Review and FIRE readiness thoughts

[patela6]

Hello all!

I've been posting more on Bogleheads.org than here, but would love to have more conversation here .

Seems we've recently passed some financial milestones which make me happy:
- Reached around 27X expenses in our investable portfolio. Roughly $100k expected retirememt expenses. I think this means we're close or at FI.
College roughly funded for 2 years for our two kids, 11 and 13

- Expenses have dropped (paid off house last month, and only one private school payment now!)

So, financially wise I think we're on a solid path. However, I'd love to hear from others on non-financial plan below:

We're mid forties, planning to work 5 to 8 more years. This will mean our kids will largely be done with school, and be in college.

One dealbreaker for me, is I want 100% of my time. I.e. I don't want to be tied to school schedules I'm ER. I'd rather plod on with my pretty easy (for now) job, until kids are out of the house.

I think it makes sense for wifey and I to retire at roughly the same time. My current thoughts are:
1. I'd love to do nothing for a month!
2. We'd like to take some trips around 6 weeks in length.
3. I want to spend more time on my health. I know, no time like the present and we are making steps. Just want health to become the top priority in ER.
4. I'd like to get bored, a bit. Find new hobbies etc.
5. Potentially find a fun part time job, if I want. Something not in front of a screen. E.g. work at a winery, become a sommelier, local park etc etc.
6. Drop thus job whenever we want, for more travel fun etc.
7. Hopefully be able to do this for a good few years in our 50s
8. Support our parents as they age
9. Support kids as they navigate college, relationships, jobs etc.

Just read die with zero, which largely resonated with me. So u I know this is the right forum to ask this question. Anyone gone thru the above FIRE lifestyle or planning to? Would love to hear new perspectives!

Cheers.

 

[brett]

I can comment on the travel component. Our plans were similar. We sold our home, put everything in storage, and traveled for seven months. Then did another three in a furnished apartment.

-I would be happy to travel for six months at a time. DW found it too long. We were in Europe, Africa, US, and Central America.

-Since retiring for nine years our sweet spot for travel is 2-3 months at a time, twice per year. Now it is Europe in the fall, SE Asia and Australia in the winter. This keeps us both happy. Pre covid I was planning a solo trip to India. On my list but not on DW's.

-we considered buying a winter home in Costa Rica, Mexico, etc. Decided against. We like to travel and did not want to feel committed to go simply because of ownership. Besides, RE in Costa Rica was a bad investment the times we were there.

-What we thought we wanted to buy when we first sold our home was not what we eventually bought. This was partly attributable to our travel experiences and where we stayed. No stars-six stars, small rooms to 2 BR. condos. Now we have a lock and leave. No plants, no pets. We can pick up a last minute deal and leave town in a few hours if need be.

-apart from downsizing greatly, we moved everything possible to the web.

-we both lost weight,,,made travel, especially 8 -12 hour flights infinitely more comfortable. Our travels changed our eating. No more convenience food. On our return we wanted more fresh fruit, fresh veg, seafood, less red meat. And more red wine for me!

-we traveled with multiple credit cards. More than once one credit card was not accepted. Always seemed to be one of the regional LC airlines in Europe or Asia.

-we started off with carry on only. It was hard at first but it made our travels so much easier. Depends I guess on where and how you travel.

Now for the entertaining part. We downsized from a large 5 BR home to a 1500 sq foot villa. After we started looking a year later we were looking at condos. Some people assumed that we had spent all of our equity on travel! Not certain why.

We rented for four years because our real estate market was in the toilet for those four years and the equity market was outperforming. Again...some people jumped to the assumption that we had to rent for financial reasons. There are people out there who think if retirees rent they must not have the resources to buy. So very strange.

I left at 58 with the intention of doing some part time consulting. When I returned for our travels that urge had disappeared. Two months later we booked a last minute flight to Thailand for the winter and forgot all about working. Went back five more winters because we enjoyed it so much. Your situation is different.

