Case Study: Unexpectedly Fire'd a few years early

[honigvod]

Greetings all! I am still fairly new here and getting settled in but circumstances conspired against me and I only have a few months left at work before I retire a few years earlier than planned. I would appreciate any other eyes on my plan to make sure I am not too crazy. 

Life Situation: Single, 45 years old, no kids or pets, midwest USA (low cost of living)

Gross Salary/Wages: 140k going to zero in the near future. However, I recently got VA pension of 13k/year which also covers all healthcare and might increase in the future.

Individual amounts of each Pre-tax deductions: In the past 15 years I built up to the point that last year I was saving 23k + match to 401k, 7k Roth IRA, 20k in bonds, 30k in taxable index fund. Total savings rate over 60% of gross or 75% of net. 

Other Ordinary Income: None planned. I will do unemployment in the spring while searching to see if another job works for me but this might be it. Social Security is projected to be 20k/year at 62 and 36k/year at 70 in today's dollars if I never work again. Yes, I trust it to be there.

Current liquid-ish holdings projected by my last paycheck based on the current amount is 750k:
120k in VTSAX
120k in bonds (I/EE mix)
160k in Roth IRA (2050 target date)
330k in Traditional 401k (2045 target date)
20k in cash (hysa/bank)

Assets: Home worth roughly 130k. Small old house works for one person, completely paid off with low maintenance. Car also paid off, only a few years old, and fuel efficient.

Taxes: I was in the 22% federal bracket and will likely be in the 0 to 10% bracket here on out. State taxes are a thing but on the lower end.

Current expenses rounded off to whole thousands and lumped categories for easy numbers. I have more detailed tracking but not worth putting it all down:
6k/year: Home taxes/insurance/utilities
6k/year: Personal spend such as food/drink/supplements/toiletries/clothes
3k/year: Car insurance/registration/gas/maint, including some in reserve in case of emergencies
3k/year: Phone and internet, including paying for both my parents' lines
3k/year: Gym and fitness, including some races and new clothes and shoes now and then
3k/year: Subscriptions and hobbies, including online streaming, music, gaming, etc
3k/year: Travel plus misc
3k/year: Emergency fund, mostly for any home maintenance that gets saved for big purchases if it isn't used.

Total yearly spend of above is roughly 30k a year and has been fairly steady for the past few years adjusted for inflation. This year I emptied my emergency fund getting a new roof/gutters/downspots and am letting it build up again.

Debt/Liabilities: 0

Based on the 4% rule, I can do 30k a year purely on investments which I will start in early 2026. I will use my last few months of pay plus cash savings and small pension to cover 2025. I have no plan on leaving any money behind so all I care about is surviving until 70 when SS kicks in. I *may* go back to work part time or seasonally if I get bored or want extra fun money but my planned amount (below) is already well above my current spend. 

Specific Question(s): Roth conversion ladder is technically possible but I don't want to erase my brokerage early if I can help it and would prefer the SEPP/72t. Does anyone have experience with it? Any major problems with my below plan?

My math starting in the beginning of 2026 at 45k/year in today's dollars maximum withdrawal:
13k/year: VA medical pension, inflation adjusted. Completely non-taxable.
6k/year: Bond withdrawal, inflation adjusted, very little federal taxes
6k/year: Brokerage withdrawal, inflation adjusted, only a little state taxes
20k/year: SEPP from tIRA once rolled over, NOT inflation adjusted until 60 because of how it works. My goal is to burn down tIRA from 46-70 to fill up the standard deduction (and a little 10%) for federal taxes and have nothing left by 70 so there are no RMDs and no 'income' once I take SS.
Roth IRA: gap filler and taking over for tIRA if it runs out in my 60s and to supplement as needed in later life

There is a little time for me to play with the numbers and ideas.
Thanks for reading my mess! Hope to have fun chatting.

-H

[mistymoney]

any severance?

can you get umemployment?

[jeroly]

Big picture: you have $750k excluding your home equity.  You are proposing withdrawing $32k/yr.  That's slightly above 4% of your starting assets and for a 45-year-old a bit of a higher risk withdrawal approach.

If you manage to stick around for another six months ($42k extra savings) and the markets do okay (say another 5%) then you'd be at around $820k.  A 3.5% WR on that is $29k.  I'd say that you'd likely be fine spending that plus your VA pension, especially if SS is still there after the fascists get through with it.

[honigvod]

any severance?

can you get umemployment?

Due to the way my contract is written, there is a 99% chance of no severance because I lost my job mostly due to a lapsed qualification I can’t get back for reasons I won’t get into. I still have to ask one last person but I don’t expect it. In lieu of that they are basically letting me ‘work’ a month longer than I would have otherwise and will also cash out my PTO.

However, because I am not ‘quitting’ but being ‘let go’, it opens up unemployment as a way to smooth things out for next year. Which will end up being more than severance would have been if I run the whole course of it. It works well enough and I might find something else to do for a while, who knows.

[honigvod]

Big picture: you have $750k excluding your home equity.  You are proposing withdrawing $32k/yr.  That's slightly above 4% of your starting assets and for a 45-year-old a bit of a higher risk withdrawal approach.

If you manage to stick around for another six months ($42k extra savings) and the markets do okay (say another 5%) then you'd be at around $820k.  A 3.5% WR on that is $29k.  I'd say that you'd likely be fine spending that plus your VA pension, especially if SS is still there after the fascists get through with it.

True enough. I modeled 45k/year because I will be pulling from it at age 46-70 and that is all I expect it to last. FiCalc and a few others I forget off the top of my head are set to 100% or very close based historical and Monte Carlo for that timeline. If I expect SS at 70, even at a reduced rate because of the crazies, should be a similar amount after when pension is added.

