Nuts - going back to work

[harley]

Sometimes I am amazed how disconnected from reality this board is

The median US household income in 2007 was ~ $50,000 and most of those people still have to pay a mortgage/rent.

In the first place, this isn't reality, it's ER. In the second place, I'm not much on "average" and "median". There are a number of fairly wealthy people included, and a ton of poorer people. But even if Joe Average is making $50K, we're not talking about people who will never retire. We're talking ERs that have to foresee a large number of possible futures in order to be able to be happy in retirement.

Most Americans won't earn $2M in 40 years, much less save $2M.

If the median income is $50K, that's $2M over 40 years. However, nobody (much) "saves" $2M. You get there by investing and compounding. If we had to save it out of our paychecks, I doubt there'd be more that a dozen or two people on this board.

Personally live in Northern VA (re:expensive) with 2 kids and spend about $4,000 a month + mortgage for a very middle class lifestyle - eat out 2x a week, 2 x $2,500 vacations year, kids do gymnastics, etc.

That's $4K/month (after taxes, savings, healthcare premiums)? Plus a mortgage? Sounds to me like you're making between $60-$75K, or more. If you are doing all that on a $50K salary, you are a much better money manage than most. And just so you know, I'm a NoVA veteran too. I made about $100K/year at the end of my career. But after taxes and all the other deductions I was only bringing home about $48K (lot's of savings). e lived well, but frugally. In retirement I wanted more.

If I had $2M and no mortgage I would quit today and could increase my lifestyle with a 4% withdrawal.

Only real issue to me is health care. A reasonable HSA would be required or some kind of national solution or my costs would go up here.

I just don't see it, with 3 kids. That $60K would still be taxed, and as you say, there's the healthcare elephant in the room. Then you have to pay for all the things that Ha is implying, and nobody has even mentioned how you are going to come up with college money, weddings, etc. I'm not saying you couldn't do it, but to me that is cutting it way to close to the bone. I'm very conservative, so I like to figure what I think I'll need, then add 50% to it. If I was in the OPs position, I'd be hesitating to go out that young with even $3M, especially with the responsibilities he has. But that is JMHO.

I appreciate the OP desire to work and am fine with that, but don't kid yourself that you can't make it. You choose not to. Most Americans make do with far less. If you really value the time then use it how you want, but you have no need to work if you don't want to. Certainly no need to step on the treadmill for 60 hours. If someone is willing to pay you $250k then presumably you are talented and creative enough to make $50k working 20 hrs week or less.

I don't think most ERs, especially with young kids, are willing to make do. I think they want to have a lot of flexibility and surety. And since work is work, I'd personally rather do a couple 60 hr/week years at $250K than the same length or more at 20 hr/wk for $50K.

 

[haha]

I don't think most ERs, especially with young kids, are willing to make do. I think they want to have a lot of flexibility and surety. And since work is work, I'd personally rather do a couple 60 hr/week years at $250K than the same length or more at 20 hr/wk for $50K.

This is the key. That $50,000 figure contains a lot of people who get payments in kind of one sort or another. And of course it really does matter where you live. It's not just real estate that costs more on the coasts. But even so, if we created a new figure that threw out anybody with government subsidies, the new higher median would still not represent a very attractive lifestyle. I have never felt that the median income represented any kind of goal to shoot for, or that the children in the median family were getting the kind of care and not absolutely necessary but awfully nice things that many of us would like to give.

Heck, if I could make $250K/year, I'd go back to work now just to see how good it would feel. Plus I could then retire with upgraded everything, better security, and more cash to play with.

I respect anyones's way of approaching this, but I sometimes wonder how some of this is even possible, let alone desirable.

