Anyone ever consider if ER is worth it?

[sergio]

We've always been big savers, but I've recently started considering whether it's worth it or not. We are in our early 30s, have $250k saved for retirement in a mix of accounts, and no debt other than a 15-year mortgage (14 years left). Two kids (1 and 10). We have about $45k in our emergency fund.

My wife only works part-time weekends so she can care for our 1-year old. I currently max out my 401k, HSA, and push hard to max out my Roth and my wife's spousal Roth. Plus $1-2k/year in a 529. We even managed to squeeze $6k into a new taxable account that we opened last year.

Sometimes I'm tempted just to say "screw it" and reduce my 401k contribution to the match minimum, max out the HSA, put less money in Roths, and refinance to a 30-year mortgage. That would free up probably an extra $1500-2000/month which would increase our QOL by an insane amount - 2 nice vacations a year, a new car, less stress when eating out or dealing with unexpected expenses. All without any debt. Maybe I could even cut back to 80% time until my 1 year old is off to pre-school.

Chances are we'd still have a lot of money left over.

There's always the thought in the back of my mind that maybe the stock market will encounter a Japan-like situation, or health issues crop up just as we're getting ready to retire. It would suck to think that we spent our prime years scrimping for nothing.

Anyone else have any doubts like mine?

Thanks for your time.

 

[RobbieB]

We were never "extreme" savers and investors. No MMM frugality. But then I was never thinking of quitting at 50 even. Constant scrimping was not for us.

 

[Walt34]

There's always the thought in the back of my mind that maybe the stock market will encounter a Japan-like situation, or health issues crop up just as we're getting ready to retire. It would suck to think that we spent our prime years scrimping for nothing.

My suggestion would be to discuss this alternative with the folks at the nearest homeless encampment and see what they think of the plan.

 

[Aerides]

Balance. No point spending 30 years of your life being miserable to improve the next 30. And depending on your career, your earnings may increase over the next 15-20 years as well. For us, socking it away became a lot easier in the last 10 years before we retired. But we never had a set age or date in mind either.

A 30 year mortgage can still be paid like it's 15, or 20 - you get options that way. I wouldn't consider cutting back your hours below a normal work week, that sort of thing can crimp your future potential.

 

[Z3Dreamer]

Balance, my friend. Your QOL must be sustainable for you to survive another 15 to 20 years of saving.

Some of the things that helped us survive: every so often go by that Mercedes dealership and sit in their nicest sports car. Then say to yourself: I could have this if I wanted it bad enough. Then drive away in your 10 year old Corolla.

DW and I had a weekly date night where we would go out to a nice restaurant - without kids.

At some point we looked at things that were eating up our time but not saving much money. And tried to eliminate them.

Weekend getaways with or without the kids. Knock off early on Friday, drive somewhere 2 hours away. Come back Sunday evening.

These are things that helped us. Still I feel your pain and remember mine.

 

[FlaGator]

We've always been big savers, but I've recently started considering whether it's worth it or not. We are in our early 30s, have $250k saved for retirement in a mix of accounts, and no debt other than a 15-year mortgage (14 years left). Two kids (1 and 10). We have about $45k in our emergency fund.

My wife only works part-time weekends so she can care for our 1-year old. I currently max out my 401k, HSA, and push hard to max out my Roth and my wife's spousal Roth. Plus $1-2k/year in a 529. We even managed to squeeze $6k into a new taxable account that we opened last year.

Sometimes I'm tempted just to say "screw it" and reduce my 401k contribution to the match minimum, max out the HSA, put less money in Roths, and refinance to a 30-year mortgage. That would free up probably an extra $1500-2000/month which would increase our QOL by an insane amount - 2 nice vacations a year, a new car, less stress when eating out or dealing with unexpected expenses. All without any debt. Maybe I could even cut back to 80% time until my 1 year old is off to pre-school.

Chances are we'd still have a lot of money left over.

There's always the thought in the back of my mind that maybe the stock market will encounter a Japan-like situation, or health issues crop up just as we're getting ready to retire. It would suck to think that we spent our prime years scrimping for nothing.

Anyone else have any doubts like mine?

Thanks for your time.

