Author Topic: Is it time to FIRE ourselves?  (Read 942 times)

FIREReady74

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Is it time to FIRE ourselves?
« on: January 05, 2019, 09:45:25 AM »
My wife and I have been running the numbers and we think it may be time to FIRE ourselves. We'd like some thoughts and recommendations on options.

About us:
Me - mid-40s
Her - about to turn 40
No kids, would like to get a dog after FIRE

Assets:
Primary home in MA valued at between $450-600K (depending on website) purchased about 9 years ago for $400K
Lake home in ME valued at between $315-360K (depending on website) purchased 2 years ago for $290K
2014 Subaru Legacy w/ 90K miles
2015 Chevy Equinox w/ 37K miles
Money market accounts: $300K
$75K in Wealthfront Index funds
$1M in various 401K and other retirement funds (401k, SEP, IRAs, Rollovers, etc)
$100K in other stock investment funds

Debts:
Primary home mortgage at 2.75% w/ $90K of principal remaining
No CC or other Debts

Currently contributing each month:
$3.5K to Roth 401k and SEP
$1K in company stock
$1K in wealthfront index funds
Extra $1K toward mortgage
$500 into HSA

We both have good jobs that we mostly enjoy, but would not shed a tear if we FIRE ourselves. We have spent most weekends at our lake house up till now. We love it up there and that triggered the discussion about early retirement. We have recently listed the home for weekly vacation rental, where when rented would get about 2K per week. It's in a location that should get winter snowmobilers and summer lake rentals, but not something we're counting on. We love to travel and usually go on one vacation a year (cruise) and one major vacation for big birthdays (40) or anniversaries (10th). We understand these trips would need to be reduced going forward if we FIRE ourselves, but that seems like a small price to pay. We've been furnishing the lake home and doing small projects which is why we're not contributing more to retirement. I'm sure there are additional changes we could make (like adding solar and reducing other expenses), but we wanted to get some opinions on our options and whether we've reached FIRE? Based on our numbers and the options below, do we even need vacation rental income?

So some options we've discussed:
1) Sell the primary residence and move to the lake house full time. Invest the proceeds from the sale in additional index funds. Given the research we've done into living expenses we think we can easily do $4.5K per month, but have no vacation rental income.
2) Sell the primary residence and invest about half the proceeds in a ski house (also in Maine about 1 hour from lake house). Invest the rest in additional index funds. This would allow us to use both homes as vacation rentals (again about $2K per week when rented), stay at the ski house during the summer and lake house in the winter. With this option we'd be looking at around $5-6K per month expenses, but we'd also have some vacation rental income.
3) Keep working and contributing to retirement if we're not at FIRE yet? Look to cut expenses to get us better prepared for FIRE.


terran

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Re: Is it time to FIRE ourselves?
« Reply #1 on: January 05, 2019, 10:02:10 AM »
You're definitely at the level of wealth that many people could FIRE. The big thing missing from your post is expenses. Have a very good sense of ongoing and irregular expenses is probably the hardest part of timing FIRE. Don't forget to research future health insurance costs.

BicycleB

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Re: Is it time to FIRE ourselves?
« Reply #2 on: January 05, 2019, 10:08:13 AM »
Like Terran says!

Also: how solid are your rental numbers?

A lot of this sounds like you will do a plan with unknowns in it. If you are inaccurate about how much rent you get, you could snatch financial defeat from the jaws of the victory you have achieved. Research hard so you can live easy.
« Last Edit: January 05, 2019, 10:11:21 AM by BicycleB »

FIREReady74

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Re: Is it time to FIRE ourselves?
« Reply #3 on: January 06, 2019, 10:46:32 AM »
So the expenses depend on which route we choose.

