FIRE riddle....

[Carnage]

Okay, question for the group. DW and I are around 31, we expect to have our mortgage paid off around when we're 35. At that time, we would expect to have $50,000 per year to start diverting to a taxable account. My wife and I think we would be comfortable living off of around $50,000 but would probably take less if we could FIRE earlier.

What would be the best plan to close the gap between 35 and 60 (when we would start taking withdrawals from our 401k's/Roth, which should be sizable). Obviously, we would consider part-time jobs, especially if they had a health insurance option included with it.

Just wanted to throw it out to the group and see what each of you would do to try to retire as early as possible. Thanks!

 

[walkinwood]

Is the 50,000 in addition to maxing out your 401K? Are you eligible for Traditional IRA or ROTH IRA, and if so, are you maxing those out?

 

[yakers]

Probably the simplest way is if you have tax deferred accounts, pick one target date retirement fund and dollar cost average everything into it that you can. When you have 'enough' (say 25X what you want to spend annually) just began withdrawals.
If limited tax deferred then pick your AA and buy a total world market fund in taxable and total bond in tax deferred.

 

[chinaco]

To retire very early.... a sizable amount of money and a strict budget.


Going part-time at a young age...

IMO - One is still working only part-time... so it did not appeal to me. Plus one never knows what life event may interrupt their earning power in the future. The shortest path to FIRE for someone that is employed. I chose to earn while I can (at my peak earning ability) so when I FIRE, I am confident I will not have to go back to work.

 

[Carnage]

Is the 50,000 in addition to maxing out your 401K? Are you eligible for Traditional IRA or ROTH IRA, and if so, are you maxing those out?

The $50,000 includes additions to maxing out Roth IRA's, but not 401k's. I didn't want to assume we would continue with those.

 

[Carnage]

The $50,000 includes additions to maxing out Roth IRA's, but not 401k's. I didn't want to assume we would continue with those.

To clarify, we WOULD be maxing out our 401K's and Roth IRA's until our ESR, but at that point, I want to only assume after pulling the trigger on ER or ESR that we would only have our Roth's left to contribute to (as long as we're still eligible).

 

[jIMOh]

Okay, question for the group. DW and I are around 31, we expect to have our mortgage paid off around when we're 35. At that time, we would expect to have $50,000 per year to start diverting to a taxable account. My wife and I think we would be comfortable living off of around $50,000 but would probably take less if we could FIRE earlier.

What would be the best plan to close the gap between 35 and 60 (when we would start taking withdrawals from our 401k's/Roth, which should be sizable). Obviously, we would consider part-time jobs, especially if they had a health insurance option included with it.

Just wanted to throw it out to the group and see what each of you would do to try to retire as early as possible. Thanks!

Have you considering the taxable investments in dividend paying stocks? Individual stocks, not mutual funds or ETFs?

It would (short term) increase your taxes. In retirement, if you do it right, you could live off the dividends only and never sell any shares.

 

[ziggy29]

To clarify, we WOULD be maxing out our 401K's and Roth IRA's until our ESR, but at that point, I want to only assume after pulling the trigger on ER or ESR that we would only have our Roth's left to contribute to (as long as we're still eligible).

By "still eligible" I assume that means you know "eligibility" for a Roth requires earned income?

 

[Carnage]

By "still eligible" I assume that means you know "eligibility" for a Roth requires earned income?

We're still open to many possibilities, many of them include part-time work/consulting, so under these scenarios we would still contribute to our Roth IRA's.

 

[Carnage]

Have you considering the taxable investments in dividend paying stocks? Individual stocks, not mutual funds or ETFs?

It would (short term) increase your taxes. In retirement, if you do it right, you could live off the dividends only and never sell any shares.

When I first started learning of investments, DRIPs were something I strongly considered. I haven't read too much regarding them on this board and I assumed that having that much in individual stocks was deemed too risky. Do you have experience investing in this manner?

 

[jayc]

When I first started learning of investments, DRIPs were something I strongly considered. I haven't read too much regarding them on this board and I assumed that having that much in individual stocks was deemed too risky. Do you have experience investing in this manner?

I used DRIPs when I first started to accumulate dividends for expenses I knew I would have forever. i.e electric bill, phone bill They now pay me more than I pay them each month. It is also a way to use dollar cost averaging for long term holding. It was also because brokerage fees at the time were very high then for odd lots and small amounts. Below is an example I posted in the 'Kids saving' thread.

