Howdy! 40 married w/ 4 kids

[Figaro]

age 40, married, 4 young kids

NW: 3.6mill
No debt, no mortgage
Expenses: $36k/year all in, includes health insurance, discretionary, lumpy expenses and able to dial back if needed

Pension:. 33k/year at age 65 or lump of $555k, deferral at 4% accrual/year thereafter. No cola
SS:. 26k/year
FIRE Calc 100% monte carlo 100%, straight math 100+ years of expenses not counting SS



Recently took a severance with my megacorp to help them out as they painfully restructured (also my thought to protect my fellow team from mandatory cuts as well - they seemed much more uncertain and scared than I was during our meeting about this stuff). This was the 4th or 5th one since I was around for about 18 or so years at this corp, so restructures are nothing new, but this was one in particular seemed different as they really wanted to automate and change everything. After restructure #2-3, I knew that I needed to protect myself so I really kick-started my FIRE plans and started reading forums such as this. Five years later I found myself ready to pull the parachute because I built myself this option and not take anymore nonsense from new management. I could reapply for my old company after the dust settles a bit because I did really enjoy working with the quality people and the challenge of the job, but taking a pause right now to see if all who have retired in similar fashion have any thoughts or insight that I'm missing or need to consider.

The numbers work out for never returning to w*rk but need some wise advice if I'm giving up too much here in earning capital during these years. I have enough to fund college, but maybe not big family vacations later on when kids are grown w/ spouses (especially if grandchildren come into the picture). At the same time a big part of why I wanted to FIRE is to be around my young kids and spouse during these important developmental years, only one kid in school currently.

I need to focus on building up my health and plan for either actual retirement or eventually back into the workforce in some capacity.

I do have things that keep me engaged with volunteering and hobbies, oh and taking care of my kiddies. The longer that I stay away from workforce, everyone else will eventually get to snooping more into our situation and I'd like to keep a low profile on that. I did have a couple of friends who were planning FIRE as well, but a bit awkward talking outright about that these things when they're still working the grind, so I turn to the early retired for insights.

Any thoughts/insights to my situation?

 

[pjigar]

If your expenses are "real" and you have accounted for future healthcare, education, home repairs, tax and car expenses then you are solid. Welcome to the forum.

 

[Figaro]

If your expenses are "real" and you have accounted for future healthcare, education, home repairs, tax and car expenses then you are solid. Welcome to the forum.

Thanks for the welcome. Yes the expenses are real. Tracked them for 10 years, they have been consistent. Had some major repairs materialize and accrued for them for the expense estimate.

 

[The Cosmic Avenger]

It sounds like you're golden! I'm 50, and I've been telling my friends who are just starting to think about retirement that 4% is a little risky for early retirees, unless you can pare that back a bit to just essential expenses if there's a big downturn. You're at ONE PERCENT, plus you do have a pension, so it sounds quite doable. I'm impressed! Don't worry too much about what anyone else thinks, most people are too embarrassed to ask or talk about money anyway, which IMO is part of the reason they're not retiring early!

Expenses: $36k/year all in, includes health insurance, discretionary, lumpy expenses and able to dial back if needed

Are you sure about the cost of your healthcare insurance purchased directly, not through an employer, for a family of 6? I priced it out on Health Sherpa, and for just my spouse and I after our child leaves home, we'd probably pay close to $20K/year. (Although that was before the cliff was eliminated.) You have been pretty thorough, so I'm guessing you have done your research on this, but I was surprised that you fit HCI for 6 into a $36K budget! I only mention it because you seem to have everything else covered really well, and even if your HCI doubled your annual budget, you'd still be fine with a WR of 2%.

As for nosy Nellies, I prefer being honest, but if you really would rather deflect you can always vaguely allude to things, like tell people you've got some ideas, some irons in the fire, etc., if you're in a job where freelancing or entrepreneurship is not unheard of. And if they keep prying, say you don't want to jinx it, or you are still in the planning stages, or whatever.

