So as you know, I have decided I want to retire to the place both of my kids are now living. Exactly when has been up in the air. Lately, I have been thinking that at 56.25, I am not so very far away from 59.5, that magic age where carefully following 72t rules will no longer be required. So, why not try to plan my retirement date around that? Can I make it work? I have been crunching numbers, and I think that I can.
If I work from now until age 59.5, I calculate that my monthly CalPers pension will be $946 per month. Of course, it won't begin until I have reached 62, so that is 2.5 years of living on savings only.
I have a spreadsheet (I have shared it before) that calculates my tax-deferred balance as I begin taking withdrawals. My goal is to still have money at age 100. Of course, I have to assume some rate of return, which may prove to be inaccurate. I use 5%, which I think is very reasonable. But still, as there is no guarantee, I like to build in some buffer. For example, I have built in a 3% annual COLA. If we hit some years of very bad market returns, I can reduce it or forego it completely for a year or two, which certainly helps prolong the life of my portfolio. When I calculate, I use the "rounddown" function, which also builds in some buffer. So if I begin at age 59.5 with a 2k per month withdrawal, increase it at 3% annually, decrease it at age 62 by the amount of my pension (which also has an annual COLA), and project out to age 100, I still have 274k at the end. I feel pretty safe with that. I am not calculating in any SS benefits, even though I do expect to receive a small amount. I intend to enroll when I reach age 65, so that I can have my Medicare premium deducted from it.
So 2k per month is not a fortune to live on, but I feel I can make it work. And, work well enough to lead a very happy life in the same area where my kids are. I have some time yet to investigate various costs and play around with that 2k per month budget.
One thing that would absolutely need to happen is my car loan would need to be paid in full by age 59.5. So, I have played around with those numbers. If I continue paying $250 per paycheck for now, then bump it up to $268 per paycheck after I receive my Step raise in September, then bump it up to $296 per paycheck after I receive my Step raise in September 2024, I will pay the loan in full on 7/30/26, exactly 2 weeks before I turn 59.5. That is a very doable plan and does not represent a hardship of any kind. So that piece of the plan is ironed out.
Now there is the small matter of a house. I want to be realistic about how much I can save. Things always seem to come up, like needing a crown. However, if I take the balance I have right now and add $225 to it each and every paycheck between now and the end of July 2026, I will have over 21k. I think that I can average more than $225 per paycheck. In fact, I think I can easily break 30k . However, I do not think I can have 50k saved up in only 3.25 years. Frankly, I am not too sure that you can buy a 50k house and take a 20k mortgage. Maybe you can? I would think that a lender wouldn't want to bother. Or maybe a HELOC for the 20k would be an option. Or, I could pull 20k out of my Roth. My Roth isn't huge, so I don't really like that idea. And what if the ideal house ends up being 65k? For sure I would want to look at borrowing some of that; 35k would be too much to pull from my Roth.
So it may be that if I am looking at having to carry a small mortgage, I will decide that 2k is simply not enough and I need to work a bit longer, save a bit more money, and let my pension increase a little bit more. If that is how it goes, then I will have to adjust. However, I am going to aim for 59.5 and see if I can hit it.
A native Californian transplanted in southern Illinois.
