Part-time until FIRE?

[Hoglebed]

Hello Everyone,

I'm a 28 year old pharmacist who has been working full time for the last 4 years in a stressful, high volume retail pharmacy. My original plan was to work full-time until 40 and FIRE, but after some calculations, I figured that I should be able to go part-time now and still FIRE at 50. This would give me ~12 of my 'best years' back, allowing for more time for wife/kids, family, hobbies and travel.

I will say that I had a few huge advantages over some of my peers (which I am very thankful for!). I am an only child so my parents were able to leave me with only $55,000 in student loans after 6 years of schooling. Also, I did recently receive inheritance (~$120k) from a Great Aunt which certainly propelled me a couple years forward.

Anyways, here is my current situation.

Previous 401k: $108K
Roth IRA: $39k
Vanguard Taxable: $138k
2.5yr CD: $60k
Bank: $27k

Debt is 10k on a 2016 Mazda worth 17k. No remaining student loans/CC

Networth: $379k
Liquid Assets: $372k
Retirement Assets: $285k

Current AA (effective ER <0.1%)

29% Domestic (Total US + SCV) - Taxable/IRA
19% International (Total Intl) - Taxable
29% Bonds (Total US Bond) - 401k
16% CD (2.53% 30mo) - Credit Union
7% Cash - Bank

Current AA is conservative for a few reasons:

1) The CD is earmarked for a house down-payment and closing costs
2) Current market valuations (market timing, shame on me)
3) Slightly risk averse (low - need, high - ability, moderate - willingness)
4) I like having 8-12 months of cash as an emergency fund

I do plan to move from this 50/50 allocation to 80/20 or 70/30 once I purchase a home and valuations improve.

For the past 4 years I have made about $120k/yr and have lived on $30k/yr. I have saved $20k in my first year (in addition to paying down loans) and saved $60k my last 3 years. I am completely happy with my current spending (low cost hobbies), but I believe it will increase to about $40-45k (in addition to my spouses contributions) once I have a home and children.

I have recently switched companies, and I have taken a part-time role working about 25 hours per week which I start in a couple weeks. I should gross $80k/yr on this salary. This still allows for 401k access and healthcare.
Originally I wanted this to be temporary until something full time opened up, but I believe I can make this work and not have to go back to full time employment.

Some rough math:

80k gross salary + 4k 401k match

Spending: 28k the next 4 years, 40-45k there after
Taxes: $14k (Federal, State, FICA)
Savings: $42k (Maxed 401k, Traditional IRA, HSA, taxable), 31k after kids/home

I should be able to lower my taxable income considerably (standard deduction + personal exemption + 401k + IRA + HSA) to where my effective tax rate is about 18%.

Assumptions:

1) Average Savings of $33k/yr for next 22 years (ages 28-50)
2) Real return assumptions: 5% equity, 1% bonds
2) Portfolio assumptions (75/25): 4% Real Return, 10% Standard Deviation
3) Will take SS at 70 (assuming 75% of present value)
4) Stand to inherit some money from parents (I use 30% of their current NW in calculations to be safe)

This has me fully retiring at 50 with a portfolio of $1.6-$1.8mil (this does not include inheritance from parents) in 2017 dollars (not including spouses assets) with a paid off home. A 3.3-3.8% SWR would yeild $60k/yr, which is more than I ever plan to spend during my working career (accounts for increased healthcare spending, contingencies and increased travel/charity/luxuries). FIREcalc shows about a 95% chance of success with a 45 year retirement.

I am looking for the community to poke holes in my plan and possibly make me aware of things that I may not have accounted for. Thank you everyone, this is such a great resource!

 

[aaronc879]

Looks good to me. If I could make $80K+/yr working just 25 hours a week I would definitely do that.

 

[Aerides]

Welcome,

Being you are only 28, your plans wrt marriage/partner/family, etc. may change your spending more than estimated. Those goals would have a big impact one way or the other. Given your relative short work history, I'd shop around other locations for full time for a few more years before considering PT and reduced income for the rest of your career.

But also age is on your side to experiment, so since you have the opportunity, give it a go for a while. But don't forget to enjoy life along the way too!

 

[SamuelLigert]

Hello and welcome to the forum! I agree with Aerides' statements. It may change along the way. Just follow her tips and never forget to enjoy and have fun in the process.

 

[Senator]

I'm a 28 year old pharmacist who has been working full time for the last 4 years in a stressful, high volume retail pharmacy.

Welcome to they real world. If you are stressed now, after only four years of working, you are in for a interesting life.

I should be able to lower my taxable income considerably (standard deduction + personal exemption + 401k + IRA + HSA) to where my effective tax rate is about 18%.

Why haven't you done this already?

 

[Golden sunsets]

I am confused on your assets income and spending. I gather you are married. Do your assets include your partners? You list only your income. What is your combined income and combined future savings? And are your expenses for both of you? If not how are you allocating your expenses vs your partners?


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[Hoglebed]

I hear you about the stress. The causes at my first job were multifactorial, very high prescription volume, high turnover, understaffing, issues with new boss. Hopefully my next role will not have these issues.

