I said we can’t retire yet. Am I wrong?

[Anonymous]

Maybe consider recast - paying a large amount into the mortgage to get the monthly lower so it’s not such a hit when you retire

[Anonymous]

Anonymous wrote:DH and I have about $5M in a combination of retirement and non-retirement accounts. That figure does not include the house, on which we still owe over $500k. The 529s for the kids are all set, but I would like to still contribute $4-8k a year to those for the tax deduction, and to beef up the reserve for their grad school.

We are both around 50 years, and currently make about $350Ka year.

DH would like to retire. I would like to work a bit longer (5 years perhaps?), but step down to something less demanding, that would pay a lot less - like $50k annual salary, but I would have health insurance.

My biggest concern with DH retiring and my stepping back is that we may have to scale back spending, and I am not sure I can do that and not feel like we are making a big sacrifice.

I have done an analysis of our spending, and averaging out big costs that don’t necessarily happen every month, but are likely to be costs encountered sometime during the year (e.g. travel, house repairs, kid expenses etc), we spend about $18K a month. That does include the mortgage, but does not include health insurance premiums that come out from my paycheck directly. I anticipate both of us will be fully retired well before 65, so we will have to pay for an ACA plan at some point, but not right away as long as I have the lower paying job.

My question is: am I a horrible/paranoid person for objecting to my husband retiring right now? (I think we need at least $7M in our retirement accounts to account for taxes and a safer withdrawal rate of 3.5%, not to mention in 5 years when I stop by lower paying job we will need to buy an ACA health plan which is $$$. I would prefer to have $8M to be on the safe side before he retires.)

Yes, you can. Especially so, if you can continue to work at some job (since you want to) and cover healthcare.

When we (60/55) were your age (50/45), we had about $3M outside of house (with a 400K remaining mortgage) with only $45K in 529s. Kids were 12 and 9. HHI had never exceeded $250K on average since then. We now have over $8.5m, kid 1 just finished private college (full pay), kid goes in-state (3 more years to go) and we have about $250K remaining in the 529. Of course, we got lucky with stock selection and a great market.

Even assuming you make a 6% on average on the $5M and you withdraw 4%, you are still growing net worth by 2% each year. It's all about investment mix and managing return expectations. I personally think the market will grow more than that.

[Anonymous]

Anonymous wrote:How on earth do you spend $18k a month? I’d think with that kind of spending you absolutely can’t retire with $5 million saved. I could but my spending is probably 1/3 of yours. So you need to keep working.

+1
Your spending is the problem. You have 216k/year in expenses and your after tax income at 4% withdrawal rate would be about 150k/year. There are retired couples with less than half of your assets who are happily retired. It sounds like you are pressuring you husband to continue working? That's no bueno.

[Anonymous]

I retired at 53, while our youngest was basically through college. I wouldn’t have bothered if I still had kids living at home because you’re chained to your house until they’re gone. It’s not like you can take month long trips abroad or something while you still have kids at home.

We kept the mortgage. The question isn’t if the mortgage has been paid off - it’s CAN the mortgage be paid off tomorrow if you wanted to. You have to look at your entire portfolio and financial situation holistically - can you generate enough income from your portfolio to comfortably live and pay your bills? If the answer is yes, you can, and that includes paying a mortgage then there’s no problem.

In our situation, we budget $20k a month for expenses, which we can comfortably afford based on our portfolio, and $2400 a month of that goes towards the mortgage. What’s the problem?

[Anonymous]

What about if both of you stepped back to less high stress jobs? Can he go part time in any capacity?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:350k each or together? If together, how did you amass 5 million?

I’m wondering this too. We are a few years younger than OP, make close to $400k combined and have been maxing out retirement for ages. We have just under $3M total (incl house equity) and I’m not sure exactly what we could have done differently to get to $5M. There was either some impressive market picks or they have a non-standard form of income.

You could have started earlier. DH and I are your ages. We have never made more than $200k a year and most years have been below that. We have the same NW that you do. The only difference I can name, based in the info given, is that I opened my first IRA at 19 and contributed the max every year.

If we had your income, we would be well over $5m.

What was the situation that allowed you to contribute the IRA max at 19? I realize that we are all outliers here talking about our multi-million dollar net worths, but you take that uniqueness to another level.

At the time, that max was $2000 per year. So it wasn't really that unique. $166.67/month.

[Anonymous]

You cannot afford to retire OP. Go talk to Merrill Lynch or the likes. You might live to 90 or 100. Then what? You don't want to have your kids forced to support you. Tell your lazy husband to keep working.

[Anonymous]

Have him work one more year but save everything he makes. See what it is like living on just what you make for one year.

