Sandwiched Dad hoping to retire by 2027 (or sooner!)

[DesertTortoise]

Hi Everyone,

Been lurking for awhile but retirement finally feels like it's getting closer even with a lot of unknowns. I really enjoy reading the forums and hope to keep building my knowledge and maybe share a bit as well! As Kim Possible would say, "Here's the sitch":

Family:

• My wife (52) and I (56) are both oldest children and we have 5 kids (ages 17-28) with the last 3 still on our health insurance.
  • Oldest is married and launched.
  • #2 lives at home, has 2yr degree, doesn't make much but pays $500/mo. rent. Just started night classes to become a school teacher.
  • #3 finished college but hasn't landed a full time job yet. Lives at home and pays $500/mo. rent.
  • #4 is starting their Jr. year in a month and attends college out of state.
  • #5 is starting Sr. Yr in HS next week.
• We are also 'on point' for my mom (87) and my wife's mom (74) and dad (77) as they get older and their health declines.
  • My mom lives alone around the corner from us rent free in a house we own. She walks with a cane and her body is slowly giving out on her. Still sharp mentally. She has no savings and brings in about $20K/yr in SS. She is really frugal and covers all her expenses with the exception of housing. I'm her only living child and will be the one to take care of her the rest or her life.
  • My wife's dad is primary care giver for his wife who has had dementia for 9 years. They live across town from us. She is not able to live by herself but can still take care of her physical needs at this point. He is in bad shape physically with congestive heart failure and diabetes. He still drives for now but probably not much longer. They have about $700K in assets that we hope will cover the balance of their life. They also have $80k annual income between pensions and SS. If they do fall short my wife has three younger siblings that live out of state that will be able to help financially but not physically.

Work

• I've worked my way up at my company over 27 years and was recently promoted to an Executive position making more than I ever have and unlocking things like stock options. I'll make around $250K this year. Found out about 6 months ago the company is looking to spin off my division, most likely to a PE firm. I've been incented financially to stick around and see how things play out. I could either be given equity in the company or be let go once the deal is done. Totally up in the air at this moment. My wife carried us financially the first 5 years of our marriage but now works part time and brings home about $10k a year.

Finances

• $3.4MM net worth
  • $2.7MM of that for retirement.
    • $1.5MM in 401K primarily invested in 2030 target date funds
    • $160K in traditional IRAs mostly in stock funds
    • $140K in roth IRAs also in target date funds
    • $600K in real estate (The house we live in right now, at some point we will sell and move into the house my mom lives in)
    • $300K in money market and CDs earning around 5% (work has been rocky over the years and we've wanted to keep a decent size amount availble to cover 2-3 years of living if we needed it)
  • $0.7MM for other things
    • $450K in equity in the house mom lives in (we still owe a little over $100K on the mortage)
    • $250K in the 'kid fund' (college, weddings, etc.). Invested in stock funds.
• Social Security
  • I've accrued 90% of the max benefit. My wife will make more claiming spousal than using her own. Right now I'm planning on claiming at 70 and she will claim at 67. We are planning on SS being there for us. Risky I know.

Spending

• We've tracked this in detail for years. The hardest part is trying to figure out what we will spend when the house is finally empty! I buy a lot of food I never eat.
• Our last 4yr average spend is $110K. That does not include health insurance.
• In retirement we estimate we will want about $135K to do the things we want to do (that includes $36K/yr. for medical which could be high but we don't know how many kids will still be on our insurance).

Retirement

• I'm tired of working. I'm in sales, travel a ton, have a team of 50 with several big customers that are very demanding. I firgure I'm working at least through next year due to the financial incentives for me to stay through the sale and the fact my youngest won't graduate HS til next year. After that I'd love to shut it down. At the latest I'm hoping to be done by mid 2027 when I turn 59.5.
• Life's been busy over the years. I have not spent as much time as I wish to manage all of this. Haven't moved money around much, haven't checked fund performance much. Just have kinda put things on autopilot.
• Wondering if I have enough money saved. Firecalc is currently spitting out about $125k/yr with a planning period of 34 years (me turning 90). That number goes up a little over $1K at the end of each month so barring a recession (big if) I'll hit the $135K/yr sometime next year. One thing that gives me pause are the unknowns around kids launching and parents final years.
• Thanks for reading my book! Looking forward to chatting. Hoping someone lets me know I'm being too conservative in my thinking

 

[jazz4cash]

Welcome. Quite an intro. You’ll be fine, I’m sure.

