Retire at 55?

[Thisisme]

Hello.  I am a 45-year old single woman looking to retire in 10 years. 

I know a friend and coworker lurks here, so if the term "525" makes you wince, or you can talk about shoelace render costs, please don't read any further =)

Current state:
Income - 142,000
15% per month put into 401K, plus employer match of up to 6%

Savings:
Employer 401K - 312,000
Former employer 401K (to be rolled over) - 188,000
Rollover IRA - 192,000
Emergency fund - 10,000
My savings will be added to by $1M in the near future, sadly, as I inherit money.  And by near I mean in weeks.
Total: $1.7M

Debt:
$202,000 left on a $256,000 mortgage, interest rate 3.75% (house is currently worth $400,000)
$52,000 HELOC at 5.5%

Net income:
$7050 per month, $84,600 annual

Monthly expenses:
Mortgage payment - $1600 (base of $1158 payment + a little extra to principle)
Property tax - 300
Homeowner's insurance - 80
Car insurance - 100

Cell - $100 (just got a new phone...I know, I know - that's a beating)
Internet - 90
Electricity - 45
Water - 50
Natural gas - 110

Groceries - 300
Gas - 50
Pet food - 75
Gifts - 200

Home maintenance - 500
Car maintenance - 50
Medical/Dental/Vision - 250
Pet care - 100

Theater - 25
Charitable - 100
College fund for niece + nephew - 400

Vacations - 850
Thanksgiving + Christmas travel - 100
Clothing/fun - 150
Hair - 100
Exercise - 50
Restaurants - 100

Loan payoff - 1250

I do zero based budgeting using YNAB, so the above #s swap around at times.  I'm trying to squeeze as much into loan payoff as possible, but would prefer not to take the extra principle payments off the mortgage; I know it's financially sensible, but paying off faster on the mortgage makes me happier.

Current plans:
1. When I inherit my brother + sister do as well, the same amount, so I am planning on dropping contributions to niece + nephew's college fund
2. That extra money goes towards paying off loan faster - hopefully squeezing to pay off in 3 to 3.5 years
3. The money that covers loan payoff goes towards paying off mortgage after loan is closed

Goal is to have a paid off house + no debt in 9 to 10 years, at which time I can retire.

In addition I expect to inherit another 750,000 to 1,000,000 at some point but I don't depend on that, because the person who I would inherit from is very healthy and I hope lives a very long time.

Given the above - how am I looking?

[Villanelle]

Over $10k in vacations seems like a lot, given your total budget, especially because Christmas travel is included in another line item in addition to that. 

But you are inheriting $1m in weeks.  So wouldn't the loans be entirely paid off at that point, since you want them gone?  And then at some point you are getting another $0.75m+?  If you feel confident about that amount--like iron-clad, then it seems to me like you are probably FIRE right now.  (I'm not going to spend the time to add up your expenses, but very rough math suggests that then ~~$2m you are going to inherit is enough, given that it equals about your current annual net take home (4% SWR=~80k/yr) before you even consider your 401k. 

So a 10 year timeline seems very, very conservative, unless I'm missing something. (Or you plan to increase expenses in retirement, which could be true given healthcare or other choices.)

That said, people here are generally very against counting on a future inheritance given the unknowns.  It sounds like the first one is pretty secure (and I'm sorry for the difficult time!). 

[jeroly]

You seem to have some areas that you could cut (car insurance, internet, phone, home maintenance) which would make you able to FIRE right now should you desire... ten years seems like overkill, but if you like your job no need to quit!

[feelingroovy]

First, I am sorry for your loss. This has to be a hard way to become FI. Because I think you are.

 I added up your expenses in my head, and rounded out of my own laziness.

I calculated that without the mortgage payment, loan payment, and niece/nephew contributions, your annual expenses are around $45k.

You have about $300k in debt. Whether you want to pay that off or leave the same amount invested, let's set that much out of the $1.7 mil aside. That leaves you with $1.4 mil. That's a conservative 3.2 percent withdrawal rate. And that doesn't count the other possible inheritance.

It might be a good idea to keep working if this is a hard time emotionally to make a big change in your life, while grieving. But you don't need the paycheck for 10 more years.

[soccerluvof4]

First, I am sorry for your loss. This has to be a hard way to become FI. Because I think you are.

 I added up your expenses in my head, and rounded out of my own laziness.

I calculated that without the mortgage payment, loan payment, and niece/nephew contributions, your annual expenses are around $45k.

You have about $300k in debt. Whether you want to pay that off or leave the same amount invested, let's set that much out of the $1.7 mil aside. That leaves you with $1.4 mil. That's a conservative 3.2 percent withdrawal rate. And that doesn't count the other possible inheritance.

