Case Study - Help me with a FIRE number

[whywork]

Dear MMM Community,

I mainly want to seek your help in trying to understand what is a good FIRE number for our case. I understand it is my own decision but would like to seek your expertise and evaluation. I am proving our expenses and situation information below to get your opinion on a number to aim at.

Our Situation: We are a family of four with both kids in elementary. We both are around 40 years. I am the primary earner with an after tax income of ~220k (including 401k contributions, roth contributions etc). My wife is mostly busy with taking care of kids but works part time to bring around 12k per year. We currently rent and have 1.1m invested (401k, ira, after tax vanguard). That's our networth (excepting two cars ~30k)

My Retirement Goals We currently spend about 6500 per month (3k rent and 3.5k non rent). If we move to a LCOL (arkansas, oklahoma, florida) I expect our monthly expenses to drop to 4.5k which will need us 1.35m invested. If market does decently well, I hope to reach this number in an year or so. Now here are few retirement goals I have set myself

• Pay kids college fully including room and board
• Once kids graduate, give them like 2500 per month each till we are alive
• Live as frugal life as possible to minimize our expenses to meet above goals

I'm very mustachian and I prefer FIRE and living a simple life to cubicle slavery. I want to get out of cubicle as quickly as possible but meeting the above goals. So with these goals in mind, I project my FIRE number to be 2m. Here are the assumptions made:

• I will have SS starting at age 63 which will be about 20k / year and by age 67 it will be 30k / year. So that will be a big help in achieving above goals.
• I'm assuming it will be 40k / year / kid for college (includes board, room etc).
• Once kids are done with college, we plan to give them each 30k / year and keep our expenses to 30k / year requiring us 90k / year
• With paying for college and 90k/year spend, our networth will become zero at some point we are into 90s
• I assumed a 3% swr

Reasons for my goals The 30k / year per kid is their living expenses in case they don't settle in their life. If they do well (and we will push them to) this will be directly contributing to their investment or passed as inheritance

Questions

• Does this FIRE number look reasonable or did I miss any edge cases? Do you think 30k / year for us is reasonable? I'm assuming we will still use ACA as our AGI will be much less than 90k
• What are your thoughts about our focus on kids more? Do you think they will mostly settle down and trying to provide 30k / year is being too cautious?
• I really don't like working anymore. No pressure at work but I kind of lost motivation. It can take me anywhere from 4 to 7 years to reach the 2M goal depending on how long I can keep my high paying job. So potentially 7 more years can be quite taxing on me. If I can shoot for less or don't need so much pls let me know

[fell-like-rain]

What’s the reasoning behind planning to give each kid 30k a year in perpetuity? I mean, it’s one thing to offer them some support if they go through a difficult period, but an endless allowance just seems weird to me. Either they’ll become self-sufficient, gainfully employed adults, in which case the money is superfluous, or they’ll become lazy and shiftless, in which case the money is a crutch and an enablement. Or I suppose they could focus on a life goal that isn’t very lucrative, like art or activism, and having that flow of cash could support their efforts. So there are cases where the money is a positive, but there are also ones where it’s negative or neutral.

[ysette9]

No way in hell would I plan on giving my kids that kind of money in their adulthood. I am likely biased based on what I see going on with some extended family members, but my feeling is this would enable the kids to never do the hard work of becoming independent.

My parents tried hard to give me a leg up early in life, with only the best intentions. I was a hard-working person who happily accepted that leg up initially. Over time it began to pinch, and looking back on it I wished they had watched from the sidelines as I figured my own stuff out. Figuring your way in life is a really important process of becoming an adult. I think this is one area where the process is as important as the outcome.

[blingwrx]

I agree throwing 30k a year at a college educated adult who is capable of making their own money makes no sense to me. In a way it feels like your setting them up as trust fund Kids and that can make them lazy to make their own way through life knowing they have money coming in for doing nothing.

