Requesting Feedback on Our Plan

[brentnice]

Hi everyone. I’m looking for some feedback here with my situation. Also just want to say I appreciate the community here as I haven’t posted much (mostly due to lack of experience and wisdom) but feel like I have learned a good bit by reading some of these threads.

I am 36 and DW is 38. Currently I make $75K/year and my DW makes $83K/year. We have 4 and 2 yr old daughters. For several reasons, my DW and I have decided it would be better for me to stay home with our kiddos and for me to leave the corporate world behind. My DW will continue to work and expects to generate the same income with future increases that keep up with inflation.

DW’s income alone will support our current budget of 65K/yr (this includes the cost of ACA coverage which we will have to purchase and a buffer amount to savings for one-time purchases and unexpected expenses); however, I do plan on some “gig” jobs like DoorDash and Instacart when I have free time, perhaps adding $5-10K per year in additional income to operate as a safety net. We’ll also be eligible for $600/mo child tax credit, though I’m not positive how long that will last.

I’ve run our numbers through Firecalc using our current “grand total” listed below as the “Portfolio” amount. I’ve put conservative amounts for SS (we have MySSA accounts and I’m factoring in all the low-dollar earnings ahead of me between now and claiming).

My hope is that we will both be able to completely cease work no later than 2041, at which point we would begin taking withdrawals from our portfolio.
Firecalc tells me this is likely, ranging as low as 85% success rate and 100% success rate depending on a slightly lower/slightly higher budget amount and our ability/inability to contribute 5K/yr between now and 2041.

I should also add that I am not opposed to working more substantial hours should future circumstances dictate. Likely I would not return to the Megacorp world (short of DW dying prematurely), but would work anywhere from part-time to full-time if necessary. How do our numbers and plan sound? Are we leaving too much to chance? Am I thinking about this decision correctly?

Here are our current assets:

Roth Total (Roth 401ks and Roth IRAs) = $190K
Tax Deferred Total (Traditional 401ks and Traditional IRAs) = $280K
Taxable Total = $48K
Cash Total = $20K (will be padding this over the next few months and will add around 12K in severance from accrued PTO)
Grand Total*: $538K
*Excludes 20K inside 529 plans

Current AA = 98% Stocks and 2% Bonds but will gradually shift to 75/25 as we get closer to needing $ from portfolio.

Misc Info = We currently live in DW’s family home valued at $580K, paying $1,419/mo in rent. DW is only child and will inherit this paid off home upon parents’ passing at which point rent will cease and be replaced by property taxes, insurance, and repairs.

[bloom2708]

I think you will be fine, but it will really change your retirement dynamics and SS amounts.

Some caveats to think about:

1. Your wife may start to resent having to work while you are at home. Especially if her job situation takes a turn for the worse
2. You won't be able to save nearly as much
3. Lumpy spending becomes an issue. You have some taxable and cash, but it could go fast. Filling Roths and such is much harder.
4. your stock/bond mix is very aggressive for near 40. A 50% drop would sting.
5. College saving will be nearly impossible on 1 salary

Personally, having done it with 3 kids (my wife currently doesn't work) I would slog it out when the kids are young. Save like mad and then one steps back when the kids are older and need more attention. Get way ahead. Then you have options.

I think you are too young to lose 50% of your income and don't have near enough retirement savings.

But then, this is "Early Retirement". We are 50/51 and 2 of 3 kids are in college. I am happy we used daycare for the young years and then had flexibility when the kids were in sports/activities. Lots of interesting forks ahead.

Good luck!

[Dash man]

This is a big change in your lives!
My primary concern is your cash. With only one income I’d think you should have at least a year of her income set aside in case she were to lose her job. She should also consider disability insurance.
You might also think about enrolling in school for one class each term in an effort to keep your skills/education current or progressing.
Kids get more expensive as they grow. Activities have lots of fees tied to them these days. Be prepared for that.

[Golden sunsets]

So you are expecting to get to $2,166,000 in assets in the next 10 years, not including 529 funds? Seems like a bit of a stretch to me. I wouldn't use a withdrawal rate of more than 3%, retiring so young.

