Koolau
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Great progress. Thanks for sharing with us. Keep us posted about your FIRE plans.
Make sure you figure in taxes with your annual spend target, and a penalty if drawing from IRAs before 59.5, question why no 529’s for tax free growth college funds. Also with Medicare at 65 with a 47 retirement that’s a long haul for a family of 4 marketplace insurance so be sure you work all details into the budgetGreetings Everyone,
I am 40 years old. My wife is 38. I have two kids aged 8 and 10.
I have been wondering about FI alot lately as I just turned 40. I am hopefully looking to hit FIRE in the next 7 years. The other option is to work in a retail store or something part-time to pay for health care coverage.
My income gross is $192,500.
My wife's income gross is $102,500
Total Income - $295,000
We paid off our mortgage in 2021. Our house is worth about $850,000.(Northern Jersey)
Our savings is broken out as follows:
$213k -Checking/Savings/CDs
$500k- Brokerage Accounts (Mix of Index Etfs and Stocks)
$794k - IRA's and 401ks -Tax Deferred (Index Etfs)
So total assets excluding the house is $1,507,000.
We did not do any 529s for the kids. The plan is to pay for at least $200k towards college for each kid. We plan to take that money from our savings and brokerage accounts.(7 and 9 years from now respectively)
We max out our 401k's. Over the last two years or so we have been trying to add at least $50k each year to the brokerage account. I just started an HSA account so did not include that in the figures above.
Sometimes I just feel burned out to save save save.
How are we doing?
If we wanted our end goal to be at around $3M in 7 years, is that doable?
Even with college expenses coming up?
Even if we do not add additional $50k each year to brokerage?
Our ultimate goal is to have around $100k-$120k in spending money annually. We are not totally against working a part-time job for extra cash to off-set healthcare premiums.
Please let me know how I am doing.
Feel free to roast me as well.
Thank you. Appreciate all your feedback.
njconfused.
Good points - especially about health care. I would never have retired as early as I did without health care issues already settled (Megacorp supplemented my health care along with providing a pension.).Make sure you figure in taxes with your annual spend target, and a penalty if drawing from IRAs before 59.5, question why no 529’s for tax free growth college funds. Also with Medicare at 65 with a 47 retirement that’s a long haul for a family of 4 marketplace insurance so be sure you work all details into the budget
I will second that. And also contribute to Roth 401K if your company offers it (instead of regular 401k). You may be surprised about your tax bracket when RMD hits. Try to estimate your RMD tax bracket using my spreadsheet as a base line: RMD ScenariosNumbers look good. I would start putting money in a tax free account (RothIRA) if you haven’t already done so. This should save you some money in the long run, because you’ll be paying 15% on your LTCG when you sell from the brokerage account.
There are ways around the penalties if you plan ahead. Getting a Roth IRA started (like AI18 suggests) through back-door Roth contributions would be a great way to ensure you have a Roth account that is greater than 5 years old. Look into After-tax 401k account contributions if your employer allows for that, this is a great vehicle to maximize contributions to tax free accounts. As I said earlier my employer allows for 9% after tax 401k contributions, which in my case greatly exceeds the standard $7k contribution limit.Make sure you figure in taxes with your annual spend target, and a penalty if drawing from IRAs before 59.5, question why no 529’s for tax free growth college funds. Also with Medicare at 65 with a 47 retirement that’s a long haul for a family of 4 marketplace insurance so be sure you work all details into the budget
Good for you!Greetings Everyone,
I figured I would post an update to my original posting.
I am going to try and update annually every January moving forward.
My age now is 41. My wife is 39.
My income has gone up to $197,000. I also received a $30k bonus in 2024.
My wifes income now is $90,000. She moved into a different role.(Less stressful and better work/life balance)
Update on savings is as follows:
$164k -Checking/Savings/CDs
$768k- Brokerage Accounts (Mix of Index Etfs and Stocks)
$977k - IRA's and 401ks -Tax Deferred (Index Etfs)
$9K - HSA (Index etf- VOO) -We just started this in 2024.
So update in total assets excluding the house is $1,918,000. A big jump from last year of $1,507,000, primarily due to market returns.
The checking/savings/cd number has gone down as we moved some of that into our Brokerage Accounts.
We decided to change it up around mid 2024. Basically in addition to maxing out 401k's and HSA's, we are saving 50% of our take home after tax.
Every month that gets invested in the brokerage account.
Lets see what Mr. Market returns in 2025, but I am happy with the progress thus far.
