300k in retirement. Can we retire?

[NoWorries]

Hubby is 45 and I am 41 and we have 2 children, ages 4 & 7. Hubby works full time and I am home with the kids and handle our rental property. We currently have 300k in retirement assets. We currently have no debt (other than the mortgage that would be paid off when we sell the properties).

If we sell both homes we will have enough equity to purchase a home outright. Our monthly bills would total $2,000 because of increases such as having to purchase health insurance.

Hubby should get $2500 from SSI at age 70, or $2,000 at age 67. I would get another half of either figure as spousal benefits.

We don't plan on, but do anticipate, some inheritance from one or both sets of parents. Not sure when or how much, but it could be significant. (half million or so) I don't want to plan on this money at all though. One or both of us could also work part time if necessary. I worry about unexpected expenses such as needing a new vehicle.

Can we currently retire? 

EDIT: When I run the numbers, 300K doesn't work to cover 24K annually until social security kicks in. I was hoping that a MMM contributer might have suggestions, investment choices, or options that I hadn't considered.

[mxt0133]

Since you need to live on $24K a year, not including any unexpected expenses, with 300k in assets and the 4% rule both of you are NOT in a position to retire permanently.  Your 300K will only support a lifestyle with yearly expenses of 12K.

But if both of you stop working you might qualify for a lot of subsidies which could reduce your cash flow requirements.  You could also be more efficient and reduce it even further.  But with kids that are 4 and 7 I would be more conservative with my estimates.  I personally wouldn't be comfortable with anything less than 600-700k in assets if I needed 24k a year.  But if you plan on earning side income then that number could be lower.

I myself have been thinking of taking a year or two off to spend some time with the family and do some traveling.  We would lower our cost of living and get to see the world at the cost of postponing FIRE.  I would also risk loosing my lucrative job that allows us to bank a good amount every year.  But I can't get the early years of my kids back no matter how much time I spend with them if I FIRE in 5-6 years.

[dcheesi]

Maybe im missing something, but the math seems clear on this one. 4% of $300k gives you a safe withdrawal rate of $12k/year, or only $1k/month. Even if you drew down the principal between age 45 and age 67 (22 years), you would only be able to withdraw about $20k per year during that time to avoid running out, even in the nominal 7% return case.

And that's assuming the  $300k is available to you now. If it's in a 401k then you'd have to jump through some hoops to gain access before age 59.5, and IIRC the Roth conversion approach requires about a five-year wait.

Obviously the inheritance would make a huge difference here, but that's a chicken that hasn't hatched yet. You have no way of knowing whether you'll really receive that much; medical expenses, financial mistakes, etc. could easily deplete your parents' fortunes between now and then. And do you really want to place a bet on your own parents dying soon enough to bail you out?

[happy]

Nope.
If you reorganise the way you describe,  your annual expenses are 24k. You need your stash to last either 22 years (til hubby is 67) or 25 years (til he is 70).
You'll need somewhere between 500k (22x24k = 528k) to 600k (25x24k).  Running your figures through cfiresim, I got only about 35% success to get to age 70. If you earn 10k a year, drawing only 14k, then you improve to 86%.

I also don't see any margin of safety. If your living expenses are 24k, have you factored in items such as home maintenance, vehicle replacement? Otherwise you need to do your figures on a higher amount.

So nope, unless you work part-time and/or count on your inheritance.

Run some figures through cfiresim yourself, it will help you work out what you need.

[KBecks2]

Sorry the answer is no, but let this kick start you into increasing your savings and tightening up your planning. 

I would be uncomfortable planning on relying on future Social Security, or relying on subsidies to make it, or even thinking about inheritance before it occurs.

You have a nice start of a 'stache, and that is great.  Now build on it!

What can you do now to make your life better, both now and in the future?

Make the most of your time, now and in the future!

[Alex321]

No way. You need to keep working and saving.

Also, I could be wrong, but aren't those Social Security income projections based on an assumption of continued contributions up to retirement age?

[Wile E. Coyote]

No way. You need to keep working and saving.

Also, I could be wrong, but aren't those Social Security income projections based on an assumption of continued contributions up to retirement age?

