Hi, I am new. Just hit 40. FIRE in 7? How am I doing?

[njconfused]

Greetings Everyone,

I am 40 years old. My wife is 38. I have two kids aged 8 and 10.

I have been wondering about FI alot lately as I just turned 40. I am hopefully looking to hit FIRE in the next 7 years. The other option is to work in a retail store or something part-time to pay for health care coverage.

My income gross is $192,500.
My wife's income gross is $102,500
Total Income - $295,000

We paid off our mortgage in 2021. Our house is worth about $850,000.(Northern Jersey)

Our savings is broken out as follows:
$213k -Checking/Savings/CDs
$500k- Brokerage Accounts (Mix of Index Etfs and Stocks)
$794k - IRA's and 401ks -Tax Deferred (Index Etfs)

So total assets excluding the house is $1,507,000.

We did not do any 529s for the kids. The plan is to pay for at least $200k towards college for each kid. We plan to take that money from our savings and brokerage accounts.(7 and 9 years from now respectively)

We max out our 401k's. Over the last two years or so we have been trying to add at least $50k each year to the brokerage account. I just started an HSA account so did not include that in the figures above.

Sometimes I just feel burned out to save save save.

How are we doing?
If we wanted our end goal to be at around $3M in 7 years, is that doable?
Even with college expenses coming up?
Even if we do not add additional $50k each year to brokerage?

Our ultimate goal is to have around $100k-$120k in spending money annually. We are not totally against working a part-time job for extra cash to off-set healthcare premiums.

Please let me know how I am doing.

Feel free to roast me as well.

Thank you. Appreciate all your feedback.

njconfused.

 

[GrayHare]

sounds doable if you keep your spending under control, welcome to the forum

 

[ut2sua]

Sometimes I just feel burned out to save save save.
...
If we wanted our end goal to be at around $3M in 7 years, is that doable?

It is a sure thing in my mind you will get to $3M+ NW at some point (given your income, current NW, and saving rate etc.)
So it will help to ask yourself:
1- Is the 7 year goal that important?
If the answer is a big yes, then you will get all the motivation to save to get to that point.
If the answer is a clear no, then you can fix your "burned out to save" issue. Your NW and $ is there to support a happy life (current and future). Sacrificing too much of the present in order to get to a better future may not be the way to go.

 

[MarieIG]

Welcome to the ER forum NJ.

You are doing well, but that does not mean that you will have your desired income in seven years. I would suggest that you reassess periodically, and also - work on destressing and your current quality of life in the meantime.

Below are two useful links.

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

FIRECalc

 

[pacergal]

Welcome to the forum!
The links that MarieIG posted are great to get a look at where you are now.

There are many folks here who are willing to review budget, etc. and give suggestions, if you are willing to post numbers.

If it were me, I would not retire if you are planning to cash flow college, or at least wait until you had their funded amount in a separate savings.

Savings and LBYM is important, but it is also very important to enjoy life along the way.

 

[Kork13]

Just confirming your future contributions --- $50k/yr brokerage + $30k/yr (each) into retirement = $110k/yr?

By my rough math (proper calculators will give you more accuracy), at the $110k/yr contribution rate (37% of gross income), assuming an average 6% return above inflation, you should hit $3M invested right around the 7 year mark. That doesn't account for the cash, but that will apparently get eaten up by college expenses anyway. Minor note: it's not too late to start 529's for them! Doing so could make a significant dent.

So can you do it? Yes, most likely. Even with paying for college? Yes, most likely. Without the extra $50k/yr? That would be tougher, but potentially doable -- the $50k/yr amounts to roughly $500k (including growth) across the 7 years, so without it you'd be closer to the $100k/yr income level long-term. Additionally, I assume you'll want to rely mostly on your brokerage until you hit 59.5 to start using your retirement accounts? Having the beefier brokerage will make that MUCH simpler. Without the extra brokerage contributions, that account grows to ~$750k in 7 years. Pulling $100k/yr (while keeping it invested), that'll last you about 10 years (to ages 57 & 55) -- not quite there, though anything you have in Roth accounts could help you get across the line. But with the extra $50k/yr, the brokerage would be at ~$1.25M, and you could pull $120k/yr for ~15 years (ages 62 & 60) -- perfect! So I recommend that you DO continue with the $50k/yr addition to your brokerage (if you stick with FIRE in 7 years).

