Plan for Exit 2024

[madman]

Q2 2023 update

- We finished Q2 at all time high of $2,413k, 80.4% of the original target, booked green quarter with +$140k and +$251K YTD thanks to the market run up in the June.

- Cash position is still red but we are closing that gap slowly.

- My 401k contributions got capped for HCE, will be trying to bump up our after tax savings after we fund our Roth IRAs for this year.

- Due to inflation and very red 2022 we are definitely behind, to retire in 4 Qs as we planned originally is out of the questions right now, will see if 6 Qs will get us to the finish line, that still can put us into the class of 2024

- We have 6Qs (?) to go...

We are still running similar numbers. I am $2.56M still working towards $3M with a goal by May 2024. Up ~200K so far YTD. Market is still unpredictable but I am staying fulling invested in stocks hoping to hit the goal for next year. I thought there would be a recession by now but market seems to keep running so will ride it and hope market keeps doing opposite of what I was expecting.

 

[Exit 2024]

Q3 2023 update

- We finished Q3 down at $2,378k, 79.3% of the original target, YTD is still solid green, looking to use current downturn to move some bonds into stocks again.

- Cash position moved to green, we are recovering after big spend on house improvements last year, but now looking at the roof replacement in Q4

- Continue to contribute to the max allowed to both 401ks and will max out our HSAs this year.

- With student loan payment about to resume child decided to take easy road through IBR plan, so that eliminates all possible help from our side to pay this thing off. So now we can increase savings or splurge more on some travel as this part of out budget spending is eliminated.

- As we both work remotely, decided to try "work and travel" for the first time, went to the Utah for 5 weeks, trying to get a feel of semi-FIRE so far so good, still working full time though but from the fun location that we explore in the evenings and on weekends

- We have ()Qs to go...

 

[Exit 2024]

Actuals without RE vs High and Low targets.

Below Low target by a lot
Below High target by even more

Added linear projection based on last 4 quarters results, of cause it will not go exactly this way every Q, just wanted to see where we could fall in case we will be able to keep that pace.
So it looks like end of 2025 is the earliest for Low target.

Image is clickable

 

[tbis]

Q2 2023 update

- We finished Q2 at all time high of $2,413k, 80.4% of the original target, booked green quarter with +$140k and +$251K YTD thanks to the market run up in the June.

- Cash position is still red but we are closing that gap slowly.

- My 401k contributions got capped for HCE, will be trying to bump up our after tax savings after we fund our Roth IRAs for this year.

- Due to inflation and very red 2022 we are definitely behind, to retire in 4 Qs as we planned originally is out of the questions right now, will see if 6 Qs will get us to the finish line, that still can put us into the class of 2024

- We have 6Qs (?) to go...

Great update Exit. I am still rooting for you (especially since it is a little like rooting for myself!). As I noted a few posts back I exited a little prematurely last December, but had severance through August. So September was the first month w/o any income - It just got real!!! The market is, of course very tenuous and I'm already in the "should I look for another job?" "What about some contract work?" mode. As bad luck would have it, I have some darn orthopedic issues I am dealing with so I have that "worry" as well...sheesh, this has been worse than "working" so far. Hoping to get on the other side of it soon. We'll see!

 

[Exit 2024]

tbis, Thanks for the support and encouragement. I am rooting for you also, hope you would not have to go back to the salt mines. Health issues are always no fun, wishing you fast recovery and get to the enjoyable part of FIRE. Hope I can join sooner than later.

 

[brett]

I stopped beating the numbers to death a few years prior to retirement. We had been where we wanted to be financially for a few years. It became pointless to review and review again. We were there with a cushion.

Instead my financial focus was how I would exit leaving as little money on the table as possible. Stock options, pay for performance bonus payments, golden handshake.

We spent the last 18 months or so making decisions about our first year of retirement. Finances were only part of the puzzle. We viewed them as an enabler vs an end point.

A year prior we had decided to sell our home on retirement, downsize, store what was left for a year, and travel internationally. A week after getting a package we had the home staging/decorator in and several real estate people. We both had bucket list items. My spouse always wanted to go to Africa so that went to the top of the list.

Completely homeless for a year. Other than early retirement it was (in hindsight) the best retirement decision we could have made.

During that travel year we would decide where we wanted to live, what type of accommodation, and whether or not we wanted to buy a vacation home in a warmer climate. That was the extent of it. We purposely did not make any firm decisions on retirement.

One surprise...our thoughts going into that year were very different than at the end of that year. Everything changed, right down to our eating habits. It seemed like overnight our focus shifted to experiences vs things. To a certain extend both of out outlooks on life changed. We began to realize that time with good health had an infinite value.

 

[tbis]

tbis, Thanks for the support and encouragement. I am rooting for you also, hope you would not have to go back to the salt mines. Health issues are always no fun, wishing you fast recovery and get to the enjoyable part of FIRE. Hope I can join sooner than later.

