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Old 02-22-2013, 01:30 PM   #61
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Very interesting! Fantastic budgeting. Is your wife on board with that budget for 60 years?
I discuss the budget with her and tell her "we can change any of these budgeted amounts, we just have to accommodate the spending in our plan somehow (more risk, larger portfolio, cuts elsewhere etc)". She is on board NOW (she doesn't particularly want to work either) but I wonder if in 20 years she (or I) will be content if we can't do things we want due to lack of funds.
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Old 02-22-2013, 01:37 PM   #62
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but I wonder if in 20 years she (or I) will be content if we can't do things we want due to lack of funds.
I know that feeling ! I think I'm changing my retirement date to 2015. I will use the two years to accumulate 100k so I can retire just a little bit better plus another 100k of cushion of other "OMG ! $hit happens" expenses.

Why have OMY syndrome when TMY (two more years) gets you twice as much ?
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Old 02-22-2013, 01:38 PM   #63
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I have thought about this a lot. Lots more free time could equate to entrepreneurial ideas and unanticipated income. We do credit card sign up bonuses now and get all kinds of free travel and airline miles, gift cards, and cash. I could probably score a few thousand per year continuing this racket (that's about where I am at the last 5-7 years on average).

I also have the chance to do some very easy work for $15-20/hr plus untaxed travel reimbursement if I wanted to do it. And as much or as little as I wanted. And probably some interesting serendipitous travel experiences/paid vacations (while I'm not working the few hours per day that I would be required to do). That used to be in my financial model providing $5000-6000/yr but I dropped it out since I'd prefer not to HAVE to work.
I like to do some of the extra money making ideas like on fatwallet and slickdeals. This past year I also probably made 5 - 10K in cash back credit card rewards, free products for writing reviews, signon bonuses, recycling ink cartridges, selling stuff to Amazon for gift cards, free birthday meals, and just stuff like that.

I sign up for store newsletters and it is wild how many will send gift certificates and give away free merchandise just to get you in the store. Of course I go and get the free stuff and never buy anything else.

Our library has free passes for about 30 different museums, zoos, plays, gardens, historical sites and other activities. When I was working full time I never even knew all this kind of free stuff existed because I didn't have any time to do the research.

Once you aren't commuting and working full time at a regular job then saving money, making money from credit cards and signon bonuses and getting free stuff can kind of become your new job. If you have time to grocery shop just the loss leaders from all the grocery stores each week and cook from scratch you can get your grocery bill super low, too.
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Old 02-22-2013, 01:41 PM   #64
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How will you occupy your time, and will those activities add to costs?
Hiking
Urban exploring
Working out
Tennis
Playing with kids
Reading
Play European board games
play video/computer games
Writing, maybe blogging
Video production
Volunteering - more at the policy level than getting my hands dirty. maybe get on a non-profit board or get more involved with a think tank, advocacy group, tech start up/incubator, etc
Be more involved at kids' school
Entrepreneurial activities
Techie stuff (PV solar panels on roof?? Solar hot water heater? Wind turbine?)
Programming
Art

And then after lunch I'd like to...

Most of this stuff is free or darn close, or if it costs something substantial it will have a very high return on equity.

Some of these activities might generate income or have a tiny chance of leading to a huge pay off (though that wouldn't necessarily be the goal going into the activity).
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Old 02-22-2013, 01:44 PM   #65
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I like to do some of the extra money making ideas like on fatwallet and slickdeals. This past year I also probably made 5 - 10K in cash back credit card rewards, free products for writing reviews, signon bonuses, recycling ink cartridges, selling stuff to Amazon for gift cards, free birthday meals, and just stuff like that.

I sign up for store newsletters and it is wild how many will send gift certificates and give away free merchandise just to get you in the store. Of course I go and get the free stuff and never buy anything else.

Our library has free passes for about 30 different museums, zoos, plays, gardens, historical sites and other activities. When I was working full time I never even knew all this kind of free stuff existed because I didn't have any time to do the research.

Once you aren't commuting and working full time at a regular job then saving money, making money from credit cards and signon bonuses and getting free stuff can kind of become your new job. If you have time to grocery shop just the loss leaders from all the grocery stores each week and cook from scratch you can get your grocery bill super low, too.
I do most of this right now, which undoubtedly helps our budget figures. I do have a limit on how many hoops I'll jump through to make a buck and focus on high reward low risk, low time commitment deals as a result.
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Old 02-22-2013, 02:13 PM   #66
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Household income is very very very very low six figures, and we have worked our way up to that point. DW and I both work and that household income includes both salaries. As you can tell from my budget outline, we spend very little. On an annual basis we are able to add close to $100,000 per year to our investments in recent years, and $70-80k per year a few years ago. Contributing this much to our portfolio in tax deferred accounts also means we owe very little in taxes each year.

We have never had any windfalls like inheritances or stock options.
that is great! I hope in the near future I can add as much to our investments! Our expenses for a family of 4 are actually slightly under yours, except we are a one income ($85K) family, so there isn't quite as much to save... Hopefully we can plan on banking more when our kids, currently 1 & 4, are both in school and DH can do work other than raising kids!

