Am I missing anything on doing a 5.5% SWR

[FIRE@50]

I can't believe how many people think that braces are a requirement of life. There is some amazing marketing going on somewhere.

Seriously ignorant post here. Kids with messed up mouths can feel like monsters and never smile. Is that what you want for your child because you're too cheap to help them? Not to mention medical issues that stem from screwed up teeth and jaws...

You believing that your child's mouth is messed up and not allowing them to smile is repulsive. Why would you even put that thought in their head?

[honeybbq]

Also, I would like some real examples of what people are allocating for their children outside of food. We are an overall frugal family and also have Grandparents that will more than likely purchase the majority of their clothes. I am just trying to get an idea of how far off we would be off. Are you all talking more like $3k a kid, $5k, $8k, etc?

I am not as frugal as most on here, but since asked:

- after school enrichment (while we both work, maybe you won't need it?) $500/month
- summer camps (again, same story) $500/week
- hockey, 1 season, ice fees alone $1000/ season. Not to mention equipment, tape, travel to games, increased gas cost to practices, etc.
- piano lessons, $200/month
- clothing, I try to buy mostly used except for socks, shoes, underwear, etc: $1000/year
- food- my kid at 8 eats more than I do.
- halloween costume (haha) $25 (homemade with some purchased side items)
- birthday parties $20-30/each for gifts
- increased costs for travel and vacations. We travel a lot and drag our kid with us. Probably $2000 a year in plane travel alone. A few years ago we went abroad twice. So that was more like 5-6k.
- kid size things- ice skates, roller skates, bikes, sleeping bags, hobbies, toys, books. All these things add up. Even if you want to do it cheaply (e.g. buy a use bike off craigslist) ... it still costs money.
- college?? We are aiming for at least 100k in our 529 account. We currently put in $1000/month.
- school supplies- our school does a fixed cost of $650 per year rather than have every kid bring in supplies and spam kids with PTA fundraisers.

[honeybbq]

I can't believe how many people think that braces are a requirement of life. There is some amazing marketing going on somewhere.

Seriously ignorant post here. Kids with messed up mouths can feel like monsters and never smile. Is that what you want for your child because you're too cheap to help them? Not to mention medical issues that stem from screwed up teeth and jaws...

You believing that your child's mouth is messed up and not allowing them to smile is repulsive. Why would you even put that thought in their head?

Way to put words in my mouth. You still don't get it, clearly.

Do you have kids? Have you ever spent time around kids?  Do you know what OTHER kids say to each other? Clearly you have no clue what it's like to be a kid or have a kid with messed up teeth and how horribly your peers treat you.

[Metalcat]

My guess is that you're like a lot of people who feel the need to have the artificial reassurance of "achieving FI" according to whatever arbitrary metric they set for themselves before you feel like you can give yourself permission to make a major life change.

You don't need it, just make the change.

Honestly this is a lot of it. I am not even sure that I would RE then but like the idea of hitting FI. I think it would lift a large weight off me.

Then stop trying to force a square peg into a round hole. If you aren't trying to make a full retirement plan where you never work again, then don't bother designing a bad full retirement plan. That's ridiculous.

If you have any intention of continuing to work in any capacity, that DRAMATICALLY changes the dynamic of your projected outcomes.

Why? Because everything changes when you give the 'stache time to grow. Not withdrawing 5.5% in 4 years is a TOTALLY different scenario than withdrawing it, so your simulations mean nothing.

Also, your budget is entirely incomplete.
You have this huge category that you're vaguely referring to as optional spending, but it isn't. Some of it is optional variable spending, and some of it seems to be periodic spending, and you are lumping them together, which is not logical.

Periodic spending is, as I already mentioned, car repairs, home repairs, medical expenses, legal costs, etc. Anything that can pop up either unexpectedly or partially expectedly and cost you a bunch of money that you can't opt out of spending just because the market is down. This isn't discretionary spending. You don't get to choose if/when you spend it.

That needs to be completely separate from your variable "oh look, the market is up, we can buy a new laptop this year!" spending.

The problem people have with 35K is not the amount, plenty of people manage just fine on 35K. The problem is that you don't actually know what your budget is.

Now, that said, there's actually nothing wrong with not having a budget and not having a solid sense of what your periodic/unexpected expenses will be, but only if you choose a financial approach that has so much buffer in it that it virtually doesn't matter. If you want that option, you don't plan for 5.5%, hell, you don't even plan for 4%. A "fuck it" level of ignorance should probably cost you a good sub 3%.

What you're doing is projecting an imaginary future where you can control your spending to max out at 35K with enough leeway that you have full discretion to cut 15% at will, regardless of what happens in your life.

That's just not realistic and just not possible with an incomplete budget that doesn't account for anything ever going wrong during a down year.

That's magical thinking, not math, and the worst part is that it's totally unnecessary to play these little mental games with yourself to feel better about a plan that is actually a really good plan if you look at it honestly.

So stop playing with numbers that don't mean anything because they don't reflect reality and start using the calculators to actually look at your real option: CoastFI, which sounds like you will be in perfect position for in a few years. So congrats on that, that's fantastic.

Get back to the drawing board and make yourself a real plan.
I think you will be pleasantly surprised.

[ontheway2]

For kids expenses, I've spent 10k over the last 18 months specifically on my 2 ages 14 and 7.  This is from pulling a report of expenses relating solely to them. That is after I removed 2k in child care related costs that you wouldn't have.  This has been a high expense time as it includes almost 4k for braces and a 2k field trip. Many years might be under 2k, but it might be hard to keep the 2k average when you get hit with big expenses. This doesn't include cell phone bill increases or car insurance increases or the like. My 7 year old does city sports and this includes one season of basketball and one baseball. My older son did one sport through the school last year.

Edit: this also does not include healthcare, clothes, haircuts as those are each a line item for the whole family

[Villanelle]

It looks to me that most people have issues with the $35k number and individual categories (particularly children) that make that up.

Do most people think that IF we met the $35k budget that the plan would work out and that I am not missing anything. I guess what I am saying is that do most people think the plan would work with a higher annual budget. Say $45k and still a 5.5% withdraw rate and 15% cut and selling the house?

Also, I would like some real examples of what people are allocating for their children outside of food. We are an overall frugal family and also have Grandparents that will more than likely purchase the majority of their clothes. I am just trying to get an idea of how far off we would be off. Are you all talking more like $3k a kid, $5k, $8k, etc?

The selling of the house and then renting actually makes your budget more worrisome to me, not less, as it's another unpredictable factor.  What will rents in your area look like when that happens?  What will real estate prices (and thus the selling of your home) look like?  It is possible that selling in order to rent in 10 or 15 or 20 years could actually increase your budget, not decrease it.  It's such an unpredictable thing, which makes your already aggressive plan (aggressive on budget, then aggressive on SWR) even more precarious, if you are counting on keeping the budget the same but banking money on the sale of your home. 

[themagicman]

It looks to me that most people have issues with the $35k number and individual categories (particularly children) that make that up.

Do most people think that IF we met the $35k budget that the plan would work out and that I am not missing anything. I guess what I am saying is that do most people think the plan would work with a higher annual budget. Say $45k and still a 5.5% withdraw rate and 15% cut and selling the house?

Also, I would like some real examples of what people are allocating for their children outside of food. We are an overall frugal family and also have Grandparents that will more than likely purchase the majority of their clothes. I am just trying to get an idea of how far off we would be off. Are you all talking more like $3k a kid, $5k, $8k, etc?

The selling of the house and then renting actually makes your budget more worrisome to me, not less, as it's another unpredictable factor.  What will rents in your area look like when that happens?  What will real estate prices (and thus the selling of your home) look like?  It is possible that selling in order to rent in 10 or 15 or 20 years could actually increase your budget, not decrease it.  It's such an unpredictable thing, which makes your already aggressive plan (aggressive on budget, then aggressive on SWR) even more precarious, if you are counting on keeping the budget the same but banking money on the sale of your home.

Even though we would be withdrawing around 2.9% on that money? And if rental costs went up much would be willing to move? And plus $300k is on the low end and $1,400 is on the high end of estimates

[themagicman]

My guess is that you're like a lot of people who feel the need to have the artificial reassurance of "achieving FI" according to whatever arbitrary metric they set for themselves before you feel like you can give yourself permission to make a major life change.

You don't need it, just make the change.

Honestly this is a lot of it. I am not even sure that I would RE then but like the idea of hitting FI. I think it would lift a large weight off me.

