35, and on track to retire by 50

[lucky2030]

35, married, 2 kids (infant and 3 yo). Wife is 33. Combined income ~425k +- 50k depending on stock performance. Saving 150-200K/ year. On track to retire by 50 at the latest.

Expenses
130K, not including taxes. Includes expensive day care. Projected expenses ex taxes in retirement ~100K.

Assets
House: ~950K value, owe ~75k. This is not a fancy or big house, but is in a good school district and has a decent commuting distance to our jobs. We're likely to upgrade in next 2 years to a 1.5M house to have more room, nicer kitchen, etc.

529s
76k total, invested 85/15 with Vanguard. Plan to fund to ~100K per child over next few years, then save more in brokerage account to reduce risk of over funding 529.

Retirement - all invested in Vanguard 2045
401k/tax deferred: 435K. Fully funded every year.
Roth: 80K. Will continue to fully fund mega backdoor.

Emergency fund/cash
85K. Target is 40K.

Things that might change:
* Job change - don't know if we can juggle high stress, all-in jobs with kids for another 15 years. Also, the go-go days might not last and I could end taking a job that's closer to industry standard pay (~100-150k/year less than what I make now).
* We could switch to a high deductible plan and use an HSA as another retirement savings vehicle, but I've been reluctant to add more complexity, and skeptical that the rules won't change.
* Upgrade the house. This would be a big expense, but will provide a lot of joy so we're likely to do it.
* Third child? In a moment of weakness, we might decide to up the ante.

So what do you guys think? Anything we should do differently or worry about?



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[ShortInSeattle]

Hi Lucky3030,

It sounds like you've done the math so kudos on having a plan. It sounds like you'll need at least 2.5 million in retirement to fund your expected spend rate. Perhaps 3.3 if you're on the more conservative side.

My only advice is to carefully consider the trade-offs involved in your rather expensive lifestyle and your planned upgrades. Between transaction costs and the higher mortgage a bigger house with a nicer kitchen could cost you 600K. By your accounting that much money would fund six years of expenses for you in retirement. Is a nicer kitchen worth those six years?

There is nothing wrong with saying yes. Just be aware of those trade-offs when you're making them.

Cheers,

SIS

 

[Big_Hitter]

sounds like a plan - DW retired about 20 years ago that put the kibosh on my "super" ER plans - I'll be 52 in a few weeks...


20 years is an awfully long time to plan but plan we must!

 

[FIREd]

Yes, 20 years is a long time. Personally, I think that you should save as much as possible now, while your income is still good. Forget about the house upgrade. There is no guarantee that this level of income can be sustained for the next 20 years. My wife had a highly stress / high pay career and the burnout came out of nowhere. She went from "I'll never retire" to "get me the heck out of there" in a matter of months. Thankfully we had saved a lot while the going was good and she was able to throttle back.

 

[Senator]

We're likely to upgrade in next 2 years to a 1.5M house to have more room, nicer kitchen, etc.

You will not make 50. You will need more time as your lifestyle is creeping up. Odds are, you will need to wait until 65, as when your income increases, your spending does too.

You save $150K-$200K each year, but your asset levels do not indicate that. You 'only' have ~$676K saved so far.

You have the opportunity to do it, but you will need more than the $100K you think you will need.

 

[DrRoy]

Your current cash flow available for investing is great, but as you say, that could very easily change for the worse. The key to FIRE to me is LBYM. You are there now, but the bigger house with the lower income might take that away. Also, it is a lot easier to never have something than to get it and have to give it up. To keep things safe, I would hold my spending to a level below the future reduced income that is likely.

 

[nash031]

More room means more stuff means more expenses. Do you need more room? Going on 39, living in 1400sq ft beachfront home with my wife and two dogs. I wouldn't upsize for anything at this point. Instead, when things get to cluttered, we get rid of stuff. Forced LBYM!

Just my $0.02... if we have kids on the way, obviously we'd look at more space, but we can and plan to stay here even with one child, at least in their youngest years.

 

[Kickernick]

My situation was almost exactly like yours at that age.
I'm retiring in 2+ months when I am 2 weeks short of my 50th birthday.

Here are a few thoughts:
- Your plan is completely dependent on your relatively high income
- Only about 2% of people retire by 50, so keep making big bucks and bank'em
- Also key is managing your spending - your kids are little, so they are inexpensive now
- There are a lot of costs besides college that you'll see in the next 15 years
- $950K house puts you in the top 1-2% of housing in the USA - don't upgrade
- When you buy a more expensive house you need to fill your new house
- Plan on spending a third more to outfit it to your new standards
- Fancier neighborhoods up the antes on new cars too -
- Your plan horizon is 15 years - expect some unexpected in that span
- Carry good insurance - especially disability, given your earning power

 

[rodi]

Kickernick - I disagree that the kids are inexpensive now, as both parents work. He mentioned high end child care.