[pb4uski]

While the calculators suggest that you will be fine, my concern is if the pundits are right and the next decade or so is low/no growth then your nestegg may not grow enough to fulfill your plan.

But go for it.... just recognizing that you'll need to monitor your progress and potentially mae some mid-course corrections. Also, once the kiddos are in middle school or higher you may have more free time to do some part-time work which will fill any holes that develop in the plan if low growth happens as many expect.

[brentnice]

Quote:

Originally Posted by Golden sunsets So you are expecting to get to $2,166,000 in assets in the next 10 years, not including 529 funds? Seems like a bit of a stretch to me. I wouldn't use a withdrawal rate of more than 3%, retiring so young.

I believe you may have misread. We are not expecting any portfolio withdrawals until the year 2041, which is 20 years from now. Since we will start withdrawals at ages 56/58, we will adhere to the 4% rule. You are free to disagree with this but we are not risk averse and believe 4% will be "safe." I am expecting somewhere in the neighborhood of 2 million in today's dollars in the year 2041, however.

[brentnice]

Quote:

Originally Posted by Dash man This is a big change in your lives! My primary concern is your cash. With only one income I’d think you should have at least a year of her income set aside in case she were to lose her job. She should also consider disability insurance. You might also think about enrolling in school for one class each term in an effort to keep your skills/education current or progressing. Kids get more expensive as they grow. Activities have lots of fees tied to them these days. Be prepared for that.

Thank you for the feedback. I think that's a great point about disability insurance. Had not considered this but makes complete sense. Also agree we need more cash before pulling the trigger. I hope to be able to amass around 40-50K in cash which will include steady saving over the next several months (have temporarily halted all stock investments and only saving cash at this point) and the approx 12K in PTO pay I will get when I leave.

[brentnice]

Quote:

Originally Posted by pb4uski While the calculators suggest that you will be fine, my concern is if the pundits are right and the next decade or so is low/no growth then your nestegg may not grow enough to fulfill your plan. But go for it.... just recognizing that you'll need to monitor your progress and potentially mae some mid-course corrections. Also, once the kiddos are in middle school or higher you may have more free time to do some part-time work which will fill any holes that develop in the plan if low growth happens as many expect.

Appreciate the words of encouragement. I agree with you and am worried too that if history is any indication, the next decade might be one of somewhat low returns. I will need to monitor accordingly and strive to continue with modest retirement contributions to help mitigate this risk. Initially that may not be much but as you said, I am open to more substantial part-time work in the future that would allow for more significant contributions.

[Time2]

Quote:

Originally Posted by brentnice I believe you may have misread. We are not expecting any portfolio withdrawals until the year 2041, which is 20 years from now. Since we will start withdrawals at ages 56/58, we will adhere to the 4% rule. You are free to disagree with this but we are not risk averse and believe 4% will be "safe." I am expecting somewhere in the neighborhood of 2 million in today's dollars in the year 2041, however.

My quick calculations say you need to save $24k every year and earn 8% on average, to get $3.6M in 2041 which is $2M in today's dollars.

[Exchme]

A lot of people live on less than your wife's salary and don't have a half a mill head start, so we're not going to tell you you can't.

You are currently winning the financial game, though and would be switching over to "playing not to lose". You would certainly have more financial limitations on what you can do, where you can live, where you can send your kids to college. Certainly you increase the risk of failure of your financial plan, and increase the damage an unexpected event could do to your finances.

From a family standpoint, there are complex relationship dynamics that can change as well when going from two earners to one, we can't presume to guess at those. Check with your wife to see if she would want to do it the other way around, where you continue to work. If she is interested by that idea, then you may have a problem if you quit and remove her option.

So all those possibilities and more have to be weighed against whatever is making you want to stop working. It's certainly a big step, I hope whatever you choose to do works out well.

[Golden sunsets]

Quote:

Originally Posted by brentnice I believe you may have misread. We are not expecting any portfolio withdrawals until the year 2041, which is 20 years from now. Since we will start withdrawals at ages 56/58, we will adhere to the 4% rule. You are free to disagree with this but we are not risk averse and believe 4% will be "safe." I am expecting somewhere in the neighborhood of 2 million in today's dollars in the year 2041, however.

