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Married, 48. Saved $2.5M. App. $.7M in 401K. How long should I continue to work?

#1
I am a married man age 48. Saved $2.5M. Approximately $700K in 401K. How long should I continue to work
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#2
That's a good sum for a 48-year-old.
 
To answer your question we'll need more information, like....
  • What are your current ongoing fixed and discretionary expenses?
  • Do you have any outstanding debt?
  • Do you have to put kids through college? If so, how many?
  • If you retire, what will you do with your time?
  • How will you get health care coverage?
  • Is the $2.5 million in liquid investments or does that include home equity?

 
Using the 4% rule of thumb, you can expect to produce about $100,000 per year from $2.5 million principal. Not bad for a good lifestyle in most places particularly if you don't have an onerous mortgage payment due every month.
 
I want to retire early myself, so as soon as I pay off my house I'll be on the glide path to retirement or at least part-time work. My job is pretty easy now, but I'm still tethered to my laptop and phone most of the day.
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#3
Yes you should until you are laid off. I was laid off at 56 and did the math. 48 is very problematic since doing any withdrawals from 401K will have penalty  and you have another 8 years The best you can expect from a safely managed portfolio of that size would be about $35K (taxable side), mostly from dividends and interest. If you are thinking about capital gains, use them as offsets in loss positions when you re balance unless you're a gambler
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#4
It probably is not all about the money, although that is certainly important.  Most people need to feel some fulfillment in life, that they are doing something productive.  Some people retire early but find that something is missing and go back to work.  Warren Buffet could have retired young but did not.  Of course, everyone's situation is unique.

matchewed mentioned the 4% rule of thumb, which is just that - a rule of thumb.  Historically, a 4% withdrawal rate has been sustainable for the vast majority of people who retire.  But, if you retire very early, it may not be.  Or, if the future is not like the past (many believe there will lower returns), then it may not be. A 2.5-3.0% rate is much safer, but means you need more money to be highly certain of achieving a given target level of income. (An annuity might be possible, but you give up some upside.)

 
I retired a little early at 58.  Several years before retirement, I worked up a retirement budget.  I looked at recent expenses and trends, and then estimated how things would change once I retired.  I broke the expenses down into various categories, as I will summarize below.  In each category I not only estimated a total figure but also a minimum figure for what I called "essentials/necessities".  When I was done, the essentials made up about 50% of the total.
 
I entered retirement debt-free, which I recommend to anyone if you can do it. Not only will it reduce your expenses and the need for income, but I think there can be "psychological" benefits as well.
 
My Categories
===========
Car - Car payments / Repairs / Periodic Replacement / Registration / Tolls / Gasoline / Insurance
Utilities - Gas / Oil / Electricity / Internet / Cable / Home Phone / Wireless / Water
Housing - Mortgage / Rent / Property taxes / Insurance / HOA fees / Appliance Repair / Appliance Replacement / Roof replacement / Insect treatment / Painting / Other maintenance
Food / Local Dining Out / Local Entertainment - Groceries / Restaurants / Movies / Live performances
Dental/Medical - Premiums / Prescriptions / Co-pays / Deductibles
Reading Material/Media - Newspaper / magazines / Books / Music
Gifts - Charity / Family
Travel - Airfare / Accommodation / Tours / Entertainment / Dining
Clothing - Clothes / Laundry / Dry Cleaning
 
To these items I added a 10% contingency for whatever I forgot or for other unforeseen circumstances.
 
This total then gave me an After-Tax requirement.  From that After-Tax requirement, I estimated what the Before -Tax equivalent would be. (I used a conservative assumption; ordinary income tax rates).
 
Once I knew what I needed before tax, then I used that rough rule of thumb, a 4% withdrawal rate, to define what I needed to have by way of financial assets.  In my case, my total annual expenses for necessities amount to less than 1% of my financial assets and the total annual expenses are less than 2% of my financial assets.  As such, I believe there is a close to zero chance we will run out of money.  If things were a bit tighter, I would look at trying to come up with a fixed income stream that would at least cover the necessities. I might also look at working longer or cutting expenses.
 
If I wanted to figure social security (or an annuity or a pension) into the calculation, I would subtract social security (and/or the annuity/pension) from my expenses (for necessities first) and then look to my financial assets (and a withdrawal rate of no more than 4%) to cover the remaining expenses.  If I retired much earlier (or if future returns are lower), the 4% rate might be too high.
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#5
Most importantly, have you asked your spouse yet? That is the first step and she may ask you bunch of questions that will make you do your due diligence about expenses/income  with life expectancy around 84-85. Also, does your spouse work? If not, is she ready to see you 24-hr a day?
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#6
Go enjoy your Life!! Do what you want to do.
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#7
Some answers cover the obvious facts that there are far too many variables about your lifestyle, debts, and cost of living where you live that are left out. I won't cover that. But the biggest answer that comes to my mind is in the form of a question. Why do you think working or a career is "all or nothing?" I am considering early retirement myself and I realized that I can ease into it by working part-time, contract work, or better yet, a complete change of vocation into something I have always wanted to do. This is the best time to consider something like that, because, like me, you don't have to really on the new vocation for a steady income. However, it will be rewarding while still supplementing your income. Plus, if you make it a business, you will be able to deduct many expenses you will now have such as health insurance. Which brings to mind another important point about savings during retirement. We never know what kind of catastrophic events may eat up a huge chunk of our savings.
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#8
It sounds like you're working for someone else, and you're not that happy.  You could always take some of your savings and start up your own business.  For example, you could start a paparazzi business focused on following high-level business people around.  If you saw Elon Musk having lunch with Tim Cook, then you could post those pictures and start a rumor that AAPL was in talks to buy TSLA.  You could then make a killing in ads and photo royalties.  This kind of business would allow you to travel the world, following the business people around.  Or if you're not one for travel, you could just contract out the work of following those guys around.  However you do it, you'd be working for yourself, which is nice.  And if it doesn't work out, you're still young enough to go back to working for the Man, if that's the way you want to go at that time.
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#9
As long as you love what you do, work as long as you can.
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#10
all the advice on this page is excellent.  the formulas and expert analysis will be of little use compared to the tips here.
 
-talk to your wife
-talk to your doctor
-talk to your therapist
-and talk to your f.c. last.
 
i just had the same existential crisis and opted on the phase out which is progressing ahead of schedule.
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