Lifestyle creep delays early retirement

[NgineER]

In similar situation as well.
Didn't think about ER until three years ago...
Thought 55 would be suitable, with $3M in assets, recently figured that I could retire at 50 with a little less. Then figured that 47 might be doable with some rental income.
Added fourth child this year and no big change in plans.

But, there is a nice five acre lot on a beautiful private lake near a metropolitan area that is really appealing to me. But can I justify saving less in order to live more now?
I'm thinking so, but it is scary to increase leverage, taxes and fixed costs that much (almost 3x loan).

It jives much more with me to live well below our means. I silently laughed at friends with similar incomes who moved into a more exclusive neighborhood and sold their beater in favor of a more exclusive and neighborhood fitting SUV.

It is very appealing to have a lake front home in an excellent school district now when the kids are young vs retiring earlier. I think it would set me back to my original plan of 55.
With rates low, I also figure that long term inflation and salary growth will take out the bite of increased expenses of higher mortgage payments.


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[brucethebroker]

Hey Hamlet, life happens. To many of us, kids are, and will be more important to us the older we get. My 2 cents is to find work you really, really enjoy-same for DW. Then, it won't be so painful to work the extra decade or so. Also, when the kids move out (after HS, not college!!) there are new options to downsize, work part time, sell off a car, move to a less expensive area or the country, etc. So, all is not lost!

 

[ivinsfan]

In similar situation as well.
Didn't think about ER until three years ago...
Thought 55 would be suitable, with $3M in assets, recently figured that I could retire at 50 with a little less. Then figured that 47 might be doable with some rental income.
Added fourth child this year and no big change in plans.

But, there is a nice five acre lot on a beautiful private lake near a metropolitan area that is really appealing to me. But can I justify saving less in order to live more now?
I'm thinking so, but it is scary to increase leverage, taxes and fixed costs that much (almost 3x loan).

It jives much more with me to live well below our means. I silently laughed at friends with similar incomes who moved into a more exclusive neighborhood and sold their beater in favor of a more exclusive and neighborhood fitting SUV.

It is very appealing to have a lake front home in an excellent school district now when the kids are young vs retiring earlier. I think it would set me back to my original plan of 55.
With rates low, I also figure that long term inflation and salary growth will take out the bite of increased expenses of higher mortgage payments.


Sent from my iPhone using Early Retirement Forum

The magic word here is lake front, usually holds it value very well,, downside a lot of value attached to the location and property taxes are usually higher then on a similar house without the lake.

And honestly 4 kids cost a pretty penny, you might be a little optimistic on that late 40's income.One option might be to take your time on the lake and see if you get some leverage on the price, have a realtor come in and give you a realistic price on your current home, so you have all the facts.

 

[kcowan]

kcowen is Canadian, I believe.... so he doesn't get the same tax break.

Yes the PR tax break is unlimited capital gains as the sole motivation for ownership. And the money we have to earn to pay rent is fully taxable. There are some property tax rebates in certain places and with restrictions.

 

[Hamlet]

Update--

Since we closed on selling the old house last week I figured I'd give an update--

It has been a challenging 9 months or so. My wife badly broke her ankle last June and required pins, wire, etc. It has been a brutal recovery for her. She will have surgery in a couple of weeks to remove all of the hardware now that everything is healed well enough to do so.

My father died last fall shortly after we had moved into the new house. He was 61 and had had some major health issues, but everyone thought he was on the mend. Life is short.

Our old house was in pretty rough shape when we moved out. One of our old neighbors was a house flipper, so we hired her to fix it up for us. It was not the cheapest path to getting it sold, but given our personal situation ( two full-time jobs, two young daughters, one broken ankle), I was pretty happy to trade money for time. It took a little longer and cost a little more than planned (which was not a surprise ). On the plus side, it was beautiful when we finally listed it and it sold quickly at just above our asking price.

Once I plunk the money we cleared down on the new mortgage, or financial snapshot will be--

$480k house with a 300k mortgage outstanding
$50k cash emergency fund
~300k in after tax retirement investments (mostly stocks)
~1.3 million in various retirement accounts (roughly 75% stocks/25% cash or stable value)

Between the two of us, we make about 200k/year.

Aside from the house (which I've started referring to as "Hamlet's Folly" ), our major expense is pre-school for the two DDs. Currently preschool and the house payment are pretty much the same cost per month (about 2.5k each, so 5k/month for our big bills). Come next fall, the oldest will go to 1st grade, which should drop our costs about $800/month (we will still need after school care for her, unless grandma volunteers). A couple years after that we should save another $800/month or so when the youngest goes to kindergarten/1st grade.

I'm currently 44 and my wife is 40. We are still pretty far out from retirement, and there are some pretty big variables that could dramatically impact our FIRE date. I figure, absolute best case would be 6 years out or so, if the market screamed upwards like the late 90s and health insurance became single-payer . I think 11 years is a decent possibility if the market is okay and there is at least a borderline functional healthcare market. Obviously, a bad market and failed health insurance market could keep at least one of us on the job waiting for Medicare.

So I think we are shooting for being part of the class of 2028 currently.

 

[Lsbcal]

Sounds like a version of the American dream to me. Best of luck.

 

[steadystate]

But at least you won't have to pay for long term care insurance ... aren't daughters supposed to take care of their elderly parents?