+Example of Exxon: ExxonMobil (XOM) DRIP - Dividend Reinvestment Plan Advice


P.S. The AT&T breakup to baby bell (7 drips) and back was very good to me. I had studied the Standard Oil breakup in college finance and it was just smoke and mirrors by the government to appease the general population. The rich got richer and I jumped on their coattails.

 

[kyounge1956]

Okay, question for the group. DW and I are around 31, we expect to have our mortgage paid off around when we're 35. At that time, we would expect to have $50,000 per year to start diverting to a taxable account. My wife and I think we would be comfortable living off of around $50,000 but would probably take less if we could FIRE earlier.

What would be the best plan to close the gap between 35 and 60 (when we would start taking withdrawals from our 401k's/Roth, which should be sizable). Obviously, we would consider part-time jobs, especially if they had a health insurance option included with it.

Just wanted to throw it out to the group and see what each of you would do to try to retire as early as possible. Thanks!

It won't be as long as yours, but I also expect to have a gap. Mine is the nine years between when I plan to retire and SS full retirement age. Something that happened last week has really got me thinking. I happened on a former co-worker from my days in the Survey section, who retired a couple or three years ago. He planned on working for a private surveying firm after leaving the City, and had a job all lined up before he retired. Then, along came the economic downturn, he got laid off, and now he is in a bit of a tight spot financially speaking. The more I think about it, the better it looks not to leave until I'm reasonably sure I'll have enough money to live on even if I never draw another hour's pay for the rest of my life.

So, to answer your original question, looking at it that way, as early "as possible" may not be as early as you'd like. The only thing I know of that will fill up a 25-year income gap is a big pile of money. Maybe some of it can be "money not spent" rather than "money in the bank", but retiring as young as you're thinking about, I'd be very leery of trying to cut expenses very much—you're going to be living on that reduced budget for maybe another 45, 50, or even 60 years. Frankly, I'd be terrified to try to figure out how much is enough at that age. (But don't let that stop you!!) I'm tying myself in knots trying to project my own likely financial needs from a work history of about 35 years to a retirement that I expect to last a little longer than that, between 40 and 45 years—you'll be trying to see further ahead with only about half as many years of history to base your extrapolation on.

 

[Carnage]

It won't be as long as yours, but I also expect to have a gap. Mine is the nine years between when I plan to retire and SS full retirement age. Something that happened last week has really got me thinking. I happened on a former co-worker from my days in the Survey section, who retired a couple or three years ago. He planned on working for a private surveying firm after leaving the City, and had a job all lined up before he retired. Then, along came the economic downturn, he got laid off, and now he is in a bit of a tight spot financially speaking. The more I think about it, the better it looks not to leave until I'm reasonably sure I'll have enough money to live on even if I never draw another hour's pay for the rest of my life.

So, to answer your original question, looking at it that way, as early "as possible" may not be as early as you'd like. The only thing I know of that will fill up a 25-year income gap is a big pile of money. Maybe some of it can be "money not spent" rather than "money in the bank", but retiring as young as you're thinking about, I'd be very leery of trying to cut expenses very much—you're going to be living on that reduced budget for maybe another 45, 50, or even 60 years. Frankly, I'd be terrified to try to figure out how much is enough at that age. (But don't let that stop you!!) I'm tying myself in knots trying to project my own likely financial needs from a work history of about 35 years to a retirement that I expect to last a little longer than that, between 40 and 45 years—you'll be trying to see further ahead with only about half as many years of history to base your extrapolation on.

Thank you for your comment. Yes, at this point, it truly is a "riddle" as I stated in the title of this thread. Being 30 years old, I'm sure my plan will change 20 times in the next 10 years. I only wanted to throw this out to see what some would do. Whatever our plans, I'm hoping to be able to assume that whatever we do ER or ESR on will include a sustainable 4% SWR. I'm also assuming that my DW and I would at the very least get part-time jobs should we pull the trigger that early, but if I had to guess right now, I'd say ER in the 40 to 45 year old range is mighty aggressive. Tempting, but not tempting enough where we'd pull the trigger without our numbers locked down and some sort of sold health insurance numbers.