As far as the taxes go. I was making $120k and my effective total tax burden was about 22%. I am moving from a no income tax state to a state with income tax, however, the reduction in salary, switching from Roth IRA to a Traditional IRA (now that I should be able to deduct it) and the addition of an HSA (which I previously didn't qualify for) should bring my tax rate lower.

I'm sorry if I was unclear. I am not currently married. All spending, income and assets are mine alone. My tentative plan is to continue to rent for another few years and then purchase a house after marriage. Until I'm married, I am not including my significant others salary/spending.

Thank you everyone for the feedback so far.

 

[NgineER]

Welcome,

Being you are only 28, your plans wrt marriage/partner/family, etc. may change your spending more than estimated. Those goals would have a big impact one way or the other. Given your relative short work history, I'd shop around other locations for full time for a few more years before considering PT and reduced income for the rest of your career.

But also age is on your side to experiment, so since you have the opportunity, give it a go for a while. But don't forget to enjoy life along the way too!

+1

Welcome to the forum. The power of compounding is on your side, but I would advise you to add work hard and add to your savings for a couple of years so that you have more money to work for you.

 

[Hoglebed]

I think you all may be right. Adding just a few more years at full salary would speed things up and of course allow for more spending and account for unforeseen circumstances. It is highly likely that a full time position will open up within the next 6-12 months, and in that time I may continue to look elsewhere for full time employment. I am not so much burnt out from working, as I was from that previous job specifically. The pace at my new job should be a lot more manageable (going from 500-600 prescriptions per day to 150-250).

I do realize that I am young and that many things can change in life. 'Man plans and God laughs' as they say. I do plan to keep my plans very fluid and adjustable. This was just sort of a rough outline of where I'd like things to head, with the realization that any number of things could alter my course at any time.

 

[OHjosh]

For what it is worth, I would suffer full time employment longer, changing employers if I needed to to make it work. As a pharmacist you have a variety of options to try. over a 40 year career, my brother was a retail pharmacist for only a short time in his career. He has worked in hospitals, nursing homes and now as the training rep for specialized meds with research centers and specialists.

You have a long run and marriage, kids and/or a downturn in the market could make RE a premature option. (I had what you had at 50 and was told I could quit totally them. Two years later the market went kaflooey. It took me five years to recover. Luckily I only went to half-time work.) Having said all this, I always over worried about money. Who knows whether we will be here tomorrow, so conservatism may be a bad option! After reading the comments, search your heart for your answer.

 

[flyingaway]

Why people calculate their financial situations independently from their spouse's when they are married? I think the only thing that really matters in a marriage license is finance. True love does need a license, but a family's finance does require a license to guarantee equal sharing.

 

[Golden sunsets]

I hear you about the stress. The causes at my first job were multifactorial, very high prescription volume, high turnover, understaffing, issues with new boss. Hopefully my next role will not have these issues.

As far as the taxes go. I was making $120k and my effective total tax burden was about 22%. I am moving from a no income tax state to a state with income tax, however, the reduction in salary, switching from Roth IRA to a Traditional IRA (now that I should be able to deduct it) and the addition of an HSA (which I previously didn't qualify for) should bring my tax rate lower.

I'm sorry if I was unclear. I am not currently married. All spending, income and assets are mine alone. My tentative plan is to continue to rent for another few years and then purchase a house after marriage. Until I'm married, I am not including my significant others salary/spending.

Thank you everyone for the feedback so far.

OK Got it. No of course you don't include your partner's assets now. But should you get married, your numbers will change pretty significantly, particularly if you have children. It would be hard to predict what your needs will be in the future without that info.

If your job is stressful I would change jobs, not go part time at the ripe young age of 28.

 

[rabbean]

I am new to this post though now at 43yrs old. I must agree with OhJosh. I was in a similar situation to you at age 25y I owned multiple income properties, my own business, and had a few part-time situations. My best suggestion is think growth and protection. Every child you have will lower the amount of disposable cash you now have. As for investments like 401k you must view them as half the value because Uncle Sam will be there to take out taxes once you access those funds. My MBA in Finance could not fully prepare me for the downturns in the economy and losing in any investment usually mean you must make at least 150% just to get back to your starting position before the loss.

 

[Hoglebed]

As for investments like 401k you must view them as half the value because Uncle Sam will be there to take out taxes once you access those funds.

Isn't this entirely dependent on how much one is withdrawing in retirement? By my calculations, a couple could be spending as much as $80-90k between qualified dividends, long term cap gains and return of principle before even incurring federal income tax (staying within 15% bracket). No FICA and states vary in how they tax investment income. This is pre-SS.

Also, its hard to gauge what will happen with tax law this many decades from now. I think halving the 401k is overly conservative for the vast majority of retiries.

 

[rabbean]

It is hard to gauge what the tax law will be though we must respect government trends. Each year since about 1982 the retirement age had went up, now the media suggesting people retire at age 70. As I see changes like these my hope for retirement is looking more like 75 or 80, so to clarify what I mean by halving is that between fees and inflation the portfolio value (what you see) may not be what you get.