 

[Golden sunsets]

I find it hard to believe that your expenses will stay as low once the children get older and become little consumers of more food, costly clothing, expensice activities, never ending extracurriculars, more than one car family drivers, etc. - you get the picture. Having said that ...... you could comfortably spend $100k/year now and still withdraw less than 3% of your stash.

I think your real issue is, do you really want to retire?

 

[Figaro]

It sounds like you're golden! I'm 50, and I've been telling my friends who are just starting to think about retirement that 4% is a little risky for early retirees, unless you can pare that back a bit to just essential expenses if there's a big downturn. You're at ONE PERCENT, plus you do have a pension, so it sounds quite doable. I'm impressed! Don't worry too much about what anyone else thinks, most people are too embarrassed to ask or talk about money anyway, which IMO is part of the reason they're not retiring early!

Are you sure about the cost of your healthcare insurance purchased directly, not through an employer, for a family of 6? I priced it out on Health Sherpa, and for just my spouse and I after our child leaves home, we'd probably pay close to $20K/year. (Although that was before the cliff was eliminated.) You have been pretty thorough, so I'm guessing you have done your research on this, but I was surprised that you fit HCI for 6 into a $36K budget! I only mention it because you seem to have everything else covered really well, and even if your HCI doubled your annual budget, you'd still be fine with a WR of 2%.

As for nosy Nellies, I prefer being honest, but if you really would rather deflect you can always vaguely allude to things, like tell people you've got some ideas, some irons in the fire, etc., if you're in a job where freelancing or entrepreneurship is not unheard of. And if they keep prying, say you don't want to jinx it, or you are still in the planning stages, or whatever.

I'm pretty sure the hci is good as long as ACA is good w/ high subsidy. I'll be slow converting ira to roth and I have a good cash position to weather high deductible/max out of pocket. And either myself or my spouse to be able to go work for health benefits if that should fail.

I prefer to be honest as well with people when they will eventually ask hey how's the job search going.., I could just make it my own "business" - self employed personal financial consultant / private wealth manager full WFH w/ flexible hours. But I like what you did there..."I've got alot of irons in the FIRE"

 

[OldShooter]

... Any thoughts/insights to my situation?

I think few of us really understand at a gut level the risk inherent in future inflation. For example, OP, for you there is probably an honest 45 year planning horizon, maybe longer. Using just the Fed's 2% inflation target, your $36K year of expenses will cost $89,000 in then-year, 45 years from now, dollars. $33K fixed is not going to look like an ample pension if that scenario transpires. Using the historical US rate which IIRC is 3.11%, your expenses will run $149,000 in then-year dollars. That's a pretty wide range even though it does not consider some of the really wild rides that inflation has given the US.

So I'd focus on inflation-paranoid portfolio strategies and on the effect of likely withdrawals as that pension fades towards irrelevance. I would also not touch the social security pot until you've reached the age where the benefit is maximum. (Which will probably be moving up as you pursue it.)

 

[lucky2030]

$36k in expenses for 6 people is just incredibly low. I’m both skeptical that’s all you are spending, and question whether you really want to live in poverty in order to not work.

 

[Figaro]

I find it hard to believe that your expenses will stay as low once the children get older and become little consumers of more food, costly clothing, expensice activities, never ending extracurriculars, more than one car family drivers, etc. - you get the picture. Having said that ...... you could comfortably spend $100k/year now and still withdraw less than 3% of your stash.

I think your real issue is, do you really want to retire?

Thanks for bringing up those kind of expenses later on in the teen years. I concede that expenses may increase as the season of life changes. Really don't even know how to spend that much in a year being how we've never been spenders in the first place. So we will.lesrn to adjust.allng the way. If the kids want extracurriculars, they either earn their own keep for their own spending.

Fortunately we come from a supportive family that offers cash gifts for bdays, holidays, etc and have a long train of hand-me downs for clothing.

I concur, that it's not really a financial thing, the numbers look solid.

It really does come to a decision of do I really want to retire. I like the thought of it, but when the kids are all in school, will I then be bored at home? Hopefully that means the house is kept in good order though.

