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Age 33, Eventual Father of Three, Looking for ER at 40 (or ASAP)
Old 10-06-2007, 12:59 PM   #1
Confused about dryer sheets
Join Date: Jun 2007
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Age 33, Eventual Father of Three, Looking for ER at 40 (or ASAP)

I'm 33 now, live in a major Metro area and would like to be able to retire at age 40 in the same area (though I'm not sure if this is realistic, but would also be fine with ER at 45 or 50 as well).

We have ~830k of non-retirement savings broken down as follows:
- 360k in tax exempt money market (to be invested)
- 140k in checking account (long story.., but also to be invested)
- 330k in index funds (S&P500, total market, pacific & euro)

We also have ~80k in retirement accounts
- 30k in 401k (total stock index)
- 18k in assorted IRAs (500 & total market index funds)
- 32k in SimpleIRA (all stocks)

Our house is paid off (a choice that I'm not so sure was so savvy), so I'm not entirely sure how one typically factors in "home equity" into the equation. Since I'm planning on staying in the area, I consider it immaterial.

Together we earned $620k (before tax) last year, though our gross is largely dependent upon my business (I accounted for 6/7ths of our income last year). This year looks to be about the same, and I've been very fortunate that business has been steadily increasing over the years.

I think I'm a fairly modest man (even cheap), but I don't yet have a good handle on our spending. I'm trying to pin down DW's expenditures (she was paying off much of her school debt this year and last and is much less frugal than I), plus our first child has added to our expenses. I'll guesstimate our spending at around $60-75k/year (and will assume that it remains at this level indefinitely).

We are planning on two more kids (so three in total), with each kid two years apart, and I'd like to be able to pay for the cost of a four-year private college education (estimating ~$160k in today's dollars due in 18 years) for each. I'm also planning to move in 5 years or so. I expect that our new house might cost between ~$400-500k more than our current house.

DW says she does not want to RE (though I need to account for a scenario where she wants to retire along with me), and I will estimate her salary at ~$100k in today's dollars.

I wish to plan for FIRE, but I'm having trouble calculating how much we should be saving in order to make that happen. In addition, I fear that without a clear savings goal, our spending will creep up (keeping up with the Joneses).

I tried the FIRECalc, but didn't have too much success. Is there a common way to "rough out" different multi-year expenses (e.g., five years of daycare at ~$14k/year per child) so that one can tweak different amounts to see how a change (e.g., suppose that our income drops in half, etc) affects the overall schedule (a spread sheet or web site that does that)? I guess that this portion is more of a budgeting problem, so any advice about methods/ways to plan for known and unknown expenditures would be helpful.

Also, if there are rough numbers for the cost of a raising a child (perhaps expressed as a ratio of the parents expenses (as I fear that DW might buy designer clothes and gifts and such)?

Additionally, I've been investing almost entirely in indexed mutual funds, but wouldn't mind some advice on good rules of thumb for asset allocation as well. I've seen that 50% US stocks, 20% bonds, 15% real estate, 10% foreign stocks, and 5% money market. As I said, I'm risk averse, so I'm chiefly concerned with not "losing" money to inflation and foolish investments, as opposed to getting outrageous returns or making overly-aggressive investments.

Finally (this one could be a divisive one), but is there a consensus about DCA vs. LumpSum for an existing amount of cash (my 500k above). I read an article some time ago, in which the author concluded that DCA only made sense when dealing with a large amount of money (inheritance or windfall) that was ~40% or so of one's net worth, and that even then, he recommended no longer than a 12 month span for the DCA (18 months as a hard maximum, in the case of the amount being a very high percentage of one's worth, i.e., > 80%). I'm leaning towards doing a 12 month DCA (just so I don't jump off a ledge when the markets swing widely upon news of the collapse of the housing/credit/etc market). Thoughts?


(oh, and don't let my nickname fool you, high yield bonds are not my bag, and I've no relation to Michael Milken )
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Old 10-06-2007, 01:54 PM   #2
Recycles dryer sheets
Join Date: Feb 2006
Posts: 403
It's all about your expenses. What do you want to spend in retirement? Do you want to help your kids buy houses and have an inheritance? You could retire today if your expenses are low enough (and you were able to sell your business for a few bucks).
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Old 10-06-2007, 02:25 PM   #3
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Welcome to the boards. Yes, it is all about the expenses. Look through the FIRE and Money section, there were a few discussions about DCA.
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