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Old 02-23-2012, 11:02 AM   #21
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Doesn't FIRECALC take inflation into account? I think my withdrawal rate (taking in future pensions/inheritances, and cost of living downgrades) is less than 5%, which seems doable, if you assume an 8% return on equities coupled with a 3% inflation rate. Worth pointing out, a significant chunk of my expenses right now are tied to housing, which obviously won't inflate at the same rate (fixed mortgage and all).
Yes, Firecalc takes inflation into account. It looks back at the last 150 or thereabouts number of years. During the 1970s and 1980s inflation was very high and those years inflationary effects are blunted by the 120 or more years that had far lower inflation. If hyper inflation were to hit us for very many years in a row our Firecalc devotion would prove to be a mistake. Also, your estimate of 40K draw out of your funds after retirement does not take into account the inflation between now and that time. If it is after the kids finish college like you posted that is a long time from now. Inflation, even if it stays at the current low rates will greatly erode the purchasing power of 40K. As others have posted that 40K already seems low. Many on here live on less today but most of them never made or spent money like you are doing today. You seem to have some very good LBYM habits with the old Toyota and taking the bus and using a prepaid cell but to many people living on 40K or less a year today your expenses do seem to be all over the place, as someone mentioned. For those of us in our late 50s and older the chances of high inflation again in our lifetimes are low compared to your chances. It seems like a certainty to me that sometime during your lifetime inflation will again be a very big issue. We cannot accurately predict the future. When I was your age there was no reasonable expectation that healthcare costs would go up at a rate so much higher than the overall inflation rate for so long. I wonder what the world will look like 50 years from now? Could food costs go up like healthcare costs have gone up? Much of the money people spend today is for stuff that did not even exist when I was a kid.
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Old 02-23-2012, 11:27 AM   #22
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You're right that my expenses are all over the board, and I am assuming no hyper-inflation, I suppose if that happens, I'll have to pick up more pt w*rk or move someplace far cheaper (e.g., Panama).

The $40K figure is based on my wife and my spending habits prior to having kids. It's low b/c it assumes no mortgage, but it basically breaks down to:

$9K- healthcare
$7K -groceries & restaurants
$7K- taxes
$4K - travel
$4K - entertainment +$ phone, cable, internet
$2K- utilities
$1K- gifts
$2K- gas/automobile repair/buying
$1K- home maintenance
$1.5K- insurance
$1.5K -personal care
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Old 02-23-2012, 12:44 PM   #23
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No secret for me to acquiring lots of dough. Basically involved selling my soul to my employer, neglecting wife and kids, and accepting mockery from people at work for being the only person who didn't buy into golden handcuffs lifestyle (LBYM) People look at me like I'm crazy when I tell them I drive a 6 year old Toyota, take the bus into work, bring my own lunch, and use a pre-paid cellphone rather than the latest Iphone.
Well, there has to be some secret in there. B/c I do all those things and my projections have me no where near $1.8 mil when I am 36.

Have you ever thought about easing into this a bit? Perhaps suggest your wife retire first (I would actually suggest I retire first) and see what the costs are as she can walk the dog and watch the kids so you can see all those cost savings.

Do you track every penny you spend? Usually that helps to eliminate big chunks of fat right off the bat. People tend to underestimate what they spend if they don't track all the money.
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Old 02-23-2012, 01:25 PM   #24
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Well, there has to be some secret in there. B/c I do all those things and my projections have me no where near $1.8 mil when I am 36.
Well yes, I worked really hard in school in order to get the kind of job where selling your soul would bring in a high salary. But now, I'm utterly burned out and desperate to be present in my children's lives.

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Have you ever thought about easing into this a bit? Perhaps suggest your wife retire first (I would actually suggest I retire first) and see what the costs are as she can walk the dog and watch the kids so you can see all those cost savings.

