39 and looking for your advice to give me a leg up

[Can-i-retire-already]

Hi everyone. First time poster. Happy to have found this community.
39 years old. Married. 3 young kids ages 8, 8, and 6.
Single earner family. I bring in $170k in a stable IT/Engineering industry. State of Virginia.

Assets include:
~$1M home with $650k equity and $375k mortgage.
$100k in employer 401k
$22k HSA
$950k in traditional IRA
$415k ROTH IRA
$600k Brokerage account
$150k between several 529 accounts for kids
$25k cash
$80k cars

No debt aside from mortgage
I've been playing with a 5 year plan to retire at 44.5 years old but open to other ideas. One option I'm toying with is working part ti.e at current job and receiving full benefits including insurance and just charging 50% of my time or 40% instead of the current 100%.

Expenses (I'm assuming having to spend $2000 a month on insurance if i was to retire. Just a guess) is about $6000-7000 a month. But assuming withdrawal from brokerage accounts and showing little "income", health insurance might be minimal. Assuming no mortgage, our expenses are only 3000-4000 a month (including everything.... emergencies.... vacations..... miscellaneous.... food...utilities...taxes...insurance..etc etc)

My retirement plan is for 5 years from now. But I'd love to be able to be financially free sooner if possible. I'd be open to working part time (20 a week at my current company just to keep busy and have insurance for the family. I think that would be huge and might allow me to go part time even next year.....and semi-retire).

Ps. I expect my portfolios (IRA/roth/401k/brokerage) to about double in 5 years, from their current levels.

Any thoughts or advice appreciated. Many thanks in advance.

 

[MBAustin]

Welcome Can-I! If you haven't found them already, we have a helpful list of things to think about as you plan for ER:

Some Important Questions to Answer

Most of us would highly recommend detailed expense tracking for a couple of years. With your children so young, your expenses will change a lot over the next 15 years so that needs to be factored in as well.

You don't mention your asset allocation / risk tolerance. Retiring before 45 is more aggressive than most of us here (excepting those with military pensions) but could be feasible. I hope we can be helpful as you plan!

 

[HI Bill]

[Investable] Assets include:
$100k in employer 401k
$22k HSA
$950k in traditional IRA
$415k ROTH IRA
$600k Brokerage account
$25k cash
______________
[$2,112,000 INTESTED ASSETS FOR ER]

No debt aside from mortgage


Expenses (I'm assuming having to spend $2000 a month on insurance if i was to retire. Just a guess) is about $6000-7000 a month. But assuming withdrawal from brokerage accounts and showing little "income", health insurance might be minimal. Assuming no mortgage, our expenses are only 3000-4000 a month (including everything.... emergencies.... vacations..... miscellaneous.... food...utilities...taxes...insurance..etc etc)

My retirement plan is for 5 years from now. But I'd love to be able to be financially free sooner if possible. I'd be open to working part time (20 a week at my current company just to keep busy and have insurance for the family. I think that would be huge and might allow me to go part time even next year.....and semi-retire).

Ps. I expect my portfolios (IRA/roth/401k/brokerage) to about double in 5 years, from their current levels.

Welcome! I took some liberties and slightly edited your post above [] = inserted text. When evaluating preparedness for ER, we don't typically count your primary residence or kids' college education funds, as those don't provide income. Excluding those, I calculated your net invested assets at just over $2M, which should provide ~$80K income annually with 4% withdrawals, assuming a typical asset allocation. On the surface, it appears that you're in good shape to RE, and possibly even cut back hours now. But you're very young, and you have a ~60-year retirement horizon to prepare for. Most of us here would urge you to better define your expenses, and to shoot for a withdrawal rate of 2.5-3.5%. Your budget doesn't seem to account for contingencies and emergencies, such as major health issues, major home repairs, long term care, insurance without the ACA, or vehicle replacements. If I were you, and had the family, young kids, young age, and long time horizon, I'd keep w#rking for another 5 years full-time, or until you double your net invested assets. RE at 44 is still very early, and this gives you the ability to add hobbies, kids, travel, or new toys, as well as be prepared for the unknown.

If you haven't tried it yet, give the FIRECALC calculator a go!

Best wishes!

 

[njhowie]

I bring in $170k in a stable IT/Engineering industry.

