31 year old, married with two young kids, looking to FIRE in 5 years

[ATC Guy]

Alex

I have quite a few concerns.

1. You SWR is over 5%, which is based on a successful part time gig in online gambling.

2. You are assuming SS, which many younger contributors, such as myself, disregard altogether. If it shows up when I hit that age, bonus, otherwise no worries!

3. You have no healthcare plan. This will likely raise your expenses even if Obamacare takes some form.

4. You're also betting on an inheritance. Another big no-no when retirement planning.

So if all of these things come together, you will possibly be able to scrape by. I understand being stuck in a job you don't like and the feeling of wanting to escape. Have you considered getting a lower stress full time job or working part time (outside of the temp idea)? Once you reach your $1.8 mill, you can build your nest egg and ESR (semi retire) in 5 years from now instead of trying to fully ER in 5 years based on online gambling, an inheritance, SS, and a very high SWR, all the while without health insurance factored in.

Just my $.02, but make sure you can exit the rate race before you actually do. Take the next 5 years to get where you want to be, then slowly exit the race. More relaxed job for less pay and less hours, to less hours, and less hours, then retire when you don't have to worry about meeting your $20/day quota in online poker.

Sorry if this criticism is harsh, but you said you could handle it. You're not there yet and won't be in 5 years with this plan.

 

[FUEGO]

W/r/t being offended, I've been dreaming of FIREing for so long now, and being called crazy by everyone (including my wife) that being called crazy doesn't faze me

We do track our spending, though its hard to crack down on some categories without causing marital discord (e.g. children's clothes & toys)

I'll just say I find it interesting that you seem to be 100% on board with your FIRE plans but your wife doesn't seem to really be on board at all. Maybe you can clarify that? Spending like crazy and thinking you are crazy because you have a workable plan for both of you to FIRE certainly doesn't sound like you are on the right track to a successful FIRE in 5 years. Maybe your wife has a job that is perfectly acceptable to her and she doesn't really mind continuing to work?

I am also curious how far along the path to $1.8 million you are right now? Is your FIRE plan mostly backloaded with lots of savings and investment growth the next 5 years?

 

[FUEGO]

Overall I will say that your plan is not without merit, but it might need some fine tuning. The upside is you have 5 more years to refine and plan. Saving a whole lot and investing it can't do anything but help.

I am on a very similar path (age 31, 2 young kids right now, shooting to FIRE in ~5 years, targeting $1.x million in investments, frugal (old Honda, ride bus to work, bag lunch)). I think you are right about waiting till 2014 to see what the healthcare costs will be like under Obamacare. Works well with your 5 year plan.

 

[alexbalex]

I'll just say I find it interesting that you seem to be 100% on board with your FIRE plans but your wife doesn't seem to really be on board at all. Maybe you can clarify that? Spending like crazy and thinking you are crazy because you have a workable plan for both of you to FIRE certainly doesn't sound like you are on the right track to a successful FIRE in 5 years. Maybe your wife has a job that is perfectly acceptable to her and she doesn't really mind continuing to work?

My wife does not like w*rking at all, but is very nervous that being FIRE'd means she won't be able to live in a house with a lawn. Generally, on a frugality scale with 10 being the most frugal she's a 5 though (I'd say I'm an 7.5), so I wouldn't classify her as frivolous with our money, by any stretch. She just likes to spoil our kids, is all

When it comes time to start more seriously living on a budget, she'll be on board, but our budget will be slightly more generous than if it I had married myself

I am also curious how far along the path to $1.8 million you are right now? Is your FIRE plan mostly backloaded with lots of savings and investment growth the next 5 years?

I'm about halfway there now, and still adding at a high rate, until I get a new job (I'm actively looking) at which point, I'll be saving around $60K-$70K annually and relying on compounding.

 

[alexbalex]

Alex

I have quite a few concerns.

1. You SWR is over 5%, which is based on a successful part time gig in online gambling.

2. You are assuming SS, which many younger contributors, such as myself, disregard altogether. If it shows up when I hit that age, bonus, otherwise no worries!

3. You have no healthcare plan. This will likely raise your expenses even if Obamacare takes some form.

4. You're also betting on an inheritance. Another big no-no when retirement planning.

So if all of these things come together, you will possibly be able to scrape by. I understand being stuck in a job you don't like and the feeling of wanting to escape. Have you considered getting a lower stress full time job or working part time (outside of the temp idea)? Once you reach your $1.8 mill, you can build your nest egg and ESR (semi retire) in 5 years from now instead of trying to fully ER in 5 years based on online gambling, an inheritance, SS, and a very high SWR, all the while without health insurance factored in.

