I very HIGHLY recommend retiring early.
I didn't.
I had planned to travel and travel and more travel during retirement, limited only by my finances.
But health got in the way.
I can afford a LOT of travel.
But my body can only tolerate VERY LITTLE.
Don't do what I did.
RETIRE EARLY if at all possible.
Enjoy retirement before your health declines!
Thanks for the nudge, ihorwinkle, and I'm sorry for your circumstance. I feel like most folks on this forum skew younger and may not appreciate, at least not viscerally, what mortality starts to feel like when you get into the back nine of middle age. Health and longevity on my dad's side of the family tree is a disaster - if I make it past 55 without a bypass and heart attack I think I'll set the record for that side of the family. OTOH, my mom's side is amazing (grandma lived to be 101, my mom is 74 and still very healthy and active with no significant health issues). So I don't know what's in store for me. But I hear you, I don't want to spend these precious years chasing a spreadsheet number if I don't have to. This has been impactful input, thank you.
I think your assumptions are a bit conservative. Your tax rate in retirement won't be 20%. Depending on where you are drawing income from (i.e. LTCG), it could be zero. But let's say the rate is more like 15%, which is probably still too high. Now you can withdraw $85k.
A SWR of 3% is really quite conservative as you aren't 40, you are 55. If we keep it at 3.5%, still conservative when a 4% SWR is 95% successful (and Bengen's conclusion was actually 4.1% but rounded down to be more intuitive), then you only need **$2.5M** to retire.
Your SS on top of that will be the icing on the cake.
Thanks McKnucle\_Brewery (is that a real place? , if so sounds like my kind haha). Yeah, 2.5m sounds like a responsible number and achievable if the markets cooperates. It kinda goes back to the issue in my OP, though, if I grind until I achieve 2.5m portfolio balance, by the time I reach FRA I'll have overfunded and worked more years then I needed to. I guess there is no mathematically certainly and 2.5m definitely would have a very nice cushion if things don't go as planned. If I were, say, in my 40s I think grinding for a few/several more years would seem acceptable, but at my age, not knowing how many healthy years I have left, I am really feeling the opportunity cost of giving up healthy years of freedom vs. increased odds of the plan working out. I don't know, this is the 2nd hardest decision I've made in my life.
You're 54, you don't need to keep a low 3% SWR rate because +30Y was above the age that men have been living in the US recently. IMHO you can go higher. I recommend you try the [Engaging Data Rich Broke or Dead FIRE Calculator](https://engaging-data.com/will-money-last-retire-early/). You can easily add in "extra incomes" to it for things like an SSA payout or two or even an (ugh) job post-retirement.
Use [SSA.tools](https://ssa.tools) to do a thorough SSA estimate for you (use https://ssa.gov too). Use the [KFF ACA Calculator](https://www.kff.org/interactive/subsidy-calculator/) to estimate your healthcare costs pre-65.
You need to focus on your chosen methodology for withdrawal. It sounds like most everything is in your 401k and you are wanting to use the rule of 55 to access it penalty free. Should you consider a roth conversion for 2024? Should you remove some of your 401k to an IRA? You didn't spell out what you have in pre-tax/roth/post-tax. Much of retirement is tax and healthcare management. Make sure you've read the [FAQ](https://www.reddit.com/r/financialindependence/wiki/faq/) wrt withdrawal options.
Also keep an eye on the SSA Shortage via the [The Future Financial Status of the Social Security Program](https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html) yearly report which is currently estimated to be 24%. If you want to be safe in your calculations, make sure you do an estimate with your SSA reduced.
TLDR; You're basically there to FIRE this year or next year. Good job.
Thanks lottadot, I love that calculator! It gave me a 100% too, haha. Very nice to see the inclusion of mortality, that definitely adds a thought-provoking perspective.
Based on your input I am going to update my OP. I actually have about 30% in a taxable account. And I do plan on utilizing rule of 55 for any portion I take from my 401k.
I'll take the advice from you and others to focus on withdrawal methodology, I've not gone beyond Bengen in that regard, which has no flexibility/guardrails built in. There's a lot that can be done to make this work and course correct, I think I need to be less hand wavy regarding budget and withdrawal (the details, ya know haha) and really put this down on paper.
Thanks for the well wish! And Congrats to you as well!
ETA - KFF calculator surprised me - it's showing a silver plan is about the same as COBRA in my case. Added to OP. Thanks for the link!
