Can I retire?

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up-n-aTm
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7:35a, 6/26/23
AG
Here's my situation:
58 year old couple, just sold our business. Have $1.3 million in cash and $1.1 million in a 2030 target fund. Only debt is a $130,000 home equity loan at 2.3% interest. SS at age 67 will be about $7k per month, if it's still available. Kids are thru school so the only future major expenses are unplanned at this time.

Can I retire? What should I do to maximize income off of the existing assets? Really don't want to work any longer but worried about out living our money.

Thanks!
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Petrino1
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7:48a, 6/26/23
4% of $2.4MM is $96k/year. Is $96k/year more or less than your current annual living expenses (including insurance)? If its more, then you can retire. If not, then keep working.
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dlp3719
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8:15a, 6/26/23
AG
Pay your taxes (or not counting that in your funds) from the sale? Congrats on the sale. You'll probably owe $200-300k in long term cap gains.
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htxag09
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In reply to Petrino1 • 8:39a, 6/26/23
AG
ea1060 said:
4% of $2.4MM is $96k/year. Is $96k/year more or less than your current annual living expenses (including insurance)? If its more, then you can retire. If not, then keep working.

Personally, I'd say 4% is a little aggressive to retire at 58. An advisor did a pretty good illustration/model in another thread about correlating percentages to age of retirement.
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BDJ_AG
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8:46a, 6/26/23
AG
https://firecalc.com/

you can plug in your own numbers and assumptions...
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OasisMan
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In reply to Petrino1 • 8:55a, 6/26/23
AG
ea1060 said:
4% of $2.4MM is $96k/year. Is $96k/year more or less than your current annual living expenses (including insurance)? If its more, then you can retire. If not, then keep working.
Wonder if the 1.1 is touchable without penalties
Wonder if he would want to invest the 1.3-2.4 w/ goals of RoR >4%, or just say no investing and we have 25yrs of 96k/yr (tho at 67 he theoretically adds on 84k/yr)
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up-n-aTm
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9:34a, 6/26/23
AG
Thanks for the replies.

I do owe taxes on the funds from the sell, so that's going to leave a mark.

I question whether the 4% rule is safe for age 58 retirement. I'm mostly concerned with inflation. We could make $96k per year work currently, but that may not apply in 20 years. I expect expenses to decrease, but the 4% plan relies on a decent return on investments as well as stable annual spending.
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BenTheGoodAg
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In reply to up-n-aTm • 9:56a, 6/26/23
AG
up-n-aTm said:
I question whether the 4% rule is safe for age 58 retirement. I'm mostly concerned with inflation. We could make $96k per year work currently, but that may not apply in 20 years.
The 4% rule is supposed to account for inflation, especially from a macro-view. If you're taking out 4% and the market makes 8%, then your account grows 4%, allowing for inflation. Next year you can take out $100k, then $104k the next, and so on. In 20 years, you could take $210k.

Average annual inflation 1960-2022: 3.8% per year
Average S&P 500 return, 1960-2022: 10.02% per year

Based on these numbers, you could have lived off of 6.22% per year, so 4% is supposed to be conservative. There's plenty of details you can pick at, but that's the theory anyway. A little skepticism isn't a bad thing for a decision like this.
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htxag09
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In reply to BenTheGoodAg • 10:01a, 6/26/23
AG
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
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htxag09
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10:08a, 6/26/23
AG
This is a thread that discussed it recently:

TexAgs - Retirement Number

And here's Ranger Rick's post:

Quote:
Just to add a bit of quantification.

I ran our numbers through FIRECalc (https://firecalc.com/) at various durations:

  • 20 year retirement: 100% success rate
  • 30 year retirement: 95.1% success rate
  • 40 year retirement: 85.8% success rate
  • 50 year retirement: 75.7% success rate

Assumptions: 4% withdrawl rate (3% CPI inflation) and no additional income (SS, W2).

Sake of comparison, upping the portfolio (+$400k) to match the same expenses, but at 3.5% withdrawal. Ball park another 2-3 years of working for the man if the market is good (8% return assumption).

  • 20 year retirement: 100% success rate
  • 30 year retirement: 100% success rate
  • 40 year retirement: 99.1% success rate
  • 50 year retirement: 95.1% success rate

I think the trade-off of an extra few years of work for a 3.5% withdrawal rate make sense.
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permabull
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10:49a, 6/26/23
AG
I want to point out again that success means you never have to lower your expenses in retirement, so failure doesn't mean you go broke and end up homeless, it just means maybe you have to keep that car a few years longer than you otherwise would or take a cheaper vacation one year.

