Hello from Suburbs of Chicago, F.I.R.E. goal 2035

[Moneybags]

Hello everyone. A few years ago I decided to FIRE and feeling that I am alone and looking for support group on this subject. When I bring up to family and people around me that I do not want to work anymore and want to retire early I get laughed at, like is just expected that you work until you are 67. So I am here hopefully to find like minded people similar to me so I do not feel so alone in this FIRE journey share ideas and hopefully learn something new.

I am 43 years old and work as an engineer and over the past few years I have been getting burned out on the job. I am tired of working 45+ hours a week and feeling burnt out. I use to work 50+ and over the years have been cutting back. I do like engineering but after working for so many years it all starts to become repetitive, and the job is not as fulfilling as it used to be. I do not like giving up so much of my life to a job I do not enjoy anymore and do not feel appreciated at work. I feel I am not benefiting or improving the world and which I can find work that has a better purpose. I would like to enjoy my life and do what I want to do, maybe work part time, travel in an RV, take on different jobs that interest me more at the time.

So I am 43 years old and married and wife that also works also works and no kids (DINK). She also does not enjoy your job and she would like to retire sooner as well. I am slowly working with my wife and having her invest more in 401k and open up a taxable account. Currently I am targeting to retire in 2035, at age 55, and save about $2.5M in a brokerage account so I can retire early and hopefully make enough income from my investments that I do not need to worry about money until I die. If I can make a similar amount from my investments every year as my work income I will feel good about retiring early. I also planning on a backup plan to save in retirements accounts in brokerage account does not work out or I change my mind. I feel that I am pretty frugal, we stay at home most of the time, very rarely eat out, and I feel I have cut my costs as much as I can but open to new ideas. I have started to sign up for credit cards to put our normal spending of utilities, food and save some money with cashback.

In 2023 this is currently my stats and does not include my wife.
Income:
Work Income: $145K, before taxes and retirement funding.

Retirement:
401K, Traditional: $130K, last couple of years started to max out and plan to in the future
401K, Roth: $123K
IRA, Roth: $175K
HSA: $15K

ESOP (Employee Stock Ownership Plan): $635k

Cash:
Savings: $138K
T-Bills: $241K
Muni Bonds: $85K
Peer to Peer loans: $6k
Taxable Brokerage: $247K (ETF- 60% S&P 500, 35% Nasdaq, 5% semi-conductor)

Debt:
School Loans: $3,500, Interest 2.625%, I have money reserved aside and can fully pay it off but currently have it is savings and T-bills that is paying me higher interest, so will make money hold the loan.
Mortgage: which will be paid off in a few month. Home value: 360k but I do not have it factored into my amounts above since we are not planning on selling house and it does not generate income.

Current expenses: 19K which includes mortgage payments + extra to principal. The house will full be paid off in a few months.

Goals:
Invest $36K/year: or more in taxable account
Car Savings: $500 month, currently have 33K saved. My car is 24 years old. My goal is about 40-45K saved which is worst case if I buy new, but planning on buying a newer used car.
RV Savings: $100 month

 

[Sunset]

Welcome !!

Seems like a very doable goal. I know my plan was to retire at 55 as well.

Getting your Wife to save and invest is smart.

I notice you didn't list Roth accounts at all.

 

[HI Bill]

Welcome! I'd say you're doing great for your age! I'll second the comment about the missing ROTH IRA. ROTH IRAs are hard to grow much with higher salaries, but having tax-free dollars in retirement is great given your likely income later on, which may well eclipse your current salary, pushing you into higher brackets.

If your 401(k) plan allows it, (and you decide you really need to w$#k that long), retire in the year you turn 55 or later so you can make penalty-free withdrawals from 55-59.5.

If your current expenses are really $19K, you might consider ER earlier!

P.S. What year can you access your ESOP? I have to wait until 62, which makes the risk longer-term. My ESOP accounts for 1/3 of my retirement assets currently, resulting an out-sized risk associated with my former company's performance.

 

[Out-to-Lunch]

Welcome aboard!

 

[Closet_Gamer]

Welcome. Lots of like minded people here.

That ESOP is a big chunk of your assets. Is it all in one stock? Any chance to diversify it?

 

[Gumby]

Even if you only can put in $100, I would recommend that you open a Roth IRA now for both you and your spouse, so that you can run out the five year clock for tax free withdrawals. It will be useful later.