Growing up, my folks didn't have high incomes, they worked manual labor jobs where they were on their feet for hours on end to sacrifice for their children's future being brighter than their own. They taught me how to save. But I only really saw my dad like once a week, and my mum four hours each night. Since I was on my own most of the time, I figured for my own family, I needed to provide my own kids with more time as the money stuff will take care of itself.

Since I've been earning $ for my time all these years a part of my identity was tied to being productive, creative and problem solver. Now I have this huge shift for where I am now. But scared to do it for long-term since I feel that I'm wasting the opportunity of future earning years (while fully knowing I don't need anymore $). So I need the insight of those who have lived and experienced more than I have.

 

[Figaro]

$36k in expenses for 6 people is just incredibly low. I’m both skeptical that’s all you are spending, and question whether you really want to live in poverty in order to not work.

I assure you that our expenses are extremely low. I was shocked at it ten years ago and we've actually improved on aspects of utility usage. Since we have had kids we did turn up the thermostat level, and with the pandemic, I don't care do.much about being efficient that much anymore since I know we have hit our number.

I'm actually fine with living in poverty levels spending because for us, any spending we do is a great luxury. Poverty in the USA is a complete luxury to a good majority of the world and we have seen what it looks like up front and personal. I spent a good amount of travel to appreciate what we have. Spending more is not going to make life anymore better. We have all that we need and are content.

 

[ivinsfan]

I assure you that our expenses are extremely low. I was shocked at it ten years ago and we've actually improved on aspects of utility usage. Since we have had kids we did turn up the thermostat level, and with the pandemic, I don't care do.much about being efficient that much anymore since I know we have hit our number.

I'm actually fine with living in poverty levels spending because for us, any spending we do is a great luxury. Poverty in the USA is a complete luxury to a good majority of the world and we have seen what it looks like up front and personal. I spent a good amount of travel to appreciate what we have. Spending more is not going to make life anymore better. We have all that we need and are content.

Problem is if you plan an ER with poverty level spending you have zero wiggle room on the downside.


What if you divorce and need to split you stash, have you planned any money for kids college expenses, all your children all going to walking everywhere they need to go all their lives.



I know what you said but I have to call foul on your projected expenses. You are care taking for six people and have all your car replacement numbers and all possible house upkeep numbers and all medical and braces expenses at 3K a month...


At your age it's if you can live at this spending level, it's do you want to be forced to live at this spending level forever. What happens to your FC number if you bump up your budget by a thousand a month?


PS That pension number is a long way off and crap happens..


I'd be surprised if SS doesn't take a haircut in the next 25 years.

 

[Aerides]

4 kids, $3.6M plus a pension, and spending of $36k per year? Retire or not, I'd look to buffer that spending plan. That's really very low. Even before their teen years, your children might show interests in sports, music, all kinds of hobbies. Those can be expensive, but with your means it would be great to ease up the purse strings and allow them those experiences.

Family vacations too, there is room to still save aggressively while increasing quality of life, even if you personally don't see the need right now.

 

[ivinsfan]

4 kids, $3.6M plus a pension, and spending of $36k per year? Retire or not, I'd look to buffer that spending plan. That's really very low. Even before their teen years, your children might show interests in sports, music, all kinds of hobbies. Those can be expensive, but with your means it would be great to ease up the purse strings and allow them those experiences.

Family vacations too, there is room to still save aggressively while increasing quality of life, even if you personally don't see the need right now.

How about college costs, I don't believe parents owe that but in that income level it's certainly to be considered.

 

[Figaro]

I think few of us really understand at a gut level the risk inherent in future inflation. For example, OP, for you there is probably an honest 45 year planning horizon, maybe longer. Using just the Fed's 2% inflation target, your $36K year of expenses will cost $89,000 in then-year, 45 years from now, dollars. $33K fixed is not going to look like an ample pension if that scenario transpires. Using the historical US rate which IIRC is 3.11%, your expenses will run $149,000 in then-year dollars. That's a pretty wide range even though it does not consider some of the really wild rides that inflation has given the US.

So I'd focus on inflation-paranoid portfolio strategies and on the effect of likely withdrawals as that pension fades towards irrelevance. I would also not touch the social security pot until you've reached the age where the benefit is maximum. (Which will probably be moving up as you pursue it.)