The math of working "just one more year" will always be better than retiring today so using that logic no one should ever retire unless they are forced too. Don't let the naysayers scare you away from retiring.
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Casey TableTennis
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In reply to up-n-aTm • 10:57a, 6/26/23
AG
Distribution rate will drop materially when SS kicks in. Even if benefits get cleaved to ~75% of expected, your distribution rate would be down below 3% from that point assuming spend of ~100k/yr in todays $.

You seem to have more of a liquidity issue for the next decade or so than a long-term challenge. Even the liquidity issue isn't bad, just more tricky than the long-term, to me.

If you work a little here and there over the next decade, would be another way to remove some financial worry. Likely unnecessary, but an alternative to working another year or two.

If you want to spend $120k+ a year, probably a little dicey to hang it up yet.

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Whirligigs
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12:41p, 6/26/23
You will work until you drop and you will like it.
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EliteZags
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In reply to htxag09 • 12:52p, 6/26/23
AG
htxag09 said:
This is a thread that discussed it recently:

TexAgs - Retirement Number

And here's Ranger Rick's post:

Quote:
Just to add a bit of quantification.

I ran our numbers through FIRECalc (https://firecalc.com/) at various durations:

  • 20 year retirement: 100% success rate
  • 30 year retirement: 95.1% success rate
  • 40 year retirement: 85.8% success rate
  • 50 year retirement: 75.7% success rate

Assumptions: 4% withdrawl rate (3% CPI inflation) and no additional income (SS, W2).

Sake of comparison, upping the portfolio (+$400k) to match the same expenses, but at 3.5% withdrawal. Ball park another 2-3 years of working for the man if the market is good (8% return assumption).

  • 20 year retirement: 100% success rate
  • 30 year retirement: 100% success rate
  • 40 year retirement: 99.1% success rate
  • 50 year retirement: 95.1% success rate

I think the trade-off of an extra few years of work for a 3.5% withdrawal rate make sense.

rather avoid the extra few years of work and achieve the upped success rates with some basic tax evasion
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billydean05
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3:04p, 6/26/23
Yes he can retire comfortably. Once he starts drawing social security in only 10 years, his withdrawal rate can decrease significantly if need be.
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Seven Costanza
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4:53p, 6/26/23
AG
What's your plan for health insurance between now and age 65?
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northeastag
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4:55p, 6/26/23
AG
I'm impressed with the $7k per month SS. I am guessing that it is from two people? I maxed out contribution for 34 of 35 years and nearly hit it in the 35th, and my estimated payment at 67 is a little over half of that (I am just a little older than you). Even if I wait until 70 it is just slightly over 5K.
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up-n-aTm
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5:55p, 6/26/23
AG
Healthcare: II currently pay about $3700/mo so I definitely need to research this situation.

SS numbers are from their website. My wife and I both started working in our mid-teens and have paid a lot into the system.
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Premium
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6:16p, 6/26/23
AG
Does the 4% include the "go years", the "slow go years" and the "no go years"? Assumption being you'll travel a ton at first, then some and then none. But when none hits maybe you have higher medical / care $$$ issues.
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MS08
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In reply to up-n-aTm • 10:37p, 6/26/23
AG
Good on you. Way to go! I would connect with a financial advisor to see how best to put the post tax 1.3mm to work for you. Some in a high interest savings account, some in JEPQ/JEPI, etc.
I could pass on mine if interested, just PM me.

Lastly, I think it would be good to try and find a way to do remote work/consulting in the next 2 years so that you could pay off the house entirely without dipping into savings/investments. Just my 0.02. Again, congrats on selling the biz.
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LMCane
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In reply to BenTheGoodAg • 6:41a, 6/27/23
BenTheGoodAg said:
up-n-aTm said:
I question whether the 4% rule is safe for age 58 retirement. I'm mostly concerned with inflation. We could make $96k per year work currently, but that may not apply in 20 years.
The 4% rule is supposed to account for inflation, especially from a macro-view. If you're taking out 4% and the market makes 8%, then your account grows 4%, allowing for inflation. Next year you can take out $100k, then $104k the next, and so on. In 20 years, you could take $210k.

Average annual inflation 1960-2022: 3.8% per year
Average S&P 500 return, 1960-2022: 10.02% per year

Based on these numbers, you could have lived off of 6.22% per year, so 4% is supposed to be conservative. There's plenty of details you can pick at, but that's the theory anyway. A little skepticism isn't a bad thing for a decision like this.
doesn't the "4% rule" entail or plan that your actual principal will never decrease by the end of your life?

that if you have 1 million dollars at retirement, and you live on 40K a year, you will end up with 1 million dollars the day you pass away?

what's the point of that if you don't have kids?!

what if someone wants to kick the bucket with next to nothing in the bank?
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BenTheGoodAg
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In reply to LMCane • 7:30a, 6/27/23
AG
LMCane said:
doesn't the "4% rule" entail or plan that your actual principal will never decrease by the end of your life?

that if you have 1 million dollars at retirement, and you live on 40K a year, you will end up with 1 million dollars the day you pass away?
More like, the principle grows with inflation. So a $1M principle today should be worth $2.2M in 20 years, but the same value in today's dollars. Again, just the theory, but ideally it's a "sustainable" net worth, and independent of your life expectancy.


