53 Years Old - Is It Wise To Retire At 60?

[thnsn]

Life Situation

Single 53 year old. Living in Portland, OR. Dependents are 3 cats. I have a very creative, fulfilling job.

I'm planning to sell my current home and purchase one with my girlfriend in 2022. We will keep the house for 5-10 years and then move elsewhere.

My current home is in need of $20-50k worth of deferred maintenance.

My priorities are being creative and traveling.


Gross Salary/Wages:

$142k annually.


Individual amounts of each Pre-tax deductions

$22k   401k
$2.6k FSA


Adjusted Gross Income: $117k

Taxes:

$20k   Federal
$9k   State
$10k   FICA

Annual Expenses: $58.7k

Mortgage: $17k


Vehicles: $12k
   $4k   Motorcycle/bicycle gear
   $2k   Insurance
   $4k   Maintenance
   $2k   Gas

Medical: $2k
   $1k    Chiropractor
   $1k    Dental

Misc: $8k   
   $3k   Electronics/appliances
   $6k   Travel

Utilities: $3.4k
   $1.2k   Water/sewer
   $.8k   Internet
   $.6k   Natural Gas
   $.4k   Electric
   $.4k   Garbage/recycling

Garden: $2k

Food: $6.8k
   $4k   Groceries
   $2k   Restaurants
   $.8k    Coffee subscription

Pets: $5k
   $2k   Veterinary
   $3k   Food

Subscriptions: $1.5k   Apple One/Adobe Creative Cloud/HBO Max/Zwift


Assets:

401k   $1,480k Employer’s Fidelity Target Date fund
IRA      $183k
ESPP   $52k

Home   $550-650k estimated value.

2018 BMW R1200GS      $16k
2009 Subaru WRX      $14k
1999 Jeep XJ         $7k
1972 Yamaha DT-3      $2k

5 bicycles, range in value from $500-$4k each


Liabilities:

Mortgage   $157k      
HELOC      $39k
Motorcycle   $9k   (24 payments remain)


Questions:

My IRA is in a Fidelity managed account. I want to move to a self-managed scenario asap. What is the best way to do this?

When we buy a house next year, we will put in equal amounts of principal. I will likely have ~$100k ‘surplus’, as she has less equity. Is putting this into VTSAX, or Fidelity equivalent, a smart move?

I’d love to retire by 60, then do independent consulting/educating for fun. FIRECalc says that it’s a no-brainer. Looking at my expenditures, it seems doable. I’d love to hear the consensus from the folks here.

[waltworks]

You don't need to wait until you're 60, you can pull the plug now. Congrats, go have fun.

-W

[zolotiyeruki]

The $1.7 million you have now would support spending of $68,000/year, with a 4% withdrawal rate.  waltworks is right--there's no financial reason for you to continue working.  Even though you'll take a 10% penalty for withdrawing from your 401k early, you have way more than you need. TODAY. 

If you choose to work another 7 years, and continue to save, your savings is likely to double, allowing you to spend a whopping $136,000 per year.

On top of that, if you provide some of your income via consulting or freelancing, that'll displace some of the income you'd otherwise need from your 401k, which would reduce your penalties.

On top of that, it won't be that long before you can start taking Social Security, which will likely reduce your withdrawal rate to well under 3%.

In answer to your questions:
1) Call Fidelity and ask them.
2) That's what I'd do.
3) You've already won the game as of today.  Forget working another seven years.

[clarkfan1979]

Life Situation

Single 53 year old. Living in Portland, OR. Dependents are 3 cats. I have a very creative, fulfilling job.

I'm planning to sell my current home and purchase one with my girlfriend in 2022. We will keep the house for 5-10 years and then move elsewhere.

My current home is in need of $20-50k worth of deferred maintenance.

My priorities are being creative and traveling.


Gross Salary/Wages:

$142k annually.