By all means they should continue to live with you after college and you don’t have to charge them rent or other expenses until they get their careers off the ground. I think they’ll have a huge leg up already with no college debt and no housing expenses if they’re cooling living with you until they are settled into their careers and save up enough for their own apartments or house. I lived at home with my parents for a few years until I saved up enough to buy a house, It definitely helped to expedite the process of saving up for a down payment. If you’re really included to throw money at them I think it would be better to put that money to help with a down payment for a house instead once they get their careers in order and have a steady income to pay for a mortgage. By that point they would have worked to build a career and realized money doesn’t grow on trees.

[MrThatsDifferent]

I’m with everyone else, you take away so much from them by giving them that cushion. Paying for college? Yes, that’s great. I would think your goal is to make them as strong and independent as possible, they neeed to develop resilience so they can survive and look after themselves when you and your wife are gone. I’d seriously rethink that part of the plan.

[tamuaggie2011]

As the saying goes "The road to hell is paved with good intentions". This 30k a year to each of your kids may sound good on paper, but what lesson is it teaching them? The money isn't being given as help on a down payment or possibly even one (though this would be way more than they actually need) initial car to start off as adults. You presumably are wanting them to not have it as rough as you did but you must also remember all the lessons that you learned from growing up the way you did. Supplying your kids with a free pension in essence won't accomplish those.

Perhaps more importantly though I want to point out that you say you assume 3% SWR but at 90k/year that would put your FIRE number at $3 million not $2 million.

[GoCubsGo]

Aren't you the same person who posted that you were actively planning  to move to where your kids went to college?  You may not want advice regarding this, but that post combined with this one is leading me towards the advice you need to let your kids figure some things out on their own.  You say you don't like to work but are adding years onto your career to fund an unnecessary trust fund for your kids.  I get paying for their college.  My parents doing that for me allowed me to purchase my first home at 25 and start saving immediately for retirement, but your plans seem excessive.

You don't want to be a helicopter parent to the point they can't deal with financial hardships on their own, it's part of becoming an adult. Teenagers and young adults want and need some autonomy and I think you would be wise to think long and hard about both your plans of the mini trust fund and moving to their college town.  That said, your kids are young,  state school full in tuition and room and board has outpaced inflation drastically in my state.  You may want to bump your year college cost allocation. 

[whywork]

Thank you all for your replies and feedback

A major clarification, I want to be able to give 30k per year to my kids. But I won't necessarily give it to them as default every year. Here is what I plan to do:

We are currently in HCOL. Once I reach my 2m mark, my elder one around the same time might be in early or late high school. If it is early, we will move to a LCOL then, else we will have her apply to some colleges in LCOL states and move there once she gets admission. We will plan to stay near the college so that she can go from home and boarding and food costs are covered. We will try to do the same with second girl too (they are 4 years apart).

Now once they are out of college, we will support them to find their jobs. We don't plan to own a home ever. So we can move to the place where they want to find jobs. Or if we can't do it for both kids (2nd one is in college and 1st one is searching) then we want to rely on the money. This can be in the form of a 30k / year living expenses to enable them to live and find a job somewhere. Once they find a job, we will hold off the money. We will give them only if they need it. But we won't use that money either. It will be for them growing as investments to be given at some point. Most probable time when we want to give is when they are in their early 30s and are finding work hard. We want to give this money to accelerate their FI. That is only if we feel they will not squander it away. If we feel they might squander it away then we will instead only pass it slowly or as an inheritance through a trust where they can only take 4% per year.

Thanks for your feedback, I get the point that they need to get a chance to struggle and find their own way. I just want to have this 30k / year ready to cover if something happens.

I personally live a mustachian style of life and don't know what to do with more money. Not interested in travelling or other expensive hobbies.

[Kierun]

What if the kids want to dorm and experience the "college life" rather than "go from home"?

[GoCubsGo]

The clarification helps but I guess I'm still confused as to why you want to add close to a decade in a job you dislike for VERY far off plans of college.  To add to it, you are basing where you will live in retirement on where a 18 year *might* want to go in college (assuming they even want to go to college in a LCOL state).  I think you may be planning for things that have a high likelihood of changing by the time they are ready for college.

