Almost 40 years old and SOOO happy to find this forum!!!

[papadad111]

OK couldn't resist

You touched a nerve when suggesting for this gentleman to talk to a financial planner. Just humor yourself. Go find a financial planner who is either

a) your same age (38, i think you said) and has the same or more net worth than you (I think you said about $1.8M)

or

b) a financial planner who is older, but had the equivalent of what you have today when he/she was your same age.

You'll be hard pressed to find one that fits the criteria.

I searched for 2 years to find a fee-only advisor that fit the criteria and never found one. Plenty of snake charmer insurance salesmen out there - but few with any real personal skin in the game. Point is - be careful. You've done well without seeking "expert" advice. Financial expertise is not rocket science - anyone with an analytic bend can do it themselves - as an engineer, you've easily got 98% of it down and the other 2% wont really make much of a difference to the taste of your Cheerio's when you do retire!

 

[donheff]

Interesting thread. I was surprised to see the skepticism about OPs need for $3+M since he is aiming for 10 years out and needs to anticipate inflation during those years. But the strangest thing was to diss his savings. Heck, they are doing great. How can you knock $100K+ at their income level? Should they live like paupers so they can shave a year off work? It seems to me they have a solid plan that balances a reasonable work life period with a nice extended ER. They will beat me by 6 years and I am the youngest guy to pull the plug on my block.

 

[GladToBeFree]

Using a retirement calculator on the MSN Money site, I figure you'll have at least $140,000 in todays dollars to spend each year when you hit 50. That's making a lot of assumptions, however.

Congrats, I think your plan is working great.

Jim.

 

[One-Zero]

I'm a newguy here as well, and Maldini you seem to be all over it - congrats on your efforts, plus your thread has added a few more ideas for consideration on my side. this is good stuff.

thanks and best of luck.
1-0

 

[maldini]

Using a retirement calculator on the MSN Money site, I figure you'll have at least $140,000 in todays dollars to spend each year when you hit 50. That's making a lot of assumptions, however.

Congrats, I think your plan is working great.

Thanks for running the numbers.

I do understand the assumptions. As an earlier poster astutely pointed out, planning today for what may happen 40-50 years from now is pretty much fraught with assumptions.

 

[maldini]

I'm a newguy here as well, and Maldini you seem to be all over it - congrats on your efforts, plus your thread has added a few more ideas for consideration on my side. this is good stuff.

Thanks and thats cool. Feel free to post here with any questions you might have on what I have done and how it may be useful to you.

 

[maldini]

But the strangest thing was to diss his savings. Heck, they are doing great. How can you knock $100K+ at their income level? Should they live like paupers so they can shave a year off work? .

This puzzled me as well.

I even went back today and updated all my numbers and happily things look even better than what I first posted(which was based on last months numbers).

Retirement savings are up to $1.42M now and the separate 529 plan is up to $84k.

 

[Vincenzo Corleone]

Maldini, sounds like you've done a great job in both your current financial situation and your projections. It's taught me that I've not been conservative enough in my own projections. I've now modified my spreadsheet to assume a 7.5% return (instead of 8%) and a 4.5% inflation rate (instead of 3.5%). I just have to figure out how to better figure taxes in as I was just winging it up until now.

 

[Rambler]

Maldini
I agree with Papadad111...you probably won't find a fee based financial planner who has done or will be able to do better than you have.

I took a look at your numbers and your assumptions, which are conservative, but strikingly similar to what I have used in my own calculations. I think you have done a great job with the calcs as well as getting this far at age 39.

We (DW and I) are looking at a similar endgame but hopefully a slightly larger starting point for FIRE (trying for about 5M at about 48). That gives us a little more to leave behind, or for unexpected expenses. FireCalc says we can manage with a SWR of 3.38% (given conservative inflation and rates of return), but we are shooting for a more conservative 2.75% + or -. The reason is the ups and downs in the market, always having 3+ years worth of after-tax living expenses in liquid accounts (tiered CDs or state muni MM, or some mixture of those), and a hope to leave a little behind for the kids (not telling them...want them to do their best on their own). We've got around 18-20 months to go until the FI part...RE will depend on the FI as well as being able to get my replancement in place and trained.

Personally I think you will end-up closer to (or a little higher than) 4m than 3.5m. If you applied the 3.38% rate, giving you somewhere on the order of 135-140k.

Hope you get there! Good luck.

Rambler

 

[maldini]

Maldini, sounds like you've done a great job in both your current financial situation and your projections. It's taught me that I've not been conservative enough in my own projections. I've now modified my spreadsheet to assume a 7.5% return (instead of 8%) and a 4.5% inflation rate (instead of 3.5%). I just have to figure out how to better figure taxes in as I was just winging it up until now.

Thank you for your kind words.

If you do figure out how to handle the taxes please let me know. My effective tax rate in retirement is almost a total guess at this point.