Just my $.02, but make sure you can exit the rate race before you actually do. Take the next 5 years to get where you want to be, then slowly exit the race. More relaxed job for less pay and less hours, to less hours, and less hours, then retire when you don't have to worry about meeting your $20/day quota in online poker.

Sorry if this criticism is harsh, but you said you could handle it. You're not there yet and won't be in 5 years with this plan.

Not harsh at all, I appreciate the input.

My feeling is that social security is most in jeopardy of three things (1) a benefits reduction, (2) a minimum age increase, and (3) an increase in the payroll tax cap. What is highly unlikely is that social security will be completely canned and unavailable to people in my generation. This would be political suicide to anyone who voted for such a thing. W/r/t the three likely situations, these can (and should) be planned for, and I have tried to do so. Also, a helpful hedge for me is the fact that my wife will have almost 30 years of SS credits by the time she FIRE's.

My SWR is only 5% for a limited time portion, basically until my kids leave college or I receive an inheritance or pay off my mortgage. The online gambling thing is only one plan which is admittedly risky, but if it doesn't work out I plan on just being a temp or finding some other low stress j*bs to supplement my income.

Its hard to factor in health costs right now, hopefully it'll be easier after 2014, at which point I agree I will need to increase my numbers.

W/r/t inheritance, I can see why it would be a big no-no, but I have tried to be very conservative (basically taking the likely outcome and dividing by 2). At this point, I'd rather risk having to work part time for longer than I wanted b/c I underestimated inheritances than risk having worked full time more than I needed to.

 

[alexbalex]

As for the crazy groceries, I spend that much, but I'm supporting those two teenage boys. My wife and I think we can cut that by 2/3rds when we set them free. Half would be luxurious for us. What I think is crazy is the $24K in daycare. Wow! I know it's expensive but wow! You likely won't replace all of that with other stuff as they grow older. I mean you could, but...

Glad to hear that I'm not the only family of 4 with crazy grocery bills!

$24K in day care is for two kids and unfortunately is not very high for the area I live in. I hope I can save a ton once they are off to public school, but I profess to not really having any experience. I could see other expenses increasing, for instance clothes, activities, electronics, toys, cars, groceries.

I read someplace that every kid you have adds about half the cost of a full person (such that if my wife and I spend $60K, each additional kid would add $15K to the household expenses) Have you found that to be the case for you?

 

[FUEGO]

My wife does not like w*rking at all, but is very nervous that being FIRE'd means she won't be able to live in a house with a lawn. Generally, on a frugality scale with 10 being the most frugal she's a 5 though (I'd say I'm an 7.5), so I wouldn't classify her as frivolous with our money, by any stretch. She just likes to spoil our kids, is all

When it comes time to start more seriously living on a budget, she'll be on board, but our budget will be slightly more generous than if it I had married myself

Your wife may be where my DW was a couple years ago. Not really interested in working, but kinda wasted some money on crap like excessive stuff for the kids. After a couple years of stuff getting destroyed, donated, trashed or boxed and stored I think she realized that maybe it wasn't the best way to expend money. And we started watching Hoarders so that killed any desire to acquire more things. She was probably a 7 on the frugal scale and I was an 8.5, now she is right up there with me.

I'm about halfway there now, and still adding at a high rate, until I get a new job (I'm actively looking) at which point, I'll be saving around $60K-$70K annually and relying on compounding.

Good to hear - that gives you some street cred here that you do actually have a significant amount saved and aren't just planning on saving $200,000 a year for 5 years with 14% rate of return to get to $1.8 million and FIRE. With the amount you have saved, compounding will get you where you want very effectively, even if you slow down your contributions.

 

[alexbalex]

Your wife may be where my DW was a couple years ago. Not really interested in working, but kinda wasted some money on crap like excessive stuff for the kids. After a couple years of stuff getting destroyed, donated, trashed or boxed and stored I think she realized that maybe it wasn't the best way to expend money. And we started watching Hoarders so that killed any desire to acquire more things. She was probably a 7 on the frugal scale and I was an 8.5, now she is right up there with me.

True, also as my wife's life becomes very kid-centric, it opens up other opportunities to save. For instance, she is now on board with cancelling our cable and moving towards using Vonage/MagicJack, which should hopefully save around $700 a year. We also don't buy eachother extravagant gifts any more and any jewelry hankering she may have once had, is no longer.

