38 and aiming at the FI target

[Retch The Grate]

Hi all, nice to be posting here. I've been interested in FIRE for a bit over a decade, I was reading the discussion on the Motley Fool board and following Intercst's web postings in the late 90s, and tried to make sure I was saving some. I sadly wasn't capping out my 401k annual limits, but so it goes. My real derailing was from spending july 2002-aug 2004 (with another 6 months to find paying work again afterwards) doing a startup with a great friend. Incredible experience, and the risk was worthwhile in light of the combined financial resources of my fiancee and I, but it didn't pan out, and eventually neither did the engagement which made the financial cost a bit steep.

So, here I am, 38, not tremendously closer to being financially independent, but working on fixing that more aggressively.

Data about me:
Single
38 years old.
I'm hoping to be FI as soon as possible, but my retirement scenarios all revolve around working till I am 70 at least (my grandfather is 94 and still happily "working" at his company that he founded 64 years ago so enjoying work runs in the family clearly). So... while I want to be free from needing a job asap, I expect to have an income from one for a very long time still (though hopefully at some point that can be an income from my own company rather than working as an employee for other people).

My current assets:
110k in 401ks and 15k in a Roth IRA all in stocks
20k in the bank as cash for liquidity (which is supposedly my emergency fund but that entrepreneurial spirit keeps wanting to grab 15k of it for funding some game development)
I make $76,500 a year at the moment, and sock away $21,500 of it in the aforementioned 401k and Roth, while slowly building up that bank balance. Basically my monthly direct deposit after taxes and retirement and the like ends up being $3400.

While I'm relatively good at saving I'm clearly not one of the incredible people on here who manage to shave their costs to the bone, I love eating, and I love hosting dinners, so I spend a fair bit on food. I also have more housing expense than I'd like (hopefully my housemate will be finding a job soon and picking up a bigger share of our rent, I don't expect to ever be able to buy a house in Silicon Valley, and it isn't clear that it is a good financial choice even if I could afford it).

I live in the SF Bay Area and plan on staying here, I love the weather, and I have a huge social network that is where most of my happiness comes from.

For retirement planning I've been using the following estimates:

No social security or medicare, if they happen to still be around when I hit eligible age, yay I'll have a rich retirement, but if not, I want my numbers to work out.

Conservative
Medical $18k a year
Auto $6k a year (I buy used, for cash, and pay for regular maintenance)
Food $10k a year (this is also essentially the entertainment budget as meals out are fungible with movies, or big BBQs for friends or...)
Housing $15k a year (I rent, and this covers all the utilities, internet, cellphone etc.)
assuming I get 70% of my annual income after taxes come out means I need $70k a year to support that, and assuming an ultra-safe 3% withdrawal rate, I'd need $2,333,333 to be financially independent

Optimistic
Medical $8k (high deductible + a theoretically affordable policy)
Auto $5k
Food $8k
Housing $12k (a cheaper room in a more occupied house)
assuming 70% I need just over $47k, with a 4% withdrawal that needs $1.2million or so to support it.

Generally I use $1.5mill as my lowball "I could probably retire on that" and $3.5mill as the high end "never have to worry about money again" amount... The low end seems achievable, the high end, unlikely.

Anyhow, that's me, and my abstracted numbers!

 

[ronocnikral]

welcome...

seems like you have your plan and are starting to make progress. the health care riddle seems to get a lot of people hung up. I figure I'll just save as much as I can and see where the chips fall when it's my time to punch out. Even with voting once a year, I have very little impact on how all this plays out.

that food budget is enormous for one person! i would search for ways to cut it down while still maintaining the enjoyment you get from the social side. 2 examples, when i was single i always had a stone soup party, where i provide the broth and everyone brings something to dump into the soup. very entertaining, especially on a cold winter night and a fire outside. also, last night even, we went over to a friends house to make sushi - while they provided everything, it would be very easy for you to provide rice and seaweed and have your friends bring the other stuffing.

either way, welcome and i lookforward to your insights.

 

[Retch The Grate]

Medical is a huge puzzle, it just seems like it is going to keep getting more and more expensive for less and less coverage, so while I think my low number is probably more sane (otherwise how will most of the country afford health care in their old age?), I fear that even my high number doesn't capture the actual cost for healthcare of the quality I want when I am older.

