Could I semi FIRE in 5 years?

[torres9]

Hello,
I have been lurking for a few months and have learnt quite a bit already! DW and I are hoping to slow down in about 5 yrs or so.

Am 41 , wife is 38 and we have 2 kids 9 and 2. It would be great to have more time to enjoy the kids before they fly the coop. My passions away from work are playing and coaching soccer and learning more about financial investments.

Currently have 1.2M total invested; 500k in deferred plans( 401k and IRAs) and 700k invested through Vanguard in both index and actively managed funds. Asset allocation is 70% stocks, 30% bonds and cash. Our home is worth about 380k and we owe about 120k on the mortgage.
Have 100k/20k in two 529 plans for the kids. No other debt.

Our plan would be to pay off mortgage and complete college savings for the kids.(our 2 biggest expenses!). Anticipate our needs to be to be about 73k after tax which includes 20k towards health insurance annually.With annual savings and current savings(1.2m returning a real return of 3%), we are hoping to reach our target in that time frame. This is with an anticipated 4% SWR.

I would then hope to work part time and leave the nest egg untouched for about 5 years just to build a cushion. Would appreciate your feedback on if this is feasible.

torres

 

[SecondCor521]

Welcome to the board!

Broadly speaking, I think you're in the ballpark, so to figure it out any better you'd have to drill down a little. For example, how much do you plan to set aside total for the kids' college funds? How much do you figure you could bring in (post-tax) from part time work?

Assuming 3% inflation, with your 3% real return would give you a nominal rate of 6%. Growing that $1.2M at 6% would give you about $1.6M after five years (ignoring any additional savings you add over the next five years. That $1.6M would throw off about $64k per year. Let's SWAG $20k per year in taxes plus your $73k in living expenses would take you to $93k. $93k less the $64k from your nest egg would leave you with $29k to cover with part time work.

That would put you in a stable position, but you wouldn't be gaining very fast on FIRE'ing completely. At that point, before downshifting to part time work, I would try to decide if it's better to suck it up for a few more years working FT and then FIREing completely, or downshifting and working part time for another several years to reach FIRE. It's a personal preference, and spending time with those kids may swing the balance towards PT sooner.

It looks like you'll have some good options to choose from at that point.

2Cor521

 

[Rambler]

I've debated the PT work thing myself a few times. You really have to figure out if your skills lend themselves to PT work. As the head of a large subsidiary of megacorp, mine don't...I'm either in (and I do a great job when I'm in), or I'm not. In your case, having been able to save that much at such a young age probably also means you are pretty senior. In any case, for myself I decided to suck it up for an extra year or so. I can probably save more in a year of work than I could make in 10 or more years of part-time work.

FWIW

Rambler

 

[rs0460a]

Time Sharing...

As a couple, I guess you can call us "part time".

I'm retired - my DW works (full-time)...

- Ron

 

[SteveR]

Welcome to the forums. Glad you de-cloaked and joined the group. We encourage folks to post as well as just read.

You seem to be doing very well for yourself and your kids. It would appear your family income is substantial to fund your investments. I agree with SecondCor521; you are well on your way but would need more to fund your actual income needs (including taxes).

If you intend to fund the 2 year old's 529 at the same level as your older child it would appear you might need to work longer or save less to put more into your defined plans and Vanguard.

Do you wish to carry your mortgage into retirement? Some do, some don't. It comes down to personal desires and cash flow. But needs to be considered.

Does your wife work and will she also retire early?

Good luck and keep us posted.

 

[torres9]

2cor521,

Thanks for your reply.

My plan is to fund is to fund 9yr old's 529 for 2 more years, the younger one for 7 more.
Approx 10k per year each. Im hopeful this would atleast cover 4 yrs of college in most places. If they go to public universities then any surplus may cover some of grad/professional school.

The tax question is one I don't have a good grip on. I have estimated 10% for taxes after reading Clyatt's book. So my annual need is 81k. I guess this is something I have to rethink!

I am hoping to be almost completely FI in 5yrs. I hope to cover my annual expenses by working PT for another 5-10 yrs and hope my nest egg grows more just to add a cushion. I guess Im not sure a 4% SWR is enough to FIRE when looking at about 45-50
yrs of not working.

 

[torres9]

I've debated the PT work thing myself a few times. You really have to figure out if your skills lend themselves to PT work. As the head of a large subsidiary of megacorp, mine don't...I'm either in (and I do a great job when I'm in), or I'm not. In your case, having been able to save that much at such a young age probably also means you are pretty senior. In any case, for myself I decided to suck it up for an extra year or so. I can probably save more in a year of work than I could make in 10 or more years of part-time work.

FWIW

Rambler

Rambler,
Im a physician and would hope to work PT but am not sure how feasible it would be. I do worry about losing my skills if not working FT. So yes, I may just have to continue FT till I can FIRE!
Just dreaming of PT in 5 yrs or so!

torres9

 

[torres9]

As a couple, I guess you can call us "part time".

I'm retired - my DW works (full-time)...