Starting with current expenses (Option 3 - continue working):
Income: take-home me: 4.6K per month, her: 7K per month
***Healthcare, taxes, retirement investments taken out of paychecks
Mortgage including taxes on primary residence: $2K per month
Utilities on primary residence (heat, electric, cable, cell phone, etc): $650 per month
Utilities on lake house (TAXES, heat, electric, cable, etc): $1200 per month
Property insurance on lake house: $100 per month
Food: $600 per month ($100 a week in groceries, wides lunches, and nights out)
Gas: $200 per month
Travel/Vacations: $200 per month
Home improvements (1% of home values): $700 per month
Wealthfront investment: $1K per month
Other misc expenses: $1k per month
TOTAL Expenses: ~7.5K per month

Option 1 - FIRE, sell primary residence, move to lake full time, don't rent house, live off savings, and work part time
Income: Live off investments/savings
Healthcare (depending on income level): as high as $1300K per month w/ less income and tax credits it could be lower
Property insurance: $100 per month
Utilities on lake house (TAXES, heat, electric, cable, etc): $1200 per month
Food: $400 per month ($100 per week in groceries and night out)
Gas: $200 per month
Travel/Vacations: $200 per month
Home improvements (1% of home value): $250 per month
Other misc expenses: $1k per month
TOTAL Expenses: $4600 per month

Option 2 - FIRE, sell primary residence, buy ski house, use both homes as vacation rentals, live off savings and rental income, and work part time. Income in this case is currently more fussy due to rental income, but I'm continuing to research the details. The ski rental is clearer as its in an area with many rentals and many with rental track records. The lake rental is in an area of many lakes with rentals and rental track records, but our particular lake has only one other property available
Income: Estimating rental income of 3.5K per month (which we think will be on the very low end, but we'd rather be very conservative)
Healthcare (depending on income level): as high as $1300K per month w/ less income and tax credits it could be lower
Property insurance: $400 per month
Utilities on lake house (TAXES, heat, electric, cable, etc): $1200 per month
Utilities on ski house (TAXES, heat, electric, cable, etc): $1200 per month
Food: $400 per month ($100 per week in groceries and night out)
Gas: $200 per month
Travel/Vacations: $200 per month
Home improvements (1% of home value): $500 per month
Other misc expenses: $1k per month
TOTAL Expenses: ~6.6K per month
« Last Edit: January 06, 2019, 04:29:14 PM by FIREReady74 »

bacchi

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Re: Is it time to FIRE ourselves?
« Reply #4 on: January 06, 2019, 11:14:13 AM »
This should be in the "Case Studies" sub-forum but, at first glance, it's not going to happen.

$1000 for food?
$650 for utilities for one house?

For Option 2, are the expenses before or after the assumed rental income?

MrThatsDifferent

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Re: Is it time to FIRE ourselves?
« Reply #5 on: January 06, 2019, 01:13:08 PM »
Of course you can FIRE now. You have around 1.5m in cash, which covers Option 1 easily. Sell the main house and you have almost 2m that would cover option 2, and thatís without needing to work PT jobs. However, as mentioned, it would be great if you examine your expenses to see where you could cut and trim, as the more your expenses come down, the more secure your money is in protecting you. $1000/month for eating is a lot for just 2 people. That means youíre eating out a lot, or getting take out. Are you both in healthy shape, happy with all of that? Might be something to look at.

But congrats, youíre there. Take some time to read through MMMís blog to get ideas on reducing expenses and have great retirement parties. Also, work on your strategy for how you will access your money through retirement. Have a budget and a plan. Good luck!

Laura33

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Re: Is it time to FIRE ourselves?
« Reply #6 on: January 06, 2019, 04:19:17 PM »
You have enough money for a lot of people to FIRE; I'm just not yet convinced you're one of them.  You have a little less than $1.5M available to invest, which if you put all of it in the market will generate about $5K/mo.  You then present 3 scenarios, all of which require over $5K/mo income.  I am also not confident that your estimated expenses are at all accurate, or that you'd be happy long-term in your planned future lifestyle without the travel and such you've gotten used to.  For example, how much time have you spent at the second home off-season?  Vacation is very different from real life.  And with your estimated expenses so close to your likely income, you will have less flexibility to change course if you get a few years down the road and find you miss all the things you gave up.

