New member and working towards FI

[engineernerd]

Thanks! I think it's hard for me to not set an age, as I'm generally a very goal oriented person. While I agree that setting a specific age goal may not be realistic, I think an age range is an acceptable goal, though it sounds like I may be in the minority with this opinion .

The thing is, how soon you will have enough to retire safely is not under your control. Both stock market performance and inflation are impossible to predict, let alone force to bend to your will. There's nothing more demoralizing than to tie your psychological well-being to a goal that depends on things you can't control.

 

[pjigar]

Multiple factors: I started working later in my 20s, low income in early years, kids, little lifestyle inflation once I had a good bump in income mid-career, upgraded future FI lifestyle requirements (i.e. estimated expenses), decided to use 3% SWR, etc. In general, like I said, life happened along the way. Initially, the goal was to leanFIRE ASAP. But as the time passed, I switched to less stressful job and the goal became FI (and now FatFIRE). As I said, enjoy the journey. Especially, after you have kids. Our best memories.

PS: Reasons for the increased estimated expenses: Inflation, higher healthcare, amortized lumpy expenses (roof, furness, cars, etc), higher taxes, etc. As you may know, once you cross 12% tax bracket, both average percentage tax rate and healthcare cost shoots up rather quickly.

Speaking of expenses, the following post is a must-read for any FIRE candidate!

Some Important Questions to Answer Before Asking - Can I Retire?

1. What are your expenses? No, your real expenses that you have tracked carefully over a period of at least two years, not some rough estimate that you just pulled out of thin air. If you don't know where your spending flow goes now, you've got no business turning off the income flow. 2. Are...

www.early-retirement.org

 

[pjigar]

The thing is, how soon you will have enough to retire safely is not under your control. Both stock market performance and inflation are impossible to predict, let alone force to bend to your will. There's nothing more demoralizing than to tie your psychological well-being to a goal that depends on things you can't control.

FWIW I was setting age goal in my 30s but eventually I setup a goal that ties the real variables (nest egg and real honest-to-god expenses): I would consider myself FI when nest egg (invested capital) is 33 times the retirement expenses. i.e. 3% SWR.

 

[chemEguy]

I’ll chime in. My wife and I are 53 and on the other side of the hill you’re climbing. But, your current financial picture and mindset closely mirrored our own 25 years ago.

Overly rosy? Yes, I think so. FI in your 30s will be challenging.

The good news? You’ve already done the hard part and have set yourself up extremely well to get where you want to be. Continue to focus on aggressively saving and sensibly investing. What you’ve accumulated to date is a phenomenal boost to your future bottom line net worth.

 

[MrTankster]

Welcome to the forum.

Whether on not your plan is "too" ambitious, the important thing is that you have started implementing your plan and that you are making progress. In the meantime, treasure the time with your family.

This is good to keep in mind. Thank you

 

[MrTankster]

The thing is, how soon you will have enough to retire safely is not under your control. Both stock market performance and inflation are impossible to predict, let alone force to bend to your will. There's nothing more demoralizing than to tie your psychological well-being to a goal that depends on things you can't control.

That's a fair point, though I wouldn't go as far as saying this is something I'm tying my psychological well-being to, but perhaps that wasn't directed at me .

 

[MrTankster]

PS: Reasons for the increased estimated expenses: Inflation, higher healthcare, amortized lumpy expenses (roof, furness, cars, etc), higher taxes, etc. As you may know, once you cross 12% tax bracket, both average percentage tax rate and healthcare cost shoots up rather quickly.

Speaking of expenses, the following post is a must-read for any FIRE candidate!

Some Important Questions to Answer Before Asking - Can I Retire?

1. What are your expenses? No, your real expenses that you have tracked carefully over a period of at least two years, not some rough estimate that you just pulled out of thin air. If you don't know where your spending flow goes now, you've got no business turning off the income flow. 2. Are...

www.early-retirement.org

Thanks for the link. I'll check that out

 

[MrTankster]

I’ll chime in. My wife and I are 53 and on the other side of the hill you’re climbing. But, your current financial picture and mindset closely mirrored our own 25 years ago.

Overly rosy? Yes, I think so. FI in your 30s will be challenging.

The good news? You’ve already done the hard part and have set yourself up extremely well to get where you want to be. Continue to focus on aggressively saving and sensibly investing. What you’ve accumulated to date is a phenomenal boost to your future bottom line net worth.

Thanks for the encouragement! Also, challenge accepted

 

[chemEguy]

Thanks for the encouragement! Also, challenge accepted

You’re welcome.

As far as actions…max out all the tax advantaged stuff you can, 401K, Roth or regular IRA, and HSA.

I will add that we are currently putting two kids through college at the same time. We decided not to contribute anything to 529 plans. I wanted to focus on retirement funding over future college costs that may or may not have happened. Plus, I figured if we did things right it wouldn’t matter and we’d cover it in cash. Turns out I was right.

This may not be the right answer for you but food for thought.

Also, I would consider taking out a 20 year term life insurance policy after your first is born. One for you and one for your spouse. They’re cheap at your age. We did this as a backstop until the kids hit college. Ours recently expired and we opted for no other life insurance aside from the dirt cheap stuff from our employers. It’s cheap peace of mind, yeah the term policies expire with no value but who cares? It’s insurance should the worst happen, not an investment.

After your portfolio hits 1 or 2 million, it will, but not just yet…consider an umbrella policy. You’ll want it before your soon to arrive baby starts driving.

