32. Hope to FIRE by 2030. Thoughts on status and plan?

[Life_by_Fire]

Hello everyone! I recently found this forum and have been enjoying reading the threads. I love the support and advice given and am hoping to get some of that for myself.

As the title indicates, my wife and I are 32 and hope to FIRE by 2030. We have a 2.5 and 1.5 year old and want to spend as much time developing their education and life experiences as we can.

A snapshot of our assets:

Inherited IRAs (Pre Secure Act)

• Total a little over 1.3 million (these grew by ~40% in 2020)

401ks

• Standard ~93,000
• Roth ~$8,000

Roth IRAs

• ~$82,000

Cash ~$70,000 with another ~$90,000 once estate is closed.

Our home is valued at approx 270k due to recent surge in demand (more realistic is 240k). We purchased for 187k and owe 163k.

Total investable assets ~$1.55 million not including the estate money.

Plan

We will feel comfortable pulling the plug with $5 million in investable assets. Our current expenses are around $6,000 a month but this will likely grow when we move into a bigger home within the next 6-9 months. We have no debt other than the mortgage. We focused on paying down student loans which has been a big relief since we finished those.

We plan to invest/save approximately $70,000 per year moving forward until we leave our j*bs. This money will be invested in the 401ks, Roth IRAs, Brokerage Account, and savings account. The RMDs from the Inherited IRAs will be put into a brokerage account. This year the RMDs total ~$23,000.

I currently have a real estate side hustle that I intend to spend much more time doing once I FIRE. This is something I find very interesting and will keep me active and mentally stimulated. My wife has several hobbies she will pursue that may or may not bring in any income but will give her fulfillment. We also plan to travel with the kids and be involved in their extracurricular activities. So we will not be bored and spending our days becoming couch potatoes.

FIRE Expenses and Income

Health coverage will be a significant expense in retirement as the RMDs will likely be approaching 6 figures by then. Since 2030 is so far away, I can't make a reasonable estimate of what the expenses will be.

I would like to have the ability to sustainably live on $200,000 pretax. Not saying that will be our actual expenses but it is a number with enough of a buffer that I never have to worry. I think of the RMDs from the Inherited IRAs as a pseudo pension since it is money that will have to be withdrawn every year. I also hope to have income available from the real estate business to use in lieu of pulling from brokerage.

So with all that rambling, how do we look currently? What things do we need to consider given the amount of time between now and 2030? There are lots of holes, how do I plug them?

Thank you in advance!

 

[bloom2708]

Don't let the FIRE tail wag the dog. Save a bunch. Have fun along the way.

Retiring at 41 leaves you 50 years to support and leave a cushion for the market ups and downs.

The FIRE bug can allow you to make sub-optimal choices. So just be cautious.

A larger house, kids college, perhaps another kid or 2. These things are wonderful, but steer you in the opposite direction.

The FI is great. The RE (retire early) part you can see how it goes. Maybe going to one income is an option or making less/more enjoyable career. Retiring at 41 will also put a dent in your Social Security amounts.

For $200k pre-tax, let's say $220k I would say you need $7.33 million with a good chunk in taxable. That is a 3% withdrawal rate. Convservative for a 50 year retirement.

Good luck in your pursuits. Just keep things in perspective.

 

[finnski1]

Subtracting out the cash of 70 k means you have about 1.483 mil that you want to grow to 5 mil in only104 months. By my calculations, even with pumping in 70k per year, you would need about an 11.4% annual return for the next 9 years. Plus "another kid or two. college, health costs etc. Very optimistic in my opinion.
Also at 32 you have never even seen what a bear market stretch can be like and do to your plans.
I think we all have been in a recency bias where we think the last 12 year returns are the norm. I am not that optimistic and believe more of a reversion to the mean way of thinking.
Not trying to be a wet blanket, but as bloom2708 said, Enjoy the ride.

 

[NgineER]

Welcome to the forum!

9 years before FIRE is not very long..

Saving $70k/year is a great goal - how much of your take home is that?

Tripling your invested assets is a long shot, but you might be that good. The 40% increase last year is impressive, but hard to sustain. With 8% yoy returns you'll double your investments by 2030, even with your additional investments you are likely to fall short of your target. Aiming for 4% WR is also a stretch at age 41 IMO.