 

[LOL!]

OK, tell us about your Plan B. You need a Plan B.

 

[alexbalex]

Well if I don't reach my networth goal or if expenses are much higher than anticiipated, Plan B would be to keep w*rking.

If I FIRE'd right before a market downturn and my networth takes a tumble, my Plan B is to keep w*rking part time until my portfolio rights itself.

Plan C is to abandon my high cost of living area entirely and move someplace cheaper.

Plan D is to run off to the circus

 

[ronocnikral]

Well yes, I worked really hard in school in order to get the kind of job where selling your soul would bring in a high salary. <snip>

this is where I went wrong. I didn't really work hard in school, rather I

 

[flyfishnevada]

Glad to hear that I'm not the only family of 4 with crazy grocery bills!

$24K in day care is for two kids and unfortunately is not very high for the area I live in. I hope I can save a ton once they are off to public school, but I profess to not really having any experience. I could see other expenses increasing, for instance clothes, activities, electronics, toys, cars, groceries.

I read someplace that every kid you have adds about half the cost of a full person (such that if my wife and I spend $60K, each additional kid would add $15K to the household expenses) Have you found that to be the case for you?

Its been so long, I can't remember.

There was a sweet spot between about 5 and 10 years of age. No diapers, formula, baby food or daycare. But after about 10 it starts to climb again. Sports, school, cell phones, computers, clothes, etc. I hope somewhere between 18 and 25 it goes back down.

 

[obgyn65]

Your withdrawal rate looks high. Have you tried this free online tool :

Merrill Edge| See Where You Stand

My plan is to try to acquire around $1.8 million by 2017, and then live off of gross yearly expenses of around 110K until the kids graduate college and my house is paid off, at which point my yearly expenses would shrink to around $40K.

 

[alexbalex]

There was a sweet spot between about 5 and 10 years of age. No diapers, formula, baby food or daycare. But after about 10 it starts to climb again. Sports, school, cell phones, computers, clothes, etc. I hope somewhere between 18 and 25 it goes back down.

Ooh something to look forward to, awesome!

 

[jclarksnakes]

Well if I don't reach my networth goal or if expenses are much higher than anticiipated, Plan B would be to keep w*rking.

If I FIRE'd right before a market downturn and my networth takes a tumble, my Plan B is to keep w*rking part time until my portfolio rights itself.

Plan C is to abandon my high cost of living area entirely and move someplace cheaper.

Plan D is to run off to the circus

You got the right attitude. You are going to be able to early retire. The only question is how early that will be.

 

[brewer12345]

Well if I don't reach my networth goal or if expenses are much higher than anticiipated, Plan B would be to keep w*rking.

If I FIRE'd right before a market downturn and my networth takes a tumble, my Plan B is to keep w*rking part time until my portfolio rights itself.

Plan C is to abandon my high cost of living area entirely and move someplace cheaper.

Plan D is to run off to the circus

Sounds like a reasonable sequence of plans.

That said, I can tell you that once you switch jobs to something less aggravating your perspective will change greatly. So for now, just get through teh transition and revisit the whole plan 6 months after you switch jobs.

 

[HatePayingTaxes]

Didn't read all the comments on here but just chiming in b/c we're in similar life situation (1 and 2 yr olds).

1. I often think about quitting and staying home with the kids but they're off at preschool and they enjoy it so don't want to pull them out. It's not really a full retirement b/c I always have to be back at 5 when preschool ends just like a regular job.

2. I had a stressful/long hour job and I hated it. Now I have 8-5, low stress job. It's nice having adult interaction at work and coming home to see the kids... I think it brings fresh energy. If it's stress/long hour job, dont' think this will be case and besides, I'll probably only see my kids on weekends. You might be thinking about retiring b/c of stressful job but why not take the pay cut and go for low stress job?

3. I think majority of the cost happens in their pre-public education age due to preschool. I pay close to what you're paying as well. Yes, food bill goes up but the activities are not necessary. I saw a TED cast once and it basically said parental efforts have very little impact on kids. As long as parents stay married and kids are raised in supportive/loving environment, that's the main factor. Of course, it's another story to convince my wife.

Good luck in whatever you decide. You're in a very good situation.

 

[EvrClrx311]

Have you considered finding a job/profession that you enjoy? Your story reminds me a lot of one of my best buds from HS. He is incredibly bright, one of those 1600 SAT guys, that always had a true love for History and English... always wanted to be a writer. In college he started off in that field and quickly came to the conclusion that he wouldn't make much money...