What are the plans for your home? Stay in it throughout retirement, or sell & downsize? Your home is a hefty asset that could help your numbers, if downsizing is part of the plan.


The real question (concern?) is your feeling of burnout. Burnout is generally a problem caused by not feeling purpose & productivity & connectedness in life. Are you & your wife both on the same page? How important is the goal of FIRE in 7 years? Do both of you still enjoy your jobs? Do you have meaningful hobbies/pursuits outside of work? Do you have meaningful relationships with friends outside of work? Most important: Why do you want to FIRE? Are you running away from work, or running toward something more meaningful? These are all important self-reflection questions for you and your wife to think through together. I think if you get aligned on WHY you're doing what you're doing, the HOW will become much easier & more purposeful (whether that means "save save save" or "slow down") ... which will ease the feeling of burnout.

 

[DrRoy]

How are we doing?
If we wanted our end goal to be at around $3M in 7 years, is that doable?
Even with college expenses coming up?
Even if we do not add additional $50k each year to brokerage

You are doing well. $3M in 7 years depends on the market. I would continue for the 7 years and reassess.

 

[Kork13]

I was thinking a little more about your kids' college .... and this might be a bit radical ... But since you've got a large chunk of cash sitting there right now, you might consider super-funding 529s for each of them, then just let it coast until they enter college. You could set it & forget it!

You could open the accounts with 5 years worth of contributions ($90k apiece), which over the next 10 years would grow to roughly $160k (today's dollars). You can't contribute anything else for 5 years after super-funding, but if desired, you could later toss in a little more here and there ... but you really wouldn't need to. The tax-free status of $160k would be nearly equal to $200k of future income. You could basically just set aside most of their college money today, and whatever the 529s don't cover would be a minimal drain from your future assets.

As I said, this would be a more radical step ... but you're technically in a position to do it, and it would mostly alleviate a significant unknown factor from your future calculus.

 

[pjigar]

If you save and invest $96000 every year for 7 years then FireCalc says you have 96% chance of FIRE with $120000 spending (includes taxes). Cutting little too close for my taste. YMMV.

Having said that, did you know you can contribute after-tax money into 401K account? Lot of plans allow it. There are some notable advantages of contributing after-tax money into 401K rather than brokerage.
1. You defer taxes on gain
2. All the after-tax principal contributed can be rolled over to Roth IRA when you leave the company. Some plans allow in-service roll over to Roth IRA. This is what is called mega-backdoor Roth IRA contribution.

FWIW we didn't do 529 for kids. We planned just like you have a large after-tax portfolio by the time they grow up. As it turned out, we throw enough cashflow with the investments now that I don't even have to sell the investments to pay for their collage!

 

[njconfused]

I want to say Thank You all to whom posted great feedback. I think what i have definitely taken from this posting is that my wife and I need to figure out our "why" first. I like the idea of continuing to just do what we are doing and reassess in 7 years. I also like the idea of starting a 529 as well. Also based on some of the feedback, I believe the 7 year goal might be super aggresive. I think 10 years might be more realistic which would put me at 50 and my wife at 48. Even then switching to some part-time work might not be such a bad idea to have less stress on the portfolio. To the comment regarding our home. We plan on staying in our home in retirement. I appreciate all the comments. Will be sure to post updates on the journey. Thank you.