Depends on your priorities...…

ER was never our goal, but FI was. Hitting that mark allowed me to quit working at 55 and finish raising our kids after DW died. The more substantial finances you have, the better your options.

Understand your thoughts, though. Lot of people around us spent money on fun things and I occasionally thought how nice that would be. Fiance' lived very comfortably-cruise, expensive vacations, horses, etc. Did that until her ex spent them into BK. She got the house and her 401k in the divorce and her ex is broke. There wasn't anything left by then.

There is probably balance between where you are and the alternative you describe. Maybe look for that?

 

[bigcmagor]

If your scrimping leaves you feeling as though you aren't living your life, perhaps you are too aggressive with it. On the other hand, hopefully you will reach your fifties when you will be thankful for your earlier sacrifices that will then provide peace of mind as well as employment/retirement options.

Balance in all things.

 

[OldShooter]

Nothing in life is certain except uncertainty. One of the things I do in my Adult-Ed investing class is to put up "pop quiz" slides to make a point. Here is one:

You’re 75 years old, healthy, and reviewing your financial situation. Which would you prefer?

A. You find that you’re running out of money.

B. You find that you’ve saved more money than you really need.
​

The point, of course, is that a mistake in saving has very asymmetric consequences. So be careful as you consider what to do. There are a lot of financial settings between "full speed" and "stop."

 

[nvestysly]

I would suggest "stay the course" but I can certainly imagine that loosening things up a bit may help you feel less constrained.

DW and I never had a 15 year mortgage. Instead we always opted for the 30 year to get the lower payment. We did always have sufficient down payment (equity) to avoid PMI. Even though we had the 30 year payment we always paid extra in order to essentially make it a 15 year loan. However, knowing that we could step back to the 30 year payment gave us some breathing room.

There were a few times when we weren't maxing out the 401(k) because we needed a bit of breathing room but we got back to maxing it out as quickly as possible. Keep in mind that back in the day the maxing out option was not nearly as large an increase over the basic contribution as it is today.

In terms of dollars you have more saved at your age than we did but that ignores inflation. Maybe when you put our dollars in terms of dollars today it's about the same.

There were certainly times when we felt all the saving and investing we were doing wasn't making much headway. But at some point we realized the dollars were doubling every 7 years or so. Granted we were putting lots of money in, but when $250k becomes $500k and then $1M it's a good feeling.

Staycations, local/regional vacations might be a good way to feel like you've increased your QOL without letting go of your saving/investing habits. I grew up with staycations, although that phrase didn't exist at the time, and I don't feel like I was deprived in any way. We don't have children but have lots of friends that do, and the folks who travel locally, exploring the state/region have every bit as much fun as those who go snow skiing, go to Disney World, go to Europe, etc.


On edit: If we had the opportunity to go back and do something differently, it would be to put a similar amount of savings/investing into taxable accounts as we put into tax-deferred accounts. By the time we retired we found ourselves being heavy in the tax-deferred accounts and a little light in the taxable accounts. It worked okay for us and using the 72(t) SEPP rule allowed us to access tax-deferred money without penalty.

 

[iloveyoga]

I never even thought of such things in my early 30's.

 

[CardsFan]

Balance, my friend. Your QOL must be sustainable for you to survive another 15 to 20 years of saving.

Some of the things that helped us survive: every so often go by that Mercedes dealership and sit in their nicest sports car. Then say to yourself: I could have this if I wanted it bad enough. Then drive away in your 10 year old Corolla.

DW and I had a weekly date night where we would go out to a nice restaurant - without kids.

At some point we looked at things that were eating up our time but not saving much money. And tried to eliminate them.

Weekend getaways with or without the kids. Knock off early on Friday, drive somewhere 2 hours away. Come back Sunday evening.

These are things that helped us. Still I feel your pain and remember mine.

^^^This.

For the most part, we maxed out 401k and IRA contributions, and then, the rest of the money was available to spend. If we didn't spend it all, it got invested. So, in my mind, the $6k/year you are investing after tax, is fair game.

With 2 young kids, elaborate vacations can be more trouble than fun. When our son was small we took a lot of long weekends (camping in the Berkshires, or off season on Cape Cod, they were both less than 3 hours away)

Also, nothing wrong with a 30 year mortgage, just don't keep refinancing into more 30 year mortgages.