You probably don't want to go higher than 3.5% for a 50 year time horizon, but I might just be too conservative.

I'm aiming for a similar exit, but I am not counting on being able to triple my assets in the next 9 years.

 

[Dash man]

I agree with what’s said above about not letting the FIRE goal taking control of your life. Enjoy life along the way.
Put together a plan that has significant savings, but keep a little fun money in your budget. Plan to put some aside for your kids educations in a 529 plan for each child. Twenty years from now costs of college and living expenses can range from $150k to over $1M per child.
Setting a year goal nine years out is pretty ambitious.

 

[Life_by_Fire]

Thank you all. I should have said that 2030 is an optimistic goal, not a deadline. While my investing didn't start until 2007, I have had a great interest in finance since the 90s thanks to my dad.

Also, I'm no super frugal live on rice and beans type. My wife and I just have similar financial beliefs and goals. No keeping up with the Joneses by buying luxury vehicles, dining out regularly, or needing the newest tech. Fortunately with my children at the ages they are, entertainment is easy and cheap/free. The $70k per year savings is about 45% of income. While I was in law school we lived very frugally and then working to pay off our student loans we upgraded slightly but still lived below our means. Our biggest expense now is daycare for the 2 little ones but we don't miss out. We plan to spend our money traveling with the kids as they get older and our nest egg is more established.

As far as increasing the nest egg, I completely understand that trippling in 9 years is very optimistic. The bulk of our holdings are in PSLDX then VTSAX then VTIAX. PSLDX already paid out ~$65,000 in dividends this year. It probably won't continue to do that with the current environment but i'll try to remain optimistic. And while I say FIRE i guess it isn't complete FIRE because I plan to make income with my real estate side gig that I'll spend more time on. I won't need to completely rely on investments. I don't consider social security in my plan because it will be minimal.

There are some reasons why we want to FIRE so early. The main reason, my wife's mother passed away in 2019 extremely unexpectedly. She was my wife's best friend and like a 2nd mother to me. She worked so extremely hard and only was able to enjoy retirement for 1 year. She always said how she wanted us to live our lives the way we wanted and her pension sign over to us will make that possible (bulk of the inherited IRA).

The bulk of the available money will be in the Inherited IRAs that we have RMD for or can withdraw as much as we want. The brokerage will continue to be built up to minimize taxes. For the kids, we are investing their education expenses in separate brokerage accounts for each that we contribute to. I didn't include those in my post because I don't consider that our money anymore. I don't like the restrictions of 529s. I know there is a trade off with losing the tax benefit but gaining freedom.

I hate my current career. Like, it makes me feel dirty doing my job. I'm trying to switch to a different practice area but that is no longer as easy as it used to be. My wife has done all she can at hers and is actively looking for more challenging and beneficial roles. We both work 50-60 hours a week and it takes its toll.

 

[someguy]

I agree with what others have said. I also would add that I got an average 2007-2021 savings of $18K per year (assuming the $70K of current cash was saved, not inherited/etc), and that is ignoring returns in the interim. If your income hasn't been increasing substantially recently, it seems saving $70K/year might be overly optimistic.

That shouldn't stop you from saving as much as possible and planning to FIRE, but an estimated timeframe that's moderately accurate can be really helpful, especially if you have other pressures. For example, if you knew you had "only" seven or even nine years left, you might stick out a job or career where you would never consider it for 20 more years.

 

[Golden sunsets]

Let me become your incentive to prove me wrong in suggesting that your goal of reaching your 5M goal in 9 years is unrealistic.

I just don't see how the math works. But...... as an attorney perhaps your income potential is much greater than a savings rate of only $70K per year.

I like your attitude but, a more realistic goal might be a better approach, so that milestones along the way are actually achievable.

 

[Life_by_Fire]

More good points. The 70k current cash was saved, not inherited. Prior to 2019, our focus was paying down 6 figures in student loan debt between the 2 of us. We achieved that, and continued to put the money were paying to loans into savings. We lived just fine while paying loans so putting it into savings/investments didn't hurt. My income has more than doubled since 2016. I changed firms and my wife has almost tripled hers as she has been extremely successful in her career (her mind and work ethic/discipline astounds me). The $70k savings is actual, not projected. It will increase as income increases.

I fully understand 2030 is ambitious, but hey, Young Dreamer haha. I am also ramping up my side business which will hopefully help.

