The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: Poodlewrangler on May 18, 2018, 07:51:48 AM
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Background: Wife and I are 55 & 57. Wife wants to quit work and I work as a photo retoucher which as a freelancer pretty much boils down to 20 hours/week. We'd like to semi retire but live in Austin and our property taxes will rise so much over the next few years that we'll be forced to move anyways. Currently 12k for a 1000 sq ft house. We've looked all over Mexico and have thought about Europe but with parents on the west coast and a large dog it seems easier to stay in US if we can. Perhaps go to Mexico for a few months to escape winter weather where we're thinking of moving-Puget Sound. If ACA goes away we will definitely move to a foreign country.
Specifics: 300k taxable Vanguard. 250k IRA. 100k Emergency. Equity form house sale 400k. We plan on buying a 300k house in the PNW.
Given the 4% rule of thumb we can start pulling out 40k/yr from principle. I make anywhere from 24-40k working part time. We figure 65k will be enough to live on.
Social Security will be around 23k each when we hit 67.
No kids so we're interested in spending down the principle as we age.
Vanguard financial advisor ran Monte Carlo simulations and including Social Security and spend down she says we can pull roughly 55k/year at any point now and have close to 99% success.
It all sounds good to me because I never know how much work I can pull in year over year. Being tasked with needing a minimum of 20k income really helps the idea of semi retirement.
We're itching to pull the trigger but are a bit gun shy because we both have strong work ethic and have been working since we were 14.
Ending on a positive note we know that if the crap hits the fan we're both ok living in Mexico.
Thoughts? (no we don't have a budget worked out-never needed one...we're pretty thrifty but will plan on eventually working one out to fit the agreed upon amount.)
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Wait -- if you sell the house, will you get $400K equity + $300K to buy the new house? Or is that $400K equity total, and you will use $300K of that to buy the new house? If the former, your numbers are right; if the latter, the 4% rule doesn't get you anywhere near $40K.
Otherwise, I would go with your Monte Carlo simulation. The really good news is that you are only 5 years from being able to take SS -- not that you want to, but if the shit really hits the fan, you have a significant backup option there. That gives you a lot of flexibility to adjust your plan as things play out. Good luck!
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total of 400k equity from selling house. Add that to existing nest egg to get the $1 million and then get a mortgage for 300k house. maybe putting down 100k so lowering nest egg by 100k. So more like 36k withdrawl.
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Sounds as if you've done all the calculations and from the numbers your semi retirement will be achievable if so desired, advisor worked out that you can safely pull 55k, if you only pull the 4% of 40k and use the semi employment income at the low end 24k that puts you at your desired level of income. And like you said your open to moving to cut expenses if you start to feel tight. Perhaps you could semi retire (get a feel of the investment draw-down), sell the house and rent for a year in your desired area (explore living expenses and areas while still keeping a safety cash cushion) to see if you really want to stay there.