One last thought. Don't focus on an age to retire. It's fine to target it, but don't be obsessed. We targeted 55, but the Great Recession got in the way. So, it moved to 60.

Bottom-line: You are young (younger than my son). Have some fun, just don't go crazy

 

[pb4uski]

It is a delicate balance between living for today and saving for a financially secure tomorrow. I had a set amount of savings, initially to maximize our match (free money) and then later when we had more income we saved more.

We spent pretty much as we wanted but were value hunters... we didn't mind spending money on something that we wanted but we wanted a good deal/bang for the buck.

Quite often our checking account would get too much and I would transfer some money to our Vanguard taxable investemnt account... but it was more because I didn't want that money languishing in low interest savings or checkking.

I see that same dilemma with DD/DSIL... they are good savers and sacrifice some but also spend some too.

This whole balance thing was difficult for me in that I had a great-uncle who scrimped and saved and sacrificed "for their retirement"... then successfully retired and died while mowing his lawn six months later... and I had decided that I didn't want to be that guy.

Perhaps you split the difference.... target a little lower savings... add $1k a month to your spending to improve your quality of life if you decide that you are scrimping too much.

 

[Dtail]

As mentioned, balance is the key.
I was lucky to be a high earner, so always LBYM but didn't do it to the extreme, as was never thinking about FIRE in my 30's.
I would have invested and saved differently had I known all the things I know now.
So again balance is the key.

 

[6miths]

Nothing in life is certain except uncertainty. One of the things I do in my Adult-Ed investing class is to put up "pop quiz" slides to make a point. Here is one:

You’re 75 years old, healthy, and reviewing your financial situation. Which would you prefer?

A. You find that you’re running out of money.

B. You find that you’ve saved more money than you really need.
​

The point, of course, is that a mistake in saving has very asymmetric consequences. So be careful as you consider what to do. There are a lot of financial settings between "full speed" and "stop."

+1

Very sound advice and a simple, and thus great, slide to get it across.

And I agree very much on balance but err on the side of 'excess' savings and recognize that we live in a very consumer driven society where credit is relatively easy to come by and many folks are 'big hat, no cattle'.

 

[Golden sunsets]

In 8 years your oldest will be ready for college. Will you have the funds in his/her 529 to foot the bill at your present rate of saving?

Having $300,000 in savings and emergency funds in your 30's doesn't strike me as being in a stellar position. Good on you for having a 15 year mortgage. I would stick with that, continue to max out your retirement funds, funnel enough into the 529's to cover the cost of your children's educations, add to taxable accounts enough to stash some serious after tax cash in investments and THEN, consider expanding the vacation/frills budget. If the DW goes back to work once the youngest is in school, it will help to accomplish the live well now and live well later goals.

In answer to your question should you slow down on the savings rate, IMHO the answer is NO. YMMV

 

[RunningBum]

There's always the thought in the back of my mind that maybe the stock market will encounter a Japan-like situation, or health issues crop up just as we're getting ready to retire. It would suck to think that we spent our prime years scrimping for nothing.

I agree with others on the balance suggestions.

I don't get the part I quoted above. You're going to be in better shape for anything like the above with more money saved than less. It won't be for nothing. If you die at that point, sure, it's gone, but your real problem is that you're dead, not that you scrimped.

Sounds like you need to back off the saving some and live a little. Probably don't back off a lot. But I don't have a real picture of what your life is like.

 

[Fermion]

ER is definitely worth it if you don't have any kids.

 

[travelover]

Early retirement is terrible. Keep working. Save yourself while you still can.

 

[The Cosmic Avenger]

Yes, don't forget to build in rewards for saving so diligently. Also, you are doing more than I was in my early 30s, but I started around then, and by 40 it became a lot less painful to max out our retirement savings. Your incomes may very well grow, in which case you'll start to get more breathing room. Don't forget, in 14 years you'll suddenly have a LOT more disposable income!

 

[socca]

We've always been big savers, but I've recently started considering whether it's worth it or not.

If you currently like your job, and if you can confidently predict that you will continue to like your job until your retirement date, then modifying your budget to increase your discretionary spending might be "worth it". There is a cost, though: months, years, or decades of additional financial dependency upon your employer. Depending upon your situation, this may or may not be a cause for concern.