I would:
- use the excess income you have while working (based on numbers you posted, that's $140K excess income a year) to fully fund 4 years of college for both kids.  Maybe earmark an extra $25k or so for helping them to launch after college.
- Once you have that socked away (which it sounds like you can do in 2 1/2 years), then re-evaluate.  You will probably have enough saved to immediately move to a lower cost of living area that you like and retire.  Try to time it before the kids start high school.

Your kids will then be able to choose wherever they want to go to school and not have to worry about just going to college in a LCOL state and worst of all (for my kids anyway), having to live with parents DURING COLLEGE.  You will have a fully funded, early retirement with tons of flexibility and the kids will have a great platform from which to launch their lives.

[ontheway2]

Not commenting on the allowance to the grown kids.

Are you figuring SS correct? I'm pretty sure it isn't 20k at 63 and 30k at 67; it is the higher number if you let it grow and don't collect at 62/63. Which figure are you factoring in your calculations?

[index]

Dear MMM Community,

I mainly want to seek your help in trying to understand what is a good FIRE number for our case. I understand it is my own decision but would like to seek your expertise and evaluation. I am proving our expenses and situation information below to get your opinion on a number to aim at.

Our Situation: We are a family of four with both kids in elementary. We both are around 40 years. I am the primary earner with an after tax income of ~220k (including 401k contributions, roth contributions etc). My wife is mostly busy with taking care of kids but works part time to bring around 12k per year. We currently rent and have 1.1m invested (401k, ira, after tax vanguard). That's our networth (excepting two cars ~30k)

My Retirement Goals We currently spend about 6500 per month (3k rent and 3.5k non rent). If we move to a LCOL (arkansas, oklahoma, florida) I expect our monthly expenses to drop to 4.5k which will need us 1.35m invested. If market does decently well, I hope to reach this number in an year or so. Now here are few retirement goals I have set myself

• Pay kids college fully including room and board
• Once kids graduate, give them like 2500 per month each till we are alive
• Live as frugal life as possible to minimize our expenses to meet above goals

I'm very mustachian and I prefer FIRE and living a simple life to cubicle slavery. I want to get out of cubicle as quickly as possible but meeting the above goals. So with these goals in mind, I project my FIRE number to be 2m. Here are the assumptions made:

• I will have SS starting at age 63 which will be about 20k / year and by age 67 it will be 30k / year. So that will be a big help in achieving above goals.
• I'm assuming it will be 40k / year / kid for college (includes board, room etc).
• Once kids are done with college, we plan to give them each 30k / year and keep our expenses to 30k / year requiring us 90k / year
• With paying for college and 90k/year spend, our networth will become zero at some point we are into 90s
• I assumed a 3% swr

Reasons for my goals The 30k / year per kid is their living expenses in case they don't settle in their life. If they do well (and we will push them to) this will be directly contributing to their investment or passed as inheritance

Questions

• Does this FIRE number look reasonable or did I miss any edge cases? Do you think 30k / year for us is reasonable? I'm assuming we will still use ACA as our AGI will be much less than 90k
• What are your thoughts about our focus on kids more? Do you think they will mostly settle down and trying to provide 30k / year is being too cautious?
• I really don't like working anymore. No pressure at work but I kind of lost motivation. It can take me anywhere from 4 to 7 years to reach the 2M goal depending on how long I can keep my high paying job. So potentially 7 more years can be quite taxing on me. If I can shoot for less or don't need so much pls let me know

Health insurance? LTC Insurance?

Your income will be too high to get any subsidy considering 40k for college and the 30k trust fund. You are looking at 12k in premiums and another 6k in costs; so your 48 to 62 (medicare) requirements are going to be ~50k per year.  LTC insurance is going to be about 250k for a decent policy to protect your nest egg for your kids if that is important to you. Instate tuition for college is about 20k right now and growing at 8% YoY so you are probably looking at around 60k/yr average between the two kids. You really need to do a cash flow analysis like what Personal Capital does in their retirement planner.  I think you are underestimating any one time expenses with a 30k budget. New car? Kids weddings? What about traveling to see them when they move away? Health problems... 2M might work if the market cooperates, and you keep your expenses where you assume they will be...