The 4% rule was modeled at a 95ish percent success for a 30 year timeline. So for my 24 years I don’t expect a problems with being slightly above that. Also, with my spend currently being about 30k/year I expect I won’t go above 40k/year even with some splurges here and there. I just wanted to see what the high end was just in case.

Thanks for taking a look! If I get nervous or bored I will being some part time stuff in the near future. Just not in a hurry if my numbers are good is all. :)

[Laura33]

You are fine.  You're spending $30K/yr.  Your $750K would cover almost all of that by itself, forever (with a caveat for possible state taxes) -- and you have $13K in a pension now, and SS upcoming in another 25 years.

I'd tell you you were ok even if you didn't have the pension, based just on your track record (which gives me confidence that you can maintain your historic spending levels).  But that pension + medical insurance makes it a no-brainer.

[Malum Prohibitum]

Social Security is projected to be 20k/year at 62 and 36k/year at 70 in today's dollars if I never work again. Yes, I trust it to be there.

What tool did you use to declare this so confidently?

If you stop working at age 45, the projected amount at 62 and at 70 will drop each year that you have a $0 income.  Did you use some sort of calculator that factored in your $0 income years after 45 until you begin drawing social security?

[Malum Prohibitum]

especially if SS is still there after the fascists get through with it.

Fascism introduced robust social welfare programs in states where it took hold, e.g., Italy, which makes sense given their socialist roots.  What an ironic post you made, even if the rest of us are to believe that we actually have some danger of "fascists" here in the US in 2024 and beyond.

[MDM]

Social Security is projected to be 20k/year at 62 and 36k/year at 70 in today's dollars if I never work again. Yes, I trust it to be there.

What tool did you use to declare this so confidently?

If you stop working at age 45, the projected amount at 62 and at 70 will drop each year that you have a $0 income.  Did you use some sort of calculator that factored in your $0 income years after 45 until you begin drawing social security?

Don't know about the absolute numbers but the ratio between the age 62 and age 70 numbers looks correct, based on the SocialSecurity tab in the Case Study Spreadsheet.

[merula]

Social Security is projected to be 20k/year at 62 and 36k/year at 70 in today's dollars if I never work again. Yes, I trust it to be there.

What tool did you use to declare this so confidently?

If you stop working at age 45, the projected amount at 62 and at 70 will drop each year that you have a $0 income.  Did you use some sort of calculator that factored in your $0 income years after 45 until you begin drawing social security?

Likely https://www.ssa.gov/OACT/anypia/index.html. You can even enter specific earnings for specific years to calculate the impact of not working in certain years.

It's not strictly true that your SS benefits will drop for each year you have $0 income. The method is the 35 highest-earning years; if we assume OP started working at 20, they have 25 working years, and so 10 years of early retirement would be counted as zero for indexing purposes and would drop their benefit slightly (about $600 using $160k as a final working salary, which also roughly matches up with the projections given), but after that there wouldn't be any penalty.

[honigvod]

Social Security is projected to be 20k/year at 62 and 36k/year at 70 in today's dollars if I never work again. Yes, I trust it to be there.

What tool did you use to declare this so confidently?

If you stop working at age 45, the projected amount at 62 and at 70 will drop each year that you have a $0 income.  Did you use some sort of calculator that factored in your $0 income years after 45 until you begin drawing social security?

SSA.GOV, the actual social security website with an account, and all further income set to $0 dollars.

https://ssa.tools/ Does the same thing without making an account with ssa.gov and the numbers are near identical.

I have 30 years of work, 31 counting my last month and PTO payout/possible unemployment next year so it might be slightly higher but not by much. SS are inflation adjusted even if their calculations aren’t perfect so all of my numbers are in today’s dollars.

My first few years are crap so I would have preferred a full 35 years of income to get me closer to the second ‘bend point’ but it didn’t work out at my current job. I do think I will end up working a few more years in the near-ish future so I’m not worried a out it as even a little more will clear out years of 0 and inch up the amount a little.

[honigvod]

especially if SS is still there after the fascists get through with it.

Fascism introduced robust social welfare programs in states where it took hold, e.g., Italy, which makes sense given their socialist roots.  What an ironic post you made, even if the rest of us are to believe that we actually have some danger of "fascists" here in the US in 2024 and beyond.

Something-something about a broken clock. :)

And yeah part of the reason I didn’t want to keep working where I was much longer anyway.

[honigvod]

You are fine.  You're spending $30K/yr.  Your $750K would cover almost all of that by itself, forever (with a caveat for possible state taxes) -- and you have $13K in a pension now, and SS upcoming in another 25 years.

I'd tell you you were ok even if you didn't have the pension, based just on your track record (which gives me confidence that you can maintain your historic spending levels).  But that pension + medical insurance makes it a no-brainer.

Thank you for the confidence boost! I hit my number, or close to it, right about the time all this went down and the the pension/healthcare got tacked on so I said ‘why not’. The only thing is those current spending levels don’t include things like getting a new car payment or increased travel, but I will be below 45/year even with the high end of those two added in. It’s just a scary new frontier is all.

[merula]

I have 30 years of work, 31 counting my last month and PTO payout/possible unemployment next year so it might be slightly higher but not by much. SS are inflation adjusted even if their calculations aren’t perfect so all of my numbers are in today’s dollars.

My first few years are crap so I would have preferred a full 35 years of income to get me closer to the second ‘bend point’ but it didn’t work out at my current job. I do think I will end up working a few more years in the near-ish future so I’m not worried a out it as even a little more will clear out years of 0 and inch up the amount a little.

I think that makes sense. Also, if we assume the gap is something like $250/month given that you're only missing ~4 years of the max (I'm not going back to play around with the numbers), that's the equivalent of around $75k present value, which is tiny in the grand scheme of what FIRE folks will forgo in order to retire early.