A mental exercise: what would it be like going into work if you had $1M in the bank with no debt? How about $2M? $3M? $5M? When you become financially secure, the balance of power between employee and employer shifts in all sorts of delightful ways (for the employee, not for the employer). By saving aggressively, this is what you are working towards. Is the journey worth it? Only you can answer that.

 

[Midpack]

Balance. No point spending 30 years of your life being miserable to improve the next 30. And depending on your career, your earnings may increase over the next 15-20 years as well. For us, socking it away became a lot easier in the last 10 years before we retired. But we never had a set age or date in mind either.

A 30 year mortgage can still be paid like it's 15, or 20 - you get options that way. I wouldn't consider cutting back your hours below a normal work week, that sort of thing can crimp your future potential.

That’s the conclusion we came to as well. We spent much less than our peers, but not to the extreme some fanatics do. We didn’t deprive ourselves of everything, but we didn’t buy big houses, prestige cars, lavish vacations, etc.*** like almost everyone else we know. And with 30 years to go in retirement, we’re still living well below our means, but not depriving ourselves. Maybe when we’re 90 yo, we’ll go crazy spending if the $’s do pile up...

And like FlaGator, I was really keen on FI by age 30, but didn’t care about retirement until much later...

*** those things don’t add to QOL in my view anyway

 

[DrRoy]

Now in ER, I am so glad that we saved what we did because we are greatly enjoying our financial freedom with lots of time to use it. We were far from unhappy in the saving years though, even if as you say we could have increased our QOL by a lot if we saved less. You should not be miserable for decades though. Perhaps the answer is to reduce your saving by perhaps 8-10%, and use that for one special buy per year - the really nice trip, new piece of furniture, or whatever gives you that QOL bump. But mostly stick to the plan.

 

[HI Bill]

Sergio - great job for where you are, in your 30s! The short answer, is No.

I see your proposed ideas of "Sometimes I'm tempted just to say "screw it" and reduce my 401k contribution to the match minimum, max out the HSA, put less money in Roths, and refinance to a 30-year mortgage. That would free up probably an extra $1500-2000/month which would increase our QOL by an insane amount - 2 nice vacations a year, a new car, less stress when eating out or dealing with unexpected expenses. All without any debt. Maybe I could even cut back to 80% time until my 1 year old is off to pre-school.." as the path to you never being able to retire. It's actually, what most folks, do, inlcuding all the gray-haired ones at my office.

Maybe take the foot off the pedal just a little. A few questions to ask yourself:

1) If you do lighten up on saving that much, what happens if one/both of you are unable to continue to w$rk for health reasons?
2) When you're 50, and your body starts to slow down, and your BS bucket is almost full, do you want to have the choice of FIRE, or be forced to keep at it?

Like my tagline...balance in everything. And no, don't re-fi the house to a new 30-year mortgage. Pay yourself first. I plan to FIRE at 54, and take $50-60K in annual vacations...how does that sound?

 

[GravitySucks]

So 5 years after graduation you have a family, house and ~$300k while earning around $100k (I assume reading your old posts.). Great job.
Still thinking of out in your 40s? Maybe that's not worth it. Maybe 55 is a better goal now that you're a Dad.
I'd keep the 15 year mortgage and keep getting the match on the 401k at least. But really you need to enjoy life now while you're living it. Take a nice vacation. Get a reliable car. Try not to fall into the big house big tax big upkeep trap or anything else that raised future expenses.

 

[NW-Bound]

Sometimes I'm tempted just to say "screw it" and reduce my 401k contribution to the match minimum, max out the HSA, put less money in Roths, and refinance to a 30-year mortgage. That would free up probably an extra $1500-2000/month which would increase our QOL by an insane amount - 2 nice vacations a year, a new car, less stress when eating out or dealing with unexpected expenses...

When I was still working, I never set any real goal to save so much each year. Of course we maxed out our 401k, and whatever was left after expenses became after-tax savings that I stashed away somewhere when I got to it. I never felt deprived. I took vacations, bought what I felt was needed.

In your case, if it feels like such hardship, then perhaps freeing up $1K for a bit more spending will "ease the pain"? Why all or nothing?