willing but not ready...yet.

[HopefulHaole]

Hi. I stumbled upon this site a few days ago and wish I had discovered it years ago! I have been reading the milestones and many other threads and have a great respect for this community and wish to learn and improve my future and FIRE in 3 yrs! I am 45, happily married (DW is 43) with 2 children. I have had a plan (was really a dream, have committed to a plan for the past year, bought forever home) to RE or more likely SRE in my 40's (have set the date to January-April 2018, 48 yrs of age!) I have about $270k in a savings account that I am looking to invest, about $35k in IRA, wife about $35k in IRA, wife has a pension she can draw at age 60 (calculated/estimated to be $18k-$20k/year), our current home is worth about $160k (mortgage free, will put up for sale upon RE or SRE), I own the home we will retire to (owe $140k, zestimate $615k, warm climate with acreage) I own my own business (intend to sell for $250k upon retirement) and real estate that should sell for about $250k-$300k. My current salary is about $45k (but as the business owner I get end of year bonus, the money that the business made after all expenses and salaries paid [about $250k-$300k/year, projected next three years, 2015-2017] and pay taxes on it from earnings from business the next year by April 15), DW current salary is $46k which we live on and pay $1,000/month to my school loans and $1,000/month total into kids college funds until retirement (kids 10 and 12, probably $10k each in college funds now). Upon quitting her job she can cash out about $30k in unused vacation and sick leave to invest (not retirement contributions). I plan on w*rking part time (having 4 day weekends) and keeping our hands out of the cookie jar for 5 years (adding to but not taking away from). My wife will also w*rk another 3 years after the move to the forever home (to meet requirements of having 20 yrs of service so as to draw pension at age 60 rather than age 62). We will likely both take SS as soon as eligible, instead of waiting for an increase in the amount. Not sure how much it will be monthly but guestimate about $1,400 each. The forever home is currently rented and the rental income covers approx. 75% of its payment and expenses. It has a seperate downstairs living area that can be rented out for $800/mo when we live there to help cover expenses if needed. One parcel of real estate I own now has an outdoor advertising sign that has paid me $4k/yr for last 10 yrs. I am starting the negotiations to get it to $6k/year for the next 10 yrs and then have the rights to this lease income put into my name (licensing, easement or what ever legal terminology) before I sell the property so as to continue the rights to that income in perpetuity even though I no longer own the property. Not 100% sure on this but I believe it can be done.

I project to have 1.5M-2M in investments, cash, etc and have no mortgage! I am committed to making this 3 year plan work. Then I will be committed to making the money last the rest of my life! Firecalc calculated 100% for $50k annual draw down for 40 years on $1.5M.

Please feel free to comment, question or laugh.

 

[Meadbh]

Welcome to the forum!

What are your exoenses, current and projected?

 

[HopefulHaole]

Thanks for taking the time.

Current expenses are as follows:
$1,000/mo to school loans, which will be paid in full in 28 mos.
$500/mo x 2 to kids 529 plans for next 36 mos. $10k in each acct now, ages 10 and 12.
$2,000/mo towards forever home mortgage/ins/property taxes
$1,500/mo credit card, living expenses paid in full every month. Groceries, gasoline, restaurants, etc.
$150/mo avg electric bill
$50/mo water
$1,200/yr property tax current home
$1,800/yr car and home insurance
$0 mortgage current home
$0 car payment on 2013, 2007, 2006 cars
$80 directv
$0 cell phones (work)

Projected ER expenses are as follows:
$1,000/ health insurance?? Pay or penalty??
$200/mo electric
$100/mo cell phone
$90/mo directv
$400/insurance
$400/mo food
$300/mo gasoline
$200/ real estate taxes
$150/mo maintenance
$250/mo miscellaneous
$0 water/sewer/garbage
$0 mortgage
$ 400/mo entertainment
$100/mo clothing

$3,590/mo total
$43k/yr out of $50k allotted

 

[Philliefan33]

Two things jump out at me: I think you are underestimating your expenses after ER, especially since you would have two teenagers. Are they boys? I think you will have a tough time feeding a family of four on $400/month if two of them are teenage boys. Will the kids be involved in any extracurricular activities? They cost money -- for fees, equipment, lessons, travel.

The bigger issue is future college costs. $28k per kid in a 529 is a nice start, but it will not enough to fully fund many (if not most) college educations. Sure, you may get some financial aid, but as you know -- since you are still paying off your loans -- much of that aid is in the form of loans. If you would like to be able to give your children more affordable choices for their college education, you need either more money saved or more income when they are in college.