Do you track every penny you spend? Usually that helps to eliminate big chunks of fat right off the bat. People tend to underestimate what they spend if they don't track all the money.
We do track our spending, though its hard to crack down on some categories without causing marital discord (e.g. children's clothes & toys)

I am sort of easing into it, in that I'm looking for an easier less time-intensive job, which will unfortunately be a 60% pay cut, for the next 5 years.
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Old 02-23-2012, 02:49 PM   #25
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Thanks, I agree with you, its a lot! Basically, it breaks down to:
$20K in taxes,
$24K in daycare costs (I've read that when children get older these costs get replaced with other things, e.g. music lessons),
$30K in housing and condo fees (definitely some savings can be had there),
$10K in groceries (this one is crazy),
$5K in clothing (my wife buys a billion children's outfits),
$2K in utilities,
$3K in student loans,
$2K in travel,
$2.5K in petcare (hopefully to be reduced once we can walk our own dogs).
$3.5K in restaurants
$3.5K in entertainment (including cable, internet, and phone)
$2K in healthcare

Lots of room for saving in here, but its tough to eliminate some of the more frivolous categories while I'm still w*rkinng, b/c they are necessary stress relief at this point
It not about giving up stuff you really enjoy. It's about weeding out the stuff that doesn't really bring you much happiness. Maybe $110K is your personal absolute minimum. That's a personal decision. I'd never presume to tell anyone what is a good level of spending for them. If I could afford to spend that much, I likely would.

It's more about priorities. Maybe you already know this, but some people don't. You want to retire young, you might have to give something up to make it happen. Giving up a few things that probably don't do a lot to enhance your life anyway is like putting that much money in your 401k. Actually put it in your 401k and its like doubling the effect. More money for retirement, but you need less.

As for the crazy groceries, I spend that much, but I'm supporting those two teenage boys. My wife and I think we can cut that by 2/3rds when we set them free. Half would be luxurious for us. What I think is crazy is the $24K in daycare. Wow! I know it's expensive but wow! You likely won't replace all of that with other stuff as they grow older. I mean you could, but...
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Old 02-23-2012, 02:51 PM   #26
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Alex

I have quite a few concerns.

1. You SWR is over 5%, which is based on a successful part time gig in online gambling.

2. You are assuming SS, which many younger contributors, such as myself, disregard altogether. If it shows up when I hit that age, bonus, otherwise no worries!

3. You have no healthcare plan. This will likely raise your expenses even if Obamacare takes some form.

4. You're also betting on an inheritance. Another big no-no when retirement planning.

So if all of these things come together, you will possibly be able to scrape by. I understand being stuck in a job you don't like and the feeling of wanting to escape. Have you considered getting a lower stress full time job or working part time (outside of the temp idea)? Once you reach your $1.8 mill, you can build your nest egg and ESR (semi retire) in 5 years from now instead of trying to fully ER in 5 years based on online gambling, an inheritance, SS, and a very high SWR, all the while without health insurance factored in.

Just my $.02, but make sure you can exit the rate race before you actually do. Take the next 5 years to get where you want to be, then slowly exit the race. More relaxed job for less pay and less hours, to less hours, and less hours, then retire when you don't have to worry about meeting your $20/day quota in online poker.

Sorry if this criticism is harsh, but you said you could handle it. You're not there yet and won't be in 5 years with this plan.
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Old 02-23-2012, 02:57 PM   #27
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W/r/t being offended, I've been dreaming of FIREing for so long now, and being called crazy by everyone (including my wife) that being called crazy doesn't faze me
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Originally Posted by alexbalex View Post
We do track our spending, though its hard to crack down on some categories without causing marital discord (e.g. children's clothes & toys)
I'll just say I find it interesting that you seem to be 100% on board with your FIRE plans but your wife doesn't seem to really be on board at all. Maybe you can clarify that? Spending like crazy and thinking you are crazy because you have a workable plan for both of you to FIRE certainly doesn't sound like you are on the right track to a successful FIRE in 5 years. Maybe your wife has a job that is perfectly acceptable to her and she doesn't really mind continuing to work?

I am also curious how far along the path to $1.8 million you are right now? Is your FIRE plan mostly backloaded with lots of savings and investment growth the next 5 years?
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Old 02-23-2012, 03:10 PM   #28
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Overall I will say that your plan is not without merit, but it might need some fine tuning. The upside is you have 5 more years to refine and plan. Saving a whole lot and investing it can't do anything but help.