 

[pjigar]

I want to say Thank You all to whom posted great feedback. I think what i have definitely taken from this posting is that my wife and I need to figure out our "why" first. I like the idea of continuing to just do what we are doing and reassess in 7 years. I also like the idea of starting a 529 as well. Also based on some of the feedback, I believe the 7 year goal might be super aggresive. I think 10 years might be more realistic which would put me at 50 and my wife at 48. Even then switching to some part-time work might not be such a bad idea to have less stress on the portfolio. To the comment regarding our home. We plan on staying in our home in retirement. I appreciate all the comments. Will be sure to post updates on the journey. Thank you.

I was in a similar boat once upon a time and we came to the same number "retire at 50". I am coming close to 50 now and my job is so steady and easy going, I may just keep working a few more years till DD finish college. I suspect that a lot will change with your life by the time you are 50 so reassess when you get there. Don't sweat, just live life and enjoy time with younger kids.

 

[NgineER]

Our savings is broken out as follows:
$213k -Checking/Savings/CDs
$500k- Brokerage Accounts (Mix of Index Etfs and Stocks)
$794k - IRA's and 401ks -Tax Deferred (Index Etfs)

So total assets excluding the house is $1,507,000.

Thank you. Appreciate all your feedback.

njconfused.

Welcome to the forum - you look pretty good for your age! Financially at least

You are certainly ahead of where I was at your age. Fire at 7 looks like a stretch, why not shoot for 10 and allow yourself to free up the purse strings a little. I'm just six years out at this point, it was my original plan to go at 55, but then I revised it to 50 (which is doable), but I realize that at 55 I have complete access to my 401k, all options and RSU's are vested on normal schedule and we keep good health insurance for a while longer. My wife had breast cancer three years ago which caused a big scare and we were happy to have access to good doctors and network at that point. I have realized that if I don't save anything for the next six years, I would still hit my target (but my spending would be significantly higher, so I haven't gone off the deep end yet).

The benefit to the 10 year goal is that you can always revise it to make it shorter which would make you happy as opposed to having to extend the 7 year number and having to slog out OMYs.

Having said that, did you know you can contribute after-tax money into 401K account? Lot of plans allow it. There are some notable advantages of contributing after-tax money into 401K rather than brokerage.
1. You defer taxes on gain

I know y know this, but you eliminate taxes on gains, but the gains are held hostage until 59.5 whereas the contributions can be accessed at any time.

We make our contributions in the following order:

Max out traditional 401k (11% of salary-me) +8% match
Max out after-tax 401k (9% of salary-me) mega backdoor Roth
Max out ESPP (10% of salary-me) charitable DFA account.
Max out backdoor Roth (me and spouse at beginning of year)
Any leftovers income and net rents funds brokerage account.

At this point our Roth is slightly higher than our traditional 401k+tIRA's and despite higher contributions + match it will never catch up to the Roth account thanks to compound interest.

 

[HawkeyeNFO]

Does NJ give a tax deduction for 529 contributions? If not, there may be better things to do with that money.

 

[bloom2708]

You have a good headstart. 40 is when FI dreams come into play.

Dream big but keep your head down, pump your arms and keep going. Run into the wind.

Get to 52ish and you will have good options. If you let up too soon it will be a lean FIRE scenario. Which is fine, but college is expensive. Everything is expensive.

47 is probably too early, because 47-59.5 is a long time. 72T won't be great for that long.

 

[pjigar]

I know y know this, but you eliminate taxes on gains, but the gains are held hostage until 59.5 whereas the contributions can be accessed at any time.

Correct.

 

[livingalmostlarge]

I would say yes but see what costs are in 7 years. Kids are often more expensive Than you think

 

[njconfused]

Does NJ give a tax deduction for 529 contributions? If not, there may be better things to do with that money.

They do but only if you earn $200k GI or below. We do not qualify at this point.

 

[brydanger]

Greetings Everyone,

Sometimes I just feel burned out to save save save.

njconfused.

We feel you.

My concern here is all about this particular comment... and the fact that you're already listening to the masses and mentally moving the needle back from 7yrs to 10yrs.

Im not saying the dollars in the spreadsheet aren't important - but they aren't the ONLY thing. Don't forget why you're trying to do this.
Happiness matters today NOT in 7-10yrs!!