I think that is in mostly correct.  I believe that the formula is based upon your highest 35 years of earnings.  If you haven't work for 35 years, they will take your current year earnings and index those amounts assuming continued work until the relevant retirement age.  If you have no earnings for 2 years, they will then assume no future earnings in estimating your benefit.

[Retire-Canada]

You can't retire with $300K, but if you are invested in the market and seeing reasonable growth from your money your hubby could start to downshift which will free up his time now while he is still bringing in enough money to cover your cost of living and letting your investments grow.

Depending on your savings rate he could take a bunch of time off and you could still be adding a little of $$ to your investments each year.

You've got enough saved that it can really work for you if you can leave it alone for another 5-8 years.

To cover your COL you each only have to bring in $1K/month or one of you needs to bring in $2K/month. At $25/hr after-taxes that's 2 weeks of work a month.

-- Vik

[Suit]

You didn't post much about your rental property…how much are you earning off of it? Maybe it would be worth keeping it or even considering keeping both it and the home you currently live in and renting out both homes and taking out a mortgage on your new (hopefully smaller, cheaper) place to reduce the amount you need from your investments?

[boarder42]

I don't understand posts like this. Its a pretty simple math formula to understand you can't retire. Its like you found this site read nothing except retire early then posted a question.  Everyone above has done the math for you. So I won't post it again. But please read the main page and throughout the forums.

[NoWorries]

I don't understand posts like this. Its a pretty simple math formula to understand you can't retire. Its like you found this site read nothing except retire early then posted a question.  Everyone above has done the math for you. So I won't post it again. But please read the main page and throughout the forums.

Wow. A bit rude, aren't you?

I wouldn't have posted to waste anyone's time and I have done a lot of research into the topic and have run the numbers. I simply wondered if there are other options that I hadn't considered. Possible investment choices that could maximize our return or variables that I am not aware of. I have edited my post to reflect that.

[Indexer]

No, but there is good news.  You are on the right track to retire very early.

If you keep adding to the accounts saving a good amount you could probably fully retire in 5 years.  Obviously we would need more numbers to say anything for sure.

OR

If one of you wanted to cut back you could do that now.  You only need 24k a year to sustain your lifestyle and let the current money pot keep growing.  Assuming a 7.2% rate of return your money will double in 10 years which is close to what you need to FIRE.  So for 10 years you need 24k a year in income, and then you might be able to retire.  That might be one person working part time.

[NoWorries]

No, but there is good news.  You are on the right track to retire very early.

If you keep adding to the accounts saving a good amount you could probably fully retire in 5 years.  Obviously we would need more numbers to say anything for sure.

OR

If one of you wanted to cut back you could do that now.  You only need 24k a year to sustain your lifestyle and let the current money pot keep growing.  Assuming a 7.2% rate of return your money will double in 10 years which is close to what you need to FIRE.  So for 10 years you need 24k a year in income, and then you might be able to retire.  That might be one person working part time.

Thank you for that insightful observation and the calculations! Our money doubling in 10 years sounds wonderful. Cutting back also might be just what the doctor ordered for my stressed out hubby.

[KBecks2]

I hear you about stressed husbands.  Do you work with a regular monthly budget?  Get going on your expenses and making sure you can live on the $24,000 or less.  It should be a great exercise and building your savings muscles is important.  It can even be fun.  The mindset shift to feeling like you have it made vs. feeling like you are depriving yourself is also very important.  If you have not read the whole MMM blog, it is GREAT for inspiration.  Have fun and welcome.

Have some good talks with your husband about your shared goals.  My husband is stressed but he does not want to stop working, he wants me to get a job.  This is not without complication as we have 3 kids and they have schedules, etc. (I only work a little, part time and bring in about 10k/year).  Does your husband want to retire early?  Are there other ways to take some stress off him? For mine a cleaner house and less work at home would help him, so I try to support him with that as much as I can.

[iamadummy]

ouch! what's that other guys problem??