Yes agree. So inflation paranoid would mean real-estate, stocks? Financially, in all my scenarios the inflation factor and also social security are the big unknowns, so to offset, I just assume that the portfolio would match inflation and expect zero real return. My thought was to sell my house and then move to LCOL area if the property taxes start to get ridiculous (which they're already are).

Most likely SS will be affected, even with a 20-30% haircut - I don't think I will depend on that leg of retirement. I'll just use it to pay for my rmd if I have any left in traditional by then. I highly doubt that congress will let SS go insolvent. My max benefit at age 70 (which is when I'll take it) will probably end up being the equivalent of standard benefit at age 66-67, but oh well.

But let's look back in time on expenses. Certain things got cheaper (TV's - I paid $1500 for a 46" back in 08' I could get a 55" for $300 now?! (I still have the old tv and it's still working...btw), vcrs- use to be $800 in 80s! - now they are free in yard sales), some things stay same (autos/food). Other things went bonkers (college).

We happen to spend mainly on food and travel. So I don't think it will ever get inflation adjusted to $149k that's ridiculous!

 

[fancy free]

The longer that I stay away from workforce, everyone else will eventually get to snooping more into our situation and I'd like to keep a low profile on that.

We retired in our early 40s with two young kids and re: what someone else said about expenses jumping up in the teen years, for us that didn't happen. Not every family is the same. We aren't the type to blow money on expensive clothing for teens and their activities weren't expensive; also, they were of an age to contribute if they had wanted to do something that would cost a lot.

Re: keeping a low profile, it was easier for us because we were self-employed to begin with so there was never a clear demarcation (for others) between working years and not-working years … but if you're comfortable using the old “doing some consulting” line, in my experience people don't probe much if you skim over particulars.

 

[OldShooter]

Yes agree. So inflation paranoid would mean real-estate, stocks? Financially, in all my scenarios the inflation factor and also social security are the big unknowns, so to offset, I just assume that the portfolio would match inflation and expect zero real return. My thought was to sell my house and then move to LCOL area if the property taxes start to get ridiculous (which they're already are).

Well, lots of things beside real estate. Equities are loosely coupled to inflation with a delay factor. TIPS happen to be our strategy. I think they are highly underappreciated as defensive investments. People cry about a small negative yield but the total return on TIPS looks pretty good with any kind of inflation. Best held in a tax-sheltered account, though.

Illinois? IL will go bankrupt in some form and property-owning taxpayers will suffer. All citizens will suffer actually. I would suggest immediately departing for a state that does not have major public pension or other financial problems and that has minimal exposure to natural disasters, which are increasing in frequency.

Most likely SS will be affected, even with a 20-30% haircut - I don't think I will depend on that leg of retirement. I'll just use it to pay for my rmd if I have any left in traditional by then. I highly doubt that congress will let SS go insolvent. My max benefit at age 70 (which is when I'll take it) will probably end up being the equivalent of standard benefit at age 66-67, but oh well.

You can count on the SS rules changing before you're ready to collect. But it will remain the only COLA-adjusted annuity you have, so IMO it should be maximized.

But let's look back in time on expenses. Certain things got cheaper (TV's - I paid $1500 for a 46" back in 08' I could get a 55" for $300 now?! (I still have the old tv and it's still working...btw), vcrs- use to be $800 in 80s! - now they are free in yard sales), some things stay same (autos/food). Other things went bonkers (college).

Well, as they say "Hope is not a strategy."

We happen to spend mainly on food and travel. So I don't think it will ever get inflation adjusted to $149k that's ridiculous!

I think many of us retired at 10x our starting salaries. We would have called that ridiculous when we graduated college.

Food is specifically a huge risk. If the dollar declines in value by 20%, which is entirely possible*, virtually all commodity food rises by 25% because food is traded internationally. Soybeans, maize, meat, milk, ... all will go up. Together with aluminum, steel, rare earths, nickel, copper, ... Serious inflation will be devastating, not "ridiculous." IMO anyway.