Hiking and European board games. Sounds like what I'd like to do in retirement! A friend recently introduced me to a new favorite, Dominion.

Good luck!
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Old 02-22-2013, 03:02 PM   #67
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why not retire at 30
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Old 02-22-2013, 03:37 PM   #68
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Let's just look at this school issue first. Are you saying tuition and books is $30,000 for the 4 years. This seems quite low. I recently ran a projection for a 6 & 8 year old to go to a state school in the WA / OR area, and in 2023 I projected this 4 year cost to be $172,000 per child. This is both tuition and living, since not many college students want to live at home, though maybe you plan for them to fund half, but even tuition only would be about half that or $86k.

The other problem with your assumption would be the low returns of any college money you have invested --- these can not be in 100% equity, or really even in the stock market at all once you reach a year or two from college. Could your college fund really take a 40% drop in the year before college starts. This would be a good way to turn a 4 year college fund into a 2 year Community College fund!

Also, I don't know where you have this college money -- in a tax deferred 529 plan, or do you plan on paying taxes on this money as you pull it out. This would substantially raise your tax obligation while funding two kids for college at the same time.
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Old 02-22-2013, 04:17 PM   #69
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why not retire at 30
I'm sure he would've if he could've. I know I would've.
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Old 02-22-2013, 04:36 PM   #70
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Let's just look at this school issue first. Are you saying tuition and books is $30,000 for the 4 years. This seems quite low. I recently ran a projection for a 6 & 8 year old to go to a state school in the WA / OR area, and in 2023 I projected this 4 year cost to be $172,000 per child. This is both tuition and living, since not many college students want to live at home, though maybe you plan for them to fund half, but even tuition only would be about half that or $86k.

The other problem with your assumption would be the low returns of any college money you have invested --- these can not be in 100% equity, or really even in the stock market at all once you reach a year or two from college. Could your college fund really take a 40% drop in the year before college starts. This would be a good way to turn a 4 year college fund into a 2 year Community College fund!

Also, I don't know where you have this college money -- in a tax deferred 529 plan, or do you plan on paying taxes on this money as you pull it out. This would substantially raise your tax obligation while funding two kids for college at the same time.
All very good points regards future college costs.

I suspect the Expected Family Contribution (EFC) in this case will be in the 10-15K range with no income. So his planned costs should be lower than the 25-30K cost of a decent public University. I'm in the same situation and just ran the calculator and got an EFC of 11K for my situation.

Even if you can afford it, I think it's good to make the kids pay/work for some of their college. But this is another topic.
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Old 02-22-2013, 04:56 PM   #71
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OK,

I ran what numbers I do know through ESP and you look to be in very good shape.

...

I think you are all set.
The last time I use ESP+, they also had conservative/aggressive settings for MC results. What did you use? Also, OP indicates that at some point he'll have a plan to move away from a 100% equity portfolio.

If you are using ESP's average yearly performance / inflation numbers then you're discounting any sequence of return issues. I found this option to be useful to compare two different scenarios (eg. taking SS at 62 or 67, working additional years etc.), but I wouldn't base ER success on it.
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Old 02-22-2013, 05:53 PM   #72
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I'm sure he would've if he could've. I know I would've.
I sure would have if I could have too.

With 20/20 hindsight, I could have hit it at 31 without doing anything ridiculous or relying on luck, 30 though would have required something like graduating from high school a year early, by using all my electives to take community college classes, instead of starting at 7am and finishing my 11am in my senior year, which was pretty fun. The big time trap was getting that law degree instead of jumping into a lucrative, fairly easy career that was already waiting for me (because of my hard work in undergrad), it is going to take an extra 5-6 years thanks to that.
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Old 02-22-2013, 06:04 PM   #73
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I sure would have if I could have too.

With 20/20 hindsight, I could have hit it at 31 without doing anything ridiculous or relying on luck, 30 though would have required something like graduating from high school a year early, by using all my electives to take community college classes, instead of starting at 7am and finishing my 11am in my senior year, which was pretty fun. The big time trap was getting that law degree instead of jumping into a lucrative, fairly easy career that was already waiting for me (because of my hard work in undergrad), it is going to take an extra 5-6 years thanks to that.
I'm pretty sure law school cost me a few years toward ER in terms of time not progressing the career I ended up in, and in opportunity cost of not working 3 years. And not having those 3 years of savings invested for the last 10-12 years. Same thing for DW (law school grad not using the degree). Law school was interesting and somewhat challenging at least.
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Old 02-22-2013, 06:14 PM   #74
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Fuego,

Good for you!

You NEED to check out mrmoneymustache.com. You're going to find that blog to be an absolute goldmine of useful, applicable, innovative ideas on how to get where you want to go.

And please do yourself a favor. Ignore any naysayers that should react to this post with scoffing and hrmmphing devoid of any factual criticisms.

See for yourself.

