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Reading for quite a while, just joined, and I think I'm ready...
Old 12-02-2015, 10:42 PM   #1
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Reading for quite a while, just joined, and I think I'm ready...

Hello all! I just turned 40 this fall, I have a wife, 37 and two kids 10 and 7. I've worked sales for the last 18 years, I've had some really good years, but I am getting to the point I am having a hard time dealing with difficult customers along with people on the company side that are incompetent. I am ready to be done, but it seems like a really big step to take with a young family. My wife is a full time mom.

Luckily I've got a part time "hobby" that will provide enough to cover our living expenses, but not add any to retirement savings. I think if I have more time to devote to it I can turn it into more than it is today.

My hesitation is do I have enough saved to never add another dollar to retirement savings?

Here is where we are at: I'd like to continue to do my "hobby" for another 20 years, possibly longer if I still enjoy it and my son doesn't want to take over someday. My wife and I would like to start to travel when the kids are out of the house, so in 10 years or so we would start to draw from our retirement.

Our net worth is $1.7M. We have no debt. Of that $515,000 is in Stocks, $50,000 in bonds, $240,000 cash (I know it's too much) and about $250,000 invested in the hobby that could be liquidated pretty quickly if needed. The rest is in our home, vehicles and real estate.

We would like to draw $50,000 of today's dollars per year starting in 10 years from the retirement to travel and have fun with.

I've ran the FIRE numbers and it's saying there is a 98.3% chance we'll be OK. I didn't figure anything in for SS as I am not convinced it will be there when I am old enough to collect. Both the wife and I have a $1M term life insurance policy that still has 10 years left on them. I am guessing that should tell me it'd be OK to step off the curb and try it.

I really like the idea of spending more time with the kids during these years. We are convinced we will not mind not keeping up with the Jones anymore and the fun of buying new cars is past. My wife is 100% for it. Worst case scenario I have to go back to work.

What is everyone's thoughts? Are we crazy? Are we missing something?
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Old 12-02-2015, 11:13 PM   #2
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You don't explain how you use your numbers with firecalc, but from my perspective I would not include things like house equity, cars, etc unless you are planning on selling them. And if so, then subtract the amount you will need to replace them or monthly payments if you choose to rent.
On the expenses side, have you included cost for health insurance? Have you included some bad health years (even if you are in good health-- something can happen-- either health or accident).
What you list as investable assets is about $800k.. is this what you put in FIRECALC?
From what you posted, I can't guess how you'll do. I expect you should estimate out to age 94 or a bit older.
You really are not going cold turkey retiring, you are changing work to one that you make a bit less. But this should provide living expenses (from your post).
Double check your numbers. Especially expenses and the values of your assets not specifically identified in OP.. are these what you could walk away with if you sold them in a short time frame?

But -- welcome to the board... good luck with your plan
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Old 12-02-2015, 11:23 PM   #3
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First off, welcome and nice post #1. I left a well paying career to ER with 3 kids at home, so I'm very familiar with the thought that you are crazy to step away at this point. Having said that, one of the best parts of ER is being there for the kids as they grow into this world.

I don't think you're crazy, but I would certainly add SS into the equation. Maybe not all, but 75% of today's SS estimate is pretty darn safe. The system would have to significantly fall apart to get no SS and at that point I'd say even your sales job is not safe.

Finally, if you haven't already, I'd check out the Bogleheads board for some investment advice. With $240K in cash I'm thinking you could use some help on that front.

Again welcome and good luck with your decision.
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Old 12-02-2015, 11:52 PM   #4
Confused about dryer sheets
 
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Quote:
Originally Posted by bingybear View Post
You don't explain how you use your numbers with firecalc, but from my perspective I would not include things like house equity, cars, etc unless you are planning on selling them. And if so, then subtract the amount you will need to replace them or monthly payments if you choose to rent.
On the expenses side, have you included cost for health insurance? Have you included some bad health years (even if you are in good health-- something can happen-- either health or accident).
What you list as investable assets is about $800k.. is this what you put in FIRECALC?
From what you posted, I can't guess how you'll do. I expect you should estimate out to age 94 or a bit older.
You really are not going cold turkey retiring, you are changing work to one that you make a bit less. But this should provide living expenses (from your post).
Double check your numbers. Especially expenses and the values of your assets not specifically identified in OP.. are these what you could walk away with if you sold them in a short time frame?

But -- welcome to the board... good luck with your plan
Thank you for the questions, I only included the Stocks, bonds and Cash into the FIRECALC, yes it was a bit over $800,000.

As far as health insurance, we are currently buying it on our own now, and not through the employer.

I feel pretty confident in our expenses numbers. We went through two years of bank transactions, itemized them and figured out what it's going to take.

