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Getting closer to FIRE!
Old 04-11-2011, 12:37 PM   #1
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Getting closer to FIRE!

Yippee!! Getting closer. I wanted to provide a little snapshot of where we are and what we are thinking about now.

After running the quarterly financial statements for our personal finances, I realized we are closing in on our magic number that will allow us to retire early. Right now the portfolio can support our basic expenses at a SWR well under 4%. But we still have at least a few years to go before we are truly FI (and maybe ER). I'm 30 now and I'm thinking FIRE at age 33 is a possibility with average market returns, 35 with below average returns.

Outstanding items that we need to throw money at:
- Mortgage payoff ($75000 or so remaining, and at the amounts we are currently paying, it will be paid off in ~4.5 years)
- College savings for 2 kids (still ~$60000 to go)
- Extra $$ to cover the SWR due to additional expenses during FIRE (that we don't have now)
- Extra $$ to cover the SWR due to fun/travel/entertainment during FIRE

Issues we will need to address in the next few years:
- Healthcare - will obamacare be substantially intact to enable us to get cheap guaranteed issue health insurance where we pay a certain amount based on our income?
- What will we do all day (mainly the DW's concern - I got all the answers for myself!).
- Shifting portfolio from accumulation to distribution phase. Part of this is shifting from 100% equities to something less than 100%.
- avoiding "one more year" syndrome where we keep trying to pad the portfolio even when we have enough or more than enough.

Any big picture items I'm missing here?

In the meantime, I have started a new job in the public sector at the beginning of the year and it is going great so far. It is still work, but I don't dread going in everyday. Better pay, better benefits, more time off, less stress.

We are saving more than ever, and the job change has allowed a significant increase in tax deferred savings (with the addition of a 457 plan plus a 401k plan). I will also be receiving a rollover from my former employer's ESOP plan over the next 5 years so I can control the money instead of a bunch of fuddy duddy miscreants. And with a 457 plan, my understanding is that I can withdraw money before age 59.5 as I want and not pay a penalty (great news to allow flexible withdrawals during FIRE).

All in all, things are going very well for us.
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Old 04-11-2011, 12:57 PM   #2
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Wow that's amazing to be so close to FIRE in your early 30's! Congrats, I hope I am diligent enough to get to that point at such a young age. Good luck!
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Old 04-11-2011, 01:02 PM   #3
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Congratulations!
Glad to hear you're enjoying your work. It makes such a huge difference in how much you'll enjoy life pre-ER.
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Old 04-11-2011, 01:15 PM   #4
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Congratulations!
Glad to hear you're enjoying your work. It makes such a huge difference in how much you'll enjoy life pre-ER.
I said "don't dread" work, not that I enjoy it! DW says I bring home less stress, so I guess an outside observer's objective opinion is better than my own. Of course some of the stress reduction is due to having the end of my working days nearer. I can honestly say "I can do this for a few more years".
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Old 04-11-2011, 02:13 PM   #5
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Wow Fuego, I didn't realize you were still a kid Well done!
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Old 04-11-2011, 02:47 PM   #6
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Wow Fuego, I didn't realize you were still a kid Well done!
It's funny because I have high school and college friends that are still pursuing PhD's or MBA's or about to finish medical residency/training (ie beginning a career) and I'm winding down.
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Old 04-11-2011, 03:47 PM   #7
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Looking at Fuego and myself, it really shows how lbym means affects your chances of FIRE. However, lbym isn't enough for very early retirement. You also need a very good income. I spend much less at ~$12,000/yr but won't be able to retire until at least mid-40's(31 now) because of my income being <$50k/yr. Every year I save enough to cover that year and 2 more years. Congrats Fuego for making a very good income AND living like you make an average or even slightly below average income. That's the key to very early FIRE.
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Old 04-11-2011, 04:00 PM   #8
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Originally Posted by aaronc879 View Post
Looking at Fuego and myself, it really shows how lbym means affects your chances of FIRE. However, lbym isn't enough for very early retirement. You also need a very good income. I spend much less at ~$12,000/yr but won't be able to retire until at least mid-40's(31 now) because of my income being <$50k/yr. Every year I save enough to cover that year and 2 more years. Congrats Fuego for making a very good income AND living like you make an average or even slightly below average income. That's the key to very early FIRE.
Thanks. Having 2 income earners is a big help. And while our combined gross income has been in six figures for probably 3 years now, it is just barely so. But we do spend as if we were earning what would be a near-poverty level income (not that you could tell at first glance). Our savings each year are 2-3 times our expenses (ignoring taxes).
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Old 04-11-2011, 04:09 PM   #9
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You are also giving your children a priceless gift by having them learn LBYM as a way of life. Gives them much more freedom to choose careers they will love instead of just for the $$$. Way to go!
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Old 04-11-2011, 10:42 PM   #10
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Fuego, I have to ask....how in the world, at 30, can you be so close to ER? I'm not trying to pull private information, but unless there is was a lotto winning somewhere or a large inheritance, I can't figure it out. I'm 54, been living pretty frugally all my life, earned six figures for the last 7 years, saved more than I've spent - and I'm just getting there now. And we didn't have any little college tuitions in our household.

