What's the deal with 45?

[EastWest Gal]

One of the nice things about taxable brokerage account MFs or ETFs is that if you have them for 15 years or so, you'll likely have up to 50% LTCGs (long term capital gains), and due to the current LTCG exclusion, you may not have to pay ANY federal taxes on withdrawals (e.g., if you withdraw funds with 50% LTCGs, you can withdraw up to $166,700 annually and pay NO FEDERAL TAXES (currently, for MFJ, the first $83,350 of LTCGs are tax-free)!

That’s only true if you have no other sources of income, such as dividends or interest. Do the math before you sell those equities.

 

[HI Bill]

That’s only true if you have no other sources of income, such as dividends or interest. Do the math before you sell those equities.

Sure, I take dividends first, and any taxable interest.

 

[Rianne]

Am I missing family health care, growing kids, college? The progress is awesome but some missing pieces or did I miss that discussion?

 

[scrabbler1]

Making great progress! My only comment is that if you want to RE at 45, then having savings outside of tax-deferred is important, unless you have a large 401(k) and want to use the SEPP method (otherwise, you'll have to pay taxes and a 10% early withdrawal penalty, except on ROTH contributions).

I wish I had RE'd between 45-50. I had a goal of 50, which would have been almost perfect. But by 47, I had my first health problem (which is a fairly typical age), and my savings were only sufficient for a LEAN FIRE. So, I continued on until 55, which allowed me to Fat FIRE...but due to COVID, I missed out on two years of travel when my health was still fairly good and I still had stamina. So, I say, continue with the goal of 45, and enjoy your health while it's good!

One of the nice things about taxable brokerage account MFs or ETFs is that if you have them for 15 years or so, you'll likely have up to 50% LTCGs (long term capital gains), and due to the current LTCG exclusion, you may not have to pay ANY federal taxes on withdrawals (e.g., if you withdraw funds with 50% LTCGs, you can withdraw up to $166,700 annually and pay NO FEDERAL TAXES (currently, for MFJ, the first $83,350 of LTCGs are tax-free)!

Keep in mind that if you are on the ACA , those LTCGs will reduce the premium subsidy even if you pay no taxes on them. In my case, using my tax spreadsheet, if my LTCG rises by $1,000, my tax bill is unchanged but my ACA premium subsidy drops by $125, or a 12.5% "tax" on that income.

 

[Exit 2024]

Bird, great thread, I really enjoined reading about your journey!
As I understand - you changed your mind and do not have retirement plans for near future, so do you plan to expand your spending? or will continue to accumulate at the same rate? what are the new targets?

Asking because I also logging our journey and original plan was to FIRE in 2024 with $3m TNW. As we are getting closer - we are thinking to delay and bump up our target to better account for inflation risks. We are also raking in good money, but if we delay FIRE - thinking to slowdown our saving rate and expand spending to include more travel while we have our health. What is your take on that?

 

[Koolau]

Bird, great thread, I really enjoined reading about your journey!
As I understand - you changed your mind and do not have retirement plans for near future, so do you plan to expand your spending? or will continue to accumulate at the same rate? what are the new targets?

Asking because I also logging our journey and original plan was to FIRE in 2024 with $3m TNW. As we are getting closer - we are thinking to delay and bump up our target to better account for inflation risks. We are also raking in good money, but if we delay FIRE - thinking to slowdown our saving rate and expand spending to include more travel while we have our health. What is your take on that?

FIRE at 45 is a worthy goal, but maybe not at the expense of memories you make now with family, travel and experiences. There can be a happy medium of spending that insures FIRE (soon) but lets you live more in the now. No value judgment on my part since I don't know your situation. More of a caution than a pronouncement because YMMV.

 

[Exit 2024]

Koolau, thanks for your input, we are thinking along the same lines although for us FIRE was planned at 55 and I am not sure if it worth to continue grinding till 58-60 with expanded spending or just keep as is till 56-57 (extra 1-2 years to mitigate inflation risks) and quit completely.

 

[A Bird In Hand]

2026

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

Retirement

$4.147k

$2,150k

$2,145k

$1,520k

$1,377k

$1,272k

$1,088k

$920k

$884k

$755k

$627k

$500k

Savings

$150k

$70k

$50k

$42k

$50k

$67k

$76k

$90k

$105k

$120k

$142k

$165k

Mortgage

$0k

$0k

$0k

$0k

$40k

$72k

$103k

$132k

$161k

$188k

$213k

$237k

Non-mortgage debt

$14k

$10

$14.5k

$17k

$0

$0

$0

$0

$0

$0

$0

$18k

Life got in the way for the past few years, and I neglected to update this post. For the table above, you'll have to do some interpolation between the last update (2022) and now (2026). The growth in Retirement accounts is mostly the result of some very good markets over the last several years -- despite admittedly sub-optimal holdings in a few of our accounts. Maxing out pre-tax and Roth IRA accounts with good employer match helped, I'm sure, but it's insignificant compared to the compounding in the pre-tax accounts.