 

[Moneybags]

Thanks for the quick responses and support so far.
I updated my post with the Roth amounts that was a good catch everyone. I had the Traditional and Roth combined in the 401k and the IRA amounts I listed. I also forgot I also have a little in HSA and have been maxing that out every year. I was saving in Roth when I was younger, but now as my income and wife's income has increased we have been either a little over the maximum amount or on the upper edge of being able to contribute. I found this out the hard way a few years ago when I put to much into my Roth and combined income was to high. I started to switch money to traditional 401k and maxing it out to help bring down the Reported W-2 Income. This past year 2023 will be the first year I maxed out the traditional 401K to help bring down the reported income so I can hope to contribute to Roth. I will find out when I do my taxes this year.

I would need to find out about my ESOP and when I can access it I do not know the exact age. As far as I know it is similar to a retirement account. I can take money out earlier but will have to pay the extra tax penalty.

All of the ESOP money is in company stock, there is no way for me to diversify it. I would either need to leave the company which I would be able to roll the full amount into an IRA. Or I am able to take out 20% every 7 years that I would be able put into an IRA.

Depending on the profits for the year the company decides how much % of your total income earn for the year to put into the account. It can be up to 25% of your total income. When you first start out most of the money earned goes into a diversified account that the company chooses. As people leave the company or sell company stock, the money in your diversified account automatically purchase company stock. As you are with the company longer you will have more money in company stock. I have not yet removed any money from ESOP because I felt there was never enough in their, until recently in the past few years. I am currently leaving the money in the company stock because we have been growing quickly and business is doing well, and ESOP returns over the past few years have been over 20%, with one year over 40%. Maybe once our returns start to slow down I might consider removing some money out of the ESOP and putting it into an IRA. I have been with the company for almost 20 years and have a good idea how the ESOP stock has grown. There was 2 years with negative returns. The return rate has been about 10% average over the 20 years.

My goal is to save up enough money in taxable account to be able to retire and all of the retirement money that I saved will be extra. Right now I am in saving aggressively and my opinion might change the older I get. I would also targeting 55 because I would meet the 35 years earning in social security and also get remove some of years with $0 income.

Over this past year I have been doing some day trading and swing trading, but not with any luck so far, and loosing. But I was smart and only day trading with about $200 so my losses are small. If I am able to be successful at day trading than I would be able to leave my job sooner.

thanks again everyone and I am excited about this group.

 

[Sunset]

Even if you only can put in $100, I would recommend that you open a Roth IRA now for both you and your spouse, so that you can run out the five year clock for tax free withdrawals. It will be useful later.

+1
Since OP updated the Roth info, it seems he only needs to get his wife to open a Roth as well.

 

[Kork13]

Welcome, you're definitely in good company around here! It looks like you're in a pretty good place with your current assets -- very rough wag, what you have now should roughly double or more by the time you retire in 12 years, especially as you continue to add to your investments. Keep at it, build up into Roth IRAs & taxable investments, and just keep saving & living below your means. You'll do great.

The fact that your ESOP makes up nearly half of your assets is pretty concerning .... it just puts you in a precarious position in the event something unexpected happens with your company/it's stock. I understand that you have significant confidence in the performance of your company .... but employees had the same confidence in Enron, GM, and other companies whose stock ultimately went to zero. I'm totally good with you keeping a sizeable chunk in your ESOP (maybe up to ~20% of total assets, though even that's pretty high) ... but I'd strongly recommend that you start working to reduce your position in the ESOP. You want to know another very reliable investment has averaged about 10% returns across most 20-yr periods? The S&P 500.

 

[Trailwalker]

Over this past year I have been doing some day trading and swing trading, but not with any luck so far, and loosing. But I was smart and only day trading with about $200 so my losses are small. If I am able to be successful at day trading than I would be able to leave my job sooner.

The other side of that coin is that if you aren't successful at day trading, you risk leaving your job later. $200/day could be significant.

I had a windfall of 10k about ten years ago and a friend with a "terrific" software program that was going to get us rich jumping in and out of commodities. That 10k didn't last long. I probably had about as much of a chance as if I bought lottery tickets or went to the casino. Learned my lesson. I had an aunt who lost a small fortune day trading and didn't recover until she got married again to a banker.

Anyway, good luck and welcome.

 

[Ronstar]

Welcome & looks like a solid plan. But it would be better to incorporate your wife's income/spending into it.

Like others here, I tracked spending for many years prior to retirement. From this spending data, I developed projected spending for our retirement years. And from the projected spending, I came to the amount of retirement investments that I needed to fund the spending. Projected spending $80k X 25 (4% withdrawal rate) = $2,000,000 needed.

