23-Year Plan for FIRE at 55

[Scots]

Hi all - I made an introduction post in the Introduction thread a while back, but wanted to pop into here and share our plan with you guys!

We've done some further planning and projecting, and we're aiming at 55 for "retirement" (now 32). I put in quotes because for me, that means being able to live where and how we want with no need for a 9-5, though I'll probably continue to keep doing things as I'd like to, on my own terms.

Current total pre-tax income: 129,000
Net worth: around 420k
House: Worth 375k, owe 223k
Cash: 25
Liquid mutual funds: 59k
401Ks: 119k
Roth IRAs: 9k
529s: 5k
HSA: 4k
Cars: 18k and 12k
Valuables: Various

We've got 23 years until 55, and our plan moving forward is:

401k Monthly Contribution: $1,000
Company Match (Monthly equivalent): $210
Roth Monthly Contributions: $800
Liquid Brokerage Fund Monthly Contribution: $200
Total Monthly Retirement Savings: $2,210

If I use my current "nest egg" number (not including cash emergency fund 25k) of $187,000, and assume a conservative 5% growth number for the next 23 years contributing the $2,210 a month, it gets us to $1,728,000 at 55. A better return of 6% gets us over $2M, while a worse return at 4% gets us to around $1.5M. Using a 3.5% withdrawal rate, that's roughly 60k/year income solely from the next egg, not including any other continuous income we bring in after that time, or inheritance money. And shouldn't have a house payment at that point.

The inheritance (we are blessed and don't take this for granted!) will be coming at some point (parents are currently 63), which will be somewhere between $1.5M and $2M at some point in the next 30 years or so (hopefully not for a long time!). There is also an inheritance of around 50k from a grandparent that will likely hit in the next 5-6 years. I know it's not wise to factor these in, so we view it as a bonus that we're planning to simply bolster the portfolio when it comes. The reality is that if it's the low end at $1.5M, my low projection of $1.5M from our own build-up becomes $3M, which sets us up very nicely.

So what do you guys think? On track for our 23 year, "55 and free" plan?

[Dtail]

Hi Scots
What are your estimated expenses at 55 and what is your healthcare coverage plan?

[Scots]

Right now, our expenses are roughly $4,500/month, and while 23 years is a long time into the future, our projection is that we would be able to stay at or under the $5,000 level for as long as needed. We are simple people and do not foresee an extravagant lifestyle. As far as healthcare coverage, the short answer is that I don't know. Likely we either buy whatever basic options there are at that time, or an alternative option such as a coop or other program.

[Dtail]

I would run your numbers through Firecalc including using perhaps a 25% discount on your estimated Social Security. Yes, you are correct in keeping the potential inheritance out of the equation, but having it in the background. I do the same.
There are obviously many moving parts in a 23 year period, but it appears to me that you are on your way.

[Scots]

Thanks for the input, Dtail. I'm not counting on Social Security at all, frankly. Who knows what that will look like in 30-40 years.

I tried Firecalc previously and couldn't figure out how to utilize it, but I will read up and give it another go.

[Walt34]

It looks like you're well on your way. At this point you don't need firm answers to these questions but it would be good to keep them in mind as things progress:

http://www.early-retirement.org/foru...ml#post1399715

[Dtail]

Quote:

Originally Posted by Scots Thanks for the input, Dtail. I'm not counting on Social Security at all, frankly. Who knows what that will look like in 30-40 years. I tried Firecalc previously and couldn't figure out how to utilize it, but I will read up and give it another go.

You can ask very specific Firecalc questions in this forum. It was developed here and there are many members who are fluent with all the nuances.

[REWahoo]

Quote:

Originally Posted by Dtail You can ask very specific Firecalc questions in this forum. It was developed here and there are many members who are fluent with all the nuances.

+1

You may be able to find the answer to your questions here: FIRECalc support - Early Retirement & Financial Independence Community

If not, start a thread and ask away.

[Scots]

Thanks guys - I'll check out the forum and give it another shot for sure.

[NgineER]

You are sitting pretty. You should be praying for a long bear market while you are contributing so that you can buy shares on sale.

You should be able to exceed your goal, especially if you try to save as much of your bonuses and raises as possible and do not get caught up in keeping up with the Jones'. Strive for increasing your earnings early on in your career before you start having responsibilities.

When I started working and saving for retirement at your age eleven years ago all we had was 20% down payment for a house in 2007 and $20k in a 401k... I guess we were fortunate to start out in a major recession and have catapulted to $1.5M+ over the
last eleven years thanks to the market and some luck.

