Dear M.,
That said, I think you can easily retire from your full-time jobs in three years, but I wouldn’t leave the workforce altogether just yet. Most people can expect somewhat lower expenses in retirement. But since you have school-age kids and you want to travel, I’d expect your expenses to stay the same or even increase at first. So at a minimum, I’d plan to replace the full $125,000 you live on.
In this case, work could take the form of consulting for five or 10 hours a week or pursuing something you enjoy that’s also profitable. In the best-case scenario, you won’t need this money. But you’ll also be grateful for the income in the event that things don’t go as planned.
You have a lot riding on one small family-owned business. What if its fortunes flipped, even temporarily? If that business income dried up, you’d have to take bigger withdrawals from your investments. One common recommendation is for retirees to limit their withdrawals to no more than 4% of their portfolios. But you need to make your money stretch about two decades longer than a typical retiree, so you’d want to be more conservative.
What if that happened as part of a wider downturn? Taking significant withdrawals from your investments after the market has tanked could be a severe blow to your wealth. A stock market crash is a big risk, particularly in the first years of an early retirement. And regardless of market performance, you wouldn’t want to touch any 401(k) money before age 59 ½ to avoid early distribution penalties.
Having a source of non-investment income will help you limit your withdrawals, giving your money more time to compound. Plus, if you decide you want to come out of retirement for any reason, it will be easier to scale up your work if you haven’t checked out completely.
Don’t worry that working a few hours a week will cause you to miss out on time with your boys. Sorry to say it, but most teens and pre-teens don’t want to spend every waking hour with their parents.
You say that you and your wife are counting the days until retirement. Is that excitement talking, or is it burnout?
Make sure you’re not discounting the value of the present. The next three years matter, too. These are years you’ll never get back with your sons. So make spending time together a priority now. No matter how hectic work is, schedule at least a couple of weeks of family vacation time.
You’ve worked hard to make early retirement viable for yourselves. Perhaps if you can achieve some semblance of work-life balance now, the idea of working a little in retirement won’t sound so bad.
