Asking for a friend...can he retire before 50?

[sirsavesalot]

Married with 2 kids, ages 15 and 17. He and wife are 47/44. No debt. House paid off, with a $6k/year property tax bill in a MCOL area. 1600 ft2 house they plan to stay in for a long time. A hair over 2 million in retirement accounts, $130k in HSA and about $500k in savings/checking/taxable stock account. In the next 2-3 years the numbers should be about 10-20% higher, hopefully, since they are aggressively contributing. Both kids have about $50k in college funds. Combined income around $170k and they are pretty frugal with their money.

I showed him firecalc and we ran numbers of 2.5 million, $80k spend and 45 years and got:

"The lowest and highest portfolio balance at the end of your retirement was $182,536 to $53,448,024, with an average at the end of $11,146,321." So, barely a 100% success rate. This was without adding in the social security option on Firecalc.

Thanks in advance.

 

[pb4uski]

Barely 100% should be good if you've included everything, and adding SS will make it even better.

80/(2,000+130+500) = 3% so no sweat if they can really live on $80k

 

[Surewhitey]

While $50k (per kid, I assume) is generous and would be plenty for our daughter 18 years ago, not sure if it would be in a couple of years. I'm not a fan of paying 100% (although we did) it may be a challenge for them. Or go to a decent state college with the first 2 years of community college for basics. DD did this and only cost ~$6k for her associates and credits were transferable. Oh, & she lived 5 miles from campus with us.

Otherwise, I'd be very comfortable with his #s.

 

[Aerides]

College is the wild card, as $50 for two kids, even at state schools, is tight. But in the 2-3 years they have left, that will come into focus. Other than that they look good, but as we all know here, the budget's the thing.

Is that $80 based on reality for a 4-person family?

 

[HawkeyeNFO]

Making the years between 50 y/o and 59.5 y/o is a bit tight with the $500k, assuming that your buddy can't get at the retirement funds without a big penalty.

 

[obsessed]

Making the years between 50 y/o and 59.5 y/o is a bit tight with the $500k, assuming that your buddy can't get at the retirement funds without a big penalty.

Looks like they would need to take a 72t distribution from their 401K/IRA.

 

[Car-Guy]

If it were me, I'd tell "your friend" it depends...Planning on a ~45 yr retirement with only 2.5m, there's a lot of "stuff" that can (and probably will) happen. If he were ~20 years older w/2.5m and zero debt or have double his current NW now and zero debt, then yes...

 

[statsman]

I couldn't do it, but that's me. Now, if you had said 5-6 years from now when he's approaching 53 and the wife 50, where the kids would be 21 and 23, then I could see myself doing it.

 

[DrRoy]

If they are looking to wait 2-3 years anyway, to make the financial situation more comfortable, I would suggest waiting for the kids to get through college. We are finding that while we were in good shape when we RE'd in 2017, the rising market since then has allowed us to spend more and we have greatly enjoyed that. Having more than "just enough" is better.

 

[HarveyS]

Too tight for my comfort. As mentioned, college cost is a big unknown. Not just tuition, but the cost of getting a kid in college. Application fees, standard tests, college visits. Then the cost of having a kid in college. Do you want to visit for a weekend in the fall and/or spring? What about study abroad? Summer courses, or unpaid internships. Those add up fast. Have you estimated home maintenance and improvements that will be needed as the house ages? Does the $80k spend include income tax and medical insurance? What about dental insurance? Is the $80k an actual number that has been steady for the last 4-5 years, or is it a look-forward budget?
You might be OK, as was pointed out you are looking at a 3% WR. But, in your shoes, I'd like to review my numbers. Check with your peers that have kids in college as to what additional costs there may be.
Good luck.

 

[threeonesix]

Count my vote among the hold out until the kids are out of college crowd. Financially I think they would be fine as-is but a few more years isn't going to hurt.

I also think that people who retire at that age tend to discover after a few years that work life wasn't so bad after all, compared to sitting at home with nothing to do. I know there is a lot of things one can do when forced but after a while you even run out of those things, especially when all of your friends are still working. Unless they find hobbies they are in love with, or spend a lot of time volunteering.

 

[TheWizard]

$80k seems low.
I'd wait till the kids are at least IN college and the end game is more clear...

 

[RetMD21]

I also think that people who retire at that age tend to discover after a few years that work life wasn't so bad after all, compared to sitting at home with nothing to do. I know there is a lot of things one can do when forced but after a while you even run out of those things, especially when all of your friends are still working. Unless they find hobbies they are in love with, or spend a lot of time volunteering.

I wonder about that too. If somebody is a hardcore FIRE and willing to accept the risks and limitations it could be done but I wouldn't.

 

[Toocold]

Is 80k pre or post tax spend? I will presume that healthcare is included in the 80k.

Also, are the kids planning to go to CC and then a 4 year degree? If they make 170k now and have 500k in non-retirement assets, they will be expected to contribute about ~40-50k per year per child if they go to a 4 year college, including room and board.

So the answer is yes, if their kids are planning to go college that cost about 12k per year or get full scholarships and 80k is pre-tax, then I would say yes.

The answer is likely no, if their kids are going to need 200k for college and 80k is post-tax.

 

[karen1972]

When kids are involved I always ask have you accounted for
- College
- Failure to find a job after college or one that allows them to leave home
- Future weddings
- Travel to see the kids as they will likely move elsewhere

The earlier you FIRE, the more things that are just unknown (taxes changes, ACA changes, SS) so it being barely there is still a lot of risk. I will be 52 this year and I finally felt like I could confidently put SS in there with a 25% haircut as worst case with only 10 years before I could claim.

Now, I did retire earlier with less, but we don't have kids and we lived bare bones the first several years of retirement as there are many ways to Make the numbers work.

 

[anothercog]

Well, according to Suze Ormond he would need at least $20M. lol!

$2M in retirement accounts is pretty impressive at their age and income levels. Well done.

Too risky to me to call it quits today but in four more years they'll have saved quite a bit more and they'll know where the kids will be in college and how much it will cost. At that point they can probably reassess with greater certainty.