Am I ready?

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tmitchell

Recycles dryer sheets
Joined
Oct 14, 2016
Messages
423
Hoping to have my situation vetted. I'm looking at taking a sabbatical next year to test the waters but will be leaving a very good, well-paid job to do so. Some of my work is still fun, but I'm over the megacorp and being chained to all the nonsense that comes with it. I may choose to work as a consultant or take short term contracts (unless the time off is so great I end up liking it too much).

Barring a huge downturn, I anticipate the following when I give notice in Jan 2021:

54 yrs old, partnered, no kids

2.4M LNW, out of which 2.2M in 60/40 index funds, 240k cash (set aside for potential RE down payment--currently renting--or retiring into a recession)

Expenses $52k/yr (without travel, estimate $500/mo for ACA)
Additional travel budget $24k/yr, bringing total desired to $76k/yr

I'm not counting on SS but maybe that will be gravy.

If I choose never to work again is this do-able? Firecalc says yes but I worry I'm missing something.
 
Even without SS, you have a 3.2%WR.
You should be fine, as your SS payments will not be zero.
Have you factored in taxes in your expenses, plus any big ticket items, like cars, new roof,etc?
 
Here's our helpful list of things to think about before you make the leap:

Some Important Questions to Answer

If you've thought of all those things and FIREcalc says you're good then you're probably solid. Congratulations!
 
I'd probably look at the ACA plans for your area. $500 pm for two is doable, in some states, for a bronze plan with a high deductible, so you'll want to factor your out of pocket costs into your budget.

The only wild card is your residence. If renting is included in that $52k, then that helps, but you mention RE downpayment - so that means you'd be adding a mortgage in retirement? That's not a common approach. So I'd at least have a budget planned for your total home costs (+taxes, insurance, if you buy in your annual budget.
 
What is LNW? Didn't get the "L".

When you say Partnered - are you married? Makes a difference in planning.

Is your NW & expenses for you & your partner?

Is the ACA cost you mention just for yourself or for both? Our experience in CO is that Bronze ACA premiums for the two of us in our late 50s is a little more than 3x what you're estimating. Will you be able to limit your income to avail of subsidies?

We took the approach of a Sabbatical before ER too. For us, it was mainly a mindset to make it easier to get back to work if we needed to or chose to. As it happened, we ER's in May of 2008 and went back to work for about a year in 2010 to allow our portfolio to recover. Good luck.
 
Last edited:
Do the expenses that you indicate include income tax or are all investments in after tax or ROTH type accounts? You must include any taxes within your expenses in FIRE Calc.
 
I guess that "LNW" probably means liquid net worth, I.e., excluding house equity.
 
Hi everyone. Thank you for your responses. Here are answers to the questions you've asked:

- Unmarried
- These numbers only account for myself as we keep separate finances
- I'll be pulling from taxable/roth accounts until 59.5, which is currently only about 25k in dividends, so yes I'm including taxes in these numbers
- Based on that income level it seems like ACA premium will be under $500/mo for myself
- I'm factoring $200/mo to go into a "big ticket" fund for things like car upgrades @Dtail. Is that enough?

Regarding mortgage @Aerides, if I decide to purchase it would be because we'd be moving to a cheaper state. I'd probably work a bit more to pay it off, but that's really up in the air right now. I could also divert some of the money set aside for travel to bolster the additional cost. We'll see!

Last, the reason I've chosen January for my notice @FREE866 is to 1) give myself some time to decouple from a lifetime of working and 2) I'll be able to max out my 401k with the last couple checks.

Anything else?? This is helpful thanks again.
 
Sounds like once you retire you'll be in a good position to do some no/low-cost Roth conversions if you have tax-deferred money to somewhat reduce the tax torpedo once RMDs start.
 
The expense 76k/annual supports the total number in next 30 years, not to counting on the SS.
You are good to go. Enjoy!!!
 
pb4uski said:
Sounds like once you retire you'll be in a good position to do some no/low-cost Roth conversions if you have tax-deferred money to somewhat reduce the tax torpedo once RMDs start.
Click to expand...

Yes, I need to plan on doing that! What's the best resource for understanding best practices?
 
tmitchell said:
- These numbers only account for myself as we keep separate finances
- I'll be pulling from taxable/roth accounts until 59.5, which is currently only about 25k in dividends, so yes I'm including taxes in these numbers
- Based on that income level it seems like ACA premium will be under $500/mo for myself
- I'm factoring $200/mo to go into a "big ticket" fund for things like car upgrades @Dtail. Is that enough?
Click to expand...
Is your partner FIRE? Do you share anything? Just thinking about vacations, free time activities, long term goals and interests. Not trying to get personal but partnerships IMHO tend towards sharing in some way that involve finances.
 