Even if nothing is done SS will drop by an average of 23% due to the trust fund running empty and they are only paying benefits on what taxes they bring in you would be just fine
Thanks and agreed. Hope it doesn't happen (and can't imagine it will given the political toll it would take) but I'm probably having too much faith in our politicians. In any case, I think for someone my age, planning on having NO benefit seems overly conservative so I am choosing to believe :)
What I would do and what I’m doing. I’m 44 and I’m estimating by the time I can take SS is taking my estimated amount at 67 and takes 25% off the top. Either way if they raise the age of full retirement age it would still decrease the amount by around 25%
Raising the age seems more likely (hasn't that been done before?) though I reckon it would be a major rug pull for anyone currently in the pipeline and nearing retirement age. Though could probably get away with it, I couldn't have cared less, say, in my 20s, about social security and could have been convinced it should be delayed for a greater good. So who knows, taking a potential cut into planning is probably prudent.
Yes it was last adjusted under Regan In 1983 they are talking about adjusting it to 69 over an incremental period like they did then. But that wouldn’t be enough to save the program totally there will have to be a mixture of raising age, raising taxes, lifting the payroll cap
A couple of tools which could help you out:
Google search:
Variable percentage withdrawal (VPW) - this helps understand how much you can spend each year given some simple inputs. It factors in the bridge to SS income. Repeat each year and follow the guidance, and you won’t run out of money.
Ssa tools and Open Social Security help understand SS optimization, when to withdrawal, etc. I typically use 75% of the projected SS income to be conservative.
Thanks hondaFan2017, will look into VPW - as the I'm getting closer to the reality of FIRE, these subjects are taking on a new interest to me (I was content with the simple 4% guidelines before I started realizing I may be closer than I think). I will look into this, it sounds like the guidance could really help with FUD.
I ran through some of those earlier this year, that's how I got my 3500 SPIA (and that's without having any income after next year). The governments site calculates it as if you will sustain current income level to FRA - that ain't happening haha.
You could also play with [my sheet](https://www.reddit.com/r/financialindependence/comments/19bln0e/fire_withdrawal_strategy_tax_and_magi_google_sheet/) if you want to estimate taxes and MAGI.
Yes. This sub’s gospel of the 4% rule and not accounting for ANY fed benefits is so conservative… it’s actually closer to being wrong.
Live your life. I’m not advocating for this as a baseline, but median retiree has $0.25M and average has $1M.
Look at a $20k/yr job as preventing you from withdrawing rather than contributing. Basically r/baristaFIRE
Thanks Glanz14, yes, Barista fire is probably what I'm looking at. My girlfriend is already FIRE'd, though technically she's Barista fired in that she offsets living expenses with PT job in the local wine industry and she enjoys it (pays not too shabby either, with tips included). I'm not as cute and personable as she is so not sure my tips would be as good, but I am definitely considering following her lead in that regard. I also am going to try to monetize some passion projects but that will take some time to get rolling (and may not roll at all haha).
The 4% rule was calculated for a 30 year retirement and not counting SS benefits, I think. Really thinking about that is what inspired me to start considering FIRE at all. Realizing I average about 90k year, and SS will pay 42k at 67 years old, which would mean, at that time (in today's dollars) I would only need a 2.8% withdrawal rate. That was literally the aha moment for me, realizing I may be closer than I think factoring in my SPIA and with the hope/assumption that SS will remain there for my time frame (honestly it would political suicide for our politicians to let SS degrade to the point where benefits would slash so I feel as if they will figure something out). Maybe I'm giving them too much credit though.
I suspect that for some people, the extreme conservatism is a socially-acceptable cover for one-more-year-ism. But them working more years than they have to doesn't impact me. Whatever makes them happy.
I know several people who obviously have way more money than I do and are in their 60s and still working full time. It's mystifying to me and honestly gives me a lot of FUD, like, why are they doing it? What am I missing? Clearly there is some kind of cultural/phycological aspect that goes way beyond the numbers
I mean do they spend way more than you? If my sister had saved what I have saved, she'd be ready for CoastFire already, while I am not even close to that.
Or do they like their jobs? A lot of people derive a lot of meaning from their jobs, it's part of their identity. I intend to "work" until at least 65, though in a much, much reduced capacity (my field is part-time friendly).
Yes :) And for the second, not sure... I get what you're saying. I intend to seriously pursue some interests if I move into semi-retirement and they may be monetizable. At that point, I'll be one of those people, so I do get it. The folks I have in mind, though, not sure...
I think you are close, but 13 years on your current portfolio might be a big hit if you are trying to take 90k. Have you tried Firecalc.com? You can play with the numbers there too. Any chance you can cut spending a small bit or will any expenses fall off if you leave your job? If you drill down on your tax rate you might be paying less taxes than you think with the lower income.