We went for mid-range childcare (kindercare center)... When the youngest was an infant, and the oldest was in the 2's room, we were paying them more than $20k/year. Fortunately, they moved up to older kids rooms (with different caregiver ratios, and therefore cheaper) and the price cut in half within 2 years.

They're now teenagers... and FAR cheaper than those early days. I think a lot of people assume that babies are inexpensive... but if both parents work and there are no grandparents to sit for free... they're very expensive.

 

[lucky2030]

Completely agree with you all - there is a trade off between a nicer house and early retirement. This is somewhat ameliorated by the fact that we plan to downsize/move to a lower cost of living state after the kids are out of school, but obviously taxes, interest, maintenance, etc are expensive and never come back. FWIW, we're talking about going from 2000 sq ft to 3000 sq ft, which doesn't seem unreasonable for 4 people.

This trade off is the main reason we have not moved yet. But, as our income has risen it's become conceivable to do both. We likely won't make a move until we see a couple more years at this income level.

Regarding kid expenses - day care in MA is really expensive -- 30K per kid. We do expect expenses to go down a bit when the kids move to public school, and once we've fully funded college.




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[Standard Staples]

Kickernick - I disagree that the kids are inexpensive now, as both parents work. He mentioned high end child care.

We went for mid-range childcare (kindercare center)... When the youngest was an infant, and the oldest was in the 2's room, we were paying them more than $20k/year. Fortunately, they moved up to older kids rooms (with different caregiver ratios, and therefore cheaper) and the price cut in half within 2 years.

They're now teenagers... and FAR cheaper than those early days. I think a lot of people assume that babies are inexpensive... but if both parents work and there are no grandparents to sit for free... they're very expensive.

+1... I have a 3 year old and a baby due next month. My daycare projection is just under $20,000 for this year (and the baby will only be in for 8 months). When my son gets to Pre-K, the state covers the tuition. Once they're both in Pre-K/elementary school, it's going to be a huge "raise." I'm very confident their collective activities/sports will not approach $20K/year.

 

[Standard Staples]

Completely agree with you all - there is a trade off between a nicer house and early retirement. This is somewhat ameliorated by the fact that we plan to downsize/move to a lower cost of living state after the kids are out of school, but obviously taxes, interest, maintenance, etc are expensive and never come back. FWIW, we're talking about going from 2000 sq ft to 3000 sq ft, which doesn't seem unreasonable for 4 people.

This trade off is the main reason we have not moved yet. But, as our income has risen it's become conceivable to do both. We likely won't make a move until we see a couple more years at this income level.

Regarding kid expenses - day care in MA is really expensive -- 30K per kid. We do expect expenses to go down a bit when the kids move to public school, and once we've fully funded college.




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I'm not familiar with the job market in MA, but would it be far fetched to think a full time nanny would be less expensive than $60K/year? If you hired a nanny and paid her hourly, she'd have to work 40 hours per week at ~$30/hr to match what you're currently spending. That is pretty astronomical for a daycare, where the teachers are responsible for multiple children. The children could potentially get much more personalized care and attention for a similar price. Just a thought.

 

[ChiliPepr]

I'm not familiar with the job market in MA, but would it be far fetched to think a full time nanny would be less expensive than $60K/year? If you hired a nanny and paid her hourly, she'd have to work 40 hours per week at ~$30/hr to match what you're currently spending. That is pretty astronomical for a daycare, where the teachers are responsible for multiple children. The children could potentially get much more personalized care and attention for a similar price. Just a thought.

A friend here at the office spends $19.75/hour for a nanny for about 45 hours a week for his two kids.

 

[lucky2030]

2 kids is definitely the break even point for nanny vs day care. With an infant and 3 year old we'll pay about 58,000. At $20/hr, 50 hrs/week (which means OT), payroll tax, added cost of food and diapers, we'd come in about the same with a nanny, but we'd have to manage an employee (lots of friends with horror stories).

Before the first was in daycare we assumed we'd switch to a nanny with the second, but the daycare is great and his socializing with other kids outweighs any concern we might have about lack of attention. Since the teacher:kid ratios are high here (by law), they get quite a lot of personal attention.