LMCane said:
what's the point of that if you don't have kids?!
Umm.... Try the R&P board, I with this one...
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ToddyHill
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9:34a, 6/27/23
AG

Quote:
What's your plan for health insurance between now and age 65?

This is a BIG issue.

I'm about to retire (I'm 66). Fortunately, I have Medicare. My wife is 3.5 years from Medicare so we're looking on the open market for insurance. Best we can find right now is a high deductible policy for about $1000 per month.

The thing about Obamacare...if you make decent money there are no subsidies available.

Good luck.
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Leeman
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In reply to ToddyHill • 9:40a, 6/27/23
ToddyHill said:

Quote:
What's your plan for health insurance between now and age 65?

This is a BIG issue.

I'm about to retire (I'm 66). Fortunately, I have Medicare. My wife is 3.5 years from Medicare so we're looking on the open market for insurance. Best we can find right now is a high deductible policy for about $1000 per month.

The thing about Obamacare...if you make decent money there are no subsidies available.

Good luck.
$1k per person per month ?

That was my assumption, but I was hoping it was pessimistic. :-(
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AgLA06
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10:03a, 6/27/23
AG
I look at these threads and can't help realize how my opinion has changed over the years.

I've watched too many people work too hard or determined to hit some theoretical number only to never have a chance to retire and live before we covered them in dirt.

Stop over thinking this. You cashed out and are in a great spot. Get with a financial / tax planner and retire today and enjoy life.

Find a part time job and volunteer if you can't sleep at night, but stop letting fear of the unknown factor in. The only certainty is we die. You can always consult or get a part time job down the road if you need it. Or God forbid buy a used car instead of new.
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GoAgs92
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10:30a, 6/27/23
AG
Clearly wait until 59.5.

Also will the OP or wife inherit any assets in the near future?
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AgOutsideAustin
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11:45a, 6/27/23
AG
I would have retired the day my business was sold. You can always do something to keep you active and earn some money for peace of mind.

You have plenty of money and time to figure it all out.

Congratulations and go for it !!
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E
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11:51a, 6/27/23
AG
Congrats!

I'd find a part time job or lower paying but self-fulfilling job to pay for beer & golf... enjoy it!
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AgLA06
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In reply to E • 12:01p, 6/27/23
AG
E said:
Congrats!

I'd find a part time job or lower paying but self-fulfilling job to pay for beer & golf... enjoy it!
Mashal at a golf course that get's reciprocated playing rights regionally.

Bass pro or Cabelas or other outdoor or home improvement store that gets you a kick ass discount for hobbies or projects.

Volunteer at a local charity you relate to or with Texas Parks and Wildlife. Be hosts at an RV parks for free room and board.

Anything that brings enjoyment or perks and also allows you to hit the road or vacation for a couple of weeks at a time without someone getting pissy.
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AgOutsideAustin
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In reply to E • 12:11p, 6/27/23
AG
E said:
Congrats!

I'd find a part time job or lower paying but self-fulfilling job to pay for beer & golf... enjoy it!


That's my plan too, earn money for my golf and booze!
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permabull
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In reply to ToddyHill • 12:13p, 6/27/23
AG
ToddyHill said:

Quote:
What's your plan for health insurance between now and age 65?

This is a BIG issue.

I'm about to retire (I'm 66). Fortunately, I have Medicare. My wife is 3.5 years from Medicare so we're looking on the open market for insurance. Best we can find right now is a high deductible policy for about $1000 per month.

The thing about Obamacare...if you make decent money there are no subsidies available.

Good luck.

If you plan on going into early retirement it is very easy to structure your finances so you have plenty of money, but as far as the IRS and Obamacare are concerned your 'income' is extremely low.

OP mentioned he has a very large after tax sum of money. If he were to invest that in tax efficient ETFs and municipal bonds his total "income" in early retirement would likely be below $50k a year which would make him eligible for Obamacare subsidies.

In the above example I would probably forgo that strategy, pay full price for Obamacare and max out the 12% bracket by Roth converting some of the tax differed assets every year to reduce any issues with RMDs down the line.
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Baby Billy
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In reply to AgLA06 • 12:14p, 6/27/23
AG
AgLA06 said:
I look at these threads and can't help realize how my opinion has changed over the years.

