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My husband retired at 54 - for four months. I was sort of forced into it cause of him at 44. He couldn't stand it. Neither could I.
Thank God we didn't sell our business. Gave the new manager a package and he took over again.
We just take time off when we want. Moved years ago to where we wanted to spend our last years. We are people who
need to keep our brains going. Nothing really appeals to us but our business. And Travel, our most expensive hobby. No we
aren't going cheap. We did that with our parents as kids.
Maybe your skill of what you did as an employee can be turned into a consulting business?
IF one gets sick, it happens to the healthiest of folks, watch out. If they take away no capping at a million many are screwed. Older health care costs a lot. My dad ran up a $600,00 bill in 7 months of cancer - in 1990!
I'd say sell your house, get out from under a several thousand a month house payment. You can probably buy what you have now in the SW for a third of that house.
OP here. Thanks again for all your helpful responses which are really helping frame my thinking about the feasibility of taking such a big step!
To answer a couple of open questions, I am not single but my wife has not worked for many years and we have always been comfortable on my income. Our monthly living expenses (food, entertainment etc) are way, way, smaller than the mortgage, insurance, property taxes, state taxes etc, associated with living in the SF Bay Area. I could reduce vehicle expenses also. Eliminating much/all of this would massively reduce our monthly outgoings.
It also seems that if we sell the house it might not necessarily make sense to buy a new house outright. ie: rather than purchase say a $400K house for cash, I could leave part of that amount in investments while taking an interest deduction on our taxable income. I know I need to consult with my CPA for my particular circumstances, but just thinking through the big picture.
My work is still of the nature that I could consult or do part time engagements if I feel in need of intellectual stimulation. I am also on the board of a notable 501(c)3 non-profit (soon to be board president for 2-years) which certainly keeps me sharp. Engagements like this are also useful for networking other part-time opportunities, while not being in a 9-5 job.
My advice: go ahead and retire, sell the house, sign up for Cobra. Then rent, don't buy. What about putting your stuff in storage and live in the RV for a while?
After 2 yrs make a decision - have you found an area you absolutely love and will take any old part time job for the benefits? Do you want to go back into tech for a few years? You could relocate somewhere with lower COL than CA, after all. Or work remotely.
If you follow the news you've heard the ACA may not go away. So staying fully retired could be an option in 3 yrs.
The devil is in the details. You really need to put together a budget and run the numbers. If you are a high earner it will be hard to go to an income of maybe $80k per year (assuming $1.5M in saving, $500k from selling the house (rest goes into another house) giving $2M investments, and maybe average 4% a year in return on investment).
Our retirement budget is about 75% of our pre-retirement budget. We have friends who are closer to 100%. It all depends on you, what you will do with your time, where you will live, whether you are used to driving new cars, go on lots of trips, eating out, etc..
The devil is in the details. You really need to put together a budget and run the numbers. If you are a high earner it will be hard to go to an income of maybe $80k per year (assuming $1.5M in saving, $500k from selling the house (rest goes into another house) giving $2M investments, and maybe average 4% a year in return on investment).
Our retirement budget is about 75% of our pre-retirement budget. We have friends who are closer to 100%. It all depends on you, what you will do with your time, where you will live, whether you are used to driving new cars, go on lots of trips, eating out, etc..
I would recommend waiting 5+ years if possible.
I agree with your assessment.
I retired at 53 and moved from a HCOL to a LCOL. We are very happy in Southern AZ. However, we have met several couples from HCOLs that are very disappointed.
In other words, they move from the Bay Area or Chicago or New York to a different part of country and expect to find everything that they had in those large cities in their new location. When they find out that there is not a Michelin star restaurant in town and a symphony concert every week, they cannot handle it. Recently, I have met folks who are on their third move in the first four years of retirement.
I think that the OP needs to find a community and see if the area is really livable by his standards and then work out a budget to see if he can make it work.
