Easing into FIRE

[NoMoreRatRace]

Hi!

My wife and I are both 46 y/o. I work from home (have for last 8 years) and will keep my job ($90k) until it ends (estimating 7-10 years if I ride it out to the end). Pre-COVID, we went out 3+ times a week at ($80-$100 easy) each night. That change (and we don't miss it) and other life changes (kids becoming adults, MIL passing away, etc) have caused us to re-think our trajectory. Instead of busting ass for another 15 years, we can downsize and begin easing into an early retirement! One of our biggest passions is hiking and we can hardly ever do it, and it's very rare that we can go to the mountains and REALLY hike! My job feels like semi-retirement anyway (shhhh, don't tell anybody) so I don't mind doing it for a while longer. Here's our info/plan for your suggestions/comments :

Current Income/assets -

$161k/yr ($26k Military Retirement, $90k My Job, $45k DW Job)
~$35k equity in current home
~$25k savings (being mostly used up for purchase of 2nd home & prepping current home for sale)
$0 Health Insurance (TriCare)

Current debts -

$1350 Mortgage
$1400/mo Child Support (ending before move)
$500 personal loan (may pay off with equity after sale of home, undecided)
$440 Car
$300 Car (paid off before move)

Planning for retirement income of $60k/yr. (~$4500/mo take-home)

We are under contract to purchase a 2nd home in GA Mountains - $110k (Mountain home, creek on property, it's amazing.) Plan on moving there in about a year.

The plan :

Sell FL house and downsize to GA home in 2021 -

Post-move Income = $116k/yr, approx $7500/mo take-home (I'm sure DW will have some income, not adding any for planning purposes though)
- Start paying ~$2500/mo on house to have it paid off in 2024
- Save as much as possible.

2024 - House paid off. Only have car payment. Property taxes + insurance are less than $1.5k/yr.
- Live on $4500/mo or less, save/invest the rest ($3k/mo bare minimum).

2028(ish) - Once savings/IRA's are enough to float us to 62, I'll stop working and we'll live on Military Retirement plus savings ($4.5k/mo)

2035 - Age 62 - MilRet + Social Security = $5k/mo gross (I've calculated SS with our planned income reductions).

With our low living expenses, this will give us the ability to travel like we want, to hike when we want and just enjoy more of our lives than if we had stuck with our old plan of working until 62! Your thoughts are welcome, thanks for reading!!

 

[WyomingLife]

Thank you for your service, and you are wise to start planning ahead this way. Your upcoming home in GA sounds ideal.

I struggled a bit to follow your finances as presented, but two things jumped out at me:

1. Beyond what you identify above as “savings”, do you have any currently (e.g., IRA’s, money otherwise in the stock market, etc.)? I couldn’t tell if you have any money in the market now. I guess you really only need to get from age 56 to 62, since you plan to live off of the pension + SS thereafter.

2. Are you currently tracking your expenditures? How comfortable are you in your expenditure estimates?

There are several ex-military posters here. Having HC costs managed that way is a huge burden lifted. The pension is also nice.

 

[Dtail]

Welcome to our wonderful site fellow (albeit temporary) Tampa man.
Are you willing to state how much is your Investment/IRA type savings, as that would assist in comments back on the viability of your plan?

 

[Golden sunsets]

I would echo the comments of others. From your list your net worth appears to be only $60,000, with $35k of it being equity in your current home, which may or may not be accurate, especially considering brokers commission and current market conditions.

 

[Kay Burton]

I would honestly think about savings. It would be nice to have a stock not only in the form of your real estate, but investments in securities, deposits. Considering the current mess in the world, what will happen in 7-10 years, everything will level out or fly into the abyss - it is not clear. What will be the pensions and will it be possible to live on them (I do not mean survival, when the pension is enough for food and medicine). I mean a comfortable life, when you can afford travel and various pleasant little things.

 

[The Cosmic Avenger]

If you're just building up savings now, I would not put extra money into the mortgage. We did pay off our mortgage early, but early was 18 years, and to be honest, if I could go back and do it over I'd save and invest more instead of paying down the mortgage. Especially now that rates are at a historic low, I would put that extra income into investments instead. (There are plenty of threads on index and target date retirement funds, both of which provide a good balance of risk and return in one fund.)

Even though your target retirement date is 3-4 years, and normally that is not a good time frame for investing in stocks, your real time frame is your full retirement, and you have both a pension and a job that you could keep doing a year or two or three longer if the market takes a nosedive during that time.

If you're determined to pay down your mortgage faster, maybe consider splitting the difference so you can up your savings.

 

[Aerides]

Welcome.

Without a large stash of invested/liquid assets, you have an income gap for the years between ER (53-56) and your pension at 62. So you'll want to have a plan to cover that - including healthcare coverage. I'd swag you need a good 10 years expenses if not more.

Assuming your pension is COLA'd, and you have a good firm grip on expenses coming in under it.

It look like you've only recently come over to the LBYM category, which explains the asset situation, but can now spend the next few years redirecting your excess income over to savings?

 

[NoMoreRatRace]

1. Currently, no on the IRA's/stock market. Plan is to put 2.5 years of needed income (for ages 59 1/2 to 62) into a traditional IRA (for the current tax benefits), and we're not sure yet where we'll put the other 3.5 years (or longer if we're able to save more) of savings.

2. Yes, we've analyzed our expenditures/lifestyle to death (thank you, Excel). Our expenditures have already dropped drastically in the last year (child support was higher, kids were on auto insurance (many hundreds/mo), purchasing cars for kids is done, installment accounts have been paid off, going out less). Additionally we are cutting out a lot of current expenses before moving (housekeeper, lawn service, car payment, extra $700/mo on our current mortgage, tax savings with lower income and IRA contributions). Our planned $60k income (minus the taxes and expenses we'll have) is in line with what we've been living on very comfortably for a long time (until recently).

The healthcare savings and pension are huge, wouldn't be able to pull this off otherwise.

Thanks!!

Thank you for your service, and you are wise to start planning ahead this way. Your upcoming home in GA sounds ideal.

I struggled a bit to follow your finances as presented, but two things jumped out at me:

1. Beyond what you identify above as “savings”, do you have any currently (e.g., IRA’s, money otherwise in the stock market, etc.)? I couldn’t tell if you have any money in the market now. I guess you really only need to get from age 56 to 62, since you plan to live off of the pension + SS thereafter.

2. Are you currently tracking your expenditures? How comfortable are you in your expenditure estimates?

There are several ex-military posters here. Having HC costs managed that way is a huge burden lifted. The pension is also nice.