Author Topic: Case Study: Can I Retire with ~800k and no debt?  (Read 1773 times)

curious_george

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Case Study: Can I Retire with ~800k and no debt?
« on: July 06, 2018, 07:58:33 AM »
32 Year old, married, 3 kids age 9, 8, and 3. Live in the Midwest. I was wondering if I could consider myself financially independent or not? Also looking for feedback on how we can improve our financial situation. Thanks!

Debts:

None

Income:

~100k/year software engineer
Spouse stays at home

Assets:

Taxable - ~450k (invested in vanguard VTI and various REITs)
Non-taxable - ~230k (invested 100% equities, split between VTI and VEU)
Paid off house - ~120k
A couple of old cars and whatnot I have but don't count as they are not significant in value. No emergency fund. Have credit cards and margin account but have never had an emergency that required them to be used.

Expenses per year:

Property Taxes   2845.6
Sanitation   720
Electricity   1800
Groceries   10400
Car Insurance   360
Car gas/depreciation   1400
House Maintenance   1800
Internet   180
School Expenses   2070 (food, fees, etc)
Cell Phones   120
Misc   2400 (gifts, entertainment, eating out)
Healthcare ??? (~3600 estimated based on premium for ACA plan + max out of pocket + putting kids on CHIP)


gpyros85

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #1 on: July 06, 2018, 08:10:10 AM »
I think financially you are in an awesome position!

However, you really have 630k investable assists which with 4% could give you 27k/year.

Healthcare is your big “?”

Also, the kids will get more expensive and we could be teetering in a potential recession soon.

You are definitely barebones FI!

If you keep this up I definitely don’t see you I working past 40. I would feel more comfortable if you did a few more years in the workforce.

ysette9

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #2 on: July 06, 2018, 09:01:29 AM »
I calculate your expenses as $27.7k per year and at a 4% withdrawal rate you would have $27.2k per year retirement income. Personally I might drop down to part time for just a bit longer to give you a little extra padding, or perhaps give you a chance to test-drive FI expenses so you can be certain your spending won’t be higher. But overall this is fantastic and it looks like you are in great shape. Enjoy!

BTW, your internet is crazy expensive, even for us poor Americans who have crappy choices. Can you get that down?
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poniesandFIRE

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #3 on: July 06, 2018, 09:21:22 AM »
Looks like you're very close, if not there, on considering yourself barebones FI.

Do you intend to help with the kid's college expenses? Healthcare is definitely a big question. Any major house repair projects needed in the near future (new roof, etc.?)

I think, if it were me, I would do at least one to two more years fulltime and then drop down to part time and/or retire. Do you foresee any lifestyle changes that might change the budget once you do retire, like travelling more?

YttriumNitrate

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #4 on: July 06, 2018, 10:07:32 AM »
BTW, your internet is crazy expensive, even for us poor Americans who have crappy choices. Can you get that down?

$180 a year is expensive?

ysette9

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #5 on: July 06, 2018, 10:28:40 AM »
BTW, your internet is crazy expensive, even for us poor Americans who have crappy choices. Can you get that down?

$180 a year is expensive?
Sheesh, I’m sorry. I had a brain short and thought that was monthly.
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LifeHappens

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #6 on: July 06, 2018, 10:36:31 AM »
I calculate your expenses as $27.7k per year and at a 4% withdrawal rate you would have $27.2k per year retirement income. Personally I might drop down to part time for just a bit longer to give you a little extra padding, or perhaps give you a chance to test-drive FI expenses so you can be certain your spending won’t be higher. But overall this is fantastic and it looks like you are in great shape. Enjoy!
I agree. You're close, but not ready for retirement yet. I would call you FI and you could certainly downshift or say "FU" to a job that isn't working for you anymore, but I don't see a way for you to retire from all paid work forever.

I guess I would be curious to know more about your goals, because you have many options available to you. Do you want to take a sabbatical? Downshift? Do an epic trip while the kids are young? Start your own business?

ysette9

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #7 on: July 06, 2018, 10:42:01 AM »
To be clear why I say I would work a bit longer in this situation: spending $27k/year is awesome but it doesn’t have much fat in it. Which means that if SHTF, you don’t have a lot of wiggle room to decrease spending temporarily. I fully plan on pulling the plug once we hit 4%/25x, or even before then, but our budget has lots of fluff in it that we could trim if we have some bad market years in a row or some unexpected expense pop up.
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curious_george

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #8 on: July 06, 2018, 11:09:24 AM »
@ysette9 - This is a good point. There isn't really a lot of fat in the budget currently - which is one reason why I'm still working full time. I'm having an internal debate with myself at the moment with respect to the "how much is enough" question.