His solution was to take a major shift in his career strategy to maximize his potential earnings... so he switched to Finance, which he hates... but is also extremely good at. He worked his butt off and got into an MBA program at Texas A&M and with the submission of an extremely good essay, and some luck from connections he acquired in school he landed an internship working for Citi's Asset Management group in Manhattan. With a lot of hard work in 5 years he moved up to a VP position (last month) and is pulling in well over half a million a year.

Over the last 5 years he's been working 60-80 hour weeks and every time I've chatted with him he goes on and on about how much he HATES his job, he has no time to even find a wife, and family is something he can't possibly do while also working. I had a heart to heart talk to him about what he really wants to get out of life... one of those "in 20 years, if you look back at your life will you be happy with it?"

He came to the conclusion that, although he lives in a million dollar pad in downtown Manhattan, drives a six figure sports car, and lives extremely well the 20 or so hours he's not working or sleeping each week... he wants out. Ironically, he is the epitome of what our society says is the perfect life... but to him he envy's the simple things many of his childhood friends now have (great families, time to enjoy life, etc...). He hasn't taken a single vacation in 5 years, if he had he wouldn't be where he is right now. "Selling your sole" is a great way to put it.

He now has a plan similar to yours... he's going to work another 3-5 years, save up a pile of money over the $1,500,000 mark and get out... move to somewhere like Tennessee and start doing what he really loves...

For him, its not about retirement... he wants to work... but he wants to work in something that he enjoys. Early retirement can be a "fun job"... but also there are plenty of things a mid 30's individual can do with their time that is considered work... but they don't think of it that way. Find something you love to do that you can also get paid for...

I've always had this mentality... if the job I'm working today is not something I would want to do after winning a $10,000,000 lottery... then I think its time to find a new job.

 

[alexbalex]

Have you considered finding a job/profession that you enjoy? Your story reminds me a lot of one of my best buds from HS. He is incredibly bright, one of those 1600 SAT guys, that always had a true love for History and English... always wanted to be a writer. In college he started off in that field and quickly came to the conclusion that he wouldn't make much money...

Lol, I got a 1580 on mine, so sounds like I do have a lot in common with your friend

Thanks everyone for all of the great advice. People are definitely right that my current high stress j*b has poisoned me towards work. I'm looking to move to someplace much less stressful for the next 5 years, and then will see if its something I want to continue in, once I'm FI (I doubt it).

My dream profession would probably be to be an entreprenuer and start my own business, but quite honestly I don't have any training or business experience so it would be a high risk to subject my family to.

People on this thread have also provided a lot of helpful advice about spending, so that's an area I think I could definitely work on to improve my FIRE success. According to FIRECALC, even if I could bring my expenses to $85K while the kids are in the house that would make a huge difference in my success rate.

 

[arebelspy]

You remind me of the blogger at Brave New Life - Brave New Life

He's in his mid-30s, planning to ER in the next few years, has young kids, about a 1MM portfolio right now, etc.

You may want to read his blog (past articles).

In particular, he describes how downsizing his house, selling his car, and moving to a cheaper area close to work where he can bike is going to let him ER way, way sooner than he would otherwise (because it cuts his expenses a ton):
How I Pulled in My Early Retirement By 20 Years | Brave New Life

(I have no affiliation with this blogger, other than having found his blog a few weeks ago and now have it on my RSS feeds.)

 

[alexbalex]

interesting website, I definitely can relate to this blogger. I'm kind of jealous of his budget. My wife wouldn't let me even approach that level of expenses. I'll keep working on her.

 

[RynoSeattle]

Fire @ 36

I just FIRE'd last month (wahoo!) @ 36 w/ no assumption of SS, factored in college costs significantly increasing, and assuming no inheritance (though this could also be significant, I just make my plans without assuming it will happen).

I'd also be very uncomfortable with your SWR...I've planned on < 4%. My expenses are a bit higher than yours, and while are less than my SWR I still plan on figuring out ways to trim down and add supplemental income through hobbies I enjoy.

Your healthcare costs are WAY low if you want decent coverage. COBRA for my family of 3 is currently $1100/month! There are some cheaper options for my family that I have quotes on (shopped across three major insurers which each had 3-5 plans), but the cheapest is around $600/month which is really just catastrophic coverage along with one doctor checkup a year. With kids you will go to the doctor much more than you think...and it will easily add up to several thousand dollars of out of pocket expenses if you only have a catastrophic plan.