Oh gosh, you're right. But it seems as though you could return to the work force full time, long before 2041.

[brentnice]

Quote:

Originally Posted by Time2 My quick calculations say you need to save $24k every year and earn 8% on average, to get $3.6M in 2041 which is $2M in today's dollars.

I believe your math may be off. Starting with $538K and a 20-year time horizon, contributing $4,800 per year, I would have to achieve a real after-inflation return of 6% per year on average over the next 20 years which is $1,902,009.72 in today's dollars.

https://www.calculator.net/future-va...ntit=0&x=0&y=0

[Doribe]

Quote:

Originally Posted by brentnice https://www.calculator.net/future-va...ntit=0&x=0&y=0

In my opinion 6% after tax for each of 20 years is not realistic. You will likely have at least one year with substantial losses. In order to meet your projection you will need much higher than 6% to make up for a bad year.

[pb4uski]

Quote:

Originally Posted by brentnice I believe you may have misread. We are not expecting any portfolio withdrawals until the year 2041, which is 20 years from now. Since we will start withdrawals at ages 56/58, we will adhere to the 4% rule. You are free to disagree with this but we are not risk averse and believe 4% will be "safe." I am expecting somewhere in the neighborhood of 2 million in today's dollars in the year 2041, however.

$538,000 * (1+7%)^20 = $2,081,890... so $2m sounds plausible given that the historical rate of return for stocks has been 10% but many expect lower growth for at least the next decade.

[Time2]

Quote:

Originally Posted by brentnice I believe your math may be off. Starting with $538K and a 20-year time horizon, contributing $4,800 per year, I would have to achieve a real after-inflation return of 6% per year on average over the next 20 years which is $1,902,009.72 in today's dollars. https://www.calculator.net/future-va...ntit=0&x=0&y=0

I used 8% and a starting value of $520K figuring your cash isn't earning much, (should have used $518k) I also used $24k added each year, that came to $3,610,000 in 2041 dollars or $2,000,000 in today's dollars if inflation was 3%.
I'm willing to bet inflation will be higher over the next 20 years.
I use this calculator, Compound Interest Calculator

[Time2]

I went back and rechecked the numbers, I used your calculator and the one I posted, I picked a different inflation adjustment calculator than previously and I got the same answer. So the math is correct, but if someone wants call me out on my method, I'll listen.

[Koolau]

I think what I like about your plan is the commitment to having one parent home most of the time. It's a big commitment and may slow the Early Retirement process somewhat. But it will pay dividends in my opinion. When we got our kids, DW stepped back somewhat from her w*rk. We were fortunate that she could do both because it involved the family business in her case - not a Megacorp as in mine.

20 years is a long plan. Stuff happens. You'll work it out if you are committed to the plan and each other. DO enjoy the journey as YMMV.

[Bamaman]

Who knows what inflation has in store for young families?

And childcare is such a major expense.

It is one thing to exit the workforce for 3-4 years. But it is also a great time to reeducate yourself.

Go for something like a certified home inspector. Or real estate appraiser. Both can be done full or part time, and they're making big money right now.

[Koolau]

Quote:

Originally Posted by Bamaman Who knows what inflation has in store for young families? And childcare is such a major expense. It is one thing to exit the workforce for 3-4 years. But it is also a great time to reeducate yourself. Go for something like a certified home inspector. Or real estate appraiser. Both can be done full or part time, and they're making big money right now.

Would also let one w*rk around their kid's school schedule. Could be ideal though YMMV.

[pacergal]

It sounds like you and DW have discussed thoroughly and both on board with one family income and you being SAHDad. Good for you! Your daughters will benefit, I am sure.

Answer the questions in the forum under ER/FAQ :
" Early Retirement & Financial Independence Community > Community Forums > Early Retirement FAQs
Some Important Questions to Answer Before Asking - Can I Retire?"
If you are positive the budget works( go over backwards , forwards, and make sure), and you have a savings plan, I say go for it!
You are willing to monitor finances and work part time if needed. Keep your budget under control and you most likely will do fine.