Alex is here...

[Alex]

Hello everyone! I am 43yo and have about two or three years before FIRE (if everything goes according to my plan!). Just wanted to say hello before I start to BOMBARD you with questions!!

 

[blanston]

hi- how can you retire at 45?

 

[dumpster56]

hi- how can you retire at 45?

I think he may have an answer.

 

[unclemick]

Start at age 11 - retire at 46.

That way you'll have 35 yrs of dollar cost averaging.

Vanguard Target Retirement 2045?

heh heh heh heh - simple! Right?

 

[retire@40]

hi- how can you retire at 45?

Is that question like, "How do you get to Carnegie Hall?"

 

[Nords]

Welcome to the board, Alex.

So... what's the plan?

 

[gtmeouttahere]

Alex is here!!! And now he's not...Where did you go Alex? We need more info...

 

[Alex]

Welcome to the board, Alex.

So... what's the plan?

That is a great question. I have a plan. here it is:
CURRENT ASSETS
Retirement accts = 150K in various 401k, Ira's SEP Ira's and roths etc..all in Mutual funds
Taxable brokerage acct invested in Vanguard mutual funds = 150K
Company stock = 50K
Conservative estimate of Home equity = 400K (i expect it to be the same in two or three years - we had the house appraised recently and the equity based on that appraisal was 525K - so I am being very conservative)
total of all (not counting all of our 'STUFF') is 750K
ADDITIONAL INVESTMENTS
I am investing an additional 24K into my 401 k every year including the employer match
I am investing $52,000 per yer ($1000 per week) into the vanguard acct. i am putting the weekly investment into the Prime Money market and will rebalance from Prime Money market to maintain asset allocation about once a year. (my AA is 80/20 stocks/Fixed income. I have 20% of the stock allocation in foreign markets and 80 % in US with a value tilt and slightly overweighted to small and mid caps)
I have paid off all of our cars, and have no credit card debt.
Future actions
We plan on selling the house in two or three years and cashing in 400K minimum tax free and moving into a smaller home in Arizona- we currently live in Los Angeles. we will either buy a small house or rent one for about half of our current expenditure.
Our total expenditures right now are around 4K per month when i take out the investments, mortgage payments and taxes etc..
MISC
My MIL is 86 and has told my wife she is leaving her $150,000 when she dies. I have added a lump sum of 125K to FIRECALC to kick in 2019.
Social Security - I have been making the maximum contribution to Soc sec for more than ten years and when I visit the site - they calculate my benefits at $2700 per month if i retire at 67, but I am not counting on it and am a bit confused about how it is calculated if I dont contribute for 22 years! When I run FIRECALC I input 10K per year at age 67 - I think that is safe.

So based on selling the home and cashing out 400K and earning an average of 8% return on our portfolio investments, I figure that we'll have around $1,000,000 to retire on in 2-3 years. We have determined we will need $52,000 per year to live on. I have run the FIRECALC and it comes up 96.6% success rate.
What do you guys and gals think??

 

[Aaron]

So based on selling the home and cashing out 400K and earning an average of 8% return on our portfolio investments,

8% return sounds pretty aggressive.  What's the success rate if you change your return to something like 5%?  

I doubt housing prices in CA will collapse but a lot could happen to the housing market in 3 years, so just be careful banking on home equity.  

 

[unclemick]

Hmmmm

A couple of random thoughts: 1) one has no control over Mr Market - either in RE or stocks; 2) we often have more control/options than we think over over our spending.

So - stick with your plan, analyze your ability to throttle up or down expenditures - thinking outside the box - you may be in FI territory right now, making the time to ER, delightfully optional - you can pick your moment.

Give some thought to asset allocation in ER.

heh heh heh

 

[Alex]

8% return sounds pretty aggressive. What's the success rate if you change your return to something like 5%?

I doubt housing prices in CA will collapse but a lot could happen to the housing market in 3 years, so just be careful banking on home equity.

If between now and when we are ready to FIRE, If we earn less than 8% on our investments, we will just wait a little longer until we retire. Our plan is sell the house in 18-24 months, when that time comes we will have a much clearer picture of where we stand.

 

[Papi]

Hi Alex,

I am puzzled as to why you are including all of your home equity in your calculations?  When you sell, you still need to either buy a new place or rent (I guess you could camp in the woods, but you didn't say that ).   Shouldn't you reduce your home equity amount based upon your new living arrangment?  So if you plan on buying a new house for say in the $150K ballpark, your home equity you should include for your calculations would only be $250K.

