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Message
Retirement at 55 questions
Posted on 5/18/26 at 9:36 am
Posted on 5/18/26 at 9:36 am
53 yrs old. Planning possible retirement at 55.
Current savings are approximately $2.3M. 28% of this is pension (Assuming taking the lump sum), 67% is 401K, and 5% is traditional IRA. Home is not paid for. Current value is about $500K. I am 15 yrs into a 30-yr mortgage with interest at 3.75%. My wife collects a small disability of about $14K/yr.
My advisor has been telling me for several years now that I will be okay to retire at 55 with the lifestyle we'd like to have. Right now, my maximum assumed drawdown will be about $140K/year (counting taxes), but this can be revised downward. The minimum needed to see zero change would be about $108K/year (not counting taxes). My family history suggests I will not live to be really old.
I am seeing my advisor again soon to review some finer details of how this will all look. Some of my questions will be How do we fill the gap years till turning 69.5? Where will we be drawing from, and how much from each, etc. Will we be doing Roth conversions? I feel like I have some idea as to what the answers will be, but this is his job so I will see what he says.
I am also curious about healthcare and life insurance. Where does one purchase healthcare? What are the price ranges for healthcare? Can a whole or term life insurance policy come into play if I choose an annuity with my pension rather than the lump sum? How much does that cost?
Which other questions should I be sure to ask? If you need more information, I can provide more.
Current savings are approximately $2.3M. 28% of this is pension (Assuming taking the lump sum), 67% is 401K, and 5% is traditional IRA. Home is not paid for. Current value is about $500K. I am 15 yrs into a 30-yr mortgage with interest at 3.75%. My wife collects a small disability of about $14K/yr.
My advisor has been telling me for several years now that I will be okay to retire at 55 with the lifestyle we'd like to have. Right now, my maximum assumed drawdown will be about $140K/year (counting taxes), but this can be revised downward. The minimum needed to see zero change would be about $108K/year (not counting taxes). My family history suggests I will not live to be really old.
I am seeing my advisor again soon to review some finer details of how this will all look. Some of my questions will be How do we fill the gap years till turning 69.5? Where will we be drawing from, and how much from each, etc. Will we be doing Roth conversions? I feel like I have some idea as to what the answers will be, but this is his job so I will see what he says.
I am also curious about healthcare and life insurance. Where does one purchase healthcare? What are the price ranges for healthcare? Can a whole or term life insurance policy come into play if I choose an annuity with my pension rather than the lump sum? How much does that cost?
Which other questions should I be sure to ask? If you need more information, I can provide more.
9
Posted on 5/18/26 at 9:42 am to deuceiswild
You have $2.3M right now and you're worried about how to fill the gap years between 55 and 69.5, assuming you're referring to social security at that age? Baw, come on. I wish I had $2.3M at age 55. I'll be lucky to have that at age 62.
Posted on 5/18/26 at 9:48 am to deuceiswild
Health care is going to be one of your biggest expenses. Is your wife on Medicare? I retired at 66 and I had to buy Obama Care for my wife and it was $1,100 a month. Buy term life insurance in case you die. Convert 1/3 of your retirement to a Roth and generate income, tax free in it. How much is left on your house?
Posted on 5/18/26 at 9:59 am to TDsngumbo
quote:
You have $2.3M right now and you're worried about how to fill the gap years between 55 and 69.5, assuming you're referring to social security at that age? Baw, come on. I wish I had $2.3M at age 55. I'll be lucky to have that at age 62.
No, I am not concerned with having enough money to get me to age 59.5. Obviously, there is plenty enough for that. I am concerned with my savings lasting the rest of my life, with drawing more than I need so early on.
And there is no SS until age 62, which is when I think I will begin drawing off of it, because I do not believe I will live to be very old. But I have to be prepared for it in case I do live long.
Posted on 5/18/26 at 10:07 am to deuceiswild
you can tap your 401k at 55.
Posted on 5/18/26 at 10:22 am to notsince98
Yes, I'm pretty sure this is what will be happening during those initial 4.5 years. Rule of 55.
Posted on 5/18/26 at 10:25 am to RedlandsTiger
quote:
How much is left on your house?
About 15 years. Let's call it $175K is owed. Pretty close to that. While it's possible, I do not see a refinance in my future due to interest rates.
I'm not a fan of writing a check of that magnitude to pay off a loan with a 3.75 interest rate. But I'm open to listening if you can imagine a scenario where it may be beneficial to pay it off.
Posted on 5/18/26 at 10:33 am to deuceiswild
quote:
No, I am not concerned with having enough money to get me to age 59.5. Obviously, there is plenty enough for that. I am concerned with my savings lasting the rest of my life, with drawing more than I need so early on.