Assets include:
~$1M home with $650k equity and $375k mortgage.
$100k in employer 401k
$22k HSA
$950k in traditional IRA
$415k ROTH IRA
$600k Brokerage account
$150k between several 529 accounts for kids
$25k cash
$80k cars

My retirement plan is for 5 years from now. But I'd love to be able to be financially free sooner if possible. I'd be open to working part time (20 a week at my current company just to keep busy and have insurance for the family. I think that would be huge and might allow me to go part time even next year.....and semi-retire).

Part time is likely the best approach. With the three young kids it's going to be difficult to fully retire.

 

[finnski1]

To have $2 million in assets at 39 on an $170k salary you are doing extremely well especially with 3 kids.
Therefore I don't really have any advice but I would caution you about expecting your portfolio to double in only 5 years.
That's over 14 % per year and even though the last 11 and a half years have averaged that I would be much more conservative in my expectations.
Better to be pleasantly surprised than to have 5 years of 0 growth and be disappointed.

 

[Can-i-retire-already]

To have $2 million in assets at 39 on an $170k salary you are doing extremely well especially with 3 kids.
Therefore I don't really have any advice but I would caution you about expecting your portfolio to double in only 5 years.
That's over 14 % per year and even though the last 11 and a half years have averaged that I would be much more conservative in my expectations.
Better to be pleasantly surprised than to have 5 years of 0 growth and be disappointed.

Thnks for the kind words. I'm at 25% over the past 10 years and 104% for the past 12 months. The stocks I'm invested in are in a sector that are very likely (imho) to do extremely well in the next decade....even more do under a Biden administration (EVs, renewables, covid recovery stocks, etc)
I'm hoping for a double up...but certainly not counting on it and definitely not counting my chickens before they hatch.

 

[WyomingLife]

To have $2 million in assets at 39 on an $170k salary you are doing extremely well especially with 3 kids.

+1

You are killing it. Great job.

I'm a risk adverse chap, and as I've aged I've seen the financial curve balls that life throws one's way. Young children are also a wild card. So pulling the trigger so soon would make me nervous even if the numbers penciled.

Then again, the good folks over at ERE might say you are well-past RE age.

If you keep gutting it out, you will wake up one day -- and while still quite young -- and realize you are a multi-millionaire, beyond what you already are.

It looks like you are invested in individual stocks. I'm a broad market ETF guy, in contrast. I was never comfortable -- nor smart enough -- to pick winners and losers. I suppose the folks picking individual stocks win the lottery from time to time; often times they lose, however. Companies go belly up.

Retirement is also psychological. What would you do in retirement even if you could pull the plug? Are you going to fish for the next 50 years?

My DW has a saying: "it is called w*rk for a reason," by which she means being a working stiff isn't necessarily joyous or happy. So if I were you, I'd gut it out for a few more years. You are on track for some serious bank if you keep it up.

 

[Retch The Grate]

To have $2 million in assets at 39 on an $170k salary you are doing extremely well especially with 3 kids.
Therefore I don't really have any advice but I would caution you about expecting your portfolio to double in only 5 years.
That's over 14 % per year and even though the last 11 and a half years have averaged that I would be much more conservative in my expectations.
Better to be pleasantly surprised than to have 5 years of 0 growth and be disappointed.

I'm guessing their were including the impact of their contributions over the next 5 years given the implied savings rate.

 

[Can-i-retire-already]

+1

You are killing it. Great job.

I'm a risk adverse chap, and as I've aged I've seen the financial curve balls that life throws one's way. Young children are also a wild card. So pulling the trigger so soon would make me nervous even if the numbers penciled.

Then again, the good folks over at ERE might say you are well-past RE age.

If you keep gutting it out, you will wake up one day -- and while still quite young -- and realize you are a multi-millionaire, beyond what you already are.

It looks like you are invested in individual stocks. I'm a broad market ETF guy, in contrast. I was never comfortable -- nor smart enough -- to pick winners and losers. I suppose the folks picking individual stocks win the lottery from time to time; often times they lose, however. Companies go belly up.

Retirement is also psychological. What would you do in retirement even if you could pull the plug? Are you going to fish for the next 50 years?