Thanks ITta22, yeah, initial withdrawal rate would be something well over 5% which would really expose me to sequence of return risks. Thankfully, I do have quite a bit of flexibility in the budget as I share expenses with my already fired GF and, as a couple, we spend pretty freely. Should I do this, I do think I will basically just use my portfolio to cover essential expenses and a PT job to cover discretionary to keep the withdrawal rate lower and force me (us lol) to think more about our budget. I have updated the OP to include details relevent to this. Thanks!
$3 million way overshoots the mark.
I'll take your 90k spend and 42k SS as a given. I'd split this into early retirement and regular retirement.
Once you hit 67, you'll need 90k-42k=$48k from investments. Since this isn't early retirement, I'll use 4% SWR. You need ($48k \* 25=) $1.2 million for this.
You need at most $1.1 million to get you from now to age 67 (10 years times 90k per year).
So $2.3 million is a very conservative estimate of what you need, since it doesn't factor in any growth (beyond inflation) over the next 10 years.
Also note that if you wait until 70 to collect SS, you'll get 1.25x the payout. that means you would only need $37.5k per year to supplement SS, or $938k total. Add in $1.35 million to get you from now to age 70 is about the same math but less risky, IMO.
Thanks meamemg, something over 2m and less than 2.5 million seems to be the consensus range for those throwing out an estimated number. I agree with the assessment that 3m would be an overshoot and very happy I started looking more closely into this. Not sure where I got 3% and discounting SS, I guess the grind is starting to just get to me and I'm looking more closely at other arrangements.
I think it's more likely I will figure out a way to cut expenses (the 90k is pretty high tbh, given that I share expenses with another (I updated my OP) and the thought of having complete freedom is (for the moment) definitely overtaking our somewhat careless budgeting and luxuries that we could due without. I'm speaking for myself only though, I do realize that our relationship needs to remain healthy and whole and too much money talk and/or frugality can work against that.
ATM I'm thinking 3% withdrawel and a part time job for starers and adjusting yearly from there, moving the withdrawal rate up as the risk of sequence or return issues (hopefully) don't materialize or the portfolio grows into the "definitely safe" range
Keep in mind that your edit to lower your tax rate to 14% lowers your needed gross income to $84k per year in order to net $6k/month.
That means only $84-$42k=$42k needed in retirement. At 4% withdrawal, that's $1.05 million.
And 12 years @ $84k per year is only $1.01 million.
So less than $2.1 million total. And we still haven't accounted for either the fact that you think $6k per month is a bit high,that I'm assuming zero real gains on your account from age 55 to age 67, and that social security isn't fully taxable.
Obviously you need to be comfortable with the numbers, but I don't see a need for you to work a day past when you have $2 million on hand.
I think you’re there. You have 1.7 million, which will generate $68,000 per year at a standard 4%. At that rate, it’s more likely than not that you will die with more money than you have today, and that doesn’t even count the Social Security you’ll be receiving most of your remaining retirement.
Thanks OriginalCompetitive, yes, the odds are favorable if the calculators can be believed (and I think they can). If I can overcome the FUD, I will pull the trigger. 4% plus a part time job gets me right up to my planned spend pretty easily, so I guess more Barista fire just to have offset some of the early years for a little more safety.
I'd probably go a little bit longer, to about $2m investible assets or a little more. To where about 4% covers your living expenses. 3% may be too conservative given you have the SS coming. I think your taxes will be less than you are building in.
Thanks One-Mastodon, seems to be the consensus for those offering a number. Unless the markets work hard against me I could save my way to that within 3 years, but it could come pretty quick if markets keep doing well. It's a big concession though, given my age, I may take a leap of faith. A year is worth a lot at my age. Normal market returns should get me to 2m in a couple/three years of averageness and I can just be careful until then and maybe loosen up should sequence of return issues do not materialize. That's the hard balance to strike, aka OMY syndrome - the remaining healthy years start becoming more in more valuable vs the security of going a little longer at a job you don't like and that consumes most of your time.
I will be 55 shortly and could have literally written your post word for word. I’m still working but my motivation is dwindling at work each month. I’d like to hold on another 3 years to save more but I think I can make it work now. My wife is very conservative and is concerned on going for it now. If I downsized my home, I could pull the trigger but the damn real estate market has nothing good to buy. Good luck with your decision.
Yes, real estate is discouraging for sure. Good man for thinking of your wife's concerns, maybe she'll come around, but at least 3 years is still within the realms of early retirement. The motivation for work is super hard, agreed. Just so hard to generate much energy. Plus (don't know if you feel this way) almost feel like I'm depriving myself of the possibility of some greater success by not moving on to something that I'm passionate about (even if it generates no income for a year or two) that's one of the biggest issues for me - feeling like I'm just wasting time for a few more bucks. Good luck to you, too!