Draw more than you need to until age 62, and whatever you don't use each month, put back into a high yield savings account in case you get to a point later when you start to outlive your savings.
Then at age 62, reduce your monthly draw by whatever your social security is to even it all out. Then continue putting whatever you don't use back into a high yield savings account each month.
Seems simple to me.
Posted on 5/18/26 at 10:58 am to TDsngumbo
quote:
Seems simple to me.
I used to think that as well. But it's rarely ever as simple as it sounds. And even if it were, when you get to the point of actually having to make these decisions where choosing wrong can potentially have disastrous consequences for yourself, or your spouse....you too will pause and explore every option carefully. You ever stopped to consider whether you or your spouse will die first? Are you covered in either scenario? Could RMDs potentially leave her in a really bad position regarding taxes? And those aren't even the only considerations.
Minimizing taxes via strategic withdrawals can be complicated for those of us who don't deal with this stuff for a living. The safest strategy to use which also provides for the best balance of coverage in all possible scenarios and also accounts for market fluctuations is no easy decision.
For me, this is the first time I've seriously considered my own mortality in this sort of way. I may be fortunate to have put myself in a position to get to where I am, but then again, maybe being fortunate has little to do with it. I've worked hard and made serious efforts to save money for decades. What I've managed to save is far from "safe". A bad market downturn early on can be devastating. Besides, even if I had twice as much as I have, yeah, I'd feel "safe" in just about any scenario. But that doesn't mean I shouldn't minimize the amount of my money going to the government when I'm gone.
It's more than simple math. Probabilities and other guesswork is definitely involved.
Posted on 5/18/26 at 11:43 am to deuceiswild
quote:
I'm not a fan of writing a check of that magnitude to pay off a loan with a 3.75 interest rate. But I'm open to listening if you can imagine a scenario where it may be beneficial to pay it off.
I lean the same way, but I also think it could be nice to pay it off, which would enable you to seriously reduce your monthly income. That might allow more room for Roth conversions.
Posted on 5/18/26 at 12:03 pm to deuceiswild
quote:
About 15 years. Let's call it $175K is owed. Pretty close to that. While it's possible, I do not see a refinance in my future due to interest rates.
See if your mortgage company will allow you to recast your mortgage. Should lower your monthly payment while keeping your current rate.
Posted on 5/18/26 at 12:14 pm to deuceiswild
glad my house was paid off 12 years ago.
if you have invested correctly you should not have to draw down any capital. pull out dividends and interest as needed. plus whatever cash streams you should have.
if you have invested correctly you should not have to draw down any capital. pull out dividends and interest as needed. plus whatever cash streams you should have.
Posted on 5/18/26 at 12:15 pm to deuceiswild
Some comments:
-$140k would be a 6% withdraw rate which is pretty aggressive imo. Though if you're planning for less than 30 yr retirement then maybe it's fine. I personally would go with a variable strategy like VPW which is what I will do. https://www.bogleheads.org/wiki/Variable_percentage_withdrawal
-There are ways to access 401k before 59.5: https://www.madfientist.com/how-to-access-retirement-funds-early/
-Fyi rule of 55 applies to all 401k plans as it's an IRS rule. Just be aware that not all 401k plans allow partial distributions which is what you want. Verify that's allowed under your 401k plan.
-For health insurance, many early retirees go with ACA. Though it can be expensive if you aren't able to control your taxable income. If your taxable income is too high then you get no premium subsidy. You can check what an ACA plan would cost you here: https://www.healthcare.gov/apply-and-enroll/health-insurance-plans-estimator-overview/
-I assume that you can get private health insurance still that isn't ACA. However ACA plans guarantee that pre-existing conditions are covered and have out of pocket limits. Non ACA plans may or may not offer that.
-I would not pay off a 3.75% mortgage. Just include the mortgage payment as part of your monthly retirement expenses. I have a 2.25% mortgage for another 25 years and I'm looking to retire in 5 years. No way I'm paying that off early. That payment just gets relatively cheaper with inflation each year.
-$140k would be a 6% withdraw rate which is pretty aggressive imo. Though if you're planning for less than 30 yr retirement then maybe it's fine. I personally would go with a variable strategy like VPW which is what I will do. https://www.bogleheads.org/wiki/Variable_percentage_withdrawal
-There are ways to access 401k before 59.5: https://www.madfientist.com/how-to-access-retirement-funds-early/
-Fyi rule of 55 applies to all 401k plans as it's an IRS rule. Just be aware that not all 401k plans allow partial distributions which is what you want. Verify that's allowed under your 401k plan.
