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Can I retire in 5 years?
Old 10-06-2018, 03:28 PM   #1
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Can I retire in 5 years?

1. I am 38 and wife is 33. Both working. Two kids 3 and 8.
2. I am making 180k and wife is making 52k. Totally 232k, but my job is not stable. May have to take a lower pay job next spring.
3. Retirement account (IRA and 401k): 300K, taxable 150k, cash 150k, totally 600k savings, all the investment funds are from Vanguard.
4. House is 380k, mortgage balance is 180k, about 200k equity in the house. Currently the mortgage is 15 year, interest rate 3%, but keeping the mortgage may require a higher cash flow and I am afraid I won't be able to generate the cash flow with 1M investment. I am planning to accumulate 1M and pay off mortgage before FIRE.
5. I am contributing 18k into 401K (employer match 7k) and 5.5K into roth IRA, wife is contributing 12k into simple IRA (1k match from her employer). About 50k goes into taxable account each year.
6. My expenses are quite high due to mortgage, property tax and day care cost. Monthly I am spending about 7400 dollars. It can be reduced to less than 3000 after FIRE. I plan to pay off mortgage and won't have day care cost after FIRE.

Current Cost:

Mortgage 1620 (11 years left on mortgage at 3%)
Day Care 1600 (day care cost will be gone in 2 years)
Property Tax 1100
House Repair 50
Medical 200
Gas 250
Toll 100
Car Insurance/Repair 200
Water 100
Gas and Electricity 100
Cable and Phone 150
Grocery 800 (can reduce to 500)
Eat Out 500 (can reduce to 200)
Clothes 100
Vacation 100
Education 200
Gifts 50
Entertainment Toys 50
Electronics 50
Furnitture 50
Other 50
Total 7420

Reduced Cost after FIRE and paying off mortgage
Mortgage 0
Day Care 0
Property Tax 1100
House Repair 50
Medical 200
Gas 100
Toll 20
Car Insurance/Repair 200
Water 100
Gas and Electricity 100
Cable and Phone 90
Grocery 600
Eat Out 0
Clothes 0
Vacation 0
Education 100
Gifts 0
Entertainment Toys 0
Electronics 0
Furnitture 0
Other 0
Total 2660

Currently the job I have is not very stable and I may have to take an 80k job next year, so the total income will decrease to 134K, it will slow down my FIRE process significantly. I had a late start and had 0 networth six years ago. I don’t like the high stress jobs. I really want to achieve FIRE ASAP. Currently I am able to save about 10k per month, but I can only save about 3k per month after changing the job.

Based on my calculation, my total investment and saving can reach 1 million after working at the new job for 3-4 years. I may work for 1-2 years to pay down the mortgage, so totally I need at least 5 years to reach FIRE, around 2023. I will be around 43 years old and wife will be about 38 years old. My wife is on board and she is willing to work for a few additional years to 2028. Hopefully her pay can cover the living expenses between 2023 to 2028. The investment should be able to reach 1.5 M in 2028 and it should be able to generate 60k per year before she retires.

Please provide some input and let me know if any optimization can be done to my FIRE plan. Thank you!
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Old 10-06-2018, 04:48 PM   #2
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1100 property tax? Wow.
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Old 10-06-2018, 04:58 PM   #3
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Thanks for that thoughtful post, and congratulations on building up such a sizable NW over only six years. It also looks like you are tracking your expenses, or at least estimating them. (Note on reflection: even your current data are neatly divisible by ten, so maybe you are not actually tracking expenses via tools such as PersonalCapital.) You are on the path.

Sorry for the job situation. That must be stressful.

Others will post this link of key questions, but here it is again: Some Important Questions to Answer Before Asking - Can I Retire?

Have you also run your numbers through FIRECalc?

Here are some considerations.

(1) How comfortable are you with your post-FIRE cost estimates? Some here, myself included, would say it is better to have a year or two of actual data before pulling the plug vice estimating what they may be in the future. Are you really going to pay nothing for clothes or vacations, for example, from age 43 on? What about college expenses? Are you really never going to purchase another car again as long as you live? You have $50 for house repairs, but what if you need a new roof when you are 50 years old and it costs $8,000?

