Author Topic: Can I Retire?  (Read 5862 times)

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Can I Retire?
« on: July 21, 2014, 11:53:55 AM »
I just had a question on if my financial plan seems ok to retire early in 2 years?

We will have $400,000 in taxable mutual funds that will have to last until my spouse receives her pension.  We also have around 150k in a TSP.  My wife will receive a pension of $1,000 per month in 15 years.  I will receive a pension of $2,000 per month in 17 years.  Our condo is paid off, but we do have a $225 per month in fees/insurance. 

We will need approximately $2,000 per month to live off of, since we will sell one of our cars.  Do you think we will be ok to check out in 2 years.  We roughly need to pull out 2k per month for 15 years, then another 1k per month for 2 years.

Thanks



matchewed

  • Magnum Stache
  • ******
  • Posts: 4322
  • Location: CT
Re: Can I Retire?
« Reply #1 on: July 21, 2014, 11:56:25 AM »
Things you need to consider.

What is your asset allocation? Do you know how much to expect in "average" returns? How old are you? How long do you need the money to last?

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #2 on: July 21, 2014, 11:59:49 AM »
Thanks for the reply.  We will need the 400k to last 15-17 years.  I have about 30% in bonds and the rest in the S&P500.  Once we hit pension age (15-17 years) our finances should be great.  My main concern is making it to this point.

curler

  • Stubble
  • **
  • Posts: 111
Re: Can I Retire?
« Reply #3 on: July 21, 2014, 12:14:08 PM »
Probably.  The general rule of thumb (ignoring pensions) is that you want to save 25 times your annual spending before you can retire.  At 2K per month that is 24K per year, so 600K saved.  You are at 550K.  So if you can save another $50,000 in the next 2 years, then you would be fine, even without factoring in the pensions. 

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #4 on: July 21, 2014, 12:18:22 PM »
2 other areas that concern me are.

I have a daughter that will be entering college next year.  We have about 2 years saved for her in a 529.  I wanted her to pay for half, but I'm concerned that I may end up wanting to pay more.  The second concern is that I would like a good bit of cushion, since I'm getting older and cant just jump into any job (very bad back).  I would always be willing to go back into the IT field, but would prefer to have the resources to not worry about that.  My situation is a tad different, since the 4% rule wouldn't necessarily apply.  I will be pulling more than the 4% to get to the pension phase.  Do you think I should try and get 600 or 700 saved up to be safe or would you be comfortable pulling the plug at 550k we will have then?  As a side note.  2k was over what our basic living would be, since I gave us $400 spending per month and $400 misc.  My wife wanted to get rid of both cars and take the bus, which would save us another $200 per month or so.  I really don't want to do this, since I like my freedom.  Thanks
« Last Edit: July 21, 2014, 12:21:41 PM by Deepsouth »

MgoSam

  • Magnum Stache
  • ******
  • Posts: 3643
  • Location: Minnesota
Re: Can I Retire?
« Reply #5 on: July 21, 2014, 12:34:23 PM »
Hey,

Sorry to hear about your back, does your job make it worse? I would hate for you to have your back get even worse which can both cause more pain and raise your living expenses (health), and limit what you can do. If you job does hurt your back then that might change my answer, but for the time being I would advise stayed and getting more of a cushion. The $550,000 you have saved has a very good chance of lasting until you reach your pension, especially if you are able to lower some expenses upon leaving your job (won't need to drive as much, ect). For myself, I am in a field that I know I won't be able to re-enter once I leave for a significant period, so I am looking to get a bigger nest egg than 25x annual expenses. Hope that this helps.

Seņora Savings

  • Stubble
  • **
  • Posts: 179
  • Age: 31
Re: Can I Retire?
« Reply #6 on: July 21, 2014, 12:41:13 PM »
Is the pension plan inflation adjusted?  If not (which is my guess) and inflation is 2%, the pension will only be worth 74% of current buying power in 15 years, 41% in 45 years.  This could leave you in a bind in old age.  Also, what will happen if one of you dies?  Your wife could be in real trouble living off only her pension if you wind down your nest egg.  I would advise using the pension as a back up plan and save the full $600,000 (you're not far off). 

