Author Topic: I think I can retire, right?  (Read 909 times)

RH

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I think I can retire, right?
« on: January 11, 2022, 01:49:57 PM »
Pretty sure I can pull the trigger this year and retire. Guess I am just looking for a 'YES!' from the MMM community. Age 45 year, husband and wife no kids.

401K - $800K
Roth - $80K
Cash - $350K (I know...having a hard time pulling the trigger to invest this all at once. I should put most of it in VTI, etc...)
Taxable - $100K
House value - $650K

We have no debt (including the house). Annual expenses would be $40K. Plan on getting healthcare thru ACA. Would just take 40K out per year from Cash/taxable (increased for inflation each year).

Figured this article spells out everything I need to know:

https://www.mrmoneymustache.com/2018/11/29/how-to-retire-forever-on-a-fixed-chunk-of-money/


Watchmaker

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Re: I think I can retire, right?
« Reply #1 on: January 11, 2022, 02:01:53 PM »
Are you including those healthcare expenses in the $40k? And how confident are you in that number? Have you tracked your actual spending? Does it include occasion large expenses like a new roof?

If I were you, I'd do something about that cash. Right now it's losing value significantly with inflation. How is the rest of your money invested?


RH

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Re: I think I can retire, right?
« Reply #2 on: January 11, 2022, 02:32:42 PM »
No, it doesn't include any surprise healthcare expenses. We've been budgeting that number for a few years now and are happy to make lower lifestyle adjustments if needed or get the occassional part time gig that brings in $5-$10K /yr. Just got a roof and our car is 4 years old.

Rest of money invested 80% VTSAX, 15% VTI, 5% bonds.

If I plan on using up all the cash in 10 years, I guess I have a hard time investing it (please face punch me). Once the cash and taxable is gone, maybe there would be 5ish years where we withdraw from the 401K/Roth and pay the 10% penalty. We live in a state with no income tax and what $ we withdraw would mean pretty low federal taxes. Even if we did all these early withdrawls for 5 years, the 401k would be worth $2.2M at age 59.5 and that would easily support an annual withdrawl of approx $57K ($40K in 15 years @ 2.5% inflation).




Watchmaker

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Re: I think I can retire, right?
« Reply #3 on: January 11, 2022, 02:41:40 PM »
No, it doesn't include any surprise healthcare expenses. We've been budgeting that number for a few years now and are happy to make lower lifestyle adjustments if needed or get the occassional part time gig that brings in $5-$10K /yr. Just got a roof and our car is 4 years old.

I'm not referring to surprise healthcare expenses, but just regular expected healthcare expenses, which may be higher in your retirement. That said, if you're happy to work here and there or lower your spending to cover surprise expenses, that flexibility removes a lot of the risk.

If I plan on using up all the cash in 10 years, I guess I have a hard time investing it (please face punch me).

I can understand not necessarily wanting to put the money into stocks, but bonds, or even TIPS or IBonds would protect the value of the money better than cash.

Once the cash and taxable is gone, maybe there would be 5ish years where we withdraw from the 401K/Roth and pay the 10% penalty.

Are you familiar with Roth conversion ladders? You could transfer the 401k money to your Roth slowly, avoiding the 10% fee.

Even if we did all these early withdrawls for 5 years, the 401k would be worth $2.2M

It's easy to slip into using that kind of language, but I find it helpful to remind myself it only might be worth that much.

Edited to adjust inadvertently snarky tone.
« Last Edit: January 11, 2022, 07:27:51 PM by Watchmaker »

frugal_c

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Re: I think I can retire, right?
« Reply #4 on: January 11, 2022, 05:12:15 PM »
Go for it.
 
You have lots of safeties:
Part Time jobs as you said
Reduce expenses for a few years
You could rent part of your house out
Home equity, you could downgrade and access a swath of it.
Social security at 67?

zolotiyeruki

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Re: I think I can retire, right?
« Reply #5 on: January 12, 2022, 12:41:27 PM »
Here's your "YES":  Expenses: $40k.  25x expenses: $1MM.  Actual savings: $1.3MM.   

And it's even better than you think.  Watchmaker mentioned the Roth Conversion Ladder, and they're 100% right.  You are set up perfectly to take advantage of it.  It will allow you to access your 401k balance with no penalty whatsoever

Jack0Life

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Re: I think I can retire, right?
« Reply #6 on: January 13, 2022, 11:39:17 PM »
Yeah some of these guys know about the Roth conversion better than me but if you're drawing from your "cash" for your expenses, you have ZERO income to report. Shame to waste that.
Also that $380k should be sitting somewhere earning you money. At worst start putting $20k into i-bonds every year.

getmoneyeatpizza

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Re: I think I can retire, right?
« Reply #7 on: January 14, 2022, 05:33:42 PM »
Agree, you're good to go.

Aside from emergency fund, invest as much of that cash as you will let yourself. Figure out your hold ups, maybe agree to invest some if the market is down for the day, whatever. I agree with other put at least 20k of that cash in I bonds. You should have done 20k in Dec 2021 too.