Am I good to retire on 650k with family?

[firenow]

Hi All,

I am 38 year old male with a total networth of 650k. I have two kids aged 9 and 5. My networth is spread as follows

401k: 170k
Vanguard Technology Fund (VGT): 200k
Vanguard Mega Cap Growth Fund: 50k
Amazon Stock: 50k
Google Stock: 60k
Facebook Stock: 40k
Lending Club: 50k
Cash: 25k

From childhood I never wanted to work or even go to school. I love living life in peace as a minimalist and only working when it is needed. I feel the greatest happiness comes through very small and inexpensive things like Laptop, TV, Parks, Spending time with family etc...

I'm fed up with working in general and am looking to retire. With this net assets of 650k, at a 4% rate, I would make about 2166$ per month. Stock market usually does good so this can even be as high as 5400$ per month (at 10%) or 3800$ (at 7%).

If I move to east coast and rent an apartment for 700$, and arrange the rest of expenses to be under 1500$, I should be able to FIRE now. I know it is a bit tight but I can always supplement it with working again if needed.

There is nothing majorly wrong with my current job but I just am fed up with working for the past 15 years in my life and the 10 years of going to school before. I never lived life in my terms. I went to school because of fear of survival. Worked all these years for the same fear. Here is what I think of expenses, let me know what you think

Rent: 700$ (2 BR in a low COL area)
Grocery+Household items: 400$
Health Insurance (Premium+OOP): 700$
Utilities (Gas+Elec+Water+Internet): 200$
Entertainment (Eating out+Shopping): 100$
Kids School: 100$

Total: 2200$

 

[Oz investor]

children plus the potential of higher inflation ,

i would say no , on the basis of unexpected higher expenses


HOWEVER are you the type of person who can just walk in the door and land a job

(no lines no waiting etc .)

maybe you need a hobby that produces income , ( and replace that job with a passion )

 

[cooch96]

Wow. Your forecasted health insurance is nearly one third your budget. Is that correct? Is that worth it? What are the chances you’ll get $8400/yr value from that kind of expense. Can you shop around for better deals?

Regardless, you should be able to live a long time with a minimalist lifestyle on $650k. But I wouldn’t want to do it, and I advise you thoroughly explore other options before pulling the trigger.

 

[pb4uski]

In short, no.

 

[OldShooter]

In short, no.

no

 

[REWahoo]

From childhood I never wanted to work or even go to school.

The condition is commonly referred to as laziness.

I just am fed up with working for the past 15 years in my life and the 10 years of going to school before. I never lived life in my terms. I went to school because of fear of survival. Worked all these years for the same fear.

Sounds like you are unique, just like the rest of us.

You don't have the money to retire now without placing your family in a precarious financial situation, something I wouldn't do to my children if I had other options. Suck it up and keep working.

Oh, one last question - you wouldn't be trolling us, would you?

 

[Helena]

.

If you can live on that amount and save/invest the rest, keep working for another 10 to 15 years you will have more than enough to retire early.

 

[97guns]

You have around 475k in liquid assets that you can use to create some monthly income, if you could find a 4 or 5% yield that would be $1500-$2000 a month and cover your expenses

 

[jim584672]

No.

 

[DrRoy]

No. At that age with family you cannot rely on a 4% WR. What are you going to do the next time the market is down 20%, or 40%? Believe me, it happens.

 

[Another Reader]

You are looking at a 40 year period for which these assets to sustain first you and two children and then you (assuming no spouse). Current stock market values overall appear high, based on historical numbers. You have an undiversified portfolio comprised primarily of tech stocks. Ask the folks that retired in early 2000 how that worked out for them.

I would not even consider doing this with two children age 9 and 5. Suggest you read the Root of Good blog about retiring early with kids. It's written by a member here, posting as Fuego. Twice your assets and a paid for house when he retired.

 

[trumpeting_angel]

Slow down!

