Help Me Decide How and If To Retire Early

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MrCheapo
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Help Me Decide How and If To Retire Early

Post by MrCheapo »

My situation is fairly simple but the decision is complex.

Thanks to Vanguard's excellent products I have:

$600K in a MM account.
$100K in various bond funds
$800K in various equity accounts (i.e. SP500)
$1M in 401k retirement accounts ($100K targeted 2025 and $900K for 2035 or later accounts).

I am 49.

I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.

So question #1.

Do I have enough to retire at 50 or should I wait to 55? I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.

I estimate retiring at 50 will be fine. $25K comes from my pension and $2.5M divided by 75K gives me 30+ years. But maybe I'm missing something. I am not counting the $2k a month in social security once I turn 67 as well to be safe.

Question #2.

Of my $2.5M in assets $1.8M is very aggressively invested. What should I do with it if I plan to retire at 50 or 55? Just about all my US funds are at an all time high so I'm inclined to take them out now if I retire at 50. But where would I put it? MM earn less than 0.1% now.

Thanks.
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retired@50
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Re: Help Me Decide How and If To Retire Early

Post by retired@50 »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm
I am 49.

I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.
Your post brings a question to my mind...

To get the $5K per month & 80% of health care can you quit working now and just wait 5 years before "retiring" or do you have to actually work until you're 55?

With regard to this thought...
Just about all my US funds are at an all time high so I'm inclined to take them out now if I retire at 50. But where would I put it? MM earn less than 0.1% now.
Conventional wisdom doesn't suggest you should sell all your stock the day you retire. You'll need to keep a mixture of stocks and bonds that you can hold through market ups and downs. I'd suggest at least 30% in stocks minimum, which would leave the other 70% in bonds and cash. Many retirees are happy with a 50% stock / 50% bond mixture... This way, you'll always be half-right. :wink:

Regards,
This is one person's opinion. Nothing more.
Triple digit golfer
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Re: Help Me Decide How and If To Retire Early

Post by Triple digit golfer »

You can retire at 50 and get $30k annual pension, leaving $70k to draw from your portfolio, or 2.8%. Seems reasonable to me, provided your annual expenses including health care are $100k as you said.

Also social security later on, so your withdrawal percentage will drop at that time too.

I'm only 35 and don't know much about ideal and maximum withdrawal rates and such, so I would defer to others. To me it seems you've got plenty to do it at 50, provided your estimate of expenses is correct and includes everything.

Weigh the benefits of waiting as well, if you don't hate your job. You'll have 5 less years to support in retirement, fewer years until social security, double the pension income and significantly reduced healthcare costs.

My dad retired a bit early and hasn't regretted it despite giving up some benefits like you would be doing. Never know when it's our time to go, so I personally would opt for retiring early if you can do so comfortably without stressing about running out of money. Just make sure you don't retire to a life of boredom. Some people are happier working. You're young so make sure you do SOMETHING.
loghound
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Re: Help Me Decide How and If To Retire Early

Post by loghound »

firecalc.com is your friend to get a rough sense.

I tried out a 40 year retirement, $100k of expenses, $2.5M of assets, and a $60k pension starting in 2026 and it looked like you never ran out of money. I then tried $150k of expenses to get a sense of sensitivity and you ran out of money about 20% of the time. You didn't mention social security but that would obviously help also.....

so yes, it looks like it could work...

I think the big question/risk is how much you really need/want to spend and what your comfort is with a retirement that could last 40+ years.
flyingaway
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Re: Help Me Decide How and If To Retire Early

Post by flyingaway »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm
Do I have enough to retire at 50 or should I wait to 55? I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.
Maybe you prefer a spending of $200,000 a year? Then why not work for 10 more years to retire at 60. I did not see that you have burning desire to retire.
surfstar
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Re: Help Me Decide How and If To Retire Early

Post by surfstar »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm Do I have enough to retire at 50 or should I wait to 55? I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.
We (40 y/o couple) pay a mortgage in a HCOL area and don't spend $100k/yr. Are you sure of your expenses and or the definition of expensive?

It sounds like you can retire, if you want to, though. Especially if you do have frugal tendencies - you can simply scale down spending if needed.
Step #1 is to document your current and proposed expenses.
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TxAg
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Re: Help Me Decide How and If To Retire Early

Post by TxAg »

Sounds easily doable
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foosball
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Re: Help Me Decide How and If To Retire Early

Post by foosball »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.
I think you can safely do it at 50, but it has a very high cost versus 55. If you work only 5 more years, you can double your monthly pension and reduce lifetime healthcare costs by 30%. How badly do you want to quit?
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Watty
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Re: Help Me Decide How and If To Retire Early

Post by Watty »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm I am not counting the $2k a month in social security once I turn 67 as well to be safe.
You also did not count your home equity which you could tap if you run short of money some day.
MrCheapo wrote: Wed Dec 30, 2020 6:29 pm I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.
With a paid off house you could do a lot more than just "survive". There would be compromises and cutbacks but even if you had to reduce your spending to $75K a year that would hardly be a dire situation. It would be frugal by you could likely "survive" on a even a lot less than that.
MrCheapo wrote: Wed Dec 30, 2020 6:29 pm Question #2.