Assuming a 7% return and 3% inflation rate:

48   2,000,000.00   50,000.00   1,950,000.00
49   2,028,000.00   50,000.00   2,028,000.00
50   2,109,120.00   50,000.00   2,059,120.00
51   2,141,484.80   50,000.00   2,091,484.80
52   2,175,144.19   50,000.00   2,125,144.19
53   2,210,149.96   50,000.00   2,160,149.96
54   2,246,555.96   50,000.00   2,196,555.96
55   2,284,418.20   355,000.00   1,929,418.20
56   2,006,594.92   110,000.00   1,896,594.92
57   1,972,458.72   110,000.00   1,862,458.72
58   1,936,957.07   110,000.00   1,826,957.07
59   1,900,035.35   140,000.00   1,760,035.35
60   1,830,436.77   140,000.00   1,690,436.77
61   1,758,054.24   140,000.00   1,618,054.24
62   1,682,776.41   140,000.00   1,542,776.41
63   1,604,487.46   90,000.00   1,514,487.46
64   1,575,066.96   90,000.00   1,485,066.96
65   1,544,469.64   90,000.00   1,454,469.64
66   1,512,648.43   90,000.00   1,422,648.43
67   1,479,554.36   90,000.00   1,389,554.36
68   1,445,136.54   90,000.00   1,355,136.54
69   1,409,342.00   90,000.00   1,319,342.00
70   1,372,115.68   90,000.00   1,282,115.68
71   1,333,400.31   90,000.00   1,243,400.31
72   1,293,136.32   90,000.00   1,203,136.32
73   1,251,261.77   90,000.00   1,161,261.77
74   1,207,712.24   90,000.00   1,117,712.24
75   1,162,420.73   90,000.00   1,072,420.73
76   1,115,317.56   90,000.00   1,025,317.56
77   1,066,330.26   90,000.00   976,330.26
78   1,015,383.47   90,000.00   925,383.47
79   962,398.81   90,000.00   872,398.81
80   907,294.77   90,000.00   817,294.77
81   849,986.56   90,000.00   759,986.56
82   790,386.02   90,000.00   700,386.02
83   728,401.46   90,000.00   638,401.46
84   663,937.52   90,000.00   573,937.52
85   596,895.02   90,000.00   506,895.02
86   527,170.82   90,000.00   437,170.82
87   454,657.65   90,000.00   364,657.65
88   379,243.96   90,000.00   289,243.96
89   300,813.72   90,000.00   210,813.72
90   219,246.26   90,000.00   129,246.26

[JGS1980]

Dear MMM Community,

I mainly want to seek your help in trying to understand what is a good FIRE number for our case. I understand it is my own decision but would like to seek your expertise and evaluation. I am proving our expenses and situation information below to get your opinion on a number to aim at.

Our Situation: We are a family of four with both kids in elementary. We both are around 40 years. I am the primary earner with an after tax income of ~220k (including 401k contributions, roth contributions etc). My wife is mostly busy with taking care of kids but works part time to bring around 12k per year. We currently rent and have 1.1m invested (401k, ira, after tax vanguard). That's our networth (excepting two cars ~30k)

My Retirement Goals We currently spend about 6500 per month (3k rent and 3.5k non rent). If we move to a LCOL (arkansas, oklahoma, florida) I expect our monthly expenses to drop to 4.5k which will need us 1.35m invested. If market does decently well, I hope to reach this number in an year or so. Now here are few retirement goals I have set myself

• Pay kids college fully including room and board
• Once kids graduate, give them like 2500 per month each till we are alive
• Live as frugal life as possible to minimize our expenses to meet above goals

I'm very mustachian and I prefer FIRE and living a simple life to cubicle slavery. I want to get out of cubicle as quickly as possible but meeting the above goals. So with these goals in mind, I project my FIRE number to be 2m. Here are the assumptions made:

• I will have SS starting at age 63 which will be about 20k / year and by age 67 it will be 30k / year. So that will be a big help in achieving above goals.
• I'm assuming it will be 40k / year / kid for college (includes board, room etc).
• Once kids are done with college, we plan to give them each 30k / year and keep our expenses to 30k / year requiring us 90k / year
• With paying for college and 90k/year spend, our networth will become zero at some point we are into 90s
• I assumed a 3% swr

