Author Topic: Can We PRE-tire Yet?  (Read 1180 times)

Fenderist

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Can We PRE-tire Yet?
« on: August 28, 2017, 09:07:03 AM »
First post here.  My wife and I are both 33 and in good health, and while we have decent jobs, we'd like to stress less, have more flexibility, and spend more of our time together..  We aren't looking to completely retire at 33 (we don't have enough saved, and while we live simply we don't want to commit our later selves to living quite that extremely).

Here are our stats:

Married Filing Jointly.

Age: 33 (both).

Current combined gross income: $175,000.

Emergency Fund: $50,000.

Retirement Savings: $450,000 (80% VTSAX, 20% VBTLX).

Home Equity: $300,000.

Debt: 3.75% Mortgage of $230,000 remaining (don't judge, our good jobs sent us to a very expensive city, buying was cheaper than renting, our condo allows us to walk most places while being safe, and it has appreciated steadily).

Here's my proposal: continue working for [X] years, move to a place we enjoy with lower COL but with a high culture-per-capita.  Pay off a modest, small home in a walkable/bikeable area.  Take enjoyable freelance or part-time work sufficient to cover modest expenses without touching our savings so they can continue to grow.

What advice or sugggestions do you all have?  I left out our monthly expenses on purpose to emphasize that we are not seeking to immediately retire, but to switch gears, get off the crazy-accumulation-and-savings ride, and start relaxing and just making the money we actually need.
« Last Edit: August 29, 2017, 06:42:52 PM by Fenderist »

backyardfeast

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Re: Can We Pretire Yet?
« Reply #1 on: August 28, 2017, 09:32:27 AM »
Welcome to the forums!  It looks like you and your wife have been doing really well. 

There are lots of us here who are choosing a version of the path you're describing: building a stash big enough to just grow on it's own and then easing into part-time or more relaxing work that just covers the bills in the meantime.

We're doing a version of this right now: I will have a good pension, so I'm continuing to work full time at my relatively fun job, while we've downsized our mortgage enough for DH to go to a part-time dream job and leave us both with a more relaxed pace of life for the next ten years or so.

Theoretically, it looks like you could pull the plug anytime.  If you cashed out half of your home equity and moved somewhere where $150K buys a modest home, the $600K you would have would generate $24,000 a year @ 4%, which could either be ample or be added to with part-time work for more luxuries.

Really it comes down to what you think a comfortable living costs and whether you're ready to move, whether kids or other future goals might demand a bigger nest egg, how comfortable you are with the 4% rule, etc.

Kwill

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Re: Can We Pretire Yet?
« Reply #2 on: August 28, 2017, 09:39:32 AM »
Here's my proposal: continue working for [X] years, move to a place we enjoy with lower COL but with a high culture-per-capita.  Pay off a modest, small home in a walkable/bikeable area.  Take enjoyable freelance or part-time work sufficient to cover modest expenses without touching our savings so they can continue to grow.

What advice or suggestions do you all have?  I left out our monthly expenses on purpose to emphasize that we are not seeking to immediately retire, but to switch gears, get off the crazy-accumulation-and-savings ride, and start relaxing and just making the money we actually need.

Welcome, Fenderist. It's hard to say how much money you need without knowing how you spend money. Different people have very different ideas of how much they need.

Is your emergency fund all just sitting in a bank? That seems a very large amount of money to have not growing. Could you put some of it in a Vanguard index fund in a taxable account and just keep out two month's expenses?

If your stash is $500,000, then the official line is that you can retire on it if you and your wife can live on $20,000 a year (plus having your modest house somewhere that would be paid for). I would think pre-tirement wouldn't be that different. If you can get by on $20,000 minimum and see any extra income from part-time fun jobs as supplementary, then you're ready.
http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

If you're currently spending $100,000 a year or something like that, then cutting down to $20,000 would probably be terribly hard. First figure out your spending and adjust to a modest budget that is somewhat similar to what you would have after your move to the LCOL area, allowing for the fact that some things will just be more expensive where you are now. If it's super easy, you should be fine. If it's super hard, you might need to save up more before giving up the good jobs.

StarBright

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Re: Can We Pretire Yet?
« Reply #3 on: August 29, 2017, 11:20:46 AM »

If you're currently spending $100,000 a year or something like that, then cutting down to $20,000 would probably be terribly hard. First figure out your spending and adjust to a modest budget that is somewhat similar to what you would have after your move to the LCOL area, allowing for the fact that some things will just be more expensive where you are now. If it's super easy, you should be fine. If it's super hard, you might need to save up more before giving up the good jobs.

Hi and welcome!  I second the above. You guys have a great retirement stash already. If you just sit on it and let it ride until traditional retirement age it should double at least three times given historical market returns.

My suggestion is that I'd figure out approximately how much I want to spend on living per year and just tailor the plan to that and then practice living at the level for a year or two.  As Kwill said, without knowing your actual spending patterns it is hard to respond. But there are definitely multiple different paths that would get you where you want to go. And your suggested path sounds perfectly feasible.