*the world hates that the USD is the major reserve currency and that as a result we can use our banking system as a weapon against people we don't like. Our only salvation will be the length of time where the dollar continues to be the least-worse alternative. When we get knocked off our pedestal a devaluation of just 20% may be something we hope for.

 

[Bigdawg]

age 40, married, 4 young kids

NW: 3.6mill
No debt, no mortgage
Expenses: $36k/year all in, includes health insurance, discretionary, lumpy expenses and able to dial back if needed

Pension:. 33k/year at age 65 or lump of $555k, deferral at 4% accrual/year thereafter. No cola
SS:. 26k/year
FIRE Calc 100% monte carlo 100%, straight math 100+ years of expenses not counting SS

Any thoughts/insights to my situation?

Figaro, It seems to me that you are getting some responses that maybe doubt or question your #'s/situation/planning. I believe the reasons for that are as follows: 1). A very small % of folks are FI. 2). Very few people have saved 3.6 mil. 3). Very few people (even most on this forum) did not have their mortgage paid off and have 3.6 mil nest egg by age 40. Some did. But, you my friend are in extreme rare air. Good for you. Seems like you have the making money/building nest egg down to a science. Now the tough part. What to do now that you have "enough". Good luck to you sir.

 

[ivinsfan]

Figaro, It seems to me that you are getting some responses that maybe doubt or question your #'s/situation/planning. I belive the reasons for that are as follows: 1). A very small % of folks are FI. 2). Very few people have saved 3.6 mil. 3). Very few people (even most on this forum) did not have their mortgage paid off and have 3.6 mil nest egg by age 40. Some did. But, you my friend are in extreme rare air. Good for you. Seems like you have the making money/building nest egg down to a science. Now the tough part. What to do now that you have "enough". Good luck to you sir.

No, people are not saying he won't make it or can't it, some are asking if he is sure he has his numbers for the next 40 years nailed down. Asking if he is sure about his numbers and future spending plans is just a way of helping him verify his plans.



For example when you are busy working and taking care of 4 kids there is very little time for fun and hobby spending...maybe that's a budget add on.

 

[Golden sunsets]

Thanks for bringing up those kind of expenses later on in the teen years. I concede that expenses may increase as the season of life changes. Really don't even know how to spend that much in a year being how we've never been spenders in the first place. So we will.lesrn to adjust.allng the way. If the kids want extracurriculars, they either earn their own keep for their own spending.

Fortunately we come from a supportive family that offers cash gifts for bdays, holidays, etc and have a long train of hand-me downs for clothing.

I concur, that it's not really a financial thing, the numbers look solid.

It really does come to a decision of do I really want to retire. I like the thought of it, but when the kids are all in school, will I then be bored at home? Hopefully that means the house is kept in good order though.

Growing up, my folks didn't have high incomes, they worked manual labor jobs where they were on their feet for hours on end to sacrifice for their children's future being brighter than their own. They taught me how to save. But I only really saw my dad like once a week, and my mum four hours each night. Since I was on my own most of the time, I figured for my own family, I needed to provide my own kids with more time as the money stuff will take care of itself.

Since I've been earning $ for my time all these years a part of my identity was tied to being productive, creative and problem solver. Now I have this huge shift for where I am now. But scared to do it for long-term since I feel that I'm wasting the opportunity of future earning years (while fully knowing I don't need anymore $). So I need the insight of those who have lived and experienced more than I have.

My jaw dropped on your response regarding paying for the routine costs of raising a family of 4. You are worth $3.6M and you won't contribute toward the cost of extracurriculars? I'm getting the picture.

 

[Time2]

I'm not sure you have to worry about the kids, I expect, if they are aware of the world outside the family, they will be out as soon as they can.
$36k is poverty level, if a child can get one of those $15 an hour jobs, they will be at 2.44 times poverty level. Move in with a friend, and they are living the life of luxury.

 

[Figaro]

Well, lots of things beside real estate. Equities are loosely coupled to inflation with a delay factor. TIPS happen to be our strategy. I think they are highly underappreciated as defensive investments. People cry about a small negative yield but the total return on TIPS looks pretty good with any kind of inflation. Best held in a tax-sheltered account, though.