 

[maldini]

Maldini
I agree with Papadad111...you probably won't find a fee based financial planner who has done or will be able to do better than you have.

I guess thats both good and bad.

Its good in that I am probably tracking the right items, its bad in maybe not finding a competent adviser to give me a one time look over.

Oh well, I guess I will have to rely on the multiple tools online, like FireCalc to be my second pair of eyes.

I took a look at your numbers and your assumptions, which are conservative, but strikingly similar to what I have used in my own calculations. I think you have done a great job with the calcs as well as getting this far at age 39.

Thanks. I chose the numbers to be conservative, but not so conservative that I am actually making a bonehead decision based on them.

I think I would rather lean towards my numbers telling me to w*rk one more year rather than quitting 1 year early.

We (DW and I) are looking at a similar endgame but hopefully a slightly larger starting point for FIRE (trying for about 5M at about 48). That gives us a little more to leave behind, or for unexpected expenses.

For my lifestyle I expect in retirement, $5M would leave a very very handsome chunk to the next generation. I wish you the best of luck getting there! That would be one hell of an achievement.

FireCalc says we can manage with a SWR of 3.38% (given conservative inflation and rates of return), but we are shooting for a more conservative 2.75% + or -.

If you get a chance, try the tool at Schwab. I was playing with it last night. It runs a ton of simulations based on both average and bad market conditions over your expected retirement and tells you how you will fair.

Personally I think you will end-up closer to (or a little higher than) 4m than 3.5m. If you applied the 3.38% rate, giving you somewhere on the order of 135-140k.

$4M and an age of >46 will see me pull the plug. Unless my wife and I keep our jobs (which neither of us expect), I don't think we will get to $4M with out some very nice years in the market.

Keeping my fingers crossed though.

 

[lightspeed]

Maldini, I think you've done great. It's admirable how much you've saved. I make quite a bit more than you but manage to only save a little more than you yearly. I'm in a similar situation with the same timing, except I have a mortgage and 2 kids (8 +7). My income is higher but so are my family's expenses. My approach is as conservative as yours... I'm 41 (DS is 45), have about 2.0 million net worth, save a minimum of $120K/yr, and by most calculators I should be able to pull the plug in 3-4 years, but I'm very uncomfortable with it and want to be prepared for worse case scenarios. Our own solution is to pay off the mortgage in 3 years, then work about 20-24 four day weeks a year (which will easily cover our living expenses +) until our net worth reaches 4.5 million. Hopefully I won't have to work more than 10 more years on the part-time schedule. Somehow, that seems more palatable then working full-time until 50.

 

[maldini]

Our own solution is to pay off the mortgage in 3 years, then work about 20-24 four day weeks a year (which will easily cover our living expenses +) until our net worth reaches 4.5 million. Hopefully I won't have to work more than 10 more years on the part-time schedule. Somehow, that seems more palatable then working full-time until 50.

That sounds like an awesome plan!

I have a question for you and others who track net worth. Are you including your home equity in that and if so, does that mean you intend to significantly downsize/downcost?

I don't include my house in any of my calculations because my goal is to retire with out having to downsize/downcost. I want to use that as a safety net.

 

[Rich_by_the_Bay]

I don't include my house in any of my calculations because my goal is to retire with out having to downsize/downcost. I want to use that as a safety net.

Most don't include their home equity when planning for FIRE, though theoretically (for estate purposes) it's part of your "net worth." However, if downsizing is in the plans and you estimate conservatively, the assets freed up by the anticipated downsizing can play into the plan. FIRECalc has a place to include those "one-time infusions" of cash.

 

[Rambler]

I never include home equity in my retirement fund planning. I only use it when considering my net worth, and "what if" scenarios...like what if we sold when we were 75 or 80, which may happen if I can no longer care for a couple of acres in the country...it would mean a million$ more in today's dollars after a downsizing replacement..its paid for.

Rambler

 

[lightspeed]

That sounds like an awesome plan!

I have a question for you and others who track net worth. Are you including your home equity in that and if so, does that mean you intend to significantly downsize/downcost?

I don't include my house in any of my calculations because my goal is to retire with out having to downsize/downcost. I want to use that as a safety net.

I don't include equity in our house to compute net worth either. Our thoughts now would be to downsize and relocate with smaller homes close to our kids, wherever they end up, but they may not settle down until long after I retire. I hope to get equity out of our house (>1 million), but to be conservative, I'm not counting on it.

 

[Vincenzo Corleone]

I have a question for you and others who track net worth. Are you including your home equity in that and if so, does that mean you intend to significantly downsize/downcost?

I do not include home equity in my net worth.

 

[nun]

I do not include home equity in my net worth.

Man with that stash I'd be retired already

 

[clifp]

Maldini

Pretty much impossible to add anything quantitatively to your financial planning.