And whatever you do, don’t alter your strategy when the next market meltdown hits. Guaranteed to happen, guaranteed. It’s not too terrible when 20% is only 50K of your 250K, it’s less fun when it’s a seven figure decline. Just keep investing regularly.

 

[Diogenes]

The thing is, how soon you will have enough to retire safely is not under your control. Both stock market performance and inflation are impossible to predict, let alone force to bend to your will. There's nothing more demoralizing than to tie your psychological well-being to a goal that depends on things you can't control.

As we get older, our investible wealth increases but our human capital diminishes. This is true whether we're working full time, part-time, or fully retired.. and anything in between. Our continuing success depends less on personal verve, be it good behavior (thrift, risk management, attending to our physical health, etc.) or creativity (finding the next killer investment), than on the economy and the market and the broader reality around us.

 

[Koolau]

Yeah, you're so far ahead of me when I was your age. Back then I thought about retirement - maybe before I hit age 65. I was always a good saver but a lousy investor. I eventually retired at 58. I'm one who believes that if you want something badly enough, you'll make it happen. (Be certain your Wife/SO is on the same page).

Good luck and please keep us posted on your progress.

 

[NomDeER]

I disagree with your opinion that you need to own property to be FI.

I agree. I retired early with FI without owning property. The analysis of what makes sense varies a lot based on specific circumstances. Just remember that there will be inflation and that you will have to withdraw adequate money (and pay taxes on it) for your rent.

I don't really know the exact specifics between cost of living labels, but $2k sure feels like HCOL when compared to where we used to live haha. What site or metric are you using to base your information on?

There definitly are cities where you could not rent an apartment for 2K per month. Take a look at New York, San Francisco, etc.

I think your 50K estimate for a family that includes a young kid is probably unrealistic, especially if you really do live in a HCOL area. Kids are expensive.

Have you thought about what your health costs will be after you leave your current employer?

It may be theoretically possible to have only 50K in expenses, but please don't be so frugal that you are missing out on opportunities to have fun, be physically and mentally healthy, and help your child thrive just so that you can put as much as possible toward ER.

 

[TickTock]

The thing is, how soon you will have enough to retire safely is not under your control. Both stock market performance and inflation are impossible to predict, let alone force to bend to your will.

This is a good point. What will the 10-year US stock market return be in 10 years?

(Source: https://www.crestmontresearch.com/docs/Stock-Rolling-Components.pdf )

It might be 10% nominal. Could even be slightly negative - not very likely, but possible. Could be 15% nominal - again, not likely, but possible (and more likely than negative). And who knows what inflation will be?

Maybe run the scenarios with a range of real returns: 12% very optimistic, 7% average, 0% very pessimistic...

 

[livingalmostlarge]

Okay so you rent in a hcola I how do you account for rent increases? What happens when in 10 years rent doubles? Or it increases by $1000 say it goes up $100 a year for 20 years super conservative? How does that work with the budget you have always renting without any appreciation of equity? Or fixed expenses which sure property taxes go up but then you do have skin in the game with home appreciation

 

[Teacher Terry]

You guys are doing great so far! As someone has already suggested, take out a term life policy for 30 years. That’s what my husband and I did when the kids were little so that if one of us died, the other person would not have to work. we wanted to be available to take care of the family. It’s so cheap if you choose term.

I would also look into one of you staying home to raise your child for the first three years. Those are the most important years and then at age 3 daycare is valuable for a child to attend. Unless it would put you so far behind in your careers that you don’t want to consider it spending that time with your child is really priceless.

I did know a couple in New York City that raised two kids of opposite sexes in a one bedroom apartment. They had a rent controlled apartment and so they divided the bedroom into half with a screen when the kids were older. They slept in a hide a bed in the living room. It’s not something that I would want to do and they both had good jobs, but they weren’t willing to give up that apartment at such a good rate.

 

[GoBears]

In addition to term life insurance, make sure you have adequate short and long term disability insurance. Statistically, you are much more likely to become disabled and unable to work than die during your normal working years. Social Security should also be providing you with an estimate of your long term Social Security disability benefits and, as you will discover, they are not all that much.

 

[Koolau]

In addition to term life insurance, make sure you have adequate short and long term disability insurance. Statistically, you are much more likely to become disabled and unable to work than die during your normal working years. Social Security should also be providing you with an estimate of your long term Social Security disability benefits and, as you will discover, they are not all that much.

Agree with disability insurance. If you have to choose between life and disability, I'd go with disability (but I recommend BOTH).

 

[chemEguy]

And I’ll reiterate my post…TERM policy. Those are super cheap when you’re young. Life, whole life, and all those other products are not worth it. Insurance is not an investment. You can get different term lengths but we liked the 20 year timed to our first child’s arrival. I think we opted for 800K or 1 million each. Thrilled when they expired last year.

 

[Koolau]

And I’ll reiterate my post…TERM policy. Those are super cheap when you’re young. Life, whole life, and all those other products are not worth it. Insurance is not an investment. You can get different term lengths but we liked the 20 year timed to our first child’s arrival. I think we opted for 800K or 1 million each. Thrilled when they expired last year.

Yes, insurance is one of those things you hope you wasted your money buying! When we got our kids late in life, I took all the group term I could get at Megacorp. I was too old/"infirm" to go through underwriting so took the group rate which wasn't the cheapest, but was affordable and "painless" to get.

Likely, the biggest insurance mistake we made was NOT buying insurance on DW. We lucked out, but in hindsight, it was a mistake to ignore half the equation!