Years ago I told my Dad that my investments made about what a union worker makes without overtime, so I thought I could retire. He said, well not many union workers are living without overtime. Is this what you really want for your family?

ha

 

[DJRR]

That's $4K/month (after taxes, savings, healthcare premiums)? Plus a mortgage? Sounds to me like you're making between $60-$75K, or more. If you are doing all that on a $50K salary, you are a much better money manage than most. And just so you know, I'm a NoVA veteran too. I made about $100K/year at the end of my career. But after taxes and all the other deductions I was only bringing home about $48K (lot's of savings). e lived well, but frugally. In retirement I wanted more.


I don't think most ERs, especially with young kids, are willing to make do. I think they want to have a lot of flexibility and surety. And since work is work, I'd personally rather do a couple 60 hr/week years at $250K than the same length or more at 20 hr/wk for $50K.

That's my point. I earn over $100k, but only spend $48k plus mortgage. If I already had the $2M and did not have to save 20% of my income and pay payroll taxes and a mortgage I would retire tomorrow. I personally value my freedom and would not submit to more 60+ hour weeks and miss my wife/kids to earn a better safety net. Not saying its wrong, but just think about it.

Again, even if the median family income is $77k that is still less than 4% SWR and the median family probably spends at least 15% of their income on rent/mortgage and 7.65% on payroll taxes. So I can propose that you will still live better than 50% of American families with children.

You do without either way - material things or family/free time. You get to choose.

I guess I value freedom now more than others. I am amazed by people who have so much, but would rather buy other things besides their freedom. I am also suprised by the people who are in the wealthiest 10% of humans on the globe and they seem afraid for their money and seem to doubt that they have the talent to make a few bucks to supplement their income if they need to. Seems worth the risk to me, but alas my squandered youth will leave me another 10 years before I get to make a decision

 

[Marquette]

Personally live in Northern VA (re:expensive) with 2 kids and spend about $4,000 a month + mortgage for a very middle class lifestyle - eat out 2x a week, 2 x $2,500 vacations year, kids do gymnastics, etc.

Real median income was ~$50k per household. I believe that's gross, not net. If you're spending $4k a month + mortgage (for an expensive area such as Northern VA would that be $2k a month?) then you're spending a net $6k a month (and I'm assuming your vacations are factored into your $4k/month figure). Or, as much as the median gross average. Factor in taxes and you're living well above average.

So, face it, you're not exactly living like Joe Six Pack either... but that's ok.

Also, what do you think your expenses would be with a third kid? I've often heard that's the tipping point on the scale. It generally means going from sedan to minivan, places where kids eat free with an adult meal and now you're paying for an extra meal, sitter costs just went up, etc.

At some point, you might be questioning that $80k (4% on $2mm) withdrawal rate over that timeline too. Especially if you start to think that you might help your kids with college, ailing parents need hospice care, etc. And, depending on your tax situation, you might not like what taxes do to that $80k...

I'm just saying.

Yes, most people would be lucky to see the money that some people have. And yes, most of the US (forget the world) gets but on well under $50k a year for a family of 5. But, face it, we're already a rare breed if we're hanging out here.

Oh, and my expenses are about $2k a month and we're living really well... but, we don't have kids and we rent a room in a friend's house. Your mileage may vary and that's what makes us all special. Everyone needs their number, though.

 

[harley]

You are still neglecting taxes and healthcare coverage. I bet that if you won $2M (take home) in the lottery tomorrow, once you sat down with your wife with those 3 trusting little faces looking up at you while you ran the numbers you'd end up back at work the next day, for a few years at least.

It's easy to say what you'll do when you've got that paycheck coming in. But, at least for me, pulling the trigger, even when I KNEW I was good to go, was very tough. I think the OP is making the right decision.

 

[aaronc879]

The median household income is for all households - single teenagers and widows on social security included. The median income for married families with children is $77k. The govt stats stop at $100k, which only gets you to the 66%-tile. On the coasts it is higher, in the metro areas it is higher, for families with college degrees it is higher. Middle class these days for a family of 5 is over $100k in most of the country.

I agree that you can live on less, but you can't say most people are doing it.