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[Markola]

+1 on the comments above about the straightjacket that can be a bigger house. Because it's often not just the house. We made that choice and it becomes addictive: Beautiful street, more room, fancier neighbors taking fancier vacations and sending their kids to fancier schools. "Welcome! You'll enjoy the neighborhood pool and racquet club." You readily absorb the new lifestyle as you subconsciously emulate your new surroundings to fit in. But then the crap hits the fan at work with new management and you feel vulnerable and realize you are out on a limb. What you crave more than a pretty street is OPTIONS, which you no longer have due to the bigger house and related lifestyle and relationship "upgrades" you've gotten attached to. I don't know the OP's situation, who is clearly doing most things right, and am only reporting our own experience with seductive lifestyle inflation. We don't regret the experiences exactly but now that FIRE is more interesting as we get into our 50s, it's harder to pull off than when we lived in that tidy first home on a too-busy street living in happy ignorance on our early professional salaries back before we knew that we deserved to treat ourselves better. It's hard to judge many of the costs/benefits and we know some lovely people. However, I am increasingly faced with one clear fact: We could be retired now or at least blissfully bullet proof from tiring storms at work if we'd stayed in the smaller house yet built our salaries as we have.


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[NgineER]

Gyygygyyvvcct

 

[REWahoo]

Gyygygyyvvcct

Someone call EMS - looks like one of our members is having a stroke!

 

[eta2020]

I also live in Boston. That 1.5 million dollar house will eat up 20k-25k just on tax bill alone.
It will likely derail your plans.

I live in expensive suburb in top school district and one can buy here house for 950k.
It will not be fancy within neighborhood but certainly comfortable.....

So I would pay off that current house and then bank all the money

 

[eta2020]

I'm not familiar with the job market in MA, but would it be far fetched to think a full time nanny would be less expensive than $60K/year? If you hired a nanny and paid her hourly, she'd have to work 40 hours per week at ~$30/hr to match what you're currently spending. That is pretty astronomical for a daycare, where the teachers are responsible for multiple children. The children could potentially get much more personalized care and attention for a similar price. Just a thought.

It is regulated here. For infants you need 1 care taker for 3 kids...if I recall
correctly.

We payed 20k for infant 15 years ago. So 30k now does not surprise me.

 

[lucky2030]

Thanks, Markola, lots to think about from someone who's been there.

I'm not too worried about lifestyle inflation triggered by the house - the new one will be a few blocks away so we'll have the same neighbors. Of course, I wouldn't be the first to be wrong about how much money I will spend in the future

Regarding whether the financials work out for the plan - my spreadsheets say yes. We can continue to save 90K/year for retirement, 30K/year for college and have the nicer house. And once daycare is out of the way, we'll have a bigger cushion to save for retirement. The big gotcha is keeping the high income.


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[papadad111]

, 20 years is a long time. There is no guarantee that this level of income can be sustained for the next 20 years. My wife had a highly stress / high pay career and the burnout came out of nowhere.

+1. Had similar for myself. At 45 I hit the wall and said f%#^ this. My bullshit bucket suddenly was overflowing.

As we age, especially in our 40's (as kids grow up and parents become less independent age /die) our life priorities can change rather suddenly.

Bank as much as you can now. Live below your means. No one cares what car I drove or what I drive now...not even me !

 

[Markola]

With your high income, is it conceivable to at least delay the move, save up 575,000 over a few hears and pay cash for the next house after selling your current one? Then you would be free to ride the gravy train at work for as long as it lasts without stress and cost of a mortgage while dumping lots of cash into investments. When the kids are out of school, sell the house and move to the lower cost area. Seems you'd have the $3 million or so available in that scenario. Good luck!


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[Senator]

Regarding whether the financials work out for the plan - my spreadsheets say yes. We can continue to save 90K/year for retirement, 30K/year for college and have the nicer house. And once daycare is out of the way, we'll have a bigger cushion to save for retirement. The big gotcha is keeping the high income.

No offense, but the big gotcha is keeping the marriage going. Be sure to have a fall back plan. If you quit work, and things go sour, often it is a financially devastating blow. You need enough cushion for that too.

If you quit work with barely enough, it means back to work. If you leave with enough of a cushion, it just means a smaller lifestyle.

 

[FI_by_2023]

No offense, but the big gotcha is keeping the marriage going. Be sure to have a fall back plan. If you quit work, and things go sour, often it is a financially devastating blow. You need enough cushion for that too.



If you quit work with barely enough, it means back to work. If you leave with enough of a cushion, it just means a smaller lifestyle.

Interesting comment, Senator. I have watched colleagues go through what I call the great asset divide late in life and at a surprise by many. It is somewhat morbid to build a plan around it, but even in my ER plan I contemplated if it could weather that type of storm if it came up. Probably more contingency than most, but part of me says understand risks and mitigation plans even if you feel they are low.

 

[lucky2030]

New Year's update: things are on track, and we had a good income and investing year:

Net worth: 1.9M (up > $300k from 1 year ago)
House equity: $950k
Tax deferred: $550k
Roth: $120k
After tax: $100k
529: $135k
Emergency fund: $40k

Expenses look ok - no new house, 3rd kid, or divorce in sight