 

[LarryMelman]

27x is 4%. That's not enough margin of safety. Revisit your numbers again in 5 years and see where you stand then.

 

[GenXguy]

Bring down that $100K/yr spending. Don't forget to include income taxes as part of your spending during drawdown and long term expenses, such as those that come with home maintenance (roof, hvac, etc).

 

[mcneally]

27x is 4%. That's not enough margin of safety. Revisit your numbers again in 5 years and see where you stand then.

27x is 3.7%. There is tons of safety margin in ability to reduce high planned spending of $100k with a paid off house, a bit more from presumed SS, possibly more from "5. Potentially find a fun part time job, if I want. Something not in front of a screen. E.g. work at a winery, become a sommelier, local park etc etc", though this is irrelevant since OP wants to work 5-8 more years anyway.

 

[Aerides]

27x is 4%. That's not enough margin of safety. Revisit your numbers again in 5 years and see where you stand then.

If the OP is at 27x today, and planning to work for 5 more years as they say, they'll probably be closer to 35-40x. So their numbers look good to me.

 

[LarryMelman]

If the OP is at 27x today, and planning to work for 5 more years as they say, they'll probably be closer to 35-40x. So their numbers look good to me.

Which is why I said to look again in a few years to see if things are still on track.

 

[patela6]

Thanks folks! Appreciate responses so far. Keep em coming. Feel free to ask me questions

 

[Retireby45ish]

Sounds like a great plan and almost exactly the same as my situation. Down to the numbers (I’m at 29x) as well as the plans for the future. I was also thinking winery!

I have to check out Die with Zero. If anyone has a copy they can mail via media mail I’d pay the postage! They don’t have it at my local library and I hate collecting books (I’d just donate it when done reading).

How do you plan for healthcare? That’s my big concern. Hard to price that out. Is it part of you 27x? How are you estimating?

 

[patela6]

Sounds like a great plan and almost exactly the same as my situation. Down to the numbers (I’m at 29x) as well as the plans for the future. I was also thinking winery!

I have to check out Die with Zero. If anyone has a copy they can mail via media mail I’d pay the postage! They don’t have it at my local library and I hate collecting books (I’d just donate it when done reading).

How do you plan for healthcare? That’s my big concern. Hard to price that out. Is it part of you 27x? How are you estimating?

Love your username

Healthcare....the bane and headache in all RE plans! I'm thinking of staying under the ACA limits and getting subsidies. I'm planning on voting for anyone/any party who has the balls to fix the healthcare mess here. As a third option, I'm a UK citizen, so I may just go back home to the good old NHS for a few years!!

 

[patela6]

I can comment on the travel component. Our plans were similar. We sold our home, put everything in storage, and traveled for seven months. Then did another three in a furnished apartment.

-I would be happy to travel for six months at a time. DW found it too long. We were in Europe, Africa, US, and Central America.

-Since retiring for nine years our sweet spot for travel is 2-3 months at a time, twice per year. Now it is Europe in the fall, SE Asia and Australia in the winter. This keeps us both happy. Pre covid I was planning a solo trip to India. On my list but not on DW's.

-we considered buying a winter home in Costa Rica, Mexico, etc. Decided against. We like to travel and did not want to feel committed to go simply because of ownership. Besides, RE in Costa Rica was a bad investment the times we were there.

-What we thought we wanted to buy when we first sold our home was not what we eventually bought. This was partly attributable to our travel experiences and where we stayed. No stars-six stars, small rooms to 2 BR. condos. Now we have a lock and leave. No plants, no pets. We can pick up a last minute deal and leave town in a few hours if need be.

-apart from downsizing greatly, we moved everything possible to the web.

-we both lost weight,,,made travel, especially 8 -12 hour flights infinitely more comfortable. Our travels changed our eating. No more convenience food. On our return we wanted more fresh fruit, fresh veg, seafood, less red meat. And more red wine for me!

