Early retirement

[robbielike]

I am 46 and would like to get out at 50. How do I bridge the gap from 50 - 65 or 67 or 70. I have about 500k saved. House all but paid for. Would like to get a yield or annuity or something that I could live off of interest - thoughts.

[Psychstache]

Hi Robbie,

First off, Kudos on the half a mil. Very nice work planning for your future.

I think any advice the community could offer will depend on where that money is. is the 500k in a 401k? traditional IRA? Roth? $1 bills in your vault so you can swim in it (if yes, you are my hero)?

If you could offer a breakdown of where the money is, exactly how much is owed on the home, and at least a rough sketch of your living expenses I am sure you will get lots of great advice.

[robbielike]

500k cash - this is the bridge monies to get me to the retirement age then I can use my 401k and SS, plus a small at&t pension (700 a month)

[robbielike]

Current living costs:
40k annually
without mort - 32k (can get better - down size house save on utilities, prop tax)

cash - 500k plus buffer cash about 100k
401k - 400k
pension - 700 month
home eq - 400k

[tooqk4u22]

Your in a good position and with a balanced portfolio with index funds you should be ok with the 4% SWR to meet your needs. Sitting in cash won't work though.  Annuities can be good option but they are expensiv and limit flexibility - if you go this route make sure it is from a highly rated/financially stable firm. 

[robbielike]

Is there a safe way to recieve a yield - say 5% x 500k = 25k annually? I have looked at Intl banks and some say they have yields like this but trust can be an issue. Where can a person get a safe yield so they can live on the interest as the principle is safe?

Is there a country out there that has safe financial offerings - no debt - some kind of bond or something. Safety is the key - our financial institutions keep ripping us off. Compounding interest - not.

[lauren_knows]

Is there a safe way to recieve a yield - say 5% x 500k = 25k annually? I have looked at Intl banks and some say they have yields like this but trust can be an issue. Where can a person get a safe yield so they can live on the interest as the principle is safe?

Is there a country out there that has safe financial offerings - no debt - some kind of bond or something. Safety is the key - our financial institutions keep ripping us off. Compounding interest - not.

Safe, as in 100% risk-free? Not likely.

You could always set yourself up with something like the Permanent Portfolio: http://en.wikipedia.org/wiki/Fail-Safe_Investing which holds equal portions of 4 different types of assets, each doing well in different economic conditions, thus reducing your risk that any given situation is going to hurt your nest egg.

[jpo]

I would start playing with FIRECalc.

Suppose inputs of:
Spending: $32k
Portfolio: $500k
Years: 15 (age 50 to 65)

If you do total market of 70% equities, you have a success rate of 86%. Bumping your portfolio up to $600k raises the chances to 100%. That's assuming, though, that SS and 401k alone will be enough for you after 65.

[tooqk4u22]

Is there a safe way to recieve a yield - say 5% x 500k = 25k annually? I have looked at Intl banks and some say they have yields like this but trust can be an issue. Where can a person get a safe yield so they can live on the interest as the principle is safe?

Is there a country out there that has safe financial offerings - no debt - some kind of bond or something. Safety is the key - our financial institutions keep ripping us off. Compounding interest - not.

Nothing risk free in that range, but you don't need 5%.  Look at JPO's summary.  You burn through the $600k until you meet SSI (62-67), Pension (?), and 401k eligibility (59.5) - and event then there should be room.  Look at is you are pulling out 4% of total investments it just happens to be that you are pulling from non-retirement accounts.   Also, keep in mind that the pension is like having another $210k in retirement accounts (future dollars).

Assuming 5% investment return, $40k expenses (assume pay off house but will need health insurance) at 3% inflation
- $500k will deplete after 11 years. 
- $600k will deplete after 13 years.

So you can sustain your current lifestyle for 13 years on non-retirement funds and a modest return, and then still have $400k, SSI, and pension thereafter and you still have a boatload of home equity.

It may require some focus but it looks like it is doable.