Lifestyle creep delays early retirement

[UpAnchor]

I'm having a hard time wrapping my head around how expensive our lifestyle has become, and how much longer we will have to work before we can retire.

My plans for FIRE at 45 have become plans for FIRE at 60.

Anyone else in that position?

Yup. Story not unlike yours. But finally retiring in two months at 64 after going part-time a couple of years ago. Original plan of 50 went down in flames. But one look at my 6 beautiful grandkids and I'm ok with it. And honestly, the number I might have retired with at 50-even had I stayed single-scares the hell out me now. So heading into pure NSER (not-so-early-retirement) with more padding in the belly but more padding in the wallet. I'll take it...

 

[ChicagoGal]

It's all about choices, balance and adaptation.

Several years ago, I got very serious about early retirement. Upped my 401k/ESPP contributions, cut back on the lifestyle, defined what I could spend in retirement, set a tentative date.

Since then, a couple of things have happened.

• Choice: I realized I would be more comfortable being able to spend a slightly higher level in retirement than originally thought.
• Balance: I didn't want to give up quite as much now (e.g., limited vacation) as I had thought. Especially if things were going to be slightly delayed.
• Adaptation: Benefits at work have been curtailed a bit. Pension frozen as of early next year. Not a huge impact to me, but still, enough that I will rethink.

So my "plan" right now is that it will be a year or two longer than originally thought. That's ok. I'm comfortable with those decisions, and no doubt more will come along to require other adjustments.

Looks like you're finding the right balance for yourself. Enjoy the journey!

 

[DrRoy]

Nothing creeped.
You chose.
The daughters did not come along. You made them.
You are in the driver seat of your life.
And each choice you make FOR something is a decision AGAINST something else.
Over time we all plan and revise plans.
The revised version often is better, more fulfilling, than the first draft.
Enjoy!

I did what you generally have done but it was pretty much what I expected rather than unexpected. We are empty nested now and will RE next year at 57.

 

[YVRRocketSurgery]

What I love about this thread is that people are not stuck on any particular cookie cutter retirement dogma. For most of us with finite means, it's really about coming up with your own solution based on your choices in life and how they fit against your own values. You can have anything in the world but not everything.

 

[traineeinvestor]

Been there, done that and FIREing at 40 ended up FIREing at 47 (although both of us work part time for non-financial reasons).

We chose to have children and accepted the price tag that comes with them but managed to keep costs in other areas under control to some degree - downgraded holidays and never bought a car etc. We also found that household income rose quite nicely which helped a lot.

 

[papadad111]

Good for you. Life isn't a balance sheet exercise. Life is to be lived with intelligent money management as a component of a well lived life. It's a means to an end rather than an end unto itself.

A lot of people I know who are miserable at work have built a family lifestyle that makes losing their jobs a near term catastrophe. Make sure you have near term security and you will have greater career flexibility -- which is valuable both financially and emotionally

Enjoy the ride!

Both of these pieces of info are very wise.

My FIL and I were just discussing to always look for the back door exits first in any business situation. So true. So true.

 

[kcowan]

Wait until you get a second wife, it will cost even more and be FIRE at 70.

This is a really good comment. The point of a plan is just to be able to quickly assess the impacts of the many choices you are faced with. In my case, the second wife only took RE from 55 to 60.

My FIL and I were just discussing to always look for the back door exits first in any business situation.

If you have no option open to you, then you will resent your current situation. I always had relationships with headhunters for exactly that. And FIRE made me realize the value of the DB Pension when compared to any of these other options.

 

[ziggy29]

We make tradeoffs. Yes, retirement is important as is saving and investing for it. So I think it's foolish to not save for retirement, and to try to set aside part of your raises to put into IRAs and 401K/403Bs before you can be tempted to spend it and engage in "lifestyle creep".

That said, there is no guarantee we'll be around to enjoy the retirement we are saving for, or a guarantee that we will be healthy enough to enjoy the fruits of our deferred gratification. OTOH, we *know* we are here today, so it's OK to take some of it and enjoy it today as well! Sometimes a few indulgences today make it easier to put up with working life for a little while longer, too. Balance, folks. Balance!

 

[ziggy29]

BTW Family of 4 could live very comfortably in 1500 square foot house IMO provided house is located in good school district.

Of course, a good school district tends to drive up the cost of the housing considerably....

 

[ivinsfan]

True on the school district but a small house will be cheaper then a bigger house and the taxes will be lower for the same school.

 

[eta2020]

Of course, a good school district tends to drive up the cost of the housing considerably....