My DW has a saying: "it is called w*rk for a reason," by which she means being a working stiff isn't necessarily joyous or happy. So if I were you, I'd gut it out for a few more years. You are on track for some serious bank if you keep it up.

Hehe thanks
Retirement (to me) isn't about "doing nothing" or "fishing for the next 50 years till i die"....it's about freedom. Freedom to work or not work. Freedo. To fish or not fiah. Freedom to always do the things i like (biking/gardening/ being with my kids/travelimg/building stuff/etc) all the ti.e or some of the time.

Our kids are low maintenance (for now). We buy them very few things...... instead, they wear hand me dows from friends and cousins.....and get stuff/toys usually from facebook for salw or free giveaway groups. They're vwry happy and have much more than we ever had as kids

Regarding stocks.....i get what you mean.... i used to be only in ETFs too. Until i realized that apple, amazon, microsft and similar companies will likely never fail.....at least not until they make me a lot of money and I'm long gone. I also am heavily invested in up and coming tech companies (riskier...but higher risk might equal higher returns) like Tesla, NIO,and some other ones.

 

[finnski1]

I'm guessing their were including the impact of their contributions over the next 5 years given the implied savings rate.

Yeah I figured that as well but didn't know how much the contributions actually are.

 

[WyomingLife]

Hehe thanks ��
Regarding stocks.....i get what you mean.... i used to be only in ETFs too. Until i realized that apple, amazon, microsft and similar companies will likely never fail.....at least not until they make me a lot of money and I'm long gone.

There’s this: https://learn.stash.com/famous-companies-bankrupt-no-longer-exist

Shareholders of XOM and GE, both still in business, might offer different perspectives, too.

You are counting on your portfolio to last half a century. As a mental exercise, go back to 1970 and pick, with certainly, the “companies that will never fail ....”

And if you are focused on IT/tech, I might offer that we are in the very early stages of the AI/machine learning/quantum computing revolution. The early winners of that may not even be publicly traded yet. Outrageous technologically driven innovation is upon us yet again. The next Google is out there, most likely, and in some kid’s garage.

 

[Can-i-retire-already]

There’s this: https://learn.stash.com/famous-companies-bankrupt-no-longer-exist

Shareholders of XOM and GE, both still in business, might offer different perspectives, too.

You are counting on your portfolio to last half a century. As a mental exercise, go back to 1970 and pick, with certainly, the “companies that will never fail ....”

And if you are focused on IT/tech, I might offer that we are in the very early stages of the AI/machine learning/quantum computing revolution. The early winners of that may not even be publicly traded yet. Outrageous technologically driven innovation is upon us yet again. The next Google is out there, most likely, and in some kid’s garage.

Oh i will definitely not be in stocks when i put the yrigger to retire. I will be mainly in safe ETFs that are preferably divided paying. I'm looking for 4-7% of gains in retirement. Definitelynot going to stay as risky as i am and have been .

 

[WhenIsItTime]

Hi everyone. First time poster. Happy to have found this community.

39 years old. Married. 3 young kids ages 8, 8, and 6.

Single earner family. I bring in $170k in a stable IT/Engineering industry. State of Virginia.



Assets include:

~$1M home with $650k equity and $375k mortgage.

$100k in employer 401k

$22k HSA

$950k in traditional IRA

$415k ROTH IRA

$600k Brokerage account

$150k between several 529 accounts for kids

$25k cash

$80k cars



No debt aside from mortgage

I've been playing with a 5 year plan to retire at 44.5 years old but open to other ideas. One option I'm toying with is working part ti.e at current job and receiving full benefits including insurance and just charging 50% of my time or 40% instead of the current 100%.



Expenses (I'm assuming having to spend $2000 a month on insurance if i was to retire. Just a guess) is about $6000-7000 a month. But assuming withdrawal from brokerage accounts and showing little "income", health insurance might be minimal. Assuming no mortgage, our expenses are only 3000-4000 a month (including everything.... emergencies.... vacations..... miscellaneous.... food...utilities...taxes...insurance..etc etc)



My retirement plan is for 5 years from now. But I'd love to be able to be financially free sooner if possible. I'd be open to working part time (20 a week at my current company just to keep busy and have insurance for the family. I think that would be huge and might allow me to go part time even next year.....and semi-retire).



Ps. I expect my portfolios (IRA/roth/401k/brokerage) to about double in 5 years, from their current levels.