I will add one bit of advice from a psychological perspective. As your net worth increases your willingness to tolerate the BS that is associated with work decreases.

At some point sometime in the next 10 years they'll be an event that makes you really want to have the option not to go to work. Even if the numbers are not exactly what you want says 2.5-3 million instead of 3.5-4 million, do what your heart says even if the number paints a bit more scary picture.

I think one of the underestimate strength of the financial types on this board is our money wisdom. By this I mean the ability to do avoid doing stupid things with their money, e.g. hand over to the annuity salesman, by the overpriced timeshare, fall in love with a ridiculously expensive hobby etc. Keep in mind that literally tens of millions of American are enjoying their retirement with financial assets a fraction of yours, and level of financial sophistication much lower.

That being said as long you are enjoying your work, keep working! Us early retirees need lots of smart people increasing the GDP and keeping those share prices up

 

[papadad111]

Interesting discussion on whether or not to consider home equity in your retirement. I generally include given assumption that we would definitely downsize (or move to lower cost location). Yes, a home is a "necessity" but typically it is a sizeable investment in ones' overall net worth portfolio. For example, pulling out equity and buying a smaller house for cash reduces ones monthly outflow on a mortgage payment. The objective is to retire....and to get there as fast as possible (with everyone having their own comfort level....some kicking the work thing all together, some moving to part time, some doing charity "work" that earns a stipend etc).

I am curious where those in their late 30's to early 40's are living - what cities.

And I am getting nervous in this market. Been a bear for the last 800 points... All the joy and hype has me nervous. Election coming....

You know, the market is kinda like having sex....about the time things are feeling good...bang...its all over.

 

[maldini]

I am curious where those in their late 30's to early 40's are living - what cities.

I am 39 and I live in a Boston suburb.

We will likely not move out of the state but if need be we would be willing to downsize our house, even in the same town, to lower expenses and to get a small infusion of cash.

And I am getting nervous in this market. Been a bear for the last 800 points... All the joy and hype has me nervous. Election coming....

You know, the market is kinda like having sex....about the time things are feeling good...bang...its all over.

Having lived through some of the best AND worst times in the markets history, I no longer get nervous. What happens will happen and if you are some what conservative and diversified in your investments, your highs won't be so high and yours lows won't be so low.

Take a look at the following fund for example. It has NEVER lost money, even in 2002
T. Rowe Price Capital Appreciation Report (PRWCX) | Snapshot

 

[maldini]

I will add one bit of advice from a psychological perspective. As your net worth increases your willingness to tolerate the BS that is associated with work decreases.

yah even at my age now, I can sense this happening.

The more I run the numbers the more I think 48 might be an achievable launching point.

 

[Coach]

Maldini

Pretty much impossible to add anything quantitatively to your financial planning.

I will add one bit of advice from a psychological perspective. As your net worth increases your willingness to tolerate the BS that is associated with work decreases.

At some point sometime in the next 10 years they'll be an event that makes you really want to have the option not to go to work. Even if the numbers are not exactly what you want says 2.5-3 million instead of 3.5-4 million, do what your heart says even if the number paints a bit more scary picture.

I think one of the underestimate strength of the financial types on this board is our money wisdom. By this I mean the ability to do avoid doing stupid things with their money, e.g. hand over to the annuity salesman, by the overpriced timeshare, fall in love with a ridiculously expensive hobby etc. Keep in mind that literally tens of millions of American are enjoying their retirement with financial assets a fraction of yours, and level of financial sophistication much lower.

That being said as long you are enjoying your work, keep working! Us early retirees need lots of smart people increasing the GDP and keeping those share prices up

clifp, that's a really good post.

Coach

 

[maldini]

Firecalc is bumming me out big time

When I plug my data in as shown below, I am getting a success rate of barely 55% to retire at age 50. Either I am doing something wrong or I WAAAAY overestimated my ability to RE at 50

Age: 39
Current Portfolio Value: $1,420,000
Yearly Additions to portfolio: $35,000
SS: $10,000 per year starting in 2032
Lump Sum: $142,000 in year 2032
Retirement: 2017
Inflation 4%: (this seems to be the issue)
Plan ends 51 years (or 90 years old)
Expenses: $85k (that will include the taxes)

in playing around with the numbers, it seems like the inflation has the largest affect. When I choose CPI or PPI in the options menu for inflation, I get 100% success. When I chose something as basic as 4% in the options menu for inflation, I drop down to the 50% range.

Can someone recommend which type of inflation I should choose? I assume the CPI is much less than 4% which is why I jump from a 50% success rate to a 100% success rate without changing any other numbers.

 

[Meadbh]

Can someone recommend which type of inflation I should choose? I assume the CPI is much less than 4% which is why I jump from a 50% success rate to a 100% success rate without changing any other numbers.

If I remember correctly, historically, inflation has averaged about 3% in the US. Of course, that wasn't very comforting in the 70s!