@LifeHappens - I enjoy reading and doing research. My goal is to do independent research into psychological matters, outside the realm and constraints of an academic setting. I'm a naturally curious person so this is basically like a form of entertainment for me. I don't enjoy travelling - and I don't foresee doing research on these things having any sort of monetary benefit in the future. Sometimes people in academic settings are constrained because they can only do research on things where there is grant money available. Thus why I want to remove the financial question from the equation.

@poniesandFIRE - No plans to pay for kids college expenses. My goal is to instill a good work ethic and financial knowledge into my children and let them make their own way in life. If my kids are successful it will be because of their own hard work and effort, not because they won the successful parents lottery. I don't foresee any major home repairs or lifestyle changes in retirement.

LifeHappens

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #9 on: July 06, 2018, 11:12:48 AM »
@LifeHappens - I enjoy reading and doing research. My goal is to do independent research into psychological matters, outside the realm and constraints of an academic setting. I'm a naturally curious person so this is basically like a form of entertainment for me. I don't enjoy travelling - and I don't foresee doing research on these things having any sort of monetary benefit in the future. Sometimes people in academic settings are constrained because they can only do research on things where there is grant money available. Thus why I want to remove the financial question from the equation.
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Will your research require self-funding? You'll have to account for that in your FIRE budget. Also, would you be willing to do some part-time work while pursuing your research part-time as well? If you could get enough paid work to cover your family's expenses, you could very reasonably downshift now.

curious_george

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #10 on: July 06, 2018, 11:27:20 AM »
@LifeHappens

Perhaps research isn't the right word to use. I plan on spending a lot of time doing introspection, meditation, reading, playing games, hiking and perhaps writing and whatnot. I'm not planning on doing research in the traditional sense of the word, but mostly learning more about my own mind and how to alter mental processes in a predictable manner, the effects of different diet and meditation on things like memory and feelings, etc. It's not going to be formal in any way. I don't expect it to cost much beyond the occasional book or two. But yes - it would be nice if I had some money for this hobby, as it were.

curious_george

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #11 on: July 06, 2018, 11:39:44 AM »
@LifeHappens - Another thought, in respect to part time work. I have considered this, however, I haven't found any part time software development positions in my area. And it seems to me that working full time as a software developer for a while longer would be more enjoyable than working part time at a retail store for several years. Perhaps I just haven't thought of a part time job that would be enjoyable enough to take me away from software development. .

LifeHappens

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #12 on: July 06, 2018, 11:46:02 AM »
@LifeHappens - Another thought, in respect to part time work. I have considered this, however, I haven't found any part time software development positions in my area. And it seems to me that working full time as a software developer for a while longer would be more enjoyable than working part time at a retail store for several years. Perhaps I just haven't thought of a part time job that would be enjoyable enough to take me away from software development. .
Makes sense. I was just prompting you to consider other options. The idea of downshifting, which some people jokingly call Barista FIRE, seems to be getting more popular. I've done it myself, going from working two contracts to a single contract. If it's an idea that interests you, maybe start looking for remote work.

curious_george

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #13 on: July 06, 2018, 11:57:28 AM »
@LifeHappens - Oh yeah, it is an excellent idea. And I think for a lot of people that can eliminate a lot of the stress from work, while giving them more time to relax, run errands, etc. My current job is pretty stress free though, but if this job ever ends for whatever reason then I would definitely look for remote or part time work for my next job.   

Bicycle_B

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #14 on: July 06, 2018, 07:38:17 PM »
curious_george, I agree with other posters that you can consider yourself just barely FIRE but would be wise to work longer.

Reason #1 for this is that you are reasonably comfortable in your job. Reason #2 is that your job pays well and you could add a lot of safety layer in a few short years. If you can continue working comfortably, at this point I would do so. As a target, at least research the current cost of the ACA policies without subsidy, and consider saving enough to cover that cost.

Reason #3 is that I suspect the next 5 to 10 years will be a historically rare time in which employees prosper but investors suffer. Without too many details (rising interest rates, high PEs, the Fed's predictions of a strong economy plus factors that suggest investors will be the ones getting the short end for once), my personal theory is that now to 5 or 10 years from now is an exceptionally beneficial time to be an earner instead of living off investments. So I double down on reasons 1 and 2 because of these "timing" factors. MMM doesn't emphasize timing, so this is just my personal two cents.

Congrats on getting to a good position. I think you can legitimately consider yourself a SWAMI from now until the day to you leave your job.

Finances_With_Purpose

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #15 on: July 07, 2018, 09:49:10 PM »
I calculate your expenses as $27.7k per year and at a 4% withdrawal rate you would have $27.2k per year retirement income. Personally I might drop down to part time for just a bit longer to give you a little extra padding, or perhaps give you a chance to test-drive FI expenses so you can be certain your spending won’t be higher. But overall this is fantastic and it looks like you are in great shape. Enjoy!

