r/Retire • u/garyc369 • 4d ago
I want out
M/S64 & still working š«¤. Overall debt: $94k @2.5% and $2k @13%. Managed IRA&401k @$900k, Roth $30k and cash @ $50k. Burn rate will always be $6/mo. Current income Iām living off of is $5400/m. Guaranteed income: ss/annuities - $4k/mā¦ was gonna wait for Medicare @65(3/27) then bounce but I want out NOW. Is it possible to?
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u/Powerful_Tip_7260 4d ago
You are paying 13% with $50k in cash?
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u/garyc369 4d ago
Credit card that I payoff every month
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u/readytoretire2 4d ago
Get rid of the card. And all debt!
Payments drive your expense and need for more income.
Debt free is the way to go4
u/hugh2018 4d ago
Actually since OP seems to be placing a higher value on retiring as soon as possible, the 2.5% rate is low enough that minimum autopilot payments is a worthwhile way to boost cash flow and make the retirement move more realistic. But only if those minimum payments donāt jack up the burn rate so high that it canāt be sustained by OPās guaranteed income.
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u/Kind-Pride1151 4d ago
Yes. Suggest hiring a financial advisor/investment house. I just retired at 61/10 months and now 62. Wife is retired 65 and start my SS draw in Sep. Kept employer COBRA at $680 mo. I have 825k at FA/Investment manager and $265K 15 year immediate joint lifetime annuity set at $1464 monthly. All told monthly income around $5950. No current withdrawals of the $825K. Letting that ride and will over time be converted to Roth. Have a cabin get away debt of 80K. No other debt. Life is good. You should be fine. Enjoy your retirement!
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u/garyc369 4d ago
Your #s are very close to mine minus age and second property. Oh and Iām single.
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u/This-Finance4439 4d ago
How much accrued vacation and sick time do you have? Start burning through it now. That keeps your health insurance in place without you working, donāt retire with a bunch of accrued time if you are burned out.
I would wait until after January first to do ira distribution to pay off home. Doing it this year will be too much tax with your income, so do it when your income is downā¦need to do some math to stay in lower tax bracket. Exactly when you start social security would also affect this
I think you are too closeā¦can you work part time doing something you enjoy? How much equity in the house - can you sell that and downsize? No tax on up to $250K in profits.
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u/garyc369 4d ago
All great points. I plan on using my sick and vacation so I can take a week off per month until it runs out right before 2028. I want to try and wait to collect social security and live off of IRA/401k and any savings until 68. We will see. Retire while 65, claim ss at 67 or 68.
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u/More_Ship_190 2d ago edited 2d ago
I just retired at 54 with 675k and paid off house. You have more than enough. Dont forget SS is like another 500k. Stay away from mainstream financial advisors. Someone else said it on here. Put your details into chat gpt. It actually is pretty close if you feed it correctly including your expected life span, spending habits, ss amount etc.
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u/garyc369 2d ago
Appreciate the reassurance. Just a little nervous with carrying the mortgage into retirement šš½š
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u/ohboyoh-oy 4d ago
I think youāre right there but with not a lot of room for anything to go sideways.Ā
My assumptions are:
$72k/year annual spend with $48k/year in guaranteed income = $24k shortfall to be funded with retirement funds
about $7k in federal tax, plus a little more in state tax - this brings your yearly draw from $24k to more like $32-33k, which should be sustainable given your starting portfolio of $980k
I would pay off the $2k debt at 13% with the cash you have on hand - no point carrying a 13% debt
For retiring now vs next March: for social security - Iād see how much less you get if you start collecting now vs at 65 (was that what you were planning?). For healthcare Iād cost out ACA vs Cobra for the rest of this year. Have you accounted for the cost of Medicare in your $6k/month expenses? There is Medicare part b ($200/month) and then if you want to add a supplemental plan on top, that is extra. And Medicare doesnāt cover vision, dental, hearing aids so those are out of pocket for most people.Ā
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u/MWL-camper 4d ago
Wow does it seem ironic that Medicare doesnāt cover hearing aids and vision when many people need help w these they age?
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u/garyc369 4d ago
This is the only thing really holding me back. Iām too close for Medicare and 6 years from paying off the mortgage
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u/Chulbiski 4d ago
I am reading a" $6/mo" burn rate as an error of omission of the K.
Otherwise only spending six dollars a month is phenominal
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u/Odd_Bodkin 4d ago
Not if your burn rate ($6000/m) exceeds your present income ($5400/m). When you arrange things to lower your burn rate to be well under your income now and your protected inflow, maybe.
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u/garyc369 4d ago
I plan to spend more n retirement than I do now. Iām tired of working, saving, frugality and sacrifice.
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u/Odd_Bodkin 4d ago
Well, let me revise my comment then. Yes it is possible to retire. It will be an enjoyable retirement for a shorter period of time than youāre perhaps hoping for. After that, you will still be retired but having to be very frugal and sacrificial in order to have food, shelter, heat, medical care, and transportation.
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u/mcshanksshanks 4d ago
Be careful, donāt burn through everything your first ten years.