 

[FlaGator]

Thanks for emerging from the shadows and sharing your details. Many similarities with my situation several years ago.

A couple of quick thoughts:

• You've done very well on turning income into assets, especially with 5 kids.
• Providing housing for elderly parents and being nearby to assist is admirable. I declined to do the former when asked, and am now 2000 miles away from the daily support needs of my aged parent (who is in the Valley). That has been left to siblings who stayed there and also had more favorable treatment growing up than I did. Karma. But still making my monthly financial contribution for their support.
• RE equity is a "soft asset" to me. Yes, if you sell, you can capture it, but there are costs that reduce the headline number and you still need a place to live, as I am being reminded right now as I consider downsizing. Getting the house ready to sell, commissions, closing costs, moving, unplanned, but reasonable expenses at the new place, taxes etc. are going to reduce what you capture.
• Suggest you re-run Firecalc with numbers excluding your RE equity. I see $2.1M in investable assets, $2.35M if you include the "kid fund" (all/some of which you may feel obligated to spend on them as I did). I come up with a much lower spending level when the kid fund and RE equity is excluded. But I don't' know your full numbers, so recommend you look at a few different scenarios.
• Your cash/equivalents are less than 3 years of expenses. Maybe that gets you to 59.5, look at the calendar.
• It's called "work" because it's not always fun. My job was very gratifying and paid me more than I ever expected to earn in my youth. It was also frequently miserable and stressful, but I tried to stay focused on the "long game".
• I had -0- plans to quit when I did, and did so to raise my kids after DW died. Intentionally building liquidity several years before her illness (solely for flexibility) covered the near-term, and adequate assets covered the long term. The more you have of both, the simpler your life will be.

A few things to consider:

• Start building your cash stash. You won't like the taxes on any other source of living expenses, even if over 59.5. The more you have, the more flexibility you have as to taxes. A cash hoard also makes to easier to manage income for ACA subsidies if that is part of your plan.
• You still have kids on the payroll, and your description implies to me that may continue for a while, even if they are making a contribution. Respectfully suggest you be realistic about that, and how long it could last. Dealing with that right now with one that has a marketable degree and motivation to work, but physical problems that make that difficult.

Don't be offended if I have mis-interpreted your info and drawn the wrong conclusions. Happy to be corrected and answer more questions. Good luck.

 

[HarveyS]

You are in a tough spot, but fortunately have planned for it. Even if savings were on auto pilot, you have savings!
Two quick thoughts; Don't forget to include income taxes on your annual expenses. Many W2 earners forget to account for this. Secondly, your kids can apply for ACA on their own if they have income above the threshold. That may reduce the amount needed for medical insurance.

 

[Dtail]

Welcome to the forum. Very good on tracking your expenses. I would also only use 2.1m as the investment assets part of the equation for now plus SS.
Since Firecalc is basically a yearly concept calendar, how does your max spending go up by 1k each month, unless you referring to monthly increases in investments which wouldn't be a linear concept.

 

[pb4uski]

Some thoughts.

When DS lived at home with us he was paying rent. The deal was that we kept $100 but the rest of the rent went into the "DS Freedom Fund" and that he would get the balance when he moved out. I would periodically give him a printout of the fund activity and balance. After a while, the prospect of receiving the growing balance was an enticing incentive to move out. It worked out well for us and the fund provided him seed money to launch.

You may want to check out healthsherpa.com and see what health insurance will cost if you do end up getting let go after the transaction and the impact on your health insurance premiums of managing your income to different levels.