Roughly doubling from ~$2.2MM to ~$4.3MM over the last four years is unsettling to me, though the math makes sense. We are now seriously considering retiring in the next 1-2 years...which, if you're paying attention to the overall thread, is a handful of years past the original prediction/goal. It's amusing to look back at what the younger me thought 14 years ago. I'm sure it will be equally amusing in another 14 years to look back at what I'm thinking now.

The biggest challenges we're facing now, in no particular order:

• Coming up with a financial plan that convinces us our money will last for a potentially long retirement (possibly 40+ years). This will likely involve 72(t) SEPP, and we're mindful of the pitfalls there.
• SORR...I can't shake the feeling that we're due for a correction, though I know trying to anticipate the timing is a fool's errand.
• Black Swan events. I actually don't lose much sleep over this because it's completely outside of our control. Trying to plan for them just results in OMY syndrome, with a high likelihood of working way too long and saving way more than we need.
• Withdrawal/conversion strategies to mitigate the tax risk of our extremely pre-tax heavy allocation -- while threading the ACA credit needle.
• Figuring out what we'll do in retirement to stay happy and healthy.

 

[MichaelB]

Looking good. Nice update

 

[tulak]

The biggest challenges we're facing now, in no particular order:

• SORR...I can't shake the feeling that we're due for a correction, though I know trying to anticipate the timing is a fool's errand.

Nice progress. Congrats!

For SORR, I built a 8-10 years ladder using TIPS for base income. That, plus the 1-2% dividends on the equities, is enough to get me through the year. If you're looking at retiring soon, it's good to come up with a plan, especially with current equity valuations.

 

[dobig]

Outstanding! Threads like this are what motivated us and hopefully motivates some of the younger generation out there.

Hope you pull the plug shortly and start enjoying the fruits of your labor.

 

[A Bird In Hand]

Outstanding! Threads like this are what motivated us and hopefully motivates some of the younger generation out there.

Hope you pull the plug shortly and start enjoying the fruits of your labor.

Thank you! I'm glad this thread is useful and/or interesting to someone other than me.

We would very much like to retire soon. Realistically we'll probably want to take a year or so to wind down at work while building a bigger cash/brokerage/Roth buffer. If market returns are anywhere near average over the next year, we should be well over $4.5MM, and the decision will be easier. If markets are flat or go down, it will be a tougher call and we might want to hang on for another year or more while markets (hopefully) recover.

The best of both worlds for us during a bad market would be working PT and retaining benefits until Rule of 55 kicks in, but I'm not sure how feasible that would be.

 

[NgineER]

wonderful progress! I joined the board in 2012 also and was a little surprised to look back and see that our investments also doubled over the last four years.

The decision to not change and just plug away is easy, the challenge will be to take the leap of faith! I'm holding tight until 55 in four years, but might do another year on top of that depending on how comfortable I feel at that point.

 

[Dtail]

Good update. What are your expenses or expected expenses in retirement? Have you used Firecalc?
Unless you are spending over 200k, you are probably good to go already.
Not sure how many posts you read, but you have probably never seen a post about a complaint about retiring too early, but surely would see the wished I retired earlier posts.

 

[A Bird In Hand]

wonderful progress! I joined the board in 2012 also and was a little surprised to look back and see that our investments also doubled over the last four years.

The decision to not change and just plug away is easy, the challenge will be to take the leap of faith! I'm holding tight until 55 in four years, but might do another year on top of that depending on how comfortable I feel at that point.

The last 3 years of returns have been kinda crazy. Had our investments been a little more aggressive, we could probably have hit $5MM instead of just over $4MM. But hindsight only works when I'm using FireCalc and it's telling me what I want to hear

And yeah...that leap of faith is the hardest part for us. Had our faith been greater, we probably could have bailed at 45. We're definitely more ant ant and less grasshopper.

 

[A Bird In Hand]

Good update. What are your expenses or expected expenses in retirement? Have you used Firecalc?
Unless you are spending over 200k, you are probably good to go already.
Not sure how many posts you read, but you have probably never seen a post about a complaint about retiring too early, but surely would see the wished I retired earlier posts.

Our current and expected spending is roughly $100k-$125k. It's been a bit lumpy with home repairs and maintenance as various systems age, and car repairs/replacements as well (not to mention car insurance, which becomes increasingly absurd as we add additional teens to our policy). I think $120k is the most reasonable figure we have, with the ability to scale back to about $100k without too much pain in down years.