-For health insurance, many early retirees go with ACA. Though it can be expensive if you aren't able to control your taxable income. If your taxable income is too high then you get no premium subsidy. You can check what an ACA plan would cost you here: https://www.healthcare.gov/apply-and-enroll/health-insurance-plans-estimator-overview/
-I assume that you can get private health insurance still that isn't ACA. However ACA plans guarantee that pre-existing conditions are covered and have out of pocket limits. Non ACA plans may or may not offer that.
-I would not pay off a 3.75% mortgage. Just include the mortgage payment as part of your monthly retirement expenses. I have a 2.25% mortgage for another 25 years and I'm looking to retire in 5 years. No way I'm paying that off early. That payment just gets relatively cheaper with inflation each year.
Posted on 5/18/26 at 12:29 pm to gpburdell
quote:25,000 is the magic number. Below that you have to get on Medicaid. Above that the subsidies go way down. Wife and I are on basically the same BCBS plan we had at work for about 270/mo for both of us. I’m hoping that I can pull this off until I can get Medicare (I turn 60 in November). We will see
For health insurance, many early retirees go with ACA. Though it can be expensive if you aren't able to control your taxable income
Posted on 5/18/26 at 12:32 pm to deuceiswild
quote:same, which is why I sold out at 58. Everybody told me I was crazy and maybe so but I’m good till 80 if I get there
My family history suggests I will not live to be really old.
Posted on 5/18/26 at 12:58 pm to deuceiswild
$140k looked like a steep withdrawal rate at first glance. But with only 7 yrs until SS that's not so aggressive. It would be pushing it for sustained withdrawals over 30+ yrs.
Up side for those of us carrying mortgage into retirement is P&I is a fixed expense not requiring inflation adjustments so housing becomes a diminishing portion of inflation adjusted expenses over the years. So, withdrawals may not need to be increased quite as much as inflation annually.
Up side for those of us carrying mortgage into retirement is P&I is a fixed expense not requiring inflation adjustments so housing becomes a diminishing portion of inflation adjusted expenses over the years. So, withdrawals may not need to be increased quite as much as inflation annually.
This post was edited on 5/18/26 at 12:59 pm
Posted on 5/18/26 at 1:11 pm to TorchtheFlyingTiger
quote:
Up side for those of us carrying mortgage into retirement is P&I is a fixed expense not requiring inflation adjustments so housing becomes a diminishing portion of inflation adjusted expenses over the years. So, withdrawals may not need to be increased quite as much as inflation annually.
Agreed. When I start retirement, all of my basic expenses will be covered by a TIPS ladder. This includes my mortgage payment which is a fixed & nominal expense as you mentioned. Since TIPS provide a real (inflation adjusted) income each year, that diminishing becomes more significant each year.
Posted on 5/18/26 at 1:41 pm to gpburdell
The $140K/yr is in todays dollars, and I only expect to withdraw that amount for 5-7 yrs. We want to do some traveling. At 62, SS will kick in, plus, I do not expect to be spending as much as I want to during the first several years. But I do understand your point, and I was aware that it's about 6% withdrawal rate.
I'm pretty sure I'll be taking advantage of the Rule of 55. My company does allow partial distributions.
I'm pretty sure I'll be taking advantage of the Rule of 55. My company does allow partial distributions.
Posted on 5/18/26 at 1:55 pm to Suntiger
quote:
See if your mortgage company will allow you to recast your mortgage. Should lower your monthly payment while keeping your current rate.
It's something to look into I suppose.
It just seems to me that holding onto that money and letting it work for me is a mathematical advantage over putting that money toward the mortgage. While I haven't entered any scenarios into a spreadsheet or anything, it seems it would take $20K or more to make a significant difference in payment... but this is why I'm asking these questions
When it comes to my home, I consider it primarily an inheritance for my two grown kids to do as they wish. There's enough equity there today to matter to them. Plus, I contribute to their IRAs every year. That's what they're getting from me, unless I die very early.
We plan to stay in the house, but we are open to moving. I am not one of those people who feel like I'll have better peace of mind by paying it off. I'd do strictly what the math tells me to do with it.
Posted on 5/18/26 at 2:02 pm to Fat Bastard
quote:
if you have invested correctly you should not have to draw down any capital. pull out dividends and interest as needed. plus whatever cash streams you should have.
Hopefully someone will correct me if I'm wrong, but I think what you're saying would only apply to something like a taxable brokerage account (which I do have one. I didn't include it in my initial post because its less than 3% of my total portfolio).
I do not believe that the portion of my 401K that is considered gains gets taxed as such. I believe it is taxed as income regardless. No?
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