Can't live on 4% but can I please get out of Corporate now? Got a pension

[MoneyStacher]

Helloooo Mustachians! I'm 47 and single with 652K invested. I track expenses on YNAB and last year spent 33,000. In 2014 I made $120K. 4% rule says I can ditch the job now if I can live on 26,000 for the rest of my life which, I think, is pretty barebones. I'm trimming expenses harder this year and might be able to get to 28,000/year. BUT, living on 36,000 would be a rich life (golf, travel). So basically I want 36K which is a 5.5% withdrawal rate. Yes, I know the MMM family of 3 lives on $24K. :P

At 55 I get a pension that will be $5,600 (today's dollars, annual). Social Security at 62 (assuming 70% of estimate) will be 11,000/year (today's dollars and assuming no more wages for life - I used the SSA online calculator with real wage numbers). I'll have my place paid off at age 62 as well (P&I 7368/year). So, at age 62 (15 years from now) I'm looking at $24K/year basically through loss of P&I plus SS and Pension incomes. So, only $12K would need to come out of the investments at that point to get me to 36.

FireCalc says this is a slam dunk. For 40 years retirement, I'm at 100% success rate withdrawing $40K/year so 36 seems like even more of a sure thing. And, in years when the portfolio trends downward, I can cut back on spending a lot since there is a lot of discretionary in there.

What are you concerns with this? I'll work at some point, sure, but I want to walk away with the idea I don't have to have an income at all.

My expenses won't drop much when I retire from corp because my work "expenses" are minimal.

Should I leave the job or stay with the firehose of cash? 3 more years should get me to $1,000,000. Thanks in advance for reading this and for your replies!

Jeff.

[bigchrisb]

I probably suffer from "one more year syndrome", but your current savings rate is 72.5%...  Further, your current spending is below what you are aiming for in retirement.    To turn it on your head a bit, is there anything you could do (even it it took spending some $) to keep working bearable for another couple of years?   Even if your spending went up to $40k while you are working, you are still banking 2 years of expenses every year!

I'd personally look at how to do that an de-risk my SWR, rather than take a gamble on government and a pension.

[bigchrisb]

Just to clarify, what I'm trying to say is:
- You are currently saving $7.25k/month while spending $33k/year
- You "might" be able to trim to barebones expenses of 28k this year, for a saving of $5k/year, or $400/month

Given that the trimming consumption might add $400 a month to the stash.  Each extra month you work adds over $7000 to the stash.  Would seem to me that staying at work is worth almost 20 times trimming the budget - maybe focus on that for the short term, until you hit that 4% at 36k?

[Gone Fishing]

Too close to call, only you can make the decision.  A lot of people struggle with the "draw more now, SS will patch the gap" approach. Personally I am suffering from "top of the market" induced one more year syndrome.  As BigChris pointed out, one more year will buy you a LOT of insurance. If you are really satisfied and just need a shove, visit the ERE forum.

[Calvawt]

I would work a bit longer then see if you can transfer to a part-time or consulting role for a bit.  If you are really fed up, then just pull the trigger.  It's easy to add some income to support $30k a year.  Think of it this way, you only need to work enough to get your withdrawal rate down to $26k, that's only a few thousand a year of seasonal or consulting work.  Good luck!

[College Stash]

If you worked until 50 you'd probably be good to go. 3 years more sucks, but it pretty much insures you won't run out if allocated sufficiently. That way you can also maintain your 33k spending level if you find it to be the most enjoyable. 

[innerscorecard]

I would quit now. $652,000 for a single person is a lot of money.

[Eric]

FireCalc says this is a slam dunk. For 40 years retirement, I'm at 100% success rate

Did you run your numbers through cFIREsim?  This allows you to input all of the variables such as higher withdrawals now until your pension kicks in, decreasing as you've added your pensions, and decreasing again as you've added SS, and any other adjustments that you want to make.  Much more flexible inputs than FIRECalc.

http://www.cfiresim.com/input.php

[deborah]

I ran his numbers through cFIREsim, and it gives 0 failures! Assuming the standard set up and his pension and SS and house.