So my advice is to sharpen your pencil a little bit and start tracking expenses/income in more detail -- e.g., if you're going to plan on rental income to help support you, start renting out the second home more reliably so you have a better sense of how often you can rent it, how long the season lasts, the reality of off-season rentals, and the like.  Track how much you are actually spending on groceries, eating out, and the like, and figure out how much of a lifestyle change you are willing to make in those areas; that will give you a better sense of what level of spending you can actually commit to long-term. 

And also focus on the lifestyle aspect of things.  If you plan to live full-time in your second home, spend more time there yourself -- spend your vacations there instead of traveling farther afield, since that's what you are talking about doing long-term; go visit in the off-season, too, and see how you like it then, or if things start to get old when you're in the same place all the time, and the high-season shops are closed, and you can't do all your same recreational stuff (or said recreational stuff gets boring when it's all you do, all the time).   

FIREReady74

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Re: Is it time to FIRE ourselves?
« Reply #7 on: January 06, 2019, 04:42:36 PM »
Thanks for the great replies and we will definitely see where we can make some changes and get a shaper image of our expenses and income.  To answer some of the questions posted.

1) I updated the food allowance from $1K to 400-600 once my wife actually looked at the bill (other bills I already knew but she does most of the groceries). We eat a pretty balanced diet, but do like our wine and beer.
2) Not sure about the question about $650 for utilities for house1... its cheaper to heat due to steam heat powered by gas vs. the lake house heated by propane.
3) Rental income is separate from any expenses in options 2 or 3.
4) Both healthy adults with no conditions, but not in optimal shape.
5) We actually have spent every weekend in the summer and usually every other weekend in the winter at the lake house the last few years. Love the winter more than the summer... less people and very quiet.

SKL-HOU

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Re: Is it time to FIRE ourselves?
« Reply #8 on: January 09, 2019, 11:20:24 AM »
Option 1.
Do you really want to deal with weekly tenants in your retirement?

flyingaway

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Re: Is it time to FIRE ourselves?
« Reply #9 on: January 12, 2019, 05:05:35 AM »
You mostly enjoy your jobs. If FIRE, you will not be able to do cruise, birthdays, etc., why bother to FIRE?

2Birds1Stone

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Re: Is it time to FIRE ourselves?
« Reply #10 on: January 12, 2019, 05:17:43 AM »
I would suggest putting in for a 12 month leave of absence, both of you.

It doesn't sound like you have a plan for filling the 40-60 hours you currently work, prepare for work, think about work, and decompress from work.

During your LoA, you could work on living off your desired FIRE budget, while exploring activities and interests you may want to pursue when you're completely retired. If you love the lifestyle and find paring back spending is easy.....don't go back.

Maybe you miss work? Or find that you don't have the budgeting down quite like you thought? Regardless, a LoA gives you the optionality to come back to work. Both SO's retiring simultaneously could change your home life and relationship in a big way.

Linda_Norway

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Re: Is it time to FIRE ourselves?
« Reply #11 on: January 12, 2019, 08:37:45 AM »
If I undestood it correctly, you spend most weekends on the lake house and love it there. After FIRE you want to purchase a house in a winter location, spend you summers there and rent out the lovely lake house. You spend the summer in a (at the time of year) depressing ski town. In the winter, you switch. Is that really your idea of how you and your wife want to spend you live after FIRE, always living in a suboptimal environment?

I also advice you to live for one year in your proposed FIRE budget. If you categorize your expenses well, you can leave the cost for one of the houses out.
« Last Edit: January 12, 2019, 08:39:35 AM by Linda_Norway »

frugal_c

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Re: Is it time to FIRE ourselves?
« Reply #12 on: January 12, 2019, 09:01:51 AM »
Congratulations you have made it.  Option 1 awaits.  $1.5M in investments/cash + $350-500K home equity, you are set.  On the low end of the home sale price, factoring in some real estate fees maybe you have $1.8M to play with.  At a convervative 3% wdr you are at $4500 a month which is just short of covering your expenses or $6k at a 4% wdr.  I assume with taxes you would probably need a 3.5% withdrawal which isn't bad at all.  You are definitely there.  It's just a question of whether you will be content with this lifestyle.  Great problem to have.