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Almost 40, Safe to RE if I wanted?
Old 12-16-2018, 11:38 AM   #1
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Almost 40, Safe to RE if I wanted?

Hello, first time post. Nearly 40, stay-at-home wife is 4 years older, with two sweet children ages 7 and 10. Have a good tech job at MegaCorp, but dreaming of RE to maximize time with family. We've been saving and tracking expenses for a couple of years, but with the kiddos so young, am cautious about risking financial security. Whether or not i actually pull the trigger, I'd like some thoughts regarding if we're in a good position to do so if wanted, say after one more year.

House is paid off, worth ~$500k. No debt anywhere else, whatsoever.

Retirement accounts for spouse and myself..
ROTHS IRAs - $327k
401ks/Traditional IRAs - $876k
Retirement Plan - $152k
Social Security - pessimistically not counting on any

Taxable brokerage accounts - $2.3M

529 for kiddos college - $236k
HSA - $21k

Yearly spending, including extravagances like extended vacations - $129k. I anticipate my retirement spending to continue at this level. Factoring in income taxes, our annual spending is $146k.

Vision would be to live off the Taxable $2.3M until spouse if 59. The $1.5M retirement accounts grow (with no new contributions) in the meantime, hopefully to $3M+ by that time.

I could work a few more years, continue to max out retirement account contributions, grow brokerage savings etc. My W2 is about $250k, from which i squirrel away about $100k into these accounts annually. But each extra year of security is a year lost of prime family time.

So how do we stand?
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Old 12-16-2018, 11:46 AM   #2
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Welcome Acey! What does Firecalc say? https://firecalc.com/

I'm not going to weigh in on where you stand because I'm a financial weenie and just got the courage to retire "early" at 61, with no kids at home. Healthcare was a major consideration for us, and getting DH on Medicare last summer helped with that concern. I'll leave it to the others to give you a more constructive review.

Looking forward to seeing your posts. Jump in - the water is fine.
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Old 12-16-2018, 12:04 PM   #3
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Retiring at 40, a 4% WR seems a little on the high side, and that looks to be right where you are at. Have you factored in many years of health care for the 4 and eventually 2 of you? Not just premiums, but I found my deductible was a lot higher than when I was on the MegaCorp health plan. Family of 4, someone is going to get sick or hurt most years.

Any option to go part time, to be able to spend more time with family but still draw maybe a $125K salary to live on, and let your investments grow untouched for a little longer?

If those numbers really are true, including health care, I'd guess you'd probably make it, but personally I'd prefer some buffer, which I don't think you have. That's only from taking your expenses * 25 (4% WR) and comparing them to your assets, which comes out almost dead even excluding the 529s. But that assumes your expenses include a fund for replacing cars, major house repairs, etc.
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Old 12-16-2018, 12:08 PM   #4
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Welcome Acey! If you haven't found them already, we have a helpful list of things to think about as you're pondering ER:

Some Important Questions to Answer

Some folks here would say "not yet" and others would say "go for it". I think for very early (pre-50ish) retirement, it requires great flexibility, including being willing and able to go back to at least part-time work if #$&! happens. IMHO, the most important thing is for your family members to all be on the same page.

Welcome and we look forward to your contributions!
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Old 12-16-2018, 12:39 PM   #5
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With your expected expenses I would say you should work a few more years. However, with a paid off house you should be able to cut those expenses in half or close to it and still live a solid middle class lifestyle. In that case you could retire today. Your choice.
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Old 12-16-2018, 12:45 PM   #6
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Originally Posted by aaronc879 View Post
With your expected expenses I would say you should work a few more years. However, with a paid off house you should be able to cut those expenses in half or close to it and still live a solid middle class lifestyle. In that case you could retire today. Your choice.
A good point. If the family time really is important to you (and I think that's great), are there things you'd be willing to give up, especially if the market goes bad, and at least for a little while? Priorities. No wrong answer, but it doesn't seem like it has to be a black-and-white, can I retire on these expenses or not question.
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Old 12-16-2018, 12:49 PM   #7
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I retired at 39, with almost exactly the same amount of money and with a similar distribution of over 2 million in taxable and over 1 million in retirement accounts.
However, I was single with no kids, but do live in HCOL place Hawaii.