Check into opensocialsecurity.com. We are similarly situated in that my DW was a SAHM so her SS benefit based on her work record was substantially less than mine as a high income earner. The analysis suggested that in that situation that she take at 62 and me at 70. The tool allows you to look at the decision assuming that benefits are reduced if you wish to.

Take care how you handle the mortgage payments in FIRECalc. You shouldn't include your mortgage payments in your spending since they are fixed and will end at some point. I would suggest that you enter your annual mortgage payments as off-chart spending on the Other Income/Spending tab starting in 2024 and not inflation adjusted, and have an offsetting pension for the same amount starting in the year after your mortgage payments end.

I would include home equity in your retirement portfolio if the plan is to sell the big house and add the proceeds from the sale to the nestegg and move into the smaller house, but you need to consider that it might be as much as a decade before that happens, costs of sale of the big house and the cost of improvements to the smaller house when you move in.

FWIW, we have two homes in HCOL areas and live pretty well and have trouble spending more than $100k a year in retirement.

 

[2029FIREaway]

Nice post OP. I am also tired of the grind!
After you sell one of the houses, looks like you will be ready financially. Imagine the freedom…I can smell it too

 

[Koolau]

I agree about having MORE cash to begin your retirement. We thought we had plenty and found out we were way short. Taxes and (later) IRMAA and other gotchas have been real issues to us though total "stash" was not a problem.

Agree that your personal RE should not be considered in your "stash."

Best of luck in your FIRE journey.

 

[pacergal]

Welcome to the forum!
It looks like you have done a great job saving and investing.
Hope to hear more from you on your journey towards retirement!

 

[DesertTortoise]

Thanks for emerging from the shadows and sharing your details. Many similarities with my situation several years ago.

A couple of quick thoughts:

• You've done very well on turning income into assets, especially with 5 kids.
• Providing housing for elderly parents and being nearby to assist is admirable. I declined to do the former when asked, and am now 2000 miles away from the daily support needs of my aged parent (who is in the Valley). That has been left to siblings who stayed there and also had more favorable treatment growing up than I did. Karma. But still making my monthly financial contribution for their support.
• RE equity is a "soft asset" to me. Yes, if you sell, you can capture it, but there are costs that reduce the headline number and you still need a place to live, as I am being reminded right now as I consider downsizing. Getting the house ready to sell, commissions, closing costs, moving, unplanned, but reasonable expenses at the new place, taxes etc. are going to reduce what you capture.
• Suggest you re-run Firecalc with numbers excluding your RE equity. I see $2.1M in investable assets, $2.35M if you include the "kid fund" (all/some of which you may feel obligated to spend on them as I did). I come up with a much lower spending level when the kid fund and RE equity is excluded. But I don't' know your full numbers, so recommend you look at a few different scenarios.
• Your cash/equivalents are less than 3 years of expenses. Maybe that gets you to 59.5, look at the calendar.
• It's called "work" because it's not always fun. My job was very gratifying and paid me more than I ever expected to earn in my youth. It was also frequently miserable and stressful, but I tried to stay focused on the "long game".
• I had -0- plans to quit when I did, and did so to raise my kids after DW died. Intentionally building liquidity several years before her illness (solely for flexibility) covered the near-term, and adequate assets covered the long term. The more you have of both, the simpler your life will be.

A few things to consider:

• Start building your cash stash. You won't like the taxes on any other source of living expenses, even if over 59.5. The more you have, the more flexibility you have as to taxes. A cash hoard also makes to easier to manage income for ACA subsidies if that is part of your plan.
• You still have kids on the payroll, and your description implies to me that may continue for a while, even if they are making a contribution. Respectfully suggest you be realistic about that, and how long it could last. Dealing with that right now with one that has a marketable degree and motivation to work, but physical problems that make that difficult.

Don't be offended if I have mis-interpreted your info and drawn the wrong conclusions. Happy to be corrected and answer more questions. Good luck.