-we traveled with multiple credit cards. More than once one credit card was not accepted. Always seemed to be one of the regional LC airlines in Europe or Asia.

-we started off with carry on only. It was hard at first but it made our travels so much easier. Depends I guess on where and how you travel.

Now for the entertaining part. We downsized from a large 5 BR home to a 1500 sq foot villa. After we started looking a year later we were looking at condos. Some people assumed that we had spent all of our equity on travel! Not certain why.

We rented for four years because our real estate market was in the toilet for those four years and the equity market was outperforming. Again...some people jumped to the assumption that we had to rent for financial reasons. There are people out there who think if retirees rent they must not have the resources to buy. So very strange.

I left at 58 with the intention of doing some part time consulting. When I returned for our travels that urge had disappeared. Two months later we booked a last minute flight to Thailand for the winter and forgot all about working. Went back five more winters because we enjoyed it so much. Your situation is different.

Nice write up! Thanks. Thailand is one of our favorite places, and a potential for staying months/winter for us too! Where in Thailand? Did you lease a place for a couple of months, or airbnb etc? Thanks again!

 

[patela6]

27x is 4%. That's not enough margin of safety. Revisit your numbers again in 5 years and see where you stand then.

Yep, I guess my number/target should be 33X for roughly a 3% withdrawal. Good thing is both wifey and I will get social security retirement benefits.

 

[patela6]

27x is 3.7%. There is tons of safety margin in ability to reduce high planned spending of $100k with a paid off house, a bit more from presumed SS, possibly more from "5. Potentially find a fun part time job, if I want. Something not in front of a screen. E.g. work at a winery, become a sommelier, local park etc etc", though this is irrelevant since OP wants to work 5-8 more years anyway.

Thanks. Once my younger son transitions to public school in 7th grade/Junior High (2 years from now), that will be the last huge milestone re: reducing today's expenses by $2k a month.
I think we should be able to survive if one of us never worked again after this milestone.

 

[patela6]

Bring down that $100K/yr spending. Don't forget to include income taxes as part of your spending during drawdown and long term expenses, such as those that come with home maintenance (roof, hvac, etc).

Hear ya. Here's a rough breakdown of expected expenses in retirement:
$1.5K property tax ($1k today)
$2k health insurance (hope for less with subsidies etc, God knows)
$500 utility bills
$2k food/entertainment
$2k travel?
$2k taxes?
What am I missing? I'm at $10k a month there! (With buffer!)

 

[Dtail]

Yep, I guess my number/target should be 33X for roughly a 3% withdrawal. Good thing is both wifey and I will get social security retirement benefits.

Please note that the 25x expenses in the portfolio based on the original Trinity studies, etc never included SS.
Thus if for example you and the DW will receive a combined 50k in SS, then the portfolio only has to fund 50k which based on the 25x means your portfolio would be 2.5m and thus your true WR is 2%.

 

[Aerides]

Hear ya. Here's a rough breakdown of expected expenses in retirement:
$1.5K property tax ($1k today)
$2k health insurance (hope for less with subsidies etc, God knows)
$500 utility bills
$2k food/entertainment
$2k travel?
$2k taxes?
What am I missing? I'm at $10k a month there! (With buffer!)

The way to do expenses is start with actuals. Then, think "big" non annual stuff. Like..you need a new fridge, roof, car.. reduced those to average annuals and layer them on top.

 

[RetiredHappy]

Hear ya. Here's a rough breakdown of expected expenses in retirement:
$1.5K property tax ($1k today)
$2k health insurance (hope for less with subsidies etc, God knows)
$500 utility bills
$2k food/entertainment
$2k travel?
$2k taxes?
What am I missing? I'm at $10k a month there! (With buffer!)