It might be a good idea to keep working if this is a hard time emotionally to make a big change in your life, while grieving. But you don't need the paycheck for 10 more years.

I agree with @feelingroovy . Couple things you could save some money on and probably good to keep your mind on other things while going through you loss and stuff. Having said that I also agree that if your inheritance goes through etc.. then personally based on what your living on and if you add 20% to it 3-5 years you could easily be done if you want to pad it a little. (thats just rough math)

[mistymoney]

Condolences.

Standard advice is to do nothing for 6 months following a loss. Consider going that route.

[terran]

I think you can retire now, or at least much sooner than 10 years.

Let's say you pay off the mortgage and HELOC now with the inheritance. That will leave you with $1,448,000. At a 3.5% withdrawal rate, that would support $50,680 annually.

Adding up your expenses while omitting Mortgage payment (paid off), Medical/Dental/Vision (you'll need to get estimates for this based on location and countable income/expected subsidies), College fund for niece + nephew (tell siblings you're done and they can pay for the rest from inheritance), and Loan payoff (this was the house, right?) I get $43,140/year. As others have said, there's lots of places you could cut if you need/want to.

So, if you can get medical (including out of pocket expenses) and pay taxes (should be minimal) for $7,540 plus any spending cuts you're willing to make then you're good to go. Or save up a little longer if that feels too tight. Definitely, not 10 more years though.

[Thisisme]

Hi - I do want to thank y'all for your feedback.  TBH I never even considered that I could be financially ready to be retired now.  I know it doesn't look this way given the budget numbers I provided vs. the numbers others on this forum fight to get to, but I am very financially sensitive.  At the same time I don't want to work myself to death to hit a standard of feeling safe that might never exist. 

I did see a few folks mention job happiness.  Right now I am in a job that has its stresses - we've just come out of crunch time - and my role specifically has some elements that can be emotionally exhausting.  But it does have benefits - I WFH, I like the people I work with, we are creating something new and unique... 

I have been struggling emotionally recently with the idea of working another 10 years because it feels like a very long time.  So for now I might switch to tentatively planning for a few more years of working, but working from the model of "I have the freedom to say - I AM DONE".  In this timeframe I can really look into what my retirement looks like; what kind of volunteering or other work I can get involved with, what hobbies/projects I'd like to do, what kind of travel I'd really like to do...

[LifeHappens]

So for now I might switch to tentatively planning for a few more years of working, but working from the model of "I have the freedom to say - I AM DONE".  In this timeframe I can really look into what my retirement looks like; what kind of volunteering or other work I can get involved with, what hobbies/projects I'd like to do, what kind of travel I'd really like to do...

Around here we call that having FU Money. You have FU money in spades. If work ceases to add value (beyond money) to your life you can walk away at any time.

If you're really struggling to envision life beyond retirement or having a lot of anxiety around money in general, you may want to consider working with a life coach or even a therapist. Other members of this forum have done so and found it helpful.

[Villanelle]

Hi - I do want to thank y'all for your feedback.  TBH I never even considered that I could be financially ready to be retired now.  I know it doesn't look this way given the budget numbers I provided vs. the numbers others on this forum fight to get to, but I am very financially sensitive.  At the same time I don't want to work myself to death to hit a standard of feeling safe that might never exist. 

I did see a few folks mention job happiness.  Right now I am in a job that has its stresses - we've just come out of crunch time - and my role specifically has some elements that can be emotionally exhausting.  But it does have benefits - I WFH, I like the people I work with, we are creating something new and unique... 

I have been struggling emotionally recently with the idea of working another 10 years because it feels like a very long time.  So for now I might switch to tentatively planning for a few more years of working, but working from the model of "I have the freedom to say - I AM DONE".  In this timeframe I can really look into what my retirement looks like; what kind of volunteering or other work I can get involved with, what hobbies/projects I'd like to do, what kind of travel I'd really like to do...

I a big proponent of what some call "Barista FIRE" for people whose numbers look good but who can't bring themselves to quit earning money and start spending down the savings.  Perhaps you commit to yourself to work through one more busy season (so maybe 1.5 more years) or two more (so up to about 2.5 more years at the job).  And then you quit and ideally you can consult find some other way to stay part time in your area of expertise.  If not, get a job at the local library, or the nursery if you like gardening or the yarn store it that's your hobby.  Or sign up to be a substitute teacher if you qualify.  (IMO, that's probably the best post-FIRE gig out there because the schedule is so flexible.)  Or tutor kids or walk dogs.  Commit to yourself to bringing in maybe $10,000 a year.  It's not going to cover all expenses, but it cuts way back on what you have to draw down.  It's a gradual step into the FIRE waters, rather than a dive into the deep end, if you don't quite have the nerves to propel yourself off the high dive just yet.  You can still give yourself the gift of being free from that stress you mention.