Thanks for the reply! Couple of thougths:

• We have two houses and our plan is to sell the one we live in now and move into the second one at some point, probably 5-10 years down the road. Zillow says first house is worth $715K and we don't have a mortgage on it so I'm counting on realizing $600K from the sale and claiming the housing exemption so the sale will be tax free. I don't count the equity in the second house in retirement assests as that will likely be our primary house in retirement but I feel pretty comfortable counting the equity from the first house.
• Scenario I'm running in Firecalc is the $2.1MM and $45K SS annually for me in today's $ beginning in 2038 when I turn 70 and my wife $18K SS annually for my wife beginning in 2039 when she turns 67. That's been spitting out about $104K annually with a 95% confidence level in Firecalc assuming I retired today for me but maybe I'm missing something? When I pop the $600K for the house is goes up to about $125K annually.
• Thanks for the thoughts on building cash. I had wondered if I had too much cash and needed to invest some but I'll relook that.
• Agree on being realistic about how long the kids may be around. Our youngest is 17 and we have gotten our brains around we may have a kid living in our place for another 10 years or so. But the plan is to retire well before they eventually move out.
• Sorry to hear about your DW passing, sounds like you did a great job carrying the load solo for you and your kids after she passed.

 

[DesertTortoise]

You are in a tough spot, but fortunately have planned for it. Even if savings were on auto pilot, you have savings!
Two quick thoughts; Don't forget to include income taxes on your annual expenses. Many W2 earners forget to account for this. Secondly, your kids can apply for ACA on their own if they have income above the threshold. That may reduce the amount needed for medical insurance.

Thanks for the call out on income taxes. You're right I forgot to add them in. Any thoughts on what type of tax rate I should assume?

 

[DesertTortoise]

Welcome to the forum. Very good on tracking your expenses. I would also only use 2.1m as the investment assets part of the equation for now plus SS.
Since Firecalc is basically a yearly concept calendar, how does your max spending go up by 1k each month, unless you referring to monthly increases in investments which wouldn't be a linear concept

Thanks for the reply. I enter my retirement assets at the end of each month in FireCalc and as they have been going up for the most part each month and my SS has also been going up Firecalc kicks out a little higher number each month. This month will be the last month I enter an increase in SS since I hit the max for the year this month. I know things vary from month to month so I won't use the Firecalc number as the only input on whether I can retire or not.

 

[DesertTortoise]

Some thoughts.

When DS lived at home with us he was paying rent. The deal was that we kept $100 but the rest of the rent went into the "DS Freedom Fund" and that he would get the balance when he moved out. I would periodically give him a printout of the fund activity and balance. After a while, the prospect of receiving the growing balance was an enticing incentive to move out. It worked out well for us and the fund provided him seed money to launch.

You may want to check out healthsherpa.com and see what health insurance will cost if you do end up getting let go after the transaction and the impact on your health insurance premiums of managing your income to different levels.

Check into opensocialsecurity.com. We are similarly situated in that my DW was a SAHM so her SS benefit based on her work record was substantially less than mine as a high income earner. The analysis suggested that in that situation that she take at 62 and me at 70. The tool allows you to look at the decision assuming that benefits are reduced if you wish to.

Take care how you handle the mortgage payments in FIRECalc. You shouldn't include your mortgage payments in your spending since they are fixed and will end at some point. I would suggest that you enter your annual mortgage payments as off-chart spending on the Other Income/Spending tab starting in 2024 and not inflation adjusted, and have an offsetting pension for the same amount starting in the year after your mortgage payments end.

I would include home equity in your retirement portfolio if the plan is to sell the big house and add the proceeds from the sale to the nestegg and move into the smaller house, but you need to consider that it might be as much as a decade before that happens, costs of sale of the big house and the cost of improvements to the smaller house when you move in.

FWIW, we have two homes in HCOL areas and live pretty well and have trouble spending more than $100k a year in retirement.

Thanks for the reply and thoughts. Our 2nd oldest has tried "launching" twice only to return home low on money and self esteem. We are hoping the 3rd time will be the charm. On the second launch, we did give them the seed money from the rent they had paid before but then COVID hit and they just burned through it without having a job.

Appreciate the links on health insurance and social security, I'll check them out.