If I were in your shoes, I would plan on working at least until the two kids are pretty much on their own -- maybe another 10-12 years in your case. It just doesn't seem to me that you have a large enough nest egg to fund a 40-year retirement while still raising two children. (I know there are plenty of working families that live on 50K/year and do just fine -- but you have the ability to do a little better if you keep working)

 

[pb4uski]

I suggest that you run your situation through Quicken Lifetime Planner. It is included in Quicken Deluxe and higher versions. It leads you through providing for your kids college, social security, pensions, living expenses, etc and shows how close you are. It will also allow you to do what-if analysis around various assumptions. I think QLP would be useful to you since you situation has a lot of moving parts.

QLP is a deterministic planner, meaning that it assumes a steady investment return (which you provide as an input) and is fine for your base case plan. What I did was to look to QLP for my basic plan and then use stochastic planners (such as firecalc, and others) to stress test my plan.

 

[HopefulHaole]

Philliefan33,
Thank you for you respone. I am also concerned about miscalculating ER living expenses. I have 2 girls and the food budget is that low because the ER forever home has acreage in a warm climate with a long growing season and I plan on having a garden (Zen moments, hobby, satisfaction, food supply, teaching children). We live comfortably now (I always say to my wife that we live better than we have ever lived and still LBYM) and are willing to continue to LBYM later on, it is in our genes and we hope to pass it on! Today the kids are home from school and one is reading "Who moved my cheese?" and the other one is reading "Rich Dad, Poor Dad", at my request of course ; ). Hoping the 529 college funds grow before and during college to help pay the expenses. Plus I plan on SRE for 5 yrs to keep from drawing down on the nest egg until age 53. I looked at SS estimator on SSA website and our projected SS income would be $860 each, lower than I guessed (but I new my guess was a total wild @ss uneducated stab in the dark, Lol). I may well end up working longer than what my plans are but it will be part time at the forever home! I want to live a less stressful life and enjoy the family more. What's more important? More time or more money? We all want more of both, but they are usually inversely proportional. Stress makes me irritable and unkind to my family at times I want more Happy time and Leisure time Plus what I didn't mention is that I will be moving close to my parents! The kids and DW and I are looking forward to a closer relationship and more time spent together! That is time I will not be able to buy back no matter how much money I have worked and saved.

pb4uski,
Thank you for your advice. I will look into QLP, I will need some type of financial planning and budgeting software and this seems like a good place to start.

I will keep earning and grinding and planning for now and trying to improve upon my plan!

 

[HopefulHaole]

2016 Update

It has been about a year since I introduced myself to the forum members and will give a quick update. Current savings is $560,000.00 in cash, my ira, sep, and DW ira. $37,000.00 total in 529 for both DDs (contribute $1k monthly). I owe $0 on primary residence worth about $165,000.00. Owe $105,000.00 on forever home that is Zestimated a little over $600,000.00. I owe $16,000.00 in student loans (paying $1k monthly). Owe $0 on 2007, 2013, 2014 autos. I have accepted that I will w#rk thru the end of 2018 instead of beginning of 2018 and hoping that I don't have to adjust again to meet my minimum goal of $1.5M, no debt, no mortgage, but will w#rk thru 2019 if I must. Trying to keep chin up and enjoy life, family and experiences now while planning and working toward a nice future. Have a great day.

HappyHaole

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[Golden sunsets]

2016 Update It has been about a year since I introduced myself to the forum members and will give a quick update. Current savings is $560,000.00 in cash, my ira, sep, and DW ira. $37,000.00 total in 529 for both DDs (contribute $1k monthly). I owe $0 on primary residence worth about $165,000.00. Owe $105,000.00 on forever home that is Zestimated a little over $600,000.00. I owe $16,000.00 in student loans (paying $1k monthly). Owe $0 on 2007, 2013, 2014 autos. I have accepted that I will w#rk thru the end of 2018 instead of beginning of 2018 and hoping that I don't have to adjust again to meet my minimum goal of $1.5M, no debt, no mortgage, but will w#rk thru 2019 if I must. Trying to keep chin up and enjoy life, family and experiences now while planning and working toward a nice future. Have a great day. HappyHaole Sent from my SM-G900V using Early Retirement Forum mobile app

Hi Hopeful; I'll chime in here regarding your goal of $1,500,000. You have $560,000 now (can't count the 529's) plus the anticipated sale of your current primary home at $165,000, which after broker's commission would net maybe $155,000, so that equals 715,000. How do you get from there to $1,500,000 by the end of 2018? You're not counting your equity in your forever home, right? With a retirement horizon of 45 to 50 years your withdrawal rate should not exceed 3% perhaps less. Also why do you still carry student loans?