Reasons for my goals The 30k / year per kid is their living expenses in case they don't settle in their life. If they do well (and we will push them to) this will be directly contributing to their investment or passed as inheritance

Questions

• Does this FIRE number look reasonable or did I miss any edge cases? Do you think 30k / year for us is reasonable? I'm assuming we will still use ACA as our AGI will be much less than 90k
• What are your thoughts about our focus on kids more? Do you think they will mostly settle down and trying to provide 30k / year is being too cautious?
• I really don't like working anymore. No pressure at work but I kind of lost motivation. It can take me anywhere from 4 to 7 years to reach the 2M goal depending on how long I can keep my high paying job. So potentially 7 more years can be quite taxing on me. If I can shoot for less or don't need so much pls let me know

Hello WhyWork!

Our numbers are remarkably similar, and I have 3 elementary school kids myself!

Our Net Worth Goal including house is about 2.5 Mill, and 2.0 Mill without the house, funny enough.

In regards to retirement and moving for LCOL education options, this sounds like a pretty sweet plan to obtain residency for cheaper undergrad.  I also plan on paying for the kids college, however, I would add that 40 K/year in savings should be plenty if you truly retire early and have a low enough AGI for FAFSA/CSS applications. Just keep that AGI super low for the prior, prior year as well as the prior year before starting school and choose a less expensive school that fits your needs. In other words, you may not need to move at all.

As for allowing the kids to live with you during college, I'd recommend against it if you can. It's one thing to grow up in a town and go to college locally while living at home. It's another thing to miss out on the college dorm experience and the opportunity to make great friends and memories for life. I admit this experience is a luxury, but it's certainly a luxury you can afford.

In regards to having extra cash lying around to give up to 30K/year, I strongly disagree with this. Maybe a one time 30K to split to help with wedding/study abroad/house down payment is fine, but beyond that you'll simply take away from your children's ability to fend for themselves in this challenging world we live in.  You will give them a lifelong handicap, IMHO.

Sorry to disagree, but I hope this helps.

JGS

P.S. I also strongly recommend talking to your kids about this plan as they grow older, and see what they think. You might be surprised what they tell you.

[PJC74]

I can see it now; your kids will be on here in 20 years with the handle whywork1 and whywork2 😂

[Villanelle]

You seem to be forgetting that your kids will be adults, with their own ideas about life and college and independence.  Sure, you hold the purse strings.  But if they want to go to college in CA, the most you can do is say that you won't pay for it.  And that attempt to control them might just further push them away.

What if one wants to take a gap year?  What if one is in college in FL and the other starts in Texas?

What if they just don't want to live with mom and dad?

You sound like you are trying to manage their lives like you'd do for a 10 year old, but you are talking about points at which they will be young adults.  Not only is it likely to fail, but it may well cause resentment.

And somehow, I wonder if that $30k/yr that you may or may not give them will be used to guide them to decision you want to see them make. 

And working at a job you hate to you have have $30k/yr in money you say you will only use if necessary?  How on earth does that make sense?  How about just having an extra $50k sitting in an account, mentally separate from your stache, so that you can deploy it in case of emergency?  $50k vs $1.5m. 

[ysette9]

Thank you all for your replies and feedback

A major clarification, I want to be able to give 30k per year to my kids. But I won't necessarily give it to them as default every year. Here is what I plan to do:

We are currently in HCOL. Once I reach my 2m mark, my elder one around the same time might be in early or late high school. If it is early, we will move to a LCOL then, else we will have her apply to some colleges in LCOL states and move there once she gets admission. We will plan to stay near the college so that she can go from home and boarding and food costs are covered. We will try to do the same with second girl too (they are 4 years apart).

