36 Months to Launch or maybe sooner?

[Cincyguy63]

Hello Group!

I've been lurking out here for a few years and the finish line is in sight. I've been running FireCalc lately and coming in around 97.8 to 100% consistently across several models.

I've got concrete plans in place on what I need to do in order to punch out and this is where I'd like some validation and guidance.

Background:

Me: 56/ Wife: 50

Current:

• Investment Accounts: 1.5M
• Retirement Accounts: 1.1M
• Cash On Hand: 75k
• Home Valued at 750k -Hot market in Austin TX
• Mortgage: 173k

Projected SS: Me 38k Wife: 16k

Annual Projected Retirement Expenses: 130-150k NET -I have run 2 years of expenses and have been avg around 15-18k per month but this includes numerous costs associated with 3 college aged kids that would fade away in retirement (cell, insurance (car/ health), food, school/ education, clothing etc.)

Bonus Paycheck March 2020: 250k made up of 120k is RSU which is repeated thru 2022. The other parts are variable comp/ commissions.

Avg Annual Pay: Me: 475-550k Wife: 20k
Contribute 50k per year to various employer savings plans (Roth 401k max, EE Stock purchase)

Here's my milestones before I will launch:

1. Payoff Mortgage: March 2020
2. Accumulate 2 years of expenses in cash -300k
3. Buy 2 cars @ 40-55k each (current cars are 3 to 4 years old)
4. Invest 100-125k in home remodel project 2021 paid with cash.

Plan would also have my wife and I doing side gigs until we are 70 @ 20k per year (work 3 or 4 months). Wife's a PRN (Flex time) Nurse and earns $40 per hour.

Does this make sense? Any concerns I might be missing?

 

[WyomingLife]

Congratulations.

It sounds like you are doing all the right things — Firecalc, budgeting, tracking expenses, etc.

Just a couple of observations.

Are you sure your budget is accurate? Your salary is relatively high. Are you tracking every dollar?

Does your retirement budget include HC costs?

I didn’t understand the bonus piece of it — is that 250K annually for the next couple of years, or is the 250K disbursed over three years?

A yearly budget of 150K would require investable assets of $3,750,000 under the 4% Rule. Maybe with SS and the future bonus payments you will get there. You should not include the value of your house, however.

As it the new cars, I guess everybody is different. I don’t consider a three year old car to be old. I buy a reliable used car/truck (typically a Toyota) and drive it for 15 years or so. So I don’t understand the part of the plan that involves buying two new cars on the eve of retirement. I’d put that cash instead in Vanguard ETFs and drive the existing vehicles until their wheels came off.

 

[Cincyguy63]

Congratulations.

It sounds like you are doing all the right things — Firecalc, budgeting, tracking expenses, etc.

Just a couple of observations.

Are you sure your budget is accurate? Your salary is relatively high. Are you tracking every dollar?

Does your retirement budget include HC costs?

I didn’t understand the bonus piece of it — is that 250K annually for the next couple of years, or is the 250K disbursed over three years?

A yearly budget of 150K would require investable assets of $3,750,000 under the 4% Rule. Maybe with SS and the future bonus payments you will get there. You should not include the value of your house, however.

As it the new cars, I guess everybody is different. I don’t consider a three year old car to be old. I buy a reliable used car/truck (typically a Toyota) and drive it for 15 years or so. So I don’t understand the part of the plan that involves buying two new cars on the eve of retirement. I’d put that cash instead in Vanguard ETFs and drive the existing vehicles until their wheels came off.

I've added 2k per month for HC in that 150k annual retirement budget. It's not 250k per year. It's actually 120k per year. Those are RSU's that have a vesting schedule that expire in 2022.Good point on the cars. Of all the parts of the plan that piece has the most flexibility to it. As far as our current household expenses I really took a swag on current spending. We are cash flowing big chunks of education for my kids. We setup 529's for about 65% of the total costs and have been paying cash out of pocket for the other 35-40% of their annual education/ room & board costs. They are fortunate to walk out of a 4 year state school with a degree and debt free. One is in med school and we are covering some basic living expenses but he's paying for the rest through loans.

 

[HI Bill]

Are you sure your budget is accurate? Your salary is relatively high. Are you tracking every dollar?

Does your retirement budget include HC costs?

+1. If you value two new cars more than ~9 months of your remaining life, then your plan looks good. If you'd give up on the new cars for the moment, you could be a year from FIRE!

 

[WyomingLife]

I've added 2k per month for HC in that 150k annual retirement budget. It's not 250k per year. It's actually 120k per year. Those are RSU's that have a vesting schedule that expire in 2022.Good point on the cars. Of all the parts of the plan that piece has the most flexibility to it. As far as our current household expenses I really took a swag on current spending. We are cash flowing big chunks of education for my kids. We setup 529's for about 65% of the total costs and have been paying cash out of pocket for the other 35-40% of their annual education/ room & board costs. They are fortunate to walk out of a 4 year state school with a degree and debt free. One is in med school and we are covering some basic living expenses but he's paying for the rest through loans.

