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45 and ready to pull the trigger!
Old 02-08-2019, 10:14 AM   #1
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45 and ready to pull the trigger!

Hello,

Want to introduce myself and share my situation/concerns with a community that gets it and hopefully get some good advice and cheerleading. I used to hang out on the Fool boards quite a few years ago and miss the FIRE community.

Anyway, Iím a government employee that has been planning on FIRE since I started 21 years ago. Made a few mistakes along the way that delayed me a bit (marriage/divorce/big house) but am still in pretty good shape. The last couple months Iíve had the epiphany that now is the time to cash in my chips and quit. I expect to pull the trigger in 2020. Hopefully not a victim of One More Year Syndrome but I want time to figure out a few things and I think the administration of my quitting will flow better at work if I wait one more year (Iíll try to max out my TSP contributions early in 2020 prior to leaving).

Situation:

TSP (401k equivalent): $700K
Roth IRA: $220K
Taxable Equities: $290K (about half of that unrealized LT gains)
Cash: $160K (home equity recovered)

Deferred pension will pay about $25K annually starting on my 60th birthday and be adjusted for COLA after that. SS calculator (not that I trust it to be there at all) seems to point to about $1400/mo starting at age 62 if I donít earn anymore.

I am 45 years old and currently renting a house. I intend to move this year and am debating purchasing a home (reducing my investable assets but also reducing my monthly cash flow slightly while protecting myself from rent increases) or renting an apartment for a while and possibly buying in the future if my assets grow in my ER.

Since my situation has changed so much recently with the house sale, I have to project my spending going forward without having a track record at this level. I estimate Iíll need about $42K/year to cover basic expenses (including healthcare obtained from the marketplace). Fortunately, Iíve been tracking my spending since 1998 so even though circumstances have changed a bit over the years, I have a pretty good idea how I spend.

Withdrawal strategies: Current thought is to live off of cash for a year or two which will allow me to figure out my true costs in retirement as well as find out how much I will earn doing whatever I want. ĖI imagine Iíll earn $5-10K a year doing something but donít want to count on any earned income in my planning. After that Iím all over the map, should I start a SEPP from my TSP (transferred to an IRA) which should cover most of my expenses (made up for as I burn down some of my cash) and let my Roth and taxable ride for a while (I do want to maintain my taxable assets for liquidity/emergencies and if I decide to buy a house), tap my Roth contributions next, and then my taxable investments. That should get me past 62 so I can end my SEPP withdrawals and have flexibility with my TSP. By then, the additional income from my pension and whatever SS may pay would be my cushion and I should have more than enough funds.

Knowing I'm almost there is a bit terrifying and exhilarating but I think I am in pretty good shape, I just need to figure out the details and get the courage up to make the leap (I am miserable at work).

Thanks for listening and for your thoughts suggestions!

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Old 02-08-2019, 10:31 AM   #2
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Welcome FLSUnFIRE! If you haven't found them already, we have a helpful list of things to think about before you make the leap:

Some Important Questions to Answer

Your plan seems a bit aggressive at first glance but if you are willing to w*rk part-time, that could make it do-able. With 15 years to go before your (smallish) pension, I think you are particularly exposed to sequence-of-returns risk, especially if you have any "lumpy" expenses in the early years (medical deductible for a major event, vehicle replacement, etc.)

You didn't mention your AA which is also important.