The food budget is large but it is meant to cover eating out at nice restaurants on a regular basis, preferably with my girlfriend, as well as having weekly BBQs at my house. I sadly am a bit of a foodie, so Whole Paycheck is my grocery store, I just prefer the quality of product there (and I have a superstition that eating as organic as I can is good for my health and good for the environment). I admit I am bad at letting other people contribute food, I like to take care of everybody when I have guests over. I should probably do a more careful food budget (the numbers are based on taking my usual expenses, multiplying out to a years worth, and rounding up, generally) and see what I can get things to. I eat out a lot at lunch time currently.

Also, I figure that any fluff in those estimates are what turns into my travel and toy budget, so if I manage to have a year where I am frugal on food, I can travel to asia, or buy a new computer, or one of those other once every now and then sorts of things.

Currently I've been trying to figure out how I can save more. My housing expense is a big one (it currently runs me more than my retirement estimates), as is my food (lots of meals out during the work week), so I know I have some places I could tighten up. Food I really could cut back whenever I choose, I just have to convince myself that the tradeoff makes sense (eating out is a shared social activity at work, which is the sort of thing that makes my day nice, I eat in frequently with a smaller circle of friends, but sometimes going out for sushi is just really nice ).

I've been trying to figure out the housing puzzle as well, it seems like a lot of people on here have paid off homes as part of their FIRE plan, but I've been moving around and renting for a long time (my ex-fiancee owned her condo, so it didn't seem to make sense for me to try to acquire a house when we were making our plans in the 2000s).

 

[Sarah in SC]

First, welcome! It seems as though your large numbers looking ahead are reasonable, but you will need to look closely at your current expenses and what you are willing to "trade" now for more FI later (or sooner, as the case may be).
While entertaining, travel, and fun with friends are pretty much non-negotiable for us, I do try to economize on the spending, if not the experience. If that makes sense--what I mean is that you can still enjoy your life and your friends without spending outsized amounts, thus reaching your short and long term goals.

Every money decision we make is a trade-off of some kind. Each of us makes different decisions, but as long as they are made "eyes wide open", then we can feel as though it was a good choice. For us, buying a boat was a reasonable trade-off--it might push back some of our FIRE plans by a small margin, but we're exchanging that for having some fun now. Just (hopefully) not too much fun in the way of bilge pumps and bottom paint.

Good luck to you! I'm 39 and one of those peeps with a paid-for house.

 

[Milton]

By the sounds of it, you are in pretty good shape. Your asset base could be bigger, but you have a sensible attitude and that is more important.

Jokes about "w*rk" aside, there is nothing wrong with working if that's what you enjoy doing. The important thing is that FI gives you the choice.

As Sarah suggests, LBYM should not (or at least need not) involve miserly deprivation. And enjoying expensive food is a relatively cheap indulgence, compared to many other activities.

Your scenarios / numbers involve a lot of assumptions, but that is inevitable when one is projecting several decades out. I see nothing obviously wrong with your approach.

I have a huge social network that is where most of my happiness comes from.

Good for you, and too bad that more people can't say the same (cf. Robert Putnam).

 

[Keim]

Good luck to you! I'm 39 and one of those peeps with a paid-for house.

Good for you Sarah! I am 38 and don't have mine paid off. But I could by transferring some assets. Great feeling, isn't it?

 

[Retch The Grate]

First, welcome! It seems as though your large numbers looking ahead are reasonable, but you will need to look closely at your current expenses and what you are willing to "trade" now for more FI later (or sooner, as the case may be).
While entertaining, travel, and fun with friends are pretty much non-negotiable for us, I do try to economize on the spending, if not the experience. If that makes sense--what I mean is that you can still enjoy your life and your friends without spending outsized amounts, thus reaching your short and long term goals.

I'm trying to figure out where I can squeeze out significant savings. It seems clear if my housemate gets a job where she has to move that I can probably rent a room in a house for far less than I currently pay for our current place. I think I could manage a $5000 a year expense reduction if I am lucky, looking at craigslist prices, which would be useful, though it may be hard finding a place that is as friendly for me hosting social gatherings (the downside of moving into a room in a house of strangers).

 

[Retch The Grate]

Jokes about "w*rk" aside, there is nothing wrong with working if that's what you enjoy doing. The important thing is that FI gives you the choice.

I love working, I'd just like to be able to do it entirely on my own terms. Making video games is fun, but a lot of the stress and BS in a big studio are just frustrating and quite unrelated to what I find compelling about the work. If I can make it to being FI, I love the idea of developing boutique web games from a beach in Thailand.