Hi folks...38 and dreaming of retiring at 53

[ATXFIRE2034]

Hi all! I’ve been lurking for a while and learning a TON. I really appreciate everyone’s openness on this forum and have found the advice here invaluable. I’ve decided that it’s time for me to share where we’re at on our FIRE journey. I am 38 and my wife is 35. I’ve been the sole income earner since July 2018 when we made the decision for my wife to stay at home. I’ve been at same megacorp 16 years now. We have two children aged 3 and 6. We reside in a suburb of Austin, TX. Details below on our current situation. Our goal is to retire when I am 53 (the year our youngest will graduate from high school). Aiming to have $2.4M in retirement assets with a 3.3% withdrawal rate. Please note that we would be selling our current home which will be paid off when we retire and using those funds to downsize to something smaller and investing the rest or using those funds to help in the early years of ER. I’m looking for an honest assessment based on where we’re at. Thanks in advance!

Current Income: Base Salary = $139k; Annual Bonus Range = $35k - $55k; Opportunities for additional incentives but this can be rather variable.

Current Expenses: $92k per year.
Expenses in Retirement: $80k per year.

Assets ($834k)

- 401k = $176k of which 41% are ROTH contributions and 59% traditional. I just started maxing out ROTH contributions to 401k at $18.7k per year. In addition, my employer contributes $7.5k per year traditional. 73% of these funds go to Equity Index Fund and 27% go to Bond Index Fund.
- ROTH IRA (wife’s ROTH 401k contributions rolled over) = $43k in FXAIX. Maxing Contribution at $6k per year.
- Traditional IRA (wife’s traditional 401k contributions rolled over) = $102k in FXAIX. No contributions.
- 529s = $33k. Contributing $4.8k per year.
- Cash = $41k
- Primary Residence = $400k
- Vehicles = $36k
- HSA = $3k. Contributing $3k per year.

Debts ($273k)

- Primary Residence = $249k
- Vehicles = $24k

Net Worth = $561k

AA (only includes 401k / IRAs / Cash) = 70 / 19 / 11

 

[njhowie]

For your age, you're doing great! Keep it up.

With two young kids, you have lots of expenses coming over the next 10 to 20 years. It's extremely common that parents want to give their kids the best of everything. We've all been through it. However, most all would likely tell you that looking back, there are many things which were expensive and totally unnecessary or could have been done less expensively. Keep this in mind over time. Remember this especially in 15 years when it's time for deciding if/where to go to college. Annual tuition at the time will likely be $50,000 for the least expensive state schools, and well over $100,000 for the Ivy League schools. Add in associated expenses like room and board, books and fees, etc., and you'll be starting out at something like $75k to $150k and increasing 5% per year!!! Those are very big numbers and can easily break any kid's/parent's financial future.

 

[WyomingLife]

It looks like a solid, well thought plan.

At your youthful age, you might consider whether your AA is too conservative. I was effectively 100% equity ETF’s until I was about 50. Everybody’s risk tolerance and personal situation are different, of course.

Great job and good luck.

 

[DrRoy]

Great looking plan, except I did not see a college fund. Carry on.

 

[ckelly78z]

I would say that you are on track to have a comfortable (early) retirement, and 53 years old is doable, but don't be locked into those thoughts. Many things/events can happen over the next 15 years which can turn the market upside down. Re-evaluate your situation when your youngest is graduated from high school, and see if you need to work another year, or two to secure everyone's happiness (including kids).

 

[ATXFIRE2034]

@njhowie - Good point on watching expenses related to raising children. We'll keep an eye on how to do things more cost effectively. I actually feel like we already do a pretty good job of this, e.g. we get a lot of 'hand-me-down' clothes, buy shoes at discount stores, don't go overboard on presents for holidays or birthdays, etc. As for college, I am not too worried and understand I am taking a risk by purposefully under-funding their 529 plans. My wife and I paid for our own college and the resulting debt. We view what we are saving for them as a gift in a way. We're a bit old school when it comes to this topic. I am also hopeful that the higher education system will have undergone some major reform by then tipping the scale in our favor.

@WyomingLife - Funny you say this as I was already re-evaluating my AA. My risk tolerance is actually quite high and I still have a long time horizon to work with. As of this morning, I have re-balanced my 401k to 100% equities. I wish my employer offered ETFs as investment options in our plan but unfortunately they do not.

@DrRoy - I have 529 plans for each child, I included the total in my original post.

@ckelly78z - Good point about re-evaluating when my oldest graduates high school. In reality, I likely won't retire until I am 55 anyway in case I need to take advantage of the rule of 55.

