • Kids are grown and on their own
  • Live in FL (no state income tax)
Social Security Plan
  • Wife: receives $24k in 10 years (at age 66)
  • Self: receives $44k in 16 years (age 70)
So nestegg (in today’s dollars) would need to support:
  • $140k/year ($160k total - $20k from pension) for 10 years.
  • Then $116k/year when wife’s SS kicks in for 6 years
  • Then $72k from time I’m 70 until the end
What does my gut say ”It’s possible – but not a slam dunk”. What do I wish? I wish I could at least feel comfortable in taking a $70k (which is available to me).
OP: I totally get where you are coming from. I am happy that the health scare had a happy ending.

I echo the comments above and agree that you are close but might be cutting it too close (without the $70K job) because of your desired budget (160K) and youth (which suggests you probably need to be planning for a 40 year retirement at least if you pulled the plug today). I guess I agree with your gut.

Another way to look at it is that you are roughly at 19X and 25X for budgets of 160K and 120K, respectively. 25X is the 4% rule of thumb, but that only assumes a 30 year horizon. You have a lot of things going for you that add safety margins — a pension, subsidized HC (which I presume applies to you as well as DW), paid off house, two SS checks down the road, budget flexibility, kids launched.

I think at your age you need to be at least at 33X, which back of the envelope for $3.1M is $94K. Again, you are close. Mentally and psychologically, I might be tempted to take that $70K job on condition that we tried our best to only live on that for a few more years, thus effectively cutting your budget in half while not tapping your next egg for, say, 5 more years. You could view those years as a “retirement test.” Again, however, I am being super conservative here.

Best of luck and let us know what you decide to do.
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Tubes
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Re: Would Love to Retire (or Downsize my Career)...

Post by Tubes »

OP hasn't responded with the spending questions. OP is ready to go if the spending can come down just a bit.

Based on our spending patterns before retirement, I thought we'd be spending 100k to 120k. I'm three years in, and we're averaging about 80k, and that's with about 15k to 20k per year charity and a 10k per year unexpected home repair. I totally over-estimated my tax load. And of course, travel was reduced.

Point is, look at that spending carefully.
Zeno
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Re: Would Love to Retire (or Downsize my Career)...

Post by Zeno »

Tubes wrote: Thu Oct 28, 2021 6:07 am OP hasn't responded with the spending questions. OP is ready to go if the spending can come down just a bit.

Based on our spending patterns before retirement, I thought we'd be spending 100k to 120k. I'm three years in, and we're averaging about 80k, and that's with about 15k to 20k per year charity and a 10k per year unexpected home repair. I totally over-estimated my tax load. And of course, travel was reduced.

Point is, look at that spending carefully.
+1

That is very fascinating; thank you for sharing that. I am 57 and DW is 61. I am basically still working out of fear and HC worries.

We have been tracking expenditures for years, and our estimated “pre-65” comfortable retirement budget is $120K. About 30% of that is HC-related (HC and LTC premiums, etc.). Estimating taxes in retirement also causes me unease.

Anyway, your information provides comfort, so thank you.
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Tubes
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Re: Would Love to Retire (or Downsize my Career)...

Post by Tubes »

WyomingFIRE wrote: Thu Oct 28, 2021 6:45 am
Tubes wrote: Thu Oct 28, 2021 6:07 am OP hasn't responded with the spending questions. OP is ready to go if the spending can come down just a bit.

Based on our spending patterns before retirement, I thought we'd be spending 100k to 120k. I'm three years in, and we're averaging about 80k, and that's with about 15k to 20k per year charity and a 10k per year unexpected home repair. I totally over-estimated my tax load. And of course, travel was reduced.

Point is, look at that spending carefully.
+1

That is very fascinating; thank you for sharing that. I am 57 and DW is 61. I am basically still working out of fear and HC worries.

We have been tracking expenditures for years, and our estimated “pre-65” comfortable retirement budget is $120K. About 30% of that is HC-related (HC and LTC premiums, etc.). Estimating taxes in retirement also causes me unease.

Anyway, your information provides comfort, so thank you.
Sure. I should mention insurance is our largest expenditure at about $16k per year. This includes retiree-subsidized health insurance (about 9k per year) and low grade LTC insurance at 2k. We consider this a good deal for a good PPO plan. Other people pay a lot more, and perhaps OP has a high health care load. It is important to really watch the health care.

Food, dining, gas, auto all are pretty stable, although inflation is starting to impact them. We don't do fine dining. We spend about $1500 per year in dining. Some people can spend that much in two fine dining episodes. So I can see where expenses can really bloom depending on the lifestyle.

We wear our clothes for at least 10 years (embarassing?). So, our clothing expenditures for both of us are always well under 1k per year.

Entertainment varies between 2k to 5k. It depends on whether my favorite pro sports team goes to the playoffs or not. This is totally discretionary.

TV, cell phones, internet can really impact spending. I put effort into getting the best deals on that and now collectively have them below $2k per year. There was a time I was paying my cable provider $240 per month and cell phone $100 per month, so collectively getting them below $2k per year on total was important. It did require cord cutting, but I don't feel deprived. After all, although we don't pay for TV sports, we instead go to some live games.

