Hope to retire in five years

[chasedream2002]

I started this journey in 2015 when my company laid off 1/3 of the people in one day. I had a very bad mood on that day and surfed Internet and encountered the Root of Good website and decided to take this journey to have more control of my own destiny. I had zero networth a few years ago. I have been trying very hard everyday since 2015.

1. I am 38 and wife is 33. Both working. Two kids 3 and 8. Networth:860K
2. I am making 180k and wife is making 52k. Totally 232k, but my job is not stable. May have to take a lower pay job next year.
3. Retirement account (IRA and 401k): 340K, taxable 210k, cash 110k, totally 660k savings, all the investment funds are from Vanguard.
4. House is 380k, mortgage balance is 180k, about 200k equity in the house. Currently the mortgage is 15 year, interest rate 3%
5. I am contributing 18k into 401K (employer match 7k) and 6K into roth IRA, wife is contributing 12k into simple IRA (1k match from her employer). On top of the retirement contributions, about 60k goes into taxable account each year. Total saving is 110k per year.
6. My expenses are quite high due to mortgage, property tax and day care cost. Monthly I am spending about 5200 dollars. It can be reduced to less than 3000 after FIRE. I plan to pay off mortgage and won't have day care cost after FIRE.
7. Current estimated FIRE date is 2024 and I hope to reach it quicker. Is there anything I can improve to meet the goal quicker?

 

[pacergal]

You are saving almost 50% of your income, that is fantastic in my book!

Watch for lifestyle creep, your future budget may not have childcare, but have you allowed for sports/school activities as your kids age? and college expenses?

Best wishes on your FIRE journey.

 

[Teacher Terry]

What a great job you did in a short amount of time.

 

[bloom2708]

I think 5 years is aggressive. Don't make any rash decisions like both quitting jobs until you are very certain of a 40 year + early retirement.

I wouldn't retire with a mortgage. With 40-50 years of potential retirement a 2.5 to 3% withdrawal rate should be used. You need to have a good plan for healthcare.

Do you plan to assist with college funds?

If you do try it in 5-6 years, it will be a "lean fire". If you had $1.5 million in invest-able assets, 3% is $45k. That has to pay for healthcare, property taxes, lumpy spending, braces, fund college.

I think you are doing great, but don't jump until you know what you are jumping into. FIRE is very contagious. You may look at your wife staying home as a stepping stone.

FIRE means you could lean retire, but could also choose to make less money and save less.

Set bold goals like paying off your mortgage and having $1.5 million or $2 million saved. Maybe a move and/or house downsize might help.

Keep spending low, keep saving, invest in low cost, diversified index funds, see what happens.

Don't feel like you failed if you get to 5 years from now and the goal posts moved. Been there, done that. We have 3 girls. Oldest in college. 2 driving. You can spend money very quickly.

 

[HI Bill]

Welcome! $110K in cash out of $660 (16% of assets) is a drag on your performance. I'd limit this to 6 months of living expenses (~$60K), and allow the remainder to grow.

I agree with others who think that 5 years is unrealistically optomistic. I certainly expect one market downturn (at least) during that period. $1.5M x 0.04 = $60K. Likely won't be enough, given your situation and kids, and unknown SS reductions, along with health care uncertainty.

Great start! Keep it up!

 

[joeea]

1. I am 38 and wife is 33. Both working. Two kids 3 and 8. Networth:860K
2. I am making 180k and wife is making 52k. Totally 232k, but my job is not stable. May have to take a lower pay job next year.
3. Retirement account (IRA and 401k): 340K, taxable 210k, cash 110k, totally 660k savings, all the investment funds are from Vanguard.
4. House is 380k, mortgage balance is 180k, about 200k equity in the house. Currently the mortgage is 15 year, interest rate 3%
5. I am contributing 18k into 401K (employer match 7k) and 6K into roth IRA, wife is contributing 12k into simple IRA (1k match from her employer). On top of the retirement contributions, about 60k goes into taxable account each year. Total saving is 110k per year.
6. My expenses are quite high due to mortgage, property tax and day care cost. Monthly I am spending about 5200 dollars. It can be reduced to less than 3000 after FIRE. I plan to pay off mortgage and won't have day care cost after FIRE.
7. Current estimated FIRE date is 2024 and I hope to reach it quicker. Is there anything I can improve to meet the goal quicker?

Sell the house and purchase something cheaper.
Find less expensive daycare.

 

[chasedream2002]

Thank you all for your comments. Appreciate it!

I plan to save to 1.2 M and payoff mortgage before FIRE. I know it will be very lean, however, I am so tired of rat race and just want to stop it in 2024. My backup plan is to move to Malaysia to lower my burn rate. If the portfolio is big enough, I can move back afterwards.

 

[knucklehead 61]

with a 3% mortgage, why in the world would you want to pay it off? it's cheap money!
put a heloc on the house to use for emergency $ if needed. that will allow you to put all your cash into the market to work for you.

 

[chasedream2002]

Thank you for your input. I am not paying it off right away, but I plan to pay it off when my FIRE date comes. I do not want to carry a mortgage in retirement. I have 2 year emergency fund in a 2% high saving account. I am taking three buckets in funds.

1.) 2 year emergency fund in 2% saving
2.) 2 year bond fund
3.) about 10 year in various stock funds

Currently have about 14 years of spending. Plan to save another 11 in the future 5 years! Fingers crossed!

with a 3% mortgage, why in the world would you want to pay it off? it's cheap money!
put a heloc on the house to use for emergency $ if needed. that will allow you to put all your cash into the market to work for you.