I am a 46 year old professional with a spouse and two teenagers. My current salary is $115,000/year. My spouse is a manager and makes $50,000/year. I can retire at age 50 with a guaranteed lifetime annuity of 50% of my salary plus annual cost of living increases. There is little likelihood of layoffs or downsizing where I work, but on the other hand little likelihood of promotions or major salary increases.

I have a 401k plan which is totally invested in the S&P 500 index (currently the only investment option) and the current balance is $350,000. $15,000 deferred salary a year goes into the 401k. I currently live in one of the top 5 highest cost of living/state taxation states. My oldest child will start college in 2 years. My spouse and I have in addition the following assets: $100,000 in other IRA's; $1 million in stocks; $500,000 home equity. I have no equity position in my company and the stocks do not pay much of a dividend stream. I have a big mortgage. State income tax is over $10,000 a year. Cash stream is currently $165,000/year gross but mortgage and state taxes alone take about $60k/year.

At age 50, I assume I will make $120,000 a year and have $500,000 in my 401(k). I am planning to retire then which give me a 50% annuity of $60,000/year. Assuming I transfer my $500,000 401(k) balance to a 72(t), at 8%/yearly withdrawal for 10 years, I will have $40,000/year in 72(t) income.

I also plan to move to a lower cost of living state with little or no state income tax such as Nevada or Washington, pay cash for a house, and find employment at a salary goal of $50,000/year. The spouse plans not to work. This will still provide a cash flow of $150,000 a year, but pretty much the current $60k mortgage and state taxes expense will be erased. Even if the market goes to pot and the 72(t) is exhausted, I will hopefully still have the $100,000 in other IRA's and the $1 million stock portfolio.

Does anyone see any problems with this?

Does any one have any thoughts on the pros/cons of small variations:

a) my employer will pay for relocation (which I estimate will cost $100,000, all taxable to me) to the West Coast, but at a cut in salary of $9000 to $16,000/year as long as I do it a year prior to retirement. However, since I was planning to retire in the West Coast, that will erase my paying my own relocation expenses after retirement. Is it worth a salary/retirement pay cut in exchange for the relocation expenses?

b) I could probably get a salary in Silicon Valley, CA of $100,000/yr instead of $50,000/yr post retirement, plus stock options, but then it would be in a high cost of living/high tax state. I would assume the extra $50,000 a year would be used up in mortgage and taxes?

c) My employer may offer investment options in the Russell 5000 and a Global Fund in six months. Is it worth switching any money with only 3-4 years to go before retirement?

This is a great retirement plan! Retiring at 50.. or not; the great thing is the choice! With kids going to college, the state of residence is a major factor to me and being relatively nearby, not the fact that one could earn more on the West Coast.
Fool on!

Well coming from Washington (I live across the street from a couple Microsoft Buildings in Redmond), your plan seems sound.

$150K/year is more than enough to live in the area, but it is easy to overextend yourself here (just as anywhere I suppose).

Although home valuations seem to be skyrocketing to me, $500K is plenty to find a good sized house with a decent lot, depending on where you are looking of course. If you want to be in an expensive area of Seattle, you will pay through the nose. You also need to avoid some of the newer housing in the area. There are HUGE houses being built on tiny lots that allow for ecentially no yards. If you are willing to go further outside Seattle, the value increases.

In Washington you do have to be aware of the sales tax which is getting to be ~9% in some areas of King County. This makes it a great place to live, but not buy. I really enjoy using online vendors, since I can avoid our sales tax. Property taxes can be steep as well.

[This is for Western Washington - Eastern Washington is completely different] Another issue you will need to decide on is the weather. Although the quantity of rain we get is pretty small (less than Atlanta I am told), it drizzles frequently. From Mid-October through early-July, the sky is frequently overcast with some small amount of precipitation. In the Winter we can get snow, but not every year. When it does snow it lasts only a few days or a week at most, and everything crashes to a halt -- most people in the area just can't drive in snow.

To many people our weather can be depressing. With limited sunlight and less defined seasons (compared to other areas), it is not suprising that some get depressed. Personally I love the weather, but then I was born and raised here.

jbw

Thanks for the reply. I am a San Francisco native so I grew up in cold misty weather except I haven't lived there for an extended period for 20 years.

I was in Seattle last May and it was beautiful. It happened to be warm and clear. According to the home advertisements I saw the housing was "reasonable", especially compared to San Francisco. Right now it saeems Seattle housing is about 50% of what they want in Silicon Valley. The sales tax in California is 8.25% percent I believe, so that will be about the same as Seattle.

I would like to work for a big high tech firm like Microsoft. The only reason I was thinking of Silicon Valley, CA was because there seems like a wider range of large high tech firms there. My professional qualifications would probably put me in the running for jobs at these type of firms.

Thanks for the reply. I am a San Francisco nativebut I haven't lived there for 20 years. I don't know where the kids will go to college but it might be on the West Coast. I sacrificed potentially higher salary for security and early retirement, and hopefully in a couple of years it will pay off.

What are kidding??

No I am not kidding.

I would like constructive criticism. Thanks