[boarder42]

she came on here seeking advice to see if she could retire essentially with an 8% SWR.. saying she didnt know if others maybe had advice for that.. Dont you think if we knew how to make an 8% work that would be the overall focus around here?

also if they are that old and only have 300k saved up i have a hard time believing their annual spending is 24k. 

[Prepube]

Who are you calling "old"?!  :)

At 40, I only had 100,000.  Changed stuff around and now i have 20 times that at 53.  Its never too late to start thinking about retiring earlier than you thought you would.

[Indexer]

she came on here seeking advice to see if she could retire essentially with an 8% SWR.. saying she didnt know if others maybe had advice for that.. Dont you think if we knew how to make an 8% work that would be the overall focus around here?

also if they are that old and only have 300k saved up i have a hard time believing their annual spending is 24k.

You don't know their situations.  How long have they been saving, at what rate, incomes, life circumstances, etc.  I think you are also leaving out that she said they have multiple rental properties, and that she isn't currently working.

She came here to learn.  Obviously she didn't know the SWR(safe withdrawal rate) was 4%.  Thats why she asked. 

For you or I its a simple math formula.... but if you don't know the formula... you ask for it.

[NoWorries]

If we sell both homes we will have enough equity to purchase a home outright. Our monthly bills would total $2,000 because of increases such as having to purchase health insurance.

Our monthly bills now include a mortgage payment. If were were to sell our homes, THEN we would only have $2,000 in monthly bills.

Also, we would have much more saved, but life happens. We have been aggressively paying off student loan debt (gone!) and also medical bills from my cancer treatment from when I was young and without insurance. Cancer treatment is not cheap, but the medical center was great about not charging interest. Still. It was quite a chunk of change. (gone!)

[NoWorries]

also if they are that old and only have 300k saved up i have a hard time believing their annual spending is 24k.

You misread my post. 24k is only our annual expenses if we sell our homes and don't have a mortgage. Also, I didn't say how much our income is, so 300k COULD be a very good savings rate for some incomes.

Thanks for the budget suggestion. We do use a budget and stick to it very well, with money usually left over each month.

[DoNorth]

You would need to do at least $9500/year of part time/side gig work.  This would phase in the max EITC of about $5800/year.  Assuming no tax liability, your annual income would look like this:

~$12K from 72t withdrawals

$9500 part time work income

$5800 EITC
------------

$27,300/year

You'd still be able to take advantage of the child tax credit for your two kids and if you had a few thousand surplus and one of you had a part time job, you could even contribute to an IRA/spousal IRA.  In reality, you should work 3-5 more years, increase your accounts to around $500k, work on developing the side work and then reconsider.

[NoWorries]

You would need to do at least $9500/year of part time/side gig work.  This would phase in the max EITC of about $5800/year.  Assuming no tax liability, your annual income would look like this:

~$12K from 72t withdrawals

$9500 part time work income

$5800 EITC
------------

$27,300/year

You'd still be able to take advantage of the child tax credit for your two kids and if you had a few thousand surplus and one of you had a part time job, you could even contribute to an IRA/spousal IRA.  In reality, you should work 3-5 more years, increase your accounts to around $500k, work on developing the side work and then reconsider.

Wow. Absolutely wow. You gave me a thorough and well-thought out analysis that I would have been pleased to play a financial planner for. Thank you! The check is in the mail! ;)

[teen persuasion]

You would need to do at least $9500/year of part time/side gig work.  This would phase in the max EITC of about $5800/year.  Assuming no tax liability, your annual income would look like this:

~$12K from 72t withdrawals

$9500 part time work income

$5800 EITC
------------

$27,300/year

You'd still be able to take advantage of the child tax credit for your two kids and if you had a few thousand surplus and one of you had a part time job, you could even contribute to an IRA/spousal IRA.  In reality, you should work 3-5 more years, increase your accounts to around $500k, work on developing the side work and then reconsider.

I like the way you think, but the EITC tests on both wage income and AGI, and your credit is whichever  result is smaller.  EITC on $9500 MFJ with 2 kids is ~$3800.  Depending on your state, you could receive a state version, too.  My state matches EITC at 30% and CTC at 33%.  Investment income can disqualify you from the EITC, though.