For ACA, it is better to estimate annual expenses which would include monthly premium and out-of-pocket maximum in a worst case. In fact, worst case can be even worse than OOP once you hit out-of-network providers. $500 per month may or may not be enough, depend where you live and what kind of plan is this.
 
Rianne said:
Is your partner FIRE? Do you share anything? Just thinking about vacations, free time activities, long term goals and interests. Not trying to get personal but partnerships IMHO tend towards sharing in some way that involve finances.
Click to expand...

We share a lot, but I'm older and have been earning more for some time so he's catching up. I also don't feel comfortable with the sugar daddy thing since I worked very hard for many years before we met to create my freedom :cool:. He's not interested in retiring for a few years anyway, and has unlimited vacation that we will take advantage of for longer trips.

Eventually we want to move to less urban area, and potentially live abroad for an extended period. We are looking for ways to make that happen, including remote work for him etc.
 
Alex The Great said:
For ACA, it is better to estimate annual expenses which would include monthly premium and out-of-pocket maximum in a worst case. In fact, worst case can be even worse than OOP once you hit out-of-network providers. $500 per month may or may not be enough, depend where you live and what kind of plan is this.
Click to expand...

This is a really good point. I'm still in good health and have no regular medical needs thank goodness. Looking at Bronze plans the yearly deductible is $6300 and I'd qualify for a subsidy with my proposed income level, but that's still over $500 as you point out.

I'll factor in a few more grand for that. Guess it'll make the travel fund a bit slushier, but that's why I set aside a good amount for that.
 
tmitchell said:
Hi everyone. Thank you for your responses. Here are answers to the questions you've asked:

- Unmarried
- These numbers only account for myself as we keep separate finances
- I'll be pulling from taxable/roth accounts until 59.5, which is currently only about 25k in dividends, so yes I'm including taxes in these numbers
- Based on that income level it seems like ACA premium will be under $500/mo for myself
- I'm factoring $200/mo to go into a "big ticket" fund for things like car upgrades @Dtail. Is that enough?

Regarding mortgage @Aerides, if I decide to purchase it would be because we'd be moving to a cheaper state. I'd probably work a bit more to pay it off, but that's really up in the air right now. I could also divert some of the money set aside for travel to bolster the additional cost. We'll see!

Last, the reason I've chosen January for my notice @FREE866 is to 1) give myself some time to decouple from a lifetime of working and 2) I'll be able to max out my 401k with the last couple checks.

Anything else?? This is helpful thanks again.
Click to expand...

Bolded by me
$200 per month sounds on the low side, but a large part of this type of expense is how much do you envision paying for additional transportation?
Other expenses like a new roof/air conditioner etc don't come into play yet.
 
Dtail said:
Bolded by me
$200 per month sounds on the low side, but a large part of this type of expense is how much do you envision paying for additional transportation?
Other expenses like a new roof/air conditioner etc don't come into play yet.
Click to expand...

I chose $200 thinking a new car every 10 years would be $30k (actually the math on that would be $250). But yes with home expenses (which I think I'll eventually have) that would add to it.

How much do you budget for this line @Dtail?
 
tmitchell said:
I chose $200 thinking a new car every 10 years would be $30k (actually the math on that would be $250). But yes with home expenses (which I think I'll eventually have) that would add to it.

How much do you budget for this line @Dtail?
Click to expand...

I budget $500 monthly for this line.
This includes all potential new "appliances" like air conditioner, dishwasher.
It also includes monies for car maintenance, birthday outlays, one time furniture purchases among other things.
It does NOT include a new roof, new car. I have a separate account already funded for these 2 expenses.
 
Dtail said:
I budget $500 monthly for this line.
This includes all potential new "appliances" like air conditioner, dishwasher.
It also includes monies for car maintenance, birthday outlays, one time furniture purchases among other things.
It does NOT include a new roof, new car. I have a separate account already funded for these 2 expenses.
Click to expand...

Ok that’s way above mine so I’ll revisit.

Question: do you hold this in cash in a separate account, or is it just rolled into investments and calculated with rule of 25x?
 
tmitchell said:
Ok that’s way above mine so I’ll revisit.

Question: do you hold this in cash in a separate account, or is it just rolled into investments and calculated with rule of 25x?
Click to expand...

I do keep it in a separate account, which is not officially included in my investment account totals.
However, I am in the minority on this site with this concept, as most folks just consider monies to be fungible and all accounts count as investments (besides the house value).
 
54 yrs old, partnered, no kids



Why is money even a factor to you.........do whatever you want.....when you want.
 
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