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Hi from West of the Windy City
Old 07-19-2016, 01:45 PM   #1
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Hi from West of the Windy City

Greetings,

Been enjoying this forum lately and decided to join.

I'm 53, wife is 49; kids are 18; 16 and 12. Oldest is starting out of state university in a few weeks.

Assets for retirement total $1.7 M in two Roths; two IRAs (from rollovers) and one 401(k). Assets outside of retirement funds - only about $10K. Asset mix is about 55% equity (18% overall Int'l equity); 35% bonds; 10 % cash or equivalents.

House is paid off, worth about $410K

529 Plan for college has $170K in assets; but college will run $33K / year for out of state tuition per year for child #1 (4 years total!)

Have HELOC with $72K balance that I have used to pay for large expenses as I max out my 401(k) and Roth contributions. Actually dipped into this for '15 Roth contributions as it is only costing me 4% APY and the interest is deductible.

Income from my single salary is $135K / year. Expenses are about $90K / year; including all taxes but does NOT including college tuition.

Social Security Benefits: Me: $2,831 / month at age 67; $3,520 at age 70; Wife: $1,200 / month at age 67; $1,500 at age 70.

Would like to RE soon - like in '17 especially if I get laid off and get a (small) package. Figure I could 72(t) out of one of the large accounts for $50K/ year income until 59 1/2.

Wildcard for me I believe is future college tuition costs. Welcome any ideas; I've ran through Fidelity RIP and the FIRE calculator - seems to give me about an 80% success rate to retire next year.

Thanks!!!
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Old 07-19-2016, 05:02 PM   #2
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Send your kids to cheaper college, each could do 2 year community college then move to regular college.
Are you planning to use the 529 for only child #1 I would split the $$ amongst them all that is 56k each , and they can borrow the rest.

I hear so often of folks sending kids to college and they get a history/English degree and then wonder why they can't get a high paying job. I hope you have the "college is for jobs" discussion with each of them.

Frankly an 80% success rate is too low, especially as you don't seem to have made calculations for child #2 and #3 college expenses
And you are carrying a 72K HELOC.
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Old 07-19-2016, 05:09 PM   #3
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I can't get your numbers to work. Personally, I am finishing up paying for the last semester of three in-state college educations and the most recent one at 4.5 years will be $145,000. Your 529 plan will be nearly exhausted paying for kid #1, so if you choose to pony up for #2 and #3, you should expect to have over $400,000 wrapped up in kid educational expenses. This will take another $200,000+ out of your nest egg.


On expenses, can you live on $50,000 in income with three kids still on the payroll? I recall the relentless bills for cars, clothes, braces, copays, etc. during the teen years. I couldn't have done it. Not without a serious decline in our standard of living anyway.


It seems to me you should stick it out until the college expenses are covered, which will give your assets a few more years to grow before tapping them. YMMV.
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Old 07-19-2016, 05:09 PM   #4
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I think you need to figure out exactly what your expenses are, and what could be cut. As right now you say its 90K/yr and then later want to 72t for 5 years at only 50K/yr.

How is that 40K/yr pinch going to feel ?
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Old 07-19-2016, 05:12 PM   #5
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Your life expectancy is very long, and your children very young. Just healthcare alone could kick your rear ends--not considering college, etc. Who knows when and if inflation rears its ugly head.

The risks that you may outlive your money may be relatively high. You might want to keep on working just a little longer--unless MegaCorp throws a voluntary retiree package they won't allow you to refuse. Such packages usually come at 55 years and older--due to U.S. Government regulations.
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Old 07-19-2016, 05:32 PM   #6
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Most here on the forum consider 80% success in firecalc to be very high risk (me included). Between unknown/unfunded college, and no real taxable accounts, as well as the kids ages and expenses and healthcare...

4% SWR (which is not exactly low-risk these days) says you'd want about 2.3, and you haven't mentioned the healthcare cost you'd be adding, even with ACA subsidies that will add up for a family of 5.
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Old 07-19-2016, 06:10 PM   #7
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Welcome to the forum. I agree with the sentiments posted so far. 80% is not good enough, at least not for most of us.

The thing most noticeable to me is the great job you have done building your 401K balance, yet you only have $10K in savings outside the 401K. It sounds like you're spending every penny you earn that doesn't make it into the 401K plan.

Make sure you know what your realistic expenses post retirement would be so that you can make an accurate assessment of where you stand and what your chances for success in ER will be.
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Old 07-19-2016, 10:21 PM   #8
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Quote:
Originally Posted by Ready View Post
..
The thing most noticeable to me is the great job you have done building your 401K balance, yet you only have $10K in savings outside the 401K. It sounds like you're spending every penny you earn that doesn't make it into the 401K plan.
.....
Actually he is spending more than every penny earned that does not go into the 401K type plans, that is how he built up the debt of 72K HELOC.
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Old 07-20-2016, 06:21 AM   #9
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Welcome and, in addition to the steely-eyed tough love support one comes here for, nice job paying off your house and saving $1.7 additional. It needs to be said, that is great progress.

For a ling time, DW and I approached our finances with the attitude, "Meh, we'll crush our 401k savings and enjoy our lives spending whatever now". That's a better approach than most Americans but just not good enough to ER, we've realized in the last few years as we round the bend to 50.

It seems you have more to do before you step away in 2017 with enough safety margin. Could you:
- Insist on in-state public schools, insist on work study, encourage maximum AP courses in high school, encourage military service, whatever, to knock down expenses? The smartest family we know on this score, and the least affluent among our friends, has a bright kid who got a year of college out of the way in high school, will go to a community college for two then transfer to the state's Big Ten university to graduate, all the while living at home. He'll probably go to an ivy league graduate school, if he has the grades he's capable of. If he doesn't, his parents will be glad they didn't send him to an expensive school.