[Exflyboy]

Too tight for me.

Whatever your level of misery right now it will be nothing compared to potentially having no money in your 70's.. remember when you have excess money you can choose to be miserable.. when you ain't got any, the choice will be made for you!

I mean really I'd plan to work 4 more years.. heck, look for a different job, you don't need a career after all.. but pad that stash as much as possible.

Personally I'd want $1M before I quit with a WR of of just over 3%

Another thought in the back of my mind is that we have had a heck of a run up in the stock market.. We could very easiliy be at the top of the market about to take a 20 to 30% pullback. Yeah I know that markets on average make say 10%, but huge run ups at some point mean a big correction, nobody really knows.

If your kinda tight, then quit, then it pulls back.. well that $26 WR might be more like $15k until the market recovers.

I'm in a similar situation to you pension wise.. but with a bigger stash plus I'm 53

[innerscorecard]

There's nothing magic about 4%. It needs to be seen in the totality of the circumstances. MoneyStacher is a single guy with a pension and Social Security. It's excessively cautious to delay a lot further.

[Ynari]

The present value of your mortgage at 7% is about $67,000. That means your non-house stash is $585k and your desired giving you nearly a $23.4k annual budget for non-house expenses. (From what I see, your current non-house expenses are about $25,600 and your desired lifestyle would cost closer to $28,600.)

The pension and SS are icing on the cake. Personally I'd try to cut the budget $2k and then find cheap ways to golf/travel, but your future streams of income have a PV of about $180k or $7,200 annual at 4% (assuming they have no annual adjustments.)  So at a 4% SWR (with no future buffer!***), if you quit today and your assumptions are accurate, you could draw $30,600 annually for non-home expenses.  (Equal to a current annual spending of $38,000 with mortgage.) 

***Most people like to have a safety buffer in their 4%. In this case, you will be out of luck if SS doesn't pay out as much as you think it will, if your company goes bankrupt and can't pay your pension, if the market doesn't do very well, or if your expenses rise.

I'd do it, but you're riding that FI line really close.

[MarciaB]

My 2 cents on this is that if you're weary and bored and needing a big change - then pull the trigger on retirement right now.

Because a 47-year old guy like you (from the sound of it) is a guy who has lots of energy and a good working brain, and you will find other things to do that add income to your household along the way.

Retirement, in your case, would be a stoppage to the full-time work you are doing right now. It wouldn't mean an end to all paid work from now until kingdom come.

A couple of points in your favor here is that you are single and no one else is depending on you (unless there's a college kid you haven't mentioned, or children who need you). That gives you a lot more freedom and flexibility.

Good luck and keep us posted!

[GoldenStache]

I would have to wait a few more years.  You are very close, but the market is up.  Rerun the numbers and see if your 652k takes a 15% or even 30% hit as soon as you retire.       

Will your pension continue to increase if you work another year or was it a former pension?   

[EDSMedS]

I bet if you try you'll be able to think of about 5 possible jobs that can net you $15K on 10-20hrs/wk.

FIRE doesn't REQUIRE losing all income beyond investment returns.  What are your hobbies?  What are your social interests?  I'll bet you can monetize something!

I say DIVE.

[lauren_knows]

I ran your numbers through cFIREsim.

Flexibility is key here.  If you retire today, and aim for $36k/yr spending, but agree to cut back to as low as $29k during down market years, and increase it to up to $38k during up market years, you have a 91% success rate historically. 

I'm with EDSMedS.... even a part-time gig for a few years can raise that success rate to 100%.

I'd say go for it.

[rocksinmyhead]

I would work a bit longer then see if you can transfer to a part-time or consulting role for a bit.  If you are really fed up, then just pull the trigger.  It's easy to add some income to support $30k a year.  Think of it this way, you only need to work enough to get your withdrawal rate down to $26k, that's only a few thousand a year of seasonal or consulting work.  Good luck!

this is exactly what I was thinking.