 

[retire@40]

...So based on selling the home and cashing out 400K and earning an average of 8% return on our portfolio investments,  I figure that we'll have around $1,000,000 to retire on in 2-3 years.  We have determined we will need $52,000 per year to live on. I have run the FIRECALC and it comes up 96.6% success rate.
What do you guys and gals think??

I think you are on the edge.  I'm pretty close to your situation, and I don't know if I would be comfortable trying to live on the edge like that for 40+ years.  My plan is to supplement with some part-time self-employed income of about $15K-$20K per year which would mean working about 5 hours a week on average until I am more comfortable with the SWR.

Also, I wouldn't factor in any inheritance until you get the check AND it clears.

I'm not sure why you would wait until 67 to take social security, but I am taking whatever I can get at 62.

 

[Dawg52]

Looks like a good plan. I agree with Aaron, use a lower rate of return when projecting for the future just to be on the conservative side.  Also, I don't count on inheritance as part of my projections. You never know, your MIL might use it up in a nursing home.

Good luck with your plans. Even if you have to work until 50, you will be retiring before most.  

 

[justin]

If things go as planned, you should be on track to FIRE according to your time schedule. Worst case - poor market returns over the next 5 years, housing market dips, and you're still looking at being FIREd a 3-5 years after your original estimated FIRE date. You're contributing $76k/yr into your investment accounts, after all. 5 years of extra contributions is close to $400,000, plus you'll need 5 fewer years of retirement savings to live off of (and be 5 years closer to Social Security).

 

[Alex]

Hi Alex,

I am puzzled as to why you are including all of your home equity in your calculations? When you sell, you still need to either buy a new place or rent (I guess you could camp in the woods, but you didn't say that ). Shouldn't you reduce your home equity amount based upon your new living arrangment? So if you plan on buying a new house for say in the $150K ballpark, your home equity you should include for your calculations would only be $250K.

I had the house appraised about 6 months ago it came in at 550k of equity. So, I am discounting 150K off the top and not factoring in any appreciation over the next 2-3 years. Also, when we are FIRED I will probably rent for the first few years. If we do purchase a home it will be in the 250K range and we'll buy with a 20%down payment- at 6.9% and 30yr fixed comes to $1317 per month - with taxes and insurance we are under $1500/month We have $1500 allowance for rent in our proposed budget.

 

[Alex]

If things go as planned, you should be on track to FIRE according to your time schedule. Worst case - poor market returns over the next 5 years, housing market dips, and you're still looking at being FIREd a 3-5 years after your original estimated FIRE date. You're contributing $76k/yr into your investment accounts, after all. 5 years of extra contributions is close to $400,000, plus you'll need 5 fewer years of retirement savings to live off of (and be 5 years closer to Social Security).

that is my thinking. I can always hold out a few more years if I need to.

 

[BigMike]

Alex,

I don't mean to pry, but are you planning to have children........? If so, does your budget allow for all the costs associated with them? Speaking from experience, children are VERY expensive and will have a definite impact on your budgeting requirements. I'm not suggesting you not have children....we have a daughter that we would not trade for $1m, but you definitely want to include them in your planning.

Also, I didn't see it in any of your messages, but how are you planning to handle health insurance during the 30-40 years you are not eligible for Medicare?

Mike

 

[jdw_fire]

We have determined we will need $52,000 per year to live on. I have run the FIRECALC and it comes up 96.6% success rate.
What do you guys and gals think??

Alex, when I run Advanced FIRECalc with your $350k current 100% stock portfolio, adding $400k to it in 2009, adding $76k per year until you retire in 2009, adding $10k/yr for SS in 2030 and looking at a 50 year plan I get an 81.4% success rate.  The discrepancy may be due to the fact that I did not assume any particular rate of return over the next three years, I just had FIRECalc include them in the run.  BTW when I change the retire date to 2010 I get a 91.9% success rate and a 100% success rate retiring in 2011.

 

[Alex]

Alex,

I don't mean to pry, but are you planning to have children........? If so, does your budget allow for all the costs associated with them? Speaking from experience, children are VERY expensive and will have a definite impact on your budgeting requirements. I'm not suggesting you not have children....we have a daughter that we would not trade for $1m, but you definitely want to include them in your planning.