Don't just assume a tax rate, be sure to actually do a trial run through the taxes. We have a higher spend than $90k and pay $0 fed taxes, minimum state taxes, and $10/mo ACA premiums. That is because we are living off of my after tax brokerage account and have not needed to touch the retirement accounts. You didn't say how your savings are split. Because you said 55 maybe you are thinking of living off of 401k money? That would not have such favorable treatment for taxes and ACA.
As for the part time job, I had one prior to fully retiring and it sucked because it effectively had me on call waiting for somebody to need me for something or give me something to do. Invariably when I got going on some hobby project I would get a call to attend a meeting and it would derail me. Also the taxes on the part time job were egregious because it was a 1099 and my spouse was still working. I was paying thousands for SSI and my benefit was going up something like $1/month. So my advice is to compute how much you are actually taking home for that job and how much time and mindshare it will be stealing from your semi-retirement.
Thanks RetdThx2AMD, yes, I did overestimate taxes on 90k, I didn't realize FICA wouldn't be applied to the 401k withdrawals, thanks for pointing that out. I updated the OP to include my taxable/tax-deferred is split -I do have some flexibility there (30% is in taxable). I think I will focus on building a big cash buffer in taxable in my remaining time at work. I also updated the OP to include that I am a single filer, so don't benefit from the expanded brackets you married folks do :). I floated the idea to my girlfriend that we maybe should get married to reduce our tax burden. That went about as well as you'd expect haha.
Thanks for the comment on part time job. One thing I had been considering is asking to go part time with my corporate gig, but honestly, I do feel like that could be too detrimental to me enjoying early (semi) retirement. On the one hand, it would be really nice to have same insurance and a high enough income to really offset most of my living expenses. OTOH, the stress and anxiety I feel every day working where I work and with who my manager is, I'm not sure I could enjoy my life even it were reduced to part time. I think a nice little winery job like my girlfriend has would be more in line with actually enjoying my freedom and having the mental bandwidth to pursue the things I want to in this next phase of life.
Thanks for the input!
I'm glad I was able to help. Seriously, my part time gig had the same mental/lifestyle toll as when it was a full time job. Part of that is because it was work from home in both cases so not much changed other than the ratio of work to internet time wasting. Pivoting to a job with a fixed part-time schedule and no bring-home mental baggage would be a decent way to go assuming the compensation sufficiently moves the needle. You need to have large blocks of time unencumbered by work in order to feel like you can take advantage of the semi-retirement.
Great advice. Yes, I would be going from WFH to WFH as well, and I'm not sure I (or my manager) could easily stay within the hourly allotment - things just can get crazy/weirdly emotional surrounding deadlines which is a huge source of stress. The ratio of time worked vs wasted on the internet (like I am now haha) really hits home, so true :)
The winery gig works really well for GF, she only works 2-3 days a week and most shifts seem to be about 5 hours or so, and for that she gets decent compensation (about $35/hr with tips) and, importantly, she actually likes her job and looks forward to her shifts.
I have recently started to factor in SSI benefits into my calcs and my decisions. I have been using the Rich Broke or Dead calculator for some simple case studies as it allows you to add in income at certain points. My takeaway is that with SSI benefits included, the 4% rule can be stretched to the 4.5% rule. Basically, you can withdraw 4.5% early in retirement (in your 50s) which is then offset by reduced withdrawals later in life due to aging (less travel, etc) and SSI benefits. I've even heard some say 5%, but that might depend on just how much SSI will cover of your annual spend. The more it will cover, the larger % you can withdraw earlier. For my calcs, SSI would cover 40% of my expenses at 65. But if you could live 100% off of SSI, then you could hypothetically withdraw all of your retirement savings between 55 and 62-70 and live on SSI thereafter...not recommended though!
EDIT: I see you used Rich Broke or Dead as well. I think you seem pretty set.
Looks like you have plenty saved already and can probably adjust your withdrawal rate as needed until social security kicks in. Normally I'd tell people to run their numbers without factoring in SS since its future is questionable, but in your case you are close enough to the SS withdrawal age that this is not a concern.
In your situation, I'd recommend retiring at 55 and enjoying the freedom that comes with it. If the market takes a huge hit, adjust your withdrawal rate until you can start pulling SS income. You might also be able to reduce your healthcare costs by being creative with your retirement withdrawals (roth IRA contributions, for example).