[DoubleDown]

Another vote to go for it! I also ER'ed last year at 47, and have never regretted one minute of it. I am also anticipating having a large portion of my expenses covered by pension + SS in later years.

You're still young -- take some time to decompress and do what you please. A fairly common story is that people generally take up to maybe half a year where they just want to relax and unwind -- no aspirations for any side income or anything else. They carry on with some hobbies or travel, etc. After that, they start to get some ideas and motivation for the next adventure in their life. Maybe after about a year you'll think of some things you'd like to accomplish in your life, and some of those are likely either to make you a little extra money on the side, or reduce your expenses (or both). But you don't necessarily need that, unless you suffer some bad market sequencing up front.

As just one example, MMM took on carpentry and building that both made him some additional money, plus greatly reduced their own housing costs since he's able to do major projects largely on his own. Word has it he also set up a blog that might have brought in a couple of extra bucks.... :-)

Anyway, you're fine if you're willing to be a bit flexible like bo_knows said. Just keep your eye on how your early years go to avoid risks of bad sequencing, adjust as needed (if at all), and otherwise you're all set. Enjoy early retirement!

[Eric]

I ran your numbers through cFIREsim.

Flexibility is key here.  If you retire today, and aim for $36k/yr spending, but agree to cut back to as low as $29k during down market years, and increase it to up to $38k during up market years, you have a 91% success rate historically. 

I guess we certainly know they were inputted correctly!

OP -- 91% is pretty damn good.  Here's an idea for you.  Work part time at a golf course.  You'll make some money and get free golf.  Two birds/one stone.  I'd be planning my escape post haste.

[skunkfunk]

You'll come up with some side income. I'd pull the trigger man. You can move to a lower COL area if shit hits the fan.

[surfhb]

At your savings rate and income I'd keep going for 3 years or so.   

Maybe make your 50th birthday party your retirement party as well.   It will be fun to see the moment come on the calendar and give you something to think about during those boring meetings :).

Plus you're ONLY half done with the time here on Earth.   Think about that!   Lots can and will change for you in retirement.   It's not like you're going to sit on your ass all day

[aj_yooper]

I would consider taking the Social Security at 70, which would give you a much larger payment but later, and running that through the simulators.

Would it be worthwhile (if possible) to receive a lump sum on your pension?  Then, you would have the money up front.

You probably got this already, but a bunch of people I know who love golf work setting up tee times or pro shop and end up bartering their time for golf time.

Best wishes!

[Cassie]

I would wait till 50 & then go.

[James]

I would cut back right away, you are 47 and have the financial ability to do it, why keep working???

Now personally I would try to cut back to part time and cushion the savings, allowing my stash to build while making enough to live on. That might mean same job part time, new job part time, enjoyable hobby that makes money, etc. Just leave the stash alone to build up a bit before withdrawing anything.

But if you want to retire right now do it, just pick up jobs if the market is down and keep an eye on your stash over time. But don't wait until you are older to spend time doing what you really enjoy. Get outside, find a great outdoor sport that takes up your time and gets you fit, enjoy life!

[HattyT]

I resemble this. If you hate your job, you are too close to FI to put up with much nonsense.   

Any of these things would put you in a better position;  Paying down your mortgage.  Getting a side gig.  Keeping a lid on the golfing and travel expenses until some benchmark that makes you comfie.  Continuing to increase your bad-assity by reading MMM. 

I’m single.  I took the plunge when my situation was Like yours, a bit snug, because I had a great travel opportunity and I didn’t love my boss.   Expect your stability in FI to vary, especially if you move, or get partnered or the stock market goes nuts or if Tiger becomes your new BFF.  Keep tracking metrics.  Even if you end up having jumped too soon, you likely have years of lead time to make adjustments.

http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-safety-margin/

[Al1961]

You're certainly beyond FU money. You have lots of options.

Maybe spend some time looking for something you'd rather do for a few years, even if it's lower paying or part-time. Your stash will continue to grow, and you have a couple less years to fund from savings.

