Early retirement plan

  There is no way to determine if plan is good without knowing your expenses. I've written a number of times that wife and I tracked our expenses, literally to the penny, for three years before retiring using a spreadsheet. This can be done using pencil and paper also.

  We then tried to project expenses over time and would break them down and add them to the expenses. This is something that so many retirement planners have written about, that people fail to do.

  Example: You have a house. Have you planned for the inevitable re-roof of the house? $10,000? Do you have a car?  If so, you need to project repairs or possibly replacement of the car.  What about general maintenance to your house and yard? Paint, repairs, tools, etc. Do you want to travel or have some kind of entertainment expenses?  Have you tried to project medical expenses? Do you know how much your insurances are --- car, auto, life, etc.? Do you have projections for your taxes?

  You get the idea. A very large number of people, according to many surveys, totally fail to take into account their future expenses.

As retiredtraveler said, the importance of whatever type of retirement income is relative to your retirement expenses,

It would be much better to pay off the debt with NON-retirement money.  If you liquidate your 401K to pay off debt, the amount which you draw down will still be reduced by the income taxes owed on it.  If you do the removal in a year's time frame, it could also push you into another higher tax bracket if done in one year.  

OR if your wife is on SS Disability, it could also mean paying some taxes on her SS amount.

Debt is important to have paid off going into retirement, including any home mortgage or car loan.  Once you are free and clear of all debt, you can go into retirement paying all consumer credit on a monthly bases so no credit cards run a balance that cannot be paid on a monthly basis or more than a few months, at least to save on interest cost.

Got an emergency fund = to at least 6-9 months of recurring expenses or more.

From here you can cover things that unexpected - replace it if you have to use the funds.

If you are going to continue to live in your home, make sure that major repairs and maintenance are done and paid for before retiring.  Just because a person has retired does not mean that these repairs/maintenance items stop happening.

What about health insurance before reaching Medicare age?  Even Medicare is not without monthly cost, copays, deductibles or Medigap insurance premiums if that is the Medicare route which you pick.

How does the cost of living look like where you will live after retirement?

Property taxes ?  Utility cost?  Insurance cost - car and home?

What about if a situation arises where you or your wife, especially if she is now on disability, need some daily living care which the other cannot handle alone?

Got long term care insurance or money to pay out of pocket?

Reverse mortgages are expensive in cost.  Why not get a HELOC before you retire and use this equity if you need it.  It will require a monthly payment if you use it.  

If you do decide to go the reverse mortgage route, use a HUD approved program and lender.  Make sure that you and your wife understand it COMPLETELY.  Don't just let the lender explain it - READ the doc's and ask questions BEFORE you sign on the dotted line.  Also let any of your heirs know what you are doing with your home.

Personally, I'd say, you need lots more money saved before going into retirement especially early retirement.  Remember you are planning for almost 30 +/- years of limited income but your expenses will be only limited by the both of you.  $2500 a month will not get you too far especially if cost rise in that period of time.

Your retirement plan appears achievable, but there are a couple of key considerations. For one, plugging for a combined income of $2,500 per month in retirement could make ends very tight indeed — particularly if you encounter any unexpected health expenses or home repairs. Tapping your 401(k) to pay off the $25,000 debt can work, but remember that you would be incurring taxes and penalties for early withdrawal. As always, check with a financial adviser to confirm whether this is the best strategy for your situation.

Reverse mortgage If you are looking for a way to tap into your home’s equity, but don’t want an additional monthly payment, then a reverse mortgage can be helpful. It works well for some people, but there are some disadvantages to it. The interest and fees will compound in value over time, which could leave your heirs with less money when they sell the home down the road. It’s critical to completely understand the mechanics of a reverse mortgage and its long-term impact.

And if you’re able to save an emergency fund and pay your debt off more quickly, it could help keep off financial pressure during retirement. Consider a comprehensive review of that long-term financial plan, and do include the reverse mortgage, so you can be ready for anything in your future.

For a more in depth look at reverse mortgages and if they could be right for you, go here: Reverse Mortgage – Saver Is The Retirement Savior. It offers a deep dive into how reverse mortgages may affect your retirement and whether they might be the right choice for you. 

Honestly, you’re in a decent spot with no mortgage and a plan to pay off debt first. One thing to watch is how a reverse mortgage might affect your cash flow down the line—you can see the numbers and options clearly here (hud.gov/program_offices/housing/sfh/hecm/hecmhome) and (reverse.mortgage/saver-is-the-retirement-savior). Even running a few scenarios now could make retirement feel a lot less stressful.

Not sure why this is getting so much attention 6 years later lol

Just to let everyone know, I executed my plan and everything worked out beautifully. Loving retirement! 😁