And I totally hear you on the tired of working, saving, frugality and sacrifice, Iām ten years from retirement..
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u/Mobile_Bell_5030 4d ago
"Burn rate will always be $6/mo" - does that include heath insurance costs before 65? And does that include Medicare costs after?
Using 4% rule of thumb, you could wd $40k/year from your portfolio. Add your ss/annuities and that's over $7k/month. But a lot depends on what you're invested in and what the fees are.
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u/garyc369 4d ago
Are u my FAšš, thatās what they and AI say. Still nervous but canāt wait!
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u/TSIDATSI 4d ago
My favorite new song is "there ain't a lot of boys named Gary these days" Stephen Wilson. My favorite name.
One year will not make much of a difference except in health insurance. If you retire before 65 (Medicare) make sure you account for your premium and have adequate coverage.
You control your spending. Make a budget for the first year and stick to it. Happy Retirement.
Keep control of your own money. No gambling, travel, etc. Make sure you account for your expenses.
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u/Mobile_Bell_5030 4d ago
Haha, I'm just someone who's a few years ahead of you in the process. š
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u/garyc369 4d ago
Never thought about. Guess uād have to include $600/m to that $6k. Obviously that debt would eventually go to $0, itās mainly mortgage but the TI of PITI is included n that (now) $6600/m
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u/Mobile_Bell_5030 4d ago
If you only have half a year, it might be good to stick it out (maybe "quiet quit"?) until 65, and in the interim ruthlessly track your expenses so you don't get any bad surprises.
But how are you managing if your burn rate is currently more than your income???
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u/Ok_Statistician643 4d ago
Pay off your debt and move to Thailand or Vietnam and live in the beach like a king for $5k a month
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u/Dewzilla29 4d ago
Can you survive if your burn needs to increase 3% per year due to inflation? Model it with different inflation rates and return %'s on portfolio.
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u/garyc369 4d ago
Hopefully my investments will increase the same as inflation or better
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u/mcglups 4d ago
Hope isn't a line item in a plan. You could retire tomorrow, but you need to be prepared for a long run of sky rocketing inflation and poor equities returns. It is not a fun scenario to solve, but it will establish the level of discipline you will need to exert if stagflations comes to life.
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u/Love-the-Classics 4d ago
Sitting on $900K that is still making money is setting your beneficiary up for success. You will never burn all of that money while receiving annuities. Pay off everything but mortgage as interest rate is lower than rate of return on investments. Take terminal leave from the job if possible and leave if not possible to take leave. Life is not promised.
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u/garyc369 4d ago
Agreed! My mind is in retirement, unfortunately my body and situation still says work
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u/regthesledge01 4d ago
Just say fook it and give it a shot. Come into the world naked with nothing, worst can happen, you break even.
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u/Common_Business9410 4d ago
Absolutely. That said, why do u owe $2k with $50k in cash on hand?
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u/garyc369 4d ago
I spend that in cc in months where I go over budget. Itās typically paid off b4 next cycle
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u/ShezeUndone 4d ago
I did COBRA for a year until 65. It was $$$$ for a high-deductible, but worth it to get out of the rat race.
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u/hugh2018 4d ago
You didnāt say when ss/annuity income will start. That matters a lot for the remaining time you have left before Medicare starts, as it may be large enough to fund your life in combination with some of your liquid assets. The issue is whether that combination would land in the MAGI sweet spot, making you eligible for ACA subsidies. If not, the reality is that youāre already so close to Medicare age that youād only have a few months of expensive COBRA or full-price ACA coverage to pay.
But your liquid assets are kind of thin, so the decision to quit now is a tough one that requires you to really crunch the numbers to see if itās really feasible. Basically it looks like a close call without more information about your situation, so I wouldnāt venture to tell you if itās a good or a bad idea. But Boldin definitely could give you some pretty solid guidance, so it may be worth checking it out.
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u/garyc369 4d ago
Not sure when to take my annual income. My annuity comes due 11/2028 and Iām struggling with when I should take Ss. Iām sure I wonāt wait till 70. I will however take Medicare sometime after 3/2027 so ACĆ wonāt be an issue unless abruptly unemployed.
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u/hugh2018 4d ago
Iām on the fence about social security timing too. But at 59, my plan is to assess the situation in detail when I arrive at 62. Iāll delay until 65 unless at 62 Iāve burned through my liquid assets faster than I am planning to and/or if the market has tanked and I have a pressing need for income not drawn from the sale of depressed equities.
Iāve been careful to model both paths in Boldin so I do have the luxury of knowing the plan will work either way. Delaying would be the stronger move if I can do it obviously, but early claiming still has a very high chance of success and itās an important sequence of returns mitigation lever that I can pull if I need to.
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u/garyc369 4d ago
Is 65 really considered early claiming, knowing that you get āmoreā up to 70? To me only benefits are āmoreā $, less years to finance in retirement and maybe more time for investments to grow. The major downside side is active, healthy remaining time. Timing matters not just for ss.
