Retire 5 Years Early – Bill & Emily, Age 55 and 50
The Problem
Bill is an ER doctor who works long shifts that vary throughout the week. Emily works part-time and is focused on getting their two teenage boys through high school and college. When they designed their financial plan ten years ago, they planned on Bill shifting to part-time at 60 and fully retiring at age 65. They’ve both realized that they would prefer to start a fully-retired life when Bill reaches age 60. He no longer enjoys his profession as much as he did ten years ago, and long night shifts are taking a toll. They’ve realized that with both kids out of the house, they want to travel and start enjoying things they’ve put off for years.
Bill wants to accelerate retirement and be completely out by age 60, five years earlier.
The Solution
HCO Private Wealth reviewed Bill and Emily’s retirement plan to develop recommended options that will allow Bill to fully retire at age 60. Ultimately, Bill and Emily need a $4 million nest egg to make work optional. To obtain this goal, HCO came up with the following options:
- Save an additional $4,000/month towards retirement by layering a cash balance plan on top of his Solo 401(k). Not only will this additional money help them reach their goal, but it will also save roughly $20,000 per year on current taxes.
- Rethink their investment allocation to focus on increasing a long-term rate of return. This would entail allocation more to equities. HCO provided an example of a second portfolio that has a higher allocation to stocks but maintains a similar risk to how they are invested now, by focusing on blue chip dividend-paying companies.
- Take a hybrid approach of options 1 and 2. Increase retirement savings by $2,000/month and reallocate the portfolio to a slightly higher allocation of stocks.
In the end, Bill and Emily chose option three and began saving the additional money while HCO reallocated their investment portfolio. HCO reviews their retirement projections and how they are tracking regularly to ensure they achieve their goal. Bill feels like a weight has been lifted off him and he is looking forward to a retirement much sooner than he originally anticipated. Emily is happily planning their first extended trip in retirement.