Al

[Villanelle]

Is there any chance of cutting back at the current job or becoming a consultant (either for your current company or for anyone else)?

[DoubleDown]

I find it a little discouraging that on an ER forum, when someone comes in with pretty rock solid numbers supporting retirement, they're encouraged to work even longer! Is that the message of the MMM blog? I understand the differences in risk tolerance, but encouragement to work years more, let alone OMY???

Maybe make your 50th birthday party your retirement party as well... Plus you're ONLY half done with the time here on Earth.   Think about that!   

I also wish I had a crystal ball that told me I am guaranteed to live to 100, especially considering the actuarial life expectancy for a male is somewhere around age 74 for a man born in the late 1960s.

[Cassie]

It all has to do with risk tolerance.  Some people would rather work a few more years (3) then have to worry about running out of $ or getting work later.   When someone asks a ? they are going to get answers that correspond to their own values, etc.  Others would take the leap & worry later if needed.  We are all different. 

[DoubleDown]

Agreed, but it seems the risks of being miserable at work, not living our lives to the fullest, ending up with a stash far more than needed, or becoming disabled or dying earlier than expected (age 100+ of course) frequently gets short shrift in these assessments.

When I asked this forum a similar question a couple of years ago, I was also advised by some to work another 3  years as a "cushion" and to pay off my mortgage in full -- that is, save another $450k on top of the approximate $1.5 million net worth I already had. Really??

[epipenguin]

I would do it, assuming you can pick up some side income somewhere, but I would run the numbers for:

1) taking some cash out of your investments to pay off the mortgage. This would reduce your annual expenses up to age 62 when you would have it paid off anyway.
2) waiting to age 70 to collect social security. You would need higher portfolio withdrawals to get to age 70 but much lower after that.

[MooseOutFront]

I would work one more year and during that year I would make sure to not give too big a shit at work.

You could pull the plug now, but I think a year of working without caring at that salary would be both enjoyable and very profitable.

[DoubleDown]

I would work one more year and during that year I would make sure to not give too big a shit at work.

You could pull the plug now, but I think a year of working without caring at that salary would be both enjoyable and very profitable.

I like that approach. Seems like a good compromise between quitting while being a little uncertain about having enough, and staying too long. OP could even modify it a little to target staying one year, but with the idea that he could leave at any time if he got too fed up.

[electriceagle]

Take the exit.

You can make up 10k/yr by doing miscellaneous online work (leapforce, online tutor, etc) for $10/hr. This will be tax free since your income will be so low. Heck, the government might even pay you a retirement savings tax credit for rolling money through your roth ladder or an earned income tax credit for converting oxygen into carbon dioxide.

[MoneyStacher]

This community amazes me. I was overwhelmed with the number of responses. People taking time to evaluate my situation and provide guidance. THANK YOU to all who replied. And may I say that you are all the voices in my head! And, have you been reading my FIRE journal?

Based on responses, 10 said go for it. 8 said wait 1-3 years. 3 said it was too close to call. Everyone's risk level is different.

Is there any chance of cutting back at the current job or becoming a consultant (either for your current company or for anyone else)?

I just did this at the end of 2014. Went from managing projects to coding SQL Server. Got a new boss now who is great. Get to work one day from home and negotiated an extra week of vacation (now have 5). Salary loss was 12% (including a big loss on bonus). My days are better but it is still corp and still a 45 min 1-way commute (train with walk or bike). No beards no long hair no tattoos no denim.

MooseOutFront nailed it saying that one more year helps a lot and it should be tolerable if you don't give a shit as much. I like that idea too - and of knowing that as each day passes it is my last for that calendar date. No more Jan 9's for me!

I'm going to attempt one more year. After that probably nothing for a while, then might do 6 months of contracting followed by 6 months no work at all for a couple of years. Or, might just get some easy side gig.

