[tom2021]

I am mortgage free, no debt, and a mid manager at an international corporation. Shall I go for the earliest retirement, freedom 55? I may work part time in the future, after enjoying a couple years of freedom 55, with good health.
Pro:
1. Do what I want whenever I want. Freedom 55.
2. Plenty things to do when I am in good health.
3. I don’t come home from work, grumpy.
Con:
1. Income cut to 50%.
2. May not able to afford another bimmer. The F25 stays for a couple years until maintenance is excessive for a retiree, who is not mechanically inclined.
3. So long to vacations, eat out at nice restaurants, afford to buy most of the stuffs I want.
4. Gone the prestige associated with the profession. I will be just a retiree.
5. May not able to find part time job years after early retirement.
The major issue staying on 5 more years on high stress job will be detrimental to my health.
I will have more money when I retire at 60, but who knows the condition of my health will be.
Any thoughts? Thanks in advance.

[Taylorsherk]

Get out as fast as possible. RUN

[wtwo3]

How old are you now? If you're mortage/debt free you should be saving a ton for retirement.

[premier3is]

Depends on what your net worth is and your cost of living/expenses. Can you live another 30-40 years from where you stand at financially now?

Only you can answer this for yourself.

[2000cs]

Every retiree’s fear is running out of money. If you are comfortable that you have enough to live on, weather market ups and downs, and ride through inflation, etc. then my advice is to retire, but find productive engagements at your own pace/in your own control. If you are not there financially, you can de-stress to a different company or position and save like crazy (live on a retiree budget, not a working budget), until you get there.

[zx10guy]

I also had the goal of retiring at 55. I can probably still do it. But my financial advisor along with a friend put some thoughts in my head.

I see you're in Canada so don't really know the healthcare situation up there. But for me, I have to factor in paying out of pocket for health insurance until I can jump on the Medicare band wagon. This is a huge expense; especially with my pre-existing conditions.

The other thing that was brought up to me was what I would really do with all the free time. We all say we will do x or y when we retire early. But how many times does this really happen? Some people end up just vegging all day and then get into worse shape both physically and mentally over if they had just kept working.

[MsGoGoMoto]

Become a consultant.
That's what I plan on doing in 5 years.

[3.0L]

Due to major job stress, I retired at age 64, one year earlier than I had planned. Before I pulled the plug I met with my long-time financial planner and investment broker. I presented my 3 sources of income which includes SS, my pension plus a draw on the portfolio they managed. I got an immediate green light.

Next, I met with my long-time CPA, armed with the same information and determined what tax bracket I would be in (it went down) and what portions of my income would be taxable (more good news!).

Having experienced job stress to the point of retiring a bit early, I would advise the OP to also consider finding a better job and perhaps sticking it out a few more years. I'm glad I stuck it out as long as I did - my net retirement income is 150% of my net working income. Believe me, after the newness of being able to enjoy sitting around and not doing much, it will probably wear off and you'll find yourself yearning for things you can't afford.

Just my 2 cents.

[DenverSteve]

I'm with the answers from above. Only you can decide when to retire. After a pretty-successful career, I retired (semi-retired) at 45, 17 years ago. I invested in real estate anytime I had extra money and built a still-growing 401K.

The best advice I learned is to be completely debt free as early as possible - remain that way and put your money into real assets. That means take your extra money and instead of buying stuff you don't need (like multiples of anything that depreciates) put it into your investment portfolio and let it compound. Stay away from borrowing anything and/or interest payments except when the purchase results in good long-term appreciation/investment.

The biggest mistake I see from people is waiting too long to begin planning for retirement. Unfortunately, I've seen very successful people power through their money as it came in thinking the stream would be endless. Afterwards, they look back, half-broke, wondering why they have to move to Lakeview Terrace in their later years because they didn't pay off their primary residence (too many moves, divorces, home-equity loans...) instead of retiring and remaining in their house on the beach - all from poor planning.

p.s. - There's nothing wrong with Lakewood Terrace except I would rather live in Malibu.

[Pablo Chacon]

Retire and enjoy life.
I completely retired at 42 and very glad I did.
I’d bet that if you don’t, you’ll spend the additional 5 years thinking “why didn’t I just retire at 55?” and beating yourself up.

It sounds like you can make it happen, go for it.

[Oldgixxer]

Go for it! I retired 2 yrs ago at 50 and am loving every minute. Do not miss any of the major stress&BS I had while working.

Now,my biggest stress factor is deciding which car or bike to drive/ride, what Im wearing to the gym and if there's gonna be a pop-up thunderstorm after I detailed my vehicles

[Murf993]

I retired on my 55th birthday, just over 5 years ago. I wasn't mortgage free but as of yesterday we are. We have done well and my wife is about to retire. I was fortunate to have a defined benefit pension so a guaranteed income for the rest of my life. The financial concern is the valid one but I only you can know what's right for you. I will say this, I have good health and have been able to keep quite busy. I can not believe how fast 5 years has gone by, and that is my point. If you like your job stay, but if you can keep busy then you might want to go while you are young and healthy. Life is short and it goes by fast. Good Luck.