Since I retired in 1999 before things like Trinity study were widely known I just ballparked a 100K figure.

The other similarity was 2000 was the end of the glorious bull market and 2001-2003 were bear markets followed by the great recession.

If this was 3 years ago, I'd say go for it. But with lots of signs saying we are looking at a bear market and your WR at 3.8%. I'd say stick around for another couple of years to hit the magic 4.1 million number which gives you a 3.5% WR.
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Old 12-16-2018, 10:07 PM   #8
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These are helpful replies. Yes, i did firecalc and it was 92.6% positive. And you folks are right on when you estimate my WR at nearly 4%. I think with 2 more years of working I'd be at $4.1M, so would achieve 3.5%.

As for reducing our spending, that is entirely an option. We've been tracking closely our budget, but that has been just data-gathering. We havent attempted to trim the expenditures, so I'm sure there is fat. I suspect that when we do pull the RE trigger, we'd naturally tighten up on some things just out caution, at least at first.

The input on healthcare deductible costs is worth taking a deeper look into, thanks.

I fear that if i end up waiting until i have achieve certain security, then I will have over-waited and missed the prime family years.
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Old 12-17-2018, 05:13 AM   #9
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OP, since you have the data on spending now. I say, update that data every month, and create some pivot tables in excel based on the spending categories. You will easily spot the "fat". Do this for few more years until your SWR drops below 3%. I promise you that monthly tracking of category-wise spending will have a visible effect on your future spending! At least, it did it for me.

Pre-50 FIRE requires lot more contingency planning because there are no reinforcements coming and your family obligations are not gone. I would not FIRE unless FireCalc gives me over 100% success rate i.e. 100% success on 120% of planned spending.

Quote:
Originally Posted by Acey View Post
I fear that if i end up waiting until i have achieve certain security, then I will have over-waited and missed the prime family years.
I fear about this as well and I am in a similar boat as you. My thinking is: I can't jeopardize decades of my family's future in exchange of few more years of working today. And it's not like my family is deprived of anything today. FWIW, I addressed the "time today" problem by switching to a less demanding job with little bit of paycut in order to balance my guilt out.
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Old 12-17-2018, 05:16 AM   #10
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Is downshifting to part-time or a role that would permit more time with family a possibility?
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Old 12-17-2018, 05:51 AM   #11
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Here are a couple hard questions to chew on..

Are you willing to give up extended, presumably expensive vacations to spend more everyday time with your family?

According to your rough number you want to spend exactly as much after you retire as you do now, is that really necessary?

As your kids age even though college is funded stuff like expensive activities, braces, cars etc start to occur have you factored that into your number.

Have you fully accounted for HI and OOP costs, they will do nothing but rise in the future. How much does your after tax brokerage throw off annually will you be able to slide in under the ACA cliff to control your costs for healthcare?

Does your job require extensive travel and/or very long hours? Otherwise 7 and 10 year olds life is pretty much school, a little down time, making and being with friends. If you already have your weekends free you're not going to be adding a lot to the one on one time.

Yes you could always go back to work. In tech with any extended time out of the work force the odds you could replace your entire income and vacation days are pretty slim.

Now you haven't said if this job causes you undue mental or physical stress or is affecting your marriage negatively that's another discussion.
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Old 12-17-2018, 06:02 AM   #12
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HC deductibles are a real budget killer on most plans. Once we exhaust COBRA, virtually every PPO plan I looked at in our area had a $6,500 (!!!!) per person annual deductible. It's basically catastrophic insurance - you'll likely never get to file a claim unless you get hit by a bus or have a major medical event. And, most of us have to pay $1K+ / month (or more - our own premiums will be $15K+/yr with $6,500 pp deductibles - and that's 2019 pricing) for even that. Of course, you could manage AGI to get subsidies - but that hits you another way as you then have limited income and have to pull more from your assets to cover your expenses. I ran the numbers both ways, and we're actually better off foregoing the subsidies and trying to maximize income - but it's still mind boggling what the HC costs are.