Then stop trying to force a square peg into a round hole. If you aren't trying to make a full retirement plan where you never work again, then don't bother designing a bad full retirement plan. That's ridiculous.

If you have any intention of continuing to work in any capacity, that DRAMATICALLY changes the dynamic of your projected outcomes.

Why? Because everything changes when you give the 'stache time to grow. Not withdrawing 5.5% in 4 years is a TOTALLY different scenario than withdrawing it, so your simulations mean nothing.

Also, your budget is entirely incomplete.
You have this huge category that you're vaguely referring to as optional spending, but it isn't. Some of it is optional variable spending, and some of it seems to be periodic spending, and you are lumping them together, which is not logical.

Periodic spending is, as I already mentioned, car repairs, home repairs, medical expenses, legal costs, etc. Anything that can pop up either unexpectedly or partially expectedly and cost you a bunch of money that you can't opt out of spending just because the market is down. This isn't discretionary spending. You don't get to choose if/when you spend it.

That needs to be completely separate from your variable "oh look, the market is up, we can buy a new laptop this year!" spending.

The problem people have with 35K is not the amount, plenty of people manage just fine on 35K. The problem is that you don't actually know what your budget is.

Now, that said, there's actually nothing wrong with not having a budget and not having a solid sense of what your periodic/unexpected expenses will be, but only if you choose a financial approach that has so much buffer in it that it virtually doesn't matter. If you want that option, you don't plan for 5.5%, hell, you don't even plan for 4%. A "fuck it" level of ignorance should probably cost you a good sub 3%.

What you're doing is projecting an imaginary future where you can control your spending to max out at 35K with enough leeway that you have full discretion to cut 15% at will, regardless of what happens in your life.

That's just not realistic and just not possible with an incomplete budget that doesn't account for anything ever going wrong during a down year.

That's magical thinking, not math, and the worst part is that it's totally unnecessary to play these little mental games with yourself to feel better about a plan that is actually a really good plan if you look at it honestly.

So stop playing with numbers that don't mean anything because they don't reflect reality and start using the calculators to actually look at your real option: CoastFI, which sounds like you will be in perfect position for in a few years. So congrats on that, that's fantastic.

Get back to the drawing board and make yourself a real plan.
I think you will be pleasantly surprised.

I am confused by this. We have a budget plan and feel confident in most of the numbers besides I guess the kids budget. We are also already accruing for home repairs, car replacement, and healthcare separately than that misc money and those would still continue in a down year. If we had kid expense in line, what else is concerning about our numbers? The overflow line item is basically just fat and would be used for vacation or not all of it in most years

[Villanelle]

It looks to me that most people have issues with the $35k number and individual categories (particularly children) that make that up.

Do most people think that IF we met the $35k budget that the plan would work out and that I am not missing anything. I guess what I am saying is that do most people think the plan would work with a higher annual budget. Say $45k and still a 5.5% withdraw rate and 15% cut and selling the house?

Also, I would like some real examples of what people are allocating for their children outside of food. We are an overall frugal family and also have Grandparents that will more than likely purchase the majority of their clothes. I am just trying to get an idea of how far off we would be off. Are you all talking more like $3k a kid, $5k, $8k, etc?

The selling of the house and then renting actually makes your budget more worrisome to me, not less, as it's another unpredictable factor.  What will rents in your area look like when that happens?  What will real estate prices (and thus the selling of your home) look like?  It is possible that selling in order to rent in 10 or 15 or 20 years could actually increase your budget, not decrease it.  It's such an unpredictable thing, which makes your already aggressive plan (aggressive on budget, then aggressive on SWR) even more precarious, if you are counting on keeping the budget the same but banking money on the sale of your home.

Even though we would be withdrawing around 2.9% on that money? And if rental costs went up much would be willing to move? And plus $300k is on the low end and $1,400 is on the high end of estimates

I'm not understanding what you are saying here.  Withdrawing 2.9% on what money?  On the house proceeds?  How on earth can you calculate with it will sell for in a decade or more?  Or what your rent would be to create a budget that you know will require only a 2.9% withdraw?

You are saying that to get $Y, you will only be withdrawing 2.9% of Z, without knowing what either Y or Z is, which is impossible math.  Or am I misunderstanding?   You seem to have made up $300k as a sales price, and $1400 as a rent price, but there is no way to know if those are even close.  What it right now is 2004 and the time you want to sell is 2008?  What if rent prices in your area skyrocket?  (Yes, you said you'd consider moving, which somewhat addresses the latter, but not the former.)

[Omy]

I shouldn't even comment since I have several times your projected net worth, less than a 2% SWR, and am way older with no kids - and I don't have nearly the confidence you have. I commend you for your optimism, though!

Health insurance seems crazy low. If ACA or Medicaid aren't available in 10 or 20 years and health costs are escalating 20% a year...what's the plan? My budget assumes 10-15 times your numbers.

I agree that kid costs are way off as well. I'd budget 3-5 times your numbers given what I've seen with my nieces and nephews.

I could have FIRED 5 years ago very comfortably, but continued working while my earning potential was high. I have no interest in being a Walmart greeter in my 80s...

[Undecided]

Also, SWR is SAVINGS Withdraw Rate, not SAFE withdraw rate.  I'm not just being pedantic; there's some meaning in the distinction.

One can impute various meanings to any Three Letter Acronym (TLA).  Safe Withdrawal Rate is however the meaning of SWR that most personal finance discussions would assume.  E.g., see that Boglehead wiki article.

Bengen’s original article on the 4% rule set out to assist financial planners in determining how much they could “safely withdraw.” http://www.retailinvestor.org/pdf/Bengen1.pdf

[DoNorth]

Interesting.  I've just watched four or five interviews with Wade Pfau where he clearly says that not even the 4% rule makes sense in today's environement.

[Metalcat]

I am confused by this. We have a budget plan and feel confident in most of the numbers besides I guess the kids budget. We are also already accruing for home repairs, car replacement, and healthcare separately than that misc money and those would still continue in a down year. If we had kid expense in line, what else is concerning about our numbers? The overflow line item is basically just fat and would be used for vacation or not all of it in most years

I see a budget for basic home maintenance, but is that supposed to cover major maintenance as well? Is the fund for major maintenance and replacing the car included in the "car" category, because I don't see it.

You say you are accruing for things, but I don't see that in your budget, at least, I'm not seeing figures that add up in a way that make sense to me. Although maybe we live in places where the numbers are very different. Car insurance and gas alone where I live costs easily 3K/yr

You have a healthcare line item, but as I already said, major healthcare costs can pop up well beyond $1800 for a family of four in any given year. I'm a healthcare professional, I take A LOT of money from families just like yours. Is there an accrual for this that I'm not seeing as well?

Overall, I actually think your basic numbers are pretty great. You're doing an amazing job, you really are. I just think that quitting all paid work forever on those numbers doesn't make any sense, especially since that doesn't even seem to be your actual plan.

Have you looked at calculations of what CoastFI would possibly look like? Even just leaving the stache alone for 5 years would give you a huge extra cushion, which itself would mostly be left alone to grow untouched through your retirement, leaving you with a massive extra nest egg that could easily cover expensive late in life healthcare or be left to your kids.

The biggest draw back of actually fully retiring early is all of the years of lost time in the market and all of those wonderful self-perpetuating gains from compounding.
Even MMM himself didn't actually start drawing from the 'stache when he retired. Even without the blog income, even if he just covered his expenses with his carpentry and Mrs MMM's soap business, they would have ended up with millions.

If you coast, you get to leave the rat race, quit your job, focus more on work you enjoy, not worry about saving anymore, and let time work its magic on the lump sum you saved already.

Looking at your numbers, if you and/or your spouse work part time enough to cover your 30-35K/year for 5+ more years, you could gain as much as an additional quarter million, which if things actually go according to your plan, and your budget actually represents reality, that quarter million would be left alone to grow for decades...

So, you can keep crunching the numbers on a plan that leaves you extremely vulnerable, which doesn't even seem to be your plan. Or you can start calculating how many millions you want to leave your children because you picked up some part time work in your 30s. 

[themagicman]

I am confused by this. We have a budget plan and feel confident in most of the numbers besides I guess the kids budget. We are also already accruing for home repairs, car replacement, and healthcare separately than that misc money and those would still continue in a down year. If we had kid expense in line, what else is concerning about our numbers? The overflow line item is basically just fat and would be used for vacation or not all of it in most years

I see a budget for basic home maintenance, but is that supposed to cover major maintenance as well? Is the fund for major maintenance and replacing the car included in the "car" category, because I don't see it.

