Getting serious about FIRE - Advice

[Camper87]

Been a lurker for a little while and finally decided to make an account. I've frankly been lazy about mine and my wife's finances. We've been basically just throwing money on our mortgage because it's easy and maxing out 401ks. I'm starting to dislike my job and would like to retire ASAP. I wouldn't consider ourselves frugal but we do not spend needlessly.



HCOL area (Los Angeles)

Income: 260k/year (before taxes)

No kids. 33M/33F




Cash:~33k


Investments:
Total: $775,682 (aggressively invested, near 100% stocks)

401ks: $597,609
HSA: $4,067
Taxable: $61,550
Roth IRAs: $112,456



Real Estate:
Home Value: ~$750,000 (according to Zillow)

Mortgage: ~180k (2.875%)

Equity: $585,000



Debt:
Car loans: ~22k (@2.19%)



No other debt.


Net worth:
According to personal capital, our net worth is about 1.4m


FIRE Goals:

Our expenses are actually really low. No kids, low mortgage payment, hardly any debt. With our company matches, we're putting away about 140k a year in our investment/cash accounts. I'd like to quit working when we have 2 million in investments and the house paid for. She will keep working making +120K a year but not putting as much into retirement since we should have a good nest egg.



How much longer do I need to work for to achieve this goal? I'm thinking about another 5 years assuming 8% returns. We've actually been doing quite a bit better but that's a different discussion.

 

[ILikeStarTrek]

Welcome to the forum!

You are in a very good position, especially for your age; you are doing very well to save $140k/yr. But you need to refine your details.

Read this:
https://www.early-retirement.org/fo...-answer-before-asking-can-i-retire-69999.html

For instance, saying your expenses are "really low" doesn't mean a lot. Is "really low" $20k/yr, 40k/yr, 60k/yr? Like it says in "important questions" #1, you should be tracking your expenses. Like it says in #2, you need a plan for health care. Like it says in #4, will you add expenses in your retirement for travel or other hobbies? Etc. When you have answered the other questions and get to #11, run Firecalc and post the result back here for additional feedback. If you have questions about running Firecalc for your scenario, post your questions also.

 

[ILikeStarTrek]

Just to give a ballpark figure, let me add this.

From a compound interest calculator:
Initial value: $775,000 (what you have now)
Adding per month: $12,000 (= $144,000/yr)
for 5 yrs at 8% annual return (compounded monthly)
gives a final value (after 5 years) of just over $2 Million.

If you assume a safe withdrawal rate of 3.5%, that gives a withdrawal of about $70,000/yr for expenses. But that doesn't answer any of the detailed questions about retirement expenses. You will need to answer these, like I said in my previous reply.

 

[HI Bill]

Welcome! I sure wish we could count on 8% returns. For those of us invested before 2008, we encountered many years of stagnant returns. While I have a 10-year average of 12% according to VG, I'm not very hopeful that this rate of return can continue indefinitely. For quite a few years, I assumed that gains = inflation.

You're doing great, saving $140K/year, with that income, and your higher taxes. On problem I foresee for you is that if you continue to invest in primarily tax-deferred accounts, you won't have access to enough taxable investments to live from. You could do 72t distributions, but they likely would be <$60K per year if you hit the $2M point.

 

[Camper87]

Thank you for the replies. Our yearly expenses including mortgage payment have been about 45k a year. We plan on having the house paid for so that 45k could actually be less! But we’d like to live more comfortably in retirement, even better than how we’re living now. We’re thinking of spending somewhere in between 75k-100k a year on newer cars, eating out more, travel, etc. I’d like to retire (male) after we reach 2 million and the house is paid for and she says she’d like to continue to work. It’s possible we could not even touch the potential 2 million nest egg for another 5-15 years if she continues to work. If we do both retire, I was thinking of doing a ROTH IRA conversion ladder with the 401k funds to be able to access some of the money.

 

[Dtail]

Different angle.
Would you and she be comfortable non financially speaking with you being retired for 5-15 years while she is still working?
Would you find daily interests on a solo basis?

 

[Rianne]

Welcome Camper87! You did not mention healthcare. That's a big topic on this forum and an expense you must consider. Say you RE at 45, that's 20 years of healthcare expense. Hopefully, our HC system will be in a better place soon.