Thanks for the responses all! Yes my income in the Bay Area is (was) high but my expenses are high also. My property taxes are $15K/year alone and the mortgage on my 4 bedroom house is several thousand/month. (Though thats less than it would cost to rent a small apartment around here) I realize though that I am at or have just passed peak earning power and did not realistically expect to have a very high level of income for the rest of my life. I saved a lot of what I earned into retirement savings, and with a lower or non-existent mortgage and lower property taxes that would save a great deal. I have also already purchased (and paid off) the most expensive entertainment items I might use in retirement such as a new RV and other expensive hobby items. Most of the things I enjoy like music, reading, outdoors travel etc, are not expensive.
Medical is definitely an issue. Besides the ACA I am not sure how people who retire this early handle this. I suspect that some insurance will always be available. It increasingly seems that the only reason to keep on working is for medical insurance, but it would be great if I was not constrained by this.
I am not sure if $40K is enough.. probably more like $60K. However if I do not have heavy household expenses then that amount might be quite comfortable. I am increasingly feeling that I am at a tipping point, when now or in the next few years I could make the transition to retirement. (And of course I could still do part-time work for some income. It does not have to be the high-powered tech type work I have been doing)
ACA has been a success, 22 million people now have insurance with it that didn't before. People who don't like ACA don't like Obama. Getting rid of it was merely campaign rhetoric. The next president is simply going to make a minor tweak to it and re-brand it with his own name, and take credit for it. To cut to the chase on the real costs and doing "what if" with ACA, this website is extremely useful and easy to use: https://www.healthsherpa.com/
The big question you have to answer is, are you going to feel comfortable and happy living in another state? My observation from friends who have retired in another state, is they got fixated merely on cost of living of where to retire, how far they live from relatives and didn't look into the other factors. If you've been living in an upscale area, it means most people you come in contact with you have a lot in common such as your profession. You might feel out of place else. I think the way to answer the question, if it is possible, is to go visit there for 2 weeks in the neighbors you would likely move to. Go grocery shopping, restaurants, and other every day stuff you'd be doing and coming in contact with. See if it is what you would enjoy.
If you've not done so already, meet with a CPA who has nothing to sell you for investments, and create a report for different retirement scenarios for costs in different areas. See how that would work for you.
Since you haven't said, I am assuming you are single, in which case, I would go for it. Housing is still hot, in your area, easy to sell. That may change. Cash in, relocate, and reinvent yourself to whatever you want. Or not. If you decide its too expensive, then do something to supplement your income and get some insurance with it. Most early retirees I know tell me it is less expensive than they expected it to be. I know I could easily live on 2/3s what I make now in retirement, especially if I was single.
That's a good point. I realized in retirement planning for expenses there would be several costs we wouldn't have at all such as no mortgage, no 401(k) or IRA contributions, cancel the Term Life Insurance polices since they were there just for income replacement if one of us died before retirement. I'm not even talking about other reduced costs such as the cost of the commute, work clothes and lunches 5 days a week.
My financial advisor tells me the two biggest things that may negatively effect people's retirement with respect to costs are issues with health and relatives asking for money. The relatives who are younger or have not planned their retirement come to his clients he told me asking for money. Something to watch out for.
i hate dislike the aca plans . our aca provider , the 2nd largest provider of them in nys went bankrupt and left us all scrambling .
the co-pays and deductibles are anything but affordable and are pretty much pay as you go despite the high premiums you pay. these are separate from the deductibles and out of pockets .the plans suck for anyone who is not getting subsidized . unfortunately i am stuck going that route for 9 months until i am 65 .
have a serious event that happens near year end and carry's over in to the next year and you can have almost 13k in out of pockets just for one person as you hit two years co-pays . . that is in addition to almost 10k in premiums paid in over those 2 years .
that is per person in after tax dollars , not pretax like when getting it through work .
you call that affordable healthcare ???????????????
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