Individual amounts of each Pre-tax deductions

$22k   401k
$2.6k FSA


Adjusted Gross Income: $117k

Taxes:

$20k   Federal
$9k   State
$10k   FICA

Annual Expenses: $58.7k

Mortgage: $17k


Vehicles: $12k
   $4k   Motorcycle/bicycle gear
   $2k   Insurance
   $4k   Maintenance
   $2k   Gas

Medical: $2k
   $1k    Chiropractor
   $1k    Dental

Misc: $8k   
   $3k   Electronics/appliances
   $6k   Travel

Utilities: $3.4k
   $1.2k   Water/sewer
   $.8k   Internet
   $.6k   Natural Gas
   $.4k   Electric
   $.4k   Garbage/recycling

Garden: $2k

Food: $6.8k
   $4k   Groceries
   $2k   Restaurants
   $.8k    Coffee subscription

Pets: $5k
   $2k   Veterinary
   $3k   Food

Subscriptions: $1.5k   Apple One/Adobe Creative Cloud/HBO Max/Zwift


Assets:

401k   $1,480k Employer’s Fidelity Target Date fund
IRA      $183k
ESPP   $52k

Home   $550-650k estimated value.

2018 BMW R1200GS      $16k
2009 Subaru WRX      $14k
1999 Jeep XJ         $7k
1972 Yamaha DT-3      $2k

5 bicycles, range in value from $500-$4k each


Liabilities:

Mortgage   $157k      
HELOC      $39k
Motorcycle   $9k   (24 payments remain)


Questions:

My IRA is in a Fidelity managed account. I want to move to a self-managed scenario asap. What is the best way to do this?

When we buy a house next year, we will put in equal amounts of principal. I will likely have ~$100k ‘surplus’, as she has less equity. Is putting this into VTSAX, or Fidelity equivalent, a smart move?

I’d love to retire by 60, then do independent consulting/educating for fun. FIRECalc says that it’s a no-brainer. Looking at my expenditures, it seems doable. I’d love to hear the consensus from the folks here.

Mathematically, leaving work seems very doable, especially considering that you are willing to work part-time. However, psychologically speaking, I would personally feel more comfortable completing the home renovations before leaving full-time work. Writing big checks for home renovations right after leaving work with no money coming in would be too much of a psychological burden for me.

I would also consider paying off the HELOC and motorcycle before pulling the plug for peace of mind. However, that's more of a personal consideration than a mathematical consideration.

[thnsn]

Many thanks to each of you for your kind responses.

zolotiyeruki It's going to take me a bit to wrap my head around this. In particular, the 10% penalty bit. I have been looking at the money as my most precious resource, and now I'm shifting it to time being my most precious resource. It started really sinking in today during our work staff holiday Zoom meeting.

1) I'll give Fidelity notice about changing my IRA to be self-directed.
2) Thanks for that. I'll put excess proceeds into a self-directed fund or two.
3) Forget working seven years? Wow! It feels great to think about work in terms of what I really want to do, as opposed to 'I really need this job!'. There are some great job opportunities right now.

clarkfan1979 You are dead right about the psychological factor of having some unresolved items (HELOC, home repairs, motorcycle) in the face of ER. I'll get those items resolved before I pull the plug. The last thing that I want is a retirement chock full of worry and anxiety.

I want to thank the posters on MMM forum for their sound advice about Personal Capital Asset Management. I was tempted, but glad that I dodged that bullet.

[zolotiyeruki]

zolotiyeruki It's going to take me a bit to wrap my head around this. In particular, the 10% penalty bit. I have been looking at the money as my most precious resource, and now I'm shifting it to time being my most precious resource. It started really sinking in today during our work staff holiday Zoom meeting.

Yeah, it's a big change in perspective.

With regards to the 10% penalty:  When you withdraw from your 401k or traditional IRA, you pay income taxes, as you would on earned income.  If you withdraw before age 59.5*, you'll pay income taxes plus a 10% penalty for early withdrawal.  Yeah, it stinks to be paying that much extra to the government, but if you have enough saved up to cover it, you're fine.  That penalty is also why it's important to not put 100% of your savings into tax-deferred accounts.  Having 5 years' worth of spending in accessible-penalty-free locations (typically Roth contributions and taxable accounts) gives you the option of accessing those 401k and tIRA funds without penalty via a Roth Pipeline.

* More correctly, the penalty comes into play if you withdraw before the year in which you turn 59.5, but that doesn't quite roll off the tongue as well.

[Fire2025]

Congratulations!!! 