Good thoughts on the mortgage on the second house. It's getting down to about $100k and we may just pay in off when we sell the first house depending on liquidity and interest rates. But if not I'll enter it in differently in Firecalc moving forward.

Thanks for your thougths on living on less that $100k a year. I feel like we live pretty frugally and I was shocked when we put together a pro forma for retirement spenging and it came out as high as it did. Maybe I was way too conservative in my assumptions. It's hard to estimate with so much of our income going to help with the kids and parents right now.

 

[DesertTortoise]

Nice post OP. I am also tired of the grind!
After you sell one of the houses, looks like you will be ready financially. Imagine the freedom…I can smell it too

I like your thinking. Here's hoping!

 

[DesertTortoise]

I agree about having MORE cash to begin your retirement. We thought we had plenty and found out we were way short. Taxes and (later) IRMAA and other gotchas have been real issues to us though total "stash" was not a problem.

Agree that your personal RE should not be considered in your "stash."

Best of luck in your FIRE journey.

Thanks for the thougths on cash. I'll take a harder look at that.

 

[DesertTortoise]

Welcome to the forum!
It looks like you have done a great job saving and investing.
Hope to hear more from you on your journey towards retirement!

Thanks...I'm hoping to post here periodically. I have lots of questions and like to read others experiences too.

 

[DesertTortoise]

Welcome. Quite an intro. You’ll be fine, I’m sure.

Thanks!

 

[Dtail]

Thanks for the reply. I enter my retirement assets at the end of each month in FireCalc and as they have been going up for the most part each month and my SS has also been going up Firecalc kicks out a little higher number each month. This month will be the last month I enter an increase in SS since I hit the max for the year this month. I know things vary from month to month so I won't use the Firecalc number as the only input on whether I can retire or not.

Makes sense.

 

[zippy2020]

Having dealt with elderly parenting issues can make for nasty surprises, sigh. I strongly suggest you or your spouse start looking around at what elderly facilities are available in your area. It's the Wild West out there and every place is different in ambiance, staffing, and resident care.

We researched for months and made multiple visits to the few that made the "final cut". Even if you don't need the facility care now, Life Happens. One emergency late night call and family members end up scrambling frantically to get control over what's happening.

Divide between senior living facilities and convalescent care. One is a long-term solution and the latter the short-term need. Some facilities offer both, but not all do. Some focus on convalescent care only. You'll want facilities that are well-regarded by people who actually work in the industry, and the names of places to avoid, as well.

Also, ask doctors, especially geriatricians. And of course, anyone you know who has dealt with eldercare issues!

Be aware that non-profit facilities generally rate better than for-profit facilities, but the Big Corp for-profit chains are buying up non-profit facilities VERY fast. Sunny reception areas and cheerful-looking DRs can hide substandard night care and high employee turnover rates. Surprisingly, very good facilities don't really charge any more than very bad facilities; pretty much all facilities with similar market focus match one another in pricing, per regional area.

Also, realize that annual price increases are a way of life in this industry. Many seniors, especially those with limited funds, don't plan for this. The advantage of starting your research NOW is that you'll at least have some ballpark figures to start with.

Facility costs don't include everything - bathrobes, slippers, medications, doctors' appts., etc. etc. - are usually extras the resident must pay for. You need to add in the all-important 'budget padding' to develop a good eldercare plan.

 

[KarenF]

Thanks for the reply and thoughts. Our 2nd oldest has tried "launching" twice only to return home low on money and self esteem. We are hoping the 3rd time will be the charm. On the second launch, we did give them the seed money from the rent they had paid before but then COVID hit and they just burned through it without having a job.

Appreciate the links on health insurance and social security, I'll check them out.

Good thoughts on the mortgage on the second house. It's getting down to about $100k and we may just pay in off when we sell the first house depending on liquidity and interest rates. But if not I'll enter it in differently in Firecalc moving forward.