BTW, your internet is crazy expensive, even for us poor Americans who have crappy choices. Can you get that down?

Basically this.  You're there if you bring in even a *little* each year.  You may consider all the worlds in between full-time income and FI/RE.  You could easily go part-time or switch jobs for a few years, leave your savings alone, and come out FI easily.  All you really need to do is augment for a number of years (probably not many) to be fully FI.  You also haven't counted social security/etc. in here, so you may be closer than it appears.  But to be safest, I would find a way to supplement your investment income for a few years at least to be sure that you're there.  That also would allow you to coast into FI whenever your investments are riding high with less risk. 

As @Bicycle_B pointed out, I would be wary of going full FI/RE today since the market is well overdue for some kind of correction, and that's the most dangerous thing to happen to you early in FI years.  I would either bolster a little or just switch to something you enjoy more (target = $30k income), even if it pays way less. 

lhamo

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #16 on: July 07, 2018, 10:04:35 PM »
I don't foresee any major home repairs or lifestyle changes in retirement.

You are 32 and presuming you are in good health you probably have a life expectancy of at least another 60-70 years, if not more.  Even if your house is brand new today and you don't leave it until you are carried out, you are probably going to have to replace the roof at least twice, the side sewer or septic at least once, repaint or stain multiple times, etc. etc.

I would not FIRE on such a small 'stache, especially since you enjoy your work.  Remote, PT or contract positions would all be good to consider if you tire of the current gig before you get to around 800k in invested assets (which would give you roughly a 5k cushion every year above barebones expenses).  If you work FT to age 35 you should be in a much more solid position. At your low expense rate, you can easily max out tax-deferred accounts now, and then gradually convert those funds into Roths once you aren't working at below the taxable threshhold.
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ltt

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #17 on: July 08, 2018, 05:11:22 AM »
32 Year old, married, 3 kids age 9, 8, and 3. Live in the Midwest. I was wondering if I could consider myself financially independent or not? Also looking for feedback on how we can improve our financial situation. Thanks!

Expenses per year:

Property Taxes   2845.6
Sanitation   720
Electricity   1800
Groceries   10400
Car Insurance   360
Car gas/depreciation   1400
House Maintenance   1800
Internet   180
School Expenses   2070 (food, fees, etc)
Cell Phones   120
Misc   2400 (gifts, entertainment, eating out)
Healthcare ??? (~3600 estimated based on premium for ACA plan + max out of pocket + putting kids on CHIP)

H/C - max OOP could be up to $10k-$14k per year
Dental ?
Eye Exams/Glasses ?
Prescriptions ?
Water Bill ?
Clothing ?
Travel/Vacations ?
Homeowner's Insurance ?
Vehicle Registration ?
Vehicle Maintenance ?
College/community college/trade school savings ?

former player

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #18 on: July 08, 2018, 05:23:38 AM »
I don't foresee any major home repairs or lifestyle changes in retirement.

You are 32 and presuming you are in good health you probably have a life expectancy of at least another 60-70 years, if not more.  Even if your house is brand new today and you don't leave it until you are carried out, you are probably going to have to replace the roof at least twice, the side sewer or septic at least once, repaint or stain multiple times, etc. etc.

Agree with this: your current budget makes no allowance for future capital expenditures: house repairs, appliance replacement, car replacement, electronic replacement/upgrade.  It also assumes future good health: I'm not talking here about medical insurance and direct medical costs but the costs with accrue to less than perfect health and strength at some point in the future when paid assistance is required, even if it's just someone to mow the lawn.

What is your wife's view on the long-term future?  Might she want to go into the workplace at some point?  No reason why the two of you shouldn't trade off work between the two of you.
Be frugal and industrious, and you will be free (Ben Franklin)

curious_george

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #19 on: July 08, 2018, 05:14:51 PM »
Thanks for your feedback everyone!

To provide some more explanation here for some of the other questions that have come up.

First - car repairs and vehicle registrations. I drive old, fuel efficient cars. I've been maintaining my own vehicles for the past 16 years and have all the tools, experience, and garage space to tackle just about any job. I've replaced CV axles, inner tie rods, timing belts, water pumps, brake pads and rotors, spark plug wires, exhaust systems, O2 sensors, oil, coolant, rethreaded spark plug holes and so on. I also know/am related to several mechanics that will lend me their more specialty tools. I paid $1,200 dollars for one of the cars 12 years ago, which gets about 40 mpg. We drive 8,000 miles per year because my work is close to home. I say all of this to say - the car repairs, depreciation, fuel, and registration fees are all included in the $1,400 /year. If you look at my actual costs for the past 16 years of driving, this number is actually below what my costs have been historically.

