Hello all!
First time to post here, but I have been reading off and on for about 6 months. Thanks to all who regularly post here, as I have learned some and been inspired a lot! I have been thinking of FIRE for a while now, but only recently found this forum. I thought I would wade in and share my plan to get some more eyes on it. I realize that it is fairly aggressive, but I look at this as my 'best case scenario' plan, realizing that I very well may need to work another 10 years to cover a more reality-based set of assumptions.
Here are the facts:
Married, wife is SAHM with our first kid (and 2 very bad beagles).
Currently making north of 200K a year, but I work as an independent consultant, so that income depends on my ability (and willingness) to keep working in the sector that I currently work for the duration of the plan. I have a unique set of technical skills so I think it is safe to assume that I can continue to earn at this level, but work is still very stressful with some travel (hence the desire to FIRE).
All numbers are after tax (adjusted any pre-tax amounts by dividing total by 1 - estimated future tax rate of 25% - which is very conservative). Also, all numbers are combined his/hers.
IRAs/Solo 401K: 92K. AA is Age in Bonds - 20, Vanguard 3 fund portfolio (Total Stock Market, Total Intl Stock Market, Total Bond). I am comfortable with this as I invested all the way through 2008 until now, though I realize this is easier to do when young and asset poor.
Emergency Fund: 1 year's expenses
2 Rental Properties: Worth 150k combined. Will pay these off by the end of next year, and they will then throw off about 15K in income after all taxes, allowances for repairs and vacancy, etc. They currently throw off around 5K a year in income (due to the mortgages).
Primary House: Recently purchased for 215K, and I currently owe about 179K. Stable area with good appreciation, but frankly I don't care too much about that stuff. I plan on paying this off aggressively over the next 3-4 years.
Life Insurance: 1.5M, with 1 20 year term policy worth 1M and 1 30 year term policy worth 500K. This costs 900 a year.
Originally, I mapped out my plan in my mega spreadsheet of doom (I am a major finance nerd) based purely on investing increasing amounts in the market as the source of income in retirement, but last year I backed into a really good deal on a rental property. Then we moved and I turned my primary residence into another rental property. Comparing internal rates of return for these properties to what I am expecting in the market long term, my rental properties are significantly outperforming (as in 15% vs 8%). To me, this makes sense as rental properties are a hybrid between an investment and a job and the job part 'adds value' to the investment, but when I retire, I plan to outsource it all to a property management firm. So, now I changed the plan to eventually have 5 rental properties (to diversify risk) and continue my original plan of saving an extra 2K a year in the market compared to the previous year. I am 3 years into the 'plan' and so far so good.
Here are the details of the remainder of the plan:
Risks:
-Stock market returns are low/negative during my short time horizon.
-Stock market variability reduces withdrawal amounts during 'low' years due to my withdrawal methodology, forcing me to work PT some during those years.
-I don't earn as much as I hope to enable me to save this much.
-I can't find 3 more rental properties for as good of a deal as I found the first two (though I know my area pretty well, and I think this is not going to happen).
-Baby expenses rise much faster than projected budget
-Random health issue comes up to slow investment ability.
Offsetting positive factors:
-I can just as easily continue to work 10-20 hours a week after FIRE if I need to by just telling my clients that is the max I can give
-Wife may chose to start photography business or other income project after the baby grows up a little.
-We are major LBYM and can further scale down the budget to the 'emergency fund' level if need be.
-I have tried a couple of times to keep a subcontractor to work under me, but both times I have lost them due to student visa issues (recruit smart mbas who happen to come from India). I may succeed in keeping one of these two guys after I figure out the visa thing or hire someone who is a US citizen with mad tech skills. This would not only increase income now, but could be a future semi-passive income source.
I have a lot more thoughts on the technicalities of how this will work and have a massive spreadsheet to contain all the numbers, but this post is long enough! Thanks for taking the time to read! And don't pull any punches, I am wanting as much constructive criticism as I can get.
First time to post here, but I have been reading off and on for about 6 months. Thanks to all who regularly post here, as I have learned some and been inspired a lot! I have been thinking of FIRE for a while now, but only recently found this forum. I thought I would wade in and share my plan to get some more eyes on it. I realize that it is fairly aggressive, but I look at this as my 'best case scenario' plan, realizing that I very well may need to work another 10 years to cover a more reality-based set of assumptions.
Here are the facts:
Married, wife is SAHM with our first kid (and 2 very bad beagles).
