38 and hoping to FIRE soon. All feedback appreciated.
I am 38 with a DW who is 35. We do not have children, and plan to keep it that way. I joined this site over 6 years ago, and at the time thought I would be able to retire by 43. It is looking like it could be closer to 40 and possibly sooner. I plan to work another year and reassess our financial situation at that time.
Investments-Tax Exempt 590K
Investments-Roth IRA 187K
Investments TOTAL 1.11M
(Allocation of 75% equities/25% bonds & REITS)
Part Time Income (now until age 51) 12k/yr
COLA'd pension (starting at age 54) 36k/yr
Expenses-40k/yr min, 72k/yr planned (the difference is travel)
Investments - All are in low cost funds with either the TSP or Vanguard. My average expense is .09 percent.
Social Security- If we get it, it will be a bonus. I don't plan for it for either of us even though we have qualified for it.
Primary Residence- Mortgage free. We don't plan to sell anytime soon, so I see it simply as an asset that allows us to reduce our annual spending (no mortgage/rent).
Annual expenses of 40k/yr excluding vacation. I have been using Yodlee for the past 5 years and it tracks every single penny that comes in or out of my linked accounts. I now have 5 full years of spending data so this is not just a guess. I expect some of the expenses to go down, so 40k/yr is on the high side and includes $200/mo for vehicle replacement every 10 years. We plan to go down to 1 vehicle after retirement. In a large market downturn we could cut down to about $30k/yr before we started to really feel deprived.
What I would like to do is to plan on annual spending of 72k a year before taxes which includes a large travel budget. After retiring from full-time w*rk, I plan to remain in the reserves until I am required to separate at age 51. This would allow me to get health insurance (Tricare Reserve Select) for both of us for $205/mo as well as allow me to make $12k/yr doing annual drill.
We have 4-5 years of living expenses in cash/taxable accounts. While we spend these down, we plan to do roth conversions equal to a year of living expenses every year. Eventually after the money percolates in the roth for 5 years, we will be able to withdrawal the money penalty free while continuing to do conversions. The roth conversion ladder is how we plan to access our retirement funds early. I expect us to remain in the 15% tax bracket during this time. By the age of 51, all of our assets will have been converted to roth, which will be good as I will be getting a pension just a few years later that will be taxed as income.
I have run I-orp as well as firecalc and it looks like I should wait until I have 1.4M in investments based on the monte carlo simulations and 100% success rates. If I'm willing to be flexible on the 72k/yr, I would think I could pull the plug in the next year. I also have some safety nets that I could utilize in the event of an economic downturn. The first would be to go back on active duty orders with the reserves if necessary, making enough money to cover all of our expenses and then some. The second option would be for us to attend school and take classes utilizing the Post 9/11 GI Bill, which would pay a housing allowance that we could use to cover our fixed expenses for about 2 years. Another option would be to have the wife utilize her CPA during tax time, but I'm hoping to limit our working to my annual drill.
Am I missing anything? If you subtract my planned $12k in income from my expenses, it puts my expenses at 28k/yr min OR 60k/yr for expenses with lots of travel. That is a 2.5% to 5.4% withdrawal rate until age 54, when my pension would kick in. I think we would be fine as long as we can be flexible on the spending side of the equation.
Please feel free to punch holes in my plan as you see them. I may be blinded by desperation.