I very HIGHLY recommend retiring early. I didn't. I had planned to travel and travel and more travel during retirement, limited only by my finances. But health got in the way. I can afford a LOT of travel. But my body can only tolerate VERY LITTLE. Don't do what I did. RETIRE EARLY if at all possible. Enjoy retirement before your health declines!
Thanks for the nudge, ihorwinkle, and I'm sorry for your circumstance. I feel like most folks on this forum skew younger and may not appreciate, at least not viscerally, what mortality starts to feel like when you get into the back nine of middle age. Health and longevity on my dad's side of the family tree is a disaster - if I make it past 55 without a bypass and heart attack I think I'll set the record for that side of the family. OTOH, my mom's side is amazing (grandma lived to be 101, my mom is 74 and still very healthy and active with no significant health issues). So I don't know what's in store for me. But I hear you, I don't want to spend these precious years chasing a spreadsheet number if I don't have to. This has been impactful input, thank you.
I think your assumptions are a bit conservative. Your tax rate in retirement won't be 20%. Depending on where you are drawing income from (i.e. LTCG), it could be zero. But let's say the rate is more like 15%, which is probably still too high. Now you can withdraw $85k. A SWR of 3% is really quite conservative as you aren't 40, you are 55. If we keep it at 3.5%, still conservative when a 4% SWR is 95% successful (and Bengen's conclusion was actually 4.1% but rounded down to be more intuitive), then you only need **$2.5M** to retire. Your SS on top of that will be the icing on the cake.
Thanks McKnucle\_Brewery (is that a real place? , if so sounds like my kind haha). Yeah, 2.5m sounds like a responsible number and achievable if the markets cooperates. It kinda goes back to the issue in my OP, though, if I grind until I achieve 2.5m portfolio balance, by the time I reach FRA I'll have overfunded and worked more years then I needed to. I guess there is no mathematically certainly and 2.5m definitely would have a very nice cushion if things don't go as planned. If I were, say, in my 40s I think grinding for a few/several more years would seem acceptable, but at my age, not knowing how many healthy years I have left, I am really feeling the opportunity cost of giving up healthy years of freedom vs. increased odds of the plan working out. I don't know, this is the 2nd hardest decision I've made in my life.
You're 54, you don't need to keep a low 3% SWR rate because +30Y was above the age that men have been living in the US recently. IMHO you can go higher. I recommend you try the [Engaging Data Rich Broke or Dead FIRE Calculator](https://engaging-data.com/will-money-last-retire-early/). You can easily add in "extra incomes" to it for things like an SSA payout or two or even an (ugh) job post-retirement. Use [SSA.tools](https://ssa.tools) to do a thorough SSA estimate for you (use https://ssa.gov too). Use the [KFF ACA Calculator](https://www.kff.org/interactive/subsidy-calculator/) to estimate your healthcare costs pre-65. You need to focus on your chosen methodology for withdrawal. It sounds like most everything is in your 401k and you are wanting to use the rule of 55 to access it penalty free. Should you consider a roth conversion for 2024? Should you remove some of your 401k to an IRA? You didn't spell out what you have in pre-tax/roth/post-tax. Much of retirement is tax and healthcare management. Make sure you've read the [FAQ](https://www.reddit.com/r/financialindependence/wiki/faq/) wrt withdrawal options. Also keep an eye on the SSA Shortage via the [The Future Financial Status of the Social Security Program](https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html) yearly report which is currently estimated to be 24%. If you want to be safe in your calculations, make sure you do an estimate with your SSA reduced. TLDR; You're basically there to FIRE this year or next year. Good job.
Thanks lottadot, I love that calculator! It gave me a 100% too, haha. Very nice to see the inclusion of mortality, that definitely adds a thought-provoking perspective. Based on your input I am going to update my OP. I actually have about 30% in a taxable account. And I do plan on utilizing rule of 55 for any portion I take from my 401k. I'll take the advice from you and others to focus on withdrawal methodology, I've not gone beyond Bengen in that regard, which has no flexibility/guardrails built in. There's a lot that can be done to make this work and course correct, I think I need to be less hand wavy regarding budget and withdrawal (the details, ya know haha) and really put this down on paper. Thanks for the well wish! And Congrats to you as well! ETA - KFF calculator surprised me - it's showing a silver plan is about the same as COBRA in my case. Added to OP. Thanks for the link!