- Ron

Ron,

My wife is a SAHM but not retired I guess with young ones!

torres9

 

[torres9]

Welcome to the forums. Glad you de-cloaked and joined the group. We encourage folks to post as well as just read.

You seem to be doing very well for yourself and your kids. It would appear your family income is substantial to fund your investments. I agree with SecondCor521; you are well on your way but would need more to fund your actual income needs (including taxes).

If you intend to fund the 2 year old's 529 at the same level as your older child it would appear you might need to work longer or save less to put more into your defined plans and Vanguard.

Do you wish to carry your mortgage into retirement? Some do, some don't. It comes down to personal desires and cash flow. But needs to be considered.

Does your wife work and will she also retire early?

Good luck and keep us posted.

Steve,
Im glad to be on board.
Im hoping to pay off the mortgage as it would cut my annual expenses.
Currently I think it gets paid off in 7 yrs.

torres9

 

[novaman]

Rambler,
Im a physician and would hope to work PT but am not sure how feasible it would be. I do worry about losing my skills if not working FT. So yes, I may just have to continue FT till I can FIRE!
Just dreaming of PT in 5 yrs or so!

torres9

I'm a dentist, and my associate has chosen to only work 2 days a week. Yes, her skills certainly have suffered, but she does fine by staying within her limitations.

I think healthcare is an excellent field for those desiring more flexible hours.

 

[maldini]

Anticipate our needs to be to be about 73k after tax which includes 20k towards health insurance annually.

My wife and I are in a pretty similar situation to you (age, assets, retirement goals, expenses etc).

Can you tell me if that $20k is in todays $'s for health care?

I am only planning on $10-$12k a year in todays $'s for health care and wonder if I am way underestimating...

 

[DblDoc]

My wife and I are in a pretty similar situation to you (age, assets, retirement goals, expenses etc).

Can you tell me if that $20k is in todays $'s for health care?

I am only planning on $10-$12k a year in todays $'s for health care and wonder if I am way underestimating...

maldini - this is such a moving target right now and depends on so many factors such as your and spouses age, current (if any) medical problems, the kind of plan you want and the state you live in. I have "ballparked" a similar 12k/yr in todays dollars for me and DW and then inflate it by 5%/yr to give me an estimate of needs starting in the ~ 10yrs from now I plan to retire. Of course in that timeframe the landscape could completely change as our current system is untenable long-term .

DD

 

[maldini]

maldini - this is such a moving target right now and depends on so many factors such as your and spouses age, current (if any) medical problems, the kind of plan you want and the state you live in. I have "ballparked" a similar 12k/yr in todays dollars for me and DW and then inflate it by 5%/yr to give me an estimate of needs starting in the ~ 10yrs from now I plan to retire. Of course in that timeframe the landscape could completely change as our current system is untenable long-term .

DD

Thanks DD, that is very similar to how I am modelling.

I know all of this planning is fraught with errors since predicting the future is near impossible but I would hate to be off as much as 50% on something like health care as it will be one of my biggest expenses in early retirement.

$20k in todays market for a healthy couple seemed a bit extreme to me.

 

[Meadbh]

Rambler,
Im a physician and would hope to work PT but am not sure how feasible it would be. I do worry about losing my skills if not working FT. So yes, I may just have to continue FT till I can FIRE!
Just dreaming of PT in 5 yrs or so!

torres9

Hi from another MD. Are you in private practice? Which field?

I'm in academia and therefore my clinical work is part time. In my speciality (which involves critical care) I think the minimum acceptable time to spend doing clinical work each year to maintain skills and stay current is approximately 0.25. I think the "critical mass" of time depends very much on what type of work you do. If you are a surgeon it may be more and may be defined by number of procedures.

 

[torres9]

Maldini/DD

Agree with both of you that it is difficult to predict health care costs! I did try to check this thru ehealthinsurance.

For a family of 4 with our projected ages 5 yrs from now,I found an option with approx
a $350 monthly premium but with almost $10k deductible. This is linked to an HSA. Now hopefully one would not have expenses of 10k per year towards the deductible!
I was not sure how much the premium would increase each year, but one of the recent threads quoted others on the forum with premium increases up to 10%.
It would be nice to free up some money for other things than health care in retirement!

torres9

 

[torres9]

Novaman,

One option would be to work fewer days per week but still take call. Im not sure partners will agree to that!

Meadbh,
Good to hear from you. Im in an IMed sub specialty.

The other option I have contemplated is locum tenens work. It may be too disruptive on the home life however. I still worry about losing skills or having to return FT if there is some catastrophe, and then not being considered for a position.

torres9

 

[maldini]

Maldini/DD

Agree with both of you that it is difficult to predict health care costs! I did try to check this thru ehealthinsurance.

For a family of 4 with our projected ages 5 yrs from now,I found an option with approx

ok this is the difference.

I am only modeling for my wife and I through out retirement. I expect my daughter to have her own coverage after college.

We do hope to retire before she is out of college and we will use what ever plan the college may have for health care, else just carry her for a couple of years on ours.