On a side note, I would be upfront with your daughter about how college will be paid for, which means you should decide that before she starts applying.

Once your daughter leaves, you might also be able to reduce your spending (smaller condo, fewer groceries, eating out), or you might increase it (fancy date nights, cross country flights to visit her). 

Bottom line: Retirement in 2 years is doable, but it'll take some work, it sounds like you're flexible and are building safeguards in, but I'd gp for the full 4% + pension.

beltim

  • Magnum Stache
  • ******
  • Posts: 2834
Re: Can I Retire?
« Reply #7 on: July 21, 2014, 12:51:54 PM »
$24k annual withdrawals is 4.36% of $550k.  The latest update to the Trinity Study suggests that there is a 100% success rate of a 5% withdrawal for a period of 20 years with a 75% stocks/25% bonds portfolio allocation (it would also be a 100% success rate with 50% stocks/50% bonds).  If you're truly sure you won't need any money from your portfolio after that 20-year period (be careful of inflation and your pension, as Senora Savings suggested), then your current portfolio is sufficient to last you those 20 years.

Source: http://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #8 on: July 21, 2014, 01:20:05 PM »
After reading these responses I think that I may have to work another 3-4 years.  I would rather be 100% certain of my future.  One positive, is that every extra year I work is actually one less year that I'm not taking withdraws.  This would also get my daughter up to the age of 21.  I would feel a bit better by cutting the purse strings at this age.  I also want to have a descent amount of money for trips to cheaper countries.  I would love to live 6 months in these cheaper countries then live the other 6 months in the condo.  This will take some extra savings, with plane tickets being so expensive.  If we decide that we are definitely done with work then I will have to go with my wife's plan and sell both cars.

mxt0133

  • Handlebar Stache
  • *****
  • Posts: 1559
  • Location: San Francisco
Re: Can I Retire?
« Reply #9 on: July 21, 2014, 01:31:35 PM »
My advice would be to get a firm handle on all your expenses once you retire.  What benefits do your jobs provide other than direct pay, medical, dental, vision, life insurace, ect?  How much will these cost you when you both quit?

It seems that you will be fine if you actually retired today given that you will get pensions, will you also get SS?  Also do you envision doing part-time work for fun?  Or do you just plan to travel and no earn any type of income at all?

Basically by working through the details it will give you more visibility on your future retirement and either give you confidence to pull the plug or validate your reason to day for a year or two more.

BTW if you need to be 100% certain of your future, then no amount of money will guarantee that.  There are too many unpredictable events and one cannot possibly plan for all of them, it is just a state of mind and balance on what you are comfortable with.

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #10 on: July 21, 2014, 01:46:22 PM »
My advice would be to get a firm handle on all your expenses once you retire.  What benefits do your jobs provide other than direct pay, medical, dental, vision, life insurace, ect?  How much will these cost you when you both quit?

It seems that you will be fine if you actually retired today given that you will get pensions, will you also get SS?  Also do you envision doing part-time work for fun?  Or do you just plan to travel and no earn any type of income at all?

Basically by working through the details it will give you more visibility on your future retirement and either give you confidence to pull the plug or validate your reason to day for a year or two more.

BTW if you need to be 100% certain of your future, then no amount of money will guarantee that.  There are too many unpredictable events and one cannot possibly plan for all of them, it is just a state of mind and balance on what you are comfortable with.

Thanks for the great reply.  I have a small 10% military disability, but it does get me free medical.   My wife would go on ACA.  My job has honestly taken away any drive or vision for the future.  I would probably do some side gig, but I just can see through the fog of my daily life.  I know that my wife and myself are extremely burned out.  We married young and had two wonderful kids pretty quick.  One has joined the military a year ago and the other will go to college in the next 12 months or so.  I think we are both tired and need a break.  For her to say lets just sell both cars, means she wants out of the 9 to 5.  I'm ready to go in 1.5, which is when my pension is vested, but I want to make certain my daughter has a descent start in life.  I guess when it boils down to it that is most important at the moment.  Thanks for the reply.