[Scots]

What’s up folks? Since I made my original post about a year ago, I’m popping in for a quick update! I’ve been lurking for the past year, believe me.

A year ago I posted this as my status:

Current total pre-tax income: 129,000
Net worth: around 420k
House: Worth 375k, owe 223k
Cash: 25
Liquid mutual funds: 59k
401Ks: 119k
Roth IRAs: 9k
529s: 5k
HSA: 4k
Cars: 18k and 12k

UPDATE as of June 2019:

Updated Income: 132k
Net Worth: Around 470k
House: Worth 375k, Owe 215k
Cash: 27k
Liquid Mutual Funds: 60k
401Ks: 140k
Roth IRAs: 22k
529s: 9k
HSA: 4k
Cars: 25k
“Valuables”

I’m gonna keep plugging away at it. Seems slow right now but I know I have to trust the system and trust that compound interest will speed things up over the next decade quite a bit as the 401k and IRAs continue to gain steam. Those 2 accounts are where we’ve gained the most steam.

My wife and I are both 33 now - we have a goal to hit millionaire status by 42 at the latest and let momentum continue to drive us toward 50. As I stated on the OP a year ago, inheritance will come down the road of likely a couple million, but we are not putting that into our planning anywhere. We want to accomplish this free and clear and have anything that comes in the future be a bonus to bolster the nest egg.

So anyway, that’s the story right now. I enjoy reading the boards and staying engaged. Any input welcome, but just wanted to post an update. Keeping things moving and hope to get even more growth this year.

[gwraigty]

Thanks for the update. It's fun to see those numbers go up, isn't it? The first million's the hardest. Good for you for not counting on that inheritance to make things work for you. Can you sock away more in that HSA? I notice that balance is still the same.

[Scots]

Thanks for the reply! The reason the HSA is the same is that we’ve been using it for all medical expenses for the whole family along the way and refilling as we go.

[ponyboy]

Ah...the good times with the bull market. Wait till the market either flattens out or goes down a few %. You'll be amazed at how little you accumulate with just contributions alone.

We're pretty close to the same path as you. When we were 32 we had $620k combined, not include home. 4 years later we're at $985k, also without not including home.

You'll soon find out what you contribute plays very little role on growth. I contribute around $1200/month in my accounts. Here's a breakdown from Jan 1

$487,000 - this is what I started with Jan 1
$524,000 - feb 1
$540,000 - mar 1
$548,000 - apr 1
$568,000 - may 1
$539,000 - june 1 (nice drop in market)
$573,000 - july 1

So far this year ive only contributed $6k to my accounts...and they've grown approx $86k...all because of a good market (well $80k if you subtract what I put in.) And im not even including my wifes accounts...I do a once a year spreadsheet for that.

Will you make it to a million by age 42...easily, if the market is friendly. You were only $200k behind us when we were your age and we're hoping to hit 1mil soon, possibly this month. I will be 36 and wife 35.

Also, in terms of inheritance. I wouldnt even factor it in. We'll probably also receive nice inheritances from both sides...but it never played any role in what we do with our finances now. We always had the mindset of living below our means. Nothings guaranteed in life.

[Scots]

Yeah, we're not factoring in inheritance at all as I said.

Definitely anticipating future times when the accounts get to a point where the growth happens more visibly.

[bigcmagor]

I started planning for early retirement when I was 23. Projected target net worth for each year until I reached my objective at age 55. All was going pretty much according to plan until the financial crisis came along. I learned that planning is all well and good, but not to expect linear results.


Pruning a third of your net worth over a period of a few late-stage years when you were expecting ongoing growth of 7-8% will make you want to shred your projections and curl into a fetal position.

[ponyboy]

Quote:

Originally Posted by bigcmagor I started planning for early retirement when I was 23. Projected target net worth for each year until I reached my objective at age 55. All was going pretty much according to plan until the financial crisis came along. I learned that planning is all well and good, but not to expect linear results. Pruning a third of your net worth over a period of a few late-stage years when you were expecting ongoing growth of 7-8% will make you want to shred your projections and curl into a fetal position.

I couldnt imagine going through that in the later years. I was late 20's when the crash happened and at that time, I was maxing 401k and roth...and didnt change a thing since I was so young and had a lot of time to recover.

But yeah...these are the gravy train years of investing. Market doesnt care what you think your projections look like.