Personal Finance

I'm in my early 50s with $1 million in my 401k and looking to quit now because I feel burnt out - what would you do?

David Beren

Published: December 9, 2024 11:33 am

Key Points

• This couple is on a solid path toward early retirement. 
• There is a big question about medical coverage if ACA is repealed. 
• The family has the bulk of its net worth tied up in just two stocks. 
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Once you hit your early 50s, it stands to reason that retirement and slowing down your work life are at the top of your mind. This is very much the case for one Redditor, who, at 52, lives in a very high cost-of-living area and hopes to begin transitioning out of the workforce. 

Posting in r/ChubbyFIRE, this Redditor has a comfortable net worth of $6.2 million but is also concerned about not being super diversified regarding his investments. On top of that, there is a unique scenario where he plans to use Cobra insurance for 18 months and the Affordable Care Act (Obamacare) until he turns 65, which leaves plenty of room for surprising medical expenses. 

What’s most enjoyable about this read is that, as someone who has been on Cobra before, I understand the desire to take advantage and start thinking about what is next so as not to get entirely overwhelmed by potential medical costs. 

The Scenario  

Looking at this post, we have a 52-year-old male Redditor who readily admits they live in a high-cost-of-living area. He is married with one child in high school, and his spouse, who previously left her job, has no plans to return to the workforce. At the time of the couple’s retirement, they plan to be able to comfortably spend $180,000 per year annually. 

The family’s savings are $4.9 million, which comes from an investment in just two stocks. Another $1 million is tucked away in a 401k, $150,000 in a HYSA, and $125,000 in a 529 for college. These holdings bring the couple’s net worth to approximately $6.2 million without including their home. 

With the home included, the couple has an outstanding mortgage of $500,000 at a $1.99% rate or $48,000 per year in payments. There are 11 years left on the mortgage, and as of December 2024, they currently have $2 million in home equity. 

Last but not least, the couple plans to use Cobra insurance for 1.5 years after the husband leaves his job, then rely on the ACA until he turns 65 and can take advantage of Medicare. With all this information, the Redditor wonders if he’s prepared to retire now. 

The Recommendation 

Ultimately, I think this Redditor is in a strong financial position, but having almost $5 million in just two stocks is a little concerning. While I’m not a financial advisor, any financial advisor worth their salt will tell you to diversify your assets immediately. Said differently, you should not be accountable to the performance of just two companies for the bulk of your net worth. 

In addition, I don’t consider $180,000 in annual expenses a very high cost of living, but I’m not sure if this impacts any recommendation. This said, my biggest concern is medical expenses as Cobra sounds fair enough for 18 months, but planning on the ACA is an unknown you can’t quite discuss as concrete. 

With a new political administration campaigning to update the ACA, planning on using it for over a decade could find you in a situation where your entire cost structure is thrown out the window. The hope is that what, if anything, would replace the ACA wouldn’t be significantly more expensive, but there is no question that if something else does come along, it could be more expensive.  

Healthcare concerns aside, this Redditor is in a fine position to walk away even on the low side of interest earnings annually. If he is concerned about sticking with his job, he should walk away as soon as possible. The medical cost concern is significant, but overall, it shouldn’t create a dramatically different scenario, though I’ll emphasize one final time that ACA costs could change. 

The Takeaway

Even though the two stocks in question went up significantly, creating much of this Redditor’s net worth, diversifying is key. Diversifying is one of the best ways to handle market volatility, which might be a forthcoming scenario with a new political administration about to take office. If you have the means to walk away, as this Redditor does, by all means, do so. It would be best if you worked to live and not live to work.