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #11 on: July 21, 2014, 01:48:46 PM »
Hey,

Sorry to hear about your back, does your job make it worse? I would hate for you to have your back get even worse which can both cause more pain and raise your living expenses (health), and limit what you can do. If you job does hurt your back then that might change my answer, but for the time being I would advise stayed and getting more of a cushion. The $550,000 you have saved has a very good chance of lasting until you reach your pension, especially if you are able to lower some expenses upon leaving your job (won't need to drive as much, ect). For myself, I am in a field that I know I won't be able to re-enter once I leave for a significant period, so I am looking to get a bigger nest egg than 25x annual expenses. Hope that this helps.

I sit at a desk all day, which I know doesn't help my back.  I know that I can't stand for longer than 1 hour so my future job options are limited.  I could probably reenter the field, since it's IT related, but hate too.  I would also feel much better if I was coming out of a bear market, instead of a raging bull.  Values dropping by 50% would definitely be devastating!  Thanks for the reply.

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #12 on: July 21, 2014, 01:51:24 PM »
Is the pension plan inflation adjusted?  If not (which is my guess) and inflation is 2%, the pension will only be worth 74% of current buying power in 15 years, 41% in 45 years.  This could leave you in a bind in old age.  Also, what will happen if one of you dies?  Your wife could be in real trouble living off only her pension if you wind down your nest egg.  I would advise using the pension as a back up plan and save the full $600,000 (you're not far off). 

On a side note, I would be upfront with your daughter about how college will be paid for, which means you should decide that before she starts applying.

Once your daughter leaves, you might also be able to reduce your spending (smaller condo, fewer groceries, eating out), or you might increase it (fancy date nights, cross country flights to visit her). 

Bottom line: Retirement in 2 years is doable, but it'll take some work, it sounds like you're flexible and are building safeguards in, but I'd gp for the full 4% + pension.

Great points.  It is COLA adjusted, but I think that it probably is only once it has started.  I will need to add a few years to it to offset it.  Thanks for pointing that out.  2k was choosing the survivorship pension.  I wanted to make sure my wife would be all set.  I think I will work a few more years for the higher pension and to get my daughter to 21.  Also, thinking about a market drop, from this raging bull market, I should probably work longer.

zinethstache

  • Pencil Stache
  • ****
  • Posts: 826
  • Location: Anywhere USA
  • FIREd 1/27/2017
    • My FIRE Hobby and travel blog
Re: Can I Retire?
« Reply #13 on: July 21, 2014, 02:03:07 PM »
I am so sorry to hear about your back. I am in a similar situation, but no kids. Sounds like your healthcare is covered which is great. I would caution you on ACA costs for your wife, make sure you have done your homework on what value to put on that in your retirement spending budget. I am currently working through the numbers and since I, with my bad back, don't have disability at this time, I have to best guess-timate what that will cost us. DH is healthy as can be. I am looking at lumbar fusion in the next couple of months (only one level thank goodness). So I am sure my ongoing healthcare will not be cheap. I am at that crossroads of whether I am going to struggle through a couple more years at work if I am physically able (still TBD). Such a bother, why can't FIREing be easy! I look forward to reading inputs on your thread...

Deepsouth

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: Can I Retire?
« Reply #14 on: July 21, 2014, 02:26:05 PM »
I am so sorry to hear about your back. I am in a similar situation, but no kids. Sounds like your healthcare is covered which is great. I would caution you on ACA costs for your wife, make sure you have done your homework on what value to put on that in your retirement spending budget. I am currently working through the numbers and since I, with my bad back, don't have disability at this time, I have to best guess-timate what that will cost us. DH is healthy as can be. I am looking at lumbar fusion in the next couple of months (only one level thank goodness). So I am sure my ongoing healthcare will not be cheap. I am at that crossroads of whether I am going to struggle through a couple more years at work if I am physically able (still TBD). Such a bother, why can't FIREing be easy! I look forward to reading inputs on your thread...

Sounds like a very similar situation to mine.  I feel your pain.  Serious back issues are very hard to overcome.  Another option for me is to just let my wife work a few more years longer than me.  Either way I need to work one year and four months to qualify for my pension.  Although, I still wont receive it for 17 more years, it will be nice to have.  Good luck with the back.  I know it can be as tough mentally as it is physically.