For what it's worth, my husband and I are currently planning on doing something similar. He is what mustachian type folks call a SWAMI (someone who LOVES their job and has no interest in retiring) and we've already moved to our LCOL walking/bikeable area. We are planning on getting our retirement account to X amount and then I'm planning on stepping back from my high stress job and go either part-time or full time SAHP.
 

Fenderist

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Re: Can We Pretire Yet?
« Reply #4 on: August 29, 2017, 06:42:29 PM »
Thanks for the welcome, and for the responses so far.

But I'm confused about whether the advice for PRE-tirement is different than advice for retirement.

Some responses ask "what are your current expenses," and assume that I should evaluate how my current saving would fare on the 4% rule.

But I don't plan to touch the savings OR any 4% growth until ACTUAL retirement, likely at 60 or so.  I'm contemplating letting it grow untouched for 30 years, doing something much less stressful to simply cover the bills (whatever we want them to be) until then.  Maybe I'm missing something, but I would imagine (hope) that my current savings would grow beyond inflation in the next 30 years, resulting in a NEW/higher savings amount that I would apply the 4% rule to.

StarBright

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Re: Can We PRE-tire Yet?
« Reply #5 on: August 29, 2017, 07:03:34 PM »
Hi Fenderist,

I can't speak for others but when I'm talking about current expenses it is to make sure that you are prepared to live, not on your savings, but on whatever reduced/part time income you cut back to.



 

backyardfeast

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Re: Can We Pretire Yet?
« Reply #6 on: August 29, 2017, 08:46:27 PM »
Thanks for the welcome, and for the responses so far.

But I'm confused about whether the advice for PRE-tirement is different than advice for retirement.

Some responses ask "what are your current expenses," and assume that I should evaluate how my current saving would fare on the 4% rule.

But I don't plan to touch the savings OR any 4% growth until ACTUAL retirement, likely at 60 or so.  I'm contemplating letting it grow untouched for 30 years, doing something much less stressful to simply cover the bills (whatever we want them to be) until then.  Maybe I'm missing something, but I would imagine (hope) that my current savings would grow beyond inflation in the next 30 years, resulting in a NEW/higher savings amount that I would apply the 4% rule to.

The responses you're getting are pretty consistent with the attitude around here that the goal is to be able free from the need to work as soon as possible (if you WANT to work, that's fine) and to try to avoid saving needlessly.  What's the point of having massive savings if can't possibly use it all?  Every year you are working to save more money for it's own sake is a year you are not living life to the fullest, is the theory.

So, in that light, and without any specific numbers about your living expenses, we are telling you: a) your plan is fine; b) you are already FI if your living expenses are $24000/year, or c) you are already FI if your living expenses are $24000/year + whatever income you would earn at a part time job.

In other words, why do you need your stash to triple in value over 30 years?

There are forumites who have smaller stashes that they will let grow and work part time so that they can pursue passions best suited to the young and healthy now, or be with young children, etc but generally your stash looks healthy enough to start withdrawing from it anytime you want to. Unless you've got a crazy expensive lifestyle you're deliberately not sharing, want to stay in your HCOL area, or have four young kids or something? ;-) 

maizeman

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Re: Can We Pretire Yet?
« Reply #7 on: September 01, 2017, 07:04:35 AM »
Thanks for the welcome, and for the responses so far.

But I'm confused about whether the advice for PRE-tirement is different than advice for retirement.

Some responses ask "what are your current expenses," and assume that I should evaluate how my current saving would fare on the 4% rule.

But I don't plan to touch the savings OR any 4% growth until ACTUAL retirement, likely at 60 or so.  I'm contemplating letting it grow untouched for 30 years, doing something much less stressful to simply cover the bills (whatever we want them to be) until then.  Maybe I'm missing something, but I would imagine (hope) that my current savings would grow beyond inflation in the next 30 years, resulting in a NEW/higher savings amount that I would apply the 4% rule to.

As I see it, there are two components to your question:

1) When you move to a LCOL area, will you and your wife be able to bring in enough income from freelancing work to cover your expenses? To figure this out you need to know what your earning potential is for that type of work, what your current monthly expenses are, and what proportion of those expenses would go away living in a LCOL area with a paid off house.*

2) Is your current stash big enough to grow through compounding alone to a size that will cover you and your wife's expenses entirely by the time you hit conventional retirement age? This again requires an estimate of spending. If you'd be spending $2k/month starting in 30 years you'd be more than covered. If you plan to hit full FIRE at 43 and spend $10k/month, no, your plan almost certainly isn't going to work.

So without some estimate of your anticipated monthly or annual expenses after your move* and the maximum length of time you folks are okay with freelancing, it's not possible to give you a helpful answer to your question.

*If you want to give more detail on current expenses and anticipated LCOL savings I'm sure there are folks who could also help you double check the assumptions going into your spending estimate, but for the two questions above it's only the final number that matters, not how you came up with it.


*Plus what new expenses would you gain switching from a house to a condo.
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