For home repairs - I do all of my own home repairs. I used to buy foreclosed houses and flip them. I've replaced everything from roofs, to water heaters, to furnaces, to drywall, to flooring, to toilets and sinks. I have also ran electrical wiring and plumbing on a number of occasions. Mostly because copper thieves seem to love ripping out pipes and wiring in the foreclosed houses in my area. While this isn't something that I do anymore for money, I still have all the tools and expertise available. I say all of this to say - the $1,800 /year is my estimate for these repairs on my primary residence. Based on my actual costs from previous jobs and living in my current house for the past few years this number is actually conservative I think.

H/C - max OOP on the silver plan I quoted is $1,200 because it includes cost sharing subsidies. With the roth conversions I have room to modify how much taxable income I show on the tax return. This plan also includes dental and vision. The premium that I would be paying is ~$150 /month due to ACA tax credit. Of course this is based on the ACA hanging around...

Eye glasses/exams. I buy eye glasses once a year from zenni optical. They cost $20. The exams are included in the insurance above.

Dental - This is included in the plan I was looking at...however, some things do require co-pays. Perhaps I should increase the healthcare budget to account for this. hmmm...

Prescription - I haven't been to the doctor in 16 years, and the only reason I went then was to get a physical for work. We eat mostly fruits, vegetables, nuts, whole grains, and drink water. The little ones also drink milk. We occasionally eat chicken. We exercise and have exercise equipment at home. None of us are on any sort of prescription medicines or have any sort of health problems, outside of my need for glasses. The body performs very well if you take care of it. My grandpa is 97 years old and the social security administration demanded to interview him because they thought it was so strange that someone is 97 without a single billing to medicare. They thought he was dead and we were scamming them. Jokes on them - He still builds sheds when he's not chopping firewood.

Water bill - Our water comes from the ground. It's clean and tastes amazing. Some people call this a well, but I call it "magic".

Clothing - Garage sales + thrift store + family members. This is included in the misc budget. In the past decade I've spent about $20 for clothes for myself - this was mostly for socks and boxers. All of my shirts and pants have been given to me from family/gifts etc. If someone doesn't know what to buy me or kids I just tell them to buy clothes. I usually pay about $1-2 dollars per pair of shoes from garage or estate sales. Honestly I like the estate sales better for shoes because all you need is one dead guy who has your size shoe and you're golden for years. Most people die with way too many shoes...

Travel/vacations - Vacation? I don't understand what this word means. But no - we've never done that. We do travel to visit family and friends though. Some of our family members have boats and live near bodies of water. They may also have additional houses and places for us to stay. Is this what you mean? If so - see Car gas/depreciation expense. We don't travel very much - and I don't expect this to change in the future.

Homeowner's insurance - I've never met anyone who has lost their house to a fire/flood/tornado. On the flip side, I have met many people who lost their house to the bank. I don't live in a flood plain. The wiring is all up to code and we don't have any candles in the house. We don't smoke. We have fire extinguishes on both floors. Someday in the future - if the economy collapses and my house burns down at the same time, then I'll just go back to flipping houses for a while. Or go back to work in an office somewhere. Or my wife will go back to work. I honestly don't see this as much of a risk. Worst case scenario I can buy another foreclosed house in my area for 60k or so and fix it up like I did with my current house. I'm sure I will get face punched a few times for this answer though.

College/Community/trade school savings - If my children are successful it will be because of their own hard work and effort, not because they won the "I have successful parents" lottery. Frankly - I think success depends more on your ability to learn, adapt, think critically about decisions, work hard and so on more than a piece of paper with your name on it. Of course I try and keep this opinion to myself. There are a lot of people who went to expensive colleges who tend to disagree with my opinion on this matter.

The wife - She said she would be willing to go back to work somewhere in the future. We've been together for 15 years and she has always been completely on board with everything.

Thanks for your feedback everyone! I think based on the feedback I will work a few more years (FMY?). The general consensus seems that it is too dangerous for me to retire yet. And since I enjoy my job it doesn't really matter that much anyway.




 




Bicycle_B

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #20 on: July 08, 2018, 08:42:36 PM »
Very impressive answers, curious_george.

former player

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #21 on: July 09, 2018, 12:38:43 AM »
I think we have found that rare creature: the wild-raised perfect mustachian.

Our work here is done, people.
Be frugal and industrious, and you will be free (Ben Franklin)

Bicycle_B

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Re: Case Study: Can I Retire with ~800k and no debt?
« Reply #22 on: July 09, 2018, 12:02:44 PM »
A further thought: you might buy some term life insurance. Part of the reason your costs are so low is skilled labor that you perform yourself. If you die in some freak accident (drunk driver, lightning strike, etc), term insurance would give your wife a way to pay for those needed tasks that you are no longer doing.

There is also the possibility that a freak accident could incapacitate you, but leave you alive. Not sure the best way to cover this, other than substantial extra savings. I guess it does show one additional benefit of working those few extra years.