I'm sure you'll get more advice and we look forward to your participation here!
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Old 02-08-2019, 10:43 AM   #3
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Welcome! This is a wonderful site.
The questions posed in the link by MB were extremely helpful for me as I planned for retirement.
Have you run Firecalc or another retirement calculator and are you satisfied with their results?
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Old 02-08-2019, 11:12 AM   #4
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IMO, you're not close to there yet at 45 years young. Have you actually priced out health insurance? 42k a year INCLUDING health insurance just doesn't seem a realistic budget.
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Old 02-08-2019, 01:17 PM   #5
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Thanks for taking the time to respond; some additional info:


Quote:
I think you are particularly exposed to sequence-of-returns risk, especially if you have any "lumpy" expenses in the early years (medical deductible for a major event, vehicle replacement, etc.)
I think, especially, if I don't buy a house, the first couple years will be insulated from bad returns since I'll be paying cash. I don't have a lot of exposure to lumpy expenses. I currently own two vehicles (2002 Chevy and a 2016 BMW) and if one fails I will not need to replace it to meet my immediate transportation needs. I plan to sell the BMW around 2020 when it is still under warranty/maintenance contract to maximize the price I can get for it and not have exposure to maintenance costs of a luxury car. Depending on the market, I may be able to buy a replacement vehicle at no net cost. In addition, my projection of $45K includes a sinking fund of $200/mo towards a future vehicle purchase.


Quote:
You didn't mention your AA which is also important
Definitely a good point.. I may be a bit aggressive (mitigated somewhat by my large cash holding) as I am 100% equity other than cash and inclined to stay that way for now. Ideally, I'd hope to withdraw no more than 3% of the equity funds per year making up the balance with cash as needed. My tolerance may change and I may decide to adjust to something less volatile. I can also adjust my expenses some. $37K covers Food/Shelter/Health Insurance/Auto (which will go down when I cut out my 60 mile R/T commute) the balance is mostly entertainment and gifts.


Quote:
Have you actually priced out health insurance? 42k a year INCLUDING health insurance just doesn't seem a realistic budget
I currently have a HDHP and HSA which will have a value of about $30K in it in 2020. I intend to continue to contribute the full amount allowed into my HSA each year after I FIRE myself (the contribution is included in the $45K). Looking at the marketplace, I can get a policy close to the one I currently have (and my Dr accepts it!) for ~$450/mo without subsidies (included in the $45K). However, it should cost me closer to $100-150/mo if I manage my income smartly and get subsidized. The plan has a deductible and max out of pocket of $7,900/yr. With my current HSA balance, I am covered for the first few years from worst case of hitting my max out of pocket. Over time, the risk should decrease as I expect the HSA balance to increase as I am investing about half in the market and will contribute each year. -Typically, I pay my routine medical expenses out of my pocket and for normal stuff I will continue to do so when FIREd unless I need to tap the HSA. Projected annual expenses/allowance in my projected budget for medical is: Premiums of $5,400, HSA contribution of $3,600, routine medical/dental bills of $1,200 (spent before tapping the HSA) for a total of $10,200/year.


I'm pretty healthy and take care of myself with respect to diet and exercise... no guarantee but I try to increase my odds of an active healthy life. My job is definitely the most unhealthy thing I do regularly.



The one risk I am knowingly taking on is long term care.... Statistically, my odds are good at having an increasing portfolio and I hope to self insure. If I need it, I'll probably be happy that I retired early and enjoyed life before entering an institution.



Thanks again!
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Old 02-08-2019, 01:53 PM   #6
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Out of curiosity, what do you plan to do in retirement over the next 20 years? After rent/mortgage and HI, we're talking about ~2 grand a month to cover the rest of your expenses and whatever it is you plan to do in retirement. I couldn't come close to funding my lifestyle on that, but if you can.......it seems you've got your plan in place.
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Old 02-08-2019, 02:49 PM   #7
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Out of curiosity, what do you plan to do in retirement over the next 20 years?

I enjoy being outside and active so I would ramp up those activities (paddling, running, cycling). I used to homebrew beer and have quite a few friends and acquaintances that now own breweries and pubs and may work for them for fun (extra money too but wouldn't be my prime motivator and not something I would count on). My parents and nieces and nephews are getting older and are about 900 miles away so I'd likely visit several times a year instead of once a year -my mother was recently diagnosed with Alzheimer's so I'd be able to help out with her when that point comes. I've helped tutor a few friends kids and enjoyed the experience and I may volunteer to tutor motivated kids born into crappy circumstances.