Way to go!
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Old 04-11-2011, 11:04 PM   #11
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Fuego, I envy folks like you. When I was at your age, it was living hand to mouth and really couldn't think of RE. I started late but there is still hope for me by 62.

I hope you enjoy RE and live your dreams.
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Old 04-12-2011, 12:29 AM   #12
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Quote:
Originally Posted by FUEGO View Post
Yippee!! Getting closer. I wanted to provide a little snapshot of where we are and what we are thinking about now.

After running the quarterly financial statements for our personal finances, I realized we are closing in on our magic number that will allow us to retire early. Right now the portfolio can support our basic expenses at a SWR well under 4%. But we still have at least a few years to go before we are truly FI (and maybe ER). I'm 30 now and I'm thinking FIRE at age 33 is a possibility with average market returns, 35 with below average returns.

Outstanding items that we need to throw money at:
- Mortgage payoff ($75000 or so remaining, and at the amounts we are currently paying, it will be paid off in ~4.5 years)
- College savings for 2 kids (still ~$60000 to go)
- Extra $$ to cover the SWR due to additional expenses during FIRE (that we don't have now)
- Extra $$ to cover the SWR due to fun/travel/entertainment during FIRE

Issues we will need to address in the next few years:
- Healthcare - will obamacare be substantially intact to enable us to get cheap guaranteed issue health insurance where we pay a certain amount based on our income?
- What will we do all day (mainly the DW's concern - I got all the answers for myself!).
- Shifting portfolio from accumulation to distribution phase. Part of this is shifting from 100% equities to something less than 100%.
- avoiding "one more year" syndrome where we keep trying to pad the portfolio even when we have enough or more than enough.

Any big picture items I'm missing here?

In the meantime, I have started a new job in the public sector at the beginning of the year and it is going great so far. It is still work, but I don't dread going in everyday. Better pay, better benefits, more time off, less stress.

We are saving more than ever, and the job change has allowed a significant increase in tax deferred savings (with the addition of a 457 plan plus a 401k plan). I will also be receiving a rollover from my former employer's ESOP plan over the next 5 years so I can control the money instead of a bunch of fuddy duddy miscreants. And with a 457 plan, my understanding is that I can withdraw money before age 59.5 as I want and not pay a penalty (great news to allow flexible withdrawals during FIRE).

All in all, things are going very well for us.
Have you paid off your student loan?
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Old 04-12-2011, 11:50 AM   #13
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Congrats on being so well prepared. I wish I was thinking this clearly at your age.

