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Old 04-18-2011, 11:35 AM
 
37 posts, read 95,261 times
Reputation: 35

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Assuming these:

Savings account: $1.2 MM
Retirement savings: $450K
House fully paid
No children to support
No debt

Expenses:

Property taxes / Maintenance / Insurance - $1K per month
Food - $1K per month
Others - Internet/cable/gas/utilities/Health care premium, etc - $1.5K per month

I am currently 50 and planning on retiring with my wife in a couple of years. We are planning on growing our garden (veggie / fruits). Maybe this will also reduce our food expenses. I understand that I will not qualify for Social Security / Medicare / Medicaid until I am 65 (or so).

Here is my questions: Can I afford to retire at age 52? Am I under-estimating my future expenses? What else am I missing?

Thanks for your input...

 
Old 04-18-2011, 12:50 PM
 
281 posts, read 712,026 times
Reputation: 118
Honestly, to retire that young, with 2 people, in an expensive place like Seattle... I'm not sure you can do it with that amount of money.

I know those amounts may seem like a lot of money upfront, but with life expectancies being what they are and the ever increasing cost of health-care, it's hard to see that much money supporting 2 people for the next 30 to 40 years.

While you have a lot of money in savings, I assume most of that is not earning much of a return rate. Having the $450k in a retirement fund also seems less than where you want it as far as earning a return and having multiple forms of revenue streams in retirement (401k dollars which would be taxed, IRA dollars which would not, monthly stipends from your savings accounts, etc.).

I don't know what your gross family income is, but if you want to retire in Seattle I would personally suggest you stretch your plan out a bit more (maybe late 50s or 60?).

Again, if you two were older and/or lived in a cheaper part of the country, then maybe. It also depends on how much of a lifestyle cut you're willing to take. If you use 1k a month on food for 2 people, I assume you two have a nicer life-style you'd like to maintain (to compare, my family of 5 uses 800 to 900 a month for food, so I assume you eat out a lot or buy expensive food).

There are just so many variables in retirement and most people peak their income in their 50s, meaning you'd be missing out on multiple years of earning to your highest potential. Even if you try to go back to work in your 60s/70s, chances are you would not be able to make as much as you can now.

Have you considered a hybrid? Maybe take a leave of absence for 6 months or so and travel the world? Get refreshed and then come back for a few more quality years of work?

Either way, I highly suggest you make a very detailed plan for the next 30 to 40 years if you're considering this. Add up all your expenses (estimate high) and the life-style you'd like to have. Make sure you include the insanely high medical bills you'll likely accumulate as you both age in coming decades.
 
Old 04-18-2011, 01:23 PM
 
37 posts, read 95,261 times
Reputation: 35
Capo,

I just estimated the food cost. We do not eat out alot, maybe once per week. We live moderate life and do not do too many entertainments. In the line of work that I am in, I don't think I can take a leave of absence for more than 2-3 weeks. My employer may just replace me instead. I am making some good money now, but I figure that we do not live to work. Maybe finding a part time job is another option.

We are also Canadian citizens. We possibly will move back to Canada when we are in our 70's to take advantage of their free health care (before the health care cost here goes crazy).

Thanks for your advise.
 
Old 04-18-2011, 02:06 PM
 
9,627 posts, read 23,818,089 times
Reputation: 5248
Timmy,
I think it's possible. You may want to find something that yields a little more than a savings account .
Given your numbers, you'll live on 42,000 per year, and have about 1.6 million saved. If you can get a 3% return on that money, that's about 48,000 dollars per year, more than enough to live on for the time being. If you invested a little in high quality, growing dividend stocks, you can boost that some with a little bit more risk. At some point, health care costs may get under control. They can't keep going up forever, can they?
Worst case scenario: Sell you house and buy something less expensive, or rent.
 
Old 04-18-2011, 02:11 PM
 
281 posts, read 712,026 times
Reputation: 118
Quote:
Originally Posted by Timmy View Post
Capo,

I just estimated the food cost. We do not eat out alot, maybe once per week. We live moderate life and do not do too many entertainments. In the line of work that I am in, I don't think I can take a leave of absence for more than 2-3 weeks. My employer may just replace me instead. I am making some good money now, but I figure that we do not live to work. Maybe finding a part time job is another option.

We are also Canadian citizens. We possibly will move back to Canada when we are in our 70's to take advantage of their free health care (before the health care cost here goes crazy).

Thanks for your advise.
That's good info to have and agree that could change your overall scenario significantly. It's hard to say if that changes it enough to make it doable, but I would highly, highly advise you meet with a financial planner (or do it yourself, if you have the skill-sets) so that you can map out your goals for the next 30 to 40 years and then make a detailed financial plan to see if you can fulfill those goals.

I would highly suggest you invest a little time/money to really develop out your retirement plan and make a real plan. The last thing you want to do is run out of money in your 70s/80s when you're potentially sick and not able to work. You'll obviously been fine for the next 10 to 20 years, but my main concern is during your 70s/80s and potentially 90s, if you end-up having an extra-long life.

