Am I able to FIRE?

[capsfanoliek]

Hi – I wanted to get feedback on whether I can become work optional at this point in my life. My goal has been to retire before 60, but never knew if it was possible since my profession as a social worker has never paid the big bucks. :-) However, I am not one to spend a lot and have tried to invest as much as possible over the years.  The market has been very kind to my portfolio this year and it made me think…could I really step away from working at this time? I never considered stopping work at 52…but am seriously entertaining the idea. I know too many people who have waited to retire and unexpectedly passed away or become very ill shortly after retiring, and never got a chance to enjoy their retirement.

I have already talked to one CFP earlier this month and I am booked to speak with another CFP in August for a second opinion. However, given that this is such a major life decision, I’d welcome as much feedback as possible to make sure I am not missing anything and to make sure I am solid if I do choose to step away from working.

I am an almost 52 yo single female living outside Washington DC with no children or anyone dependent on me.  My parents are still alive and financially solid as are my siblings. My portfolio is really just for me and to ensure I have enough to last the rest of my lifetime (however long that may be). I do not need to factor in inheritance for anyone – quite frankly, everyone in my family is richer than I am! lol

I currently make $121,500/year (gross wages). There is a possible annual bonus of 10%+ in March, but I’m not counting on it since my company is not financially doing well.

Here is what I have in assets: ($1,996,500 not including the home equity or car)
Rollover IRAs $1,006,000 (invested in equities, ETFs, index funds)
Roth IRA $467K (invested in equities, ETFs, index funds)
Brokerage $359K (invested in equities, ETFs, index funds)
Money market fund/cash/CDs $106K
HSA $29K (invested in index funds)
Traditional 401K $12K (I just started at this job a year ago which is why my 401Ks have a low balance) (invested in index funds)
Roth 401K $17.5K (I just started at this job a year ago which is why my 401Ks have a low balance) (invested in index funds)
Home – worth $500K, $115K remaining mortgage (3.5% fixed rate, 9 years left on the mortgage but have considered paying it off early)
Car - purchased new 3 years ago, paid off

My only liabilities are:
my housing - $1800/mth for mortgage + $400/mth condo fee
credit cards - less than $1000/mth (averaging about $600/mth this year and $700/mth last year)
electric+ gas bill - averages $100/mth or less combined for both
cell phone bill - $75/mth
internet/tv/home phone - $227/mth
(health insurance through ACA if I were to stop working – currently covered by employer, but I am estimating $500/mth for this cost)
car insurance is already factored into the credit card amounts since I use my CC to pay for my car insurance premiums

In total I would need $50K annually for the liabilities above + adding in another $12k ($1/mth) buffer for unexpected expenses = roughly $62K per year.

My plan was to live off of my brokerage accounts and Roth contributions (if needed, but hoping to just stick with brokerage) until 59.5 to give my other accounts time to continue growing.

I am also planning to add more cash to my money market fund/cash/CDs bucket to take into consideration sequence of returns risk (plus to have funds to pay for taxes on roth conversions, capital gains tax, etc.) - I'm thinking of getting that bucket to about $150k?

Do you think I could step away from working at this time? Is there anything I am overlooking? Thanks for reading and I welcome your honest feedback!

[Republic DC-9]

I’m not FIRE’d yet, but plan on doing so with two adults and a paid off house when we hit $1.4M (not including the house) at age 50 - based on every sim I can find we’ll be fine with similar spend…so think you’ll be just fine at $2.0M.  Well done BTW!!!

The trickier questions that others on this site and elsewhere have asked me are “what will you retire TO” and “are you mentally ready to stop” etc. (I think I’ve answered those questions myself, but perhaps think of that too.

The things you mention about dying earlier than expected or falling ill and not getting to enjoy retirement have provided strong motivation for me to prepare to FIRE.

[lhamo]

I think financially you can totally do it -- in addition to tapping Roth contributions, you COULD always draw from trad retirement accounts through a 72t/SEPP option, or just pay the taxes and penalty if you had to. 

You might want to qualify for a HELOC while you are working just to give yourself an extra little cushion.  There are ways to qualify for loans while living off investments but it is definitely easier when you have steady income.