 

[Katiek]

ckelly78z stated what I was thinking. You're doing a great job and your plan looks solid. But lots of things can happen over 15 years so you'll want to be flexible when the unexpected happens. But all the planning and saving you're doing now will enable you to weather the unexpected and will serve you well in the future.


And welcome! I hope you'll stick around and that we get to see as your plan develops over time.

 

[ATXFIRE2034]

Thanks @ katiek. I will definitely continue to post updates as time progresses. I love this forum!

 

[pjigar]

I am about 7 year ahead of you with similar expeseses but higher income. I cross checked with my historical networth numbers for age 38, and seems like you are on track. It would be very important that most future income growth is saved rather than used to expand your lifestyle. If you can do that then your are on track.

On a side note: Depending on your hobbies, your retirement expenses may not change much from your regular expenses.

 

[ATXFIRE2034]

Thanks @ pjigar. Appreciate the cross-check. I already have a plan in terms of how expenses come down over time so definitely not looking to expand lifestyle. In terms of expenses in ER, I figure I have some built-in wiggle room given ideal WR%.

 

[ATXFIRE2034]

Update ~1 year later. In this time we have bought and sold a house AND I changed jobs voluntarily. Left megacorp for a technology startup, it is a great opportunity and is going really well. I get a new challenge in pioneering a completely new function and building something from nothing. I’m aware of the risk but was in a position financially to take it - not sure I would have had another opportunity like this come along. It also helps that I got a 30% pay increase and substantial equity. The company has a solid strategy in place and if things go according to plan the exit event could easily make us multi-millionaires in 3-5 years significantly accelerating ER plan. Definitely not getting my hopes up about that but it is a possibility. New numbers:

Assets: $1.25M
Debts: $460K
NW: $790K

 

[Dtail]

You are on your way to ER.

 

[finnski1]

Update ~1 year later. In this time we have bought and sold a house AND I changed jobs voluntarily. Left megacorp for a technology startup, it is a great opportunity and is going really well. I get a new challenge in pioneering a completely new function and building something from nothing. I’m aware of the risk but was in a position financially to take it - not sure I would have had another opportunity like this come along. It also helps that I got a 30% pay increase and substantial equity. The company has a solid strategy in place and if things go according to plan the exit event could easily make us multi-millionaires in 3-5 years significantly accelerating ER plan. Definitely not getting my hopes up about that but it is a possibility. New numbers:

Assets: $1.25M
Debts: $460K
NW: $790K

Lot of changes in only one year.
I would very much temper the "easily could make us multi-millionaires in 3-5 years."
You saw what one year changes were (alot) and things can change alot in the next few years as well. I know several friends who were going to retire on the next great start up and idea and are still working at 62 because the odds are tough and it didn't work out.
Not trying to be a wet blanket and I hope it works out for you just keep your eye on the ball!

 

[ATXFIRE2034]

You are on your way to ER.

Thanks Dtail!

 

[ATXFIRE2034]

Lot of changes in only one year.
I would very much temper the "easily could make us multi-millionaires in 3-5 years."
You saw what one year changes were (alot) and things can change alot in the next few years as well. I know several friends who were going to retire on the next great start up and idea and are still working at 62 because the odds are tough and it didn't work out.
Not trying to be a wet blanket and I hope it works out for you just keep your eye on the ball!

Couldn’t agree more and I left out some other changes that took place as well. A LOT can change in a year and undergoing that much change during COVID has been challenging to say the least. As far as the startup is concerned, it’s late stage growth - we’re already well established in the market and current doubling every year in terms of growth. It’s more about execution at this point to get us to that exit event and we have / are building a great team to make that happen. We’re B2B SaaS in the cloud space with strong and differentiated IP with great margins. I am by no means counting on the exit event and I am not counting the current value of my equity in NW either. I am essentially pretending like that possibility doesn’t exist but it is nice to dream! I’m continuing on my established FIRE journey with extra income to save/invest at this point.

 

[ATXFIRE2034]

Hit a big milestone on Friday when we surpassed $500K ($506K to be precise) for what I will call our retirement specific investable assets (tIRA's, Roth's and 401k). I am not sure if it's in my head but the pace of growth seems to be increasing as we've gotten closer to this number. Including contributions, that is 58% portfolio growth in 16 months. I know these aren't normal times market wise and I shouldn't expect this going forward but it is a nice little milestone as I approach my 40th birthday in a couple months.

 

[Finance Dave]

You must have an aggressive portfolio...so hopefully you have a strong stomach lining if things turn south!