It would pay to read up on asset allocation. You'll need a sizable amount in bonds (for when (not if!) the market goes down) and cash. You've done a good job accumulating thus far. Is there work you'd like better? Does your spouse work? Could you find part-time work and get some free time that way?

$700 insurance for a family of 4 is a miracle where I live. Or perhaps it's just insurance for the OP, and the family is on the spouse's plan? Something here doesn't quite add up; but the whole package doesn't seem to add up to ER.

 

[Oz investor]

No. At that age with family you cannot rely on a 4% WR. What are you going to do the next time the market is down 20%, or 40%? Believe me, it happens.

i was looking at a 'rosy scenario ' of no draw-downs unless a major emergency and sustained by portfolio returns and maybe a few bucks earned casually .

they look to need an extra income stream as a buffer ( to me )

 

[exnavynuke]

Hi All,
With this net assets of 650k, at a 4% rate, I would make about 2166$ per month.


Rent: 700$ (2 BR in a low COL area)
Grocery+Household items: 400$
Health Insurance (Premium+OOP): 700$
Utilities (Gas+Elec+Water+Internet): 200$
Entertainment (Eating out+Shopping): 100$
Kids School: 100$

Total: 2200$

As your expected income is less than your expected expenses, the answer is a resounding no. Add in that your budget doesn't include a number of things (transportation costs, kid's activities as they grow, new clothes, replacing things that break/wear out, etc etc etc), and the situation is clearly not conducive to retiring as is.

 

[flintnational]

Congrats on your savings. But, you are not there yet. Keep w*rking.

 

[firenow]

You'll need a sizable amount in bonds (for when (not if!) the market goes down)

$700 insurance for a family of 4 is a miracle where I live. Or perhaps it's just insurance for the OP, and the family is on the spouse's plan? Something here doesn't quite add up; but the whole package doesn't seem to add up to ER.

I feel Investing in bonds only slows you down. For example if I invest just in SPY / VOO, I get 10% return. If I dilute it with 40% bonds my return falls down to 7%. You can take these historical profiles and compare; those with bonds don't do any better


As for insurance ACA premium for lowest insurance coverage is 270$ per month for a family of four at low income level. In addition I have a buffer of 400$ for OOP costs. It seems pretty reasonable to me

 

[firenow]

Add in that your budget doesn't include a number of things (transportation costs, kid's activities as they grow, new clothes, replacing things that break/wear out, etc etc etc), and the situation is clearly not conducive to retiring as is.

Yeah transportation costs are not there; I am planning to rent near to school and drop the kids by walk. Similarly use bikes for most stuff and on weekends go to nearby parks for fun. Every alternate weekend go out and eat, user uber here which is covered in the 50$ eating out expense.



Kid's activities are included in kid's school fee of 100$. Mostly we will stick to free ones unless absolutely necessary.



Clothing expenses are included in the 50$ "shopping" category


Replacing things that break? Not sure what they will be. These will be minimal as we won't be owning a home. We will be renting. And I don't have car. May be if I need some kitchen utensils replacement? If so they will come from the entertainment expenses for that month. The household items already covers things like soaps, paste etc...


Even if there are unexpected extra expenses in a month, if it eats out of capital a tiny bit then no big deal. Also the market return need not always be 4%; those extra savings can be used for these. I can always drive uber for that month and cover those up ONLY if needed that month.


Given my nature to be frugal and the way I don't like to see my capital go down, I will always do some part time work to bring it back if needed.

 

[firenow]

You are looking at a 40 year period for which these assets to sustain first you and two children and then you (assuming no spouse). Current stock market values overall appear high, based on historical numbers. You have an undiversified portfolio comprised primarily of tech stocks. Ask the folks that retired in early 2000 how that worked out for them.

I would not even consider doing this with two children age 9 and 5. Suggest you read the Root of Good blog about retiring early with kids. It's written by a member here, posting as Fuego. Twice your assets and a paid for house when he retired.