Respectfully, I disagree with prioritizing a Roth 401k over a “regular” traditional 401k. The OPs income level suggest that he’s in the 24% marginal tax bracket for 2025. By going the Roth 401k route, he’s effectively paying 24% taxes now for tax free withdrawals in the future. This doesn’t sound too bad if your concern is that RMDs will push you into a higher tax bracket, however, the key factor here is that OP is planning to retire in his late 40s. That gives him 20+ years to convert a majority, or likely even all, of his traditional 401k into a Roth IRA and pay little to no taxes (since he will no longer have earned income, thus lower tax brackets) so that RMDs will not even come into play when he’s in his early 70s. The Roth IRA does make sense though because once you max out your traditional 401k, your next options are really only a backdoor Roth IRA (given OPs income precludes a normal direct Roth IRA contribution) and a normal brokerage account, and the Roth IRA is clearly more advantageous given the tax benefits. I’m in a very similar situation as OP and this is how I’ve prioritized my savings. I’m also a CPA for what it’s worth.I will second that. And also contribute to Roth 401K if your company offers it (instead of regular 401k). You may be surprised about your tax bracket when RMD hits. Try to estimate your RMD tax bracket using my spreadsheet as a base line: RMD Scenarios
Yes, every case is different and that is why it is important to "model" RMD bracket every year rather that assuming that your RMD will be low. BTW if one is contributing to Roth IRA and/or megadoor backdoor Roth IRA then contributing to Roth 401K is no different from tax perspective.Respectfully, I disagree with prioritizing a Roth 401k over a “regular” traditional 401k. The OPs income level suggest that he’s in the 24% marginal tax bracket for 2025. By going the Roth 401k route, he’s effectively paying 24% taxes now for tax free withdrawals in the future. This doesn’t sound too bad if your concern is that RMDs will push you into a higher tax bracket, however, the key factor here is that OP is planning to retire in his late 40s. That gives him 20+ years to convert a majority, or likely even all, of his traditional 401k into a Roth IRA and pay little to no taxes (since he will no longer have earned income, thus lower tax brackets) so that RMDs will not even come into play when he’s in his early 70s. The Roth IRA does make sense though because once you max out your traditional 401k, your next options are really only a backdoor Roth IRA (given OPs income precludes a normal direct Roth IRA contribution) and a normal brokerage account, and the Roth IRA is clearly more advantageous given the tax benefits. I’m in a very similar situation as OP and this is how I’ve prioritized my savings. I’m also a CPA for what it’s worth.
Because you can do backdoor contributions via IRA route and Mega backdoor contributions via 401K route. A lot of us on the FIRE journey has been doing that for a while.Not sure why a Roth IRA is being suggested when OP brings in $295,000/yr in income. Check the tax laws. Chances are OP's MAGI is over $240,000, married filing jointly, and he can't contribute. Unfortunately, I was never eligible to contribute in my working years either.
I agree - traditional 401k will be key to reduce taxes now and with a 25-year horizon before RMDs there will be ample opportunity to do Roth rollovers. Contributions to after-tax 401k and backdoor Roth IRA contributions should be priorities in addition to the brokerage account.Respectfully, I disagree with prioritizing a Roth 401k over a “regular” traditional 401k. The OPs income level suggest that he’s in the 24% marginal tax bracket for 2025. By going the Roth 401k route, he’s effectively paying 24% taxes now for tax free withdrawals in the future. This doesn’t sound too bad if your concern is that RMDs will push you into a higher tax bracket, however, the key factor here is that OP is planning to retire in his late 40s. That gives him 20+ years to convert a majority, or likely even all, of his traditional 401k into a Roth IRA and pay little to no taxes (since he will no longer have earned income, thus lower tax brackets) so that RMDs will not even come into play when he’s in his early 70s. The Roth IRA does make sense though because once you max out your traditional 401k, your next options are really only a backdoor Roth IRA (given OPs income precludes a normal direct Roth IRA contribution) and a normal brokerage account, and the Roth IRA is clearly more advantageous given the tax benefits. I’m in a very similar situation as OP and this is how I’ve prioritized my savings. I’m also a CPA for what it’s worth.
I’m not quite sure I understand the comment about modeling RMD bracket every year. I guess my point is that given OP has 20+years between planned retirement age (late 40s) and RMD age (early 70s), RMD will not be a factor at all because very likely, it will not apply to OP so there’s nothing to model out. Said differently, he will have 20+ years to convert any traditional funds into Roth funds once he retires (and pay little to no taxes on those conversions in doing so) so by the time he’s in his early 70s when RMDs would normally kick in, it won’t be applicable anymore because he no longer has funds in his traditional accounts. As you probably know, RMDs only apply to traditional accounts.Yes, every case is different and that is why it is important to "model" RMD bracket every year rather that assuming that your RMD will be low. BTW if one is contributing to Roth IRA and/or megadoor backdoor Roth IRA then contributing to Roth 401K is no different from tax perspective.
And even when you're FI you don't HAVE to retire early. I waited to RE after FI because I was still having fun. Megcorp realized I was enjoying my j*b and changed it. THAT is when I FIRE'd.OP,
Enjoy the journey and good progress.
FWIW I planned to FIRE at 50 when I was 40. We are close to 50 and we may be FI this year. But guess what? We may not RE and keep working. Life is good and RE is not a hard goal for us. FI IS a hard goal for us.
At ~$320k of income before accounting for any deductions, OP is squarely in the 24% federal tax bracket, and being in NJ at that MFJ income level, they're paying 6.37% in state income tax.I will second that. And also contribute to Roth 401K if your company offers it (instead of regular 401k). You may be surprised about your tax bracket when RMD hits. Try to estimate your RMD tax bracket using my spreadsheet as a base line: RMD Scenarios