[feelingroovy]

Another option is to try to negotiate a part time schedule at your current job. This doesn't work for every position, but if it did, it might free up some head space to figure out what is next.

[Goldielocks]

Your expenses, not including mortgage payments, loan and college fund are around $3900/mo.*

To retire -- you would need assets of $1.2 Million*, a paid off home, plus a strategy to fund market downturns in the first 5 years of retirement.  This means additional savings or a plan to cut vacations and other discretionary items, or even to sell the house if needed and downsize.   

Bonus -- you will be able to draw SS by age 70, which actually lowers the amount needed today to fund retirement.

Are you there?
Yep... NET ASSETS $1.4+ million with the inherited monies.

It's that simple.


* In today's dollars, expenses and invested amounts increase by the rate of inflation each year.

[MrThatsDifferent]

You’re fine and can pull the pin whenever. If it were me, I’d use the inheritance to pay of the mortgage and all debts then dump the rest in Vanguard and work 5 more years max. I’d use those 5 years to work on what to do with my life from 50 and above. Your money invest over that time will grow quite a bit. Subtract the mortgage, loan and niece/nephew expenses and your other expenses are quite reasonable. If you focus on channeling the next 5 years of income, you’d easily be able to cover expenses from 50-60. At 60 your investments now will be more than double, giving you far more than you need for the rest of your life. You’re fine.

[Thisisme]

Like other posts on this board I'm back to say I get to find out if I can retire now (possibly); I was laid off today.  I have emergency funds to cover the next couple months (plus some unknown amount of last paycheck/severance/PTO payout coming tomorrow).  I plan to take the next two months off - and decide what to do.

[Gremlin]

A layoff is never the greatest feeling emotionally, but it could ultimately be the best thing that ever happens to you.  Absolutely take a couple of months off.  Take your time and decide what to do next.  But good luck and congratulations on your freedom.  Keep us informed!

[MoneyizHere]

Like other posts on this board I'm back to say I get to find out if I can retire now (possibly); I was laid off today.  I have emergency funds to cover the next couple months (plus some unknown amount of last paycheck/severance/PTO payout coming tomorrow).  I plan to take the next two months off - and decide what to do.

Sorry to hear about the job loss.  Every trial is an opportunity.  You'll definitely be fine.  The bright side is that you won't have the stresses of that job anymore. You get to really evaluate and test drive if you really want to work another 10 years since its a long time.  In the next two months - start your volunteering and hobbies/projects.  Pay off the HELOC with the inheritance and slow on down. 


[/quote]I have been struggling emotionally recently with the idea of working another 10 years because it feels like a very long time.  So for now I might switch to tentatively planning for a few more years of working, but working from the model of "I have the freedom to say - I AM DONE".  In this timeframe I can really look into what my retirement looks like; what kind of volunteering or other work I can get involved with, what hobbies/projects I'd like to do, what kind of travel I'd really like to do...
[/quote]

[Magnolia]

I just wanted to send my best wishes for your sudden retirement. You sound in good shape financially. Just make sure you take some time for you. Death of a close family member, being let go from work and retirement are three big stressors in life's journey nad you have been hit with all three in a short space of time.

Also if you are planning some travelling in the future have a look a the workaway site. People offer accomodation and food in exchange for five hours of work a day. I have be wanting to do this at some stage. There are some great opportunities there.

[mistymoney]

Your expenses, not including mortgage payments, loan and college fund are around $3900/mo.*

To retire -- you would need assets of $1.2 Million*, a paid off home, plus a strategy to fund market downturns in the first 5 years of retirement.  This means additional savings or a plan to cut vacations and other discretionary items, or even to sell the house if needed and downsize.   

can you point me to some reading/postings on this?

[Goldielocks]

Your expenses, not including mortgage payments, loan and college fund are around $3900/mo.*

To retire -- you would need assets of $1.2 Million*, a paid off home, plus a strategy to fund market downturns in the first 5 years of retirement.  This means additional savings or a plan to cut vacations and other discretionary items, or even to sell the house if needed and downsize.   

There are two schools of thought.

Bucket method - Set up a "secure" bucket.
My preferred one is to move to CASH, Bonds, or GICs for the basic, minimum, expenses that you need to live on for the next 3-5 years (depending on comfort level).  Each year you spend, and move 1 years' worth into it.   If the markets are down, you stop drawing additional monies.

Alternatives -- set up a 10 year Bond Ladder, investigate Annuities -- this is to fund the BARE MINIMUM living style.

Second method -- "Quit like a Millionaire" suggest a "Yield Shield" - use REITs and high dividend paying ETFs to generate income for you so you don't sell shares when the markets are down in the first 5 years.  I am not sure I fully agree with this strategy, but it is a one to think about.


can you point me to some reading/postings on this?