So even if 2030 is unrealistic, what can I do to make this FIRE dream real ASAP? Also, what should I consider on top of savings rate and health insurance?

 

[SnowballCamper]

I currently have a real estate side hustle that I intend to spend much more time doing once I FIRE. This is something I find very interesting and will keep me active and mentally stimulated.

So it sounds like it's more of a planned career change, to be a landlord or real estate investor/speculator. That sounds prudent to me. I think you're in for a challenge to grow assets that quickly to maintain the 200k lifestyle for 50+ years.

You don't have to make it a sprint, but with some good (probably risky) real estate deals it's probably possible. Good luck!

 

[Life_by_Fire]

The 5 million is a goal and the 200k is just a comfort capability level. We spend nowhere near that and to do so would be quite a lifestyle change. I guess I include cash infusion into real estate gig as part of that.

As my real estate portfolio grows over the years with a mixture of rental and land (timber, minerals, lease, etc), I plan to roll all proceeds into building it further. Perhaps in 9 years I'll be content with the holdings and keep income or a portion thereof.

Also, 2030 is a goal. If we obtain new jobs that we enjoy and don't make us hate waking up in the morning, it may be pushed out. Honestly, my ultimate dream is to create a foundation that provides free to low cost annual PET scans for early detection of cancer. This should be something that is done with annual physics that would save countless lives with early detection, but insurance isn't onboard. That's my "win the lottery" dream.

 

[Dash man]

Keep the inflation factor in mind too. That $200,000 could be closer to needing $300,000 for the same spending power.

 

[socca]

... I changed firms and my wife has almost tripled hers as she has been extremely successful in her career (her mind and work ethic/discipline astounds me). ...

One option: quit your job, become a house-husband, and tell your DW to work harder.

OK, seriously, when I was your age I also dreamt of escape. I considered finding the most beautiful spot in the world, buying or building a B&B, and living out the rest of my life in peace and harmony with the natural world. I actually bought a book on running a B&B, and after reading it I decided that my plan would work great as long as I didn't have any customers. This didn't seem like a valid business plan. The moral of the story: dreams are fine but keep one foot anchored in reality.

 

[Finance Dave]

Do you have life and disability insurance? I'd look into that...especially with two children.

You already have some money in Roth accounts, but IMO having a LOT is helpful for those at the high end of the NW scale, as it helps to manage taxable income later.

Depending on how you plan to invest, you may want to look at some defensive strategies with a professional that would protect your portfolio if there is a major downturn in the market. Some type of options may help.

For someone young like yourself, inflation can also be a concern...it eats away slowly over time...so keep an eye on your "real" returns.

Hopefully you have estate documents in place?

For a goal that far away, I think you're wise to set a "preliminary" target...but I'd suggest a complete re-evaluation about every 2-3 years and adjust as necessary. In other words, set a goal TODAY for your savings at age 35. If you get to 35 and have not met that goal, then make adjustments by increasing income or cutting lifestyle, or delaying your planned exit date.

Good luck!

 

[Life_by_Fire]

One option: quit your job, become a house-husband, and tell your DW to work harder.

Haha I semi joke semi serious say to her all the time I am ok with her being the breadwinner and I'll be a kept man. Won't make me feel less masculine in the slightest. We often share our daydream of picking up and moving to Roatan to live on the beach. Maybe some day....

Do you have life and disability insurance? I'd look into that...especially with two children.

You already have some money in Roth accounts, but IMO having a LOT is helpful

We each have term life policies of our own and through work. I'm looking into supplemental Long Term Disability now. I'm hoping my real estate side gig can serve as a hedge against inflation and downturns. Creating milestones along the way is a great idea. Maybe I'll do 3, 5, and 8 year ones.

 

[Life_by_Fire]

*update*

Thought I would give an end/beginning of year update.

2021 was a pretty good year for investing. We crossed over the 2 million milestone in investable assets and cash at the very end of the year.

My wife has recovered from the injuries she sustained in an accident and is set to return to work next week. Actually, she was hired for a new position with a very nice pay increase, so cheers to that.

I'm still looking for a new job but have been picky. I may soon suck it up and take a less than ideal role but something that will still be better than what I am in now.

I anticipate we will be moving to a new state by Spring and we are both excited for that new start.

Cheers everyone and Happy New Year!