Early Retirement or work another 5 years?

[York 0]

I'm thinking about early retirement. I'm 44 years old and I have around $400,000 altogether. $200,000 in retirement accounts and $200,000 in cash. If I stay another 5 years with my company, I'll receive $1200 a month in pension for life with COLA when I turn 60 but the problem is I hate my job and my boring life in the states. I'm in excellent health with no debt. I should also get Social Security at 62 with another $1200 per month, if SS still exists.

My question is should I quit and move to Pattaya or should I stick it out and suffer for another 5 years then retire at 49?

Edited September 9, 2005 by York

[Carragher 0]

Not really the sort of thing someone on an internet forum can decide for you mate. Its ultimately up to you.

[ballisticus 0]

It sounds like a long time now, but 5 years will go by fast. An extra $1200/month is something you will miss later. Especially if some unforseen medical issue or otherwise becomes a reality. A boring unfufilling life in the states can be changed with some effort. Who knows, 5 years in Pattaya could get plenty boring too. Impossible? Ask a few vets who know. If I was you, I would stick it out. You can never have enough guaranteed income.

[Soi7 1]

You can never have enough guaranteed income

 

Is there such a thing ? I always thought nothing was guaranteed

[ericg1953 1]

If you want a guarantee......buy a toaster......I am in the same boat as you although I don't have the 1200 in pension money coming my way. I have decided to move over at 52. I can't see the sense in working another 5-10 yrs. as I will be in the same boat at that time, just older. I also want to enjoy my life while I am still young and immature.

 

Eric

[BigDUSA 71]

I retired when I was 44 and it was the best move, I ever made. I'm well suited for retirement as I don't like to work. It's been 14 years since I walked out the door.

 

With your assets and a reasonable rate of return on investments, I'd do it.If your interested in make money in LOS check out www.ajarn.com

[Slobbert 0]

Although a little older (50) than you, I was in a similar situation earlier this year. I had a nice stash of cash and investments that was earning interest while my interest in getting up and going to work every day was waning (I'm a lot like BigD in that respect). I did the math, searched my soul and retired in March 2005.

 

I'm able to spend about half my time in LOS and half my time in Farangland. Maybe some day I'll make the complete move over there but for now I'm content with the situation.

 

Everybody has different circumstances but for me, retiring early was the right choice.

[Rex7777 0]

At 44 you're a bit young, and don't forget, if you access the retirement account early, you'll pay a hefty penalty on top of the regular income taxes. So, You're working with just 200K to last until you're 59 1/2. Doesn't quite seem like enough. I'll be retireing early next year at 55, but I have the financial part covered, at last for a place like Thailand where the costs aren't so much. I too could work 5 more years, but why?

 

Rex

[mike100 0]

I retired at 49 with a very small private pension, but a reasonable amount of savings, plus also the sale of my house.

Factors that helped me decide about this were the loss of three of my best friends passing away suddenly within 12 months, two of them younger than me, plus half a dozen collogues from work in the last couple of years. Oh, and also a Thai wife that lived with me in London for about six months.

Just thought that life was too short and wanted to enjoy what ever time I had left.

 

Here nearly three years now, and having a better life than ever before, with no regrets.

Hope it continues.

 

Probably don’t have the option anymore of returning to farang land and having a similar life style as I had before, but after living in Los for three years, I don’t think I would ever want to.

 

Set up a good life style for fairly little money in comparison, and manage to live well on the interest provided from my savings n the UK.

 

Mike.

[BigDUSA 71]

Probably don’t have the option anymore of returning to farang land and having a similar life style as I had before, but after living in Los for three years, I don’t think I would ever want to.

Marry up, it worked for me.

[irishman 0]

The 200k in retirement accounts isn't going to do you any good for another 15 years so you can't really include it.

 

I think retiring at such a young age and with only 200k might prove to be a tad foolish in the long run. Assuming the baht doesn't change for the next 15 years, ( yeh, right ) you will have an average of about 45000 baht a month to live on until you each age 59 1/2 and your income will increase. Certainly there are people living in Thailand for that much a month or less (witness Soi 7) but it wouldn't be my cup of tea. And while you are fairly young now, you don't have any margin for the problems that happen in everyone's life.