You say you are accruing for things, but I don't see that in your budget, at least, I'm not seeing figures that add up in a way that make sense to me. Although maybe we live in places where the numbers are very different. Car insurance and gas alone where I live costs easily 3K/yr

You have a healthcare line item, but as I already said, major healthcare costs can pop up well beyond $1800 for a family of four in any given year. I'm a healthcare professional, I take A LOT of money from families just like yours. Is there an accrual for this that I'm not seeing as well?

Overall, I actually think your basic numbers are pretty great. You're doing an amazing job, you really are. I just think that quitting all paid work forever on those numbers doesn't make any sense, especially since that doesn't even seem to be your actual plan.

Have you looked at calculations of what CoastFI would possibly look like? Even just leaving the stache alone for 5 years would give you a huge extra cushion, which itself would mostly be left alone to grow untouched through your retirement, leaving you with a massive extra nest egg that could easily cover expensive late in life healthcare or be left to your kids.

The biggest draw back of actually fully retiring early is all of the years of lost time in the market and all of those wonderful self-perpetuating gains from compounding.
Even MMM himself didn't actually start drawing from the 'stache when he retired. Even without the blog income, even if he just covered his expenses with his carpentry and Mrs MMM's soap business, they would have ended up with millions.

If you coast, you get to leave the rat race, quit your job, focus more on work you enjoy, not worry about saving anymore, and let time work its magic on the lump sum you saved already.

Looking at your numbers, if you and/or your spouse work part time enough to cover your 30-35K/year for 5+ more years, you could gain as much as an additional quarter million, which if things actually go according to your plan, and your budget actually represents reality, that quarter million would be left alone to grow for decades...

So, you can keep crunching the numbers on a plan that leaves you extremely vulnerable, which doesn't even seem to be your plan. Or you can start calculating how many millions you want to leave your children because you picked up some part time work in your 30s.

Yes the "car" budget covers repairs and replacement. I was thinking that would give us an $11k car and sell for $2k every six years and leave $800 a year for maintenance (above our average). We are planning on one car in retirement

 The house Maintenance is for repairs. I came up with that number by estimating the life of repairs and their cost over the next 20 years. That is the average that I came up with.

Healthcare was a guess. It might be low but hard to estimate. I figured we would hit our out of pocket every three or so years and minimal the other years. I'm not really sure.
What do you think would be more in line for a family averaged out over 15 years (we will probably get a silver aca plan assuming it's there)

Thanks for the kind words on the situation. We will probably end up working part time at that point just always makes me worry to rely on that but I guess it is less risky the original plan for sure.

[ontheway2]

I am confused by this. We have a budget plan and feel confident in most of the numbers besides I guess the kids budget. We are also already accruing for home repairs, car replacement, and healthcare separately than that misc money and those would still continue in a down year. If we had kid expense in line, what else is concerning about our numbers? The overflow line item is basically just fat and would be used for vacation or not all of it in most years

I see a budget for basic home maintenance, but is that supposed to cover major maintenance as well? Is the fund for major maintenance and replacing the car included in the "car" category, because I don't see it.

You say you are accruing for things, but I don't see that in your budget, at least, I'm not seeing figures that add up in a way that make sense to me. Although maybe we live in places where the numbers are very different. Car insurance and gas alone where I live costs easily 3K/yr

You have a healthcare line item, but as I already said, major healthcare costs can pop up well beyond $1800 for a family of four in any given year. I'm a healthcare professional, I take A LOT of money from families just like yours. Is there an accrual for this that I'm not seeing as well?

Overall, I actually think your basic numbers are pretty great. You're doing an amazing job, you really are. I just think that quitting all paid work forever on those numbers doesn't make any sense, especially since that doesn't even seem to be your actual plan.

Have you looked at calculations of what CoastFI would possibly look like? Even just leaving the stache alone for 5 years would give you a huge extra cushion, which itself would mostly be left alone to grow untouched through your retirement, leaving you with a massive extra nest egg that could easily cover expensive late in life healthcare or be left to your kids.

The biggest draw back of actually fully retiring early is all of the years of lost time in the market and all of those wonderful self-perpetuating gains from compounding.
Even MMM himself didn't actually start drawing from the 'stache when he retired. Even without the blog income, even if he just covered his expenses with his carpentry and Mrs MMM's soap business, they would have ended up with millions.

If you coast, you get to leave the rat race, quit your job, focus more on work you enjoy, not worry about saving anymore, and let time work its magic on the lump sum you saved already.

Looking at your numbers, if you and/or your spouse work part time enough to cover your 30-35K/year for 5+ more years, you could gain as much as an additional quarter million, which if things actually go according to your plan, and your budget actually represents reality, that quarter million would be left alone to grow for decades...

So, you can keep crunching the numbers on a plan that leaves you extremely vulnerable, which doesn't even seem to be your plan. Or you can start calculating how many millions you want to leave your children because you picked up some part time work in your 30s.

Yes the "car" budget covers repairs and replacement. I was thinking that would give us an $11k car and sell for $2k every six years and leave $800 a year for maintenance (above our average). We are planning on one car in retirement

 The house Maintenance is for repairs. I came up with that number by estimating the life of repairs and their cost over the next 20 years. That is the average that I came up with.

Healthcare was a guess. It might be low but hard to estimate. I figured we would hit our out of pocket every three or so years and minimal the other years. I'm not really sure.
What do you think would be more in line for a family averaged out over 15 years (we will probably get a silver aca plan assuming it's there)

Thanks for the kind words on the situation. We will probably end up working part time at that point just always makes me worry to rely on that but I guess it is less risky the original plan for sure.

Seeing the sinking funds in your budget makes me feel better about the 35k number; my issue is more with the 5.5% withdrawal. I think having not much wiggle room in your budget combined with a high withdrawal is what is giving me pause more than 2k/year for a kid. I think a couple of your lines might be a little low 10 or 15 years from now (after adjusting for inflation), and you could easily be at more of a 6% withdrawal or having to reduce your standard of living, neither of which would be sustainable.

Edit: and to answer a previous question I missed, I did not factor 100% stocks in firecalc. From everything I've read, 100% stock actually decreases the success probability. I found a really good chart with withdrawal rates and asset allocation crossed to a success rate, but I can't find it right now

[freya]

If I were you I'd adjust your numbers this way:

Base spending level - keep the 20% annual cushion but add extra for vacations/travel.  Which you will probably want to do more of in FIRE.

Healthcare - Realize that this is increasing several times the rate of inflation and will continue to do so in the foreseeable future.  Budget the full cost of health insurance & a reasonable number for copays & deductibles.  Ignore Obamacare.  Counting on government benefits that could disappear anytime is not a good plan for your 40-50 year retirement horizon.

Child costs - Use #s provided by other posters to estimate TOTAL costs up to age 26.  Add an amount you think you would contribute to college costs.  Currently, private schools cost $100K/year, public schools probably in the range of $30K depending on your state.  Like healthcare, these costs are also increasing much faster than inflation, and there is no sign of that changing anytime soon.  Add the total amount as a lump sum to your FIRE number.

Reduce your expected SWR to 4%.  Many here argue that 3% is safer for such a long anticipated retirement, especially since your SS will be next to nothing given your short working career.  This is equivalent to a 25% cushion, so you might increase your planned "overflow" to this level.

Then you'll have a FIRE number that makes sense.  This likely means several more years of working, so you may want to consider changing to a job you'll be happier with, or speed up your progress by developing a side business.  Having one you can take into retirement would be an excellent idea.

[Laura33]

You keep asking what we think are better numbers for kids, medical expenses, etc.  What I spend is irrelevant, because I am a completely different person than you, with very different options available, and I am going to make entirely different choices.  I can't tell you what your health insurance costs will be, because I probably live in a different state with different options.  But you have relevant information available to you: if you are looking at an ACA Silver plan, then research what that costs in your state on your proposed income; then add in the out-of-pocket max allowed by the plan, and you have pretty much a reasonable worst-case cost scenario.  You can then ratchet that down if you want, on the assumption that you won't hit your max every year.