If you are willing/able to be flexible about when/how you realize your income from investments, and if your area has good health insurance options through ACA and/or expanded medicaid, you will probably find ways to keep your cost of insurance WAAAAY below $500/month.  I pay nothing because I take income irregularly and therefore qualify for Medicaid, which in the Seattle area offers excellent choices/quality of care. 

FWIW I am 55 (56 in November) and living off investments until 59.5.  I have about 1 mill in retirement accounts, .5 mill in non-retirement investments, and a house I paid 650k cash for (will probably be worth about 800k once I finish the renovations I want to do).  Since the market has been doing so well and I have renovations to fund, I'm cashing out quite a bit in LTCG from the investment accounts this year (around 30k so far) to build my cash stash, but will stay below the 0% tax threshold (I have a dependent who is a college student, so I can claim Head of Household - gives me about 60 to work with).  I also moved a big chunk of my Roth contributions into money market funds in order to shield those from market drops in case I do need to tap them -- maybe overly cautious, but my Inner Bag Lady went a bit whacko last year when the market was down so it is worth it to me to lose a bit on returns in order to keep her calm and happy.

[capsfanoliek]

I’m not FIRE’d yet, but plan on doing so with two adults and a paid off house when we hit $1.4M (not including the house) at age 50 - based on every sim I can find we’ll be fine with similar spend…so think you’ll be just fine at $2.0M.  Well done BTW!!!

The trickier questions that others on this site and elsewhere have asked me are “what will you retire TO” and “are you mentally ready to stop” etc. (I think I’ve answered those questions myself, but perhaps think of that too.

The things you mention about dying earlier than expected or falling ill and not getting to enjoy retirement have provided strong motivation for me to prepare to FIRE.

Thanks for the feedback, Republic DC-9!
Honestly - I had not even considered the idea of stepping away from work this early at 52 but when I saw how much my portfolio had increased these last 6 months (thank you Apple, Microsoft and Nvidia!) I realized that it could be a real possibility. One of the reasons I am entertaining this thought is my mom isn't well and if I were to pull back from working, I could provide more support to my dad. That is not to say I plan to become a full time caretaker, but would like to be available to give my dad a break when needed. I definitely have a bucket list of things I've wanted to do when retired, but my guess is the first 6 months of not working will be just mentally decompressing and detoxing from the stress of working. And after that 6 month period, then attempting to tackle some of the bucket list items. :-)

[capsfanoliek]

I think financially you can totally do it -- in addition to tapping Roth contributions, you COULD always draw from trad retirement accounts through a 72t/SEPP option, or just pay the taxes and penalty if you had to. 

You might want to qualify for a HELOC while you are working just to give yourself an extra little cushion.  There are ways to qualify for loans while living off investments but it is definitely easier when you have steady income.

If you are willing/able to be flexible about when/how you realize your income from investments, and if your area has good health insurance options through ACA and/or expanded medicaid, you will probably find ways to keep your cost of insurance WAAAAY below $500/month.  I pay nothing because I take income irregularly and therefore qualify for Medicaid, which in the Seattle area offers excellent choices/quality of care. 

FWIW I am 55 (56 in November) and living off investments until 59.5.  I have about 1 mill in retirement accounts, .5 mill in non-retirement investments, and a house I paid 650k cash for (will probably be worth about 800k once I finish the renovations I want to do).  Since the market has been doing so well and I have renovations to fund, I'm cashing out quite a bit in LTCG from the investment accounts this year (around 30k so far) to build my cash stash, but will stay below the 0% tax threshold (I have a dependent who is a college student, so I can claim Head of Household - gives me about 60 to work with).  I also moved a big chunk of my Roth contributions into money market funds in order to shield those from market drops in case I do need to tap them -- maybe overly cautious, but my Inner Bag Lady went a bit whacko last year when the market was down so it is worth it to me to lose a bit on returns in order to keep her calm and happy.