Now once they are out of college, we will support them to find their jobs. We don't plan to own a home ever. So we can move to the place where they want to find jobs. Or if we can't do it for both kids (2nd one is in college and 1st one is searching) then we want to rely on the money. This can be in the form of a 30k / year living expenses to enable them to live and find a job somewhere. Once they find a job, we will hold off the money. We will give them only if they need it. But we won't use that money either. It will be for them growing as investments to be given at some point. Most probable time when we want to give is when they are in their early 30s and are finding work hard. We want to give this money to accelerate their FI. That is only if we feel they will not squander it away. If we feel they might squander it away then we will instead only pass it slowly or as an inheritance through a trust where they can only take 4% per year.

Thanks for your feedback, I get the point that they need to get a chance to struggle and find their own way. I just want to have this 30k / year ready to cover if something happens.

I personally live a mustachian style of life and don't know what to do with more money. Not interested in travelling or other expensive hobbies.

I know you are planning this with only the very best of intentions for your kids whom you care about deeply and want to do right by. That said, your plan sounds stifling. Your goal is to raise independent human beings. To be independent they need space to test and fail and experiment and most importantly, be away from their parents to figure out who they are as fledgling adults.

My sister and I lived at home while going to junior college. It worked for us. We lived our parallel lives with work and school and my parents lived their lives at work and whatever. We socialized as we saw fit but they really treated us as independent adults, for which I am eternally grateful. We both transferred to univiersities far enough away that we moved out. If your kids choose that path then more power to them. But for heaven's sake, give them freedom in the college years! If going away for four years is the best path for them, then help them choose wisely and manage whatever college savings are available by then.

I feel pretty strongly about this because every family gathering I see the aftermath of what best intentions and helicopter parenting produce. A "kid" (now almost 30) who is book smart but utterly unable to function as an independent adult in the real world. His parents always pushed him to do well academically, which he did. They were always involved in everything, he went to school one city over from the childhood home, moved back home after graduation, spent weekends there once finally getting a job (never fully moved out honestly), had his parents helping with the job hunt and calling his boss to report him in sick when he couldn't haul his butt out of bed.

I get that you probably have no intention of going this far down the path of enabling. But be very careful when you say things like "I'll only give $ if they need it". If your kids are intellectually normal with no severe health issues and have an education, they don't need the money. Scrambling and working hard and building a life up from nothing are REALLY important lessons on the path to being a successful and independent adult. Don't stunt them by taking away that learning opportunity.

[MrThatsDifferent]

I can see it now; your kids will be on here in 20 years with the handle whywork1 and whywork2 😂

Good one!

OP, I’m not quite sure what’s your motivation in micro-managing your kid’s lives as they move through adulthood? There’s no need for you to move to where your kids are going to school or force them into the LCOL options. I find especially confusing when you plan to have this $30k available for them. Let them apply to schools using the traditional, dream schools, practical schools and safety schools. Once they discover where they get accepted, then do the finances, pros and cons and let them work their way through where they want to be taking in all the relevant factors. If they choose something away from you, well, you can afford dorm life, so let them develop as people. Some kids live at home because of necessity, that’s not your situation. It feels like your aim is to build co-dependence, instead of independence. Give them the tools to be their strongest selves, as much as they can be, on their own. It’s more than generous enough paying for college and the associated expenses, hopefully they make the most of that, but everything is a learning experience, but after 18, people don’t need mom and dad to hold their hands every step of the journey.

[whywork]

Thank you so much everyone. Very wise and brilliant replies each and every one. FIRE people are successful and smart people :). Love the joke about whywork1 and whywork2 :). TBH, I will be happy if they turn to mustachianism.

The clear advice seems to be this: pay for kids college but don't try to give them money as it can hurt rather than help them. I will keep that in mind. Someone made a good point about unexpected expenses during our retirement like travelling to kids place etc. So we need to budget a bit higher like 50-60k (instead of 30k) for us and call it done probably. The 20-30k additional if unused can always be used for kids emergencies. It is not like both the kids will need it. Even if I accumulate more, I will make sure the kids won't get it unless an emergency. It will enable them to learn hard lessons

I always hated work (generally not motivated and find it difficult to work with people, socialize, handle arguments etc) but if my parents had passed an inheritance, I might have been bored with purposelessness and something to keep me busy during such a long retirement period. Sometimes adversity in life is a good thing