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Early retirement plan

Trying to find out if anyone thinks this retirement plan will work.

My wife and I have a modest income of just under $50k a year. I am 59 and still working. She is 58 and on Disability.


I plan on retiring early at 62. Our house is paid off and we have no major debt but owe some back taxes plus some consumer debt totaling around $25k.

Our combined monthly income in retirement will be about $2,500 a month.

I have a small 401k that nearly matches our total debt mentioned above and I plan on using it to pay that debt off at age 59 1/2.

When my wife turns 62 we plan on doing a reverse mortgage on our $200k+ home.


What do you think?

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Honored Social Butterfly

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.


It's Always Something . . . . Roseanna Roseannadanna
Periodic Contributor

Honored Social Butterfly

  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.

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