In contrast, other dear friends of ours have twins, both headed to prestigious private schools out of state this fall. The parents make too much for financial aid and are in knots about the $500,000 in debt they've committed to. They are so stressed it makes us stressed, and they are about to voluntarily inflict major damage on their ability to ever retire comfortably, barring a miracle. One can't save someone from themselves but I hate to see it happen. We were looking forward to traveling with them in FIRE. They're adults and have added up the costs and benefits to themselves, so "bon voyage, precious snowflakes" and "adios any real prayer of retiring before 65-70."
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Old 07-20-2016, 06:24 AM   #10
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Well, the OP has a paid for house of $400k or so. Once the kids are out the house, perhaps he plans to sell it and downsize to the South for the half price. That would be an additional $100-200K for taxable accounts.

But I agree with others. The big questions/concerns are:
- High current expenses and how they will change later;
- Healthcare OOP and insurance premiums;
- College expenses. Right now it sounds that one child will be getting a full ride in the out-of-state college, but about the other 2 kids?
- Any savings going on right now or is everything spent?
- Any pensions for either of your?
- Today's market is so up that we all are starting to wear rosy glasses. This is my biggest concern for our own portfolio as there's nowhere to run it seems. Equities are very high, but so are bonds. Not sure how AA can be changed for when a coaster starts rolling down...?

I think you should try to stretch to 55-57 and then revisit your plan.
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Love the advice - thanks!
Old 07-20-2016, 08:44 AM   #11
Confused about dryer sheets
 
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Love the advice - thanks!

Thanks for all the sage advice. I actually got an updated social security statement with higher $s and reran the FIRE model, I'm up to 91 % success rate now. Fidelity RIP, using the pessimistic, down market scenario it is still mid 80s. We will not get any pensions. True that most all savings goes to 401(k) and Roth. We do put away $8,000 / year to 529 plan. Figure I don't need to save much after-tax, as you can always pull Roth contributions out with no penalty or tax. In a sense, this is my Emergency Fund.

Definitely resonate with controlling expenses and truly understanding what these are now. I don't expect to have the other two go out of state for college - or if they do it will be more affordable than child #1.

Child #1 is going to a top Engineering university, I suspect she will get an internship that will pay well and that will go back into tuition costs. Not counting on this though. No boomerang here!

Thanks all!!!!
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Old 07-20-2016, 11:02 AM   #12
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Congrats on getting to this point. And congrats to your daughter for getting accepted into a top engineering school. I'm sure you are very proud. Lots of advice and opinions so far on how to keep college costs down, but when one of the offspring has an opportunity like that... well, money is not what's important, IMHO.

I think you have done extremely well. You're close, but not sure I'd pull the trigger in 2017. Your 529 is going to be at least $100K short, probably more like $150K. I recreated your 80% in cFIREsim using data in your first post. I then raised SS until it got to 91% per your 2nd post. But then I added "other spending" of $150K, spread evenly across the years that your 12 and 16 year-olds will be in college. Success rate dropped back to 80%. I then did a scenario that started in 2018 instead of 2017, raised the portfolio from $1.7M to $1.8M, and cut the 529 gap in half. Success rate went to 95%. That's what I would do. You can test drive the $50K plan while funding the 529.
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Thanks Cobra9777
Old 07-20-2016, 12:34 PM   #13
Confused about dryer sheets
 
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Thanks Cobra9777

Appreciate the link and info from cFIREsim runs. Makes total sense. My only caution is to *overfund* 529. I would contribute more in retirement accounts while I have earned income to avoid a possibility of one child not going to college or simply not needing the money (because of course they are so brilliant they'll get a full ride - har de har har!) But your point of being about $150K off the mark seems spot on.

Thanks!
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Old 07-20-2016, 12:59 PM   #14
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If you have access to an after tax 401k, I'd contribute there and roll over to a Roth IRA, then you could access those contributions for college costs. The after tax 401k limits are much higher than the standard Roth contributions. This could allow you to put the savings into a retirement account but access for college costs if needed.


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Hi from West of the Windy City
Old 07-20-2016, 06:10 PM   #15
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Hi from West of the Windy City

I'm not a parent but have wondered if a kid whose parents have FIREd benefits more in the financial aid formulas and process, or not? Are those formulas based on family income or net worth? If the former, maybe FIREing could be part of a college funding strategy, assuming other elements of the FIRE plan are secure, such as health insurance.
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Old 07-21-2016, 08:29 AM   #16
Confused about dryer sheets
 
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Hi, good point, reduced income may make loans and other aid possible. I got nothing from FAFSA or the University, mainly because of high total annual income. FIRE effect, probably not enough effect for Child #1, but may be used for the other two. Thanks.
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Old 07-21-2016, 09:33 AM   #17
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Awesome progress so far. You've done a fabulous job building a nice nest egg/keeping debt down.

As others have mentioned, giving your taxable account a bit more attention over the next year or two would be a big benefit, IMHO. The 72t is an option, but I sure would sleep better if I could get comfortably beyond 10K in after tax savings. As you've stated, you're a bit short on college funding but I wouldn't chase that at the expense of building the taxable account. The 72t will be fixed and equal, and things are going to come up which weren't anticipated in formulating the original budget. They always do, I've bit bit a few times in the last year

Good luck!!
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