And so on. There's another thread about Quicken. Because we've detailed our spending carefully for the last 20 years, we have a very good pulse on our spending. I'm glad we invested in putting all that data in Quicken through the years.
J295
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Re: Would Love to Retire (or Downsize my Career)...

Post by J295 »

Op shows net worth around $4 million for two people in 50s with grown kids.

Op has choices and depending upon the choices may retire now.

To my way of thinking, a few more years of taxable income of $70,000 per year doesn’t move the needle.

The two of us transitioned eight years ago at age 53.

There are some comments above thread about health insurance. Our total health insurance cost since 2013 for premiums and out-of-pocket is around $25,000 total. Bronze high deductible plans under the affordable care act.
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Watty
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Re: Would Love to Retire (or Downsize my Career)...

Post by Watty »

revhappy wrote: Thu Oct 28, 2021 2:22 am Interesting! What would be a perpetual rate? If not perpetual, something that works for 50 years.
The fallacy with safe withdrawal rates, even for 30 years, is that in the real world your income needs will not be the same at different ages.
aristotelian
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Re: Would Love to Retire (or Downsize my Career)...

Post by aristotelian »

You have $3M. Yes, you can retire. The question is really whether it is worth it to you to keep working to maintain a $160k lifestyle.

Back of napkin, you could set up a liability matching portfolio in safe bonds with the equivalent of your SS payments for the first 15 years. Call that 750k. That would cover a $50k floor throughout your retirement.

That would leave you with about $2.25M for the investment portfolio. At 3.7% withdrawal that would provide about $83k. I would say that gives you a current safe budget of about $133k.

One concern is your portfolio is very traditional/pretax heavy with apparently no Roth funds. You will want to strategize your withdrawal plan and budget some tax on withdrawals/conversions.
Last edited by aristotelian on Thu Oct 28, 2021 7:50 am, edited 1 time in total.
Topic Author
LookingForward2
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Joined: Tue Aug 10, 2021 1:04 pm

Re: Would Love to Retire (or Downsize my Career)...

Post by LookingForward2 »

Thank you for all the replies and guidance!!

Some additional thoughts / answers to questions:
  • Wife's $20k pension does have a COLA
  • Our Costs...The $160k number is almost certainly overstated. We have been tracking our costs now month by month and we are no where near there. I goosed my number to account for emergencies (HVAC replacement; hole in the roof, etc), budget for a nice trip each year, and a little more. But given my age (still on the younger side) - i can sleep better at night if I use a conservative estimate.
  • I have used Firecalc and a variety of the other online calculators. Ive modeled the 4% rule, Guyton's Guardrails and have played with the assumptions. They all echo what my gut tells me. It's definitely possible but not a slam dunk.
So where does that leave me this morning? My answer today is likely to:
  • I definitely think i "could" make it work if i had to (by reducing costs)
  • This morning, I plan to stay the course at current job for 1 more year than reassess.
  • But i might also change my mind tomorrow :D
  • If i knew the next 10 years in the market were like the last 10 - i'll pull the cord this morning. But no one knows. My gut tells me that the next 10 years wont be like the last 10 - but i don't think we'll have a "lost decade either". If I'm right - I would take that in a second
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Tubes
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Re: Would Love to Retire (or Downsize my Career)...

Post by Tubes »

OP, good luck and hope it works out!

My wife was in IT, doing the whole "getting called at 3am thing" for too long. She had to retire. I got dragged into retirement in order to get on her retiree health insurance. We were 55. Another few years of adding to the pile would not have made much difference.

Here's some differences we have made:
- Wife can sleep peacefully
- Wife is fulfilled with volunteer things she's wanted to do forever
- My blood pressure went down 20 points. I can't believe it. It really mattered.

We did intend to travel, but alas, you know what happened. Maybe next year. In the meantime, we've spent time close to home hiking and what not. Very low cost. Florida isn't the best hiking state, but there are still plenty of things to do that don't cost a ton.

I guess the point is a career isn't everything. I don't miss my career one bit. I'm onto other fulfilling things in life.
Zeno
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Re: Would Love to Retire (or Downsize my Career)...

Post by Zeno »

LookingForward2 wrote: Thu Oct 28, 2021 7:49 am Thank you for all the replies and guidance!!

Some additional thoughts / answers to questions:
  • Wife's $20k pension does have a COLA
  • Our Costs...The $160k number is almost certainly overstated. We have been tracking our costs now month by month and we are no where near there. I goosed my number to account for emergencies (HVAC replacement; hole in the roof, etc), budget for a nice trip each year, and a little more. But given my age (still on the younger side) - i can sleep better at night if I use a conservative estimate.
  • I have used Firecalc and a variety of the other online calculators. Ive modeled the 4% rule, Guyton's Guardrails and have played with the assumptions. They all echo what my gut tells me. It's definitely possible but not a slam dunk.
So where does that leave me this morning? My answer today is likely to:
  • I definitely think i "could" make it work if i had to (by reducing costs)
  • This morning, I plan to stay the course at current job for 1 more year than reassess.
  • But i might also change my mind tomorrow :D
  • If i knew the next 10 years in the market were like the last 10 - i'll pull the cord this morning. But no one knows. My gut tells me that the next 10 years wont be like the last 10 - but i don't think we'll have a "lost decade either". If I'm right - I would take that in a second
+1

Welcome to OMY-ville, my friend.
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JoeRetire
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Re: Would Love to Retire (or Downsize my Career)...

