Financial gurus: How can I retire at 60?

What is your profession?

Are you the custodial parent?

Does your $6k per month include your current mortgage payments or investing?

Pay off the house and rent it out. Then retire to a cheap country like Vietnam. You can live very well for $2000 a month. Which would come from your rent. I knew a guy there. He was a retired bus driver. So he got a pension from that and rent from renting out his condo.

Tell your kids to join the Air Force or Coast Guard and pay for their own college. I graduated 10 years ago and my parents paid for my college, but it's not worth it when you consider the alternatives. I'm going back to school for an associate's degree that will get me a solid and high paying government job.

dave ramsey2 wrote:

Does your $6k per month include your current mortgage payments or investing?

We share custody and split expenses for the kids. I'm a statistician in a software company.

The 6k does include mortgage, but not investing.

I know nothing about your profession, so wonder: is working abroad a possibility? The tax status and salaries can improve savings potential immensely, if you find the right employer/opportunity.

The wrinkle may be that joint custody means that kids need to be accessible to both parents. So neither staying where they are or moving abroad works, if you move.

College is the key here. Who says you have to pay for their college? Take loans that they can pay back themselves. If you want to help them repay later you always have that option. No parent should ever delay retirement by a significant amount of time to pay for college.

You could retire now if your kids self-fund college and you lower your cost of living.

That guy... wrote:

College is the key here..

I actually think health insurance is the key. How much is that going to cost you until Medicare kicks in, and what will you still have to pay once Medicare does start?

I don't think you have enough set aside, unless returns on your 401k take off or you win Powerball

Did you say you and your x still own the house together? Is it a requirement that you must stay in the house until the kids reach a certain age or graduate from college?

What does your divorce decree say about funding the kids education?

I was in your shoes (and still am for 1 more year).

The way we worked it out was 1/3, 1/3, 1/3 for college AFTER my kids college funds were exhausted. This way, the child has some skin in the game with a loan. In addition, the children can go to an in-state school (or get in-state residency after freshman year by living and working there, in addition to some other school requirements (license/registration, proof of residency, etc)

So, the way I see it is you have to be frugal for 4 years while socking away as much as you can =age 56/7, right? Look at all your expenses and work them down to the bare minimum. Phone, internet/tv, car and home insurances, Starbucks, dining out, etc.

You are smart enough to figure out all the #'s and how much you can continue to save in the meantime. After 4 years, according to what you say, half of your expenses will be eliminated. If you have to keep the house until then, sell it at that time.

I am still frugal but have been retired for 9 years now. Within reason, I get to go anywhere but I use my credit cards to my advantage, don't eat out often, paired my expenses, etc. Will spend a 10 days camping in Vermont, a month in C0 (running and biking at elevation) renting a place, a week cruise to Bermuda and and a 10 day river cruise in Europe, for example. It can be done (gotta be smart with your investments) on what you will have at age 60.

All the best,

Life expectancy? 5k/mo retirement means 60,000/yr with the intention of preserving most of the retirement savings. What about inflation? What are your yield expectations on the nest egg? "average" right now is low single digits and that affects everything.

Income property is a wise move, but most end up only slightly cash positive if you do not defer maintenance. So, rental income is not totally free cash flow.

You had better maximally fund your savings way beyond tax regulation limits.

Taking out $5k per month just seems really high to me. Where do you live? The best scenario is that you live someplace with a modest cost of living and a house that is paid off. Then your monthly expenses drop precipitously. You must live someplace with exorbitant property taxes or something. I dunno.

The house I live in now is just mine. We sold our house and split the equity, which I used all of as a down payment toward my current home.

The funding of college is tricky ... she has control of all the college funds started during the marriage. When we separated, I was required to start funds and put in $200/month for each child. She indicated recently that she thought we'd split costs 50/50. I said I considered the funds that were in there during our marriage to be both of ours. She didn't respond. There is nothing in the separation agreement that spells it out other than my requirement to fund college plans. My plan is to decide on an amount that I think is reasonable and tell my daughters that that is what I'll contribute. I am planning to do likewise towards weddings ... give them a specific dollar amount that I'll contribute.

I like the 1/3 approach and thank you for that insight.

If you don't mind my asking, what do your total expenses average per month now that you are retired? How much is health insurance? Is anything higher than you anticipated?