ETA - I'm budgeting $25K/yr for HC in retirement if that helps. And that's 2019. Heavens only knows what 2020 and beyond will look like.
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Old 12-17-2018, 06:20 AM   #13
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Acey, I don't know what you are going to do, but congratulations on being so well set up at your age. You certainly have provided yourself with the option of doing it.

I suppose one thing to consider is that if you can even think of FIREing, you can certainly afford to cut back some, and find an opportunity that lets you keep your hand in (in case you want to return to something after the nest is empty) and provide you with much time for other stuff with the family. Maybe freelancing, or part time?

Best of luck! You've put yourself in a great position! Enjoy the family!
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Old 12-17-2018, 10:04 AM   #14
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HC deductibles are a real budget killer on most plans. Once we exhaust COBRA, virtually every PPO plan I looked at in our area had a $6,500 (!!!!) per person annual deductible. ....
So what? Our claims are less than $500 a year for 6 of the last 7 years and only a few thousand that one year that was more than $500.

If you regularly use medical services then deductibles and co-pays are an important factor to consider, but if you are healthy then not so much.

That insurance does exactly what I want it to... it protects us from the cost of an expensive illness and gives us access to negotiated rates for medical services.

Too many people falsely presume that they will blow through their deductible every year in assessing the cost of health insurance and health care and conclude it is too expensive.... thankfully, it hasn't even been close for us.
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Old 12-17-2018, 10:16 AM   #15
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Pb, you have been very lucky. Many of us have chronic conditions that greatly increase HC costs.
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Old 12-17-2018, 10:19 AM   #16
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So what? Our claims are less than $500 a year for 6 of the last 7 years and only a few thousand that one year that was more than $500.

If you regularly use medical services then deductibles and co-pays are an important factor to consider, but if you are healthy then not so much.

That insurance does exactly what I want it to... it protects us from the cost of an expensive illness and gives us access to negotiated rates for medical services.

Too many people falsely presume that they will blow through their deductible every year in assessing the cost of health insurance and health care and conclude it is too expensive.... thankfully, it hasn't even been close for us.
So on a 20 plus year planning budget what number you use? That's the problem isn't it..hindsight is 20/20.
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Old 12-17-2018, 10:52 AM   #17
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Congratulations on your success! Amazing asset accumulation for somebody approaching 40.

If I had one suggestion it would be to work one more year and do a test drive. Live off a WR of 2.75% of your entire saved assets and run your retirement budget accordingly. You may never have to go that low when you actually pull the trigger but it would give me piece of mind knowing I could “tighten the belt” if I had to.
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Old 12-17-2018, 11:44 AM   #18
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Is downshifting to part-time or a role that would permit more time with family a possibility?
Agree with this. You could still work and pad your numbers without making sacrifices in lifestyle by going part-time, consulting, or doing some kind of side gig that allowed you to protect your savings but gave you more time. Your kids are in school, so their days are occupied. What would occupy yours? This is pretty much what I'm doing in about a year when I leave my first career (military officer) and find something else. I'll get much more family time overall since I won't be leaving for months at a time anymore, but won't need to dip into savings any time soon, even if I just go work at Home Depot, drive an Uber, or work at a bike store rather than a no-kidding bridge career.
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Old 12-17-2018, 02:27 PM   #19
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I have to ask. How does someone nearing 40 accumulate $3,655,000 and a paid off $500k home? Kudos! But seriously that is a tremendous amount to have accomplished it age 40.
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Old 12-17-2018, 02:36 PM   #20
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I have to ask. How does someone nearing 40 accumulate $3,655,000 and a paid off $500k home? Kudos! But seriously that is a tremendous amount to have accomplished it age 40.
I was thinking the same thing...I am the same age and don't have nearly that much saved with a similar income and higher savings rate. Not sure what I am doing wrong but very impressive on the OPs part.
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