This is a good start.
- Is there any expensive hobby?
- Auto, home, umbrella insurance policies.
- Car maintenance and replacement schedule.
- Add 5% to 10% value of home per year for upkeep and can go into a reserve fund for whatever that is unutilized for each year.
- Yard, pool, pest control and HVAC routine services.

 

[patela6]

This is a good start.
- Is there any expensive hobby?
- Auto, home, umbrella insurance policies.
- Car maintenance and replacement schedule.
- Add 5% to 10% value of home per year for upkeep and can go into a reserve fund for whatever that is unutilized for each year.
- Yard, pool, pest control and HVAC routine services.

Thanks! No expensive hobby...yet.
Insurance is a good catch: 5k a year roughly. (Car, house, umbrella and life). So another 500 a month there.
Probably 1k month for a car fund/maintainence.
2k for home maintainence fund
500 a month for routine services. Just pest control at the moment + house cleaning.

Wow so I'm up to 13 to 14k a month.
I'll look at actuals but this is probably a good conservative number for future expenses.

So it looks like I should really be targeting $140 to $150k a year. In which case, I have about 20X expenses saved, not 27X! (Not factoring SS)

 

[mystang52]

OP, I was struck by your comment about improving your health once you ER. Tough-love: nothing magical happens the day you stop w*rk to all of a sudden see your health improve. You will, of course, have a lot more time for exercise, going to the gym, etc. However, if you have few or no good health habits now, you should start laying the groundwork immediately.
Early morning, after w*rk, one of the weekend days, and you can squeeze in 3 separate health-related events each week. If weight is an issue, cut back your calories at least a little.
A lot can happen, and not in a good way, in 5 to 8 years healthwise. And that's especially the case if you don't see yourself as healthy now.

 

[RetiredHappy]

I had no hobbies, well no real hobby other than a ton of fun travel, until a couple of years before we retired. I picked up golf and it has been excellent for my blood pressure and overall health. Hence the question of whether any expensive hobby. Obviously workout in gym is a much cheaper alternative but for me, 1 hour on the treadmill 5 days a week does not do as much for my blood pressure than 3 to 4 hours on the golf course several times a week. Golf / country club membership cost us another $20K a year.

 

[patela6]

OP, I was struck by your comment about improving your health once you ER. Tough-love: nothing magical happens the day you stop w*rk to all of a sudden see your health improve. You will, of course, have a lot more time for exercise, going to the gym, etc. However, if you have few or no good health habits now, you should start laying the groundwork immediately.
Early morning, after w*rk, one of the weekend days, and you can squeeze in 3 separate health-related events each week. If weight is an issue, cut back your calories at least a little.
A lot can happen, and not in a good way, in 5 to 8 years healthwise. And that's especially the case if you don't see yourself as healthy now.

Thanks. I've gotten better, some bike riding and walking. Need to become more regular for sure.
When I have completely free days, I'll have my coffee, then go for a nice bike ride (15/20 miles), come back & perhaps pick up some weights for a few reps, hit the infra red sauna and then cold/warm soak in the Jacuzzi tub. I'll then feel like a million bucks (or 3). If no one is bothering me (work, kids, spouse) it could easily be past midday by the time I'm done . Those are the sort of days I yearn for...

 

[patela6]

I had no hobbies, well no real hobby other than a ton of fun travel, until a couple of years before we retired. I picked up golf and it has been excellent for my blood pressure and overall health. Hence the question of whether any expensive hobby. Obviously workout in gym is a much cheaper alternative but for me, 1 hour on the treadmill 5 days a week does not do as much for my blood pressure than 3 to 4 hours on the golf course several times a week. Golf / country club membership cost us another $20K a year.

Thanks. I'll dabble at the range for a bit but hardly have ever gone on courses. I can see myself doing this more with the right company/friends in retirement. I'm not sure I could afford that membership though! Would eat into my travel budget!

 

[Scuba]

Hear ya. Here's a rough breakdown of expected expenses in retirement:

$1.5K property tax ($1k today)

$2k health insurance (hope for less with subsidies etc, God knows)

$500 utility bills

$2k food/entertainment

$2k travel?

