Author Topic: Case study: Are we ready to pull the trigger now?  (Read 1632 times)

moneytaichi

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Case study: Are we ready to pull the trigger now?
« on: February 08, 2018, 07:14:48 PM »
Hi MMM Community,

I increasingly feel dissatisfaction about my job/company, which really have impacted my health. I would really appreciate your thoughts if we have enough for early retirement. I have many personal interests that I’d like to spend more time on: painting, writing, yoga, travel, spiritual retreats…

My age: 47, currently full-time in IT. DH’s age: 54, unemployed since May, 2016. We don't have kids, nor need to support anyone else. My salary and bonus is $170K per year.

Our networth is 1.77 million. We have:
 • A house to be sold soon (fully paid off): $288K after the agent commission.
 • A local bank: $48K.
 • Investment account in Vanguard: $93 in Extended Market Index and Intermedia Bond: $137K
 • My 401K account #1 in Vanguard 2025: 628K
 • Our combined Roth in Vanguard 2025: $179K
 • DH’s 403 B in Fidelity Freedom 2025 and Vanguard Target 2025: $391K
•   No debts.
•   We both can start collecting our social security at 62. DH has the estimated $1312 SS per month, and I have around $2000 per month.

Finally, our 2017’s living expenses is $60K (after taxes, deductions, 401k, health insurance). Since we are selling a house and moving to a rental (around $1500 per month), I am hoping to reduce our living expenses to $50K.

Thank you so much for your feedback!

nereo

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Re: Case study: Are we ready to pull the trigger now?
« Reply #1 on: February 09, 2018, 09:13:47 AM »
Yes.  Congratulations, you are FI by almost any definition, and you should feel free to quit your jobs whenever you like.

Looking into the numbers, once the sale of your home is complete you should have ~$1.7MM, of which roughly $225k is in tax advantaged accounts and $336k in cash.  You estimate your living expenses will be $50k/year, a WR of 3.4%.  Even if you continue to spend at your current $60k your WR will be 3.5% - very comfortably below the 4% SWR

But wait, there's more good news; you have SS in the near-ish future (8 years for your spouse), which will cover >25% of your total monthly expenses just with your husband. This means in just 8 short years your WR could drop to around 2.6%.

cFireSim shows 0 failures. Common sense shows you've got 28-34x living expenses before SS kicks in (depending on your ultimate spend rate).  You have plenty of money in taxable accounts and cash to bridge the years until your husband reaches 59.5  - so there's not even a worry of needing to tap those accounts early (though you can!).

Once you are retired you may want to consider delaying your SS payments, assuming you remain in good health. In all likelihood you will not need to tap those funds to live comfortably.

jlcnuke

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Re: Case study: Are we ready to pull the trigger now?
« Reply #2 on: February 09, 2018, 10:26:41 AM »
You should be perfectly fine as long as your expenses are accurate.

moneytaichi

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Re: Case study: Are we ready to pull the trigger now?
« Reply #3 on: February 09, 2018, 06:27:37 PM »
Hi Nereo, thank you so much for your detailed feedback! Your analysis is very interesting and put me at ease. I am still on the fence on quitting or not, but knowing that we'd be in a good place even if I decide to quit is comforting and empowering. Thanks a million!

lhamo

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Re: Case study: Are we ready to pull the trigger now?
« Reply #4 on: February 09, 2018, 07:02:47 PM »
I would also be concerned about your expenses.  You don't have a very expensive house, and it is paid off, so wondering why moving from paying only property taxes + maintenance costs to paying $1500/month in rent is going to DECREASE your budget.   Aren't your housing costs going to go UP? 

Also, while you have quite a bit saved (good job) if you have been making in the 100-200k range for awhile AND your DH had a decent salary on top of that, your nest egg is small compared to many here.   Especially with no kids generating extra household expenses.

I would track expenses closely for awhile before taking the leap, assuming you haven't been doing so already.

In the meantime, pull back at work.  The phrase that came in handy for me when I was trying to learn to detach was "not my circus, not  my monkeys."   Don't try to fix all your company's problems.