[XutvJet]

How old are you?

Do you have solid investment portfolio ($1M+) or are you relying on other income like SS, pension, etc.?

How much do you spend in a year and do you foresee that doing down in retirement?

I used the following retirement calculator website to make the decision to take a 20% pay cut and go 32-hour part time at 47. The work stress was simply too much working 50+ hours a week. Now, I'm not allowed to work more that 32. This calculator also helped me get comfortable with meeting my goal of retiring at 52 all the while supporting kiddos in college from 49 to 57.

https://engaging-data.com/will-money-last-retire-early/

[NickyC]

If you can afford it get the hell out.

[M_Six]

As stated numerous times here, only you can decide if it's a good time to retire. But to address some of your questions, here's my experience with retirement so far (almost 5 months).

The big question everyone asks me is what I do with my time now that I'm not working. It's still early in my retirement, so this may change, but so far my days have been taken up with a daily bike ride (I average 100 miles/week) and tackling projects around the house. Plus, I've learned to cook and I'm getting better at it all the time. Wifey (who is still working) and I had planned to travel more, but this damn pandemic has ruined some of those plans. Hopefully that issue will go away soon.

Between the bike rides and the various projects around the house, I'm actually more active and on my feet more now in retirement than I was when I was working and staring at a computer screen all day. So it's been beneficial in that regard. I don't have the stress of work, and since my job was just a job and not something I loved to do, I don't miss it a bit. A friend of mine retired from a federal gov't job a year or so before I retired. When he was eligible, he went back to working virtually the same job as a private consultant. He had to wait 6 months to go back, though. His advice from his 6 months of downtime was to not try to do too much, but to also not just sit and watch TV or whatever. So that's how I came up with the plan to spend half the day riding and half the day on projects around the house. Then I cook dinner. That pretty much fills my days. And time is flying by. Can't believe it's been almost 5 months.

My father also retired at 62 and I'm very glad he did. He had 15 good years to enjoy retirement before COPD caught up with him. The point being, retiring when you're healthy is huge. You never know when some medical issue is going to crop up and rain on your parade.

As others here have also mentioned, it's important to determine if your retirement income will last the rest of your life if you end up living to a ripe old age. That was my big concern, as a good part of my retirement income is from my 403b and 457 plans. Do I look at 25 years of withdrawals? Or 30? And what about long term disability should my health go south? These are still questions we're dealing with.

[1MOREMOD]

If I could I would, planning on trying to go part time at 58 unless things go better than expected.

[jmg]

This is perfect timing. I just had my 45th birthday and I have really started to crunch the numbers to try and figure out how and when to retire. Murf993 , Oldgixxer , DenverSteve or anyone else that has retired comfortably, your input is extremely valuable!

Currently my IRA is maxed every year, thanks to income splitting through incorporation I still technically qualify for the full contribution. I have a pension plan through my union, a lump sum Individual Account Plan, my wife's 401k, my 401k from a previous employer, and my own SEP IRA. I made a spreadsheet projecting account balances with growth to age 66.

Assumptions:

To simplify, I am conservatively assuming annual income over time to match inflation which cancel each other out. Raises over the inflation rate will be a bonus that I can account for as they occur. I am not accounting for wage reduction over time since my field does not see a reduction in income as age increases, it's actually the opposite.
7% average annual growth on my investment accounts
6% annual income contribution to SEP IRA
3% annual income contribution to IAP
Hopefully I will NEVER pull out of any of these accounts for whatever reason (knocking on wood)

I've read that $1-1.5 million in investment assets is a good starting point, withdrawing 4% a year after retirement. That sounds low, but I guess combined with Social Security, pension, I will still be getting 6 figures a year after age 53. This doesn't include my personal stock portfolio nor real estate equity. At age 67 (FRA) it will be significantly higher, but damn, I don't want to work until 67.


What else can I account for? Is $1.5million a good number? Keep in mind I live in Los Angeles/Orange County, CA but I could see us moving away to a cheaper city/state.

[Sephiroth]

A) What is your total in annual expenses? To keep your standard of living the same you need to assume that’s what you need each year inflation adjusted in retirement, accounting for the fact that healthcare expense will increase with age and other expenses will drop off.

B) do you have kids or other dependents that need support?

C) You need to consider your tax exposure on that pension and 401ks, not to mention RMDs at 72. Is your wife planning to work until full retirement?

D) What is your outstanding debt?

[jmg]

Originally Posted by Sephiroth

A) What is your total in annual expenses? To keep your standard of living the same you need to assume that’s what you need each year inflation adjusted in retirement, accounting for the fact that healthcare expense will increase with age and other expenses will drop off.