A few more details on this "trial run" year I've had which you may find valuable (if a bit discouraging):

• Healthcare (hidden cost) - As I mentioned, I've had a few healthcare issues. This has obviously cost me money (I will likely hit my max out-of-pocket this year - $5K - beyond premiums). However, it has also cost me money in that I've had to pay some folks to do stuff around the house that I would have normally just done myself...a hidden cost. I think we all expect this in our late 70s or 80s...but 50s? Not so much.
• Expected Infrequent Expense Timing - So we all know we will have various big repair bills for cars or our houses, but I managed to encounter a perfect storm this year for my house. I have $31k in home repairs (2 A/C replacements and a slab leak) and the year isn't over yet! I have those things sort of "averaged in" to my budget, but having them hit "all at once" is pretty sobering. I even have a line item in my budget called "Unexpected Expense" with $5K allocated to it...so far, my house has laughed at that this year....ouch!
• Inflation and More - So I am seeing the effects of inflation against my planned budget numbers and can see I will need to bump it up (which doesn't help my Firecalc score of course). However, there have been some "knock on" effects from the Pandemic supply side shortages that can make that percentage MUCH higher for a given item. The aforementioned A/C replacements I did would likely have been 30-40% less had they been done a couple of years ago. I am seeing contractors simply charging whatever they want for various services. Indeed, we had hoped to do a home remodeling job this year or next, but the quotes (if you can even get someone to bother responding) are ridiculous. I fear only a recession will help to "correct" this...and that likely means higher interest rates and bigger hits to equities.

I am obviously VERY glad I was receiving severance for much of this year as w/o it, I'm sure I would have been freaking out (more than I already am). Heck, we almost bought a car earlier this year and decided to hold off...glad I did!

Statistically, I shouldn't hit a ton of these big expenses again next year, but I am definitely very cautious. I could see taking on some contract work (even though I loathe the thought of it), just to give me some more buffer...my own version of OMYing.

The roller-coaster continues!

 

[livingalmostlarge]

I have dreamed watching this thread. The one sticking point for us is I'm not sure how no HSA will affect us. We are similar in numbers but slightly different skew.

Also where to put college savings? And I don't know how to balance no HSA. And higher home equity especially since I think we'll sell our house

 

[Exit 2024]

Q4 and full 2023 update

- We finished Q4 at $2,581k, 86% of the original total NW target, booked green quarter with +$203k but all time high gain for the full year +$419k. We added to our NW $87k during the year, rest was pure portfolio growth

-For 2023 income I will not be considered HCE, so my 401k contributions will be maxed out in 2024. We still plan to max out all retirement accounts and both HSAs, and this the first year that we will be eligible for HSA catch up.

- Still need to max out HSAs for 2023 and also need to contribute to the Roth IRAs for 2023. I did back of the envelop calculation of our AGI for the last year and we may be able to contribute without using back door approach, great news on one hand, but it also shows that our income is not keeping up with inflation adjustments of the IRS limits

- RE #1: we still in continue with house updates, it is slow and pricy, but we will hit all major repairs and updates before FIRE.

- RE #2: condo was rented for the full year, very nice to have this extra income every month. But renter just moved out and we up to see "the damage"

Overall we had a pretty good financial year, with 4 large travel expenses (2 were unplanned overseas trips due to family emergency) and continues spending on RE#1 updates we still hit all time high in total NW and in Investable assets alone.

 

[Exit 2024]

Actuals without RE vs High and Low targets.

Below Low target but slowly catching up
Below High target by a lot and now it is our main target to achieve

Linear projection based on last 4 quarters shows that we potentially can hit Low target this year and High target in 2025, but of cause all will depend on the market and it is at the previous top right now, and our job stability which looks ok, but things in IT sector are changing rapidly, so I feel we may hit a rough patch again. Will see ...

 

[Exit 2024]

brett, thanks for sharing your experience, it is very interesting approach to go homeless and we actually talk about something similar to kick off out ER, but instead of selling the house may be to rent it out. Will see if that is something that we can pull off as soon as we will get close to the number. At this point we are behind the schedule even for low target and feeling we need to focus on getting there first.

 

[Exit 2024]

tbis, as always appreciate your feedback. Hidden costs- that is something I would not consider if not your comment. Thank you for that.

One time large expenses and inflation - both of those we are already trying to address, first one through making all major house repairs before the FIRE, and second through increased target.

All 3 are very valid points and thanks again for giving your owns examples to reinforce the need to get them covered.

 

[Exit 2024]

livingalmostlarge, lack of HSA is not a deal braker, it in nice to have but you can always cover healthcare expenses out of other accounts, not as tax efficient but still not a huge problem in my books.

College savings - we did not have 529 account and did not dedicate any accounts for that with rationale that we will help with student loans repayment out of cashflow and will consider that as monthly expense same as taxes.
And we are started payments after child's graduation hoping that with our help loans will all be gone in 4-5 years. Long story short, child decided to go on IBR repayment as she works for non-profit hospital and will be eligible for forgiveness after 10 years. So all extra payments would be a waste and she requested all her (and ours) money back that were paid since start of the Covid deferment.

Point of the story - college money is fungible asset, they are yours till they are paid or you may find out that you will never use them for college as you are planning now. You can have separate account for them and list on separate line but to include or not include is personal choice, same as equity in real estate.

