You’re probably right about the 5.5% yield being difficult to achieve. Apparently a 4% withdrawal rate is “safe”. [/quote]
The 4% “safe” withdrawal rate is for typical retirees who have 25 years of living expenses ahead of them and the benefit of medicare, not someone who is 40 and has to plan for 50 years of expenses.
I think that the number of uncertainties over the next 40 years is too wide to plan to retire in your early 40’s. You would need a pretty decent nest egg to hedge against multiple outcomes over that period. Inflation could wipe you out in a decade. The most important hedge against inflation is to maintain your ability to work. You already hit on a key compnent of that (maintaining health care coverage).
I empathize with you, however.
Perhaps a better approach is to try to downsize your work hours or shift into a new phase. Turn a passion (real estate?) or hobby into a second career. Try some part time work.
I think you are too young and the financial world is too cruel to allow you to retire at 40 or even 45 on 1.5 Million …
Unless…
you could live on 35 K a year (before taxes and any early withdrawal penalties)
Here’s how it might work:
Work a few more years to get a nest egg in the 1.5 Mil range, say at age 45.
Put aside $1 Million of that to be invested for your “real” retirement at age 60-65. Hopefully that chunk would grow to at least $3 Mil over a 20-year period.
Could you make it 15 to 20 years on the income from the other 500K ?
If you made a rate of return of 3% and withdraw 30-35 K per year, you could.
Problem is, what will that 35K get you 15 years from now after inflation ?
… Maybe it’s better to get work doing something you enjoy than to check out of the work force completely.
