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Hello from a not so young dreamer!
Old 03-07-2018, 07:31 AM   #1
Confused about dryer sheets
 
Join Date: Mar 2018
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Hello from a not so young dreamer!

I've been lurking here for a while and really like the wealth of information on this forum. I decided to create a login and post our plan. Appreciate any advice to help us improve it.

Current status
  • Husband is 46, wife 41. Two 9-year-old kids.
  • No debt (house/cars paid for by cash)
  • Base gross income is $360K combined. Bonus is up to $50K on a good year, $15K on a bad year. We either use it on a big ticket furniture, extra vacation or extra contribution to the Vanguard portfolio.
  • Total annual spending is $70K
  • $1mil in combined 401Ks; yearly contribution is $60K including company matches
  • 2 year of emergency fund in a saving account
  • $100K in Vanguard fund, 80% stock 20% bond. Contribution is bi-monthly totaling $70K a year. We just started this last year after getting out of rental properties business and consolidating our assets.
  • $30K in 529s. Yearly contribution is $6K (we just moved to a state with no income tax so no obvious benefits to contribute more to 529s. Maybe we're wrong?). Plan to fund kids college from other assets.
Plan to be able to FIRE in 10 years
  • Hoping to accumulate at least $2.5mil in the 401K and Vanguard portfolios. Target withdrawal rate is 2.5% or less.
  • Downsize the house ($675K to $400K or less in today's dollars)
  • Keep annual spending the same or less. How realistic is this? We won't be spending as much on kids and house but will have to fund kids' college.
  • Would like to relocate to a retirement friendly state/city/town financially and culturally. Any place that you recommend?
  • Wife can continue working (or both part time) to help fund college and graduate schools if needed. One kid aspires to be an astrophysicist and the other a surgeon. They are still young and their aspirations likely change. We don't plan to pay for all of graduate schools but do want to help as much as possible. Luckily, we don't hate working yet . We just want the freedom of being able to retire early.
Risks
  • We both have aging parents who are likely to rely on our financial, physical and emotional support if they get sick. They have small pensions and do okay for now. But none has much savings to speak of.
Anything we should know about and plan for, such as health and long term care insurance, unexpected expenses, etc.? Anything we can do to improve our current FIRE plan?
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Old 03-07-2018, 11:03 AM   #2
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2.5% is very, very, very low imo. 3-3.5% is probably "very safe". 4% plus pensions + social security is likely "plenty".

With $130k in contributions each year ($60k 401k plus $70k Vanguard), and $1.1M in investments already, you're probably going to have quite a bit more than $2.5M in 10 years. With a 6% constant rate of return you're looking at $4M or so ten years from now. So maybe you might wanna consider either retiring earlier or spending more, unless you really want to work to give other people money eventually.
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Old 03-07-2018, 01:15 PM   #3
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Quote:
Originally Posted by drk787 View Post
I've been lurking here for a while and really like the wealth of information on this forum. I decided to create a login and post our plan. Appreciate any advice to help us improve it.

Current status
........
[*]$30K in 529s. Yearly contribution is $6K (we just moved to a state with no income tax so no obvious benefits to contribute more to 529s. Maybe we're wrong?). Plan to fund kids college from other assets.
..........
You still get the benefit of tax-free growth in the 529.

At your kids' age, the account won't quite double before they need it. Putting more money in now from your excess cash flow could reduce or eliminate the need to work later to pay their college costs.
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Old 03-07-2018, 01:19 PM   #4
Confused about dryer sheets
 
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I guess we are very conservative. With the dot com bubble and then housing/stock collapse recently we do try to plan for worst case scenario. We keep worrying that a catastrophic event (such as another financial collapse, parents needing expensive medical care) would wipe us out financially. We don’t have pensions and who knows what SS benefits are still available when we are old enough to collect them.

I don’t think we deprive ourselves but we can definitely spend a little more. Being able to FIRE earlier than 10 years sounds great though! Thanks for the assurance.
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Old 03-07-2018, 01:32 PM   #5
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Based on your numbers, you look golden but I suspect your expense estimate is off base. You must be missing something from adding into the expense side. If you expenses are 70K and if your taxes are $115K (Federal + FICA) then your savings should be $175K. So your savings and expenses don't add up. You must have missed something.
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Hello from a not so young dreamer!
Old 03-07-2018, 04:12 PM   #6
Confused about dryer sheets
 
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Hello from a not so young dreamer!

Thanks for pointing it out! We had to redo the numbers. DH also bought his company stock from his paycheck and we have about $100K vested so far. We are supporting my husband’s daughter who’s in the last semester of college. We have our pot of ‘fun’ money to spend each month, about $1500-$2000 each. I spend about $500 a month and save the rest to put in Vanguard end of every year. DH spends all of his which is perfectly fine.

So yeah we spend way more than I thought ☹️. Yikes! I don’t think we want to deprive ourselves too much while we are working. But we need to work on reducing spending gradually before retirement.
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Old 03-07-2018, 04:28 PM   #7
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Welcome. Congrats on $$ so far. Your instincts are sound. Keep it up.
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Old 03-07-2018, 06:08 PM   #8
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Suggest that you buy Quicken... use their Lifetime Planner to make your plan and look at What-Ifs and then use Quicken to monitor your progress against plan and your spending.
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Old 03-07-2018, 07:13 PM   #9
Confused about dryer sheets
 
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Thank you all for your reply so far! We’ll look at putting extra into 529s from our individual ‘fun’ money.

We are using Flexible Retirement Planner (http://www.flexibleretirementplanner.com/wp/?index.htm) but will look into Quicken and FIRECalc as well.
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Old 03-08-2018, 04:51 AM   #10
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I use one of many account aggregation services (My Accounts from Bank of America) in order to track and categorize spending and income regularly. This tool has allowed me to make sure that none of my spending goes untracked and hence out of the radar for planning the future spending. Moreover I download the raw data as CSV file and maintain a running list of transactions into an Excel file. The Excel allows me to slice and dice transactions to collect lot of useful information e.g. track my rental expense/income, hobby expense/income, cashflow, savings rate, etc. I have a running history of transactions for about 12 years now using this setup. The only thing this setup can't track are the payroll withdrawals that never comes back into any of my regular accounts e.g. taxes, health insurance premiums, etc.
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Old 03-08-2018, 05:50 AM   #11
Confused about dryer sheets
 
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How do you plan for big ticketed items, such as a car, that you spend once every few years during retirement? Mine is 10 year old and although I like it and will drive it for as long as possible. But I imagine we’ll need to replace it in a few years. We will have enough cash to pay for it and plan to replenish the cash over a couple of years. Would like to know how you folks would do it in retirement. Do you set aside some money every year or just take the hit one year?
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Old 03-08-2018, 05:05 PM   #12
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Originally Posted by drk787 View Post
Do you set aside some money every year or just take the hit one year?
We set aside some money every month, not just for new cars, but all the "lumpy" expenses like a roof, furnace, etc. One year it was $3,400 for a new water line from the meter to the house, completely unexpected. Nice to have the cash on hand for stuff like that.
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Old 03-08-2018, 05:19 PM   #13
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We set aside some money every month, not just for new cars, but all the "lumpy" expenses like a roof, furnace, etc. One year it was $3,400 for a new water line from the meter to the house, completely unexpected. Nice to have the cash on hand for stuff like that.
+1 much easier doing it monthly.
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