Currently making north of 200K a year, but I work as an independent consultant, so that income depends on my ability (and willingness) to keep working in the sector that I currently work for the duration of the plan. I have a unique set of technical skills so I think it is safe to assume that I can continue to earn at this level, but work is still very stressful with some travel (hence the desire to FIRE).
All numbers are after tax (adjusted any pre-tax amounts by dividing total by 1 - estimated future tax rate of 25% - which is very conservative). Also, all numbers are combined his/hers.
IRAs/Solo 401K: 92K. AA is Age in Bonds - 20, Vanguard 3 fund portfolio (Total Stock Market, Total Intl Stock Market, Total Bond). I am comfortable with this as I invested all the way through 2008 until now, though I realize this is easier to do when young and asset poor.
Emergency Fund: 1 year's expenses
2 Rental Properties: Worth 150k combined. Will pay these off by the end of next year, and they will then throw off about 15K in income after all taxes, allowances for repairs and vacancy, etc. They currently throw off around 5K a year in income (due to the mortgages).
Primary House: Recently purchased for 215K, and I currently owe about 179K. Stable area with good appreciation, but frankly I don't care too much about that stuff. I plan on paying this off aggressively over the next 3-4 years.
Life Insurance: 1.5M, with 1 20 year term policy worth 1M and 1 30 year term policy worth 500K. This costs 900 a year.
Originally, I mapped out my plan in my mega spreadsheet of doom (I am a major finance nerd) based purely on investing increasing amounts in the market as the source of income in retirement, but last year I backed into a really good deal on a rental property. Then we moved and I turned my primary residence into another rental property. Comparing internal rates of return for these properties to what I am expecting in the market long term, my rental properties are significantly outperforming (as in 15% vs 8%). To me, this makes sense as rental properties are a hybrid between an investment and a job and the job part 'adds value' to the investment, but when I retire, I plan to outsource it all to a property management firm. So, now I changed the plan to eventually have 5 rental properties (to diversify risk) and continue my original plan of saving an extra 2K a year in the market compared to the previous year. I am 3 years into the 'plan' and so far so good.
Here are the details of the remainder of the plan:
- 2013 - Invest 19K After Tax (AT), pay off remaining 38K of 1 rental property, save 2.5K in daughter's 529, fully fund HSA.
- 2014 - Invest 21K AT, pay off remaining 50K of other rental property, save 2.5K in daughter's 529, fully fund HSA.
- 2015 - Invest 23K AT, prepay 58K of primary home, save 2.5K in daughter's 529, fully fund HSA.
- 2016 - Invest 25K AT, prepay 58K of primary home, save 2.5K in daughter's 529, fully fund HSA.
- 2017 - Invest 27K AT, prepay 58K of primary home (to pay off house), save 2.5K in daughter's 529, fully fund HSA.
- 2018 - Invest 29K AT, buy rental property 3 for 60K (with another 5K in rehab costs), save 2.5K in daughter's 529, fully fund HSA.
- 2019 - Invest 31K AT, buy rental property 4 for 60K (with another 5K in rehab costs), save 2.5K in daughter's 529, fully fund HSA.
- 2020 - Invest 33K AT, buy rental property 5 for 60K (with another 5K in rehab costs), save 2.5K in daughter's 529, fully fund HSA.
- 2021 - FIRE!
Risks:
-Stock market returns are low/negative during my short time horizon.
-Stock market variability reduces withdrawal amounts during 'low' years due to my withdrawal methodology, forcing me to work PT some during those years.
-I don't earn as much as I hope to enable me to save this much.
-I can't find 3 more rental properties for as good of a deal as I found the first two (though I know my area pretty well, and I think this is not going to happen).
-Baby expenses rise much faster than projected budget
-Random health issue comes up to slow investment ability.
Offsetting positive factors:
-I can just as easily continue to work 10-20 hours a week after FIRE if I need to by just telling my clients that is the max I can give
-Wife may chose to start photography business or other income project after the baby grows up a little.
-We are major LBYM and can further scale down the budget to the 'emergency fund' level if need be.
-I have tried a couple of times to keep a subcontractor to work under me, but both times I have lost them due to student visa issues (recruit smart mbas who happen to come from India). I may succeed in keeping one of these two guys after I figure out the visa thing or hire someone who is a US citizen with mad tech skills. This would not only increase income now, but could be a future semi-passive income source.
I have a lot more thoughts on the technicalities of how this will work and have a massive spreadsheet to contain all the numbers, but this post is long enough! Thanks for taking the time to read! And don't pull any punches, I am wanting as much constructive criticism as I can get.