Illinois? IL will go bankrupt in some form and property-owning taxpayers will suffer. All citizens will suffer actually. I would suggest immediately departing for a state that does not have major public pension or other financial problems and that has minimal exposure to natural disasters, which are increasing in frequency.

You can count on the SS rules changing before you're ready to collect. But it will remain the only COLA-adjusted annuity you have, so IMO it should be maximized.

Well, as they say "Hope is not a strategy."


I think many of us retired at 10x our starting salaries. We would have called that ridiculous when we graduated college.

Food is specifically a huge risk. If the dollar declines in value by 20%, which is entirely possible*, virtually all commodity food rises by 25% because food is traded internationally. Soybeans, maize, meat, milk, ... all will go up. Together with aluminum, steel, rare earths, nickel, copper, ... Serious inflation will be devastating, not "ridiculous." IMO anyway.

*the world hates that the USD is the major reserve currency and that as a result we can use our banking system as a weapon against people we don't like. Our only salvation will be the length of time where the dollar continues to be the least-worse alternative. When we get knocked off our pedestal a devaluation of just 20% may be something we hope for.

Thanks, I was thinking that you'd probably mention TIPS, I've got to look deeper into that thanks.

I do have an exit plan from IL, my backup plan will be in action.in three years. All in IL know what a mess it is. But for retirees it's not too bad w/ the current income tax structure. If the only issue is prop taxes it could only go up so high. Chicago's economy is quite diverse so unlikely that we'd experience a Detroit collapse. Time will tell.

Regarding natural disasters I have always thought it's good to be located to a huge body of fresh water. If it all goes down like that, that particular commodity is what everyone truly needs.

If the dollar ceases to be the world's reserve currency and another country establishes it's soft-power dominance then all of us are in ruin then, early retired or not! If that's the case - time for relocation to another Canada.

 

[Figaro]

I'm not sure you have to worry about the kids, I expect, if they are aware of the world outside the family, they will be out as soon as they can.
$36k is poverty level, if a child can get one of those $15 an hour jobs, they will be at 2.44 times poverty level. Move in with a friend, and they are living the life of luxury.

They'll miss my cooking though! That will keep them home. Why move out when they could have that $15 job and stay at home for free?

 

[Figaro]

We retired in our early 40s with two young kids and re: what someone else said about expenses jumping up in the teen years, for us that didn't happen. Not every family is the same. We aren't the type to blow money on expensive clothing for teens and their activities weren't expensive; also, they were of an age to contribute if they had wanted to do something that would cost a lot.

Re: keeping a low profile, it was easier for us because we were self-employed to begin with so there was never a clear demarcation (for others) between working years and not-working years … but if you're comfortable using the old “doing some consulting” line, in my experience people don't probe much if you skim over particulars.

Thanks for that anecdote. I suppose I'll have to browse your posts now to find out how you did it!

 

[Figaro]

No, people are not saying he won't make it or can't it, some are asking if he is sure he has his numbers for the next 40 years nailed down. Asking if he is sure about his numbers and future spending plans is just a way of helping him verify his plans.



For example when you are busy working and taking care of 4 kids there is very little time for fun and hobby spending...maybe that's a budget add on.

Totally agree, anybody's plan is subject to change. We have to have pivot points and investment policies in place. It's really hard to nail down all expenses over such a long time period.

 

[Figaro]

My jaw dropped on your response regarding paying for the routine costs of raising a family of 4. You are worth $3.6M and you won't contribute toward the cost of extracurriculars? I'm getting the picture.

It's really what you value and what we want to teach our kids. You need to have some skin in the game. That creates perseverance. Otherwise they will make unwise decisions later in life (or w/ choosing a university/major). What other people fill their time with, we do not. I have no interest in shuttling my child to a soccer practice every weeknight and then all day weekend. We have alternatives like cooking together, strategy board games and reading. What we find interest in, others may not. All my kids love reading and learning - a day at the library is all they want now. In ten years, maybe something different, but what I'm reaching them is to be continual learners and weigh the cost of what they do.