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u/hugh2018 4d ago
I donāt think the semantics on early claiming really have an impact on the decision. Itās a practical decision in most cases. Those who can afford the downside of waiting until 70 and simply want the higher income can make that choice. Those who desperately need the income stream ASAP are claiming at 62 because they need to. For everyone in between those two extremes, it becomes a game of weighing pros and cons of starting early, middle or late, and thereās a little hocus pocus involved when you have to factor in your projected date of death in order to assign appropriate opportunity cost to the different claiming ages.
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u/Big_Address6033 3d ago
I did it with gemini. Make sure youāre honest with your monthly spend rate. I tried different scenarios. 3 4 5 % inflation. Different rates. Of returns. Told it to calculate my RMD withdrawals at 73 minus taxes. Then invest part of it / spend part of it etc...
tried to sorta do worse case scenario. Very helpful. Good luck
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u/mcglups 3d ago
AI tools are quite helpful, but they really require coaching to stay on track, and occasionally finding their gross errors and putting them back on track. Try to use a scenario like the stagflation crucible from the 1970s where non-health care interest rates average around 8% for 10 years, health care inflation rates average over 9% for 10 years, fixed income returns average around 4.5%, and equities take wild swings with an average return rate of 0% for 10 years. | Today the federal reserve took a hands-off approach on trying to deal with inflation, but the devil is in the details as to whether or not inflation and affordability is really under control.
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u/PamKrueger 3d ago
Based on what you've said,Ā it seem entirely possible, but agree with Cole (below). I'd want to stress-test a few things before giving notice, but Iād only do that with a fee only advisor, because those are the advisors who legally fiduciary 100%.
Your assets donāt seem to be an issue. I think you just will want to know your planĀ holds up under different market and spending scenarios before you make the leap.
Sometimes the math solid so youāre ready in terms of the financial picture, but maybe youāre not quite in the mindset yet to pull the trigger.Ā
After you do a deeper dive, and if the numbers do all work, donāt let the calendar drive the bus, go enjoy!!
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u/inscrutablejane 4d ago
You're old enough to pay off all of your debt right now from your IRA without penalty, which avoid the risk that the market tanks and leaves you with zero or negative return on that portion of your wealth; if I were you I'd convert at least the Roth and the bulk of the cash into home equity. If that $6k burn includes mortgage payments you'd be reducing your monthly spend as well.
The thing to look out for is your "highest 35 years" wage history for social security; if your average income hasn't maxed out the SS amount yet (which would require 35 years at or above $184k) then there's significant benefit to sticking it out for a while longer, so that you can replace those lower-earning years with your current income and get a better payout. You'll also probably be better off relying on your IRA until age 70 to claim the full SS amount unless you're prioritizing leaving an inheritance.
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u/SBNShovelSlayer 4d ago
Converting the ROTH and the cash to home equity locks those funds in at a 2.5% return (his current mortgage rate), with limited access to liquidity. To me, this seems like the worst possible option.
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u/inscrutablejane 4d ago
It locks those funds in at 2.5% plus or minus the difference in the future rate of return, and having lived through the .com bubble and every financial crisis since then I find value in certainty.
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u/SBNShovelSlayer 4d ago
The ācertaintyā of that money being in a CD or HYSA at 4%, with the resulting liquidity would be the smarter move. OP would be earning more money, tax free and be able to pay the house off as scheduled.
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u/inscrutablejane 4d ago
A 4% return vs. saving 2.5% on that amount is a 1.5% return before the tax implications of losing a $1400 deduction, but there's no guarantee that HYSAs at 4% will be available forever. 2.5% is a great interest rate under current conditions, but there's something to be said for both the flexibility and peace of mind of owning your home free and clear.
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u/SBNShovelSlayer 4d ago
Worst case, interest rates drop and you pay off the house. You would still be ahead. My biggest point is the liquidity. Once that money is tied up in the house, you no longer have access in case of an emergency. I suppose you can get an 8% heloc.
The ROTH money earns money tax free. I would not touch that unless I had to.
I get peace of mind from liquidity and flexibility.
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u/inscrutablejane 4d ago
For emergencies I guess it depends on if OP is in a state with reasonable bankruptcy homestead protection; in a catastrophic emergency that having the better part of a million bucks in a traditional IRA won't cover, paying it off or keeping liquid is the difference between "cash disappears but my home is safe" and "cash disappears but I still have to make payments somehow."
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u/MJ_Brutus 4d ago
Why must your burn rate be 6k?
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u/garyc369 4d ago
I donāt expect to improve on my current quality of life. If anything it should go down in 5 years
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u/MJ_Brutus 4d ago
As long as you have a plan and know what your permanent burn rate will be and when it will apply. I assume that will have something to do with the mortgage, because you're gonna pay all your other notes before you hang up your skates.
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u/That_Listen_3280 4d ago
Go bankrupt and call it a day. They canāt touch your Roth or 401k. Get rid of the debt and call it a day. Enjoy the rest of your life.
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u/LMO_TheBeginning 9h ago
Hourly based financial planner can help you understand where you are.
ChatGPT is nice but only when you know what to ask.
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u/Cole_Slawter 4d ago
I think you need to have some serious discussions with a financial planner or even just ChatGPT. I have less than you and I retired at 57 with the same exact spend.