Fortunately, I live where other's vacation so I can enjoy vacation everyday for cheap but would still like to take advantage of cheap travel opportunities that are only available to those with time flexibility (last minute fares, etc) when they fit my budget.


My spending would be in line with what I spend now - the only thing I lack is time... any additional money ends up being saved so I can have more time.


Still need to fill in some blanks and make sure I'm not missing anything (hence jumping on the forum) and have the courage to quit. Keep throwing rocks at my plans!

Thanks!
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Old 02-08-2019, 03:55 PM   #8
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Originally Posted by FLSUnFIRE View Post
TSP (401k equivalent): $700K
Roth IRA: $220K
Taxable Equities: $290K (about half of that unrealized LT gains)
Cash: $160K (home equity recovered)

Withdrawal strategies...After that I’m all over the map, should I start a SEPP from my TSP (transferred to an IRA) which should cover most of my expenses (made up for as I burn down some of my cash) and let my Roth and taxable ride for a while (I do want to maintain my taxable assets for liquidity/emergencies and if I decide to buy a house), tap my Roth contributions next, and then my taxable investments. That should get me past 62...[/FONT]
I would tap the taxable equities first and then the ROTH IRA. Since the SEPP is easy to mess up (and that comes with drastic penalties), why not let the TSP accounts continue to grow? I'm assuming that at least half of your ROTH IRA are contributions, which means you have about 3 years covered there with your projected expenses without paying taxes.

So my strategy would be minimize taxes and allow tax-deferred accounts to grow. I'd take out just enough from your taxable equities so that the distribution, minus your Standard Deduction (currently $12K single or $24K married) keeps you to an Adjusted Gross Income of less than $39.375K (single) or $78.750K (married, filing jointly). That way, your long-term capital gains tax rate on those gains is 0%!!! You could balance these withdrawals with ROTH IRA contributions, and end up paying no federal taxes for the first six or so years. Note that this may result in a higher tax bill later; but waiting on the SEPP would give you larger distributions as you'd be older, and the RMD would be a greater %. I'd recommend setting up a retirement spending spreadsheet with different rows showing where the income is taken from each year, and how much in taxes are owed on any taxable distributions. Good luck!
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Old 02-08-2019, 05:35 PM   #9
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I would tap the taxable equities first and then the ROTH IRA. Since the SEPP is easy to mess up (and that comes with drastic penalties), why not let the TSP accounts continue to grow? I'm assuming that at least half of your ROTH IRA are contributions, which means you have about 3 years covered there with your projected expenses without paying taxes.

So my strategy would be minimize taxes and allow tax-deferred accounts to grow. I'd take out just enough from your taxable equities so that the distribution, minus your Standard Deduction (currently $12K single or $24K married) keeps you to an Adjusted Gross Income of less than $39.375K (single) or $78.750K (married, filing jointly). That way, your long-term capital gains tax rate on those gains is 0%!!! You could balance these withdrawals with ROTH IRA contributions, and end up paying no federal taxes for the first six or so years. Note that this may result in a higher tax bill later; but waiting on the SEPP would give you larger distributions as you'd be older, and the RMD would be a greater %. I'd recommend setting up a retirement spending spreadsheet with different rows showing where the income is taken from each year, and how much in taxes are owed on any taxable distributions. Good luck!

I don't disagree - and I have lots and lots of spreadsheets and one is just as you describe! I guess I am a bit hesitant to draw down my taxable funds too soon beyond spending down my cash the first few years because that is my liquidity should I need it. If I spend down too much of my "touchable" money up front and then start SEPP and have a contingency come up that requires a sizable chunk of money I would have no liquidity to address the emergency.



