sodonewithit Journal

[sodonewithit]

Journal Entry 1 Not Really Extreme Retirement

I'm planning on retiring in 6 months - 2 to 4 years early

Late 50's, employed in tech - extremely burned out
Wife employed - she wants to work 10 more years. She is maxing out her 401K with about 250K in it now
2 kids starting college. 1 with full ride 4 years, 1 has tuition pre-paid for 4 years. We agreed to pay child #2's room and board
House is paid off and we are planning on staying there as long as possible (still 15K roof, 15K hvac, etc every 10-12 years)
No car payments now. We keep cars 8-10 years but buy new, fuel effecient, fairly inexpensive cars when we buy

280K in my 401K plan. I know this is underfunded. I plan on taking about 15K from it each year until empty. Planning on 4% return while it exists
I will receive 33800 yearly from a well funded state retirement fund. CPI increase every year. My wife will receive 2/3 of this after I'm gone
I plan on collecting SS as early as possible - 20200 per year, about 2 years away

My retirement income + wife salary = about 160K yearly after I retire.

We pay 60K expenses per year (this includes child #2 room and board at university)

We will switch to her employer provided healthcare from mine when I retire.

We have 70K cash reserve but plan some major house projects (kitchen reno, new fence, pool resurface, etc.)

Family looks at me like I'm crazy. Tell me I'm not crazy. Tell me this looks doable. This looks reasonable, doesn't it? I just can't work anymore.

Too simplistic?

sodonewithit

[CS]

Without even running numbers, this looks doable. The kid's room and board expenses are temporary. Your tax bill will drop significantly as your income drops closer to your retirement expenses. Also, working is expensive - you'll save on commuting costs - less miles means less new car purchases needed.

If you can't work, you can't work. If it were me, I'd say no to some of the renovations - or do part of them yourself. You might be a lot happier out in the sunlight working on a new fence yourself (even if you just do the removal portion for the old one) than stuck in a job where you are losing your mind.

New fancy stuff is a poor return on your life.

Also, just noticed something. Why would you take money out of the 401k when your income is going to be so much higher than your expenses? You could let that grow. You could also wait on the Social security since you are going to be paying a lot of taxes on it due to your wife's income and each month you wait would up the amount you eventually get each month. I'm not sure how it works for married people, but if your income alone is too high, then you will lose Social security money anyhow. You are not guaranteed full benefits (as much of a guarantee as it is) until you reach full retirement age.

Tax-wise, it would make sense to max your 401k (pre-tax money) next year as quickly as possible and quit as soon as you have done so (if you can do close to 100% of your paycheck, that would be ideal). That way you get to keep all that money (yay!!!) instead of your current situation, where I'm guessing more than 50% of your income dollars go to taxes (boo!!!). You would also keep your 6-month time frame.

I think you'd feel a lot better if you just ran some numbers through a tax calculator. I've made my own based on published tax rates - and let me tell you, I've turned down work late in the year, because my after-tax income drops like a rock after a certain amount (halving my after-tax hourly rate!). It does not pay to make too much money sometimes.

Even better if your wife is maxing out her 401k. Get your on paper income as low as possible!

[thrifty++]

Your post retirement income is an extremely large amount from my perspective. Looks like a substantial safety net. Where do you live?

If things are as bad as they are it makes sense to leave work early. Not good for your health. And you are at an age where you have to prioritise such things. Just because you leave your job doesnt mean that you will necessarily have to do no work. What about just resigning and seeing if there is some less stressful less time intensive work you could do part time.

[sodonewithit]

Thank you for responding.

CS, I do plan on doing some of the work myself - demo and such. Maybe putting up fence panels as I can. As far as the 401K, you make a good point. I can let that stay as long as possible. But the SS, since my highest 35 years are already in, I am thinking it won't go up much more. I guess I need more research on that. I checked though, SS payouts are not changed by spouse income.

Putting all next year's income in my 401K is an interesting thought. I will only be working a couple of months next year.

thrifty++, I live in the southern US: hot, sunny, only getting hotter with climate change...

[EdithKeeler]

My only question is, if you currently pay $60k expenses each year, where has the rest of your money gone? Your 401k contributions and savings and taxes don’t seem to account for everything? If the retirement income is $160k, inclusive of your $33k pension and the $15k you plan on taking out of your 401k, that means your wife’s take-home (?) is $112k a year? If you’re only spending $60k, and you’ve been bringing home more than $48k a year, where’s your money gone? Maybe kids’ tuition, accelerating paying off house, etc.—I don’t know, and maybe it’s all accounted for. My only thought is to make sure that’s a realistic number. Have you tried a “dry run” with only her salary, etc?

And please forgive me if I missed something.

[suomalainen]

SS payments won't go up from your spouse's income or from your income if you've already got your 35, but the payments go up due to the actuarial assumptions if you wait as long as you can to take it. This is easy to see by using the SS website's calculator. I agree with EK, that something seems to be missing. You have list $69k in retirement income (15k+33.8k+20.2k) and$160k total, so that means your wife is earning $91k which after tax should easily cover your $60k in expenses. Delay taking 401k and SS and your $33800 pension easily covers any surprise expenses, no?

Maybe the crazy looks are from either the 1) "you're supposed to work until normal retirement age" sociological angle or from the 2) "that's not enough cushion" super-conservative angle. I dunno. It's your life; may as well do what you want.