[Anonymous]

You can't afford it with the level of spending you have and don't seem to want to change. You will be very uncomfortable if you retire now or any time soon. But it's not your finances that is at issue. It's your mindset.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why does everyone keep insisting that the mortgage needs to be paid off before retiring? I’ve been early retired for 10 years, I’m still not 65, and we still have a mortgage. I could pay it off tomorrow, but it makes no sense to do that financially. It all depends on the interest rate, the tax deductions, and how diverse your overall portfolio is. You are all retirement planning amateurs for focusing so much on mortgages.

You almost always need more money to retire if you have a mortgage because your 3-4% withdrawals have to cover the mortgage payment, which is comprised of principal and interest. I don’t feel like drawing up an example, but do the math and you’ll see that I’m right.

At a certain point, it’s about retiring and enjoying your life, not maximizing net worth. Otherwise, people age 60 would use their entire nest egg to buy 10 rental properties, which would not generate any cash flow because they would be highly leveraged. They would have an extremely high return but could never retire. Glad I could help you understand this.

2.75% mortgage rate on a $500K < 4% growth on $5million.

You would be net positive by keeping the $500K in a 4% growth. Sure, you net out only 1.25% on $500k, but it's still a positive.

And then there's the possibility of a down market. They would have $500K less to be able to live on.

Your reading comprehension is terrible. Since this makes me question your ability to do basic math, I will provide an example with numbers.

As I mentioned, it’s not just about the interest rate. The reason one needs more money to keep a mortgage in retirement is that mortgage payments include principal and interest. When retiring early, as the OP suggested, they can only withdraw something like 3% of their portfolio annually. So even if they have one of those 2.75% mortgages that makes DCUM’s nipples erect for some reason, they need less money to retire if they just pay off the mortgage.

$500,000 mortgage at 2.75% for 30 years = $2,041/month = $24,492 per year.

This means they need $24,492 × 33.3 = $815,584 in assets to cover the mortgage payments, whereas they would only need $500,000 if they paid off the mortgage.

As I mentioned, you can always boost your returns with leverage if you want. But, at a certain point, retirement and enjoying life is more important than squeezing every tenth of a percent possible out of your investments or working an additional year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:350k each or together? If together, how did you amass 5 million?

I’m wondering this too. We are a few years younger than OP, make close to $400k combined and have been maxing out retirement for ages. We have just under $3M total (incl house equity) and I’m not sure exactly what we could have done differently to get to $5M. There was either some impressive market picks or they have a non-standard form of income.

I’m wondering the same. About 7 years younger than OP, with $375 k annual income, and including equity in our house (no mortgage) plus kids college accounts ($350k) we have a little over $3M. No clue how we could ever get to $5 million networth by 50.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why does everyone keep insisting that the mortgage needs to be paid off before retiring? I’ve been early retired for 10 years, I’m still not 65, and we still have a mortgage. I could pay it off tomorrow, but it makes no sense to do that financially. It all depends on the interest rate, the tax deductions, and how diverse your overall portfolio is. You are all retirement planning amateurs for focusing so much on mortgages.

You almost always need more money to retire if you have a mortgage because your 3-4% withdrawals have to cover the mortgage payment, which is comprised of principal and interest. I don’t feel like drawing up an example, but do the math and you’ll see that I’m right.

At a certain point, it’s about retiring and enjoying your life, not maximizing net worth. Otherwise, people age 60 would use their entire nest egg to buy 10 rental properties, which would not generate any cash flow because they would be highly leveraged. They would have an extremely high return but could never retire. Glad I could help you understand this.

2.75% mortgage rate on a $500K < 4% growth on $5million.

You would be net positive by keeping the $500K in a 4% growth. Sure, you net out only 1.25% on $500k, but it's still a positive.

And then there's the possibility of a down market. They would have $500K less to be able to live on.

Your reading comprehension is terrible. Since this makes me question your ability to do basic math, I will provide an example with numbers.

As I mentioned, it’s not just about the interest rate. The reason one needs more money to keep a mortgage in retirement is that mortgage payments include principal and interest. When retiring early, as the OP suggested, they can only withdraw something like 3% of their portfolio annually. So even if they have one of those 2.75% mortgages that makes DCUM’s nipples erect for some reason, they need less money to retire if they just pay off the mortgage.

$500,000 mortgage at 2.75% for 30 years = $2,041/month = $24,492 per year.

This means they need $24,492 × 33.3 = $815,584 in assets to cover the mortgage payments, whereas they would only need $500,000 if they paid off the mortgage.

As I mentioned, you can always boost your returns with leverage if you want. But, at a certain point, retirement and enjoying life is more important than squeezing every tenth of a percent possible out of your investments or working an additional year.

DP. You are not as smart as you think you are. That 815k in your example returns 48k at 6%. So that covers the 24k withdrawn to pay the mortgage plus adds 24k to the account.