To the other voices, HattyT suggested quit and lay low until the stache hits a high number. I've considered that. DoubleDown offered some great advice from his personal situation - thanks. AJ_Youper and Eric suggested PT work at a golf course. Also considered that and LOVE that idea for some free golf. GoldenStache says run the numbers again assuming a 15% market drop. I'll try that, but as James said, if that were to happen, I would jump back in the job market as a contractor to buy some stock funds on sale.

Now need guidance for this 2015 and the cash I'll have to invest. After putting 18,000 into the 401k, I'll have around $60K to invest (at the very most) wherever. Normally this would go to Vanguard Funds with ultra low fees of course. But, epipenguin and spartana are suggesting that I pay off the mortgage. They say this will reduce my monthly requirement (yes easily understood) but will also lower my tax burden since I'll need less income to live and with a lower salary requirement I'll get some Obamacare subsidies to boot (I have to look into this). My mortgage balance is 92K right now. If I did 5K/month all this year then went back to regular payments the balance would be paid before I turn 53 (47 right now). I'm on a variable right now and paying 2.5%. Most people would say market returns beat that and so don't pay it down. But for someone close to retirement like me, is there different advice?

To add one more thing, I'm in a 1044 SF condo right now which is way too big after some recent, significant downsizing. Love this building and location in Midtown Atlanta and ideally would swap for a 706 SF condo here in this building. Would reduce mortgage and would be paid off sooner.

Jeff

[James]

At the point you are at I don't think the mortgage is about numbers, it's about what you want. Long term the money is best in the market, at 2.5% you should beat that easy, and you have the ability to work if needed to avoid taking money out of the market during a down turn. I just can't see any way paying off the mortgage is best from a numbers standpoint.

But in your shoes I might pay it off just to pay it off. It frees up cash flow and gives you freedom of mind. You aren't going to be short of money long term, so do what feels best, even if numbers indicate to leave it alone. If you want to pay it off, pay it off. If you don't, invest the money. In your position you can afford not to be perfect, do what you will appreciate most long term and in the process along the way.

[CryingInThePool]

No.  You can get out as soon as you complete downsizing.  :)

That's my 2 cents at least. I would spend the next year downsizing yourself/stuff into the smaller condo.  There are always moving expenses and if you already know that your place is too big for future you I'd tick that off my list before pulling the plug on that firehose of cash. In case you need income statements as part of finance options...  I'm also assuming with the downsize/equity cash in you would decrease your mortgage by a good chunk.   If you really loved your unit I'd go the roommate route as suggested above until you decreased the mortgage a bit more but since you brought up the smaller unit I'd go with that.   

So get moving on the move and rerun the numbers once you've settled. My bet is that it puts you safely off the edge and into blue sky territory.  Not to mention that OMY is easier to swing when you are making headway with your other goals.  Between the move and and any last minute employment related medical/investment hoops to jump thru,  the year will go by before you know it.   In fact set the date,  January 8th 2016 for instance, and get busy. 

[MoneyStacher]

No.  You can get out as soon as you complete downsizing.  :) 

So get moving on the move and rerun the numbers once you've settled. My bet is that it puts you safely off the edge and into blue sky territory.  Not to mention that OMY is easier to swing when you are making headway with your other goals.  Between the move and and any last minute employment related medical/investment hoops to jump thru,  the year will go by before you know it.   In fact set the date,  January 8th 2016 for instance, and get busy.

I am LIT UP thinking how close I am. Selling this big condo will net 90K and I can buy a small place for that amount. That knocks about 9600 off the annual requirements. If I stay OMY at work the stache should be at 750K and throwing off a nice, even 30K. My want was 36K and that was with the big condo. With a smaller annual nut 30K sounds really sweet so I am going for it! The pension and SS will roll in later and I'm sure I'll work here and there so I feel really good about the exit. Only 12 monthly paychecks to go!!!!!!!!!!!

Thanks for all the consideration from everyone. I'll update later. 

[chasesfish]

I'm completely impressed you can live on that in a midtown Atlanta condo.  You are in an expensive area!  I really think you'd be okay retiring now, but working another year and paying off the mortgage is also a solid choice. 

