Author Topic: CASE STUDY: When Can We FIRE Away?  (Read 3997 times)

vaudville52

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CASE STUDY: When Can We FIRE Away?
« on: September 22, 2014, 05:36:34 AM »
Hello,

We're at a crossroads and are wondering when we can FIRE.  I'm in my mid 30's and DW is in her late 20's.  Our combined household income is over $550K, mostly due to my income.  My job can be demanding at times, but I've figured out how to make the system work for me at this point.  Plus, I'm in more of a leadership position now so I'm not the one grinding anymore.  My wife hates her job and I'm encouraging her to explore her options.  We rent and live in an expensive part of the country -- we'll probably move somewhere cheaper when we go FIRE.  No kids (yet).  We might have kids in the future, but are undecided.  Part of me would rather travel the world.  Although some here might not find the two to be mutually exclusive, I think DW might feel that way.  While our income has gone up a lot over the past few years, we have tried to keep our spending down.  Here's a snapshot of our financial position.

Retirement accounts (401k/Roth): $375K
Taxable accounts (checking/investments): $1M

We spend $45K to $50K a year depending on how frugal we decide to be, not including health insurance premiums.  This year was higher because we went on a 2 week trip to Europe where we spent $7K or so.  Here's a rough monthly breakdown:

Rent (likely below market for one bedroom within walking distance to my office in a very, very nice area) $1950
Groceries $325
Restaurants $450
Travel (includes several weekend trips and a 2 week trip to Europe) $500
Transportation (includes 1 car and commuter rail pass) $350
Other - according to Mint (entertainment, personal care, ATM, etc.) $200
Shopping (clothes, electronics) $175
Gifts $150
Utilities (includes electricity, phone, internet) $150
Health (includes co-pays, pharmacy, gym) $150

I'm sure there are areas we can cut, but we're not dying to be FIRE.  It's something we'd like to achieve and be comfortable there.  Don't want to go FIRE and have regrets because the door to a $500K+ job will likely be closed at that time.  Anyways, we're shooting for a 3% withdrawal rate, given our age, which at our current NW will cover $41K of our expenses.  If we move somewhere cheaper, then maybe that'll cover all of our expenses.  Health insurance is a big question mark.  I'd hate to plan for only needing a subsidized amount based on "income" in FIRE and have the subsidy get repealed.  Plus, we might have kids too.  Given these question marks, what would you guys plan to do?  Again, not a fan of cutting as we'd want more flexibility than less.  We're saving about $300K a year right now after taxes and that does not include investment gains and dividends.
« Last Edit: September 22, 2014, 05:44:05 AM by vaudville52 »

thedayisbrave

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #1 on: September 22, 2014, 07:05:09 AM »
If you two worked and saved for one more year (adding $300K to your stash), according to my calculations a 3% WR would yield you $50,250 which is higher than your $45K-$50K expected expenses.  Depending on health insurance and your actual expenses, this could cover it all or you may have to cultivate some other income stream... side gig, or some part-time work to cover the healthcare premiums.  Either way after 1 year at the most you can drastically (both of you) reduce your hours.

If my numbers looked like that, I'd FIRE right away.  But I do live in a low COL area.

Best of luck!


former player

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #2 on: September 22, 2014, 08:45:30 AM »
Congratulations on your almost exactly mustachian levels of spending (housing excluded).  You are currently FI, which I guess you know. 

At a savings rate of 300K per annum, using a withdrawal rate of 3% each extra year of work gives you an extra $9K of annual income on retirement.  So the question for you and your wife is: how many "one more years" are you going to put in?  Given that you are now in a leadership position where you don't have to grind and it is demanding only at times, the temptation could be for you to keep on carrying on.

Half your current expenses go on your rent of $24,000 per annum.  That is equivalent to a retirement stash of $800K ($24,000 per annum on rent and a 3% withdrawal rate gets me to that figure), which at your current savings rate is 2 and 2/3 working years.    So if in retirement you go for a cheaper housing option, you get a lot more wriggle room in your budget and a lot less need to work "one more year" for those contingencies of travel, kids and health insurance.

Cheddar Stacker

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #3 on: September 22, 2014, 09:13:59 AM »
It sounds like she is ready to quit but you could go on for a while. Here's my thought:

Have her quit her job and you continue to work for one more year (or less if possible).
During this year she maintains your household/lifestyle while planning for the future.
Slow travel, move to a LOCL place, logistics, etc.

You have the funds already to make this work. 3% or 4% doesn't matter much with the numbers you laid out, you're ready. With your rent at $1,950 half your expenses are rent. Move from NY/LA to a LOCL city in TX/CO or wherever if you plan to stay in the states. If you plan to slow travel for a while, your US rent expense disappears and you replace it with a much smaller rent in South America or Asia.

You have $1M liquid, and another $375K tied in a 401K. On the 401K, if you haven't already read up on this check out the Roth Pipeline methods at madfientist and gocurrycracker.

bugbaby

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #4 on: September 22, 2014, 08:43:39 PM »
Can you have your wife quit and yourself take a 1-3 month leave and explore the feel of FIRE life? For y'all, the $ aspect is the easy part -- how will she like being SAH while you work?  when you do leave yourself, how will you manage the social and identity adjustments? Also this is a good time to start zeroing in on mid to long term life goals vis-a-vis kids? travel - how, where and what type? other passions worth leaving your high- level position to pursue?  you don't wanna FIRE just because you can.

waltworks

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #5 on: September 22, 2014, 10:35:35 PM »
Now. Seriously, you're done needing to make money. Now you have to figure out what you actually want to do with your life. Have fun out there!

-W

retired?

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #6 on: September 23, 2014, 02:35:10 PM »
I'll give a non-mustachian view.  Four years tops.  You're still very young and you say your job is not too bad. 

Meanwhile keep in mind that you can say f-u if the job situation turns.  I quit my job b/c it was stressful and depressing.  But, I'd like another 1-2M.
Can you have your wife quit and yourself take a 1-3 month leave and explore the feel of FIRE life? For y'all, the $ aspect is the easy part -- how will she like being SAH while you work?  when you do leave yourself, how will you manage the social and identity adjustments? Also this is a good time to start zeroing in on mid to long term life goals vis-a-vis kids? travel - how, where and what type? other passions worth leaving your high- level position to pursue?  you don't wanna FIRE just because you can.

Tnis is a good suggestion.  Also, consider a sabbatical if the answer is no.  3-6 months off b/c you can afford it and are confident should not count against you.

backandforth

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #7 on: September 23, 2014, 02:56:53 PM »
you said No kids (yet).  We don't either (yet), but from what I gathered, they are expensive and will be for a long time! If you want to hedge your bet in case you want to get one or two in the future, safe to save up one more year (at least you if not wife as well).

mozar

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Re: CASE STUDY: When Can We FIRE Away?
« Reply #8 on: September 23, 2014, 06:52:57 PM »
You've got another 5 years before you have to worry about fertility issues (for both of you). You could work another year, slow travel/ live on a boat for four years. By then you will probably be ready to stay put for awhile.