Where do you live Bongo because here in the midwest a full 90% make less than 100K. I'd consider middle middle class to be about $55K for a family in this area. My bosses bosses boss might be making $100k but almost nobody else is around here. If both spouses work then maybe they can make $100K if they have college degrees and several years of experience but they would also have high cost of living with childcare which is expensive everywhere.

 

[harley]

Where do you live Bongo because here in the midwest a full 90% make less than 100K. I'd consider middle middle class to be about $55K for a family in this area. My bosses bosses boss might be making $100k but almost nobody else is around here. If both spouses work then maybe they can make $100K if they have college degrees and several years of experience but they would also have high cost of living with childcare which is expensive everywhere.

Yeah, but that's the midwest. If you can drive on one tank of gas and see an ocean, prices and wages tend to be higher. And in the East and West, people do tend to have two working spouses, driving up the income numbers.

I'm sure there are places to live where you can get by on much less, but most people live in or near the major population centers (duh!), and that's where most of the weight behind the stats comes from.

 

[jIMOh]

My feeling that 2MM might not be enough is based on how long that has to last for someone in the OP's age bracket and with a young family. That $60,000 it might generate today won't seem like a lot 40 or 50 years from now.

I agree 60k would not be the same in 10 years, 40 years or any timeframe longer than a couple of years.

$2 M is a 3% withdraw rate with a pre-tax return of 60k per year.

3% can be 80-20 or 100% equities in dividend paying stocks. As other threads here have indicated, getting a 3% yield is EASY (most posters here told me they get between 3.5% and 5%). Meaning the $2 M can appreciate around 3-4% per year and the yield can provide the income needed year over year. As the principal increases, it increases the payout (and keeps pace with or exceeds inflation).

 

[DJRR]

You are still neglecting taxes and healthcare coverage. I bet that if you won $2M (take home) in the lottery tomorrow, once you sat down with your wife with those 3 trusting little faces looking up at you while you ran the numbers you'd end up back at work the next day, for a few years at least.

It's easy to say what you'll do when you've got that paycheck coming in. But, at least for me, pulling the trigger, even when I KNEW I was good to go, was very tough. I think the OP is making the right decision.

Not a chance My basic numbers would then be:

Net Worth $2.5M

Buy prepaid VA tuition for 2 kids - $65K
Fund 529 for room and board - $35k
Invest money for 2 weddings - $20k
Set up healthcare fund to pay premiums and fund HSA over time - $200k
Move to Williamsburg and buy nice house - $350k

Remainder - $1.8M

Withdrawal 4% = $72,000 per year

Less tithe - $7,200
Less taxes - $7,200

Net spendable - $57,600 = $4,800 per month

Eliminated expenses - payroll taxes, mortgage, sell one car - no commuting, no need for life insurance, swap work expenses for leisure expenses.

Without lifting a finger I would have more disposable income than the vast majority of working families in Williamsburg with my kids education and health care funded.

In 15 years kids would leave the nest, wife would collect SS. Then I would collect SS and a small pension. Some inheritance from my Father.

Income up, expenses down, still have a fully paid for house that has kept up with inflation. Still have the ability to work if needed. Wife still has ability to work if needed.

Spending days in the coffe shop, strolling Colonial Williamsburg, taking classes at William and Mary (my alma mater), volunteering at my kids school, volunteering at church, tinkering in my house, etc. - priceless

With another kid I might think for 5 minutes, but would come to the same conclusion.

 

[Bestwifeever]

Personally dh and I are er'ing with under 2MM, but that is for two people who are almost 20 years older than the OP and have kids gone for a few years. I cannot fault OP's decision to go back to work, and I can't fault Dave's decision to ER on much less, it sounds like. It was my impression that Firecalc doesn't "safely" extend to a 50-year projection, and I am reading a letter on Vanguard's site about the S&P being essentially flat since 2000, and we are pretty conservative financially, so I don't plan on our WDs increasing with inflation or on our principal both keeping up with inflation and allowing a 4% WD (note, it's not that I don't believe this will happen, it's just my sleep-at-night index to not plan on it).