Post by JoeRetire »

LookingForward2 wrote: Wed Oct 27, 2021 3:31 pm What does my gut say ”It’s possible – but not a slam dunk”. What do I wish? I wish I could at least feel comfortable in taking a $70k (which is available to me).
If you take the $70k job, it's a slam dunk.

Other than "not work", what would you each plan to do once retired?
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LookingForward2
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Re: Would Love to Retire (or Downsize my Career)...

Post by LookingForward2 »

As for what we would "retire to"...I think we would be ok

For Me:
  • I have been volunteering on a Board for the past 5 years. I can put as much or as little time into that as I need. There is an abundance of support they need and it's different from my day job so i find it intellectually stimulating (and making an impact). I could easily put in 10-15 hours a week here now and would enjoy the social and intellectual interactions
  • I've re-discovered the joys of exercising later in life (after forgetting about it for 20 years). I do a mix of traditional walking with some weights and HITT training. I would love to raise the bar here
  • Ive developed a joy of landscape photography. Right now - it's jammed into small windows on weekend mornings. but i find it a great way to get out and walk and see new places. In some respects it's like my "golf" - my game is getting better - but i have SO FAR to go
Wife is already experiencing aspects of what retirement is like as she is a teacher and has summers off. What is nice is she has now had a few summers without the kids so she got to experience time not being a Mom in the summer and getting used to being a wife & person with free time on her hands. What's nice is we have passions that we both share but also have interests we do separately.
tigermilk
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Re: Would Love to Retire (or Downsize my Career)...

Post by tigermilk »

Kind of depends on how long you and your wife live. Your current nestegg matches your expected non-inflation adjusted 30 year expenses, For comparison, when I expect to hit the eject button I will be in a similar posture - my nestegg will cover 30 years of expenses net of a desired "income" accounting for pension and SS. I have no concerns for myself knowing that I likely won't hit those spending targets, and we have the discipline to throttle back as needed (my pension will cover 2/3 of our needs).

One thing to think about is if you are gone - the SS component for your wife will be lower. Is she comfortable with the profile if you are gone?

But personally, I would have confidence.
Shorty
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Re: Would Love to Retire (or Downsize my Career)...

Post by Shorty »

Edit - just noticed OP posted a decision. Well done...
dstac
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Re: Would Love to Retire (or Downsize my Career)...

Post by dstac »

LeftCoastIV wrote: Thu Oct 28, 2021 2:53 am
revhappy wrote: Thu Oct 28, 2021 2:22 am
marcopolo wrote: Thu Oct 28, 2021 12:57 am
dstac wrote: Thu Oct 28, 2021 12:42 am
marcopolo wrote: Wed Oct 27, 2021 8:58 pm
I think your gut is about right. Does the $20k pension have a COLA, that would help a little.

Here is one way of looking at it.

I will simplify the withdrawal for the first 16 years and call it $135k/yr for the 16 years
If we use 4% WR to support your $72k withdrawal after age 70, you need to have $1.8M inflation adjusted dollars left from your portfolio.

Starting with $3.1M, withdrawing $135k/yr and ending with $1.8M (using all real dollars) requires a 2.3% real return. That should certainly be possible for a balanced portfolio over the next 16 years. What that does not take into account is Sequence or Return Risk. If you get a bad stretch of returns while withdrawing the $140k/yr, your portfolio may not recover enough to leave you with $1.8M real in 16 years.

I think if you are willing to cut back your spending as you stated if/when markets perform poorly, then your plan is pretty sound.
Maybe it’s late, but why wouldn’t you use 4% withdrawal on $1.8M now, years 1-15 and years 16+? Seems like a perpetual portfolio should be as good now as in 16yrs.
Because 4% is not a perpetual rate.
"4% rule" only studied 30 yr time periods.
That would only take OP to mid 80's.
Interesting! What would be a perpetual rate? If not perpetual, something that works for 50 years.
ERN has an article that looks at longer withdrawal periods, withdrawal rates, and associated success/failure rates. Scroll down to the "heat map" table.

https://earlyretirementnow.com/2016/12/ ... t-1-intro/
Thanks for the reminder of that table. Also appreciate the precise language. An interesting component here is that if the SWR/PWR failed in their mid-80s their income would only be $88k/yr. Not exactly risk of ruin by the time things slow down.

So dropping to even a 3% WR is $2.4M for the $72k. Leaves $700k to cover the gap for yrs 1-15. (3% was 100% success in ERE table at 50/50 AA for 60yrs). That’s right on the edge for $160/yr all-in.
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