Also, I didn't see it in any of your messages, but how are you planning to handle health insurance during the 30-40 years you are not eligible for Medicare?

Mike

We are child free and plan to stay that way. We love kids too, as long as they go home with their parents at the end of the visit, lol. I even have a 'baby not onboard" sign for my vehicle (just kidding!). But seriously, no kids for us, ever.
Regarding Health insurance - I admit, my plan is a bit hazy here - I do plan on purchasing a catostrophic policy with a 5Kor 10K deductable. I am hoping that gets us through until medicare kicks in. We have been blessed with excellent health so far and we both get a fair amount of exercise., but I still need to get a qoute and investigate more thoroughly. Thats why I am here!!

 

[Nords]

I have a plan. here it is:

Well, that puts you ahead of most of us board members when we registered. Your foresight alone ensures that, whatever date & plan you choose, you'll do fine. Everything past this point is some form of cannonball-polishing.

Social Security - I have been making the maximum contribution to Soc sec for more than ten years and when I visit the site - they calculate my benefits at $2700 per month if i retire at 67, but I am not counting on it and am a bit confused about how it is calculated if I dont contribute for 22 years! When I run FIRECALC I input 10K per year at age 67 - I think that is safe.

The mailed estimate assumes you're working until age 62, so that's no good. Use Social Security's detailed calculator (scroll down the web page to get to the data forms) to give yourself a more precise estimate. Essentially you'll have some zeroes in your earnings history that will reduce your maximum benefit.

So based on selling the home and cashing out 400K and earning an average of 8% return on our portfolio investments, I figure that we'll have around $1,000,000 to retire on in 2-3 years. We have determined we will need $52,000 per year to live on. I have run the FIRECALC and it comes up 96.6% success rate.
What do you guys and gals think??

I think that 8% is too aggressive for an all-stock portfolio, let alone an 80/20 allocation. Conservative concensus appears to be 6-7% with Dimson's "Triumph of the Optimists" going as low as 5%. If you can make this work by assuming that your portfolio returns an overall 6% (before taxes) then you're bullet-proof.

Regarding Health insurance - I admit, my plan is a bit hazy here -  I do plan on purchasing a catostrophic policy with a 5Kor 10K deductable. I am hoping that gets us through until medicare kicks in.  We have been blessed with excellent health so far and we both get a fair amount of exercise., but  I still need to get a qoute and investigate more thoroughly. Thats why I am here!!

Even without further tweaking, as your plan is now you're still wearing pretty good Kevlar. Affordable health insurance will be the key.

 

[Alex]

Well, that puts you ahead of most of us board members when we registered. Your foresight alone ensures that, whatever date & plan you choose, you'll do fine. Everything past this point is some form of cannonball-polishing.
The mailed estimate assumes you're working until age 62, so that's no good. Use Social Security's detailed calculator (scroll down the web page to get to the data forms) to give yourself a more precise estimate. Essentially you'll have some zeroes in your earnings history that will reduce your maximum benefit.

That was very helpful, thanks! Now I have a soc sec estimate, actually two- 0ne is in todays dollars = $1143.00/month and one in future inflated dollars = $2411. Which number should I use for FIRECALC?? I have been using 10k/ year.

 

[brewer12345]

That was very helpful, thanks! Now I have a soc sec estimate, actually two- 0ne is in todays dollars = $1143.00/month and one in future inflated dollars =  $2411. Which number should I use for FIRECALC?? I have been using 10k/ year.

The 1100 and 2400 figues are annual or monthly? If the former, I would just ignore SS and leave it out. I would use the future value in firecalc if it is a monthly number.

 

[jdw_fire]

That was very helpful, thanks! Now I have a soc sec estimate, actually two- 0ne is in todays dollars = $1143.00/month and one in future inflated dollars =  $2411. Which number should I use for FIRECALC?? I have been using 10k/ year.

I thought I read in a post from Dory36 that you would use present value dollars as inputs to FIRECalc and FIRECalc will adjust for the inflation between now and when SS actually starts.

 

[REWahoo]

I thought I read in a post from Dory36 that you would use present value dollars as inputs to FIRECalc and FIRECalc will adjust for the inflation between now and when SS actually starts.

This is the way I understand it as well.