How do others manage liquidity or am I worrying too much? I could maintain my cash balance (CD, MMF, High Yield Savings,etc) but I'd rather have more of my money working for me. If I decide to buy a house, I could tap the equity but then I'd be using my taxable funds to buy the house.
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Old 02-08-2019, 05:43 PM   #10
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Originally Posted by FLSUnFIRE View Post
I don't disagree - and I have lots and lots of spreadsheets and one is just as you describe! I guess I am a bit hesitant to draw down my taxable funds too soon beyond spending down my cash the first few years because that is my liquidity should I need it. If I spend down too much of my "touchable" money up front and then start SEPP and have a contingency come up that requires a sizable chunk of money I would have no liquidity to address the emergency.



How do others manage liquidity or am I worrying too much? I could maintain my cash balance (CD, MMF, High Yield Savings,etc) but I'd rather have more of my money working for me. If I decide to buy a house, I could tap the equity but then I'd be using my taxable funds to buy the house.
I think you are on the edge of having enough...working till 50 would put you on much firmer ground. If you had a paid-off house, I'd say you were fine, but the $160K will need to be spent for either a house or rent!
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Old 02-08-2019, 06:16 PM   #11
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welcome fellow ex-fool. Looks pretty close for the numbers since you have a really solid handle on your spending and healthcare costs. You are taking a similarly conservative take to me on will we eventually get SS, etc. (Gen-Xers not trusting the safety net, whaaaat?). I'm currently looking at 3% WR for a 60 year timespan retirement since I'm hoping to be done soon too.
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Old 02-09-2019, 10:34 PM   #12
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Welcome to the site. Looks like you already got great info.
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Old 08-04-2020, 01:30 PM   #13
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So, since I first posted quite a bit has changed… personally, and in the world. I originally ended up planning to FIRE in July but with COVID and my risk aversion had punted a bit and still deciding when. I’m also pretty sure at this point that I will be doing things I think are fun for pay - I have been moonlighting serving at my regular spot and love it and I like the idea of getting paid to do fun things better than volunteering (most likely in the craft beer/fitness/tourism fields where I hang out with people doing things they enjoy but get paid instead of paying to do them) but I still don’t want to count on the income (the income will just be a bonus but does ease my mind).

I would kind of like this update to be treated as a new post with my current status posted below and open to advice, critique, and especially, encouragement as I am very burned out but also cynical about the state of the world (and think that I would be retiring at one of the worst times with respect to market valuation) if I were to pull the plug tomorrow. Here we go!....

Single, age 46.

Assets:
Townhouse: $250-400K owned free and clear ($250K realistic realized value if I sold, $400 based off of recent listing but I think they are smoking crack)
TSP: (mix of C, S, and I): $850K (Plan to tap with RMD method as a SEPP whenever I do)
ROTH IRA: $235K
Traditional Non-Deductible IRA: $4K
Taxable (All equities, 40% cost basis): 250K
Approximate liquid assets: $1,340K
Pension that will pay out approx. $22K/yr at age 60 (then year dollars adjusted for inflation thereafter)
Also a bit of cash and an HSA that are “off balance sheet”. The HSA will mostly smooth out bumps in medical expenses as I usually pay “out of pocket” so it will grow unless I have a major medical event.

Liabilities:
TSP loan: $36K (will have to pay off after separating - probably a mix of cash, current income, and liquidating some of the taxable account)

Trailing 12mo Expenses: $34K
Health Insurance delta (ACA plan with no subsidy - my contribution to employer plan which is captured in my trailing expenses): $4K
Total Estimated Expenses (fairly bare bones but the HOA covers exterior maintenance/insurance (fee simple but basically a condo that I own the dirt under): $38K

Potential Earned income of $8K-20K/yr but won’t know till it happens and don’t want to be dependent on it –especially in this economy and environment where they could be shut down as non-essential. If I can have fun and earn money I will (especially if I can stay under the ACA threshold).

Thanks for your feedback… I think if I was advising a friend, I would say go for it but much harder to jump than encourage someone to jump! (If someone wants to push me....)


