My spouse really wants to retire early (late 50s) for multiple reasons and prefers not to work in any capacity afterward. I haven’t worked for pay in years. Our travel plans do not involve camping, but are of a more frugal road trip variety.
Our financial advisor says my spouse can retire now and we would then have the opportunity to do Roth conversions over two or three years of no income.
Not that we don’t believe our advisor, but we have significant concerns about extra expenses in the next 5-8 years and what that would do to our savings, particularly in the case of an economic downturn.
Tuition/college expenses: 3 more years of those.
Mortgage: We could pay it off, but we now have the balance in an account that earns more than our mortgage interest rate. We plan to downsize and pay it off in about 8ish years.
Deferred Home Maintenance: Our home is at the age where original furnace, water heater, etc. are on their last legs and there are some repairs and remodeling that must be done to get the best price when we sell. Home-related expenses in the next five years are likely to far exceed a typical five-year period.
Health Care. We will have to fund our own health insurance for years before Medicare.
Even if we are frugal about travel in our go-go years, these items could easily require us to draw down on the nest egg early on — even though income should easily exceed expenses in future years after medicare and social security kick in and we have downsized. The advisor says we should still be okay, but “should” isn’t the same as “absolutely will, no question about it.”
It’s a frustrating conundrum. Continuing with the status quo allows us to continue to save rapidly while reducing the years we are relying on our nest egg, but feels like staying in a loveless marriage at this point. We don’t want to waste our healthiest years with my spouse toiling away in burned-out drudgery just to squirrel away funds we may not need. And the idea of a potentially lower-paying but more enjoyable job holds no appeal; we are psychologically ready to be done. First world problems, for sure, but still hard to solve.
Kinda jealous of those of you who still really enjoy your work, but grateful that we are able to contemplate retirement at all at this age.
My H absolutely detested his job at the end. Basically, the company was working hard to make the old timers want to leave. It was really wearing on him. He retired in his late 50’s, and it was a great choice for him. I planned to work another five years, but that plan got derailed and I ended up retiring a few months after he did. Our FA told us we’d be fine, but I worried like crazy. I like to be in control, and I felt very much like everything was beyond my control.
Fast forward four years, and I am comfortable with our choices. I realized that we would never be rich, even if we’d kept working a few more years. We have the luxury of being in a position where we won’t be poor, which was key to our decision. Try running your numbers in Firecalc to see how you might fare … if you have a good FA, the results should align with their assessment of your financial situation.
For us, being healthy was very important. Not working has allowed us to remove stresses that were problematic for us. I didn’t want my H to have a heart attack, so I decided I’d rather have him alive & healthy than have a few more dollars in our accounts. Okay, maybe a lot more dollars, but how much is enough? Only you can determine what is best for you. But I just wanted to say that money is important … but so is happiness.
Your comment about your husband reminds me of mine. When he retired, the next time he visited his doc his blood pressure was way down. Doc asked how he managed that. His response - “easy - I retired.”
Lots to consider. A couple of quick thoughts. Much can depend upon whether there is a pension (reliable income, not dependent on market). Also, if you plan to do Roth rollovers that will increase income…. could derail any plans to use marketplace subsidized health insurance.
This is a big one. We were looking at doing this until I found out that I was eligible for “retiree” health care from my company. Very reasonable premium for very good coverage. That really helped make the decision for us although we still waited until we were close to 64 to retire.
We are getting health insurance on the exchange, and are fortunate that here in MA there are many plans to choose from. It’s pricy, the bronze-level plan we got with $3300 each in deductible runs about $1,700/month. There were cheaper ones but this one has the hospital network we want (some have really restricted networks), and virtually all of our doctors take it.
Re: subsidies, the good news is that the Inflation Reduction Act of 2021 eliminated the subsidy cliff, where if you were $1 over the income limit you lost the entire subsidy. Now it tails off gradually until it is gone.
This does have repercussions for things like IRA disbursements and Roth conversions, basically every extra dollar of income has an 8.5% or higher surtax due to the reduced subsidy.
I believe the subsidies were only extended through the end of 2025.
the Senate recently passed a three-year extension (through 2025) of enhanced subsidies for people buying their own health coverage on the Affordable Care Act Marketplaces. These temporary subsidies were originally slated to last two years (2021 and 2022) and were passed as part of the American Rescue Plan Act (ARPA). The enhanced subsidies increase the amount of financial help available to those already eligible and also newly expand subsidies to middle-income people, many of whom were previously priced out of coverage.
Have you costed out what health insurance will cost?
