How much do we need to FIRE?

[FIREdToBeExpat]

We’ve been living overseas (Turkey) for about 2 years, and the city in which we live is similar to Miami, Florida. We have the intension of settling here indefinitely. I am 39, DW is 36. We have 2 kids ages 11 and 2. We don’t necessarily budget but keep detailed track of our spending for many years. We are LBYM kind of family, in general. We are both engineers with masters and run a home-based business, a New York State based LLC.

Below are some stats;

Our Essential Expenses (groceries, utilities, transportation, health insurance, family, clothing, eating out, vacation and donations to be exact.) are about $36,000/year.

Our oldest, a 5th grader, goes to a private school, and it costs about $5,000/year. We do intend to send our younger one to private school as well but don’t have to. If this is added, our essential expenses will be $41k/yr for now and $46k/yr in about 3 years. We are open to the idea of sending them to the college here, which costs a lot less than the US. We are now in 15% tax bracket and will most likely to stay in that bracket.

We earn in $USD but spend in local currency. The local inflation rate is averaging about 8-9% per year. The exchange rate has been very favorable for a few years (1$ = 2.70 TL). (I teach part time at a local private university’s engineering department and that income is in local currency, which is $6k-$8k/yr)

We have a rental property back in New York. It is paid for, and it has about $12k-$13k/yr positive cash flow. Our current condo in Turkey is also paid for and it is fairly new, only 5 years old.

Based on these input, how much do you think we need to have in our portfolio to be FIREd?

 

[Fermion]

Curious, do you pay into USA SS?

 

[FIREdToBeExpat]

Curious, do you pay into USA SS?

Yes. Our business is under DW's name, so she has been paying into it. I also paid into SS, and have 40+ credits (10+ years).

 

[David1961]

Not sure what you mean by "Essential Expenses". Is that the bare bones amount you need to live on OR a realistic estimation of what your actual retirement expenses will be? It implies there are "Nonessential Expenses" - if that is the case then you may want to consider these as well in your planned retirement expenses. Once you get an estimation of what your retirement expenses will be per year, subtract the income you will get from your rental property in NY. Take that amount and multiply by 33 (for a 3% WR) and that should give you a BALLPARK FIGURE for the needed portfolio amount. You could subtract from this the assets you currently own (like the rental property).
HOWEVER, not sure how you'd factor in things like the local inflation rate and exchange rate. You have some unique situations to consider which might dictate you needing more. The above is just my opinion based on the information you provided.
Good luck and keep us posted.

 

[FIREdToBeExpat]

HOWEVER, not sure how you'd factor in things like the local inflation rate and exchange rate. You have some unique situations to consider which might dictate you needing more. The above is just my opinion based on the information you provided.
Good luck and keep us posted.

That (the local inflation & exchange rate) is the wild card in the equation. The rest is easy to calculate, as you pointed out. I guess there is no easy answer/solution for it The Essential Expenses is our current expenses based on actual numbers.

 

[MichaelB]

That (the local inflation & exchange rate) is the wild card in the equation. The rest is easy to calculate, as you pointed out. I guess there is no easy answer/solution for it

Most definitely. If economic history is a guide, you can expect the US$ purchasing power to decline if the country continues to develop and improve it's overall standard of living relative to the US. Whether that happens, and how it would come about, it anyone's guess. If you intend to remain there indefinitely, it might be a good idea to hedge your situation by investing some money in an asset that will hold vs inflation and generate local currency income, such as real estate.