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Old 08-06-2020, 04:49 AM   #14
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Originally Posted by FLSUnFIRE View Post
So, since I first posted quite a bit has changedÖ personally, and in the world. I originally ended up planning to FIRE in July but with COVID and my risk aversion had punted a bit and still deciding when. Iím also pretty sure at this point that I will be doing things I think are fun for pay - I have been moonlighting serving at my regular spot and love it and I like the idea of getting paid to do fun things better than volunteering (most likely in the craft beer/fitness/tourism fields where I hang out with people doing things they enjoy but get paid instead of paying to do them) but I still donít want to count on the income (the income will just be a bonus but does ease my mind).

I would kind of like this update to be treated as a new post with my current status posted below and open to advice, critique, and especially, encouragement as I am very burned out but also cynical about the state of the world (and think that I would be retiring at one of the worst times with respect to market valuation) if I were to pull the plug tomorrow. Here we go!....

Single, age 46.

Assets:
Townhouse: $250-400K owned free and clear ($250K realistic realized value if I sold, $400 based off of recent listing but I think they are smoking crack)
TSP: (mix of C, S, and I): $850K (Plan to tap with RMD method as a SEPP whenever I do)
ROTH IRA: $235K
Traditional Non-Deductible IRA: $4K
Taxable (All equities, 40% cost basis): 250K
Approximate liquid assets: $1,340K
Pension that will pay out approx. $22K/yr at age 60 (then year dollars adjusted for inflation thereafter)
Also a bit of cash and an HSA that are ďoff balance sheetĒ. The HSA will mostly smooth out bumps in medical expenses as I usually pay ďout of pocketĒ so it will grow unless I have a major medical event.

Liabilities:
TSP loan: $36K (will have to pay off after separating - probably a mix of cash, current income, and liquidating some of the taxable account)

Trailing 12mo Expenses: $34K
Health Insurance delta (ACA plan with no subsidy - my contribution to employer plan which is captured in my trailing expenses): $4K
Total Estimated Expenses (fairly bare bones but the HOA covers exterior maintenance/insurance (fee simple but basically a condo that I own the dirt under): $38K

Potential Earned income of $8K-20K/yr but wonít know till it happens and donít want to be dependent on it Ėespecially in this economy and environment where they could be shut down as non-essential. If I can have fun and earn money I will (especially if I can stay under the ACA threshold).

Thanks for your feedbackÖ I think if I was advising a friend, I would say go for it but much harder to jump than encourage someone to jump! (If someone wants to push me....)


FLSunFIRE


If you really are confident about your expenses you will be fine. I always think when expenses are low like yours you need lower risk in your investments bc there is no room to cut back if things go downhill for a while.

You will have a long retirement. Are you confident you wonít want a 70k lifestyle in the future? Travel? More restaurants? Expensive hobbies?
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Old 08-06-2020, 05:17 AM   #15
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Sounds like you can make the jump. Your expenses are on the lower side, but have seen other examples on this site of these levels of expenses.
Being able to manage your monies for tax subsidies under the ACA can make a decent difference, especially being in Florida.
Perhaps go the part time route in a paid hobby to bridge the transition.
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Old 08-06-2020, 05:47 AM   #16
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What does Firecalc say? Do your expenses include income taxes? Also are big ticket expenses factored in? Bottom line though is, a 3% withdrawal rate would give you approximately $40,000 a year to spend.
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Old 08-06-2020, 06:43 AM   #17
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What does Firecalc say? Do your expenses include income taxes? Also are big ticket expenses factored in? Bottom line though is, a 3% withdrawal rate would give you approximately $40,000 a year to spend.
If you stay healthy and stay single then your plan might work but you don't have much wiggle room.