Of my $2.5M in assets $1.8M is very aggressively invested. What should I do with it if I plan to retire at 50 or 55? Just about all my US funds are at an all time high so I'm inclined to take them out now if I retire at 50. But where would I put it? MM earn less than 0.1% now.
To get better suggestions on how to invest the money it would be good to do another post using this suggested format as a guideline.

viewtopic.php?f=1&t=6212
Last edited by Watty on Wed Dec 30, 2020 10:33 pm, edited 1 time in total.
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JoeRetire
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Re: Help Me Decide How and If To Retire Early

Post by JoeRetire »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pmDo I have enough to retire at 50 or should I wait to 55? I think $100K a year would be more than enough to survive on.
You have enough to retire at 50. You can choose whether you want to wait until 55 or not.
Of my $2.5M in assets $1.8M is very aggressively invested. What should I do with it if I plan to retire at 50 or 55?
Decide how aggressive you want to be in retirement, then adjust your portfolio accordingly.

Remember that at 50, you are investing for a 40+ year period.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
ExitStageLeft
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Re: Help Me Decide How and If To Retire Early

Post by ExitStageLeft »

I see this is only your second post, so let me say "Welcome to the forum!"

I'll echo other commenters that suggest you get a firmer grasp on your expenses, present and anticipated. Knowing just how much discretion you'll have with your planned $100k a year may make it easier to decide when to retire.

I like the idea of having ten years worth of living expenses in bonds or cash. That works out to 40% of the portfolio for me. Depending on what the 401k target retirement funds have for an allocation glide path, that's about where you are too. Using the Vanguard target date funds as a model, I assume the 2025 fund has a 60/40 allocation whereas the 2035 fund has a 75/25 allocation. Grinding through the math yields a total asset allocation of 61.4 % equities and 38.6% bonds or cash.

I'd say you can readily retire if you want to and have some flexibility in your expenses. You don't have to do anything to your portfolio allocation if you're comfortable with the present mix. I find it to be more conservative than you indicated in your post. But you could easily shift money in the 401k from 2035 to 2025 if you want to increase your bond allocation.
chassis
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Re: Help Me Decide How and If To Retire Early

Post by chassis »

MrCheapo wrote: Wed Dec 30, 2020 6:29 pm My situation is fairly simple but the decision is complex.

Thanks to Vanguard's excellent products I have:

$600K in a MM account.
$100K in various bond funds
$800K in various equity accounts (i.e. SP500)
$1M in 401k retirement accounts ($100K targeted 2025 and $900K for 2035 or later accounts).

I am 49.

I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.

So question #1.

Do I have enough to retire at 50 or should I wait to 55? I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.

I estimate retiring at 50 will be fine. $25K comes from my pension and $2.5M divided by 75K gives me 30+ years. But maybe I'm missing something. I am not counting the $2k a month in social security once I turn 67 as well to be safe.

Question #2.

Of my $2.5M in assets $1.8M is very aggressively invested. What should I do with it if I plan to retire at 50 or 55? Just about all my US funds are at an all time high so I'm inclined to take them out now if I retire at 50. But where would I put it? MM earn less than 0.1% now.

Thanks.
@MrCheapo Theoretically you can retire. $100k per year living expense is 4% of your $2.5m net worth. 4% is considered a safe withdrawal rate in the FIRE world. It's close.
Flyguy
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Re: Help Me Decide How and If To Retire Early

Post by Flyguy »

It's not really that close, when you consider the pension.

The $100K requirement becomes $70K, so he's more like 2.8% withdrawal rate.
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luminous
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Re: Help Me Decide How and If To Retire Early

Post by luminous »

I agree with most of the advice given so far. If I were you I'd:
* Get more detailed with your current and proposed expenses, as recommended by a few folks. Understanding what your minimum spending can be is important.
* Consider your potential long term care expenses. Will you buy insurance, self fund, some combination? You can get an estimate for the local costs of various kinds of long term care here: https://www.genworth.com/aging-and-you/ ... -care.html
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2022.
TravelGeek
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Re: Help Me Decide How and If To Retire Early

Post by TravelGeek »

foosball wrote: Wed Dec 30, 2020 7:48 pm
I think you can safely do it at 50, but it has a very high cost versus 55. If you work only 5 more years, you can double your monthly pension and reduce lifetime healthcare costs by 30%. How badly do you want to quit?
But working five more years comes at the expense of losing the freedom of doing what the OP wants to do for arguably the five best remaining years of their life. To determine if that is worth it the OP needs to work out how much money they need and what the plan is for any “leftovers” when they pass away.