FireCalc says 90% success at $170k/yr for 45 years. Taxes and ACA premiums + deductible would need to come off the top, and that brings us down to the neighborhood of our planned $120k spending.

We're very mindful of our susceptibility to the siren song of One More Year. At the same time, I don't want to completely ignore my rational brain which is flashing warning signs about SORR given the exceptional bull run we've experienced in recent years.

 

[Dtail]

Our current and expected spending is roughly $100k-$125k. It's been a bit lumpy with home repairs and maintenance as various systems age, and car repairs/replacements as well (not to mention car insurance, which becomes increasingly absurd as we add additional teens to our policy). I think $120k is the most reasonable figure we have, with the ability to scale back to about $100k without too much pain in down years.

FireCalc says 90% success at $170k/yr for 45 years. Taxes and ACA premiums + deductible would need to come off the top, and that brings us down to the neighborhood of our planned $120k spending.

We're very mindful of our susceptibility to the siren song of One More Year. At the same time, I don't want to completely ignore my rational brain which is flashing warning signs about SORR given the exceptional bull run we've experienced in recent years.

Understand. Hard to truly pull the plug. You should be about 50 y.o. now, so still on the younger side of FIRE, even for this site.
Have you included Social Security for both of you in Firecalc? You should at least include a discounted (77%?) amount.

 

[A Bird In Hand]

Understand. Hard to truly pull the plug. You should be about 50 y.o. now, so still on the younger side of FIRE, even for this site.
Have you included Social Security for both of you in Firecalc? You should at least include a discounted (77%?) amount.

Yep, I'm assuming 75% of SS for both of us. That's included in the FireCalc 90% success @ $170k/yr. What is not included is a likely combined inheritance of perhaps $500k (current value) sometime in the next 15 years or so. I'd really prefer that our parents just spend it all, but that probably won't happen.

 

[Dtail]

Yep, I'm assuming 75% of SS for both of us. That's included in the FireCalc 90% success @ $170k/yr. What is not included is a likely combined inheritance of perhaps $500k (current value) sometime in the next 15 years or so. I'd really prefer that our parents just spend it all, but that probably won't happen.

As stated in other inheritance threads here, probably the correct decision to not use any expected inheritance in portfolio survival scenarios, but you keep it in the background of knowledge.

 

[HI Bill]

Job well done! Personally, at your age, I'd shoot for $5-6M, depending on your desired lifestyle. More always provides more possibilities. I think the answer to why 45? is that about 20-24 years is typically what it takes most to achieve FI if working actively and effectively towards that goal and living way below one's means, or earning an outsized income.

 

[livingalmostlarge]

i'd pull the trigger you are good to go. And 45? Well we did but life got in the way and we are FI but no RE. Sometimes you just do it because the kids are home and what else can you do? at least that's how my DH feels. That he might as well work or be bored. We didn't consider that when we said 45. That the kids would still be home.

 

[Patience]

Great thread! Thanks for popping by and updating. Your diligence is inspiring.

 

[Love This Community]

Great to see your progress in a short period. Kudos to you.

 

[A Bird In Hand]

Job well done! Personally, at your age, I'd shoot for $5-6M, depending on your desired lifestyle. More always provides more possibilities. I think the answer to why 45? is that about 20-24 years is typically what it takes most to achieve FI if working actively and effectively towards that goal and living way below one's means, or earning an outsized income.

Thank you!

It's true: $5-6MM at my age would offer more margin of error for SORR or unanticipated expenses, and/or more spending throughout retirement. But for us, the optimization problem always seems to end in a OMY infinite loop:

We have closer to $4MM, and it will take N years to reach $5MM or $6MM. We'll be N years older then, having spent N more years working away what are the N healthiest remaining years of our lives. Small values of N imply SORR likely wasn't a problem, and large values of N mean we're right back to OMY until the 'RE' part of FIRE falls off entirely.

 

[A Bird In Hand]

i'd pull the trigger you are good to go. And 45? Well we did but life got in the way and we are FI but no RE. Sometimes you just do it because the kids are home and what else can you do? at least that's how my DH feels. That he might as well work or be bored. We didn't consider that when we said 45. That the kids would still be home.

Agreed: 45 sounded good on paper, and an achievable goal when making financial projections back in my 20's and 30's. But as we approached 45 and found ourselves on the hairy edge of FI, our answer to "OK, but what's next?" was never compelling enough to make the leap.

I will say, it was easier to justify the j*b status quo when the j*bs were more enjoyable. But we've definitely started to feel increasing burnout in the last couple years. Combined with a more substantial FI position, it becomes easier to stomach the thought of turning off the W2 fire hose. The OMY monster still lurks though!