Roast me (but seriously how are we doing)

[kevdolla]

Hiyo,

Wanted to get the forum’s thoughts on my stats and trend towards retiring albums 50 (in 12 or so years) The rundown:
-38 year old married with 2 preschool age kids (they probably need college)
-between the 2 of use we avg about 450k income per year
-just crossed 1mm in savings (600 in 401k, 529 and iras; rest in brokerage accnts)
-own my house and have regular payments in hcol coastal city; maybe another 600 or so in equity there.

How are we looking to starting our life of leisure by 50?

 

[skyking1]

need more info, what is your current spend/save?

 

[JBTX]

Hiyo,

Wanted to get the forum’s thoughts on my stats and trend towards retiring albums 50 (in 12 or so years) The rundown:
-38 year old married with 2 preschool age kids (they probably need college)
-between the 2 of use we avg about 450k income per year
-just crossed 1mm in savings (600 in 401k, 529 and iras; rest in brokerage accnts)
-own my house and have regular payments in hcol coastal city; maybe another 600 or so in equity there.

How are we looking to starting our life of leisure by 50?

Need to provide more information, such as how much do you spend now and what would you expect to spend in retirement.

 

[MichaelB]

Here are some questions you should think about https://www.early-retirement.org/fo...-answer-before-asking-can-i-retire-69999.html

 

[Sojourner]

Without knowing your annual spend, it's hard to say, but my knee-jerk reaction to the details you posted is that you're not in great shape. You should have more saved than $1MM given your ultra-high incomes, which makes me wonder if you're lavish spenders or if you just recently started pulling down those high salaries. Given that you're in a HCOL area and have two young kids (who will each easily cost more than $350k to raise till they go off to college), I think you're a bit behind the eight ball when it comes to saving and investing a large enough chunk of your income every year to get you to a comfortable retirement in 12 years. But, again, more details from you on the spend side would be helpful.

Being able to FIRE at a young age really comes down to choices and tradeoffs. Having kids is a choice that usually makes FIRE'ing more difficult (or at least, delays it) due to the high costs involved. Living in a HCOL area is a choice that means accepting very high housing costs and much higher day-to-day expenses in return for very high salaries. Only saving 15% of your income due to HCOL (or just "lifestyle creep" or "keeping up with the Joneses", etc.) is a choice that trades away nearer-term FIRE satisfaction in return for present-day happiness, creature comforts, plush lifestyle, etc.

Feel free to post more details and you'll get LOTS more constructive feedback. This is a great forum.

 

[HI Bill]

With a current income of $450K and a paltry $1M in savings, it appears that you have a saving and spending problem (not enough saving, too much spending) to be able to ER at 50 and maintain your current spending level or greater. Agree with others, there is not enough information provided to come up with an informed response, though.

 

[pb4uski]

...How are we looking to starting our life of leisure by 50?

It depends. If you need $45k a year in retirement then you're in good shape, if you need $450k a year in retirement you are hopelessly behind. You get my drift... how much you need and how you are doing all depends on how much you need to have the retirement that you want.

Play around with FIRECalc. There is a link in the ribbon near the bottom of the page or go to firecalc.com

Be sure to complete the Not Retired tab. If your success ratio is less than 95%, look at the last option on the Investigate tab to see how much you could safely spend at 95% success.

Another option is to plug your situation into Quicken Lifetime Planner, included in Quicken Deluxe and higher.

 

[EastWest Gal]

As many have said, your spend rate is important. We don't have enough info to be very helpful. And congratulations on that high income. Many here have said you haven't saved enough, but maybe you were paying off student loans and did not reach that income level until recently. Max out your 401ks, hopefully there is a company match. Invest as much as you can of the rest in a regular brokerage account. It is your friend in early retirement. Watch out that the spending doesn't creep up.

+1 to FIRECalc.

 

[kevdolla]

Without knowing your annual spend, it's hard to say, but my knee-jerk reaction to the details you posted is that you're not in great shape. You should have more saved than $1MM given your ultra-high incomes, which makes me wonder if you're lavish spenders or if you just recently started pulling down those high salaries. Given that you're in a HCOL area and have two young kids (who will each easily cost more than $350k to raise till they go off to college), I think you're a bit behind the eight ball when it comes to saving and investing a large enough chunk of your income every year to get you to a comfortable retirement in 12 years. But, again, more details from you on the spend side would be helpful.

Being able to FIRE at a young age really comes down to choices and tradeoffs. Having kids is a choice that usually makes FIRE'ing more difficult (or at least, delays it) due to the high costs involved. Living in a HCOL area is a choice that means accepting very high housing costs and much higher day-to-day expenses in return for very high salaries. Only saving 15% of your income due to HCOL (or just "lifestyle creep" or "keeping up with the Joneses", etc.) is a choice that trades away nearer-term FIRE satisfaction in return for present-day happiness, creature comforts, plush lifestyle, etc.

Feel free to post more details and you'll get LOTS more constructive feedback. This is a great forum.

Thanks folks for taking the time to review, and for the feedback. Love the candid eye opening responses!

I would say between mortgage, childcare, general keeping people alive spending we’re looking at about 100k per year in expenses. We do have 600k equity in a house after all.

That being said we are relatively new to this income level, maybe 5 or so years. I wouldn’t say we’re big spenders (think Subarus and TJ Max not BMWs and Nordstroms).

Maybe we’ll just have to work a few more years, or if anyone has any get rich quick schemes to consider, please let me know.

Firecalc looks awesome- will need to study up so I can speak the lingo more fluently.

 

[disneysteve]

-just crossed 1mm in savings (600 in 401k, 529 and iras; rest in brokerage accnts)

How much is 529? That's not retirement money obviously so can't be counted toward retirement, but you do need to make sure you have enough in there for college.