OP, is the pension inflation-adjusted?
THY4373
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Re: Help Me Decide How and If To Retire Early

Post by THY4373 »

TravelGeek wrote: Thu Dec 31, 2020 2:01 am
foosball wrote: Wed Dec 30, 2020 7:48 pm
I think you can safely do it at 50, but it has a very high cost versus 55. If you work only 5 more years, you can double your monthly pension and reduce lifetime healthcare costs by 30%. How badly do you want to quit?
But working five more years comes at the expense of losing the freedom of doing what the OP wants to do for arguably the five best remaining years of their life. To determine if that is worth it the OP needs to work out how much money they need and what the plan is for any “leftovers” when they pass away.
I agree I am in a similar position to OP (couple of years older and a bit less saved) but in my case while I can get a pension now but I have to hit 55 to get retiree medical benefits. So my plan is to work till 55 then pull the plug. I want to have some good healthy years to bang out some bucket list items before I get too old.

Also OP hasn't stated whether his retiree benefits are primary for the rest of his life or not. In my case my employer makes me go on Medicare at 65 so my savings are mostly between 55 and 65 and not the rest of my life.

To OPs question it sounds like he could retire now but I'd echo the other comments on getting a handle on current and likely future expenses before pulling the plug. I have been tracking my costs for several years and it really helps with retirement planning.
Mrxyz
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Re: Help Me Decide How and If To Retire Early

Post by Mrxyz »

If you cannot/do not retire with these figures..........then I am in trouble and I cannot retire...............for a very long time!!
qwertyjazz
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Re: Help Me Decide How and If To Retire Early

Post by qwertyjazz »

You can probably retire today. The rest comes down to what your goals are. Inheritance? Charity considerations? Etc
OTOH having more is not a bad thing
G.E. Box "All models are wrong, but some are useful."
humblecoder
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Re: Help Me Decide How and If To Retire Early

Post by humblecoder »

Is your pension inflation adjusted? If not, then that $30K/year pension (assuming you retire at age 50) is going to get smaller and smaller in real dollar terms.

Looked at another way, you will need progressively more money out of your retirement fund each year to make up for the erosion of value of your pension.

Let's say inflation is 5% (I picked that number because it makes it easier to do the math in my head). This year your expenses would be $100K, so you would need $70K from your retirement fund and $30K from your pension.

Next year, your expenses would be $105K. If you follow the "Trinity study" rule of increasing your withdrawal by 5% to match inflation, you would withdraw $73.5K. Add this to your $30K pension which didn't adjust for inflation, you now have only $103.5K. This is a $1.5K gap. That means that you would need to withdraw an additional $1.5K from retirement above and beyond your standard "increase your withdrawal by inflation" to meet your expenses.

This effect gets worse with every passing year, due to compound interest (or more accurately compound inflation :happy).

My point in all this is to you can't necessarily use the "4% withdrawal and I'm good" rule when you are relying upon a non-COLA pension.

In practice, you still might be good since, as others have pointed out, $70K is under a 3% withdrawal rate. However, you should run the numbers for yourself just to make sure.

Good luck!
striker79
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Re: Help Me Decide How and If To Retire Early

Post by striker79 »

The money has been there. What took you so long to retire?
Topic Author
MrCheapo
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Re: Help Me Decide How and If To Retire Early

Post by MrCheapo »

Thank you all for your wonderful advice. You guys are smart!

Some answers to your question:

i) My pension gets COLA (cost of living adjustments) of approximately 2% per year.
ii) My retiree health insurance is primary until 65 then it becomes secondary to medicare parts B and D but not part A.

With a 11 and 15 year old kid we spend $6K a month and don't really hold back, so spending $8K a month ($100K annually) seems doable.

I've been very conservative and as some of you pointed out I will get SS of about $2500 a month starting at 67 and I haven't included other "already spent" funds like $400K for the kids college.
TrollToll
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Re: Help Me Decide How and If To Retire Early

Post by TrollToll »

foosball wrote: Wed Dec 30, 2020 7:48 pm
MrCheapo wrote: Wed Dec 30, 2020 6:29 pm I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.
I think you can safely do it at 50, but it has a very high cost versus 55. If you work only 5 more years, you can double your monthly pension and reduce lifetime healthcare costs by 30%. How badly do you want to quit?
Maybe you prefer a spending of $200,000 a year? Then why not work for 10 more years to retire at 60. I did not see that you have burning desire to retire.
These kind of comments frustrate me. I've seen people make this comment on effectively every single thread asking whether they can retire. What if OP was 55 with 3M net worth, and a pension that pays $5K a month and 80% health care? Well, OP could work to 60 or 65 - just 5/10 more years - and spend $X more with a bigger cushion. Good to be safe, right?