DH exited 8 months before he turned 65 and I turned 65 4 months after he turned 65. DH had a few options (like working 30 hours/week), but his boss was a jerk and DH saw we had enough money (and I agreed that he could retire then, because his emotional well being was at stake). I had returned to work (sunset career) for last 4 1/2 years - and worked enough hours to pick up health insurance, otherwise COBRA would have cost us $1K/month more than what it did from my employer. It was better to keep him on my insurance and we both went to Medicare A/B plus supplement together (he picked up Medicare A at age 65).
You might see if you have on the market options that are affordable.
I see where you might want to get the college expenses out of the way.
You also might want to have the house repair ready by the time you project DH will retire.
Most likely your DH won’t want to change employers or do something else to continue working until the numbers work out where you are comfortable retiring (before he and you are 60).
You might have your financial advisor work out the scenarios on Roth Conversions when you are closer. Two or three years of Roth conversions – is that going to be enough, and how does your FA have your cash stream worked out once you do retire?
Have you solidified you are selling your home when you retire, and then doing…X, Y, Z. Working out what you project on all of that (will your home sale cover where your next want to live?)
My brother was in a lucrative but high stress job. His wife begged him to retire a year before he wanted to, and he complied. His last year was a 7 figure amount (due to his ownership share in company, and what his work areas brought in). His wife is 13 years older than him, and her health was declining, and I do believe she thought the job might kill him that last year. Brother in retirement immediately quit smoking and lost 40 lbs (he liked being active, and now had the time). Stopped cholesterol and BP meds. When he saw his MD, his BP was normal and his lipid panel was excellent. His doc asked him what he was still taking, and he said “nothing - I quit it all”.
We have budgeted health care to be $25k a year based on current income, but that should go down in future years when we have no income other than Roth conversions and capital gains on earnings.
If we retire before age 60, we will have a lot of years with no income in which we can do Roth conversions to significantly reduce future RMDs (don’t know if we will eliminate). We have no pensions other than one that is less than $500/month starting when DH is 65.
Our plan is to stay in the house until we pay down the mortgage to the point we can buy a new home with just equity and use the rest of the sale proceeds to pay off the remaining mortgage. We estimate we will reach that point in 5-8 years, based on current home values in our area (both for our house and the ones we are interested in buying). We want to move to a smaller, newly constructed home to save on utilities and maintenance thereafter.
We were on track for retiring at 65 with all the bases covered. But I think we are gonna duck out early and that carries some risk. On the other hand, I don’t think as many tax-advantaged Roth conversions would be as available to us if we waited.
You will need money to live on (and pay college, mortgage, medical insurance etc). I assume since there is FA blessing you have a lot of savings available that can be tapped without tax consequences. Just make sure it feels like enough, even if inflation impacts its buying power.
This is an interesting listing (for people considering retirement in a city where they find a high level of educated people), however there are certainly some extremes on political thought - and for many in the ‘wrong’ area for them, this would be ‘troubling’ for QOL.
Political thought by itself may not be a quality of life problem, but it can become a quality of life problem if laws, policies, and customs resulting from it do affect quality of life.
I thought Boston would be #1 as it was the place we found our peeps, but Ann Arbor—of course! Go Blue! Best college town on the planet and where DH and I met and whet our young intellectual whistles. If not for winters, we’d be there instead of AZ.
We’ve had a few discussions here (and other threads) on Long Term Care (LTC) insurance. I’m wondering if anybody in this wise group has knowledge or experience with LTC Nonforfeiture benefit rider ?
My recollection has been that it means if rates increased, I’d have the option to cancel and to get a refund of the money paid (without interest).
Looking back at my folder with policy and old notes, I think(?) it actually means I could stop at any time and a have policy with max benefit of the amount paid to date. Darn - that’s not as appealing as my recollection since it would only be useful if I qualify for LTC down the road.
My policy is Genworth (through an employer group plan). I pay an extra $10/month for this rider.
New topic - we received letters this week from PBI about Genworth hack. They are offering credit monitoring … anybody familiar with Kroll credit monitoring service?
I am not, but many years ago (more than 15 but not quite 20 years perhaps), I paid for one of those monitoring services. It was annoying as they would send emails with ‘balance change notice’ simply b/c I had charged more than usual on AmEx.
My personal solution was to place a freeze on my credit fifteen years ago. Then a few years ago, I added text notification of every CC transaction above a very low dollar threshold. I seem to have also ended up with notification for online bill payments that I generate (not the automatic monthly CC payments).
I figure that by receiving notice of all charges, no one will hack my CC (has happened to one child more than once) and by having a freeze on my credit with the reporting agencies, no one will be able to open a new CC.
Hoping that is enough. I should set up 2FA on more accounts and consider the use of Yubikey where available.