 

Were I you, I would work hard for another 5 years or so and just vacation here as much as possible.

 

Cheers

Edited September 10, 2005 by irishman

[dotcom_OD 0]

Take a leave of absence...a sabbatical of sorts to sort out your depression from working your present job. I am sure a good doctor friend will assist you in doing a stress reliever vacation for your boss based on doctor's orders.

 

After 6 months or a year,,,remember Family Medical Leave Act is real and LAW...your boss cannot fire you. Return a recharged man and continue working until your nest egg is sufficient to leave. Good luck!!!

[Eneukman 1]

I quit my job at 48 2 years ago mainly becuase I was thoroughly pissed off with it. It was also seriously stressing me out and had I am convinced contributed substantially to my high blood pressure.

 

I temped for 18 months or so, finally stopping work completely in April of this year and moving out to live here full time in June. Definitely a good move on my part, as I'm now enjoying being totally retired.

 

My flat has just been sold, with entry in the middle of next month so I'll be able to invest the sale proceeds shortly after that - just in time for the stock market to suffer a substantial fall 2 weeks later!

 

By the way, Mike, your wife doesn't happen to have a sister around late 30's by any chance?

 

Alan

[guido13 0]

York

 

Some food for thought about Social Security. The $1200 a month figure is calculated with the assumption that you will continue to work until you are 65 and maintain your present income level. If you stop working now, your Social Security will be much less, as the amount you recieve largely depends on your earnings during the 15 years before age 65. Check out the Social Security website. They explain the system very well.

 

Thanks

 

Guido

Edited September 10, 2005 by guido13

[mike100 0]

By the way, Mike, your wife doesn't happen to have a sister around late 30's by any chance? 

 

Alan

Yes Alan, the wife is the youngest of five sisters, unfortunately they are all married, live up country, ..and speak no English.

 

However, she does have a cousin who is 32, available, no babies, but again, little English and has never been out of Buriram.

 

BTW, great news about the sale of your flat at last.

 

Mike.

[Owen` 2]

Folks,

 

I've been to Pattaya once and am returning in November. I happen to know something about the retirement money issues.

 

The bottom line on it all is 4-5% as magic numbers. This is from a study at Trinity University in the US. To survive 30 yrs on a lump sum of money with that money allocated 50% equities and 50% bonds, you may not extract more than 4-5% the first year (with an inflationary bump of 3% per year on the extracted amount each year).

 

So if you have 200K, and you want to live on it 30 yrs (you don't, you have other money coming in), you should not try to remove any more than $9,000 the first year (that's 4.5%). If you go for 11K, or 20K or whatever, you will run out of money before you die, and your final years will just suck.

 

Given that you have 400K, the 5% number is actually 20K. I keep saying 4-5% because the study showed at 4% your odds of running out of money are about 1%. If you yank 5% out your odds drop to 85% (still pretty good).

 

For folks trying to retire in farangland, a good number is $45,000/yr. That takes a million dollars if you don't trust Soc. Security to appear. That's ugly, but that's the way it is.

[fd2084 0]

If you're not familiar with how to use a spreadsheet (such as MS Excel) I think it's well worth learning to help answer a lot of these questions for yourself. After you've worked up some numbers, then get a friend or two to check your assumptions and formulas. Getting a basic sheet to give you a ballpark figure isn't too hard.

 

Given the standard 4-5% numbers you'd be looking at spending 50-60K baht in your first 15 years. Check out other people's budgets for Pattaya to see if this gives you the lifestyle you're thinking of (or whether it's worthwhile suffering another 5 years to get a better lifestyle).

 

However, that 4-5% standard assumes 3% inflation, as Owen stated. I'm not sure that's valid for Thailand and especially a farang lifestyle in Thailand. I would think it's at least 5% inflation if not higher, which will really cut into your savings.