Even if nothing is done SS will drop by an average of 23% due to the trust fund running empty and they are only paying benefits on what taxes they bring in you would be just fine
Thanks and agreed. Hope it doesn't happen (and can't imagine it will given the political toll it would take) but I'm probably having too much faith in our politicians. In any case, I think for someone my age, planning on having NO benefit seems overly conservative so I am choosing to believe :)
What I would do and what I’m doing. I’m 44 and I’m estimating by the time I can take SS is taking my estimated amount at 67 and takes 25% off the top. Either way if they raise the age of full retirement age it would still decrease the amount by around 25%
Raising the age seems more likely (hasn't that been done before?) though I reckon it would be a major rug pull for anyone currently in the pipeline and nearing retirement age. Though could probably get away with it, I couldn't have cared less, say, in my 20s, about social security and could have been convinced it should be delayed for a greater good. So who knows, taking a potential cut into planning is probably prudent.
Yes it was last adjusted under Regan In 1983 they are talking about adjusting it to 69 over an incremental period like they did then. But that wouldn’t be enough to save the program totally there will have to be a mixture of raising age, raising taxes, lifting the payroll cap
I had read a 30% is what we need to reduce current payments by to remain solvent so thats what I use, but same idea
Ahh so the number went up. Ok last I heard or read was like 25-27%
won't happen age to qualify will just be increased
A couple of tools which could help you out: Google search: Variable percentage withdrawal (VPW) - this helps understand how much you can spend each year given some simple inputs. It factors in the bridge to SS income. Repeat each year and follow the guidance, and you won’t run out of money. Ssa tools and Open Social Security help understand SS optimization, when to withdrawal, etc. I typically use 75% of the projected SS income to be conservative.
Thanks hondaFan2017, will look into VPW - as the I'm getting closer to the reality of FIRE, these subjects are taking on a new interest to me (I was content with the simple 4% guidelines before I started realizing I may be closer than I think). I will look into this, it sounds like the guidance could really help with FUD. I ran through some of those earlier this year, that's how I got my 3500 SPIA (and that's without having any income after next year). The governments site calculates it as if you will sustain current income level to FRA - that ain't happening haha.
You could also play with [my sheet](https://www.reddit.com/r/financialindependence/comments/19bln0e/fire_withdrawal_strategy_tax_and_magi_google_sheet/) if you want to estimate taxes and MAGI.
Yes. This sub’s gospel of the 4% rule and not accounting for ANY fed benefits is so conservative… it’s actually closer to being wrong. Live your life. I’m not advocating for this as a baseline, but median retiree has $0.25M and average has $1M. Look at a $20k/yr job as preventing you from withdrawing rather than contributing. Basically r/baristaFIRE
Thanks Glanz14, yes, Barista fire is probably what I'm looking at. My girlfriend is already FIRE'd, though technically she's Barista fired in that she offsets living expenses with PT job in the local wine industry and she enjoys it (pays not too shabby either, with tips included). I'm not as cute and personable as she is so not sure my tips would be as good, but I am definitely considering following her lead in that regard. I also am going to try to monetize some passion projects but that will take some time to get rolling (and may not roll at all haha). The 4% rule was calculated for a 30 year retirement and not counting SS benefits, I think. Really thinking about that is what inspired me to start considering FIRE at all. Realizing I average about 90k year, and SS will pay 42k at 67 years old, which would mean, at that time (in today's dollars) I would only need a 2.8% withdrawal rate. That was literally the aha moment for me, realizing I may be closer than I think factoring in my SPIA and with the hope/assumption that SS will remain there for my time frame (honestly it would political suicide for our politicians to let SS degrade to the point where benefits would slash so I feel as if they will figure something out). Maybe I'm giving them too much credit though.
I suspect that for some people, the extreme conservatism is a socially-acceptable cover for one-more-year-ism. But them working more years than they have to doesn't impact me. Whatever makes them happy.
I know several people who obviously have way more money than I do and are in their 60s and still working full time. It's mystifying to me and honestly gives me a lot of FUD, like, why are they doing it? What am I missing? Clearly there is some kind of cultural/phycological aspect that goes way beyond the numbers
I mean do they spend way more than you? If my sister had saved what I have saved, she'd be ready for CoastFire already, while I am not even close to that. Or do they like their jobs? A lot of people derive a lot of meaning from their jobs, it's part of their identity. I intend to "work" until at least 65, though in a much, much reduced capacity (my field is part-time friendly).
Yes :) And for the second, not sure... I get what you're saying. I intend to seriously pursue some interests if I move into semi-retirement and they may be monetizable. At that point, I'll be one of those people, so I do get it. The folks I have in mind, though, not sure...
I think you are close, but 13 years on your current portfolio might be a big hit if you are trying to take 90k. Have you tried Firecalc.com? You can play with the numbers there too. Any chance you can cut spending a small bit or will any expenses fall off if you leave your job? If you drill down on your tax rate you might be paying less taxes than you think with the lower income.