 

[seraphim]

I think you are counting on too much at the moment which may not come true. A potential inheritance can disappear with a long term illness on the part of the person from whom you intend to inherit.

I'd say it's too early to determine if you can retire early. It's certainly a laudable goal for which to strive. When you have the money in hand, then run numbers. For now, strive for the financial goals you've stated.

 

[seraphim]

.3. I think majority of the cost happens in their pre-public education age due to preschool. I pay close to what you're paying as well. Yes, food bill goes up but the activities are not necessary. I saw a TED cast once and it basically said parental efforts have very little impact on kids. As long as parents stay married and kids are raised in supportive/loving environment, that's the main factor. Of course, it's another story to convince my wife.

I don't think you can make such a blanket statement. Our costs skyrocketed after 4th grade. Little booger was musically gifted and travelled the country, plus voice trainers...

If you don't keep kids occupied in activities they enjoy, they'll find other activities, loving home or not. My job often deals with those kids. Sports, art, whatever activities they enjoy, let them stay involved. Encourage them. The activities ARE necessary, in my ( professional) experience.

@ OP

$80000 per child? Put it into a good plan. BS (beloved son) had a college bill of about $180,000. What will that cost be in 16 years? That's your target goal x 2.

 

[Finance Dave]

Lol, I got a 1580 on mine, so sounds like I do have a lot in common with your friend

Thanks everyone for all of the great advice. People are definitely right that my current high stress j*b has poisoned me towards work. I'm looking to move to someplace much less stressful for the next 5 years, and then will see if its something I want to continue in, once I'm FI (I doubt it).

My dream profession would probably be to be an entreprenuer and start my own business, but quite honestly I don't have any training or business experience so it would be a high risk to subject my family to.

People on this thread have also provided a lot of helpful advice about spending, so that's an area I think I could definitely work on to improve my FIRE success. According to FIRECALC, even if I could bring my expenses to $85K while the kids are in the house that would make a huge difference in my success rate.

Good luck Alex!

I know many people who own small businesses (including me, although mine is different than the below list), and their stories are all very similar. IMO you don't need much in the way of training (but good common sense and a good work ethic go a long way), and you can get the experience as you go. Below are what I hear from all of them on starting/running your own business:

1) VERY hard work, especially the first 4-5 years. 7 days a week, 10-12 hours/day average, some days 16 hours.

2) Lots of stressful moments early...like getting funding, landing the early accounts, building the client list...lots of selling and convincing, will they buy? will they give loan? will they...

3) No vacations for first 3-4 years...no one you can trust the business to while you're gone

4)Don't use a partner as ownership. Fine to have a partner, but pay them a wage as an employee and ok to give them stock or incentives such as a % of the profits

5) Need to really learn the business, do lots of research, demographics, trends, use business incubators, talk to retired business owners and ask them their biggest mistake and best decision, etc.


My business is rental real estate LLC, and it's definitely not full-time and doesn't fit the category above..but let me share my experience.
1) First year was unbelievably busy...get LLC setup with lawyer, obtain PO box for business mailing address, design/order business cards, draw up business plan, goals, articles of incorporation must be filed with state, meet with CPAs about proper business structure and tax implications, decide on business name, get 2nd phone line, open business checking account and credit card, buy office supplies and new file cabinet for records, sign up with local landlords association and attend all meetings, do research on housing market, read the state landlord statute so I know legal obligations, draft all forms (lease, application, move-in and move-out form, notice to evict form, notice of intention to vacate form, employment verification form, the list goes on....I have over 40 forms), get access to a tool to check criminal history and credit reports on prospective tenants, put together a list of vendors (plumber, electrician, roofer, termite inspector, good appliance store, concrete company, where to get blinds, ...I interviewed three of each of the above and more), research way to protect lock system (legally must change locks on house each time tenant moves out), buy tools and organize them, get to know all county officials such as code enforcement director for inspections, deed officers, health department inspector, surveyor), meet with banks about funding options....the list goes on and on.

Basically I'd leave my j*b at MegaCorp at 5, drive to all these appointments or to the first rental I bought, work until 10-11 pm, go home, shower, repeat. 12 hour days on the weekends were the norm.

The good news? This went on for 6-7 months while I got it all set up and got my first unit rented....then I worked maybe 2-3 hours/week on the business and got a check each month for $750! That was awesome!

In summary...the startup is he**, but the long-term picture looks bright and is exciting. If I can get about 4 rentals going (have two done and rented), we can FIRE immediately.