I always account to future unforeseen expensive hobbies when I retire. After all what are you going to do with all the extra free time at your disposal. Did you account for replacement costs for major home repairs/renovations and cars? What if ACA goes away? What if they cut pension in future (not unheard of)? What if you find love of your life (and he/she wants a family!)? Too many things can happen when you FIRE at young age. So make sure you have contingency plan and lots of wiggle room in your expense estimates.
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Old 08-06-2020, 07:18 AM   #18
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As someone who ERed 12 years ago at age 45, a key part of my retirement plan included splitting up the longer-term budgeting into 2 parts. The first part, the more difficult one, was getting from age 45 to age ~59.5 using only the taxable portion of my portfolio. After that, things would become much easier because my "reinforcements" would begin arriving. Those included (1) unfettered access to my tIRA, (2) my frozen company pension, and (3) SS. Looks like you have some solid reinforcement starting at age ~60, especially that pension. The question is, can you get to age ~60 intact and with a lifestyle you are comfortable with?
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Old 08-06-2020, 07:25 AM   #19
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If you really are confident about your expenses you will be fine. I always think when expenses are low like yours you need lower risk in your investments bc there is no room to cut back if things go downhill for a while.

You will have a long retirement. Are you confident you wonít want a 70k lifestyle in the future? Travel? More restaurants? Expensive hobbies?

Thanks, I agree and hence my hesitation even though $38k on liquid assets of $1.3M leaves some wiggle room. I don't think I'll have too much creep but the percent of "fixed" expenses is a high proportion so there may be some growth. I did the get married/divorced, money-pit big house, $ports car thing already and it's really not for me. Travel will be cheaper when I can flex to take advantage of deals unlike when w*rking. I still will likely earn income "playing" for pay too. My hobbies are fairly cheap at this point - mostly being active outside. Historically, there are many more scenarios that would have me sitting on a huge stash and looking at "blowing that dough" in a few years... hopefully, I will be so lucky but certainly planning for the opposite.


Other mitigation is the value of my townhouse. I could rent it now for positive cash-flow of $1500-$2500/mo (I think the market is worth about $1,700 but there is one, smaller than mine, that I know is renting for $3K but that's a pretty unique renter) and rent/buy something less expensive. At the extreme end, I could move to a lower cost of living area.



My biggest concerns are state of the economy/market valuation and also and access to my funds as SEPPs will be pretty low the first few years due to my age and I want to do the RMD for simplification (TSP will report as qualified so less fear of screwing it up and also my payouts will rise with my portfolio since 59.5 is a long ways away). I did set up a HELOC so I can have some flexibility with respect to cashflow vice liquidation of assets for tax purposes.


Seriously, someone push me! (I think my job will, I feel more and more like a true "at will" employee and find myself thinking, "is this the day" many mornings)


FLSunFIRE
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Old 08-06-2020, 07:39 AM   #20
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If you stay healthy and stay single then your plan might work but you don't have much wiggle room.

I always account to future unforeseen expensive hobbies when I retire. After all what are you going to do with all the extra free time at your disposal. Did you account for replacement costs for major home repairs/renovations and cars? What if ACA goes away? What if they cut pension in future (not unheard of)? What if you find love of your life (and he/she wants a family!)? Too many things can happen when you FIRE at young age. So make sure you have contingency plan and lots of wiggle room in your expense estimates.

Shouldn't have major repairs/expenses as the HOA covers the building itself and I don't see any large assessments on the horizon (I'm on the board).


Car is new but once FIREd will walk or bike almost everywhere I need to go so it will be a luxury. Replacement is 10-15 years away and I will likely go for used and cheap if we aren't all using shared autonomous vehicles by then.


ACA, not planning on the subsidy (but should get it if I manage my cash flow well) but certainly buying through the marketplace. I expect if it goes away, it will be replaced with single payer... I may want to buy supplemental for better care at that point but no way to know what will happen till it happens.


I got fixed this year (as part of my FIRE prep... don't want a surprise!) so hopefully the love of my life doesn't want kids (or more).


I'm not dismissing any of these and worry/think about all the above constantly as I try to psyche myself up to make the jump. I tend to be conservative and so does this forum relative to others (which I appreciate) and hope you guys will find any unknown unknowns in my situation!

Thanks!!!
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