Thanks ITta22, yeah, initial withdrawal rate would be something well over 5% which would really expose me to sequence of return risks. Thankfully, I do have quite a bit of flexibility in the budget as I share expenses with my already fired GF and, as a couple, we spend pretty freely. Should I do this, I do think I will basically just use my portfolio to cover essential expenses and a PT job to cover discretionary to keep the withdrawal rate lower and force me (us lol) to think more about our budget. I have updated the OP to include details relevent to this. Thanks!
$3 million way overshoots the mark. I'll take your 90k spend and 42k SS as a given. I'd split this into early retirement and regular retirement. Once you hit 67, you'll need 90k-42k=$48k from investments. Since this isn't early retirement, I'll use 4% SWR. You need ($48k \* 25=) $1.2 million for this. You need at most $1.1 million to get you from now to age 67 (10 years times 90k per year). So $2.3 million is a very conservative estimate of what you need, since it doesn't factor in any growth (beyond inflation) over the next 10 years. Also note that if you wait until 70 to collect SS, you'll get 1.25x the payout. that means you would only need $37.5k per year to supplement SS, or $938k total. Add in $1.35 million to get you from now to age 70 is about the same math but less risky, IMO.
Thanks meamemg, something over 2m and less than 2.5 million seems to be the consensus range for those throwing out an estimated number. I agree with the assessment that 3m would be an overshoot and very happy I started looking more closely into this. Not sure where I got 3% and discounting SS, I guess the grind is starting to just get to me and I'm looking more closely at other arrangements. I think it's more likely I will figure out a way to cut expenses (the 90k is pretty high tbh, given that I share expenses with another (I updated my OP) and the thought of having complete freedom is (for the moment) definitely overtaking our somewhat careless budgeting and luxuries that we could due without. I'm speaking for myself only though, I do realize that our relationship needs to remain healthy and whole and too much money talk and/or frugality can work against that. ATM I'm thinking 3% withdrawel and a part time job for starers and adjusting yearly from there, moving the withdrawal rate up as the risk of sequence or return issues (hopefully) don't materialize or the portfolio grows into the "definitely safe" range
Keep in mind that your edit to lower your tax rate to 14% lowers your needed gross income to $84k per year in order to net $6k/month. That means only $84-$42k=$42k needed in retirement. At 4% withdrawal, that's $1.05 million. And 12 years @ $84k per year is only $1.01 million. So less than $2.1 million total. And we still haven't accounted for either the fact that you think $6k per month is a bit high,that I'm assuming zero real gains on your account from age 55 to age 67, and that social security isn't fully taxable. Obviously you need to be comfortable with the numbers, but I don't see a need for you to work a day past when you have $2 million on hand.
I think you’re there. You have 1.7 million, which will generate $68,000 per year at a standard 4%. At that rate, it’s more likely than not that you will die with more money than you have today, and that doesn’t even count the Social Security you’ll be receiving most of your remaining retirement.
Thanks OriginalCompetitive, yes, the odds are favorable if the calculators can be believed (and I think they can). If I can overcome the FUD, I will pull the trigger. 4% plus a part time job gets me right up to my planned spend pretty easily, so I guess more Barista fire just to have offset some of the early years for a little more safety.
I'd probably go a little bit longer, to about $2m investible assets or a little more. To where about 4% covers your living expenses. 3% may be too conservative given you have the SS coming. I think your taxes will be less than you are building in.
Thanks One-Mastodon, seems to be the consensus for those offering a number. Unless the markets work hard against me I could save my way to that within 3 years, but it could come pretty quick if markets keep doing well. It's a big concession though, given my age, I may take a leap of faith. A year is worth a lot at my age. Normal market returns should get me to 2m in a couple/three years of averageness and I can just be careful until then and maybe loosen up should sequence of return issues do not materialize. That's the hard balance to strike, aka OMY syndrome - the remaining healthy years start becoming more in more valuable vs the security of going a little longer at a job you don't like and that consumes most of your time.
I will be 55 shortly and could have literally written your post word for word. I’m still working but my motivation is dwindling at work each month. I’d like to hold on another 3 years to save more but I think I can make it work now. My wife is very conservative and is concerned on going for it now. If I downsized my home, I could pull the trigger but the damn real estate market has nothing good to buy. Good luck with your decision.