Again, great job. You are also in your mid 50's, so reasonably close to the finish line anyway.

I have no experience with RSU's, but wish I had them.

2K/month sounds reasonable for HC. Our budget has 3K/month but we are dealing with some health issues. Our state market also doesn't have a lot of options.

From the 10,000-foot level, it feels like if you tightened things up a bit, you'd be fine. I seized upon the cars because what I perceived (fairly or unfairly) as the "new car every 3-4 year" aspect triggered my "Millionaire Next Door" response (paraphrasing: "NW and car age are correlated"; stated another way, if you want to increase the odds of finding the person on your street with the most wealth, locate the driveway with the '58 Buick). I personally view new/new-ish cars as a waste of money, but my views are likely outdated. If you are going to continue to purchase new cars frequently in retirement, however, make sure you have that built into your budget.

As to your house, one of the best economic moves we ever made was cashing out of HCOL to LCOL. In HCOL, we were working to keep the house (property taxes, etc.). Once we sold that HCOL house and put the proceeds into the market, that house has been effectively working for us ever since as we reap the benefits of LCOL living. So consider departing Austin at some point, at least as a back-up plan.

Speaking of "best economic moves," our second-best one was purchasing a 2001 Toyota 4-Runner back in the day. We got 300,000 miles out of it. And when we finally sold it nearly 20 years later, we recouped a four-figure number.

 

[Dtail]

Sounds like good to go.
Can you manage your MAGI for ACA subsidies, so you can possibly reduce your HI through age 65?

 

[MBAustin]

Welcome and congratulations on working the plan to get here. As others have suggested, personally I'd retire earlier and buy the cars later, but YMMV. (I did have a new car purchase on my "to do before retiring" list but it was to replace a 10-year old car that I disliked.)

Have you considered speeding things up by moving to a lower cost neighborhood in the Austin area rather than remodeling? Just a thought from someone who consciously decided to stay in our same relatively pricey neighborhood (due to great schools) rather than move farther out. If you do remodel, make sure to include accessibility features in your plans - drawers instead of shelves in lower kitchen cabinets, wider doorways, ideally a no-curb shower with handrails, etc.

 

[Cincyguy63]

Again, great job. You are also in your mid 50's, so reasonably close to the finish line anyway.

I have no experience with RSU's, but wish I had them.

2K/month sounds reasonable for HC. Our budget has 3K/month but we are dealing with some health issues. Our state market also doesn't have a lot of options.

From the 10,000-foot level, it feels like if you tightened things up a bit, you'd be fine. I seized upon the cars because what I perceived (fairly or unfairly) as the "new car every 3-4 year" aspect triggered my "Millionaire Next Door" response (paraphrasing: "NW and car age are correlated"; stated another way, if you want to increase the odds of finding the person on your street with the most wealth, locate the driveway with the '58 Buick). I personally view new/new-ish cars as a waste of money, but my views are likely outdated. If you are going to continue to purchase new cars frequently in retirement, however, make sure you have that built into your budget.

As to your house, one of the best economic moves we ever made was cashing out of HCOL to LCOL. In HCOL, we were working to keep the house (property taxes, etc.). Once we sold that HCOL house and put the proceeds into the market, that house has been effectively working for us ever since as we reap the benefits of LCOL living. So consider departing Austin at some point, at least as a back-up plan.

Speaking of "best economic moves," our second-best one was purchasing a 2001 Toyota 4-Runner back in the day. We got 300,000 miles out of it. And when we finally sold it nearly 20 years later, we recouped a four-figure number.

Thanks Wyoming. Great insights. I know for a fact that once I have time on my side I will have fun reducing spend in commodity areas like utilities, food shopping, clothing, services etc. Right now we do pay too much in areas that take time to negotiate. I agree on the car front. Should of said "replace older cars" within next 6-8 years with a lightly used value car (no need for luxury cars). We just moved to Austin and based on quality of life we are staying put for awhile at least. If anything down the road, we might sell and roll some of the proceeds to a condo and split time in CO during the hot months.

 

[Cassius King]

Congrats, and best of luck with your plan.

 

[Cincyguy63]

Thanks everyone for the feedback. We've decided to push out the car purchase and when the time comes buy when the wheels are falling off our current vehicles we will go with used cars. The upgrade to our current home is in discussion. We are meeting with some real estate friends to get advice on the topic. We see ourselves living here for 6-8 years but the property taxes in this part of Austin are some of the highest. We love the area and it has all the amenities and access to the Lake that we love and moved here for. We will stay in this area but move to a lower cost older area within 6-8 years. I'd like to make the retirement move sooner than later and instead of 3 years maybe with some of these adjustments we can FIRE in 2 years instead.

Thanks again for all the input.