Same with kids.  Think of the kinds of things you want your kids to be able to do, and do the research to figure out what that would cost.  A few examples from my life:

-School supplies, field trips, school band competition fees, other extra school expenses: @$800/yr.  For one kid (the other is in college, so that wouldn't even cover one semester's books).  Our school doesn't have a big budget, so every field trip is $15-35 to cover the costs, we pay the costs to try out for all-county band and that sort of thing, there are always things like science projects that require extra supplies, there are after-school clubs that cost $50-60 per semester, and there's one big year-end trip that's like $135 that I want my kid to be able to go on.  ES was cheaper; MS is more expensive; HS was even more expensive, because there were more clubs doing more stuff -- my kid got the opportunity to go to nationals for two different clubs she was in, and I was damned if I was going to keep her from doing that because of money, so that was another $2K+ for both trips combined (because we wanted to go too).  Her debate team also had several weekend tournaments away that cost a couple hundred bucks each time for hotel/food.

- Birthday parties:  At least $10-15 each for a present.  We are on the cheaper end of gifts in our area, because I don't like the extravagance that some of this stuff has grown into.  But there are a lot of years the kids invite the whole class, and the parties become social occasions for the kids, and the $ seriously adds up.   

-Sports:  $100/season fees x 3 sports (one kid plays basketball/baseball, the other played softball) = $300, plus cleats every year because the little buggers grow so fast, mitts/bats/helmets every couple of years, plus periodic trips to the batting cage; call it $600/yr or so on average.  When they were younger, it was about $150/mo for gymnastics or karate, plus about $50-60 every couple of months for swim lessons at the Y -- plus we had to pay $70/mo. for a membership at the Y to have access to those lessons.  Do you guys have any sports hobbies that you'd like to do as a family?  If you need gear for that, that adds up as well; even hiking boots are expensive when the little buggers outgrow them every year.

- Music:  DS has really gotten good at his instrument and wants private lessons, so we pay $35/week for that.  We are lucky that the school provides the instrument free. 

- School lunches:  ours are $3.10/day.  I don't pay for that, because they're crap.  But I still have to buy food to send with them for lunch, which definitely involves more pre-packaged stuff than I'd prefer (yogurts, string cheese, etc.).  YMMV, of course; if I just sent them with leftovers or PBJ every day, there wouldn't be a difference.  Of course, I also wasn't allowed to send PBJ for many years because of peanut allergies, which required more expensive options like sunflower butter.

- Clothes:  we shop at Kohl's/Target.  Probably $600/yr total as a minimum for both kids, until they stopped growing.  You can obviously do better. 

- Camp: we send our kids to camp, both for daycare and because they really love it.  Our Y sleepaway camp is around $800/week; the daycamp runs about $2500 for the summer.  We also have local, publicly-run sports or music camps that the teachers are always pushing, which run anywhere from $100-200/week for part-time days; there are a few that focus on stuff my kid loves, and I would totally send him if they ran at any more convenient hours.  You can do a little work and figure out what camps near you cost, if that's something you're interested in.

- Phone:  don't get me started.  DH insists that we all have iPhones, so he gives his kids his hand-me-downs so he can justify getting himself the new phone.  You can and will obviously make a much more reasonable choice here.  But the reality was that I wanted my kids to have some kind of phone by about 12-13, because they were getting themselves to and from school, and that way I didn't have to be there.  The phone gave my kid more freedom while still giving me the ability to check on them, and that was a benefit to me. 

- Driving:  our insurance went up maybe 50% when we added a teen driver, even with all applicable discounts (we did limit her to one car, though, to limit the impact).  Ugh.  Your insurance company should be able to estimate that for you.

- Religious stuff:  my kids go to Hebrew School, which cost us probably $1200 or so for a bunch of years.  When they got old enough to be an aide, they did, for $4/hr -- but we still had to pay $100 or so to register them, and they wanted to go to a teen class that cost a couple hundred bucks or more.

- Allowance: as the kids got older, they wanted to hang out with their friends at the local ice cream shop or pizza parlor.  I let them do chores to earn the money, but that was still probably an extra $50/mo that I hadn't anticipated. 

- College:  all I can say is run an "estimated cost of attendance" calculator at any school you might be interested in sending your kids to based on your anticipated 'stache and income.

I don't expect that you will pay anywhere near what we do for any of this, btw.  We are older, already FI, and still working for a number of reasons, so we have plenty of free cash floating around, and it makes me happy to use some of it to give my kids these opportunities.  But that's sort of the point: it's not really going to help you to have 50 people weigh in with what we think is a reasonable estimate of future kid costs, because the only thing that matters is what you are going to want for your kid.  So make your own list of your kids' future needs/wants, figure out what kind of activities you want them to be able to participate in, and then do the research to figure out what those cost in your area. 

[Villanelle]

I don't want to do the math, but as a general rule of thumb, most people suggest 1%/year in home maintenance.  More if a large old home, less if a smaller condo where you aren't responsible for some typical items (roof, paint).  Most years you won't hit that, but some years, you will exceed it.  Is that about what you've factored in?  You said that you came to your number by adding up expected items, but I think the problem is all the unexpected items.  Basement starts flooding.  Fridge dies.  Kitchen faucet rusts through. 

[GoCubsGo]

After reading all these posts, I'd back of napkin change the following items:

- Double the kids expenses (you still haven't said if they will be allowed to drive, or to play sports, or take lessons).  I'm assuming you
  pay zero for college (you haven't answered that). 
- Double the Healthcare... at least.  It sounds like you've never had healthcare bills.  You will and you aren't ready for them if there is a paradigm shift in healthcare costs (I could fire now on 2x your budget but am cautious due to healthcare).
- Add $1,000 to home maintenance.  I own multiple single family properties and things rarely go to plan/expected life
- Traveling with 4 people will probably be more than you think but I guess you have some overage for that.

Don't retire until you've hit 4% although I would shoot for lower as healthcare is a massive crapshoot and your Social Security will be low.

Read the BigErn Early Retirement blog on SWR.  I personally wouldn't care if you tried to do this if it were just you.  You chose to have kids and working a few more years and still retiring before 40 is a sacrifice I really think you should consider.

[secondcor521]

I like @Laura33's list above.  Here's things I spend on my kids, who are 24, 19, and 17.  It may overlap or repeat Laura33's list items; I didn't feel like trying to sort that out.  I'll leave the amounts out, as I think you should price them in based on your area and plans, not mine:

1.  Auto.  I pay for gas to make sure my kids can get back and forth to high school.

2.  College.  The biggest cost for me right now.  We have a low EFC because of my low AGI; however universities will also "gap" you by funding some of your demonstrated need with loans, which I don't take.

3.  Child support.  My children's mother and I are no longer married, and I was the higher wage earner.

4.  Clothing.

5.  Education.  These are non-college education expenses, including musical instrument rentals and purchases (my youngest is a musician), class fees, high school tuition (my kids went to private high schools), high school textbooks, music lessons, gifts to teachers, AP/ACT/SAT test fees, computer equipment, and music trips and camps.

6.  Gifts.  I give my kids money for reaching certain milestones or achievements (such as graduating from high school or earning distinctions), as well as at Christmas time and their birthdays.  I match their Roth contributions up to a certain dollar amount each year.

7.  Recreation.  I pay for my kids to go to events that they're interested in, such as BlizzCon, or music competitions, or father/daughter Valentine's dances, or football games where my daughter is in the honor marching band.

There have also been medical expenses (braces for all three, some broken bones and minor surgeries, allergy shots).  I also do vacations with my kids that I don't include under the "Kids" category in Quicken because I go on the trips too.

In my particular case, out of all of the above, the biggest categories have been College, Child Support, Education and Gifts.

...

The only other thing that I would add that I don't think has been said yet is that the budget you listed had a lot of round numbers in it.  You could be rounding out of convenience, but more often when I see budgets like that I think that they're based on estimates.  I don't actually budget, but what I do is put 99.999% of all my spending into Quicken and measure my actuals over the past six months.  I'd suggest that you spend at least six months, preferably a year, and actually track every dollar and assign them to categories.  I think you will probably find that your actual expenses don't line up with your budgeted expenses, and the differences may be illuminating as to whether your plan is reasonable.

[bbates728]

Man, this is not the type of conversation I would expect from the MMM blog. It is really, really negative so far. Be sure to have flexibility both in the 15% expenses cut and also with the possibility of earning some.

I feel like this is exactly what Pete discusses in his Optimism posts and 4% posts (where he talks about how it is more like a 5% rule). Look at his safety margin post and ask yourself if you can create some of those levels of safety in your plan. If you can't then 5.5% is a little risky, if you can, then do it and feel better about your financial standing.