(2) Some of your estimated future estimates strike me as low -- health care, for example. What about taxes? All of your estimated values are divisible by ten, too, which suggests that they are guesses. (Note: even your current expenses are divisible by ten.) I recognize that you are doing future planning here, and that is well and good by itself, and perhaps guesstimating is the best that can be done in that scenario. Still, if I were in your shoes, I would walk the walk first, so to speak, with real data.

(3) Have you considered SS? What will the impact be on future SS payments if you leave the workforce early? At minimum, you need to have that estimate for both you and DW so you can plug those values into FIRECalc to enable an informed decision.

I suspect that if you made the same posting at ERE or MMM you might get different responses than here.
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Old 10-06-2018, 05:01 PM   #4
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1100 property tax? Wow.
Agreed. We live in a ridiculously low-tax jurisdiction (rural, too) and even our property taxes are higher. OP also has tolls, which suggest an urban environment.
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Old 10-06-2018, 05:36 PM   #5
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Well........ Suze Orman made a recent prediction that many have poo-pooed. She stated that people should not contemplate Early Retirement until they have $5M saved. Those of us approaching FRA consider that dollar value ludicrous because all of our major expense years are behind us: home purchase, raising children, assisting with children's college expenses, assisting aging parents, etc.

However those who read the entire article have posted that Suze's advice was for people considering early retirement in their 30's. People who are staring all of life's predictable major expenses right in the face.

Will the $60K per year you envision earning from a future $1.5M portfolio be enough for living expenses after 50 years?

Only you can answer that question for you and your wife but I would not choose that path. You asked for opinions and that is mine.

Best of luck with whatever you decide.
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Old 10-06-2018, 05:37 PM   #6
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Yes, the property tax is very high because the community was recently built. It will go down each year, but not much.

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1100 property tax? Wow.
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Old 10-06-2018, 05:43 PM   #7
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Thank you very much for your input. Appreciate it!

All the living expenses were estimated using historical data. I did track all my expenses in personal capital. My living expense ranges from 6000-7500 each month. I took the max number as the worse case scenario.

For health care, we will be on wife's employer for the first few years and then switch to ACA. I think the post-Fire living expense estimate is a little low, but I think 4000 dollars a month should be enough for us. Believe it or not, I haven't bought any clothes in the past six years. I started my journey six years ago with a networth of 0. I woke up a little late and had a late start, but I am trying to catch up now. The only thing is I am going to lose the high pay job next spring, so my wealth accumulation will be much slower.

Quote:
Originally Posted by WyomingLife View Post
Thanks for that thoughtful post, and congratulations on building up such a sizable NW over only six years. It also looks like you are tracking your expenses, or at least estimating them. (Note on reflection: even your current data are neatly divisible by ten, so maybe you are not actually tracking expenses via tools such as PersonalCapital.) You are on the path.

Sorry for the job situation. That must be stressful.

Others will post this link of key questions, but here it is again: Some Important Questions to Answer Before Asking - Can I Retire?

Have you also run your numbers through FIRECalc?

Here are some considerations.

(1) How comfortable are you with your post-FIRE cost estimates? Some here, myself included, would say it is better to have a year or two of actual data before pulling the plug vice estimating what they may be in the future. Are you really going to pay nothing for clothes or vacations, for example, from age 43 on? What about college expenses? Are you really never going to purchase another car again as long as you live? You have $50 for house repairs, but what if you need a new roof when you are 50 years old and it costs $8,000?

(2) Some of your estimated future estimates strike me as low -- health care, for example. What about taxes? All of your estimated values are divisible by ten, too, which suggests that they are guesses. (Note: even your current expenses are divisible by ten.) I recognize that you are doing future planning here, and that is well and good by itself, and perhaps guesstimating is the best that can be done in that scenario. Still, if I were in your shoes, I would walk the walk first, so to speak, with real data.