B) do you have kids or other dependents that need support?

C) You need to consider your tax exposure on that pension and 401ks, not to mention RMDs at 72. Is your wife planning to work until full retirement?

D) What is your outstanding debt?

Not sure if you are asking me or the OP but I'll answer anyway:

A) Right now it's high, scaling back will be a must for sure. I still have to check what my healthcare will be, but I believe I will be covered until death through our program.

B) 1 kid that will be graduating college by the time I retire. Hopefully they won't need support!

C) Wife is not working but may return in a few years part time as an RN and start to contribute to her 401k again. I'm trying to be conservative so my calculations are based on her not ever going back. If she does, that speeds up the timetable.

D) Just my house. Loan balance is less than half market value. No CC debt. Cars are either paid off or leased.

[erickonphoenix]

If you hate your job definitely get out while your healthy. I absolutely love my job, they'll have to drag me out the door.

[2000cs]

Originally Posted by jmg

This is perfect timing. I just had my 45th birthday and I have really started to crunch the numbers to try and figure out how and when to retire. Murf993 , Oldgixxer , DenverSteve or anyone else that has retired comfortably, your input is extremely valuable!

Currently my IRA is maxed every year, thanks to income splitting through incorporation I still technically qualify for the full contribution. I have a pension plan through my union, a lump sum Individual Account Plan, my wife's 401k, my 401k from a previous employer, and my own SEP IRA. I made a spreadsheet projecting account balances with growth to age 66.

Assumptions:

To simplify, I am conservatively assuming annual income over time to match inflation which cancel each other out. Raises over the inflation rate will be a bonus that I can account for as they occur. I am not accounting for wage reduction over time since my field does not see a reduction in income as age increases, it's actually the opposite.
7% average annual growth on my investment accounts
6% annual income contribution to SEP IRA
3% annual income contribution to IAP
Hopefully I will NEVER pull out of any of these accounts for whatever reason (knocking on wood)

I've read that $1-1.5 million in investment assets is a good starting point, withdrawing 4% a year after retirement. That sounds low, but I guess combined with Social Security, pension, I will still be getting 6 figures a year after age 53. This doesn't include my personal stock portfolio nor real estate equity. At age 67 (FRA) it will be significantly higher, but damn, I don't want to work until 67.


What else can I account for? Is $1.5million a good number? Keep in mind I live in Los Angeles/Orange County, CA but I could see us moving away to a cheaper city/state.

1. DON’T GET DIVORCED.
2. Major medical, outside of insurance, and insurance cost rising faster than inflation
3. Kids and Grandkids needing some help (especially college).
4. Less work expense (commuting, suits, whatever), more travel etc.

A good number is 25-33 times your annual need (25 is equivalent to your 4% withdrawal rate). But if you retire early you might want to bump that up because those rules-of-thumb assume something like 30 years retired (until death) while you might have 40 or more. An annuity calculator can help with this analysis. Start with your annual total expenses before taxes, then calculate at different, realistic rates to get the range of how much you need.

So to make that concrete, if you need $100k per year, and your social security will be $40k (assuming it still pays, do a scenario with it reduced 25% or eliminated), then you need $60k. You can probably manage income taxes to be 10% or so federal plus your state rate. So $60k becomes $67k plus state taxes. For this quick analysis, let’s assume $72k pre-tax and after social security.

At age 60 or more you need 25x that, or $1.8 million. Plus a cushion if you’re like me and want to sleep well. Or using the more conservative 3% (33x), $2.4 million.

Someone already mentioned the RMD on retirement accounts and this is a very big deal. If you have a lot concentrated in those accounts, consider drawing them down as soon as you can without penalty, but within the threshold for a desirable tax bracket. (You have to back into this considering std deduction or your deductions, etc). The excess cash you draw down goes into a regular brokerage account, spend only what you actually need. This will help minimize the RMDs which otherwise could push you into a much higher tax bracket.

And for strategy, I look at all of my accounts holistically when I consider diversification. So I don’t mind having my 401(k) heavy in dividends and my regular account heavy in growth. Together they are properly diversified, individually they are not. That allows me to manage taxes to my advantage.

If you can work though all of this with some confidence, you can handle it yourself. You may want to get some financial planning advice from a real pro (not some anonymous dude on a BMW forum).

One other wild card factor is we seem to be on the verge of solving some major health issues (cancers, dementias, etc) which could result in a much longer life, although it isn’t clear that health generally will keep up (e.g., bone degradation, etc). This might require some extra planning/reserves.

[clickclickboom]

1. Don't overlook the effects of inflation over time slowly eroding your lifestyle/buying power.

2. Give yourself a practice year. Try living off of the money you anticipate you will need to in retirement.

3. Already mentioned...Health Insurance cost to gap you to 65/medicare.