Although 12 years from retirement, you're not too early to go through the exercise of developing a retirement spending plan (don't forget projected capital expenditures) and calculating the nest egg that you need. Although you have a solid plan, your post tells me that you could go a little further in gaining confidence in your numbers.

and save about $2.5M in a brokerage account so I can retire early and hopefully make enough income from my investments that I do not need to worry about money until I die. If I can make a similar amount from my investments every year as my work income I will feel good about retiring early.

Again you're early in the planning process, and your planned expenses/ nest egg amounts , etc will be more concrete as you get closer to retirement.

 

[MarieIG]

Welcome to the ER forum Moneybags. You will certainly have company here with regard to wanting to retire early and/ or discuss financial planning.

I noted your revision and inclusion of the Roth. It's a lovely little tool. If it means that you have no funds in a traditional IRA; should you wish to add to the Roth, you could, for example, put your funds into a non-deductible traditional IRA and then convert the whole traditional in a day or so (filing the 8606) so that your "earnings" would be minimal (potentially 0 or a few cents) and you would only pay taxes on those. If do have a sum in a traditional IRA already, conversions would be taxable on a pro rata basis, so that would be less appealing.

Below are two links to two frequently used sources on the site.

Some Important Questions to Answer Before Asking - Can I Retire?

FIRECalc

 

[Cassius King]

Welcome aboard MB. Looks like you're off to a great start and thinking right.
You have found the right board, amazing collection of like minded folks.

 

[TheWizard]

I agree with a few others that $19k per year in expenses seems low, especially for a couple.
OP has 12 years to start of retirement, so no rush.

Eventually, it would be good to start a spreadsheet of your basic expenses, one that you can update from time to time as you realize something was omitted.

Together with that, it would be good to define your Desired Retirement Income and which accounts it will be coming from.
It's fine if that number is double your basic expenses, or more...

 

[NgineER]

Welcome - you are well on your way to FIRE in 12 years, you could likely swing it earlier. Dig into the information on the ESOP, I am surprised it would be restricted in this way. The ESOP plans I've had have all allowed you to buy and sell stock in the account. If you sell in the first year it would count as ordinary income, after two years it would count as long term capital gains.

As far as the Roth IRA goes, you would still be able to do a back door Roth contribution. My company also allows for after tax contributions up to 9% of my salary which I roll over into a Roth IRA with a different company. This allows me to contribute $25k+ into my Roth IRA annually.

 

[Sunset]

OP - I really doubt your expenses are $19K per year. Maybe you meant something else

I use spending tracker (a free phone app) to track my spending as I have my phone around a lot, so it's convenient to take 10 seconds to add an expense when I have it that day.
I found it really helpful and surprising on the amount I spent (higher and lower) than expected on various things.

 

[Gumby]

Please note that if you are going to try FIRECalc, you need to include all taxes in your expenses.

 

[38Chevy454]

I'm a retired engineer, so you being an engineer know the math and it seems you are on a good path to retirement. Some good helpful advice in previous replies, especially about being so concentrated in ESOP. Try to reduce that and put into diversified equity funds. Diversity is good and minimizes the effect if your company stock takes a big hit.

 

[Moneybags]

I just want to clarify some items from the comments that I have been reading.

My day trading total account was $200, so by the end of the year I lost about $120, so I was trading with a very small amounts. I was not trading with $200/day. I am looking to be consistent before I trade with larger amounts of money.

As stated in the original posts all of the amount listed including the expenses is for me only and does not include my wife funding or expenses. I know my wife would not want we me to put putting any of her information out on the internet. But the plan that I develop for myself I can change values and apply it for my wife, which I have already done so far.

So the $19K of expenses is for me only. I probably not consistent with everyone on this forum what is considered an expense. I do not know if $19K for only myself is high or low since I do not have anyone to compare it too.
For all household expenses my wife and I have split the costs 50% / 50%, so the amounts listed is for my 1/2.
I only have 3 major accounts that I have money coming out which is what I used to figure my expenses.

$16,400: this funds my 1/2 of the joint checking account which is used for mortgage, real estate taxes, utilities, food, etc.
$1,650: was for personal credit card, personal items, gas, insurance, etc
$400: came out of my personal checking


Therefore the $19K expenses for myself only, but this amount will be lower once we pay off the mortgage in a few months. I just recently start a budget last year so will need to have a few more years to get a better average expense. I think I am frugal compared to the average American.
I will need to look into the FIRECalc and as I am not including taxes from income in expenses category. I am still learning which is why I joined this forum so I can learn more.