Hi lhamo!
Yes - my $500/mth estimate for ACA was just trying to use a higher amount for worst case scenario. My income really will come from Roth conversions which I plan to convert smaller amounts, so the ACA premiums should be significantly lower. I figured though it was better to aim high when reporting out potential retirement expenses - better to guess too high than to guess too low? :-)

I actually also sold off some Apple and Microsoft earlier this month to bulk up my cash stash (30K also on my part!).  I can appreciate being nervous about market drops because I know I am also like that...I have considered maybe selling off more of my Apple and Microsoft to pay off my mortgage since who knows what might happen after the election with the market. Sell off some while high and capture the gains in case the market becomes unstable later? Crossing fingers all will be well!

[MDM]

I am an almost 52 yo single female...
Here is what I have in assets: ($1,996,500 not including the home equity or car)

In total I would need $50K annually for the liabilities above + adding in another $12k ($1/mth) buffer for unexpected expenses = roughly $62K per year.

Do you think I could step away from working at this time?

$62K/$1997K = 3.1%.  Given that includes a mortgage payment that will end and meanwhile not increase with inflation, and that doesn't include eventual Social Security benefits, yes that's a safe withdrawal rate.

See Roth Conversion and Capital Gains On ACA Health Insurance when on ACA insurance.

[capsfanoliek]

I am an almost 52 yo single female...
Here is what I have in assets: ($1,996,500 not including the home equity or car)

In total I would need $50K annually for the liabilities above + adding in another $12k ($1/mth) buffer for unexpected expenses = roughly $62K per year.

Do you think I could step away from working at this time?

$62K/$1997K = 3.1%.  Given that includes a mortgage payment that will end and meanwhile not increase with inflation, and that doesn't include eventual Social Security benefits, yes that's a safe withdrawal rate.

See Roth Conversion and Capital Gains On ACA Health Insurance when on ACA insurance.

Thank you! I will be sure to review the article and the spreadsheet.

[subiegirl]

In my opinion you are definitely good to go! We are retiring this year with about $1.6m saved and $50k in expenses so close to the same WR but as @MDM mentioned, your expenses include a mortgage payment that will go away so you are even safer than us! Congrats!!

[Villanelle]

I’m not FIRE’d yet, but plan on doing so with two adults and a paid off house when we hit $1.4M (not including the house) at age 50 - based on every sim I can find we’ll be fine with similar spend…so think you’ll be just fine at $2.0M.  Well done BTW!!!

The trickier questions that others on this site and elsewhere have asked me are “what will you retire TO” and “are you mentally ready to stop” etc. (I think I’ve answered those questions myself, but perhaps think of that too.

The things you mention about dying earlier than expected or falling ill and not getting to enjoy retirement have provided strong motivation for me to prepare to FIRE.

Thanks for the feedback, Republic DC-9!
Honestly - I had not even considered the idea of stepping away from work this early at 52 but when I saw how much my portfolio had increased these last 6 months (thank you Apple, Microsoft and Nvidia!) I realized that it could be a real possibility. One of the reasons I am entertaining this thought is my mom isn't well and if I were to pull back from working, I could provide more support to my dad. That is not to say I plan to become a full time caretaker, but would like to be available to give my dad a break when needed. I definitely have a bucket list of things I've wanted to do when retired, but my guess is the first 6 months of not working will be just mentally decompressing and detoxing from the stress of working. And after that 6 month period, then attempting to tackle some of the bucket list items. :-)

It sounds like you hold significant amounts of individual stocks.  If you plan to retire and live off your portfolio, I'd strongly encourage you to diversify into something a bit more likely to be stable.  Sure, there's less potential upside, but you no longer need much upside/growth.

[capsfanoliek]

In my opinion you are definitely good to go! We are retiring this year with about $1.6m saved and $50k in expenses so close to the same WR but as @MDM mentioned, your expenses include a mortgage payment that will go away so you are even safer than us! Congrats!!

Thanks Subiegirl - best of luck to you as well!

[capsfanoliek]

I’m not FIRE’d yet, but plan on doing so with two adults and a paid off house when we hit $1.4M (not including the house) at age 50 - based on every sim I can find we’ll be fine with similar spend…so think you’ll be just fine at $2.0M.  Well done BTW!!!