 

[Nodak]

Welcomr aboard.

 

[HopefulHaole]

Golden sunsets; That is a good question. No, I am not counting equity in the forever home. I have a small rental house that I will be selling and when I RE or SRE, and I will be selling my business entity and business real estate. Admittedly, this may or may not get me to my minimum goal of $1.5M. That is why I may need to OMY thru 2019, though I hope not. Yes, I intend to use a SWR of 3% which is $45k/yr (plus working on a Billboard lease on the business property that will that will pay $10k in perpetuity). But in all honesty I intend to w#rk part time (1-2 days/wk) and slowly transition to full retirement over a few years (up to 10). Unfortunately, I am still carrying student loans. I have been paying on the student loans since about 1999. I had a balance of about $100k refinanced early on at a rate of 3.64% I believe. There were years that I paid more than the minimum, In fact I paid ahead then received a letter that no payment was due for 2 yrs. So I stopped paying for a couple month that turned into a year and a couple of months (foolishly). Then when I started making payments again, I made payments for a year or more that turned out to be only interest payments "because interest was accruing while I was not making payments and the interest has to be paid before applying payments to principle", at least that is what they told me when I called last week (after reviewing the account payments online). I called to ask why the entire payment went to interest for over a year. But the main reason I did not pay it off was low interest rates and in the event of my death, my wife or family is not responsible for paying the balance, unlike car loans, mortgages, business loans. So it was least on my priority list. It still is.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[ugeauxgirl]

Welcome. I didn't do any calculations with your numbers but did want to chime in to say that I also have young children- boys aged 9 and 12. I am planning on retiring in 2-4 years. 35 and 45 K saved for their college educations and I have intentionally undersaved a bit for the cost of a state university education here. I suspect we will have plenty of money to make up the difference if we want to, but I don't think we want to. My parents saved an amount of money for me and my siblings to go to college on and told us if there was anything left we could HAVE it- if we ran out, we were on our own. All of us have degrees- I had some left over which along with summer jobs I used to pay for my graduate degree. My sister ran out just in time for graduation, and my brother ended up with a loan or two but also a degree. I can tell you that none of us considered our college education a 4 year party. I have already explained to my kids that same deal is available to them. As they get older, I will show them estimated college costs and what their money will buy at each university and how expensive debt can be. I am not delaying my retirement for the kids, in fact I'm looking forward to spending more time with them. I just came up with the fantastic idea of renting a cabin in Colorado for a month in the summertime to escape the lethal Alabama heat the summer after I retire...

 

[HopefulHaole]

Ugeauxgirl; I think that is a great plan for college savings. Thanks for your input.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[HopefulHaole]

2017 Update

It has been about 2 yrs since I introduced myself on this forum and about a year since my last update.

Me- 47 y/o
Wife-45 y/o

Currently $720k in after tax savings and $115k in retirement accts (IRAs and SEP).

Plan to reach $1.5M minimum by 6/2018 - 12/2019 by continuing to work until then and selling business, business real estate and primary residence.

Primary residence is mortgage free, valued at about $170k.

Forever Home in warm climate with $64k on mortgage (my only debt other than $5k on cc), and valued at $620k.

My school loans PAID IN FULL! (Happy Dance!!!)

529s about $26k each for both daughters, ages 11 and 13

Owe $0 on 2007, 2013, 2014 vehicles.

Minimum threshold for RE is $1.5M with 3% SWR.

Signed contract for ongoing billboard on my business real estate for $8,500 minimum - $10,000 per year avg, adjusted 3% annually for inflation. Has easement on deed to continue these payments to me even after selling real estate.

Will move to bottom floor of Forever Home and rent out the top floor for $1,800/mo. (Currently rented for that amount)

Hoping to be RE in June 2018, but willing to stay until Dec 2019 if needed.

Estimating $800/mo when eligible for SS, similar for wife maybe a little higher.

Wife will be eligible for about $1,500/mo non cola pension, at age 60 or 62.

Wish all of you the best. Live long and prosper.

HopefulHaole

 

[broadway]

Wife will be eligible for about $1,500/mo non cola pension, at age 60 or 62.