$2k taxes?

What am I missing? I'm at $10k a month there! (With buffer!)

A few thoughts on this:
- Any funds needed for helping kids with grad school, weddings, etc.?
- Any funds needed to help subsidize Eldercare for parents?
- Need money for home maintenance/repairs and also auto replacement.
- Once you don’t have to work, if you really like travel and want to go for longer periods of time, $2K/month may be light. Depends on where you like to go and what you like to do. We are SCUBA divers and like going to remote areas of the world and staying at very small dive-oriented resorts or higher end dive liveaboard boats, and we like to go for 2-3 months.
- Medical costs are very high even for healthy people. Our insurance alone is $1,500/month and this excludes co-pays, lab work, deductibles, and prescriptions. We are both very healthy with no chronic conditions and our spending has been around $2K/month now and it goes up double digits every year.
- Taxes might be higher or lower depending on where your cash flow comes from and what state you live in.

Suggest you track actual spending by category for the last few years and see what your history is. We bumped up our spending in retirement compared to spending while we worked, knowing that having more free time often results in more spending. We’ve spent less on auto maintenance, gas, clothing and dry cleaning, but WAY more on travel and healthcare.

 

[Closet_Gamer]

Hear ya. Here's a rough breakdown of expected expenses in retirement:
$1.5K property tax ($1k today)
$2k health insurance (hope for less with subsidies etc, God knows)
$500 utility bills
$2k food/entertainment
$2k travel?
$2k taxes?
What am I missing? I'm at $10k a month there! (With buffer!)

I'd suggest getting far more specific. In particular, do the math on income taxes as that "comes right off the top", isn't really controllable and (IMHO) can only go up from here.

Also, consider adding LTD insurance to the mix to cover any extraordinary nursing care or other issue. If you get to 33x, you be in the 3% range but something like a major illness could still flip your boat. Particularly as you will be retiring young. Lots of things can happen.

$2k/mo travel is fantastically aspriational. I hope you can get it all out the door every year!

Makes sure you budget for large occassional expenses (cars, roofs, etc.)

Also, have you started to think about your withdrawal strategy?

Great job.

 

[patela6]

A few thoughts on this:
- Any funds needed for helping kids with grad school, weddings, etc.?
- Any funds needed to help subsidize Eldercare for parents?
- Need money for home maintenance/repairs and also auto replacement.
- Once you don’t have to work, if you really like travel and want to go for longer periods of time, $2K/month may be light. Depends on where you like to go and what you like to do. We are SCUBA divers and like going to remote areas of the world and staying at very small dive-oriented resorts or higher end dive liveaboard boats, and we like to go for 2-3 months.
- Medical costs are very high even for healthy people. Our insurance alone is $1,500/month and this excludes co-pays, lab work, deductibles, and prescriptions. We are both very healthy with no chronic conditions and our spending has been around $2K/month now and it goes up double digits every year.
- Taxes might be higher or lower depending on where your cash flow comes from and what state you live in.

Suggest you track actual spending by category for the last few years and see what your history is. We bumped up our spending in retirement compared to spending while we worked, knowing that having more free time often results in more spending. We’ve spent less on auto maintenance, gas, clothing and dry cleaning, but WAY more on travel and healthcare.

Thank you! Grad school or weddings for kids...I haven't thought about or earmarked $. We'll likely help some, but def not pay 100%.

Luckily our parents have planned and saved well. A friend at work is paying for both parents elder/nursing care, so I hear you 100%. I'm suggesting to my mum and my wife, we need to plan healthcare/living (back) in the UK, even if just as a backup option given so much uncertainty here in the US.

Yep, $2k may be light for travel. We are big on travel, so $2k may just cover local trips. Gotta think about this more. In the past we've sometimes spent 40 to 50k on travel a year (4 people).