Any thoughts or advice appreciated. Many thanks in advance.

Congrats on your current position. Well done! Love to see that asset accumulation.

I spend a lot of time war gaming FireCalc before I walked away from good paycheck.

 

[tb001]

I may have missed it while reading the thread, but one thing I haven’t seen mentioned is access to funds. Those IRAs aren’t available until your 50s without a penalty. You may want to focus on saving more into brokerage accounts.

Also, think carefully about your withdrawal rate when your retirement horizon is that long.

FWIW, I worked 75% for several years before leaving. That was the minimum required for healthcare. A 75% job is much like a 100% one in many industries. They just get away with paying you less! Unless you’re independently consulting, you may find it’s more work than you want. The less I worked the more I realized how much I enjoyed not working!

 

[38Chevy454]

Part time is great if your company has that available, and you can assure that it really means a corresponding cut in hours. Don't get paid part time and still be working full time. I agree that your invested assets are what matters, not total net worth. House and college funds are needed, and may be cost avoidance in future (vs rent, paying 100% of tuition as examples), but they do not make income to live on. Also you may have dome well with the individual stocks, but you are also subject to the increased volatility and fluctuation. It is easy to convince yourself of being able to pick winners. But think of this way: you may hot some home runs, but you can also strike out. I think it is better to get steady singles and doubles, and run up the score that way as opposed to big jumps with the home runs. Just my viewpoint, but diversification has worked well for me. I am still high in equities, just widely diversified funds as opposed to concentrated individual stocks.

 

[The Cosmic Avenger]

I suggest going to your state healthcare exchange or https://www.healthsherpa.com/ and see what your family would pay now for health insurance, and what your family would pay if you were all five years older right now. HI is one of the biggest variables, and very hard to pin down for the future, but that will give you an educated guess as to what you might actually pay if you do retire as you hope.

Good luck! And as others have said, just your investable assets at that age is a good sign; I had barely started at 37 or so.

 

[Can-i-retire-already]

I suggest going to your state healthcare exchange or https://www.healthsherpa.com/ and see what your family would pay now for health insurance, and what your family would pay if you were all five years older right now. HI is one of the biggest variables, and very hard to pin down for the future, but that will give you an educated guess as to what you might actually pay if you do retire as you hope.

Good luck! And as others have said, just your investable assets at that age is a good sign; I had barely started at 37 or so.

Many thanks.
So how did you catch up starting at 37?

 

[The Cosmic Avenger]

Many thanks.
So how did you catch up starting at 37?

Unfortunately, my mother passed away suddenly when I was 37, but she left me about $200K. We knew that we wanted to save most of the money towards our retirement. However, since it would have taken many years to put that money into a Roth IRA, we instead decided to max out both of our 401(k)s and Roth IRAs, and started gradually spending a bit of that money to enable us to get by after suddenly increasing our contributions by so much. Basically, we considered it a way of routing that money into our 401(k)s. After a few years we had about $40K left, but we had shored up our finances by paying off loans and funding an emergency fund, and had gotten raises, so we could sustain the retirement contributions without any supplement.

But even without the windfall, that was when we also started putting roughly three quarters of any raise or paid-off loan payment into savings, so each time we had a slight boost in income it still felt good. For example, after I sold my mother's relatively new car, we paid off our car loan and started saving most of that amount per month towards a replacement car, which we eventually bought for cash; we paid off a home improvement loan, and started saving most of that monthly payment for home improvement projects or big trips so we could plan better for those.

 

[Can-i-retire-already]

Unfortunately, my mother passed away suddenly when I was 37, but she left me about $200K. We knew that we wanted to save most of the money towards our retirement. However, since it would have taken many years to put that money into a Roth IRA, we instead decided to max out both of our 401(k)s and Roth IRAs, and started gradually spending a bit of that money to enable us to get by after suddenly increasing our contributions by so much. Basically, we considered it a way of routing that money into our 401(k)s. After a few years we had about $40K left, but we had shored up our finances by paying off loans and funding an emergency fund, and had gotten raises, so we could sustain the retirement contributions without any supplement.

