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Topics - Que1999

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Early Retirement / Can I retire? I'm so tired of this job/HCOL area!
« on: March 20, 2021, 12:36:40 PM »
Hi!  Huge fan of the blog, and am very grateful for all the advice over the years that you have provided for my family & I.

I'm tired.

I've been working a high-stress, politically charged job for 16 years, and I would love some input on whether or not I can OR even should retire early.  The wife & I are both 40, and the kids are 6 & 9.  I work for a local government agency, and when I reach 20 years of service I qualify for a 50% pension for the rest of my life.  That's in 4 years....  That number can swing above 50% based on whether or not you contribute extra into the pension fund over the course of a career.  Salary for last year was around $170k, and should remain consistent throughout the next 4 years.  I have made excess contributions for most of my 16 years because it accrues at a guaranteed 8.25% interest.  If I retire right now, I have an excess of about $250k that I have (2) options with:

1) I can leave the money IN the pension fund and will begin receiving approximately $86,000 per year for the rest of my life beginning in July of 2025.


2) I can withdraw $55k tax-free (because these were post-tax extra contributions) & roll over around $195k to my IRA to avoid any tax.  This would reduce my pension in 2025 to around $60k per year.

Please note the pension has no COLA adjustments, so inflation would eventually chip away at it’s spending power.

The next option would be to STAY for 4 more years, reach my obligation and qualify for the full pension + a $12k bonus every year for the rest of my life.  Guesstimating the pension at that time would be difficult due to future contract negotiations/raises....  but if I had to guess I'd say.... $90K if I withdraw the excess contributions from the pension fund and rollover/withdraw the tax-free amount, or $115k or so if I leave the excess contributions in.  Just a guess, but I think these numbers should be pretty accurate.  The problem is I don't want to stay in this job anymore, and I don't want to remain where we currently live.  It is one of the highest cost of living locations in the US, and is abound with ‘issues’.  On a Cost of Living comparison website, where the median cost nationwide is 100, my current location is 178.  The area that I'm looking to relocate to is 78.  $100k where I live now = $40k where we are considering, according to the site.  We live in a 1500 sqft apartment, and the monthly maintenance/property tax = $1550 per month.  No mortgage, paid it off last year.  Also, no debt aside from credit cards that are paid off monthly for bonuses.

Our assets:

My 457:  $192k
Her 457: $179k
My 401k: $125k
My Annuity Fund: $30k (will be rolled over to IRA at retirement)
My Roth IRA: $46k
Her Roth IRA: $45k
Her T-IRA: $6k
529-1: $20k
529-2: $20k
Vanguard Brokerage Acct: $65k
100% Home Equity - If sold, we would walk away with around $450k cash
Checking Account - $50k emergency fund

All investments are index funds - 100% equities.  Mix of S&P/Total US Market funds.  No bonds for me.  I consider the pension and eventual Social Security payments as my fixed income…  I would reach the second bend point in 2025, coincidentally, when I would reach the 20-year mark.  So retiring 4 years early would be cutting down my SS payments by a bit.

As with anything in life, there’s pros and cons to each choice.  If I stay for the next 4 years, the pension would substantially increase, however, that means I have to continue paying the high taxes/cost of living for the next 4 years as well.  I can instantly cut our cost of living/expenses with an early retirement and geo-arbitrage.  A nice sized home that would meet our needs where we are considering costs between $200-$225k, and the property taxes are extremely low at around $1500 per year.  Not to mention, obviously, everything else is much cheaper as well.  The thing is we’d need to fund our living with the (2) 457’s + taxable brokerage account until the pension kicks in in 2025 (and decide which pension option I’d be going with?)...  Also, I have to mention that I would qualify for health insurance ($10 per month premium) for life at the 20-year mark, but the health insurance offered is extremely location-centric.  I would have to stay in the HCOL area to take advantage of it.  If we relocate, I would need to purchase health insurance through the marketplace, which of course would require me to stay within the income requirements to qualify for ACA subsidies.

Total in the 457’s = $371k
Taxable Brokerage Account after home sale:  $450k + $65K + $55k (if pension withdrawal) = $570k
Total: $941k - $225k for new house = $716k with no mortgage......  Or should we rent?

Should we stick it out?  Should we leave?  Can we even retire yet?  I’m so conflicted…...

Thanks in advance for your help!

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