Also, note that many of the users before me are sending their children to private schools, paying for cars and paying for college. All great things but aren't necessary for raising a responsible human. My suggestion would be to think about what YOU want to do for your children and how you would like to raise them. Then figure out how much that would cost.

[themagicman]

I don't want to do the math, but as a general rule of thumb, most people suggest 1%/year in home maintenance.  More if a large old home, less if a smaller condo where you aren't responsible for some typical items (roof, paint).  Most years you won't hit that, but some years, you will exceed it.  Is that about what you've factored in?  You said that you came to your number by adding up expected items, but I think the problem is all the unexpected items.  Basement starts flooding.  Fridge dies.  Kitchen faucet rusts through.

Mine is pretty close to that. Mine is 0.8% but it is a brand new house so I would think that could justify 0.8% vs 1%

[themagicman]

I like @Laura33's list above.  Here's things I spend on my kids, who are 24, 19, and 17.  It may overlap or repeat Laura33's list items; I didn't feel like trying to sort that out.  I'll leave the amounts out, as I think you should price them in based on your area and plans, not mine:

1.  Auto.  I pay for gas to make sure my kids can get back and forth to high school.

2.  College.  The biggest cost for me right now.  We have a low EFC because of my low AGI; however universities will also "gap" you by funding some of your demonstrated need with loans, which I don't take.

3.  Child support.  My children's mother and I are no longer married, and I was the higher wage earner.

4.  Clothing.

5.  Education.  These are non-college education expenses, including musical instrument rentals and purchases (my youngest is a musician), class fees, high school tuition (my kids went to private high schools), high school textbooks, music lessons, gifts to teachers, AP/ACT/SAT test fees, computer equipment, and music trips and camps.

6.  Gifts.  I give my kids money for reaching certain milestones or achievements (such as graduating from high school or earning distinctions), as well as at Christmas time and their birthdays.  I match their Roth contributions up to a certain dollar amount each year.

7.  Recreation.  I pay for my kids to go to events that they're interested in, such as BlizzCon, or music competitions, or father/daughter Valentine's dances, or football games where my daughter is in the honor marching band.

There have also been medical expenses (braces for all three, some broken bones and minor surgeries, allergy shots).  I also do vacations with my kids that I don't include under the "Kids" category in Quicken because I go on the trips too.

In my particular case, out of all of the above, the biggest categories have been College, Child Support, Education and Gifts.

...

The only other thing that I would add that I don't think has been said yet is that the budget you listed had a lot of round numbers in it.  You could be rounding out of convenience, but more often when I see budgets like that I think that they're based on estimates.  I don't actually budget, but what I do is put 99.999% of all my spending into Quicken and measure my actuals over the past six months.  I'd suggest that you spend at least six months, preferably a year, and actually track every dollar and assign them to categories.  I think you will probably find that your actual expenses don't line up with your budgeted expenses, and the differences may be illuminating as to whether your plan is reasonable.

Thanks for the list. Those are good things to be thinking about.

No, I just round the numbers up for convenience and to make it look more visually appealing for my OCD. They are based on 5+ year of tracking every dollar.

[themagicman]

If I were you I'd adjust your numbers this way:

Child costs - Use #s provided by other posters to estimate TOTAL costs up to age 26.  Add an amount you think you would contribute to college costs.  Currently, private schools cost $100K/year, public schools probably in the range of $30K depending on your state.  Like healthcare, these costs are also increasing much faster than inflation, and there is no sign of that changing anytime soon.  Add the total amount as a lump sum to your FIRE number.

I like this idea. I might try to work through that to come up with an average number

[themagicman]

You keep asking what we think are better numbers for kids, medical expenses, etc.  What I spend is irrelevant, because I am a completely different person than you, with very different options available, and I am going to make entirely different choices.  I can't tell you what your health insurance costs will be, because I probably live in a different state with different options.  But you have relevant information available to you: if you are looking at an ACA Silver plan, then research what that costs in your state on your proposed income; then add in the out-of-pocket max allowed by the plan, and you have pretty much a reasonable worst-case cost scenario.  You can then ratchet that down if you want, on the assumption that you won't hit your max every year.

Same with kids.  Think of the kinds of things you want your kids to be able to do, and do the research to figure out what that would cost.  A few examples from my life:

-School supplies, field trips, school band competition fees, other extra school expenses: @$800/yr.  For one kid (the other is in college, so that wouldn't even cover one semester's books).  Our school doesn't have a big budget, so every field trip is $15-35 to cover the costs, we pay the costs to try out for all-county band and that sort of thing, there are always things like science projects that require extra supplies, there are after-school clubs that cost $50-60 per semester, and there's one big year-end trip that's like $135 that I want my kid to be able to go on.  ES was cheaper; MS is more expensive; HS was even more expensive, because there were more clubs doing more stuff -- my kid got the opportunity to go to nationals for two different clubs she was in, and I was damned if I was going to keep her from doing that because of money, so that was another $2K+ for both trips combined (because we wanted to go too).  Her debate team also had several weekend tournaments away that cost a couple hundred bucks each time for hotel/food.

- Birthday parties:  At least $10-15 each for a present.  We are on the cheaper end of gifts in our area, because I don't like the extravagance that some of this stuff has grown into.  But there are a lot of years the kids invite the whole class, and the parties become social occasions for the kids, and the $ seriously adds up.   

-Sports:  $100/season fees x 3 sports (one kid plays basketball/baseball, the other played softball) = $300, plus cleats every year because the little buggers grow so fast, mitts/bats/helmets every couple of years, plus periodic trips to the batting cage; call it $600/yr or so on average.  When they were younger, it was about $150/mo for gymnastics or karate, plus about $50-60 every couple of months for swim lessons at the Y -- plus we had to pay $70/mo. for a membership at the Y to have access to those lessons.  Do you guys have any sports hobbies that you'd like to do as a family?  If you need gear for that, that adds up as well; even hiking boots are expensive when the little buggers outgrow them every year.

- Music:  DS has really gotten good at his instrument and wants private lessons, so we pay $35/week for that.  We are lucky that the school provides the instrument free. 

- School lunches:  ours are $3.10/day.  I don't pay for that, because they're crap.  But I still have to buy food to send with them for lunch, which definitely involves more pre-packaged stuff than I'd prefer (yogurts, string cheese, etc.).  YMMV, of course; if I just sent them with leftovers or PBJ every day, there wouldn't be a difference.  Of course, I also wasn't allowed to send PBJ for many years because of peanut allergies, which required more expensive options like sunflower butter.

- Clothes:  we shop at Kohl's/Target.  Probably $600/yr total as a minimum for both kids, until they stopped growing.  You can obviously do better. 

- Camp: we send our kids to camp, both for daycare and because they really love it.  Our Y sleepaway camp is around $800/week; the daycamp runs about $2500 for the summer.  We also have local, publicly-run sports or music camps that the teachers are always pushing, which run anywhere from $100-200/week for part-time days; there are a few that focus on stuff my kid loves, and I would totally send him if they ran at any more convenient hours.  You can do a little work and figure out what camps near you cost, if that's something you're interested in.

- Phone:  don't get me started.  DH insists that we all have iPhones, so he gives his kids his hand-me-downs so he can justify getting himself the new phone.  You can and will obviously make a much more reasonable choice here.  But the reality was that I wanted my kids to have some kind of phone by about 12-13, because they were getting themselves to and from school, and that way I didn't have to be there.  The phone gave my kid more freedom while still giving me the ability to check on them, and that was a benefit to me. 

- Driving:  our insurance went up maybe 50% when we added a teen driver, even with all applicable discounts (we did limit her to one car, though, to limit the impact).  Ugh.  Your insurance company should be able to estimate that for you.

- Religious stuff:  my kids go to Hebrew School, which cost us probably $1200 or so for a bunch of years.  When they got old enough to be an aide, they did, for $4/hr -- but we still had to pay $100 or so to register them, and they wanted to go to a teen class that cost a couple hundred bucks or more.

- Allowance: as the kids got older, they wanted to hang out with their friends at the local ice cream shop or pizza parlor.  I let them do chores to earn the money, but that was still probably an extra $50/mo that I hadn't anticipated. 

- College:  all I can say is run an "estimated cost of attendance" calculator at any school you might be interested in sending your kids to based on your anticipated 'stache and income.

I don't expect that you will pay anywhere near what we do for any of this, btw.  We are older, already FI, and still working for a number of reasons, so we have plenty of free cash floating around, and it makes me happy to use some of it to give my kids these opportunities.  But that's sort of the point: it's not really going to help you to have 50 people weigh in with what we think is a reasonable estimate of future kid costs, because the only thing that matters is what you are going to want for your kid.  So make your own list of your kids' future needs/wants, figure out what kind of activities you want them to be able to participate in, and then do the research to figure out what those cost in your area.

