Hi from AZ....44 yrs Old and Getting Closer. I think.

[raydermonk]

Just signed up and am amazed by the wealth of knowledge on the site. Looking forward to learning from the folks here on the forum, as I try to wrap up the last few years of my career.

A little about me, as I'd welcome any advice or guidance you may have. I'm in middle management (multi-unit) for a large fuel retailer, and have been in the industry for 26 years. No college degree (though my semester at ASU was memorable), and started a family very young. All 3 kids are grown, with my youngest (19) almost out of the house. My wife is in a good senior sales position at Megacorp, and has been there for 15+ yrs.

We're currently salaried at a combined $180k annually, with my additional bonuses adding another $60k+ to that. Her 401k is at 18%; with 2% for me, and an additional 12% going into my NQDC account (high-comp rules...). Current portfolio (cash, IRA, 401k, NQDC) at $600k+. Our primary house, at approx $275k market value, was paid off in 2013 after purchasing in 1999.

We purchased our dream mountain home on 5 acres for $400k, with a rough market value of $500k currently. Our only debt is the mortgage on the weekend home, with a current balance of $300k. As my financial plan thus far has played out exactly as written 15 years ago, I'm confident that the cabin will be paid off in <5 years. With company partner-profit bonuses paid on a schedule of 1 year and 6 years from now (totalling $400k-$500k, gross), that will leave me at 50 years old, with the estimated holdings, figured on VERY modest gains from today:

--Debt = $0
--Portfolio = $1.2 million
--Real estate = 2 houses, clear, @ approx $900k-$1.1mm value (?)
--NO pension to count on
--Wife will continue working (it's her turn, she says. I'm glad!)
--Estimated yearly expenses on current calc + inflation = $45k

My balance on the NQDC ($350k+) will be paid out over 2 years upon resignation....I'd absolutely welcome hints on how to leverage this, as I haven't found any yet. Net cash from this would be reinvested, as the wife's salary more than covers yearly expenses and fun money.

While I'm not decided on going full FIRE at 50 yrs old, I like to think it's an option, or at least an option to spend my time doing things I enjoy in a completely different industry....part-time of course, and on MY schedule. If things in my current role seem favorable, I could always stretch it and bank the additional $200k/yr for backup cash and peace of mind. But, my motivation is strong to be done before 51. I've noticed the term "One more Year" in my reading here....I'll be cautious.

Sorry for the long post, but hopefully this helps get solid feedback from the well versed here. Thanks!

 

[Big_Hitter]

the nqdc will be a huge tax hickey, especially 6 years from now - but hey, you won't have to pay FICA on it

409A rules are pretty strict. I'm not sure there is much you can do about it but I'd like to hear what others think.

 

[gauss]

Welcome raydermonk!

My critical comment/question has to do with your level of spending.

Going down to $45k in retirement? Is this based on realistic data or is what you needed to make the numbers work? Do you track spending and categorize expenses in a tool such as Quicken? Having this hard data was invaluable to me when the time was suddenly right to consider FIRE'ing.

At a high level it seems that you may be spending significantly more than that currently.

Again welcome
-gauss

 

[raydermonk]

Thanks for the reply Gauss. On spending, the $45k estimate is actually a little higher than what my expenses currently track (over the last year--wife keeps a pretty tight record on her own excel sheet). That's of course considering the absence of existing debt on my second home. We're currently paying against that mortgage at an accelerated rate to stay on plan, so things change significantly when that's gone. As we are essentially empty-nesters now, our living expenses have decreased immensely since our kids have started on their own paths in adulthood (the decrease was a little shocking, honestly). With no debt other than the cabin, our existing expenses run between $2500-$2800 monthly, at a pretty comfortable pace. One thing I committed to long ago is that mortgage debt = No ER. While that's not necessarily textbook thinking, the peace of mind it provides is invaluable, at least to me.

One of the keys to my plan over the years has simply been to maintain an enjoyable but very reasonable quality of life, regardless of the increases in income we've realized over the last 10 years. Keeping our spending habits closer to a couple that makes <$100k/yr has made a gigantic difference in our long term planning.

I'll admit, that estimate does NOT include major travel, luxuries, or unforeseen expenses out of left field. I'll be sure to tighten that estimate, and probably expand it to include a little more in the leisure folder, as I get closer to pulling the trigger on my FIRE plan.

Thanks again for the feeback -- I'll take all I can get!

 

[38Chevy454]

Welcome to the forum. Des your $45K include health ins and taxes?

Congrats on the LBYM budgeting and where you have gotten so far at this point in your life and retirement goals. Can't help on the future tax consequences of the bonus income, but it does seem you have a pretty good idea of where you want to end up and what it takes to last. Your wife working a bit longer will help a lot since no withdrawals required for some time after you stop working.

 

[ProspectiveBum]

With two properties, I'd guess that you're paying close to $10K per year between property tax and homeowners insurance? That makes your overall spending number seem surprisingly low.