How many more years does your wife have to work before vesting in the pension?

I am always envious of a pension. non-COLA or COLA.

 

[Ready]

Just catching up and reading your original post...one question:

If your business is generating $250K-$300K in profit, how could it only be worth $250K when you sell it?

 

[HopefulHaole]

broadway, I believe she is fully vested. She is a public school teacher. If she has 20 yrs of service she can start pension at age 60. If she has less than 20 yrs of service then she can start pension at age 62. She will complete her 17th yr of service in June. She has about a year of sick leave and personal time saved up. Depending on whether WE throw in the towel in June of 2018 or 2019 will determine whether she can start pension at age 60 or 62. Would love to start pension at 60 but will not hang in a year longer to accomplish this if we meet our minimum goal of $1.5M to FIRE in June 2018.

 

[HopefulHaole]

Ready, I am giving a rough estimate on a rule of thumb for valuation of a professional service "business". It may be sold independent of the real estate on which it is located. I have a real estate developer interested in the real estate, but would sell to whom ever would write the largest check (most likely the developer because the real estate is in a good location but the building is aging and in need of updates and repairs). If I can get a good price for the real estate then will likely FIRE June 2018, if not then i plan to work thru 2019 to make up the difference and FIRE Dec 2019 and then sell the real estate and business.

 

[exnavynuke]

I'm not sure if you're aware or not, but the SS website estimates assume you continue to work until you start taking SS. There's a calculator you can download and input your anticipated future earnings (including $0 years) and see what that changes. For me, ERing in my late-40's dropped my age 62 anticipated SS payments by almost 1/3rd. If you haven't taken that into consideration, you may want to look into running that calculator yourself. Looks like you have a pretty solid plan though, congrats on the progress

 

[HopefulHaole]

exnavynuke, yes I have adjusted our expected SS benefits based on early retirement with $0 yrs calculated into the benefits. Thank you.

HopefulHaole

 

[evilanne]

HopefulHaole,
The one thing that really would bother me from one of your early posts:
"Projected ER expenses are as follows:
$1,000/ health insurance?? Pay or penalty??"
Are you seriously considering not having health insurance?

 

[HopefulHaole]

evilanne, that is a good question. I am a veteran and qualify for coverage thru the VA, I guess; though that would leave no insurance for wife and kids. Maybe I would have VA health care and the wife and kids would be cheaper on a policy. I am not sure yet. I have to think about it and do the math, but probably eventually get insurance. I guess I am not as young as I think I am.

 

[readytofire]

Thanks for updating us on your situation. Good luck!

 

[TrophyWife]

Just a side note on the college savings. We chose not to bankroll our kids college experience. We gave them each 20,000 over the course of 4 years. One son stayed local, chose community college and then a state University graduating in 3 years with no debt. He used his "college money" as a down payment on a rental property that he will eventually move into.

The other chose a very expensive private school. He joined ROTC in college. They paid for school, he used his money for housing at the expensive private school. He graduated with no debt and he's an Army officer. He chose to go reserves and works in the private sector making good money. No college debt.

There are many ways to do college without having a big 529 fund. We thought it was more important in our family to have a stay at home parent. We did have frequent talks with our kids about this as they grew up so there would be no shock factor that we would not be paying for college.

Did I wish we could have paid for college? Yes, and I'm sure I cried about it a time or 2. We live in a very academic area of the country. But working together to come up with other solutions to graduate debt free was very character building for all of us.

 

[HopefulHaole]

readytofire, your welcome and thanks for the well wishes!

TrophyWife, that sounds like a good plan. I definitely believe in teaching my children to earn what they want and manage funds wisely! Thanks.

 

[HopefulHaole]

2018 update

Me 48
Wife 46
Daughter 14
Daughter 12

Wife Salary $50,000

My income avg $300,000 before taxes

Savings and investments $865,000

Wife's unused leave $53,000

$52,000 emergency fund

$69,000 529 college fund for 2 daughters

$8,500 annual income from billboard lease

Home value $190,000 mortgage $0

Forever home in warm climate value $740,000 zestimate, mortgage $0

2007, 2013, 2014 vehicles paid in full

Taxes paid up to date, (had been a year behind for many years)


Only debt is about $4,000 on personal cc and $8,000 on business cc

Health is good except over weight and OMY Syndrome!

Possible change in employment making for less stress but less pay, must investigate more and decide.

Possibly retire end of 2019 and move to forever home or maybe OMY!