Yea but you are way better off living in 1000 square foot house in great location, school system, parks, bike paths, commuting etc then living in 3000 square foot house in so so location. Even from resale angle..... Plus it is way cheaper to maintain, insure, furnish.

Kinda like Buffet said:
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

What I am trying to say in great majority of cases moving to bigger house will not give you much in terms of life satisfaction. Maybe moving to better location will, but one should think about that when buying initial property.

 

[hankster]

That said, there is no guarantee we'll be around to enjoy the retirement we are saving for, or a guarantee that we will be healthy enough to enjoy the fruits of our deferred gratification. OTOH, we *know* we are here today, so it's OK to take some of it and enjoy it today as well! Sometimes a few indulgences today make it easier to put up with working life for a little while longer, too. Balance, folks. Balance!

Well said! We've taken some trips that have undoubtedly added to my work years, but we enjoyed some bucket list type experiences while in our healthiest years. My attitude toward my job is much better by balancing fairly aggressive retirement saving with liberal use of my generous paid vacation time for life enhancing adventures.

 

[doneat54]

I'll just add this: FIRE is a mentality, a way of life, a philosophy, a mantra. No matter where you are in your life, married or single, kids no kids, house here, house there, you still espouse it, live way below you means and never pay anyone to do anything that you can do yourself. I "decided" that I wanted to retire at 55 when I was in my 20s, single, no kids. I am '54 now and will FIRE a month before my 55th birthday. (one) wife, 2 kids, 2 houses, and I made it.... (well, 6 months and 30 days, but who's counting) Granted I have been VERY lucky with corporate America and a supporting, trusting wife how makes a great salary also, but I have often asked myself what would I have done if......

I am sure I would have done whatever I needed to do and never let go of my dream....

 

[2017ish]

I'll just add this: FIRE is a mentality, a way of life, a philosophy, a mantra. No matter where you are in your life, married or single, kids no kids, house here, house there, you still espouse it, live way below you means and never pay anyone to do anything that you can do yourself. ....

Basically agree with the spirit of your post, except for the emphasized part. Maybe, never pay someone to do things that I could do without carefully considering the cost/benefit tradeoff? If one puts their mind to it (and skips a lot of sleep), there is little that one can't do for oneself. Rather than giving examples, let's just say that I do a lot less for myself now than when I was a SAHD. So too, if I could count on having a day off every weekend, I'd do more....

 

[Hamlet]

Yea but you are way better off living in 1000 square foot house in great location, school system, parks, bike paths, commuting etc then living in 3000 square foot house in so so location. Even from resale angle..... Plus it is way cheaper to maintain, insure, furnish.

Kinda like Buffet said:
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

What I am trying to say in great majority of cases moving to bigger house will not give you much in terms of life satisfaction. Maybe moving to better location will, but one should think about that when buying initial property.

I agree to a point. Our current house is about 1500 square feet. It has two bedrooms upstairs and a small bedroom in the somewhat damp basement. There is substantial value to me for moving into say a 2000 sqft house with 3-bedrooms on one level so that I can separate my kids. So moving to a $300k house in the school district we wanted would be perfectly sensible to my mind, and it would've had a pretty small impact on our FIRE plans given our income level.

That would have been the sensible, FIRE-friendly approach. Instead, we bought the 3400 sqft house with 5 bedrooms, a master bath, a walk-in closet and a 3-car garage. That will likely push back the FIRE date a fair amount.

Although, having just locked my mortgage rate at 3.6125 for a 30-year mortgage, I'm starting to think a 55 FIRE date may still be in the cards.

We just need a little inflation.

 

[eta2020]

Although, having just locked my mortgage rate at 3.6125 for a 30-year mortgage, I'm starting to think a 55 FIRE date may still be in the cards.

We just need a little inflation.

As far as having money (FIRE) house is a bad investment. For investment to be terrible:

It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.

It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.

It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.

It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.

It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.

It should be mortgaged! Another beauty of leverage. We can charge interest on the loans. Yep, and with just a little more effort we should easily be able to persuade people who buy this thing to borrow money against it more than once.

It should be unproductive. While we’re talking about interest, let’s be sure this investment we are creating never pays any. No dividends either, of course.

It should be immobile. If we can fix it to one geographical spot we can be sure at any given time only a tiny group of potential buyers for it will exist. Sometimes and in some places, none at all!

It should be subject to the fortunes of one country, one state, one city, one town…No! One neighborhood! Imagine if our investment could somehow tie its owner to the fate of one narrow location. The risk could be enormous! A plant closes. A street gang moves in. A government goes crazy with taxes. An environmental disaster happens nearby. We could have an investment that not only crushes it’s owner’s net worth, but does so even as they are losing their job and income!