Thanks for all this info! I am going to think through it and estimate the numbers for us but these are good categories to consider!

[themagicman]

After reading all these posts, I'd back of napkin change the following items:

- Double the kids expenses (you still haven't said if they will be allowed to drive, or to play sports, or take lessons).  I'm assuming you
  pay zero for college (you haven't answered that). 
- Double the Healthcare... at least.  It sounds like you've never had healthcare bills.  You will and you aren't ready for them if there is a paradigm shift in healthcare costs (I could fire now on 2x your budget but am cautious due to healthcare).
- Add $1,000 to home maintenance.  I own multiple single family properties and things rarely go to plan/expected life
- Traveling with 4 people will probably be more than you think but I guess you have some overage for that.

Don't retire until you've hit 4% although I would shoot for lower as healthcare is a massive crapshoot and your Social Security will be low.

Read the BigErn Early Retirement blog on SWR.  I personally wouldn't care if you tried to do this if it were just you.  You chose to have kids and working a few more years and still retiring before 40 is a sacrifice I really think you should consider.

We would like for the kids to be able to drive, take lessons, play sports within reason. I guess we thought the costs of these things would be lower than most people are thinking.
College - we should have about $60k per kid saved for college. We would probably not give them much more than that though. (at least in this plan)

[themagicman]

Man, this is not the type of conversation I would expect from the MMM blog. It is really, really negative so far. Be sure to have flexibility both in the 15% expenses cut and also with the possibility of earning some.

I feel like this is exactly what Pete discusses in his Optimism posts and 4% posts (where he talks about how it is more like a 5% rule). Look at his safety margin post and ask yourself if you can create some of those levels of safety in your plan. If you can't then 5.5% is a little risky, if you can, then do it and feel better about your financial standing.

Also, note that many of the users before me are sending their children to private schools, paying for cars and paying for college. All great things but aren't necessary for raising a responsible human. My suggestion would be to think about what YOU want to do for your children and how you would like to raise them. Then figure out how much that would cost.

Thanks! Yes, I think we could cut 15% easily if not 20-25% and earning should not be very difficult for us to make a few thousand if not $10k.

I am sure that I have read those posts but have not in some time! I will definitely check them both out! Thank you!

[Villanelle]

After reading all these posts, I'd back of napkin change the following items:

- Double the kids expenses (you still haven't said if they will be allowed to drive, or to play sports, or take lessons).  I'm assuming you
  pay zero for college (you haven't answered that). 
- Double the Healthcare... at least.  It sounds like you've never had healthcare bills.  You will and you aren't ready for them if there is a paradigm shift in healthcare costs (I could fire now on 2x your budget but am cautious due to healthcare).
- Add $1,000 to home maintenance.  I own multiple single family properties and things rarely go to plan/expected life
- Traveling with 4 people will probably be more than you think but I guess you have some overage for that.

Don't retire until you've hit 4% although I would shoot for lower as healthcare is a massive crapshoot and your Social Security will be low.

Read the BigErn Early Retirement blog on SWR.  I personally wouldn't care if you tried to do this if it were just you.  You chose to have kids and working a few more years and still retiring before 40 is a sacrifice I really think you should consider.

We would like for the kids to be able to drive, take lessons, play sports within reason. I guess we thought the costs of these things would be lower than most people are thinking.
College - we should have about $60k per kid saved for college. We would probably not give them much more than that though. (at least in this plan)

Didn't someone calculate that your budget is something like $38/week for the kids?  When you say you want them to drive, does this mean giving them their own car (or access to their own car that you own, so you sill have to purchase it)?  Have you looked at the costs of just adding on 16yo to your car insurance?  that probably eats up a quarter or third of your kid budget, just adding them to your cars, not accounting for extra gas or their own vehicles.    They will eat more.  (Don't know the age/gender of your kids, but tween and teen boys will probably eat $38/mo more than little kids, if not more, so that's about 1/4 of your kid budget done.).  Field trips in school.  Fees to pay even modest sports.  (Figure either two sports a year or a year-round sport and you are probably at very roughly $500, before extra lessons or equipment.)  You mentioned taking lessons.  One hour a week of just about anything is probably going to cost you at least $30, or about $120/mo, or $1440 year, or more than half your kid budget.  And thats one weekly lesson for one kid! 

[BicycleB]

I just round the numbers up for convenience and to make it look more visually appealing for my OCD. They are based on 5+ year of tracking every dollar.

Ah, hadn't heard the 5+ year tracking every dollar. Very good!

This implies you are already succeeding at keeping costs quite low. Since several of your costs are at the low end of what is common on this forum, that's important. Personally I'm curious how you insure two drivers for $400/year (I pay more than that individually) and it made me wonder about your cost plans.

In your last few replies, you seem open to considering various cost comments and adding some coverage to account for them. Doing so will help a lot IMHO, perhaps at the cost of a couple years of work.

earning should not be very difficult for us to make a few thousand if not $10k.

This last is a point where I hear two viewpoints from you. You've said you wanted a plan without needing to work. That's part of why I proposed 4% withdrawal rate above. If you're willing to work periodically, you have a lot more capacity to handle the unforeseen.

In the event that 5.5% doesn't work out, others will look for work too. The important thing is that you can look for work gradually over the long term. You can get work in the next upturn, not just during a downturn, because you wouldn't wait until the last dollar is gone.

Fwiw, one reason I was remaining skeptical of 5.5% until now has been the comments that you would tighten spending in the overflow part of the budget "in a down year." Big ERN has article(s) on the topic suggesting that's the wrong perspective in the sense that if you have an exceptional downturn, it can take a lot more than one year to make up for it. If you do suffer from SORR, you need to work your way out of it for a while (multiple years), according to his modeling. I think he remarks on that in the Safe Withdrawal Rate series linked above.

If you ARE willing to risk years of work later in exchange for taking some years off at the point you're planning, the future is yours. It's just not the same as knowing you won't need to work.

I myself interviewed for a job this week, five years or more into FIRE, and will at some point likely do some more work for pay. 'Cause my FIRE is a bit too thin for my tastes! Though I might tighten up my car insurance as well, should your comments on that topic contain something I've missed.  :)

[formerlydivorcedmom]

I have 3 kids, currently aged 10, 12, and 13.

The medical costs are eating us up.
1) oldest has needed braces (two rounds) and TMJ treatment.  That's easily about $8k total, after insurance
2) middle kid wears glasses (~$100/year) (diagnosed at age 9)
3) youngest kid has had 5 surgeries for eyes or ears.  Even with really good insurance, this was about ~$2k each for the surgery, plus much much more in doctor visits copays and medications.
4) youngest was diagnosed with an anxiety disorder at age 9.  He sees a psychiatrist and a therapist and is on meds.  ~100/month

[When it wasn't the kids, it was me.  I turned 40 and fell apart.  In the last 18 months I've had oral surgery, a broken foot, then foot surgery, plus adult acne)  And I'm a healthy, active person!

Sports activities -
1) oldest plays club volleyball; ~$4,000/year + 1 weekend out-of-town trip where we are required to stay at fancypants team hotel (this line item is an absolute luxury and she knows that and is grateful for it)
2) middle plays local rec soccer = $250/year for fees and equipment
3) youngest once played Little League t-ball = $700/year
4) tae-kwon do for one kid = $1000/year

School -
1) oldest and middle are both in band.  Fees + instrument rental + mandatory private lessons + mandatory fundraiser =  ~$600-$2000/year for each
2) youngest is in math club.  $20 fee for each tournament = $160/year
3) school has required fees for most electives.  We even have to pay for mandatory PE outfits = 100-300/year per kid.  I've been told this will go waaaay up when my kids are in high school
4) Field trips = $100/year per kid
5) teachers ask for supplies (optional) = $50/year per kid

Food -
My oldest was as tall as I was by 4th grade.  My children can eat a lot. 

I had no idea that middle school kids were so expensive until mine got there.

[secondcor521]

I will add that the OP might be in a VLCOL area.  $35K a year can be absolute poverty for one person in some places in the country, and, depending on their setup, a pretty decent middle class lifestyle for a family of four.  I think some respondents on this thread live in HCOL areas and that might color their responses.