Ugh.. Whatever happened to freedom 55? Most people I know in Canada are retired by 60 or 65. How? I don't know.

former canuck runner wrote:

Ugh.. Whatever happened to freedom 55? Most people I know in Canada are retired by 60 or 65. How? I don't know.

People are living longer now than 50 years ago. So, it is not unreasonable to work until later on in life to fund retirement.

how,

I would be very conservative in my asset allocation and save as much as possible. Prospective returns for a 60/40 stock/bond allocation over the next eight years will be closer to zero. So the savings component should dominant your plan.

Igy

You could, though I doubt 5k/month is realistic. Maybe with social security and you don't pay for your kid's entire college.

"She didn't respond."

It sounds like it is time to start talking to a better lawyer. Almost nobody gets divorced and then retires early. My guess is that you have been putting $600/month into an account that your wife controls because the idea of the agreement was that she would use ALL of that account, from both before and after your separation, to fund her 50%.

What percentage of your salary does your ex make? If she only makes about half or even 75% as much as you, why would you have expected anything else? The point of these agreements is to keep both sides equal until the kids get out of college. Did you think the separation doomed your ex and your daughters to live on less? Did you think you were putting aside your extra 25 to 50% in salary to retire 5 or 10 years before her?

You may not think what I write is fair, but what really isn't fair is that your lawyer didn't tell you all this and now there is nothing you can really do to punish a lawyer for such a poor agreement, since you signed it...

how to do this,

1) Don't listen to those who are telling you not to pay for your children's college. For all we know, this is a long-lasting promise you made to them or something you or your ex really want to do. I take that as a given.

2) Good Lord, you can EASILY do this.

3) With $700,000 already, plus your contributions over the next 7 years (I just did 7 years, not 8), that money at just 5% gain annually will be worth $1,243,671.97 when you are 60. Do NOT touch that money at age 60. Start withdrawing at age 62 (I will give final totals later).

4) You will fund your children's education with your income over the next few years, so this is just an expense (like paying for electricity), so you need to budget for that, but it will not go into my calculations.

5) Regarding the house, if you want to leave the area, do that, or if you want to stay in same area but with smaller cheaper house, do that. If you want to stay in that house, re-consider. Is your house too big for a dude about to have all children gone? I am going to assume a sale in 8 years. With Realtor fees and moving expenses, I will still keep your net gain from sale at $380,000. I will take off $140,000 for amount you likely still owe on it by then. That leaves $240,000. Go find a nice $180,000 house somewhere. Buy it. Bank $60,000.

Sample $180,000 homes from around the country:

Surprise, AZ -

http://www.realtor.com/realestateandhomes-detail/15944-W-Quail-Creek-Ln_Surprise_AZ_85374_M21520-32352

Grand Junction, CO -

http://www.realtor.com/realestateandhomes-detail/473-Duffy-Dr_Grand-Junction_CO_81504_M26527-37615

Clearwater, FL -

http://www.realtor.com/realestateandhomes-detail/1581-Lotus-Path_Clearwater_FL_33756_M65623-97543#photo0

Austin, TX -

http://www.realtor.com/realestateandhomes-detail/7111-Thannas-Way_Austin_TX_78744_M70558-40375

Carmel, IN -

http://www.realtor.com/realestateandhomes-detail/501-Walbridge-St_Carmel_IN_46032_M41310-09041

Bellingham, WA -

http://www.realtor.com/realestateandhomes-detail/17-Little-Strawberry-Ln_Bellingham_WA_98229_M15308-28319

6) So, at this point you have no mortgage and $60,000 from the proceeds of the sale of your house. You also have $190,000 extra in utilities and emergency fund (you should sell those utilities -- too risky for a retired person -- should go in diversified mutual funds).

7) Now, retire at age 60. Spend $180,000 of your money listed in #6 above over 3 years to live on leaving you with $70,000 emergency fund. You are now 63, and your 401k money is now worth $1,439,705.77 at still the paltry gain of 5% annually.

8) Take 4% of the $1,439,705.77 and that is $57,588.23, so that right there is almost enough. Honestly, with zero debt and kids gone, you COULD live on that if you wanted to, so retirement is ALREADY a possibility. BUT, you now get to add Social Security, and at age 63, you will get $30,612 based on a current salary of $80,000 (just a conservative guess). So, now you are up to $88,200.23. If you can't live on that with zero kids around and a paid for house, then you've got problems.

Make it happen, brother.

5% annual gain is too optimistic.