The trickier questions that others on this site and elsewhere have asked me are “what will you retire TO” and “are you mentally ready to stop” etc. (I think I’ve answered those questions myself, but perhaps think of that too.

The things you mention about dying earlier than expected or falling ill and not getting to enjoy retirement have provided strong motivation for me to prepare to FIRE.

Thanks for the feedback, Republic DC-9!
Honestly - I had not even considered the idea of stepping away from work this early at 52 but when I saw how much my portfolio had increased these last 6 months (thank you Apple, Microsoft and Nvidia!) I realized that it could be a real possibility. One of the reasons I am entertaining this thought is my mom isn't well and if I were to pull back from working, I could provide more support to my dad. That is not to say I plan to become a full time caretaker, but would like to be available to give my dad a break when needed. I definitely have a bucket list of things I've wanted to do when retired, but my guess is the first 6 months of not working will be just mentally decompressing and detoxing from the stress of working. And after that 6 month period, then attempting to tackle some of the bucket list items. :-)

It sounds like you hold significant amounts of individual stocks.  If you plan to retire and live off your portfolio, I'd strongly encourage you to diversify into something a bit more likely to be stable.  Sure, there's less potential upside, but you no longer need much upside/growth.

I’m not FIRE’d yet, but plan on doing so with two adults and a paid off house when we hit $1.4M (not including the house) at age 50 - based on every sim I can find we’ll be fine with similar spend…so think you’ll be just fine at $2.0M.  Well done BTW!!!

The trickier questions that others on this site and elsewhere have asked me are “what will you retire TO” and “are you mentally ready to stop” etc. (I think I’ve answered those questions myself, but perhaps think of that too.

The things you mention about dying earlier than expected or falling ill and not getting to enjoy retirement have provided strong motivation for me to prepare to FIRE.

Thanks for the feedback, Republic DC-9!
Honestly - I had not even considered the idea of stepping away from work this early at 52 but when I saw how much my portfolio had increased these last 6 months (thank you Apple, Microsoft and Nvidia!) I realized that it could be a real possibility. One of the reasons I am entertaining this thought is my mom isn't well and if I were to pull back from working, I could provide more support to my dad. That is not to say I plan to become a full time caretaker, but would like to be available to give my dad a break when needed. I definitely have a bucket list of things I've wanted to do when retired, but my guess is the first 6 months of not working will be just mentally decompressing and detoxing from the stress of working. And after that 6 month period, then attempting to tackle some of the bucket list items. :-)

It sounds like you hold significant amounts of individual stocks.  If you plan to retire and live off your portfolio, I'd strongly encourage you to diversify into something a bit more likely to be stable.  Sure, there's less potential upside, but you no longer need much upside/growth.

Hi Villanelle - I agree with you. I actually am split between stocks only in some accounts and then other accounts are primarily index funds tracking S&P 500. I have already sold off my Apple and Microsoft in a couple of my accounts to reduce concentration risk but I plan to reduce down further. Thanks for the feedback!

[flyingaway]

What is your estimated amount of social security payments? Your current assets looks good, but if you have some good social security amounts in the future, that would be a nice buffer.

[capsfanoliek]

What is your estimated amount of social security payments? Your current assets looks good, but if you have some good social security amounts in the future, that would be a nice buffer.

Hi flyingaway - My plan for now is to wait until 70 to draw from SS. The estimate is that I would get about $3500/mth at that time. By that point I will have no mortgage so that could easily cover my monthly expenses, and then all of my other accounts (brokerage, roth, traditional) would be extra spending month.

[flyingaway]

What is your estimated amount of social security payments? Your current assets looks good, but if you have some good social security amounts in the future, that would be a nice buffer.

Hi flyingaway - My plan for now is to wait until 70 to draw from SS. The estimate is that I would get about $3500/mth at that time. By that point I will have no mortgage so that could easily cover my monthly expenses, and then all of my other accounts (brokerage, roth, traditional) would be extra spending month.

Looks like that you are in a good position to walk away. Hope you have good plans for your retirement.