Setting aside college (paid for out of a separate bucket) and child support (only six payments left), my lifestyle is running about $28K a year, and that includes a moderate amount of fluff (most notably recreation and gifting).

There are a lot of things people can do to vary the cost of things.  My daughter is trying out for a competitive band in the spring.  If she gets in, the tuition will be about $2K.  But I can volunteer to chaperone or serve food or do other things, which I've been told results in a discount.

If you're FIREd, you can spend a fair amount of additional time and creativity minimizing costs.

I think having five years of actual numbers is very significant and a good thing.  Personally, I've watched my expenditures for ten years, and I have a very good feel for how much my lifestyle costs, what the big items are, and whether or not it's sustainable (after 10 years, I've decided it is).  Heck, with 5-10 years of data, a person can actually probably estimate their own personal rate of inflation (mine is about 0.5%).

[themagicman]

I just round the numbers up for convenience and to make it look more visually appealing for my OCD. They are based on 5+ year of tracking every dollar.

Ah, hadn't heard the 5+ year tracking every dollar. Very good!

This implies you are already succeeding at keeping costs quite low. Since several of your costs are at the low end of what is common on this forum, that's important. Personally I'm curious how you insure two drivers for $400/year (I pay more than that individually) and it made me wonder about your cost plans.

Well our insurance costs are $560 a year now but we will be going to one car in retirement, so I estimated that it would cost us around $400 a year.

This is for a 2014 sedan and a 2013 van. We use GEICO and have good driving records. We also both take an online defensive driving course every three years that gives us a discount (Costs like $20 and takes a couple of hours)
Aside from that I we do not have any of the "Extras" like rental car or towing and we also do not have collision just comprehensive coverage. We have pretty high liability. (maybe 300/300/300 I think)

This last is a point where I hear two viewpoints from you. You've said you wanted a plan without needing to work. That's part of why I proposed 4% withdrawal rate above. If you're willing to work periodically, you have a lot more capacity to handle the unforeseen.

In the event that 5.5% doesn't work out, others will look for work too. The important thing is that you can look for work gradually over the long term. You can get work in the next upturn, not just during a downturn, because you wouldn't wait until the last dollar is gone.

Fwiw, one reason I was remaining skeptical of 5.5% until now has been the comments that you would tighten spending in the overflow part of the budget "in a down year." Big ERN has article(s) on the topic suggesting that's the wrong perspective in the sense that if you have an exceptional downturn, it can take a lot more than one year to make up for it. If you do suffer from SORR, you need to work your way out of it for a while (multiple years), according to his modeling. I think he remarks on that in the Safe Withdrawal Rate series linked above.

If you ARE willing to risk years of work later in exchange for taking some years off at the point you're planning, the future is yours. It's just not the same as knowing you won't need to work.

I myself interviewed for a job this week, five years or more into FIRE, and will at some point likely do some more work for pay. 'Cause my FIRE is a bit too thin for my tastes! Though I might tighten up my car insurance as well, should your comments on that topic contain something I've missed.  :)

I think I kind of contradict myself on that. I think most years we will still make $5-10k (My wife teaches english part time online and I already do contract work that I would keep doing) but I guess I just do not want that to be apart of my plan. I like the idea of it not being necessary at all.

As far as a "down year" for me. I mean any year that my portfolio balance is less than starting (inflation adjusted). So one negative performance year might make me have the 15% cut for 5 years before it is back to where it was. I think that is what you were saying I would need to do but I did not make that clear in the original post, I do not think.

[BicycleB]

I meant some kind of ongoing response... was thinking work, but if the gap is small enough, and your budget overflow is consistently available because all of your other costs are in budget, using the overflow for catchup might gradually work. I think those are fairly big ifs, but that's a side issue.

The bigger issue is that you seem to be thinking of any year where your stash shrinks in value as a surprise that requires you to take corrective action. The safe withdrawal rates assume that a shrinking stash is acceptable and can easily happen. If you intend to take corrective action in all such cases, I agree that your action will improve your % of success in not running out of money. But history says the chance of needing that corrective action is higher than the 10% to 15% range you've mostly suggested upthread.

Maybe you already anticipate the above, and expect it. It just doesn't sound like it from reading your posts so far. But you might want to read up on the difference between safe and perpetual withdrawal rates. Portfoliocharts.com discusses this; Big ERN covers it also. Big difference. Your plan to use overflow to catch up year by year on portfolio performance intends, if I read this correctly, to not spend on overflow whenever your cumulative portfolio performance is below 5.5%. You can find Withdrawal Rates graphs for your chosen portfolio on portfoliocharts.com showing perpetual withdrawal rates for your planned portfolio allocation. Also you can use the retirement spending calculator and review the drawdowns. These are just based on historical data, but make sure you're comfortable with the results before you decide you're ready to go.

https://portfoliocharts.com/portfolio/retirement-spending/
https://portfoliocharts.com/portfolio/withdrawal-rates/
https://portfoliocharts.com/portfolio/drawdowns/

Playing around with the Withdrawal Rates calculator, I do think you can find a path that you'd like. Using the default settings for withdrawal variances and portfolio allocation, but with your planned starting amount and initial withdrawal rate, you can see that in the majority of cases, the simple passage of time allows you to increase your spending substantially ABOVE the 5.5%, ending up with over 50k of spending. You just also see that in some historical cases, perhaps 15% to 20% of them, your spending goes down and in many these cases you go broke. If you are willing and able to work your way out of these latter cases, simple experiment would give you a sabbatical at age 34 with an 80% chance or so of a great outcome, and a 20% chance of undertaking substantial work later.

It's possible I'm missing what the deal is with your house, and that the work you're likely to do anyway will cure the remainder of the problem. The only thing your plan doesn't do is clearly meet the stated criteria of not needing to work later.

Sorry to keep babbling. I think of "15% to 20% chance of needing to deal with a contingency" as similar to "chance of Donald Trump being elected in 2016 according to poll-based projections." Some analysts said 1% to 5% chance it would happen; some more detailed analysts, 20% to 30%. Let's say 15% as a summary. It meant that it wasn't likely to happen, but it could. It was almost as likely as flipping tails twice in row, perhaps likelier than three tails in a row. Your chance of needing work appears to be on the same level. Are you comfortable with that risk?

Not seeking a political sidetrack, just trying to illustrate the probability.

[Villanelle]

I just round the numbers up for convenience and to make it look more visually appealing for my OCD. They are based on 5+ year of tracking every dollar.

Ah, hadn't heard the 5+ year tracking every dollar. Very good!

This implies you are already succeeding at keeping costs quite low. Since several of your costs are at the low end of what is common on this forum, that's important. Personally I'm curious how you insure two drivers for $400/year (I pay more than that individually) and it made me wonder about your cost plans.

Well our insurance costs are $560 a year now but we will be going to one car in retirement, so I estimated that it would cost us around $400 a year.

This is for a 2014 sedan and a 2013 van. We use GEICO and have good driving records. We also both take an online defensive driving course every three years that gives us a discount (Costs like $20 and takes a couple of hours)
Aside from that I we do not have any of the "Extras" like rental car or towing and we also do not have collision just comprehensive coverage. We have pretty high liability. (maybe 300/300/300 I think)

This last is a point where I hear two viewpoints from you. You've said you wanted a plan without needing to work. That's part of why I proposed 4% withdrawal rate above. If you're willing to work periodically, you have a lot more capacity to handle the unforeseen.

In the event that 5.5% doesn't work out, others will look for work too. The important thing is that you can look for work gradually over the long term. You can get work in the next upturn, not just during a downturn, because you wouldn't wait until the last dollar is gone.

Fwiw, one reason I was remaining skeptical of 5.5% until now has been the comments that you would tighten spending in the overflow part of the budget "in a down year." Big ERN has article(s) on the topic suggesting that's the wrong perspective in the sense that if you have an exceptional downturn, it can take a lot more than one year to make up for it. If you do suffer from SORR, you need to work your way out of it for a while (multiple years), according to his modeling. I think he remarks on that in the Safe Withdrawal Rate series linked above.

If you ARE willing to risk years of work later in exchange for taking some years off at the point you're planning, the future is yours. It's just not the same as knowing you won't need to work.

I myself interviewed for a job this week, five years or more into FIRE, and will at some point likely do some more work for pay. 'Cause my FIRE is a bit too thin for my tastes! Though I might tighten up my car insurance as well, should your comments on that topic contain something I've missed.  :)

I think I kind of contradict myself on that. I think most years we will still make $5-10k (My wife teaches english part time online and I already do contract work that I would keep doing) but I guess I just do not want that to be apart of my plan. I like the idea of it not being necessary at all.