But even without the windfall, that was when we also started putting roughly three quarters of any raise or paid-off loan payment into savings, so each time we had a slight boost in income it still felt good. For example, after I sold my mother's relatively new car, we paid off our car loan and started saving most of that amount per month towards a replacement car, which we eventually bought for cash; we paid off a home improvement loan, and started saving most of that monthly payment for home improvement projects or big trips so we could plan better for those.

Sorry for your loss

 

[FlaGator]

Thnks for the kind words. I'm at 25% over the past 10 years and 104% for the past 12 months. The stocks I'm invested in are in a sector that are very likely (imho) to do extremely well in the next decade....even more do under a Biden administration (EVs, renewables, covid recovery stocks, etc)
I'm hoping for a double up...but certainly not counting on it and definitely not counting my chickens before they hatch.

Only a fool would build a plan on the whims of politicians.

Get over yourself. You've done incredibly well to this point, but don't confuse good fortune, lucky timing, and intelligence with being smart enough to bat 1000 every time. Things happen, and your comments lead me to believe you think none of that will happen to you, although they *might*.

Here are a few things that could blow up, sidetrack, or delay your plans, all of which happened to me or people I know well:
1. Directly affected by a natural disaster that impacts your home, your employer or community
2. Death or serious illness of your spouse
3. Death or serious illness of one of your children
4. Your own death or serious illness
5. Sale/takeover of your employer leading to dramatic changes in your opportunities
6. Dramatic downturns in the economy, right when you think you're in the clear (1987 crash, 2008-2010)
7. Divorce
8. Obligations to support parents or other family that are material to your finances and were not anticipated.

I won't continue, hope you get the idea.

As said, you've done incredibly well. Expect bad things will happen, some of them might be really bad. Plan accordingly and build in some cushion.

Maybe you'll be lucky and skate through without anything unexpected, but plan for at least something to not go your way.

Yeah, those are harsh comments. Wish someone had told me those things early in my career........

 

[Montecfo]

Hi everyone. First time poster. Happy to have found this community.
39 years old. Married. 3 young kids ages 8, 8, and 6.
Single earner family. I bring in $170k in a stable IT/Engineering industry. State of Virginia.

Assets include:
~$1M home with $650k equity and $375k mortgage.
$100k in employer 401k
$22k HSA
$950k in traditional IRA
$415k ROTH IRA
$600k Brokerage account
$150k between several 529 accounts for kids
$25k cash
$80k cars

No debt aside from mortgage
I've been playing with a 5 year plan to retire at 44.5 years old but open to other ideas. One option I'm toying with is working part ti.e at current job and receiving full benefits including insurance and just charging 50% of my time or 40% instead of the current 100%.

Expenses (I'm assuming having to spend $2000 a month on insurance if i was to retire. Just a guess) is about $6000-7000 a month. But assuming withdrawal from brokerage accounts and showing little "income", health insurance might be minimal. Assuming no mortgage, our expenses are only 3000-4000 a month (including everything.... emergencies.... vacations..... miscellaneous.... food...utilities...taxes...insurance..etc etc)

My retirement plan is for 5 years from now. But I'd love to be able to be financially free sooner if possible. I'd be open to working part time (20 a week at my current company just to keep busy and have insurance for the family. I think that would be huge and might allow me to go part time even next year.....and semi-retire).

Ps. I expect my portfolios (IRA/roth/401k/brokerage) to about double in 5 years, from their current levels.

Any thoughts or advice appreciated. Many thanks in advance.

Hi Can-i-retire-already,

Congratulations on accumulating a nice net worth at a young age. It seems we are probably pretty close to being neighbors.

You seem to be in decent shape to retire in 5 years if you so desire and set your mind to it. I think your expectations for stock returns are a bit aggressive. Given what you have accumulated, you may want to tilt a portion of your allocation to safer investments. You have the goal in sight and IMHO need to start thinking defense as well as offense.

That and as others have said get a laser focus on expenses in general and health care costs and taxes in particular.

Are you thinking of extended travel or new hobbies in retirement? Budget for those.

If you can go part time that seems to be a fabulous way to straddle the issue. Great to have time.for your kids when they need it.

I wish you the best!