We built up our cash reserves and some I Bonds and EE Bonds early on to offset our income to qualify for ACA. Plus, DH has a consulting LLC from home. You may consider something like that. It brings in@ $42K but his work schedule is worked around his free time, ~20 hours/week...walks, cooking, even traveling is easy with his laptop. We spent 4 weeks in South Padre Island last year. He worked a few hours/day. It was a great winter getaway.
After 25 years of megacorp drudgery, our lifestyle is great. We FIRE'd at 55. Keep reading, lots of good advice here.

 

[Camper87]

Different angle.
Would you and she be comfortable non financially speaking with you being retired for 5-15 years while she is still working?
Would you find daily interests on a solo basis?

I think there are some details to be worked out but on a general level, yes. I have a feeling I would either volunteer or work at Starbucks (my old high school job). I would definitely find other interests. I would also take on the brunt of the house work and yard work.

 

[Camper87]

Welcome Camper87! You did not mention healthcare. That's a big topic on this forum and an expense you must consider. Say you RE at 45, that's 20 years of healthcare expense. Hopefully, our HC system will be in a better place soon.

We built up our cash reserves and some I Bonds and EE Bonds early on to offset our income to qualify for ACA. Plus, DH has a consulting LLC from home. You may consider something like that. It brings in@ $42K but his work schedule is worked around his free time, ~20 hours/week...walks, cooking, even traveling is easy with his laptop. We spent 4 weeks in South Padre Island last year. He worked a few hours/day. It was a great winter getaway.
After 25 years of megacorp drudgery, our lifestyle is great. We FIRE'd at 55. Keep reading, lots of good advice here.

I’m also in the megacorp drudgery. I’ve been doing it for 10 years and can’t imagine doing it for another 10. As far as healthcare, we plan to either pay out of pocket or do ACA. Since shes most likely going to be working for a few more years after I retire, we’ll have more time to figure out that part.

 

[ILikeStarTrek]

If you and your wife are both good with the plan for you to retire in 5 years and her to work 5-15 years longer, it does make things a lot easier financially. From a household perspective, in 5 years you're just dropping from a 2-income household to a 1-income household. If your wife's income is enough to pay household expenses thereafter (even if she doesn't contribute anything more to retirement assets), by having your retirement assets invested for another 8-10+ years, they should grow a lot by the time your wife retires. Even at a mediocre 4% average market return, $2 Mil turns into about $3 Mil in 10 years. If the market is better, you could end up with $4 Mil or more by the time your wife retires.

A main thing is to keep up good communication with your wife both before & after you retire to make sure neither of you has any resentment about what you are both doing to contribute to the household. And, continue to add details to how well you track annual expenses and to your plans for health care, the Roth conversion ladder you spoke of, etc.

It seems like you have a good plan, just keep at it!

 

[mystang52]

FWIW I don't think you can retire NOW. So, just keep doing what you're doing and revisit in 5 years......knowing the possibility is that 5 years from now your envisioned retirement may not be feasible. Within 5 years' time many things can happen, such as change in your portfolio value, change in your desired retirement lifestyle, or maybe even a change in desire to have children. That last one would be a game changer, of course.
Good news is that regardless you'd be in even greater financial shape. I'm not you, of course. But I find it hard to believe that someone so successful, as you have been, would be happy becoming a permanent part time barista.

 

[UnrealizedPotential]

My first thought is you should keep working at least until 40. Why? In my opinion for a lot of reasons. First, you don't have to sell me on how hard the workplace sucks. I get it. But I think you need to look at some things first. You are only 33 and another 7 years will make a big difference in all likelihood if your income and savings stays the same.

Another thing to consider is you have some investments in stocks. While I have no idea what stocks will do in the future and no one else does either, no one can deny right now they look expensive by many measures. A day of reckoning in the stock market is surely coming and it would not be good to lose your wonderful income and endure a market downturn that clips 50% off your holdings in a year or two after you retire and so you would want to prepare for that as well.

My advice is worth what you pay for it. But with that said, I think you need to keep working and keep socking away for retirement. Your time will come, but it is not here yet I don't feel. Hang in there. When you are 40, you can look at your situation and decide if you are in a better position. If you keep your income and continue saving I think you will be. You know how many people I know who retired comfortably at 40? Zero. If you can accomplish that you will have done something that is very rare in this world.