Author Topic: Will I be ready to retire in 2 years?  (Read 6911 times)

silvia

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Will I be ready to retire in 2 years?
« on: July 10, 2015, 06:57:52 PM »
Very excited to finally join the forum.
Please advise whether I will be able to retire in 2 years.
I am 54 years old.  I am currently working with an income of 102300 annually.
I have 500k in my 403b and 457 plan. I am still contributing 22k per year.
Upon retirement, I will have a defined pension of $4500 per month. No cost of living adjustment.  I also will have a supplement income of $970 per month for 10 years or $350 per month for the rest of my living life.
I have a house worth 750k on the market with 80k left on the mortgage.

I plan to sell my house in a year or two, buy a condo for about 350k.

Am I good for retirement at 56 years old ?

Thanks.
Silvia

Psychstache

  • Pencil Stache
  • ****
  • Posts: 868
Re: Will I be ready to retire in 2 years?
« Reply #1 on: July 10, 2015, 07:09:37 PM »
How much do you spend/plan to spend in retirement in 2 years. Without that, we have no way of answering with any accuracy.

If it were me based on my plans, the pension alone would be enough to enact my retirement budget with the investment nest egg there to support the lack of COLA, but that is meaningless to you.

MDM

  • Walrus Stache
  • *******
  • Posts: 9686
Re: Will I be ready to retire in 2 years?
« Reply #2 on: July 10, 2015, 07:11:37 PM »
Very excited to finally join the forum.
Please advise whether I will be able to retire in 2 years.
I am 54 years old.  I am currently working with an income of 102300 annually.
I have 500k in my 403b and 457 plan. I am still contributing 22k per year.
Upon retirement, I will have a defined pension of $4500 per month. No cost of living adjustment.  I also will have a supplement income of $970 per month for 10 years or $350 per month for the rest of my living life.
I have a house worth 750k on the market with 80k left on the mortgage.

I plan to sell my house in a year or two, buy a condo for about 350k.

Am I good for retirement at 56 years old ?

Thanks.
Silvia

Silvia, welcome to the forum.

In short, the answer to your question is "yes" - assuming you expect your annual expenses in retirement to be ~$50K, rising with inflation.

Here's a quick equation - put your numbers into Excel and see what you get....

Time in years to FI = Ln((S + i*E/WR) / (S + i*A)) / Ln(1 + i)

A = Amount currently invested in funds you will draw upon in retirement, $
E = Total (including taxes) annual expenses in retirement (today's dollars) - in your case, net after pension.
i =  Real return on invested retirement funds, e.g., 3% (conservative - we hope...)
S = Annual amount invested in funds you will draw upon in retirement, $/yr
WR = Withdrawal Rate planned for retirement, using Trinity Study definitions (e.g., 4%)

See http://forum.mrmoneymustache.com/welcome-to-the-forum/early-50s-what-should-be-my-target/ for more discussion.

Also see http://forum.mrmoneymustache.com/welcome-to-the-forum/how-did-you-figure-your-fire-date/msg642786/#msg642786.

For a more detailed analysis, see www.cfiresim.com.

silvia

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Will I be ready to retire in 2 years?
« Reply #3 on: July 10, 2015, 07:17:38 PM »
Thank you.

From what I have been reading, I need 70 to 90 % of salary for retirement.  But I am wondering if the figure is based on someone still paying a mortgage.  Yes or No?  I won't have a mortgage by the time I retire.

What does "n" mean in "Ln".

Will read articles now.

MDM

  • Walrus Stache
  • *******
  • Posts: 9686
Re: Will I be ready to retire in 2 years?
« Reply #4 on: July 10, 2015, 07:38:34 PM »
From what I have been reading, I need 70 to 90 % of salary for retirement.  But I am wondering if the figure is based on someone still paying a mortgage.  Yes or No?  I won't have a mortgage by the time I retire.
Don't believe any % of salary number.  You need to look at your current expenses, then adjust (up or down) as appropriate for differences you expect in retirement.  E.g., gas cost may drop if you currently commute a long distance by car - or it may increase if your retirement plan includes "driving all around the country", etc.

Quote
What does "n" mean in "Ln".
That's Excel's function name for "natural logarithm".  See the 'Misc. calcs' tab on the spreadsheet you can download from http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.  Inputs go in cells C36-C40 for this calculation.

pbkmaine

  • Walrus Stache
  • *******
  • Posts: 8375
  • Age: 63
  • Location: The Villages, Florida
Re: Will I be ready to retire in 2 years?
« Reply #5 on: July 10, 2015, 07:41:41 PM »
You need to understand how much you spend now. You also need to make an educated estimate as to how those expenses will change in retirement. Take the retirement expenses you are estimating. Does your pension cover most of them? 

aschmidt2930

  • Bristles
  • ***
  • Posts: 273
Re: Will I be ready to retire in 2 years?
« Reply #6 on: July 10, 2015, 08:47:07 PM »
It depends on your spending, but if it's anywhere within reason, the answer here seems to be a resounding yes. The pension alone will cover a great lifestyle.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Will I be ready to retire in 2 years?
« Reply #7 on: July 11, 2015, 05:47:34 AM »
If you're making $100k and paying taxes and saving $22k and paying your mortgage now, your spending level now is probably pretty close to where you could sustain it in retirement with the funds you mention. Especially if you have access to SS in your 60s.

silvia

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Will I be ready to retire in 2 years?
« Reply #8 on: July 11, 2015, 06:29:27 AM »
No social security. Only defined pension available.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Will I be ready to retire in 2 years?
« Reply #9 on: July 11, 2015, 07:00:59 AM »
Do you know what your current spending is (ignore your mortgage since you won't have one in FIRE)? And whether you expect that to increase? Will your health insurance be provided through a retirement benefit or do you need to purchase on the Marketplace?

silvia

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Will I be ready to retire in 2 years?
« Reply #10 on: July 11, 2015, 08:04:31 AM »
Employer will pay $5k per year for 5 years so I will be good till 61 years old for health insurance.   Any extra health cost will be absorbed by me.