Our company is 100% employed owned company and all profits go back to the employees. Every year we vote for the board of directors. Our stock is not publicly traded and is only available to the employees. I read over a 40 page document on our ESOP today and looks like there is not many options at my age to diversify my funds and take money out. 80% of the amount in the ESOP is in company stock the rest is in the diversified account. The rest of the money is an diversified account but still within the ESOP. As share become available money from the diversified account purchases company stock automatically. There might be some differences with how ESOP operate at different companies so mine might be different than others in this forum.

ESOP (Employee Stock Ownership Plan): $635k

Seems I could not edit my original post. This is amount I have in company stock vs. diversified account which

ESOP Company Stock: $510K
ESOP diversified account: $125K
ESOP Total: $635K


Summary of ESOP distributions:

• Death, Disability or Retirement
• Termination from employer
• Pre-Retirement Diversification Distributions- when 55 and older you are able to take out 25% a year.
• 20% of ESOP every 7 years

Thanks everyone for your comments and suggestions are greatly appreciated.

 

[Sunset]

I have to say you are very frugal.

I track my own expenses, and estimate DW's , we have an informal sharing of the expenses, she pays income taxes, property taxes, utilities, personal spending

I pay groceries, travel, restaurants, insurance, Summer vacation, gas, auto repairs, house repairs, personal spending etc.

My pretty accurate tracking of just my spending alone comes in at $35K to nearly $40K per year.

 

[Moneybags]

Maybe the areas that we live have a different cost of living. I would say if you can think of it I probably do not spend money on it. For example:
Car: is 24 years old, no car payments, I do almost all of the car maintenance: I change oil, fluids, spark plugs, brakes, wheel bearing replacement, etc. I have only taken it to shop for tire replacement because I do not have equipment to balance tires. My car insurance is about $450 for entire year.

Home repairs: I do most of my own home repairs. I fixed furnace when blower motor went out, fixed washing machine when parts broke fixed leaking faucet, etc.

TV: We have no subscriptions like Disney+, etc. We watch t.v. using tv antenna that is free and watch movies on Tubi, Crackle, that is free. We had the old picture tube and rear projection tv up until a few years ago. We might go to the movie theatre 1 time a year.

Food: most of the food we eat is from a grocery store. I make my own breakfast, make sandwich for lunch, and wife makes a bulk dinner over weekend and we eat that all week. We typically go to restaurants 2-3 times a year for special occasions. We do not drink alcohol, soda, and mostly drink water. Since we do not go to restaurants often when I do go out I was shocked how expensive restaurants food is today.

Vacation: We have not been on a traditional vacation for many years.

Clothes: I wear my clothes until I physically wear them out, and I will repair clothes to make them last longer. I do not buy designer clothes.

I try not get suck into consumerism, and that I need to have the latest item. I appreciate the items that I have now, I try to appreciate the small things in life. If I buy a new item I question if this will make my life better or happier and is it worth it. I see many people struggle with having to many things, when they are older, having garage sales, etc. I do not want all of this stuff cluttering in my life, I already have enough stuff. The items that I do have I take care of them so they last a long time. If I do need an item, I will look at Goodwill, buy it used on ebay or go to a garage sale, but also buy some items new. I tend to keep items for a very long time and repair them as much as I can.

We try to find free or low cost things to do. We go to free festivals, go camping, hiking. Get together with family and play board games. I play computer video games that I have had for years. Both my wife and I like to be at home.

I read an article that mentioned that every $1 you save today is about $17 in retirement. $1, 10% rate of return over 30 years = $17.
So to think of it another way that $5 coffee or item today is $85 in retirement that you will not have. That $100 restaurant bill for one meal is $1,700 in retirement. That really opened my eyes and questions everything dollar I spend. I read an article about how a lot of people pay for items or subscriptions that they are not using. I recently went to a lower cell phone plan with same company to save $5 a month for each phone (so total of $10 a month). All of these small changes add up and can be significant.

 

[pacergal]

Fugality/live below your means is haw many of us got to retirement.
It looks like you are doing well with a lower budget and it seems you do have fun along the way via camping, time with family, etc.

Welcome to the forum, look forward t reading more from you along the way.

 

[TheWizard]

Welcome - you are well on your way to FIRE in 12 years, you could likely swing it earlier. Dig into the information on the ESOP, I am surprised it would be restricted in this way. The ESOP plans I've had have all allowed you to buy and sell stock in the account. If you sell in the first year it would count as ordinary income, after two years it would count as long term capital gains...

Why two years (24 months)?
Do ESOPs have a different definition of LTCG?