 

Given all the uncertainties, if your health is really good it would be hard to pass up that pension (that said not knowing all the details of the pension).

[prairieoyster 0]

Hi

 

Do you own a home?

 

I always figure I can rent out my homes(or convert them to more rentable properties)and that will cover my nut in Los. Most of my savings are in my homes and that is currently yielding 20% a year in growth but that can't continue much longer. The booms gotta bust soon. I get residual income from my business accounts till I or they die, currently 4,000 usd/month. I can draw a 50,000 baht from government pensions in 10 years. I am going in January and will calebrate my 50th in Pattaya in April but I intend on finding something to make a few baht and keep me busy.

 

Remeber; Tomorrow is promised to no one.

 

 

 

 

oystter

[Owen` 2]

The matter is very complex. The 4-5% reality does indeed presume 3% inflation, and a poster above quoted 5% for Thailand, which is very good input into the calculation and tightens all projections. The Trinity study looked at all 30 year periods from 1890 to present and found that 85% of such periods saw a retiree not run out of money if he withdrew 5% from his assets the first year and bumped that withdraw up 3% each year (with 50/50 bonds and stocks in his portfolio). It found 99% of such 30 yr periods saw the retiree still have money after 30 years if he withdrew only 4% of assets the first year. Important Note: that is 4% after taxes. A 4% pretax yank does not supply 4% for living expenses. Your living expenses are what is left after taxes.

 

If you have Soc. Security showing up X number of years from now, that does not change the overall equation. It just means the calculation restarts on that date and if you live to 95 (30 yrs forward from 65) you still have to worry about running out of money. If you make it to 65 I think the odds are now over 50% that you will make it to 90.

 

Another major issue is at age 65 Americans get Medicare to cover 80% of health costs. But the current laws are that Medicare will not send any money for health care expenses out of the US. Someone else may know more about that than I. My point in mentioning it is that at age 65 your asset drawdown could reduce in that your health care premiums would reduce since Medicare kicks in.

 

The rental property idea is fine, and it would seem to change things, but I suspect it does not. The stocks/bonds mix mentioned above just combine to create some annual return. It doesn't matter what the vehicle is that generates that return. The point is that the returns vary and some years they are negative. Average them all together, as the study did, and 4-5% is the magic number.

[fd2084 0]

The matter is very complex.  The 4-5% reality does indeed presume 3% inflation, and a poster above quoted 5% for Thailand, which is very good input into the calculation and tightens all projections.  The Trinity study looked at all 30 year periods from 1890 to present and found that 85% of such periods saw a retiree not run out of money if he withdrew 5% from his assets the first year and bumped that withdraw up 3% each year (with 50/50 bonds and stocks in his portfolio).  It found 99% of such 30 yr periods saw the retiree still have money after 30 years if he withdrew only 4% of assets the first year.  Important Note: that is 4% after taxes.  A 4% pretax yank does not supply 4% for living expenses.  Your living expenses are what is left after taxes.

 

At the numbers we're talking here I don't think taxes are a very big factor (for a US citizen). Especially since the $200K is probably completely (or mostly) already taxed at this point (a judicious withdrawal scheme might be able to avoid all future taxes).

 

One issue I've had with projections such as the one you've referenced is when they say that x% of the time you will run out of money. Thus implying that the only safe choice is to retire only when there is almost zero chance of going bust, or that you need to start out with reduced withdrawals.

 

This is misleading as it implies the retiree is an idiot who will not change his spending patterns and thus will end up impoverished if the market has a few down years. It should be fine to start out with a higher withdrawal and if it turns out that your investments have a bad year or two, you can pare down the withdrawals until it improves. However, if you retire and the minimum you can live off is that 5% then you will be screwed due to fluctuations in the market some percentage of the time. Most of the time you should be able to sustain that initial withdrawal amount and sometimes you will be able to raise it over time (above inflation).

 

If you have Soc. Security showing up X number of years from now, that does not change the overall equation.  It just means the calculation restarts on that date and if you live to 95 (30 yrs forward from 65) you still have to worry about running out of money.  If you make it to 65 I think the odds are now over 50% that you will make it to 90.