(3) Have you considered SS? What will the impact be on future SS payments if you leave the workforce early? At minimum, you need to have that estimate for both you and DW so you can plug those values into FIRECalc to enable an informed decision.

I suspect that if you made the same posting at ERE or MMM you might get different responses than here.
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Old 10-06-2018, 05:47 PM   #8
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Thank you for your input.

So you think I should continue working a little longer? 1.5M investment is a decent size. Of course 2M is better, but I am just very tired of office work. I went through some very bad business cycle and 75% of my coworkers got laid off in the past few years. There is no growth in my career and I am not interested in any promotion /fancy things. I may take a part time job in a mall or something to kill time and get some additional income after FIRE.

Quote:
Originally Posted by MI-Roger View Post
Well........ Suze Orman made a recent prediction that many have poo-pooed. She stated that people should not contemplate Early Retirement until they have $5M saved. Those of us approaching FRA consider that dollar value ludicrous because all of our major expense years are behind us: home purchase, raising children, assisting with children's college expenses, assisting aging parents, etc.

However those who read the entire article have posted that Suze's advice was for people considering early retirement in their 30's. People who are staring all of life's predictable major expenses right in the face.

Will the $60K per year you envision earning from a future $1.5M portfolio be enough for living expenses after 50 years?

Only you can answer that question for you and your wife but I would not choose that path. You asked for opinions and that is mine.

Best of luck with whatever you decide.
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Old 10-06-2018, 05:49 PM   #9
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Yes, I am in a big city. The property tax is ridiculously high. I am also planning to sell the house and downsize into an apartment after kids going to college.

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Originally Posted by WyomingLife View Post
Agreed. We live in a ridiculously low-tax jurisdiction (rural, too) and even our property taxes are higher. OP also has tolls, which suggest an urban environment.
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Old 10-06-2018, 06:17 PM   #10
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Originally Posted by chasedream2002 View Post
Thank you very much for your input. Appreciate it!

All the living expenses were estimated using historical data. I did track all my expenses in personal capital. My living expense ranges from 6000-7500 each month. I took the max number as the worse case scenario.

For health care, we will be on wife's employer for the first few years and then switch to ACA. I think the post-Fire living expense estimate is a little low, but I think 4000 dollars a month should be enough for us. Believe it or not, I haven't bought any clothes in the past six years. I started my journey six years ago with a networth of 0. I woke up a little late and had a late start, but I am trying to catch up now. The only thing is I am going to lose the high pay job next spring, so my wealth accumulation will be much slower.
Very admirable. All I can say is that you basically seem to be doing all of the right things, and it is even more impressive that you switched gears a few years ago.

From my aged perch, your spouse's employer-provided health plan is a literal gold mine. You might want to think about ways to keep that going. 65 years of age is a long ways away for you, at least from my perspective. I recognize the income-managing ways to ACA subsidies, but health care costs are a significant wild card the further out you have to plan. If I could live my life all over again, I would have ensured that I (or DW) had worked at a company that provided insurance to span the years from FI/RE to 65. Alas, that was not to be, so now we are in the proverbial health care "valley of [cost] death."

Best wishes to you.
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Old 10-06-2018, 09:31 PM   #11
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Thank you! Sorry, I think you misunderstood my wife's health insurance. It is not life long health insurance. What I meant was we would stay on my wife's insurance from 2023-2028 because she can work a little longer than me.

Appreciate your input. I know that there can be a lot of unexpected cost after FIRE. I just want to have the option of leaving the job. I have experienced massive layoffs in my company and 75% of my coworkers have been laid off. I have been living in fear in the past few years. I just want to have the option of not fearing layoff in the future. If in one day the boss lays me off, I can walk away without any stress. Currently I still need the job to make ends meet and everything I have is under the mercy of the manager/CEO. The feeling is not so great.

Quote:
Originally Posted by WyomingLife View Post
Very admirable. All I can say is that you basically seem to be doing all of the right things, and it is even more impressive that you switched gears a few years ago.