Did you enjoy your time in China and, if so, can you get another stint there before you go?  You can really save tons of money if you are willing/able too live a more local lifestyle.  We lived in China for 13 years and were able to FIRE early on non-profit salaries.  A salary like yours would have cut years off our time....

Lobo

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Re: Case study: Are we ready to pull the trigger now?
« Reply #5 on: February 10, 2018, 01:08:30 AM »
The way you list your expenses is a bit confusing.  Are you counting
 your 401k contributions as expenses?  Will you be purchasing Health insurance through the exchange?  I too would have to question selling a low value - paid off home to rent.  Remember we don't have a real complete picture to work with here - this is just some food for thought.
« Last Edit: February 10, 2018, 01:16:32 AM by Lobo »

moneytaichi

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Re: Case study: Are we ready to pull the trigger now?
« Reply #6 on: February 11, 2018, 11:28:00 AM »
Thanks, Lobo and Ihamo! The living expense is a guestmate. We did have a mega house, which has over 3000 SF with 4 stories (counting attic and the basement). We naively bought it because its price and location are right, and everyone else is buying the house. It is very expensive to heat, maintain and high property tax. Neither us likes house work so it will be put on the market in April. We don't know where we are moving right now. Just try to make a living decision 6 months at a time, while enjoying living different parts of US West and Rocky Mountain areas.

Our salaries have not been that high all the time. I will start tracking the expense more closely once we move to a new place. Right now, I have too much going on (e.g. selling the house, moving, a full-month travel that visits 3 continents) so I don't want to take another major initiative. I also want to get my DH on the same page with my FI vision. He quit his job about 2 years ago, but wants to find a meaningful work so he projects his need to me and prefers me stay on the job :(

I just realized in the last couple weeks: FI is as much a financial independence as an emotional independence. When I become attached with my corp identity and want to get my sense of "security" from corporations, I never would get true security. Just like the saying that true happiness comes from within, true security comes from within too. I give myself one year to untie my dependency and addition to a socially approved life path. Hopefully, both my finance and my mindsets are in a stronger place.

nereo

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Re: Case study: Are we ready to pull the trigger now?
« Reply #7 on: February 11, 2018, 11:43:15 AM »
Thanks, Lobo and Ihamo! The living expense is a guestmate. We did have a mega house, which has over 3000 SF with 4 stories (counting attic and the basement). We naively bought it because its price and location are right, and everyone else is buying the house. It is very expensive to heat, maintain and high property tax. Neither us likes house work so it will be put on the market in April. We don't know where we are moving right now. Just try to make a living decision 6 months at a time, while enjoying living different parts of US West and Rocky Mountain areas.

Our salaries have not been that high all the time. I will start tracking the expense more closely once we move to a new place. Right now, I have too much going on (e.g. selling the house, moving, a full-month travel that visits 3 continents) so I don't want to take another major initiative. I....

@moneytaichi

I applaud you for realizing that FI is as much about emotional independence as anything else.
The one thing you really should do before pulling the plug on careers completely is to get a better handle on your monthly and annual spending.  Free programs like Mint.com can help you with that; if you link your bank accounts it can categorize your spending (with some manual oversight) over the last several months.  Its even possible to back-enter a year or more of data.

This isn't a monumental chore - you could probably knock it out in an afternoon, but its important to see how much you are spending and where.  Certain things, like your commuting expenses and home-owning expenses will go away.  You'll also see a lot of 'fat' that could be trimmed if so desired.
Once you know your existing expenses it becomes pretty easy to make a rough early-retirement budget. Without the expense of owning a home you may find its quite easy for an adult couple to live very well on <$50,000/year even if you do have the added expense of rent.

moneytaichi

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Re: Case study: Are we ready to pull the trigger now?
« Reply #8 on: February 11, 2018, 04:52:40 PM »
@nereo, good idea on Mint. I used it in the past and got side-tracked. I will start it soon to get a handle on our expenses.

This forum has been super helpful. Thank you all! It allows me think more rationally and get some feedback. I think the most important thing for me now is healing, no matter which path I choose and how long to stay on the job. Work with anger, resentment and grief. Ask each of them what they would like me do with my life and next steps...