Hi, I am new. Just hit 40. FIRE in 7? How am I doing?

Great progress. Thanks for sharing with us. Keep us posted about your FIRE plans.
 
Greetings 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.
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
 
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 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.).

Your good salaries should allow you to save plenty of money for HC purchases after FIRE but do the math.
 
Numbers 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.
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
 
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
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.
 
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.
Good for you!
Always nice to see you're further along than anticipated!

Any chance that means you've decided to move the date up as well (or at the least back to your original plan of 7years - now 6years)?
 
I agree regarding careful, conservative planning for healthcare, taxes, big ticket items, etc. Retiring late 40's with 2 teenagers means alot of life still to happen for all of you. You'll want to feel as successful in retirement as you did in your careers and that might mean (for me, at least) being able to be generous with my son when he experiences big life events - besides college, there's a car, a place to live, maybe a wedding, grandchildren, family trips, etc. I don't mean footing the bill for everything, but it sure feels good to give a great gift toward these types of things.

Also, at late 40's it's often a best practice to plan for around 3% safe withdrawal rate. So, take your planned spending and divide back to arrive at what a comfortable nest egg target would be. You clearly have what it takes to win this game and put in place a retirement you can get really excited about.
 
Great going, njconfused. Your savings rate and high salaries will get you to the target sooner than you think (of course with markets cooperating). As others have pointed out, kids are expensive. Especially with decent earnings and savings, you / your spouse will come across many "expensive experiences" options for the kids. It may not be a bad idea to earmark kids education expenses and open a 529 Plan. Also, your after tax and Roth buckets would be your best friends should you choose to RE. Fund them to the max while having fun along the way.
 
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
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.
 
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.
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.
 
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.
 
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.
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.
 
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 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.
 
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.
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.

And I agree with your note about the tax treatment of Roth IRA and Roth 401k being similar but you may have missed my point in my initial post. I was simply suggesting that OP should first prioritize a traditional 401k over a roth 401k. Once he maxes the traditional 401k and has money left over to invest, his next best course of action is then to prioritize a Roth IRA over a traditional IRA. Why? Because unlike the traditional 401k, OP will not get a tax deduction now by contributing to a traditional IRA given his income level and therefore, a Roth IRA is more advantageous because in neither scenario will you get a tax deduction now, but at least with the Roth your future withdrawals are tax free.
 
Modeling means, estimating which tax bracket you may end up in RMD even with Roth conversions in your low income years. I use my own spreadsheet for estimating my RMD tax bracket:

The secondary goal with any investing (retirement included) is to minimize lifetime taxes (and generational taxes if that applies to you). I am simply saying that making a blanket statement about where one should make investment (even if they are in a high tax bracket today) is not prudent. Because they may very well end up in even higher tax bracket at RMD. Personally, for the longest time, we thought it was best to minimize tax because we have always been in 22%/24% tax bracket which is high in my mind (so we maxed out traditional 401K, followed by backdoor IRA, mega backdoor IRA, etc.). But upon estimating/modeling RMD tax bracket a few years back, we realized that we may end up in even higher bracket in RMD thanks partly to our non-retirement investments (RE, partnerships, etc.) which throws non-trivial annual income which limits out ability to convert to Roth IRA. Again, every case is unique and an individual has to estimate RMD bracket on their own if they want to minimize lifetime taxes. There is no one size fits all.

PS: FWIW in OP's case, they most likely will be able to covert everything to Roth IRA if they don't have much income from non-retirement investments.
 
Njconfused welcome to the forum!

I think you will reach your number eventually. When will depend on the market or course.

But be careful not to feed the future FIRE monster and starve your life now. These are great years with your wife and kids.

It's not the destination it's the journey. There should be joy in the journey.
 
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.
 
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.
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.
 
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
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.

With OP planning to retire before they're 50, why pay that 30% tax now by going with a Roth 401k, versus sticking with a traditional 401k to defer those taxes, and then doing Roth conversions after they retire? OP won't run in to RMD's until they're 75, so that gives them 25+ years to do Roth conversions, which they could strategically do up to the max amount in the 12% bracket, significantly reducing what they would end up paying in taxes, while also being able to likely transfer all of that money in to a Roth IRA before RMD's ever come in to play.
 
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