I think only you can know at the point of jumping into ER if you have enough for you, and OP was able to jump back out, so good for him since that's what HE wanted to do.

 

[bongo2]

Where do you live Bongo because here in the midwest a full 90% make less than 100K. I'd consider middle middle class to be about $55K for a family in this area. My bosses bosses boss might be making $100k but almost nobody else is around here. If both spouses work then maybe they can make $100K if they have college degrees and several years of experience but they would also have high cost of living with childcare which is expensive everywhere.

I live in the midwest. Median family income in my county (of 356k people) was $71k in 2000 according to Wikipedia, so maybe $90k today. The statistics I quoted were national, on the coasts it would be higher. Hop on over to the census webpage and check it out.

I agree that there are many families where both spouses work and have college degrees and several years of experience. I would say that is the typical middle class family these days.

 

[Caroline]

You do without either way - material things or family/free time.

A lot of good points have been made about the nickles and dimes here -- let me interject another element.

My "baby brother" also has three young kids.

Two weeks ago he was in a car accident -- airlifted to the trauma center with fractured skull, smashed face, and possible bleeding into the brain.

The doctors say he'll make a full recovery. We are thankful that we still have him, and terrified at how close we came to losing him.

Sometimes it takes these types of reminders to help us pull back from the money-only discussion and think about ALL the ramifications of our decisions. I'm betting that if I asked him today, my brother would rate the time he spends with his wife and three young sons in the future as priceless beyond measure.

 

[harley]

Sometimes it takes these types of reminders to help us pull back from the money-only discussion and think about ALL the ramifications of our decisions. I'm betting that if I asked him today, my brother would rate the time he spends with his wife and three young sons in the future as priceless beyond measure.

Affirmative on that, Caroline. I'm glad your brother is going to recover, and wish him the best. I agree that family time is the most important time you can spend.

David, good luck with that plan. Seriously. I'm a big fan of family time and ongoing education, those are good ways to spend your years. I still bet you would hesitate, although maybe you are much more decisive about these things than I am. I planned and talked about ER for many years, but probably wouldn't have bailed even as soon as I did if I hadn't gotten a decent buyout opportunity.

By the way, I was in Williamsburg a couple of weeks ago. We (DW and I) used to go all the time, and have many great memories of the town (the Pottery Factory, dinner at the Lodge, lunch at Chownings Tavern, the Grand Illumination, etc). We've also considered retiring there, although we ended up further north near OC MD. But we haven't been there in about 7 years until this month.

I have to say I was severely bummed out at the changes. CW was still basically the same, although it was practically impossible to park nearby. The lodge had been torn down and redone, although we didn't eat there this time. But the biggest change was the traffic. It took me over 5 minutes to make a left across Richmond Rd. at the hotel we were staying in.

Have you been back recently? If you go a lot, probably the changes seem more gradual to you. But it was a shocker for us. Although the W&M coeds were still a worthwhile viewing attraction.

 

[W2R]

A lot of good points have been made about the nickles and dimes here -- let me interject another element.

My "baby brother" also has three young kids.

Two weeks ago he was in a car accident -- airlifted to the trauma center with fractured skull, smashed face, and possible bleeding into the brain.

The doctors say he'll make a full recovery. We are thankful that we still have him, and terrified at how close we came to losing him.

Sometimes it takes these types of reminders to help us pull back from the money-only discussion and think about ALL the ramifications of our decisions. I'm betting that if I asked him today, my brother would rate the time he spends with his wife and three young sons in the future as priceless beyond measure.

Caroline, I am so sorry to hear that your little brother was in such a dreadful accident!!! Thank goodness he will recover. You are right, of course - - this type of event reminds us that there is so much more to life than money. I wish the best for him and for your family as he recovers.