I've watched too many people work too hard or determined to hit some theoretical number only to never have a chance to retire and live before we covered them in dirt.

Stop over thinking this. You cashed out and are in a great spot. Get with a financial / tax planner and retire today and enjoy life.

Find a part time job and volunteer if you can't sleep at night, but stop letting fear of the unknown factor in. The only certainty is we die. You can always consult or get a part time job down the road if you need it. Or God forbid buy a used car instead of new.
Sorry, but you aren't finding a part time job as an 80 year old man even if you're able to work. That's the absolute last thing you'd want to do anyways.

Sounds like OP really needs a retirement income plan that he can count on for the rest of his life, even if he lives to 90. It all depends on how much he wants to spend on an annual basis, whether he has LTC insurance or not, and whether he has estate or legacy goals beyond a comfortable retirement.

I can also promise one thing, OP will not have enough money for a two person 30 year retirement by keeping it all in cash or fixed income. He needs a comprehensive plan to follow religiously each and every year.
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permabull
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In reply to AgLA06 • 12:14p, 6/27/23
AG
AgLA06 said:
E said:
Congrats!

I'd find a part time job or lower paying but self-fulfilling job to pay for beer & golf... enjoy it!
Mashal at a golf course that get's reciprocated playing rights regionally.

Bass pro or Cabelas or other outdoor or home improvement store that gets you a kick ass discount for hobbies or projects.

Volunteer at a local charity you relate to or with Texas Parks and Wildlife. Be hosts at an RV parks for free room and board.

Anything that brings enjoyment or perks and also allows you to hit the road or vacation for a couple of weeks at a time without someone getting pissy.

REI gives health insurance for part time employees. I have def considered trying to work there if I were to retire early.
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AgLA06
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In reply to Baby Billy • 12:16p, 6/27/23
AG
Bizarro Jerry said:
AgLA06 said:
I look at these threads and can't help realize how my opinion has changed over the years.

I've watched too many people work too hard or determined to hit some theoretical number only to never have a chance to retire and live before we covered them in dirt.

Stop over thinking this. You cashed out and are in a great spot. Get with a financial / tax planner and retire today and enjoy life.

Find a part time job and volunteer if you can't sleep at night, but stop letting fear of the unknown factor in. The only certainty is we die. You can always consult or get a part time job down the road if you need it. Or God forbid buy a used car instead of new.
Sorry, but you aren't finding a part time job as an 80 year old man even if you're able to work. That's the absolute last thing you'd want to do anyways.

Sounds like OP really needs a retirement income plan that he can count on for the rest of his life, even if he lives to 90. It all depends on how much he wants to spend on an annual basis, whether he has LTC insurance or not, and whether he has estate or legacy goals beyond a comfortable retirement.

I can also promise one thing, OP will not have enough money for a two person 30 year retirement by keeping it all in cash or fixed income. He needs a comprehensive plan to follow religiously each and every year.
He's 58. Stop fear mongering.

He should know long before 22 years from now (if he's still alive) if needs to consider what to do with his principal that isn't being used.

Drawing $100K a year at 80 from his $2MM in principal would get him to 100 assuming he never earned any more interest.
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Baby Billy
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In reply to AgLA06 • 12:18p, 6/27/23
AG
AgLA06 said:
Bizarro Jerry said:
AgLA06 said:
I look at these threads and can't help realize how my opinion has changed over the years.

I've watched too many people work too hard or determined to hit some theoretical number only to never have a chance to retire and live before we covered them in dirt.

Stop over thinking this. You cashed out and are in a great spot. Get with a financial / tax planner and retire today and enjoy life.

Find a part time job and volunteer if you can't sleep at night, but stop letting fear of the unknown factor in. The only certainty is we die. You can always consult or get a part time job down the road if you need it. Or God forbid buy a used car instead of new.
Sorry, but you aren't finding a part time job as an 80 year old man even if you're able to work. That's the absolute last thing you'd want to do anyways.

Sounds like OP really needs a retirement income plan that he can count on for the rest of his life, even if he lives to 90. It all depends on how much he wants to spend on an annual basis, whether he has LTC insurance or not, and whether he has estate or legacy goals beyond a comfortable retirement.

I can also promise one thing, OP will not have enough money for a two person 30 year retirement by keeping it all in cash or fixed income. He needs a comprehensive plan to follow religiously each and every year.
He's 58. Stop fear mongering.

He should know long before 22 years from now (if he's still alive) if needs to consider what to do with his principal that isn't being used.
Telling him he needs a retirement income plan before he retires is not fear mongering at all and I'm not sure how anyone could view it as such.
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