From my aged perch, your spouse's employer-provided health plan is a literal gold mine. You might want to think about ways to keep that going. 65 years of age is a long ways away for you, at least from my perspective. I recognize the income-managing ways to ACA subsidies, but health care costs are a significant wild card the further out you have to plan. If I could live my life all over again, I would have ensured that I (or DW) had worked at a company that provided insurance to span the years from FI/RE to 65. Alas, that was not to be, so now we are in the proverbial health care "valley of [cost] death."

Best wishes to you.
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Old 10-06-2018, 11:48 PM   #12
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So you think I should continue working a little longer? 1.5M investment is a decent size. Of course 2M is better, but I am just very tired of office work.
For two younger folks with a family, I think $1.5M is inadequate...you won't have much in the way of contingency funds, and won't have much ability to pursue hobbies or travel. If you want to live a frugal lifestyle and are happy checking books out of the local library for fun, and are able to still get subsidized health care under ACA, it might be possible. My goal for just myself started at $1M, then went to $1.5 (added a wife), then $1.8, then $2.2, and not it's at $2.4, where I think it will finally end. When you actually get ready to quit, the OMY syndrome may hit, which is both psychological, but also occurs through the realization that once you RE, you don't want to have to ever go back to work. Of course, if you're in your 40s, it might be way easier to do than if you're in your late 50s. Just thoughts. Best wishes.
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Old 10-07-2018, 05:49 AM   #13
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I think that your cost estimate for the long haul is not realistic. W/O your wife's job, your health insurance will be pricy, and you have nothing for income taxes. It is a total guess but I would say that $5K/mo (w/no mortgage) is a fair number. At your age, 3% WR is also reasonable. That gives a need for $1.8M in investments.
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Old 10-07-2018, 06:20 AM   #14
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What about the kiddos college education. $200 per month doesn't seem like enough of a contribution, even for state schools.

If I were you I'd seek a job change so that you are not as desperate to retire at such a young age.


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Old 10-07-2018, 06:33 AM   #15
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I think that your cost estimate for the long haul is not realistic. W/O your wife's job, your health insurance will be pricy, and you have nothing for income taxes. It is a total guess but I would say that $5K/mo (w/no mortgage) is a fair number. At your age, 3% WR is also reasonable. That gives a need for $1.8M in investments.
I want to make sure that I've been doing the SWR calculation correctly all these years.

Doesn't $5K/month and 3% SWR require $2M?
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Old 10-07-2018, 07:27 AM   #16
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Yes, I am in a big city. The property tax is ridiculously high. I am also planning to sell the house and downsize into an apartment after kids going to college.
$1,100 of property tax on a $380k property is ridiculously LOW, not ridiculously high.... I pay double that on our $200k condo and over six times that on our house.
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Old 10-07-2018, 07:29 AM   #17
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I want to make sure that I've been doing the SWR calculation correctly all these years.

Doesn't $5K/month and 3% SWR require $2M?
Yes. ($5k*12)/3% = $2m
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Old 10-07-2018, 07:32 AM   #18
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$1,100 of property tax on a $380k property is ridiculously LOW, not ridiculously high....
+1

I pay four times that amount on a property of similar value. Sounds like a bargain to me.
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Old 10-07-2018, 07:35 AM   #19
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I don't see budget for big ticket recurring expenses: major house repairs (roof, AC, etc.), cars and education for kids

The kids expenses may reduce but will NOT go away until they find a job. Lot of here can attest to that fact. Even adult kids cost money.

Make sure you do not exceed SWR to more than 3% if you decide to retire in your 40's or 50's. FYI: We are in frothy market so plan for sequence of risk events.

Like lot people of said, take it easy and slow down. You are running a marathon. Enjoy time with your kids. Find different work.
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Old 10-07-2018, 07:57 AM   #20
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+1

I pay four times that amount on a property of similar value. Sounds like a bargain to me.
Is the $1100 property tax per month or per year? It is listed as a monthly expense. You pay $4400 per month on a $350k property?



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