Thanks again for the questions!

Quote:
Originally Posted by NanoSour View Post
First off, welcome and nice post #1. I left a well paying career to ER with 3 kids at home, so I'm very familiar with the thought that you are crazy to step away at this point. Having said that, one of the best parts of ER is being there for the kids as they grow into this world.

I don't think you're crazy, but I would certainly add SS into the equation. Maybe not all, but 75% of today's SS estimate is pretty darn safe. The system would have to significantly fall apart to get no SS and at that point I'd say even your sales job is not safe.

Finally, if you haven't already, I'd check out the Bogleheads board for some investment advice. With $240K in cash I'm thinking you could use some help on that front.

Again welcome and good luck with your decision.
Thanks for the post! I know the $240,000 is a lot to have sitting around. We have been waiting to buy some real estate with the price is right, but we haven't got there yet. I've been following the Bogleheads forum for a while too, but never posted there. We don't feel real comfortable putting it in the stock market right now, it seems like we might be getting to the end of a good run with a correction coming. We like the idea of buying something locally that we can see and touch as well as getting a dividend and some appreciation in value, and add diversity at the same time.

I do want to spend the time with the kids, I remember when I was that age and how it sets the course for the rest of your life.

Thanks for the encouragement!
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Old 12-03-2015, 08:02 AM   #5
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Originally Posted by Old MacDonald View Post
What is everyone's thoughts? Are we crazy? Are we missing something?
If the numbers work out, go for it. I just pointed to areas where I have seen people over estimate retirement planning. You only live once... sounds like you have good reasons and a plan. Why not go for it?
I RE early this year @ 53 and most of my coworkers figured I'd be back in 2 weeks... 1 month tops. They thought I was crazy to go since I was so "in to" what I did. Haven't considered going back yet.
You'll enjoy the time with the family... remember you only live once.
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Old 12-03-2015, 12:26 PM   #6
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Welcome and congrats on saving such a nice amount at an early age.
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Old 12-03-2015, 07:48 PM   #7
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Welcome and I am sort if in the same boat in a lot of ways. I think the key is obviously the income from your hobby; it seems like you have a good thing going there. As long as that income can cover your expenses, and your investments are not tapped and allowed to compound, I could see that 800k doubling or tripling, which would likely be sufficient to kick off 50k in income in today's dollars. I am 44 and though I expect changes to social security, I would not count it out either, means testing etc. The key will be what type of return you can expect with your investments. With so much in cash, it may be 6% versus 7%. It doesn't sound like a big difference but it can be significant over that long a time period. Market linked CDs offer principal FDIC coverage with some market exposure, often capped. Guaranteed options might increase your expected return.

I am 44, wife is 34 and we are starting the process of downsizing. The first step will be to keep our cars and not renew our Porsche lease. We are stuck in an oversized expensive new home in one of the worst real estate markets in the country but we are looking to sell that as well. I am glad to hear that you and your sig other have accepted this as this was an important step for us. I think my wife just saw how all the stuff was really not making me any happier and the toll it was taking on me in this real estate market. Things happen for a reason, I'm a firm believer, and I think it is important to follow your instincts. Good luck.
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Old 12-03-2015, 11:50 PM   #8
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I agree on adding in at least 75% of SS. The NPV of our combined SS would be a significant amount to leave out of our retirement planning altogether.

You seem to be in a pretty good spot to downshift your job, which takes a lot less savings than full ER. How easy would it be for you to go back to work or would your wife be employable and willing to work, if your business had a downturn or didn't work out as planned?

I covered our basic living expenses the first year DH left his full-time job with hobby job type income I could do from home. I've been ramping down a bit each year on the hours as our retirement plan seems to be working out okay. I will probably always work some as I like the extra money and I need to have some hobbies anyway so I might as well have some profitable ones.
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Old 12-04-2015, 07:56 AM   #9
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If your $800k nestegg grows at 5.5% a year over the next 10 years and you then use a 3.5% WR beginning at age 50 you could withdraw $48k. But, if inflation is 2.5% then the $50k you need today would be $64k so it looks like you have a $16k gap which at 3.5% is $460k.

But perhaps the value of your business will grow and it could be sold at that point for $460k and the proceeds from the sale used to fill the gap. Or downsizing your home might help fill the gap. Or adding SS in part will help fill it as well.

Your OP mentions home, vehicles and real estate. What is the real estate and can that be monetized?

Do your expenses include provisions for periodic vehicle replacements, periodic major home repairs and replacements, potential medical deductibles and co-pays, etc? If not, then I think you may be cutting it too close to quit now, but perhaps you could quit and grow your business.
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