I am on a very similar path (age 31, 2 young kids right now, shooting to FIRE in ~5 years, targeting $1.x million in investments, frugal (old Honda, ride bus to work, bag lunch)). I think you are right about waiting till 2014 to see what the healthcare costs will be like under Obamacare. Works well with your 5 year plan.
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Old 02-23-2012, 03:17 PM   #29
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I'll just say I find it interesting that you seem to be 100% on board with your FIRE plans but your wife doesn't seem to really be on board at all. Maybe you can clarify that? Spending like crazy and thinking you are crazy because you have a workable plan for both of you to FIRE certainly doesn't sound like you are on the right track to a successful FIRE in 5 years. Maybe your wife has a job that is perfectly acceptable to her and she doesn't really mind continuing to work?
My wife does not like w*rking at all, but is very nervous that being FIRE'd means she won't be able to live in a house with a lawn. Generally, on a frugality scale with 10 being the most frugal she's a 5 though (I'd say I'm an 7.5), so I wouldn't classify her as frivolous with our money, by any stretch. She just likes to spoil our kids, is all

When it comes time to start more seriously living on a budget, she'll be on board, but our budget will be slightly more generous than if it I had married myself

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I am also curious how far along the path to $1.8 million you are right now? Is your FIRE plan mostly backloaded with lots of savings and investment growth the next 5 years?
I'm about halfway there now, and still adding at a high rate, until I get a new job (I'm actively looking) at which point, I'll be saving around $60K-$70K annually and relying on compounding.
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Old 02-23-2012, 03:32 PM   #30
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Alex

I have quite a few concerns.

1. You SWR is over 5%, which is based on a successful part time gig in online gambling.

2. You are assuming SS, which many younger contributors, such as myself, disregard altogether. If it shows up when I hit that age, bonus, otherwise no worries!

3. You have no healthcare plan. This will likely raise your expenses even if Obamacare takes some form.

4. You're also betting on an inheritance. Another big no-no when retirement planning.

So if all of these things come together, you will possibly be able to scrape by. I understand being stuck in a job you don't like and the feeling of wanting to escape. Have you considered getting a lower stress full time job or working part time (outside of the temp idea)? Once you reach your $1.8 mill, you can build your nest egg and ESR (semi retire) in 5 years from now instead of trying to fully ER in 5 years based on online gambling, an inheritance, SS, and a very high SWR, all the while without health insurance factored in.

Just my $.02, but make sure you can exit the rate race before you actually do. Take the next 5 years to get where you want to be, then slowly exit the race. More relaxed job for less pay and less hours, to less hours, and less hours, then retire when you don't have to worry about meeting your $20/day quota in online poker.

Sorry if this criticism is harsh, but you said you could handle it. You're not there yet and won't be in 5 years with this plan.
Not harsh at all, I appreciate the input.

My feeling is that social security is most in jeopardy of three things (1) a benefits reduction, (2) a minimum age increase, and (3) an increase in the payroll tax cap. What is highly unlikely is that social security will be completely canned and unavailable to people in my generation. This would be political suicide to anyone who voted for such a thing. W/r/t the three likely situations, these can (and should) be planned for, and I have tried to do so. Also, a helpful hedge for me is the fact that my wife will have almost 30 years of SS credits by the time she FIRE's.

My SWR is only 5% for a limited time portion, basically until my kids leave college or I receive an inheritance or pay off my mortgage. The online gambling thing is only one plan which is admittedly risky, but if it doesn't work out I plan on just being a temp or finding some other low stress j*bs to supplement my income.

Its hard to factor in health costs right now, hopefully it'll be easier after 2014, at which point I agree I will need to increase my numbers.

W/r/t inheritance, I can see why it would be a big no-no, but I have tried to be very conservative (basically taking the likely outcome and dividing by 2). At this point, I'd rather risk having to work part time for longer than I wanted b/c I underestimated inheritances than risk having worked full time more than I needed to.
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Old 02-23-2012, 03:39 PM   #31
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As for the crazy groceries, I spend that much, but I'm supporting those two teenage boys. My wife and I think we can cut that by 2/3rds when we set them free. Half would be luxurious for us. What I think is crazy is the $24K in daycare. Wow! I know it's expensive but wow! You likely won't replace all of that with other stuff as they grow older. I mean you could, but...
Glad to hear that I'm not the only family of 4 with crazy grocery bills!

$24K in day care is for two kids and unfortunately is not very high for the area I live in. I hope I can save a ton once they are off to public school, but I profess to not really having any experience. I could see other expenses increasing, for instance clothes, activities, electronics, toys, cars, groceries.