I wouldn't count on government run healthcare. The elephants will stop this for many years to come. I'd be sure and pad your portfolio to account for HIGH private healthcare costs.
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Old 04-12-2011, 12:01 PM   #14
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Amazing, you must be doing something right or have been extremely lucky. Heck, I am almost 62 and still have a bit of anguish over when to pull the plug.

For ER activity, you may want to consider writing a book on "How I ER'd at 3X"
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Old 04-12-2011, 12:45 PM   #15
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Have you paid off your student loan?
Nope, and I don't plan on paying much if anything on it once I ER. It will be based on income, and I'll pay 15% of anything I "earn" (in the 1040 sense of the word) above $33000 a year or so. Now, if my portfolio increases wildly and I need to realize more than $33000 a year in taxable income, then I may be paying some toward my loan. But I'll have the means to do so.

And there will be a period of time at the end of my loan (in about 15-18 years) where the kids I have right now will no longer be tax dependents, so I will pay 15% on earned income above, say $20,000 in today's dollars. Of course my kids not being dependents also means my expenses will drop (in an ideal world). And who knows, the young wife is still fertile, so there may be more fueguitos in our future.
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Old 04-12-2011, 12:51 PM   #16
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Originally Posted by DFW_M5 View Post
Amazing, you must be doing something right or have been extremely lucky. Heck, I am almost 62 and still have a bit of anguish over when to pull the plug.

For ER activity, you may want to consider writing a book on "How I ER'd at 3X"
I thought about writing a book like that, but the true story wouldn't fill half a page.

Save a bunch in a tax efficient manner and put all your money in low expense, low turnover funds. Don't buy new cars very often. Buy a house the size you need it. Learn to cook. Pay attention to deals and ways to save lots of money on big ticket items and ignore coupon clipping to save a buck here and there. Take financial risks that are in your favor. Enjoy life's adventures along the way, or one day you'll wake up and realize you forgot to live.

I don't think I have anything flashy enough to sell books here. "Work moderately hard for 10-12 years and save most of your income" isn't quick and easy to implement.
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Old 04-12-2011, 12:57 PM   #17
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I wouldn't count on government run healthcare. The elephants will stop this for many years to come. I'd be sure and pad your portfolio to account for HIGH private healthcare costs.
Healthcare has an asterisk next to it in my personal accounting, because I don't know what will happen to it. I think I'll know by 2014 though, and this time line corresponds with when I think I'll have enough to be FI. I personally think if obamacare stays around and gets implemented in roughly the current configuration, then after a year or two people will think of it as a sacred cow entitlement, and it will remain in place. Of course if it is substantially modified or removed, then I'll be working for a while longer to accumulate more $$ for insurance.
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Old 04-12-2011, 01:00 PM   #18
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WOW!! Big Congrats FUEGO!!
VERY IMPRESSIVE!
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Old 04-12-2011, 01:11 PM   #19
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Fuego, I have to ask....how in the world, at 30, can you be so close to ER? I'm not trying to pull private information, but unless there is was a lotto winning somewhere or a large inheritance, I can't figure it out. I'm 54, been living pretty frugally all my life, earned six figures for the last 7 years, saved more than I've spent - and I'm just getting there now. And we didn't have any little college tuitions in our household.

Way to go!
We pay very little income tax, have very low expenses and save a lot of money. Our savings are at least twice our expenses, maybe more depending on how you categorize some expenses. I would say I'm pretty focused on efficient spending and efficient investing and my wife and I are focused on building wealth in the form of invested assets.

I don't have any secrets or tricks to reveal - and for better or worse, no large inheritances (actually zero inheritances) and no luck at the lotto (don't play at all anymore, never spent more than $50-100 total back when we did play it years ago). To contemporize what Benjamin Franklin said, a dollar saved is a dollar earned, and then some, due to compounding of returns and tax policy.
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Old 04-12-2011, 03:12 PM   #20
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We reached financial independence at 36 but we did it with more money coming in and fewer mouths to feed, so I am definitely impressed with your progress!

Way to go, FUEGO!
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