Also if you delay 2 years, look into the age 55 rule for your 401k.  The thing to ask your work is if they allow irregular or unequal withdrawals from your plan.  If they do that's great, set-up whatever works for you. 

If they don't, you can set up something like a 72t withdrawal, because you're only bridging from 55 - 59.5 this is a lot easier than a super Early FIRE'r.

Both have no penalty.

[Mrs. Healthywealth]

Things to consider:

• Do your investments cover the bridge till early withdrawal penalty is no longer an issue?
• You might benefit from Roth conversions, you can work with a planner or accountant or read about it yourself
• Did you already factor in health care and hm maintenance? may have missed that
• Are you fully aware of the 4% rule and are you comfortable with 4% withdrawal? I calculate everything on 3.5% WR after reading Trinity study and Big ERN's website on sequence of returns risk.

Since you're asking for an opinion, I would create a larger buffer that makes you feel most comfortable, maybe even 2 yrs; If you find your job fulfilling, I wouldn't quit until you really want to. The goal of achieving FIRE is great, but so is working a fulfilling and creative job.  Currently, @ 4% you are right at the amount you spend. It's nice to have wiggle room. If you know you will work PT and that it will generate a certain amount of cushion that helps you sleep at night during downturns, then leaving your job is great...especially if you can find PT work that's also fulfilling and creative.

[waltworks]

Are you fully aware of the 4% rule and are you comfortable with 4% withdrawal? I calculate everything on 3.5% WR after reading Trinity study and Big ERN's website on sequence of returns risk.[/li][/list]

OP is at 3.3% or thereabouts currently, not accounting for SS kicking in in another decade or ever earning another penny.

There is no financial reason to keep working. Period. There may well be emotional/quality of life reasons to do so.

-W

[DaTrill]

If I were in your shoes, look into a 401k ROTH, you are headed for a tax bomb with that large of a Traditional IRA balance.  Switch to basic index fund over managed account to lower fees.  Vanguard is usually offered in most Fidelity retirement plans, if not, contact the Fidelity 401k rep and ask for it to be added.  Vanguard Institutional charge 1.5 bps/year as opposed to managed accounts which charge 100+ bps/year.  If fees are 100 bps, you are paying $14,000 in fees to manage the account (that is unlikely to produce positive returns relative to the market) while a blind index will cost $200-$400/year.   

Think of a 401k as delayed income, not a retirement account.  You will have to pay income taxes when that money is used after turning 59.5.  I would also contact Fidelity and ask if they allow in-plan rollovers and ask if they can calculate the maximum amount if you wish to retire at 60.

Spend less on cars, don't buy a house.   

[Mrs. Healthywealth]

Are you fully aware of the 4% rule and are you comfortable with 4% withdrawal? I calculate everything on 3.5% WR after reading Trinity study and Big ERN's website on sequence of returns risk.[/li][/list]

OP is at 3.3% or thereabouts currently, not accounting for SS kicking in in another decade or ever earning another penny.

There is no financial reason to keep working. Period. There may well be emotional/quality of life reasons to do so.

-W

I don’t see what you’re seeing. Maybe I’m missing something. 1.7mil assets, doesn’t look like medical insurance from 53-65 is accounted for or annual maintenance on Hm (outside of current deferred), buying a car later on down the line, additional travel, hobbies, etc. are considered.  My suggestion to OP is not take suggestion that you can retire now period without making sure all expenses are accounted for and most importantly he/she feels they can sleep at night…that psychological piece is closely intertwined with the financial. That’s all, not saying he/she can’t, just to make sure all is accounted for.

[zolotiyeruki]

I don’t see what you’re seeing. Maybe I’m missing something. 1.7mil assets, doesn’t look like medical insurance from 53-65 is accounted for or annual maintenance on Hm (outside of current deferred), buying a car later on down the line, additional travel, hobbies, etc. are considered.  My suggestion to OP is not take suggestion that you can retire now period without making sure all expenses are accounted for and most importantly he/she feels they can sleep at night…that psychological piece is closely intertwined with the financial. That’s all, not saying he/she can’t, just to make sure all is accounted for.