 

[DJRR]

Affirmative on that, Caroline. I'm glad your brother is going to recover, and wish him the best. I agree that family time is the most important time you can spend.

David, good luck with that plan. Seriously. I'm a big fan of family time and ongoing education, those are good ways to spend your years. I still bet you would hesitate, although maybe you are much more decisive about these things than I am. I planned and talked about ER for many years, but probably wouldn't have bailed even as soon as I did if I hadn't gotten a decent buyout opportunity.

By the way, I was in Williamsburg a couple of weeks ago. We (DW and I) used to go all the time, and have many great memories of the town (the Pottery Factory, dinner at the Lodge, lunch at Chownings Tavern, the Grand Illumination, etc). We've also considered retiring there, although we ended up further north near OC MD. But we haven't been there in about 7 years until this month.

I have to say I was severely bummed out at the changes. CW was still basically the same, although it was practically impossible to park nearby. The lodge had been torn down and redone, although we didn't eat there this time. But the biggest change was the traffic. It took me over 5 minutes to make a left across Richmond Rd. at the hotel we were staying in.

Have you been back recently? If you go a lot, probably the changes seem more gradual to you. But it was a shocker for us. Although the W&M coeds were still a worthwhile viewing attraction.

That is the weak part in my plan Williamsburg has changed so much in the last 10 years that I might not want to retire there when I get the money Amazing to see how much building has gone on. We have annual passes and go a few times a year and I have an Uncle retired there.

 

[Rustic23]

40 yrs old, three kids one less than a yr old, and 2M if reserves. Yea, you could most likely make it, however, at 40 you are in your prime earning years. I think you are doing the right thing. Take the 250, save for the 5 years and re-evaluate your position. Even waiting 10 years would not be out of the question. Your youngest 10, oldest in college and two to go. You would be about to get those large expenses out of the way. Retiring at 50 still gives you plenty of time to do just about anything you want. Only real question for me would be the stress induced by work, and only you and your wife can answer that.

 

[Finance Dave]

I always thougt that you work to get enough $ so you don't have to. I must be missing something!

2M not enough, I should be really worried because I did it with a lot less than that.

But he does have 3 young children and he's only 40. Everyone's situation is different. He probably could stay retired if he wanted to move into a $125k house and stop eating steak out...but he may have that lifestyle today and not want to move downwards from it.

Although I don't make nearly that much money, I'm kinda the same way. I have a few expensive hobbies and would rather work a few extra years so I can continue with them.

 

[willowbeezer]

thanks for everyone's perspective...

Life is a set of tradeoffs and hopefully, i can find the right balance between work/financial security and family. Its nice to know that I can make it with a downsized job working part-time. Just knowing that will make my work life much better as I will no longer feel compelled to push myself to exhaustion climbing the corporate ladder. I'll target 5 years and will assess then if work is still rewarding.

As for us, my wife works part time and combined we have recently pulled in quite a nice income. Although we live in a relatively affluent suburb, we own a McStarterhome, I drive a 12yr old vehicle, don't eat out much, modest vacations.

Even though we live well below our means and try not to keep up with the Jones, its remarkable how much we still spend in the Chicago Suburbs. High property taxes, utilities, extracurricular activities for the kids, etc.... it all adds up.

I am happy that others on this board can make it work for them on say $60k/year!

 

[haha]

I am happy that others on this board can make it work for them on say $60k/year!

Just call it a miracle.

Ha

 

[sailor]

Just call it a miracle.
Ha

When you wrote this, it reminded me of Mel Brooks (like in History of the World, Part I - Wikipedia, the free encyclopedia )
But to me it's not a miracle and I know plenty of families living on less.
As a discussion fodder I can attach YTD Quicken report of our expenses & budget.
It's almost end of the 3rd quarter and our expenses so far been 45k, making our yearly expenses very close to 60k