Thanks for your thougths on living on less that $100k a year. I feel like we live pretty frugally and I was shocked when we put together a pro forma for retirement spenging and it came out as high as it did. Maybe I was way too conservative in my assumptions. It's hard to estimate with so much of our income going to help with the kids and parents right now.

We had one child who landed at home twice and the third time was the charm! He is doing great now.

 

[eyenitnoy]

Finances

• $3.4MM net worth
  • $2.7MM of that for retirement.
    • $1.5MM in 401K primarily invested in 2030 target date funds
    • $160K in traditional IRAs mostly in stock funds
    • $140K in roth IRAs also in target date funds
    • $600K in real estate (The house we live in right now, at some point we will sell and move into the house my mom lives in)
    • $300K in money market and CDs earning around 5% (work has been rocky over the years and we've wanted to keep a decent size amount availble to cover 2-3 years of living if we needed it)
  • $0.7MM for other things
    • $450K in equity in the house mom lives in (we still owe a little over $100K on the mortage)
    • $250K in the 'kid fund' (college, weddings, etc.). Invested in stock funds.
• Social Security
  • I've accrued 90% of the max benefit. My wife will make more claiming spousal than using her own. Right now I'm planning on claiming at 70 and she will claim at 67. We are planning on SS being there for us. Risky I know.

Spending

• We've tracked this in detail for years. The hardest part is trying to figure out what we will spend when the house is finally empty! I buy a lot of food I never eat.
• Our last 4yr average spend is $110K. That does not include health insurance.
• In retirement we estimate we will want about $135K to do the things we want to do (that includes $36K/yr. for medical which could be high but we don't know how many kids will still be on our insurance).

Retirement

• I'm tired of working.

Yes, you can retire.

Here's my take: You have sufficient assets (3.4 million) to support your projected spending of $135,000 per year which comes to 3.97%. This is especially true since a chunk of that spending is discretionary and can come down if needed. Also, your health insurance cost projections are probably a bit high, which is fine, and will go down when you reach Medicare age in any event.

You said something very important: I'm tired of working.

You need to retire and I anticipate you will find it harder to stop than you think. Old habits die hard. But it would be well worth it to open a new chapter in your life now, while you are young enough to still do so.

Advice: You may want to discuss with a financial professional whether 1.5 million in a 2030 target retirement fund is appropriate for you. I don't think it is. I'd say transitioning to a mix of Vanguard type index funds might be better. You need to capture long term growth and I'm doubtful the 2030 target fund does that for you.

Advice: A large chunk of your assets are in a taxable 401(k). Please carefully estimate the taxes you will pay on this money and include that as a line item in your annual spending if you have not already included such a number in your total of $135,000. I'd start moving that money annually in tax-efficient chunks to a Roth IRA, paying the taxes with non retirement monies, once you have retired. But please do not make the common planning mistake of not including taxes in your annual budget. (As an aside, I always reduced the amount in my 401K by 30% when making my net worth number. Your 401k is NOT worth 1.5 million, it is worth 1.5 million-whatever tax you will pay.)

And I salute you on your excellent work raising a large family and caring for your elders. Well done. And I am pleased you are charging rent to your adult children living at home. You are doing them a big favor by doing so, whether they understand this now or not.

Best of luck to you!

 

[Surewhitey]

+1 on great job of raising a huge family & parent responsibilities. You definitely deserve your retirement.

I'd do the house sale asap and move in with mom personally. Secondly use the proceeds to do some Roth conversions of the IRA and 401k... Get taxes to a future minimum. Then you don't have to "budget" for them. Probably up to the 12% tax bracket for a few years depending on the health insurance subsidies amount.

 

[stephenson]

Slightly different input, but share others' thoughts about you and your wife being great folks for carrying such a big load of responsibilities while still saving for the future.

You sound like you are dissatisfied with your current work - change jobs, don't quit working for two reasons. The first is your own happiness - you know what I'm talking about. Second, you still have a load to carry at home - your kids need to leave the house, and you need to finish educating them. Don't let this continue ... push if you need to as they need to fly.

You've written more from your perspective and family perspective - what about your wife's perspective? Could she add her honest thoughts to this thread?