I read someplace that every kid you have adds about half the cost of a full person (such that if my wife and I spend $60K, each additional kid would add $15K to the household expenses) Have you found that to be the case for you?
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Old 02-23-2012, 03:43 PM   #32
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My wife does not like w*rking at all, but is very nervous that being FIRE'd means she won't be able to live in a house with a lawn. Generally, on a frugality scale with 10 being the most frugal she's a 5 though (I'd say I'm an 7.5), so I wouldn't classify her as frivolous with our money, by any stretch. She just likes to spoil our kids, is all

When it comes time to start more seriously living on a budget, she'll be on board, but our budget will be slightly more generous than if it I had married myself
Your wife may be where my DW was a couple years ago. Not really interested in working, but kinda wasted some money on crap like excessive stuff for the kids. After a couple years of stuff getting destroyed, donated, trashed or boxed and stored I think she realized that maybe it wasn't the best way to expend money. And we started watching Hoarders so that killed any desire to acquire more things. She was probably a 7 on the frugal scale and I was an 8.5, now she is right up there with me.


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I'm about halfway there now, and still adding at a high rate, until I get a new job (I'm actively looking) at which point, I'll be saving around $60K-$70K annually and relying on compounding.
Good to hear - that gives you some street cred here that you do actually have a significant amount saved and aren't just planning on saving $200,000 a year for 5 years with 14% rate of return to get to $1.8 million and FIRE. With the amount you have saved, compounding will get you where you want very effectively, even if you slow down your contributions.
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Old 02-23-2012, 03:52 PM   #33
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Your wife may be where my DW was a couple years ago. Not really interested in working, but kinda wasted some money on crap like excessive stuff for the kids. After a couple years of stuff getting destroyed, donated, trashed or boxed and stored I think she realized that maybe it wasn't the best way to expend money. And we started watching Hoarders so that killed any desire to acquire more things. She was probably a 7 on the frugal scale and I was an 8.5, now she is right up there with me.
True, also as my wife's life becomes very kid-centric, it opens up other opportunities to save. For instance, she is now on board with cancelling our cable and moving towards using Vonage/MagicJack, which should hopefully save around $700 a year. We also don't buy eachother extravagant gifts any more and any jewelry hankering she may have once had, is no longer.
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Old 02-23-2012, 04:29 PM   #34
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OK, tell us about your Plan B. You need a Plan B.
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Old 02-23-2012, 04:39 PM   #35
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Well if I don't reach my networth goal or if expenses are much higher than anticiipated, Plan B would be to keep w*rking.

If I FIRE'd right before a market downturn and my networth takes a tumble, my Plan B is to keep w*rking part time until my portfolio rights itself.

Plan C is to abandon my high cost of living area entirely and move someplace cheaper.

Plan D is to run off to the circus
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Old 02-23-2012, 07:50 PM   #36
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Well yes, I worked really hard in school in order to get the kind of job where selling your soul would bring in a high salary. <snip>
this is where I went wrong. I didn't really work hard in school, rather I
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Old 02-23-2012, 09:14 PM   #37
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Glad to hear that I'm not the only family of 4 with crazy grocery bills!

$24K in day care is for two kids and unfortunately is not very high for the area I live in. I hope I can save a ton once they are off to public school, but I profess to not really having any experience. I could see other expenses increasing, for instance clothes, activities, electronics, toys, cars, groceries.

I read someplace that every kid you have adds about half the cost of a full person (such that if my wife and I spend $60K, each additional kid would add $15K to the household expenses) Have you found that to be the case for you?
Its been so long, I can't remember.

There was a sweet spot between about 5 and 10 years of age. No diapers, formula, baby food or daycare. But after about 10 it starts to climb again. Sports, school, cell phones, computers, clothes, etc. I hope somewhere between 18 and 25 it goes back down.
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Old 02-24-2012, 04:33 AM   #38
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Your withdrawal rate looks high. Have you tried this free online tool :

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My plan is to try to acquire around $1.8 million by 2017, and then live off of gross yearly expenses of around 110K until the kids graduate college and my house is paid off, at which point my yearly expenses would shrink to around $40K.
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Old 02-24-2012, 06:52 AM   #39
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There was a sweet spot between about 5 and 10 years of age. No diapers, formula, baby food or daycare. But after about 10 it starts to climb again. Sports, school, cell phones, computers, clothes, etc. I hope somewhere between 18 and 25 it goes back down.
Ooh something to look forward to, awesome!
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Old 02-24-2012, 11:20 AM   #40
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Well if I don't reach my networth goal or if expenses are much higher than anticiipated, Plan B would be to keep w*rking.

If I FIRE'd right before a market downturn and my networth takes a tumble, my Plan B is to keep w*rking part time until my portfolio rights itself.

Plan C is to abandon my high cost of living area entirely and move someplace cheaper.

Plan D is to run off to the circus
You got the right attitude. You are going to be able to early retire. The only question is how early that will be.
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