 

[Yoheadden]

Welcome to the community and congrats. As the others have said, you’re in a great position For a 39 year old.
My advice, don’t take this one post as a confirmation or a rebut as to whether you can retire early. Use it as a stepping off point to narrow down your investment strategy by reading other threads and posts. Lock down your spending budget. Everyone has their own risk tolerance and time frame, so me or no one else can say what investments are appropriate for you. I’m more of a buy and hold MF/ETF guy. Intel taught me in ‘97 when the tech bubble burst that is is no free lunch. Just steady saving with good spending control.

 

[Can-i-retire-already]

Only a fool would build a plan on the whims of politicians.

Get over yourself. You've done incredibly well to this point, but don't confuse good fortune, lucky timing, and intelligence with being smart enough to bat 1000 every time. Things happen, and your comments lead me to believe you think none of that will happen to you, although they *might*.

Here are a few things that could blow up, sidetrack, or delay your plans, all of which happened to me or people I know well:
1. Directly affected by a natural disaster that impacts your home, your employer or community
2. Death or serious illness of your spouse
3. Death or serious illness of one of your children
4. Your own death or serious illness
5. Sale/takeover of your employer leading to dramatic changes in your opportunities
6. Dramatic downturns in the economy, right when you think you're in the clear (1987 crash, 2008-2010)
7. Divorce
8. Obligations to support parents or other family that are material to your finances and were not anticipated.

I won't continue, hope you get the idea.

As said, you've done incredibly well. Expect bad things will happen, some of them might be really bad. Plan accordingly and build in some cushion.

Maybe you'll be lucky and skate through without anything unexpected, but plan for at least something to not go your way.

Yeah, those are harsh comments. Wish someone had told me those things early in my career........

"Get over yourself"?
Ya grumpy old man.... ��

 

[Can-i-retire-already]

Hi Can-i-retire-already,

Congratulations on accumulating a nice net worth at a young age. It seems we are probably pretty close to being neighbors.

You seem to be in decent shape to retire in 5 years if you so desire and set your mind to it. I think your expectations for stock returns are a bit aggressive. Given what you have accumulated, you may want to tilt a portion of your allocation to safer investments. You have the goal in sight and IMHO need to start thinking defense as well as offense.

That and as others have said get a laser focus on expenses in general and health care costs and taxes in particular.

Are you thinking of extended travel or new hobbies in retirement? Budget for those.

If you can go part time that seems to be a fabulous way to straddle the issue. Great to have time.for your kids when they need it.

I wish you the best!

Great points. Thank you so much.

 

[Can-i-retire-already]

Update:
I've increased my portfolio by $1.1M since Nov when i started this thread, and i'm looking to expedite my original plans if possible.

I think i've found a solution that might work with minimal risk. I was hoping you might be help me figure out the health insurance aspect of my decision, as well as any red flags you see.

I was thinking about this over the weekend:
I want to first increase my deductions at work this year in order to max my 401k by around April 2021 until i reach the max match (The match would be about 19k) and save some cash in the mean time....
Then around April/May, I'll ask to go on a 7 month sabbatical until January 2022. I have 1.5 months of vacation that ill use first for income and get by until the end of the year without hopefully selling any large number of shares in the market....

then re-evaluate in December to see if:

1. I quit altogether and retire 100%
2. I go back part time or
3. worst case scenario, if i lose all my portfolio or some crazy nonsense happens (worst case scenario, but very very low likelihood), i go back to full time starting January, making a healthy 175k salary.


Currently 39 years old with now 1M in brokerage and 2.2M in 401k/IRAs. (Total NW is now at 4.2M) Avg monthly expenses will be around 5000-5500 conservatively.

I plan on paying the bit ticket items (car insurance for the year, property taxes for the year, etc.) before may, so my monthly expenses from May to December will likely be even less.

I just checked ACA and assuming 100k income, our monthly for a silver plan would be 800 a month for a family of 5, and about 1000 a month assuming 120k income in 2021.

Questions:

1. I know that the ACA upper limit for a family of 5 is 122k. Is this amount gross income, or after taking 401k contributions into consideration?

2. I will take all income into consideration, including my regular income until April, plus the 1.5 months of regular income from my vacations. I will also need to estimate any additional stock sales that might be required throughout the year in order to NOT go over the 122k ACA limit. Is there a recommended strategy here? should I limit my income at 120k or 100k or even less, in order to take further advantage of ACA discounts? what's the sweet spot?

Any other thoughts appreciated.