OP has <3% withdrawal rate, which is safe assuming proper investments.

There will always be an urge to work one/five/ten more years for a bit more certainty/spending level and that will always need to be weighed against your desire to retire. The only difference I see between the FIRE crowd and the traditional Boglehead crowd is that FIREers value early retirement more and traditional Bogleheads value higher spending and financial "cushion" more. Ultimately, the decision of when to retire is up to OP.

I would make sure you have a good understanding of your finances, how to invest and how to resist market timing, etc. If you are smart with your finances and follow Boglehead advice, I certainly think you can retire at 50.
dboeger1
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Re: Help Me Decide How and If To Retire Early

Post by dboeger1 »

TrollToll wrote: Mon Feb 08, 2021 2:44 pm
foosball wrote: Wed Dec 30, 2020 7:48 pm
MrCheapo wrote: Wed Dec 30, 2020 6:29 pm I will get a $5K a month pension when I turn 55 and 80% of health care OR
$2.5K a month and 50% of health care if I retire at 50.
I think you can safely do it at 50, but it has a very high cost versus 55. If you work only 5 more years, you can double your monthly pension and reduce lifetime healthcare costs by 30%. How badly do you want to quit?
Maybe you prefer a spending of $200,000 a year? Then why not work for 10 more years to retire at 60. I did not see that you have burning desire to retire.
These kind of comments frustrate me. I've seen people make this comment on effectively every single thread asking whether they can retire. What if OP was 55 with 3M net worth, and a pension that pays $5K a month and 80% health care? Well, OP could work to 60 or 65 - just 5/10 more years - and spend $X more with a bigger cushion. Good to be safe, right?

OP has <3% withdrawal rate, which is safe assuming proper investments.

There will always be an urge to work one/five/ten more years for a bit more certainty/spending level and that will always need to be weighed against your desire to retire. The only difference I see between the FIRE crowd and the traditional Boglehead crowd is that FIREers value early retirement more and traditional Bogleheads value higher spending and financial "cushion" more. Ultimately, the decision of when to retire is up to OP.

I would make sure you have a good understanding of your finances, how to invest and how to resist market timing, etc. If you are smart with your finances and follow Boglehead advice, I certainly think you can retire at 50.
Well, I saw your username, but I'll bite anyway. I think you missed a valid point. It's not that the other commenter is saying that OP should work longer and save more just because they can. They're insinuating that OP doesn't appear to have conviction that they wouldn't prefer being able to afford "the finer things in life". I kind of agree. Anybody who plans to spend $100k annually in retirement either has serious medical issues, maybe family obligations, or they really want to live it up. There's nothing wrong with that. I think it's solid advice that OP should really consider. Maybe they don't actually want to leave work as much as they want to be able to retire in luxury. That extra savings could buy fancier cars, a bigger house, a boat, a plane, fine dining every day of the year, rent exclusive beach homes for vacations, etc. For high achievers wanting to really enjoy the fruits of their labor, working an extra few years can make those things a reality. FIRE has exploded in popularity and recognition in recent years, but time and freedom are just two things money can buy when all its said and done.
Wanderingwheelz
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Re: Help Me Decide How and If To Retire Early

Post by Wanderingwheelz »

surfstar wrote: Wed Dec 30, 2020 7:37 pm
MrCheapo wrote: Wed Dec 30, 2020 6:29 pm Do I have enough to retire at 50 or should I wait to 55? I own my house and don't have expensive taste. I think $100K a year would be more than enough to survive on.
We (40 y/o couple) pay a mortgage in a HCOL area and don't spend $100k/yr. Are you sure of your expenses and or the definition of expensive?

It sounds like you can retire, if you want to, though. Especially if you do have frugal tendencies - you can simply scale down spending if needed.
Step #1 is to document your current and proposed expenses.
I agree. I’m also 49 without a mortgage and my wife and I live a very nice lifestyle on less than $100,000.

OP, are you single? You didn’t make mention of anyone other than yourself. Two people obviously take more to support than just one.
3 Fund Portfolio. 70%/30% AA. No mortgage. Simple.
raiderjkwong
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Re: Help Me Decide How and If To Retire Early

Post by raiderjkwong »

You can definitely retire at 50. Great job investing and enjoy your retirement. We are 54 with a 2.8 M portfolio. Our AA is 30/70 stocks to bonds. My wife and I will retire in 2023 with two pensions. We also have paid off our mortgage and have 0 debt. We plan to retire and finally enjoy life with peace of mind and no stress, thus we are very conservatively invested. We are very frugal people too and can basically live off our two pensions and will probably never touch our portfolio. Good luck to you in your retirement. You earned it.
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