Good luck,

Alex in Virginia
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Old 02-22-2013, 06:17 PM   #75
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I am surprised that you are currently paying nothing on student loans on IBR with a combined 6 figure income. Is that because you are putting the maximum into retirement accounts and reducing your AGI?
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Old 02-22-2013, 06:17 PM   #76
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And please do yourself a favor. Ignore any naysayers that should react to this post with scoffing and hrmmphing devoid of any factual criticisms.


Alex, do you know something we don't about MMM?
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Old 02-22-2013, 06:19 PM   #77
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Let's just look at this school issue first. Are you saying tuition and books is $30,000 for the 4 years. This seems quite low. I recently ran a projection for a 6 & 8 year old to go to a state school in the WA / OR area, and in 2023 I projected this 4 year cost to be $172,000 per child. This is both tuition and living, since not many college students want to live at home, though maybe you plan for them to fund half, but even tuition only would be about half that or $86k.

The other problem with your assumption would be the low returns of any college money you have invested --- these can not be in 100% equity, or really even in the stock market at all once you reach a year or two from college. Could your college fund really take a 40% drop in the year before college starts. This would be a good way to turn a 4 year college fund into a 2 year Community College fund!

Also, I don't know where you have this college money -- in a tax deferred 529 plan, or do you plan on paying taxes on this money as you pull it out. This would substantially raise your tax obligation while funding two kids for college at the same time.
College savings are in 529 plan. 100% equities now (or whatever the aggressive allocation fund is invested in).

We plan on covering about 1/2 the cost of college - tuition. Room and board don't increase at the high rate that tuition does at our state schools. Or at least there is the option of market rate apartments and grocery stores and restaurants that could replace the dorms and the dining hall. Plan B is probably they live at home with us for part or all of college. Plan A is that we have enough in the 529 and in our main investment portfolio to cover at least tuition and maybe more, and they can get some student loans and work a little, especially during summers. So they have a little skin in the game. I had so many scholarships and grants in college they paid me to go to school, so I wouldn't rule that out for them, especially the oldest two who have the advantage of being minority and female (if that still counts for anything in another 11-12 years).

As for allocation, sure we'll back off the aggressiveness closer to the time of college. Still 11-18 years out right now so no need to do so yet.

Plan C would be for me to hustle up some work to help pay for college.

We all have different philosophies on what we owe our children and I think I'm walking the middle road between letting them figure it all out on their own and rolling out the golden carpet for 7+ years through a PhD program or Med school. I have seen the availability of student loans with great terms that you sometimes don't have to repay, so I'm not too worried about the kids being destitute during college.
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Old 02-22-2013, 06:23 PM   #78
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I am surprised that you are currently paying nothing on student loans on IBR with a combined 6 figure income. Is that because you are putting the maximum into retirement accounts and reducing your AGI?
We pay around $4k per year right now. We will pay zero in retirement when the kids are all still living with us, increasing to $1500/yr when it is just DW and I (for 6-8 years before our 25 years of repayments happens). The sum of all anticipated future payments is around $20k so we have a lump sum set aside on top of the target portfolio required to fund our routine annual spending. Now that I think about it, that lump sum would grow over the years since we won't touch it until a decade after ER.
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Old 02-22-2013, 06:27 PM   #79
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Fuego,

Good for you!

You NEED to check out mrmoneymustache.com. You're going to find that blog to be an absolute goldmine of useful, applicable, innovative ideas on how to get where you want to go.
I read MMM's blog from time to time. And get updates on my Facebook feed. Very interesting reading usually. I'm not quite a MMM but it is a good example that it isn't that hard to live well on ~$30k/yr with a little attention to detail.

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And please do yourself a favor. Ignore any naysayers that should react to this post with scoffing and hrmmphing devoid of any factual criticisms.
You may note I haven't spent any time responding to certain posts.
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Old 02-22-2013, 06:34 PM   #80
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that is great! I hope in the near future I can add as much to our investments! Our expenses for a family of 4 are actually slightly under yours, except we are a one income ($85K) family, so there isn't quite as much to save... Hopefully we can plan on banking more when our kids, currently 1 & 4, are both in school and DH can do work other than raising kids!
We actually spend more than $23000 per year right now if you add in things like pre-tax deductions for dental ins and health ins, and deductions for child care FSA, and the mortgage we pay each month. I don't want to mislead anyone into thinking the $23000 is all that we live on right now with 2 working parents and 3 kids, 1 of which is in childcare year round, the other 2 needing summer care of some sort.

$23000 was the baseline for expenses that would (mostly) continue into retirement with the modifications outlined in my first post.

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Hiking and European board games. Sounds like what I'd like to do in retirement! A friend recently introduced me to a new favorite, Dominion.

Good luck!
I should say long walks through the woods, parks or city, and/or day hiking. Much more accurate than any images of weeks long adventures on the AT.

I have played and enjoyed ticket to ride, Carcassonne, Settlers of Catan, and a few others. Haven't found one I don't like so far. Right now I have been playing a lot of "Conquer Club" - online turn based strategy/war game like Risk.
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