 

[Exit 2024]

Q1 2024 update

- We finished Q1 at $2,748k, 91.6% of the original target, booked green quarter with +$167k and that is our new all time high

- Cash position is green, but went slightly down as we used some cash to fund Roth IRAs and also parking some amount in the Vanguard taxable, their Federal MM fund has 7days SEC yield as of 03/28/2024 at 5.28% vs 4.25% at our saving account.

- Investment did very well this quarter, thanks to market hitting all time highs. We still contribute max to all tax-deferred accounts, I am waiting for HCE cap being removed form my 401k that I can increase my contributions to the IRS limit.

- In anticipation of the FIRE in 1-2 years and our planned increase in travel, I started to review all our accounts for possible consolidation and also beneficiary designation updates. Plan is to have all set the way that if something happens to me, or to both of us, spouse and/or child will have ability to get all assets without going through probate. I will make additional post about my findings as some are really surprised me.

Next step will be to create a binder with all assets listed and instructions on how to get them and what to do with them. For example for child - inherited Roth IRA need to be drained completely by 10th year of the owner's death. Because there will be no any tax liability - take all money out in the year 10, put to the taxable account at Vanguard or Schwab, invest into XXX. And so on.
If anyone have example or template for such instructions - please share

 

[Exit 2024]

Actuals without RE vs High and Low targets.

Below Low target but catching up
Below High target still by a lot and now it is our main target to achieve

Linear projection based on last 4 quarters shows that we potentially can hit Low target this year and High target in Mid 2025, but of cause all will depend on the market and it is at the all time high right now. Tentative FIRE date is end of 2025- Mid 2026.

 

[tbis]

Nice progress for sure! I'm still "retired", but TBD on whether I'll remain that way. The bigger ticket "one time" items really are crazy expensive these days. As an example, a friend of mine got a quote to have hardwood floors installed back in 2022...it was a pricey $19k. They delayed to this year and the same floors are $35k!!! I had planned to have all the "big stuff" done on out house before I retired, but that didn't happen...now I am loathe to pull the trigger. May have to wait for the inevitable recession when prices will hopefully come back down if folks are a little more desperate for business...or I go back to work to fund it all!

 

[Al18]

FYI you could probably retire in 2024 and still hit your target NW next year. If you have some assets in stocks, they will likely appreciate faster you can spend the money.

 

[Exit 2024]

tbis, I hear you ! And hopw that you still can stay retired.

As I said before we are doing some house improvements and repairs before retirement and I agree - prices are raising way faster than official inflation. We did a lot in the last 3 years but still need to renovate 2 bathrooms and replace kitchen before we call it quit, those definitely will affect our retirement date as price tags that we planed for about 3 years ago are not even close to what it cost today. And we did not receive any pay adjustments due to inflation, spouse got total for 3 years 5% increase and I got 0%. As a result 2023 was the first year in a long time that we do not need to do Back door Roth IRA, our AGI fell below the limit.

 

[Exit 2024]

FYI you could probably retire in 2024 and still hit your target NW next year. If you have some assets in stocks, they will likely appreciate faster you can spend the money.

That would be ideal scenario but we do not have the crystal ball, unfortunately, and cannot predict if market will continue to move up. We already have non-zero risk to retire into the recession as I do not believe into "soft landing". I would prefer to error on the safety side, although concept of "appreciate faster you can spend the money" is fascinating one. I see a lot of posts on this board where people after 10+ years of retirement have NW a lot higher than on the date of FIRE, some times it is double the amount. That would be a great problem to have

 

[tbis]

tbis, I hear you ! And hopw that you still can stay retired.

As I said before we are doing some house improvements and repairs before retirement and I agree - prices are raising way faster than official inflation. We did a lot in the last 3 years but still need to renovate 2 bathrooms and replace kitchen before we call it quit, those definitely will affect our retirement date as price tags that we planed for about 3 years ago are not even close to what it cost today. And we did not receive any pay adjustments due to inflation, spouse got total for 3 years 5% increase and I got 0%. As a result 2023 was the first year in a long time that we do not need to do Back door Roth IRA, our AGI fell below the limit.

Yes, we also have 2 bathrooms to remodel, flooring for 3 bedrooms and a refinish of our entire downstairs flooring. Last year I had to replace both our our A/C units ($26K!) after milking them for decades (note: I even got my HVAC license - online - just to buy refrigerant!). I haven't even gotten estimates for the remodels as I know it will be brutal. I fear only a market crash and recession will "fix" this....and that will actually do MORE damage to my "staying retired" prospects than the remodel costs! If anything though, this shows what retiring a "little bit too early" can feel like - it isn't "relaxing". I think I would feel very different if I had entered retirement with the big ticket items (new car, remodeled house, new roof, etc. already bought/completed and paid for). I can tell you this...the longer I am out...the more I loathe the thought of going back. Soon, I'll just be one of those old guys no one wants to hire...if I'm not already!

On the upside, we are just 4 years away from my wife's first SS payment!