I agree the part-time option is a good compromise, but again, see how it plays into your overall financial/retirement plan.
 
Old 04-18-2011, 02:18 PM
 
37 posts, read 95,261 times
Reputation: 35
Ira500 just gave me a hint (since he/she is a real estate agent). Maybe a reverse mortgage would help when we get old.

Capo: I agree that I should visit one of the financial planner.

If I have more than $1 MM for retirement and it is not enough, how do other people who only have a couple of thousands to retire?? Or retirement just a dream or just for the super wealthy? Sad.
 
Old 04-18-2011, 02:26 PM
 
Location: South Bay
327 posts, read 859,520 times
Reputation: 190
I don't think so. You're looking at 30 years to go. Your level of savings looks good, but you're looking at an average annual living cost of 40k. That's barely enough. Social security will help a little, but not much. Your biggest risk if healthcare costs. If you get sick or hurt in any way, you've got a serious problem. Insurance will really eat at your savings, so it's a tough call. Actually, I just read you're Canadian, so you're better off than the rest of us. Having the house paid off is a great asset. You can always sell it and scale down if you need the money...which I'm sure you will.

I think it can be done, but it'll be tight. I know people who have retired in their early 50s, and realized a few years later that they will not have enough money. Once you retire, it's nearly impossible to go back without spinning your wheels.

Keep in mind that you have 30 years of inflation on a fixed income. Most fixed interest savings accounts (1.5-2.5%) cannot keep up with inflation, so you will not be on the winning side of interest rates unless you invest your money in riskier areas, which Suzy Orman would say to you “DENIED!!!”. Healthcare will be a huge expense unless you're in Canada. Your house will require continuous maintenance (new roof, furnace, water heater, etc...). I don't know where you house is, but I cannot grow a lot of veggies in my back yard. The Seattle weather is not very conducive to back yard farms. You need more sunshine and a green house. Get a chicken coop as well. You also have to think about how much traveling you want to do and have a budget for that as well. Last point is what are you going to do with your time? 52 is pretty young. I've known of people who sold their business and retired in their late 40s and went nuts and had to go back to work. It's hard for people who work hard to just STOP and retire. It's a massive life changing event, but I wish you luck!
 
Old 04-18-2011, 02:30 PM
 
281 posts, read 712,026 times
Reputation: 118
Quote:
Originally Posted by Timmy View Post
Ira500 just gave me a hint (since he/she is a real estate agent). Maybe a reverse mortgage would help when we get old.

Capo: I agree that I should visit one of the financial planner.

If I have more than $1 MM for retirement and it is not enough, how do other people who only have a couple of thousands to retire?? Or retirement just a dream or just for the super wealthy? Sad.
Again, I think the main challenge here is not that you're retiring, but that you're trying to retire nearly 15 years early. That's 15 extra years of your life you have to support... for 2 people.

You clearly have worked hard to save up a nice chunk of money and to pay off your house. All of which are commendable. If you're hearing any uncertainty from us, it's purely from the fact you're retiring early, in an expensive part of the country, with unknown healthcare costs, inflation, goals/life-style preferences, etc.

I'm not saying it can't be done, I'm just saying make sure you really, really do your homework and assume worse-case scenario for cost planning.
 
Old 04-18-2011, 02:52 PM
 
37 posts, read 95,261 times
Reputation: 35
Thank you for all your advises. Maybe I need to re-visit my options, including working part-time.
 
Old 04-18-2011, 07:53 PM
 
Location: US Empire, Pac NW
5,008 posts, read 10,789,347 times
Reputation: 4125
I just did a simple calculation in Excel and mapped out your savings. Assuming a 4% yield on your investments (which means you will have to move some of your money into stocks, mutual funds, and high yield investment grade bonds, and assets like gold) your savings will actually increase until you're about 70 with only 42,000 a year in expenses.

Did you make that much before taxes when you were working? Usually experts will say you need to assume lifestyle costs at 80% minimum from when you were in the workforce. For example, if you earned $100,000 when you retired per year, then you should assume your expenses will be $80,000 a year.

If you have roughly $1.6 million in the bank, I'm assuming your income level is similar to mine ... maybe a little less. So assuming your expenses are 80% of my income then you will run out of money when you're 75, after factoring in the projected cut in SS benefits that is inevitable when you look at the demographic bomb about to hit the US.

Now, if you retire when you're 62, and you continue working at the same earnings level (adjusted for inflation) and you contribute 15% of your money to your 401(k) or other investments and get 6% ROI, then you will have money until well into your 90s (98 to be exact).

No debt, no reverse mortgages, and no having to flee to Canada for free health care.

So, the message here is pretty clear - compounding works in your favor. Dollar cost averaging over the next 10 years even according to the gloomiest economic forecasts means you will be able to put away at least another 1 million and have enough to last into your 80s.

My advice: delay retirement. You also avoid penalties you incur when you take money out of your retirement account prior to 59.5 years of age.
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