-own my house and have regular payments in hcol coastal city

What do you mean by "regular payments"? Do you mean your mortgage payments?


How much debt do you have?
What's your monthly spending?

 

[disneysteve]

I would say between mortgage, childcare, general keeping people alive spending we’re looking at about 100k per year in expenses.

We were posting at the same time.


This response tells me you probably don't really know how much you're spending. Your first step needs to be to nail that down. Keep track of everything for a couple of months, add in the recurring but not monthly payments like insurance premiums and taxes and such. See how much you are actually spending. You really can't do any serious planning until you have that information.

 

[pb4uski]

...I would say between mortgage, childcare, general keeping people alive spending we’re looking at about 100k per year in expenses. ...

I'm skeptical on the $100k only because if you are earning $450k and only spending $100k then that would mean that you are saving $350k and I suspect that isn't true. Rather than guess, sit down with paystubs and bank statements and see what it really is.

 

[Morgan22]

You shouldn't count 529 and home equity in your retirement assets. Unless you are planning on raiding the 529s, and selling your home and renting, or maybe downsizing, when you retire.

When you figure out how much you will spend in retirement, (this number will include health insurance costs and taxes!), multiply that number by 25 to get a very rough estimate of how much you need to save.

Once you get to that number then you can reevaluate. Are you still enjoying working, do you want to save more to help the kids with wedding costs, down payments for first homes, etc.

It is possible you will be able to retire by 50, but it depends on how much you spend/save in the meantime.

 

[Gumby]

I'm skeptical on the $100k only because if you are earning $450k and only spending $100k then that would mean that you are saving $350k and I suspect that isn't true. Rather than guess, sit down with paystubs and bank statements and see what it really is.

I suspect he is not accounting for taxes as spending. If they make ~$450k gross and file jointly, then the federal income taxes would be ~$75k. If they lived in CT, their state income taxes would be about ~$25k. If they are both W2 employees, then the FICA and Medicare taxes knock off another ~$26k . So that's $126k off the top for taxes (I'm assuming that property tax is included in the mortgage payment), leaving a net $325k for spending. If they spend $100k for mortgage plus all other spending, that should leave $225k per year to save. He says they have only been making this much for 5 years and have ~$ 1 million saved, which seems to within the realm of reason if they started with zero. (Note that the $600k home equity is apparently not included in the reported $1 million savings.)

 

[skyking1]

OP,
People keep bringing the home equity into these questions. Unless the plan is a van by the river for retirement, then you must concede you have to live somewhere.
We can't assume without any mention that you are selling and moving to a Low Cost Of Living (LCOL) area, or downsizing.

 

[Unpaintedhuffhines]

if you stay in your current house, then equity is an interesting but mostly irrelevant figure. I can increase my NW just because zillow updated my home value, but that doesn't mean I can buy more groceries.

What makes a difference is accounts you can pull from to buy things you need.

You can do a lot of "what-ifs" (and you definitely should!), but for us, our spending 12 years ago is very different than it is today (and I'm not just talking about inflation impact). Non-subsidized HC today might be $10K-12K per person, but I have no idea what it will be in 12 years... $20K? $30K?

But agree that Firecalc is your friend here and will provide some good general guidance.

 

[pacergal]

Here are some questions you should think about https://www.early-retirement.org/fo...-answer-before-asking-can-i-retire-69999.html

OP--
Answer these questions, run firecalc, and post some more info.
As others have mentioned, you need a very clear idea of your actual spending, including taxes.
Savings for retirement living excludes the 529 and home equity, but they are part of your net worth.

 

[Aerides]

Eh with 12 years to go the OP can certainly get there.

At 38 I figured the incomes were pretty new at that level. Yes, ignore your Home equity, and stack up savings for college - in your planning assume they'll both be bright successful students and you'll want to cover their 4 year degrees almost anywhere. And expenses for kids can be a wild card. One shows an interest in the violin, the other is a dancer, and that starts to add up fast.

For now, look at your actual expenses for the past year, and then figure out how much you should be saving. Max both 401ks, and then aggressively plop the rest into other investments. Have a plan and know with each paycheck how much is swept into savings so it's automatic.

DH and I were in a little ahead of you at your age. No kids no mortgage and incomes slightly less but in a medium COL area. And we retired at 46/47.

 

[Sojourner]

I'm skeptical on the $100k only because if you are earning $450k and only spending $100k then that would mean that you are saving $350k and I suspect that isn't true. Rather than guess, sit down with paystubs and bank statements and see what it really is.

+1

DW and I live in a MCOL area, don't have kids or a mortgage, and we spend around $100k/year. Hard to imagine OP could be spending that little given his HCOL circumstances.

 

[kevdolla]

Eh with 12 years to go the OP can certainly get there.

At 38 I figured the incomes were pretty new at that level. Yes, ignore your Home equity, and stack up savings for college - in your planning assume they'll both be bright successful students and you'll want to cover their 4 year degrees almost anywhere. And expenses for kids can be a wild card. One shows an interest in the violin, the other is a dancer, and that starts to add up fast.

For now, look at your actual expenses for the past year, and then figure out how much you should be saving. Max both 401ks, and then aggressively plop the rest into other investments. Have a plan and know with each paycheck how much is swept into savings so it's automatic.

DH and I were in a little ahead of you at your age. No kids no mortgage and incomes slightly less but in a medium COL area. And we retired at 46/47.

Thanks again folks for the feedback, clearly lots more homework to do. More to come with stats etc. and yes, taxes were not included in expenses.

Appreciate the vote of confidence aerides!