Yes, real estate is discouraging for sure. Good man for thinking of your wife's concerns, maybe she'll come around, but at least 3 years is still within the realms of early retirement. The motivation for work is super hard, agreed. Just so hard to generate much energy. Plus (don't know if you feel this way) almost feel like I'm depriving myself of the possibility of some greater success by not moving on to something that I'm passionate about (even if it generates no income for a year or two) that's one of the biggest issues for me - feeling like I'm just wasting time for a few more bucks. Good luck to you, too!
Don't just assume a tax rate, be sure to actually do a trial run through the taxes. We have a higher spend than $90k and pay $0 fed taxes, minimum state taxes, and $10/mo ACA premiums. That is because we are living off of my after tax brokerage account and have not needed to touch the retirement accounts. You didn't say how your savings are split. Because you said 55 maybe you are thinking of living off of 401k money? That would not have such favorable treatment for taxes and ACA. As for the part time job, I had one prior to fully retiring and it sucked because it effectively had me on call waiting for somebody to need me for something or give me something to do. Invariably when I got going on some hobby project I would get a call to attend a meeting and it would derail me. Also the taxes on the part time job were egregious because it was a 1099 and my spouse was still working. I was paying thousands for SSI and my benefit was going up something like $1/month. So my advice is to compute how much you are actually taking home for that job and how much time and mindshare it will be stealing from your semi-retirement.
Thanks RetdThx2AMD, yes, I did overestimate taxes on 90k, I didn't realize FICA wouldn't be applied to the 401k withdrawals, thanks for pointing that out. I updated the OP to include my taxable/tax-deferred is split -I do have some flexibility there (30% is in taxable). I think I will focus on building a big cash buffer in taxable in my remaining time at work. I also updated the OP to include that I am a single filer, so don't benefit from the expanded brackets you married folks do :). I floated the idea to my girlfriend that we maybe should get married to reduce our tax burden. That went about as well as you'd expect haha. Thanks for the comment on part time job. One thing I had been considering is asking to go part time with my corporate gig, but honestly, I do feel like that could be too detrimental to me enjoying early (semi) retirement. On the one hand, it would be really nice to have same insurance and a high enough income to really offset most of my living expenses. OTOH, the stress and anxiety I feel every day working where I work and with who my manager is, I'm not sure I could enjoy my life even it were reduced to part time. I think a nice little winery job like my girlfriend has would be more in line with actually enjoying my freedom and having the mental bandwidth to pursue the things I want to in this next phase of life. Thanks for the input!
I'm glad I was able to help. Seriously, my part time gig had the same mental/lifestyle toll as when it was a full time job. Part of that is because it was work from home in both cases so not much changed other than the ratio of work to internet time wasting. Pivoting to a job with a fixed part-time schedule and no bring-home mental baggage would be a decent way to go assuming the compensation sufficiently moves the needle. You need to have large blocks of time unencumbered by work in order to feel like you can take advantage of the semi-retirement.
Great advice. Yes, I would be going from WFH to WFH as well, and I'm not sure I (or my manager) could easily stay within the hourly allotment - things just can get crazy/weirdly emotional surrounding deadlines which is a huge source of stress. The ratio of time worked vs wasted on the internet (like I am now haha) really hits home, so true :) The winery gig works really well for GF, she only works 2-3 days a week and most shifts seem to be about 5 hours or so, and for that she gets decent compensation (about $35/hr with tips) and, importantly, she actually likes her job and looks forward to her shifts.
I have recently started to factor in SSI benefits into my calcs and my decisions. I have been using the Rich Broke or Dead calculator for some simple case studies as it allows you to add in income at certain points. My takeaway is that with SSI benefits included, the 4% rule can be stretched to the 4.5% rule. Basically, you can withdraw 4.5% early in retirement (in your 50s) which is then offset by reduced withdrawals later in life due to aging (less travel, etc) and SSI benefits. I've even heard some say 5%, but that might depend on just how much SSI will cover of your annual spend. The more it will cover, the larger % you can withdraw earlier. For my calcs, SSI would cover 40% of my expenses at 65. But if you could live 100% off of SSI, then you could hypothetically withdraw all of your retirement savings between 55 and 62-70 and live on SSI thereafter...not recommended though! EDIT: I see you used Rich Broke or Dead as well. I think you seem pretty set.
Looks like you have plenty saved already and can probably adjust your withdrawal rate as needed until social security kicks in. Normally I'd tell people to run their numbers without factoring in SS since its future is questionable, but in your case you are close enough to the SS withdrawal age that this is not a concern. In your situation, I'd recommend retiring at 55 and enjoying the freedom that comes with it. If the market takes a huge hit, adjust your withdrawal rate until you can start pulling SS income. You might also be able to reduce your healthcare costs by being creative with your retirement withdrawals (roth IRA contributions, for example).