Hi, everyone. This is my first post, but I've been lurking around here to read the blog and the forum casually. I would like some advice on how to best transition into retirement. Here's a little background about me.
I'm single 33/m, living in Durham, North Carolina. I make $105k/yr. I have $200k in non-retirement, $75k in Roth, $200k in Traditional, and $25k in 401k, totaling to almost exactly $500k. I have a negligible $5k in checking.
I spend $1500/mo, where my biggest expense is by far housing at $850/mo for a 1 bedroom apartment. I bought with cash a used, cheap, (Mustachian :) sub-compact car. I'm guessing that if I quit my job, I'd need about $200 more per month for health insurance.
I am planning on maxing out 401k every year, plus putting $3k in Roth and $3k in Traditional. I front loaded the retirement contribution, which takes 4 months of saving. The last 8 months, I put all the savings in non-retirement, which is about $4000-$5000 per month, or $32k - $40k per year. Everything, except 401k, is stashed in Vanguard ETFs at 10% bonds, 10% international, 5% REIT, and the rest in VTI.
I'm planning on retiring in the next 5-10 years. My aim is to retire when I turn 40, in 7 years, but this is flexible since I "don't dislike" my job.
Since my spending is $1500 + $200 health insurance, that's $20400/year. The dividend income I'm seeing in my non-retirement is about $5000/yr. Assuming 15% tax, ($1700 * 12)/(1 - 0.15) = $24000/year of gross income is needed. This means that I have a upper bound of $200k * $24000 / $5000 = $960k of non-retirement saving needed if I ONLY spend my dividends, which is around $5000/$200k = 2.5%.
I have read in MMM blog about the 4% rule, so I can potentially take 1.5% from the principal, or simply $24k * 25 = $600k of non-retirement saving. With inflation, it'll be a little more possibly.
What are some strategies that I can use to transition into retirement? I was thinking that I'll need to reduce the risk of my allocation from 10% bonds to about 30% bonds. I should probably have 1 year of living expense in cash, or is this too low/high? I was also thinking about moving the Roth principal over to non-retirement at the moment that I retire, to speed it up by about 1 year. When withdrawing from the non-retirement account, is it better if I not reinvest the dividends (2.5%) and then take the rest (1.5%) from principal? What are some strategies on withdrawing from the principal?
I was also thinking about buying a one-bedroom condo a year or so before retirement. This should help reduce my spending variance. I'm also thinking about living near a bus line and bike-friendly area so that I can go car-free. My current transportation expense is $2000/year, but it'll reduce to about $500/year if I go car-free. I just need easy access to the supermarket and a park.
Currently, I'm a programmer. I actually enjoy programming, so I'll do more of that, just not 40 hours a week. It's terrible for my health, so I was thinking about reducing my "screen time" to about 1 hour a day. I'll also have all the time to cook/eat (2 hours/day), exercise (1 hour/day), walking around parks (1 hour/day), meditation/yoga, art, reading, gardening, etc. With some luck, I might be able to make money from hobbies, say $5k/year, and reduce the retirement stash by $5k * 25 = $125k.
I still question whether retirement is a good option for me. I've always wanted to teach, so I would consider teaching Math or CS part-time in a community college, or go for a PhD so that I can be a lecturer (also part-time) in a university. There are 3 highly ranked universities in the Raleigh-Durham area, so I might take advantage of that.
I have also considered moving to a cheaper country, like Thailand or Ecuador, at least initially, to let the stash grow faster before moving back to the US. But I haven't done any research other than youtube videos and travel blogs.
Maybe I'm overloading this thread with too many ideas, but I want to paint a big picture of all my current ideas and potential projects. Thanks in advance for sharing your strategies and/or improving my current strategies!