The 4% return already covers the scenario of stock market going down immediately. Doesn't it? FIRECalc shows a 100% success for withdrawing 24k for my capital of 650k for next 25 years (after which social security will kick in).



Rootofgood is a good example for my scenario; started reading it a week back. He had twice my assets yes but he now ended up with a lot more like 2M+; had he retired on my amount he would have been around 1.3M by now with the stock market doing so well in his times.

 

[Oz investor]

The 4% return already covers the scenario of stock market going down immediately. Doesn't it? FIRECalc shows a 100% success for withdrawing 24k for my capital of 650k for next 25 years (after which social security will kick in).



Rootofgood is a good example for my scenario; started reading it a week back. He had twice my assets yes but he now ended up with a lot more like 2M+; had he retired on my amount he would have been around 1.3M by now with the stock market doing so well in his times.

will Social Security kick in ( when you are 65 ?? )

in Australia i was formerly blessed to squeeze in at 65 , but on the 1st July 2018 , they shifted the goal posts and currently in kicks in at 66 .( for me )

HOWEVER they are intending to creep the retirement age higher at regular intervals so by the time in am 66 ( in 2021 ) will the magic number be 66 , 67 , 68 or bigger

our nation would rather buy new war machines from foreign nations than look after it's aging taxpayers

such concepts might easily be contagious

 

[cathy63]

...
And I don't have car.
...
I can always drive uber for that month and cover those up ONLY if needed that month.
...

There is a big disconnect between these two ideas.

 

[RobbieB]

Have fun, retire now!

 

[firenow]

There is a big disconnect between these two ideas.

You don't need a own car; you can always rent one from uber or associates

 

[Aerides]

A 4% WD rate assumes 7% growth, minus inflation/taxes, not just 4% growth. And a "retirement ready" portfolio it means having flexibility to sustain the down-periods without impacting your capital, for a few years if need be. I don't think any reasonable retirement advocate would endorse a 4% SWR for a 37 year old. It's risky at 47, and assumes things like a paid off house, flexibility in spending (ie, turn down discretionary a tad here and there).

You have two small children. Earlier posts you asked about when/enough, and were targeting 3M in 10 years. Even then you'd still have two college educations in front of you, but far more workable.

If you were single, I'd say go have fun, no harm no foul. But you have a young family. You can either suck it up for several more years and provide them with security and comfort, or you can bail now and leave them wondering what happens when the rent goes up....or they need braces...or can't join the school band or dance class - all things that would be a non-issue if you stay working.

That health insurance will go up, and you just have premiums covered there, not the deductible expenses of regular check ups, dental care, vision, etc.

By all means, if you want to live a very frugal existence, it can be done. But I think that ship sailed when you made a family.

 

[FIREd]

The 4% return already covers the scenario of stock market going down immediately. Doesn't it? FIRECalc shows a 100% success for withdrawing 24k for my capital of 650k for next 25 years (after which social security will kick in).

How much social security are you expecting to get after retiring so young? Have you already passed the second inflection point?

Rootofgood is a good example for my scenario; started reading it a week back. He had twice my assets yes but he now ended up with a lot more like 2M+; had he retired on my amount he would have been around 1.3M by now with the stock market doing so well in his times.

RoG’s withdrawal rate seems to be far below your proposed 4%. Based on his monthly income summaries, his blog and consulting income covers a great deal of his expenses. And, as you mentioned, he benefited from an up market, which you may or may not benefit from. So I don’t think that his situation is necessarily a good example for your scenario.

 

[firenow]

How much social security are you expecting to get after retiring so young? Have you already passed the second inflection point?

If I retire today, I will get 1250 social security at age 62 and my wife will receive half of that to make it ~1900 which will be good for both of us to live on as long as we have some capital left by then.

With a 2k per month withdrawal, I'll have 750k by the time social security kicks in.