You make a fair point that some retirement expenses are not accounted for. That said, OP has an expensive vehicle habit that accounts for a full 20% of his expenses.  I mean, seriously, my family of eight owns three old cars and has three drivers, one of whom is a teenage boy.  And we spend *maybe* $6,000/year for registration, insurance, gas, and maintenance.

There are several other categories that could use a fair bit of trimming ($2k/year on appliances and electronics!?), but the OP didn't request feedback on his/her spending.

[thnsn]

Things to consider:

• Do your investments cover the bridge till early withdrawal penalty is no longer an issue?
• You might benefit from Roth conversions, you can work with a planner or accountant or read about it yourself
• Did you already factor in health care and hm maintenance? may have missed that
• Are you fully aware of the 4% rule and are you comfortable with 4% withdrawal? I calculate everything on 3.5% WR after reading Trinity study and Big ERN's website on sequence of returns risk.

Since you're asking for an opinion, I would create a larger buffer that makes you feel most comfortable, maybe even 2 yrs; If you find your job fulfilling, I wouldn't quit until you really want to. The goal of achieving FIRE is great, but so is working a fulfilling and creative job.  Currently, @ 4% you are right at the amount you spend. It's nice to have wiggle room. If you know you will work PT and that it will generate a certain amount of cushion that helps you sleep at night during downturns, then leaving your job is great...especially if you can find PT work that's also fulfilling and creative.

I agree with creating a larger buffer. Think a Roth conversion would be a good thing to pursue. I have not factored in health care, which is a concern. I'm really enjoying work a lot, and am taking night classes. Obviously not in financial planning!

[thnsn]

If I were in your shoes, look into a 401k ROTH, you are headed for a tax bomb with that large of a Traditional IRA balance.  Switch to basic index fund over managed account to lower fees.  Vanguard is usually offered in most Fidelity retirement plans, if not, contact the Fidelity 401k rep and ask for it to be added.  Vanguard Institutional charge 1.5 bps/year as opposed to managed accounts which charge 100+ bps/year.  If fees are 100 bps, you are paying $14,000 in fees to manage the account (that is unlikely to produce positive returns relative to the market) while a blind index will cost $200-$400/year.   

Think of a 401k as delayed income, not a retirement account.  You will have to pay income taxes when that money is used after turning 59.5.  I would also contact Fidelity and ask if they allow in-plan rollovers and ask if they can calculate the maximum amount if you wish to retire at 60.

Spend less on cars, don't buy a house.   

I've been pondering the "tax bomb" that you speak of. I think that it's time to put less of my income into my employer's retirement plans and invest in self-directed index funds. Good point about in-plan rollovers. I'll put that on the list.

My expenses were truly out of line in this past year. I had to take the Subaru in for the expensive service, and I had a cat with cancer. I had a refrigerator die too. At the moment, I have everything that I need. In fact, I have a lot more. I'll be putting a lot of motorcycle gear on eBay this winter.

[waltworks]

I don’t see what you’re seeing. Maybe I’m missing something. 1.7mil assets, doesn’t look like medical insurance from 53-65 is accounted for or annual maintenance on Hm (outside of current deferred), buying a car later on down the line, additional travel, hobbies, etc. are considered.  My suggestion to OP is not take suggestion that you can retire now period without making sure all expenses are accounted for and most importantly he/she feels they can sleep at night…that psychological piece is closely intertwined with the financial. That’s all, not saying he/she can’t, just to make sure all is accounted for.

https://engaging-data.com/will-money-last-retire-early/

Go have fun. Even with no SS and no income and no spending flex whatsoever OP is at 99% success rate. Sure, there could be some healthcare expenses for the next decade or so until Medicare kicks in, but even assuming an extra $15/year for that period, you're still at 97%.

Remember he (I think he) is 53. There's a 10% chance he's dead in 10 years. ~30% in 20. Money is less valuable than time now.

-W

[thnsn]

I don’t see what you’re seeing. Maybe I’m missing something. 1.7mil assets, doesn’t look like medical insurance from 53-65 is accounted for or annual maintenance on Hm (outside of current deferred), buying a car later on down the line, additional travel, hobbies, etc. are considered.  My suggestion to OP is not take suggestion that you can retire now period without making sure all expenses are accounted for and most importantly he/she feels they can sleep at night…that psychological piece is closely intertwined with the financial. That’s all, not saying he/she can’t, just to make sure all is accounted for.