Plan to travel extensively after retirement.

Mrs.LC

  • Stubble
  • **
  • Posts: 226
    • Loose Change Living
Re: Will I be ready to retire in 2 years?
« Reply #11 on: July 11, 2015, 09:11:03 AM »
I would be doing the happy dance now. Why wait for two more years?

patrickza

  • Pencil Stache
  • ****
  • Posts: 546
  • Age: 40
    • The Investor Challenge
Re: Will I be ready to retire in 2 years?
« Reply #12 on: July 18, 2015, 08:34:44 AM »
Very excited to finally join the forum.
Please advise whether I will be able to retire in 2 years.
I am 54 years old.  I am currently working with an income of 102300 annually.
I have 500k in my 403b and 457 plan. I am still contributing 22k per year.
Upon retirement, I will have a defined pension of $4500 per month. No cost of living adjustment.  I also will have a supplement income of $970 per month for 10 years or $350 per month for the rest of my living life.
I have a house worth 750k on the market with 80k left on the mortgage.

I plan to sell my house in a year or two, buy a condo for about 350k.

Am I good for retirement at 56 years old ?

Thanks.
Silvia
Let's look at the numbers. You earn $102300, but you're currently contributing $22000, you don't say if that's pre or post tax money, but let's assume it's pre-tax. That means your base salary is around $80000. That gives you around $6700 gross per month, and probably about $5200 after deductions. Now that's with no state tax, state tax would make it lower.

Now if we assume you won't cut any spending at all, apart from retirement contributions, you'll need to replace $5200 a month. Your pension already covers $4500 so you're only short $700. Then you have either another $970 for 10 years, or $350 for life. With the 10 year amount, you'll actually have more spending money than now. If you take the $350 you're now only another $350 short. Then you'll likely gain ($750000-$80000-$350000) $320000 or to be safe we can say - another $20000 for expenses, so let's call it $300000 gained post house change. And of course let's not forget the $500000 you already have sitting around in your accounts. Using the 4% rule that would give you $32000 a year to spend, or $2666 a month.

So to round off, you're probably spending $5200 a month now. In two years you can retire on $7516. Yes I think you'll be ok :)

So to round off, you'll be able to spend $

mustachianteacher

  • Stubble
  • **
  • Posts: 204
Re: Will I be ready to retire in 2 years?
« Reply #13 on: July 18, 2015, 02:32:49 PM »
Just don't forget to account for taxes. I assume the $4500 a month from the pension is before taxes, so depending on your tax bracket (25% probably), you'll only be seeing maybe $4000 a month or so. Every time you take money out of your 403b and 457, you will also pay income taxes.

dess1313

  • Bristles
  • ***
  • Posts: 441
  • Location: Manitoba Canada
Re: Will I be ready to retire in 2 years?
« Reply #14 on: July 20, 2015, 02:56:35 AM »
You should make yourself a full budget, and pinpoint where your expenses are.  Make a 2nd budget with reduced/increased costs for when you would retire.  Maybe you won't need a parking pass for work, but would need a membership somewhere else.  You will have 0 mortgage with your current planning so a lot of costs would disappear there on the 2nd budget.  Maybe gas cost goes down but entertainment goes up.  Or you plan to travel.  You can then look at what you would need to live and how close that would be to your pension amount (minus taxes)  Then you would know how much a month above your pension you would need to cover your living expenses.  You are probably in good shape, but it depends on how much you want to spend when you retire.


boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: Will I be ready to retire in 2 years?
« Reply #15 on: July 20, 2015, 06:11:29 AM »
you're not answering the most important question which is how much you plan to spend.  doing about 30 mins of reading around these forums should give you an understanding of where you're at and if you can retire.  you're taking a very lazy way out AND not even providing all the information.  Yes this is a website about retiring early and all of us have pretty deep understandings of what that means.  But just posting that up on here without any real knowledge of what the site or the forum is about is quite ignorant IMO. Leaving out your spending more or less proves you havent read much around here as that is the number one goal to acheive retirement for most here, curtailing spending.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 6728
Re: Will I be ready to retire in 2 years?
« Reply #16 on: July 20, 2015, 06:46:23 AM »

Am I good for retirement at 56 years old ?

Thanks.
Silvia

Well based on your posts I'd say no.

You have a very well defined benefit pension and yet you don't grasp the idea that you need to determine what your annual expenses will be based on what you actually spend rather than some silly % you read on the back of a cereal box somewhere.

You are probably okay financially, but you lack a bunch of knowledge and skills. So I would spend my time in the next two years acquiring them. When you are able to confidently answer your own question you'll be ready.

Rollin

  • Handlebar Stache
  • *****
  • Posts: 1192
  • Location: West-Central Florida - USA
Re: Will I be ready to retire in 2 years?
« Reply #17 on: July 20, 2015, 08:41:51 AM »
you're not answering the most important question which is how much you plan to spend.  doing about 30 mins of reading around these forums should give you an understanding of where you're at and if you can retire.  you're taking a very lazy way out AND not even providing all the information.  Yes this is a website about retiring early and all of us have pretty deep understandings of what that means.  But just posting that up on here without any real knowledge of what the site or the forum is about is quite ignorant IMO. Leaving out your spending more or less proves you havent read much around here as that is the number one goal to acheive retirement for most here, curtailing spending.

You gotta start somewhere, right?  I guess you provided the first "facepunch" border42, but I'm not sure that the way you delivered it is what a MMM facepunch really is (more like a chastise slap?).