Why your house is a terrible investment

 

[Andre1969]

I never really looked at a house as an investment, although there is value in having a roof over your head and a place to store your possessions. So you're stuck with either buying it, or renting it.

But, for an example of how real estate isn't always the money maker people think it is, check out this gorgeous little early-retirement killer I looked at about a month ago: https://www.redfin.com/MD/Davidsonville/2907-S-Lake-Dr-21035/home/10071344

I pulled the property tax records, and this place had the following transactions:
1989: Sold for $410K (to the original owner, when it was built)
1999: Sold for $424K
2005: Sold for $849K
2016: On the market for $770K.

Adjusting for inflation, those numbers come out to $791K, $608K, $1,040K, and $770K respectively. So, whoever bought the house in 1999 and sold in 2005 did well, but everybody else lost money.

 

[Fedup]

Real estate depends on location.

 

[eta2020]

I also do not look at it as an investment.

What I am saying is you should buy house conservatively if what you desire is FIRE. For people who are incapable to save money house may do well as a savings vehicle though.

The above numbers do not tell story of Property Taxes, Insurance, Maintenance, Leaking roof and if you have 500k in equity loss of income that that 500k could earn you

 

[Fedup]

I say a big house is cheaper than divorce. Do live reasonable but I don't have a manta on anything. To me 3000 sqft is reasonable. Our real estate investments have done really well for us. When we had bank run in 2008 and stock market crashed in 2009, my husband and I sleep well. Our rental income stays the same or go up. House price went up also. Leveraging is good in this case.
Of course, general statement about real estate doesn't work. It varies from region to region.

 

[ivinsfan]

That house is most likely going to become filled with furniture, consumables, and more "stuff" in the garage which is going to push your FIRE date even farther into the future, but you knew that, right?

 

[Fedup]

55 is still young. It's not terrible to retire at 55. My brother thought I was too young to retire.

 

[Hamlet]

As far as having money (FIRE) house is a bad investment. For investment to be terrible:

It should be not just an initial, but if we do it right, a relentlessly ongoing drain on the cash reserves of the owner.

It should be illiquid. We’ll make it something that takes weeks, no – wait – even better, months of time and effort to buy or sell.

It should be expensive to buy and sell. We’ll add very high transaction costs. Let’s say 5% commissions on the deal, coming and going.

It should be complex to buy or sell. That way we can ladle on lots of extra fees and reports and documents we can charge for.

It should generate low returns. Certainly no more than the inflation rate. Maybe a bit less.

It should be mortgaged! Another beauty of leverage. We can charge interest on the loans. Yep, and with just a little more effort we should easily be able to persuade people who buy this thing to borrow money against it more than once.

It should be unproductive. While we’re talking about interest, let’s be sure this investment we are creating never pays any. No dividends either, of course.

It should be immobile. If we can fix it to one geographical spot we can be sure at any given time only a tiny group of potential buyers for it will exist. Sometimes and in some places, none at all!

It should be subject to the fortunes of one country, one state, one city, one town…No! One neighborhood! Imagine if our investment could somehow tie its owner to the fate of one narrow location. The risk could be enormous! A plant closes. A street gang moves in. A government goes crazy with taxes. An environmental disaster happens nearby. We could have an investment that not only crushes it’s owner’s net worth, but does so even as they are losing their job and income!

Why your house is a terrible investment

I don't really think of a house as an investment. It's consumption. I was just pointing out that the cost of that consumption is a lot less when you're only paying 3.6125% (tax-deductible no less ) it is costing a more modest amount to borrow that money. If inflation picks up, that mortgage that seems extreme now may look pretty modest in 20 years.

A lot of those points are pessimistic about home ownership to the point of silliness, though.

 

[eta2020]

I say a big house is cheaper than divorce.

Hard to argue with that

 

[eta2020]

I don't really think of a house as an investment. It's consumption. I was just pointing out that the cost of that consumption is a lot less when you're only paying 3.6125% (tax-deductible no less ) it is costing a more modest amount to borrow that money. If inflation picks up, that mortgage that seems extreme now may look pretty modest in 20 years.

A lot of those points are pessimistic about home ownership to the point of silliness, though.

3 of us live for 20 years in 1037 square foot house Zillow valued at 595k. From my experience those points are not silly at all.

And our house sits in prime location and does not suffer from lack of employers that pay 6 digit salaries or lack of buyers so it probably did way better then many other locations.

I think retiring at 55 is just fine. That is what we plan though we could do it today.

BTW I never missed having big house hence my opinion is clearly skewed.

As a payed off house it costs me today 30k to live in. I could probably rent it for 30k. So once we FIRE I want to be forever renter.