Case Study: 47 with 1.3M. Retire at 50?

[carl1111]

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[swashbucklinstache]

Hey. Welcome!

1) Why aren't you maxing your IRA? Even just throwing the dividends from your taxable account into it or something I can't read, nevermind this =)
2) Go to the health exchange website and get a quote for 50 year old you, then for 51 year old you, etc. and put it in your spreadsheet, modeling out each year until Medicare. Then make a best guess at Medicare for the years after that by looking at the cost of Medicare. For both of these scenarios, model in paying some or all of the deductible + costs for things not covered by insurance that might drive up costs anyway (e.g. you get arthritis that makes it less pleasant to cook so you order more food or something more serious) * probability of them happening in a given year * your risk tolerance. Determine your best guess plan for end of life care, noting that something as simple as mentally designating 10k invested as for end of life care today might allow it to grow to 160k when you're 90 and cover at least some of this in addition to your regular withdrawals and stache burn down.
3) What does social security estimate your benefit to be, if any? Now addressed above, and banking this for medical would pretty well cover that most likely =)
4) Your current expenses are 18k. Is 18k + health insurance your expected expense in retirement? Projected at 24k after retirement.

Updating, thanks for adding the info! At these numbers, as long as you're flexible/trust the numbers if we do have a downturn, you're in phenomenal shape. For me the only risks are if your expenses are inaccurate now or in the future. If you develop a caviar habit you can just go back to work, and if expenses go higher because of a sad thing in the next 10 years that's bad enough that you can't work, well, best retire ASAP and enjoy the time as well as you can then! You've earned it, and I think these numbers scream "retire whenever you want" =)

[chagan]

Congrats on your success, and a debt free living.

For an annual expense of just 18K ... you have a lot of assets as cash (almost 15 years worth expenses), any specific reason for that large an emergency stash? maybe you consider some TIPS like investments for some of that cash to protect your capital but at least beat inflation? or maybe some Vanguard ETFs?

You might even consider upping your "stock" pile, given how balanced your other assets are.

Have you shopped around to assess how much your health insurance costs would be post FIRE?

[erutio]

You're already there man.

Taking your invested balance of 1.03M, your expenses of $25k gives you a withdrawal rate of 2.3%.  That is a SWR that has never failed in history.

And that's not even taking into account your cash stash of $270k.  If you just lived off your cash and never touched the invested money, your invested stash will likely double before you run out of cash.

What you should do is take the next few months or even a year of work to prepare financially and mentally to retire.  But definitely don't work until 50. Those are years you'll never get back.  In retirement, live off the cash but withdraw just enough from your tax-advatnaged accounts to offset the standard deduction and pay no tax, or maybe fill up the %10 bracket. 

However you do it, I think over time you'll find yourself with a "runaway" stash.  Congratulations.

[zolotiyeruki]

^^^ This!  As far as health insurance goes, $25k/year income will qualify you for hefty subsidies, so you shouldn't end up paying very much.

[carl1111]

I do max out my IRA between regular and Roth.
Social Security at age 62 estimated at $1570, at age 67 would be $2300.
Health insurance would be $400 to $500 a month before subsidies.
I have been moving cash to regular mutual funds but I think I need to move more since the days of a decent interest rate on CD's are over.
Thanks for the replies.

[Retireatee1]

I threw together a Retireator simulation which is attached (Excel for Windows required).

There are some assumptions which you can review (I used Florida with no state tax).  If your expenses are really that low, you look to be in really good shape to FIRE at any time.  I did get a substantially lower projection of your Social Security benefits from what you predict, so you probably want to review that data carefully.

[Retireatee1]

I made a few changes and have version 2 attached.  I had to add another $1800 in monthly expenses and a Great Recession in 2022 just to get anything interesting to happen.  The retirement date calculated is now 8/14/2021.   With that retirement war chest you have and those low expenses, you have to work at it to come up short.

[jeroly]

I made a few changes and have version 2 attached.  I had to add another $1800 in monthly expenses and a Great Recession in 2022 just to get anything interesting to happen.  The retirement date calculated is now 8/14/2021.   With that retirement war chest you have and those low expenses, you have to work at it to come up short.

The one failing scenario I could envision (assuming you are correct in your projected retirement expenses ex-healthcare) is if the ACA is overturned AND you have pre-existing conditions that cause you to be uninsurable or insurable only at some crazy cost.
...and that's assuming you retired TODAY.  With another three years of savings and some investment returns, you should be hella fine at fifty.

[carl1111]

State income tax is 5%
Is there a way to calculate Social Security benefits if retiring early?
The numbers I used were from my SS statement but that assumes I work until retirement age.

[chagan]

there is, you can use the calculator and specify you will work for 0 years more, as if you are now retired (or specify how many more years you will be carrying at your current income levels)

[Retireatee1]

State income tax is 5%
Is there a way to calculate Social Security benefits if retiring early?
The numbers I used were from my SS statement but that assumes I work until retirement age.

You can enter any valid age under Primary Benefits Filing Age on the Main sheet that I provided if you have Excel for Windows or Excel Online (you didn't say).  You'll need to correct all the assumptions made obviously.

Or you can use the Case Study Spreadsheet if you need to use Google Sheets or Open Office.