If you're not tracking your expenses with an application like Mint or Quicken, it might be eye-opening to do that for a year. It's been helpful for us, because a lot of irregular expenses add up and affect the overall spending number.

 

[EastWest Gal]

Also, you have to add $10K-20K in health insurance premiums. Don't count the value of your home and cabin in your retirement plans. The roof over your head and all that acreage won't pay the electric bill or put gas in your gas tank, unless you sell it or rent it out. In fact, it is a major expense, until you sell it.

Your 401K should be maxed out but it isn't. Why only 2%?

You have to have living expenses and incidentals (new roof, replacement autos) figured into your budget, in addition to taxes and health insurance, which is a biggie. The health insurance and property tax and insurance expense alone will cost $20K+. And with inflation, that could very well double in 20 years.

I budget $85K but am safe up to $125K per Firecalc. No way I could live on $45K without downsizing my home. Energy bills, insurance, health insurance and taxes eat up a lot.

I think you should be after tax investing a lot more on your own. Recheck your budget with all expenses factored in and run Firecalc and other calculators to be sure. Your budget needs to be real, not optimistically tiny.


Sent from my iPhone using Early Retirement Forumle
Wm

 

[eta2020]

Those houses valued at 1.1 M are not really assets if you keep them I look at housing as liability that needs to be financially suported.

They will cost you dearly in Taxes, Repairs, Insurance sucking up maybe 30-40% of you 45k budget. Add in Health insurance and you have pretty much nothing left.

 

[Katiek]

First, welcome Raydermonk! If you've been reading before posting, I'm sure you saw the FAQ which is always a good first stop:

http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

Also, while your wife may want to continue working for now, who knows if she'll change her mind once she sees how much fun you're having. Make sure your budget works if you have to get insurance from somewhere other than through her employer.

And congrats on doing a good job of setting yourself up well for the future.

 

[raydermonk]

Thanks all for the feedback. Definitely some strong advice, and the biggest area of opportunity seems to be my expense estimation, and adding a few things that were either budgeted low or left out completely. I'll spend the next few years dialing that in with one of the suggested programs. As humbling as it is to get that realistic feedback, it feels better now to evaluate things as opposed to doing it on FIRE day #1.

Regarding my lack of health insurance, my wife's employment currently handles that end of things (her corp is more Mega than mine), and will continue to do so until she decides to join me. As for my real estate holdings, which are and will be be non-revenue generating, they were added more for info on my overall bio....I've never considered them to be an active part of my retirement portfolio. We are however, considering downsizing the primary home, as it's paid off and could provide a nice boost to the pocket in the meantime. My property taxes and housing insurance are fairly cheap currently, with both houses amounting to <$6k year, all in. Housing upkeep is something I've definitely shortchanged though, and will need to readjust for that quickly.

A couple of the comments that have REALLY stood out to me in the feedback deal with 1) my DW's career plan, and 2) my shortfall on personal investments. While she is excited to focus on her career after many years of following me around, her frame of mind could change drastically (and quickly) when I'm not an equal active partner in the daily grind any longer. That obviously changes the health insurance issue immensely. Secondly, I've always "felt" I've been a little lax on my own investment activity outside of my IRA management and company holdings. Time to address that and be a bit more aggressive.

Regarding the 2% 401k contribution on my part, since I fall under the Highly Compensated Employee rules per the folks in our Labor department. My contribution limit is severely restricted, leaving me to our NQDC plan as my only other pre-tax option. The large deferrals there make sense from a current tax-protection philosophy, and upon NQDC payout, I will be under a better tax bracket during the payout period. Not ideal, but I keep telling myself it's a "good problem to have", since there are literally no alternative options. It's actually a little frustrating, but I'll move on.

Thanks again everyone!

 

[rodi]

Welcome Radyermonk.

I think you've got a good outline of a plan, but as you noted... there are areas to refine and flesh out a bit more. The things that stood out to me are:

- Health Insurance: Your wife's employee plan will cover until she quits or is downsized. Your budget should account for what you'd pay through private insurance. You can get some ideas for prices over at healthsherpa.com. Be sure to budget for deductibles and copays - some people overlook this.

- Taxes: Property taxes, income taxes, etc... You know you're going to take a tax hit on your NQDC. Have you calculated (based on todays tax rules) what your net value will be? While your wife is working you'll have that tax obligation on her wages.

- What savings will be available prior to 59.5 (when you can withdraw, penalty free from IRA/401k). Do you plan on 72T? Or is it the bonus you'll be getting soon? Or do you plan to use the NQDC funds?

And really look hard at your budget. Did you budget for replacement cars periodically? Did you budget for repairs and maintenance on your 2 homes? Do you plan to travel?

But - you've got a good starting point. When I joined here I had a similar rough idea... and asking questions and looking at the suggestions I was able to improve/refine my plan till I was able to pull the plug.