[Anonymous]

If any of my money were in the market, I would not retire. I know people think the worst is over, but America is going downhill and fast. Unless you move abroad, I would keep working.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why does everyone keep insisting that the mortgage needs to be paid off before retiring? I’ve been early retired for 10 years, I’m still not 65, and we still have a mortgage. I could pay it off tomorrow, but it makes no sense to do that financially. It all depends on the interest rate, the tax deductions, and how diverse your overall portfolio is. You are all retirement planning amateurs for focusing so much on mortgages.

You almost always need more money to retire if you have a mortgage because your 3-4% withdrawals have to cover the mortgage payment, which is comprised of principal and interest. I don’t feel like drawing up an example, but do the math and you’ll see that I’m right.

At a certain point, it’s about retiring and enjoying your life, not maximizing net worth. Otherwise, people age 60 would use their entire nest egg to buy 10 rental properties, which would not generate any cash flow because they would be highly leveraged. They would have an extremely high return but could never retire. Glad I could help you understand this.

2.75% mortgage rate on a $500K < 4% growth on $5million.

You would be net positive by keeping the $500K in a 4% growth. Sure, you net out only 1.25% on $500k, but it's still a positive.

And then there's the possibility of a down market. They would have $500K less to be able to live on.

Your reading comprehension is terrible. Since this makes me question your ability to do basic math, I will provide an example with numbers.

As I mentioned, it’s not just about the interest rate. The reason one needs more money to keep a mortgage in retirement is that mortgage payments include principal and interest. When retiring early, as the OP suggested, they can only withdraw something like 3% of their portfolio annually. So even if they have one of those 2.75% mortgages that makes DCUM’s nipples erect for some reason, they need less money to retire if they just pay off the mortgage.

$500,000 mortgage at 2.75% for 30 years = $2,041/month = $24,492 per year.

This means they need $24,492 × 33.3 = $815,584 in assets to cover the mortgage payments, whereas they would only need $500,000 if they paid off the mortgage.

As I mentioned, you can always boost your returns with leverage if you want. But, at a certain point, retirement and enjoying life is more important than squeezing every tenth of a percent possible out of your investments or working an additional year.

DP. You are not as smart as you think you are. That 815k in your example returns 48k at 6%. So that covers the 24k withdrawn to pay the mortgage plus adds 24k to the account.

Opportunity cost for the win! I think I learned about that in 5th grade.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why does everyone keep insisting that the mortgage needs to be paid off before retiring? I’ve been early retired for 10 years, I’m still not 65, and we still have a mortgage. I could pay it off tomorrow, but it makes no sense to do that financially. It all depends on the interest rate, the tax deductions, and how diverse your overall portfolio is. You are all retirement planning amateurs for focusing so much on mortgages.

You almost always need more money to retire if you have a mortgage because your 3-4% withdrawals have to cover the mortgage payment, which is comprised of principal and interest. I don’t feel like drawing up an example, but do the math and you’ll see that I’m right.

At a certain point, it’s about retiring and enjoying your life, not maximizing net worth. Otherwise, people age 60 would use their entire nest egg to buy 10 rental properties, which would not generate any cash flow because they would be highly leveraged. They would have an extremely high return but could never retire. Glad I could help you understand this.

2.75% mortgage rate on a $500K < 4% growth on $5million.

You would be net positive by keeping the $500K in a 4% growth. Sure, you net out only 1.25% on $500k, but it's still a positive.

And then there's the possibility of a down market. They would have $500K less to be able to live on.

Your reading comprehension is terrible. Since this makes me question your ability to do basic math, I will provide an example with numbers.

As I mentioned, it’s not just about the interest rate. The reason one needs more money to keep a mortgage in retirement is that mortgage payments include principal and interest. When retiring early, as the OP suggested, they can only withdraw something like 3% of their portfolio annually. So even if they have one of those 2.75% mortgages that makes DCUM’s nipples erect for some reason, they need less money to retire if they just pay off the mortgage.

$500,000 mortgage at 2.75% for 30 years = $2,041/month = $24,492 per year.

This means they need $24,492 × 33.3 = $815,584 in assets to cover the mortgage payments, whereas they would only need $500,000 if they paid off the mortgage.

As I mentioned, you can always boost your returns with leverage if you want. But, at a certain point, retirement and enjoying life is more important than squeezing every tenth of a percent possible out of your investments or working an additional year.

DP. You are not as smart as you think you are. That 815k in your example returns 48k at 6%. So that covers the 24k withdrawn to pay the mortgage plus adds 24k to the account.

You must’ve missed the part where I acknowledged that leverage will boost returns, meaning that, yes, in the long run, they will end up with more money by keeping the mortgage.

But because of the sequence of returns risk, they can’t withdraw 6%; they can only withdraw 3%, meaning that they have to accumulate an extra $300,000+ to be able to pay a mortgage.

If they’ve got a ton of extra money, fine. But, for many people, that would mean having to delay retirement for a year or so. You can always end up with more money if you keep delaying and delaying retirement, but at a certain point, you just want to live your life.