The reality is with your skill set and network, part time work will find you.  You can also find hobby work to supplement your leisure time, like being the starter on the golf course. 

Are you in good physical shape?  One of the coolest retirement jobs I ever saw in Atlanta was a golf caddie at Eastlake (I was playing for work) was a late 40's retired firefighter.  Said it was awesome work relative to hauling fire gear with a full suit. 

I've also seen fore caddies at Piedmont Driving Club.  No carrying clubs

[MoneyStacher]

Hey chasefish, a mustachian can live cheap anywhere, right? Yes in great shape and have considered East Lake caddy for fun and some cash. Just looked at their site this week and they are not currently hiring though. I was lucky enough to play that course two years ago (won a silent auction) and really enjoyed it. HOT job in the Summer though, but you get to play the course every Monday.

Yes, Atlanta can be expensive housing but mine is a mid-rise no frills conversion of an old Dept of Ag building and I bought back in 1999. High rises have grown up all around me. Corner across from me they just leveled a Starbucks to put up 9 stories with 20 condos that start in the 700's.

There are cheap condos in Pinehurst NC too! :)

[chasesfish]

Agree about the summer!  On the hiring, I think you just keep calling the club and asking for the caddie master until they say yes

[MoneyStacher]

Update...I pulled the trigger! :p  Gave notice to my boss (pretty good friend) for May 1 of this year. He wanted a good lead time to plan replacement. I've talked to a recruiter and we discussed a 6 months on 6 months off scenario for SQL programming. Recruiter says no problem. I'll take off the rest of the year to get my head cleared of the corporate fog, grow out my hair and grow a beard too (neither allowed at my workplace). During that time will spend periods with family and friends on the East Coast while getting into even better shape and never wear dress pants or khakis during that time! Going to downsize to very little (small storage) and rent out my condo - I'll be homeless! I am scared of course. And really not as excited as I thought I would be. Maybe it is still just a lot of time to go (only 47 days but still it isn't next week and there are still work stresses.)

Thank You to all who posted their ideas, opinions, and encouragement! I've reread this post countless times in the past couple of months.

[Neustache]

Ahhh!! Congrats!  I get so excited when people quit! 

 

[Suit]

Congratulations! I hope you'll keep updating all of us after you FIRE.

[MooseOutFront]

Awesome.  I really like the idea of your 6 on/6 off transition.

[pdxvandal]

Phuck yeah! Glad you're going for it.

My former co-worker was about your age when he died on a treadmill (three kids no less). Probably had a high net worth and didn't get to enjoy it. It's one of my primary motivations to leave the full-time workforce forever.

[chasesfish]

Jeff - do your numbers include the part time income (and golf benefit) of working as a starter or in the clubhouse of one of those really nice courses in Atlanta?  Forecaddie at PDC sounds like a good side gig.

[lifejoy]

Awesome! Check out www.theminimalists.com and "the life-changing Magic of tidying up" by Marie Kondo for downsizing :)

[YK-Phil]

Fantastic! I wish I had your guts.

[Retire-Canada]

Update...I pulled the trigger! :p  Gave notice to my boss (pretty good friend) for May 1 of this year. He wanted a good lead time to plan replacement. I've talked to a recruiter and we discussed a 6 months on 6 months off scenario for SQL programming. Recruiter says no problem. I'll take off the rest of the year to get my head cleared of the corporate fog, grow out my hair and grow a beard too (neither allowed at my workplace). During that time will spend periods with family and friends on the East Coast while getting into even better shape and never wear dress pants or khakis during that time! Going to downsize to very little (small storage) and rent out my condo - I'll be homeless! I am scared of course. And really not as excited as I thought I would be. Maybe it is still just a lot of time to go (only 47 days but still it isn't next week and there are still work stresses.)

Thank You to all who posted their ideas, opinions, and encouragement! I've reread this post countless times in the past couple of months.

Sounds like a solid plan. Congrats!

-- Vik