You make a fair point that some retirement expenses are not accounted for. That said, OP has an expensive vehicle habit that accounts for a full 20% of his expenses.  I mean, seriously, my family of eight owns three old cars and has three drivers, one of whom is a teenage boy.  And we spend *maybe* $6,000/year for registration, insurance, gas, and maintenance.

There are several other categories that could use a fair bit of trimming ($2k/year on appliances and electronics!?), but the OP didn't request feedback on his/her spending.

As I noted above, expenses were truly an anomaly in the past year. The new refrigerator was not a fun thing to invest in! The only other unplanned expense was a cat breaking her leg.

Anyway, a big part of the reason that my gf and I are combining households is to minimize expenses. This includes saving a ton on utilities (tho my current house has a great solar system), selling cars and bicycles that are no longer needed, etc.. I've entered into 'divestment' phase. I sold all 600+ cds that I had, and got rid of a lot of furniture and clothes that I no longer need. It feels incredible!

I think that this exercise of creating a budget has given me a LOT of insight into where I've been regarding spending, and where I want to go. You make fair points about vehicles. Since I do most of the work myself, the expenditures show some anomalies in the past year. The Subaru needed a lot of engine work. Old vehicles are the way to go, if you can wrench on them. Heck, I still have a bicycle that I raced in 1989!

[markbike528CBX]

Go Do it!

You've made it farther than your namesake :-)    https://en.wikipedia.org/wiki/Darby_Crash

While it would be nice to have a bigger taxable stash, you're fine.  Don't worry about the "tax bomb" for your 401k.  After 59.5 you can adjust your withdrawals.
A way to reduce the "tax bomb" is to do a SEPP/72(t).  See the notes on single or partial payouts of 401k, or just roll it to a tIRA and be done.

[Jack0Life]

It's like asking if you see a $20 on the street, should you pick it up ?
The OP also has a ~$600k house that he's planning to sell and profit $300k-$400k which he can use to bridge to retirement funds. Over ~$2 millions NW for a single male, common.

[thnsn]

Go Do it!

You've made it farther than your namesake :-)    https://en.wikipedia.org/wiki/Darby_Crash

While it would be nice to have a bigger taxable stash, you're fine.  Don't worry about the "tax bomb" for your 401k.  After 59.5 you can adjust your withdrawals.
A way to reduce the "tax bomb" is to do a SEPP/72(t).  See the notes on single or partial payouts of 401k, or just roll it to a tIRA and be done.

Thanks! I've been a bit risky than my namesake, Darby. He is a bit of a legend, unlike myself!

Good point about the SEPP/72(t). It does look appealing, tho for the moment I'll keep working and having fun. Until 59.5 anyway.

Or just quit like a few of my colleagues and sell NFTs!

[thnsn]

It's like asking if you see a $20 on the street, should you pick it up ?
The OP also has a ~$600k house that he's planning to sell and profit $300k-$400k which he can use to bridge to retirement funds. Over ~$2 millions NW for a single male, common.

Good point! The profit from selling my home can bridge to retirement. Sadly, to sell my home I will need to put some serious $$ into it. Hopefully I can recoup it.

Regardless, selling a home and moving on is an important step for me. I've been in this house for a long time, and want something else.

[getmoneyeatpizza]

The easiest way to look at it is add up all NW and subtract that amount owed on the mortgage. That puts you at 1.5 million with a paid off house. That let's you spend $60,000 a year with no mortgage payment. Since you spend 59k with 17k to mortgage your paid off house expenses would be 41k. You are good to go now as others have said and you can spend 19k more than you currently do if you wanted.

I agree with the others. Sell your house and put a max of 20% down on the new house.

If you retire immediately, use that cash from home sale to bridge the gap until you are 59. Also do a Roth conversion every year up to the 12% bracket.

Ideally, you would have put more money into a taxable account over the years but you didn't. So if you choose not to retire immediately, do the math yourself, but strongly consider stopping all non-match payments to your pre tax retirement and simply put it all in a taxable brokerage account in VTSAX, this will help you bridge the gap to 59 as well.