As far as a "down year" for me. I mean any year that my portfolio balance is less than starting (inflation adjusted). So one negative performance year might make me have the 15% cut for 5 years before it is back to where it was. I think that is what you were saying I would need to do but I did not make that clear in the original post, I do not think.

Wait.  You want to withdraw at 5.5% and never decrease your portfolio?  The SWR is based on spending down your money, not never reducing it.  If you truly don't want your balance to ever be less than starting, your SWR probably needs to be incredibly low (think 1%), and even then, you very well may not make it.  If the market drops even, say, 8% after a mediocre year, it's not even a terribly bad market and your plan would have failed and it could take years of severe austerity just to get back to your starting point + enough for your annual spend.

It may be time to do some reading on SWR, what it actually means (including that it is a success if you die with $.01 in the bank), and how it is calculated. 

[herbgeek]

Your expenses are already very low, and don't leave a lot of room in a down market.   I'm also sensing you have some missing categories:  I don't see any listings in your budget for any clothing for you or your wife, haircuts, toiletries and the like.  As others have said, a 5.5% swr is pretty risky, given the long time horizon and limited flexibility in the budget.

[mistymoney]

at the very least - you are on the right path!

Once you do get to 34, you can evaluate how your path has gone so far in terms of projections, and see where you at. At that point - you can determine where you are in terms of FIRE.

I'd say the feedback is overwhelmingly in favor of - go back to the 4% rule! - but other than that keep working your budget, see how it looks in 5 years, and revamp your strategy. You might find that you do hit FIRE at 34 - maybe expenses are a little less than you projected, maybe your raises, a promotion, or wife's job make it doable - or you might find that just one or two years of additional accumulation puts you in position. Or maybe it will take another 5 years. Or a little long than that. But keep on the path!

Good luck!

[Here4theGB]

Retiring a family of 4 at 34 y/o on a 650k nestegg is so far beyond a bad idea that I struggle to even find adequate words.

[Metalcat]

Retiring a family of 4 at 34 y/o on a 650k nestegg is so far beyond a bad idea that I struggle to even find adequate words.

That's the thing, he's not actually planning on doing that, he just wants to feel like 650K is enough to quit his current job, which, it really is if that's what he wants.

He's willing to keep working, he just "doesn't want to depend on it".

Well, OP, you don't get to micro manage the future. You don't get to decide what you can or can't depend on. It's 4 years away, you have no idea what will happen between now and then.

You can't depend on not needing to continue some form of work. You can't depend that your expenses stay the same. You can't depend that you will be able to work full time for the next 4 years. You can't depend that one of your family members won't need incredibly expensive medical interventions. You can't depend that the market won't crash spectacularly. You can't depend on ANYTHING.

But that's not what plans are for. They're not for predicting what you will do in the future, they're for deciding what to do today. And today, you spend ~30K +/- 5K per year and save the rest.

In 4 years, you may or may not have 650+/-K invested and your home may be worth around what you expect it to be. At *that* point, you should look at your life, your expenses, and your options, and contemplate what your next moves are going to be.

You may decide to quit your job, you may along the way have stumbled upon a career option that you actually want to stick with. You may develop a side hustle that you really enjoy. You may just be burnt out and want at least a year off to figure out what to do next. You may even decide before 4 years that you hate your job and have more than enough FU money to quit and do something else.
Who knows?!!

The one thing you 100% CANNOT do, no matter how hard you try, is decide today what you will do tomorrow.

That's not how plans work, that's not what plans are for, and that's a great way to fail to utilize planning properly.

The worst part about you looking for reassurance in this way, is that it's actually making you look like you are at risk, which you really aren't. You are in great shape, you have amazing numbers, you seem to have a good head on your shoulders, and a demonstrated history of frugality.

In 4 years, after you've read Big ERN's posts about WR, participated in a bunch of threads here, and run a ton of simulations with various CoastFI possibilities, you will have a much better grasp of where your actual risks are, where your actual best efforts should be placed, and how many incredible options you have available to you because you're starting off so incredibly strong.

Don't voluntarily put blinders on yourself as to what your options are because you have so many great options.

[Villanelle]

Retiring a family of 4 at 34 y/o on a 650k nestegg is so far beyond a bad idea that I struggle to even find adequate words.

That's the thing, he's not actually planning on doing that, he just wants to feel like 650K is enough to quit his current job, which, it really is if that's what he wants.

He's willing to keep working, he just "doesn't want to depend on it".

Well, OP, you don't get to micro manage the future. You don't get to decide what you can or can't depend on. It's 4 years away, you have no idea what will happen between now and then.

You can't depend on not needing to continue some form of work. You can't depend that your expenses stay the same. You can't depend that you will be able to work full time for the next 4 years. You can't depend that one of your family members won't need incredibly expensive medical interventions. You can't depend that the market won't crash spectacularly. You can't depend on ANYTHING.

But that's not what plans are for. They're not for predicting what you will do in the future, they're for deciding what to do today. And today, you spend ~30K +/- 5K per year and save the rest.

In 4 years, you may or may not have 650+/-K invested and your home may be worth around what you expect it to be. At *that* point, you should look at your life, your expenses, and your options, and contemplate what your next moves are going to be.

You may decide to quit your job, you may along the way have stumbled upon a career option that you actually want to stick with. You may develop a side hustle that you really enjoy. You may just be burnt out and want at least a year off to figure out what to do next. You may even decide before 4 years that you hate your job and have more than enough FU money to quit and do something else.
Who knows?!!

The one thing you 100% CANNOT do, no matter how hard you try, is decide today what you will do tomorrow.

That's not how plans work, that's not what plans are for, and that's a great way to fail to utilize planning properly.

The worst part about you looking for reassurance in this way, is that it's actually making you look like you are at risk, which you really aren't. You are in great shape, you have amazing numbers, you seem to have a good head on your shoulders, and a demonstrated history of frugality.

In 4 years, after you've read Big ERN's posts about WR, participated in a bunch of threads here, and run a ton of simulations with various CoastFI possibilities, you will have a much better grasp of where your actual risks are, where your actual best efforts should be placed, and how many incredible options you have available to you because you're starting off so incredibly strong.

Don't voluntarily put blinders on yourself as to what your options are because you have so many great options.

Yes, yes, yes!

I've found this thread somewhat frustrating and had trouble putting my finger on why.  It's not a 5.5% SWR, or very low expected expenses.  It's this!

OP, just save as much as you reasonably can.  What else are you going to do?  It you realize your budget is too low or that you aren't comfortable with 5.5%, what are you going to do?  if you'd save more, then save more anyway.  I certainly hope you wouldn't react by spending more and saving less.  So just move forward and when you get to the point where action is even a possibility, *then* you can evaluate it it. 

[BicycleB]

There's a difference between having a plan and not having a plan. Between reasonably expecting that you can quit your damn job in four years, and suspecting you can't. OP probably wants the peace of feeling now that he can quit in four years, and have a reasonable expectation of subsequently not needing to work beyond situations that seem convenient and fun. That's different from being on the hunt for extra income, or needing to find the emotional to energy to grind indefinitely.

I sympathize, and feel his asks are reasonable. I may feel there's a chance his plan includes a bigger risk than he really wants, but there must be situations in which the feelings he's seeking are reasonable, therefore he's justified in asking whether he's at that point yet. (One person's opinion.)

[TheAnonOne]

It looks to me that most people have issues with the $35k number and individual categories (particularly children) that make that up.

Do most people think that IF we met the $35k budget that the plan would work out and that I am not missing anything. I guess what I am saying is that do most people think the plan would work with a higher annual budget. Say $45k and still a 5.5% withdraw rate and 15% cut and selling the house?

Also, I would like some real examples of what people are allocating for their children outside of food. We are an overall frugal family and also have Grandparents that will more than likely purchase the majority of their clothes. I am just trying to get an idea of how far off we would be off. Are you all talking more like $3k a kid, $5k, $8k, etc?

I think 5.5% is an issue, you basically need to be able to "Flex" down to 3% if your going to do that.

This flexing is possible when 5.5% is $120,000, it's easy to jump down to $60-70k.
At 35k, I am not sure you can do that.
At 45k, you would need to be able to flex down around 25k to make any real difference.

(I am assuming any amount over 4% that you go, you need to be able to flex a "like" amount under 4%, not an exact science but high risk, high reward ect ect)