The two parts of the equation here are: 1) does he have enough money to make it to SS, and 2) will there be enough left to supplement the SS income to make him comfortable. My ballpark estimates looked good in this case, but I really think you need a spreadsheet to figure that out for sure.

[Owen` 2]

This is misleading as it implies the retiree is an idiot who will not change his spending patterns and thus will end up impoverished if the market has a few down years. It should be fine to start out with a higher withdrawal and if it turns out that your investments have a bad year or two, you can pare down the withdrawals until it improves. However, if you retire and the minimum you can live off is that 5% then you will be screwed due to fluctuations in the market some percentage of the time. Most of the time you should be able to sustain that initial withdrawal amount and sometimes you will be able to raise it over time (above inflation).

 

You are correct, sir. The Trinity study did presume guys were on autopilot and yanked that money out at that rate regardless of what kind of year they were having in the market. And as you say, if that amount is simply the minimum someone can live on, then the numbers do make sense.

 

We're into this really deeply here, and probably for good reason given the interest folks have for retiring to Pattaya. FYI to all, these topics are hit really hard on the discussion forum Investing In Retirement of www.morningstar.com. It's free. I'm not shilling for the website.

 

Also FYI, my understanding of the whole shebang is the issue is largely decided in the first 2 years of retirement. If you get two good years in the market to start out, you are guaranteed a comfortable 30 yrs. If the first 2 yrs are like 2001, 2002, best you find a job.

[Skate 9]

Good tread..

 

You know none of us want to work so a good plan is a must.

 

Seems to me 5 yrs to get an extra $1200 or $14000 a year is a no

brainer. Also 200/k isn't that much and you could almost double that

in 7 yrs.

 

I hate my job too. But planning to get out in 2 years. Thats also 2 more

years of 401/k, stock fund, and one more toy.

[Dungheap 243]

Interesting thread.

 

I know nothing about US tax or pension schemes but am always somewhat baffled by people in your situation who are sick of work, want to live in LOS and feel retirment is the only answer.

 

Ever considered semi-retiring or tele-commuting?

 

American mate of mine from SF who's a big analyst with a major firm in the US relocated to Hawaii and works from home. Even has the Lei for the video conferences. Took a 20 percent pay cut and is in heaven.

 

Then there's other guys I know who do all sorts of Internet-related work -- web design, systems, on-line auction sites, translating, rewriting, etc, etc.

 

You would have to be discreet about this sort of work depending on your visa.

 

If you think your nest egg ain't big enough, protect it, but enjoy yourself, too.

 

You do have options.

 

If you're not happy and have no ties, make a change.

[Soi7 1]

Seems to me 5 yrs to get an extra $1200 or $14000 a year is a no

brainer. Also 200/k isn't that much and you could almost double that

in 7 yrs.

 

Skate,

 

I agree and Disagree If you have a job you really enjoy then you may be right but if you Simply dread your job can't stand the though of going to work then I would say pull the plug. God forbid if you were to die during the last two years in a real shit job. Then had you retired you would have gotten 3 years of retirement. No one in my family ever lived to retire so my though on retireing at 49 was that even if I live another year only I was able to enjoy it. Money just does not mean all that much to me anymore

[York 0]

Thanks you all for your inputs. It appears working another 5 years until 49 then retire makes the most sense. By that time I should be able to save another $60K per year for the total of $300K. Plus the interests and dividends I'll be getting on my investments. I should have close to $400K at 49 to live on and $800K+ in my retirement accounts at 60. Plus another 5 years of credit on my SS account. And I'm still young enough to enjoy my retirement. I guess I knew all this but I needed to hear it from others.

For your info., if I stay until 55, my pension increases to $1500+/month at 55, $3000+/month at 60, and $4800+/month at 65. But I have no intention to work this late, although vast majority of all other Americans do so and/or have no choice.

Meanwhile, I'll stick it out and take my 6 weeks of vacation per year in Thailand.

Edited September 16, 2005 by York