Major Milestone Achieved - Sort of

[ChiSaver]

Wanted to provide another update. Same jobs, same wife, same cars, same kids (now 10, 8 and 6) and same house (6 years remaining on the loan).

Updated the balance sheet this evening before a mid year check-point with the financial advisor. Was very excited to see that we were 2k over the 3 Mil mark on the net worth statement. If you read my original post you know I calculate 2 ways. This includes the cars and house. Hopefully investment assets will be there by the summer of 2015.

I love the anonymity of this site and the camaraderie we all share towards a common goal. As I've mentioned in previous posts, I may not post much, but I read these threads almost every day. You all are a big source of inspiration for getting to FI and hopefully, RE. Thanks again.

 

[segfault]

1 mil to 3 mil in ~4.4 years? That's cause for celebration! When will you hit your FI number?

 

[ChiSaver]

The goal for FI is 4 mil in investment assets (no house/cars/property/college savings). That would get us to a very comfortable 120k at 3% SWR. Depending on how the markets do, that is looking good in the next 2-3 years. RE is another question. With 3 relatively small children and aging parents, we are on the hook for a lot of others expenses. The DW and I are targeting RE at 45 (currently 37/38) but will look for ways to pull this in after hitting FI.

 

[Jay_Gatsby]

The goal for FI is 4 mil in investment assets (no house/cars/property/college savings). That would get us to a very comfortable 120k at 3% SWR. Depending on how the markets do, that is looking good in the next 2-3 years. RE is another question. With 3 relatively small children and aging parents, we are on the hook for a lot of others expenses. The DW and I are targeting RE at 45 (currently 37/38) but will look for ways to pull this in after hitting FI.

You should probably exclude some or all retirement accounts from your "investment assets" for purposes of calculating your 3% SWR. If your goal is to RE by 45, you won't be able to touch that money for quite a while. Otherwise, your SWR will be much higher than 3%, though your retirement accounts will still be growing in the interim.

I'm sure someone has done the foregoing exclusion/inclusion calculation, but it doesn't seem right to include retirement accounts if you're RE (unless you're very close to 59 1/2, which may not be RE).

 

[REWahoo]

You should probably exclude some or all retirement accounts from your "investment assets" for purposes of calculating your 3% SWR. If your goal is to RE by 45, you won't be able to touch that money for quite a while. Otherwise, your SWR will be much higher than 3%, though your retirement accounts will still be growing in the interim.

You're saying retirement accounts that can't be accessed (without penalty) prior to 59.5 shouldn't be used in calculating SWR? I'm not following this.

 

[scrabbler1]

As someone who actually ERed at 45 back in 2008 (I did not know about SWRs at the time; I did not join this forum until 2009), I split my ER plan into two parts: the first was using only my non-retirement (taxable) accounts to get me to age ~60 and the second was beyond age ~60. The first part was the more challenging part, of course.

After I learned about SWRs, I calculated them for my own portfolio. However, they don't seem to be relevant because of my two-part plan to use only some of my portfolio to cover my expenses. Do I use my entire portfolio's value in the denominator or only the taxable portion of it? I use the entire portfolio's value even if I can't access the entire portfolio right now. This gives me, perhaps, an understated SWR (2-2.5%). But just because I can't access the entire portfolio right now doesn't mean the inaccessible part is totally worthless (and it is growing, too).

My SWR using only the accessible part is in the 3.5-4% range which is fine. I am still living off the dividends from that part and I still have a small surplus there, too. The SWR, if calculated this way, will eventually drop once I gain unfettered access to my IRA (i.e. my complete portfolio). And it will drop more once I can begin collecting SS and my former company's frozen pension in my mid-60s.

Bottom line: My SWR is a moving target which can be calculated a few different ways. So I don't care a whole lot what it is as long as my dividends alone more than cover my expenses and I don't have to tap into principal. Even if I have to tap into principal a little bit in my late 50s I will be fine.