40 with 4 more to go

[Omalley]

I have been reading and learning from posts on the website for a few months, and have finally made the time to type my introduction. My wife and I are both 40. We have two children (8 and 10) and plan to retire in four years. Current assets of $980k (401k-type funds = $520k, Taxable funds = $100k, Cash/CD’s = $20k, House = $180k (no mortgage), College fund = $100k (16 semesters pre-paid at “State U”), College 529 Accts = $60k (room, board)). Vehicles are 7-9 years old (paid off), with no other debt obligations.
We spent the last 10 years paying off student loans, credit cards (used to subsidize grad school costs not covered by student loans), vehicles, mortgage (nearly double current home value), and funding undergrad college costs for our kids. We are now focused on building up the Taxable funds/cash to allow for FIRE at 44. We plan to leave our corporate jobs when cash/taxable investments total $1.1 million which should allow for inflation adjusted $60k annual spending for 15 years (FIRECalc shows 95% success). At age 59.5, we will access 401k-type accounts which should be worth about $2 million by then allowing for $80k annual withdrawals until age 95.
Like many others, my main concern will be family health insurance. I expect to qualify for a high deductible plan with monthly premiums of about $425. I plan on continuing to track our actual spending leading up to the 2016 retirement to ensure that our household spending remains within our $60k goal.
Omalley

 

[Alan]

Welcome to the site.

Sounds like you have a pretty good plan lined up. Hopefully in 4 years time you should have a more accurate view on where health insurance is headed before you make the jump to retirement.

 

[pb4uski]

Sounds like a good plan financially. Imagine you are 44 and not working. What will you be doing?

My point is to give thought to the non-financial aspects as well.

 

[walkinwood]

Congratulations! I agree with pb4uski.

Also work out contingency plans. What steps can you take if your investments tank and you need to reduce your cost of living. These plans will help you stay with your investment plan when stock markets drop sharply.

All the best.

 

[Midpack]

Looks like you have a good plan, congrats. I'd only echo the "it's not enough to retire from something, you need to have something better to retire to..." Some people make the transition effortlessly, but some struggle with the transition, so it's worth some thought (and maybe you just didn't share those thoughts, which is understandable).

To me, the $ were the simple but not easy part, the non $ aspects deserve advance consideration too.

And health care is a common concern for many of us here...

 

[jclarksnakes]

It will take a big income and a serious LBYM mentality to grow 120 thousand to 1.1 million in 4 years. Something tells me you will actually do it. Lead on Gunga Din.

 

[Omalley]

Thanks for the feedback everyone. After retiring, we plan to spend more time on home improvement and community volunteer projects. We are currently involved in Scouts/school PTA, and expect to take a larger role in the future. Other volunteer projects include the library, community garden, and the youth sports leauges. I am still negotiating one round of golf each week, but nothing guaranteed yet.

Our main goal is to keep summers clear so we can travel while the kids are out of school. However, by their teen years the last thing our kids may want to do is hang out with Mom and Dad for two months. By far, the largest line item in our retirement (and current) budget is Travel.

As far as LBYM, we spend 25-30% of our take-home pay. Even before our plans crystalized into a goal of early retirement, we had resisted the urge to upgrade the house and buy new cars. That restraint will pay-off in the next few years.

 

[Omalley]

Well, it has been six months since my "Hi" posting and wanted to provide an update so I can help myself track my progress with this thread. First, I have already moved my planned retirement date from Spring 2016 to Spring 2017 ("one more year" syndrome started early). This was mainly due to increased budgeted costs that were uncovered when I created a detailed spending plan for ages 45 to 60.

We crossed the $1 million mark (including house value) since my original post. Current assets are:
401k = $525k
Taxable funds/Cash = $205k
House = $190k
Prepaid College (4 yrs X 2) = $100k
529 accounts = $62k

Current focus is on funding the Taxable accounts, but we may miss our investing goal by 25% this year due to less income than the two prior years. Hopefully some better than expected market gains or dividends keep us on track for Spring 2017.

Omalley

 

[ejw93]

Big 'O' -

Congrats on your progress. Just read your original post.

You've got a nice 401k nest-egg. Don't forget that if you're willing to re-enter the w**k force for a few months at age 55, you can roll your old 401k/IRA in to the new employer's 401k plan, then re-retire and start drawing from your 'new' 401k penalty-free (NOT income-tax free, though).

Just thought I would feed you that info if it makes it feasible for you to avoid pushing back your retirement another year.

Best of luck!

Well, it has been six months since my "Hi" posting and wanted to provide an update so I can help myself track my progress with this thread. First, I have already moved my planned retirement date from Spring 2016 to Spring 2017 ("one more year" syndrome started early). This was mainly due to increased budgeted costs that were uncovered when I created a detailed spending plan for ages 45 to 60.

We crossed the $1 million mark (including house value) since my original post. Current assets are:
401k = $525k
Taxable funds/Cash = $205k
House = $190k
Prepaid College (4 yrs X 2) = $100k
529 accounts = $62k

Current focus is on funding the Taxable accounts, but we may miss our investing goal by 25% this year due to less income than the two prior years. Hopefully some better than expected market gains or dividends keep us on track for Spring 2017.

Omalley

 

[pb4uski]

....Don't forget that if you're willing to re-enter the w**k force for a few months at age 55, you can roll your old 401k/IRA in to the new employer's 401k plan, then re-retire and start drawing from your 'new' 401k penalty-free (NOT income-tax free, though). ....

Interesting idea. Just remember that not all 401k's allow penalty free withdrawals if you end service after you are age 55 - many do but some don't so if you are to pursue this check to make sure.

 

[obgyn65]

Welcome, Omalley.

 

[DallasFH]

That is amazing within six months!

Taxable funds/Cash = $205k

 

[CMH in CO]

Since you plan to retire at 45, that is almost 15 years until you can tap into your retirement funds without the 10% penalty. Re-entering the workforce to take advantage of 401-k withdrawals at age 55 was mentioned, but you could instead do a 72 T at age 45 without having to re-enter the workforce. What are your plans to cover expenses until you are 59 1/2?

Cass

 

[Omalley]

We plan on using funds in cash/taxable brokerage account between ages 45 and 60. If needed we may consider 72t withdrawals, but I would rather avoid the paperwork and tracking if possible.

Since we have paid off the mortgage and funded tuition costs, we have been able to save about 70% of our after-tax income for the past 12 months. If we can maintain this savings pace, we will be ready to FIRE in 4.5 years. My retirement budget includes increased travel costs, but if I only planned to cover the same level of costs we have incurred over the past several years we could FIRE in three years.

Omalley

 

[Omalley]

Now 41 with still 4 more to go

Another 6 months closer to FI and hopeful ER.

Current assets are:
401/457 = $616k
Taxable funds/Cash = $301k
House = $190k
Prepaid College (4 yrs X 2) = $100k
529 accounts = $62k

Current focus is still on funding the Taxable accounts, and we continue to w*rk hard. As with last year, hopefully some better than expected market gains or dividends keep us on track for Spring 2017.

The key for us is the balance in the Taxable accounts which need to cover 15 years of ER and lots of planned travel. Afterwards the 401/457 accounts will be tapped along with a small pension and SS. Not sure if it is helpful to focus on this goal four years out, but we continue to live for today with lot of family trips and kid activities.

Omalley

 

[Gasdoc]

Holy Cow!!

Way to go....you are tearing it up in the taxable account, for sure. Adding 100k every 6 months is HUGE (actually, beyond huge)!! Having the mortgage paid and the kids education out of the way is really helping you throw the funds towards retirement. Well done! I hope to be in your same spot when I am 40 to all of my extra income can just go pad the taxable accounts. Looks like you are reaching your goal just as planned.

Nice job

GD

 

[jclarksnakes]

Holy Cow! For sure. You are doing great.

 

[Omalley]

It has been over a year since my last update. It was interesting reviewing the thread to see our progress over the last two years. As stated in an earlier update the 4 more years became 5, but that part of the plan has been firm for over a year now. We are starting to plan our lives in early retirement, and we are looking forward to the potential freedom. The only shackles left in RE will the school calendars for five years after quitting w@rk. However, we plan on making the most of kid's vacation times.

Current assets -
401k - 790k
After tax brokerage/Cash - 530k
College tuition - prepaid 8 years credits (2 kids)
529 - 70k
House - 230k (no mortgage)

At this time we are just trying to enjoy life. Lots of time spent with kid activities and family vacations. However RE daydreams are more frequent.

 

[BigE]

Thanks for the update...and WOW! Awesome job on the savings front. Really enjoy reading periodic updates on ER plans.

 

[dontworry]

You guys are rock stars!!! Congratulations! You are almost there.

 

[38Chevy454]

Great job on the savings! Only thing I would suggest is that your college tuition and 529 money is not really retirement savings, those will be used for the kid's college expenses and depleted. In addition, while your house is part of your net worth and estate, unless you have a plan to sell and tap into those finds somehow, it is also not really retirement living funds. You still have a good savings with $530K in after-tax and $790K in 401k, so it would indicate that you are not going to need the house funds to live on. Besides you still need a roof over your head no matter what, so what you currently have seems to be just fine!

Thanks for the updates, nice to see the progress and show others what has been done to stay on goal.

 

[Omalley]

38Chevy454 - Totally agree with your comments about the house value and college savings. I only include those amounts to cover potential questions about mortgage and college costs with a planned early exit.

The only number I actually focus on is the Brokerage/cash balance. We need $1.3-1.5 million to cover 15 years until the retirement accounts can be tapped. Three more years of savings/dividends should allow us to reach our goal.

Spending more time daydreaming about the first summer of extended travel with the family these days. Planning on spending about two months traveling, with the biggest choice of where. The kids are leaning towards Italy for the first summer.

 

[Golden sunsets]

O'Malley; Just curious-what do you anticipate your SWR to be when you FIRE? With such a long anticipated retirement, a withdrawal rate of any more than 3 percent would be considered unsafe by many. Personally, I'd aim for no more than 2.5 percent. And have you calculated the higher cost of those teenage years?

 

[aida2003]

Great job on saving!
I would be curious if you don't mind sharing: what type of work you and your wife do? How do you invest your taxable money (individual dividend stocks, dividend mutual funds or something else?)?
Is the growth in the 401k's comprised of market change only or with max contributions as well?

If your kids pay attention, you set a good example for them: choosing a well-paid occupation and LBYM lifestyle can lead to the ER.

 

[ChrisTexas]

Travel will retiring

Excellent progress. As far as Traveling, although we are older, are children are younger. After we retire in 7 years, we plan on a one or two semester trip to Europe (Ireland, France, Germany, Switzerland, Italy) Probably staying at each place for about a month. We will home school for one year. We believe the immersion in different cultures and the experience of the travel more than make up for one year out of school in the U.S.

Our financial assets will be closer to $750K by the time I retire and we will have a paid off house. However, I also will have 2 pensions totaling over $65K a year so I don't plan on using too much of the $750K each year. We may or may not rent out our house. We will suspend car insurance and other bills so I think this is very doable.