Case Study: Mid 30s, 600K savings

[chasedream2002]

1.   I am 38 and wife is 33. Both working. Two kids 3 and 8.
2.   I am making 180k and wife is making 52k. Totally 232k, but my job is not stable. May have to take a lower pay job next spring. My industry has been downsizing in the past few years. 75% of my coworkers have been laid off. I have been under fear of layoff and I hate this feeling.
3.   Retirement account (IRA and 401k): 300K, taxable 150k, cash 150k, totally 600k savings, all the investment funds are from Vanguard.
4.   House is 380k, mortgage balance is 180k, about 200k equity in the house. Currently the mortgage is 15 year, interest rate 3%, but keeping the mortgage may require a higher cash flow and I am afraid I won't be able to generate the cash flow with 1M investment. I am planning to accumulate 1M and pay off mortgage before FIRE.
5.     I am contributing 18k into 401K (employer match 7k) and 5.5K into roth IRA, wife is contributing 12k into simple IRA (1k match from her employer). About 50k goes into taxable account each year.
6.   My expenses are quite high due to mortgage, property tax and day care cost. Monthly I am spending about 7400 dollars. It can be reduced to less than 3000 after FIRE. I plan to pay off mortgage and won't have day care cost after FIRE.

Current Cost:

Mortgage   1620
Day Care   1600
Property Tax   1100
House Repair   50
Medical   200
Gas   250
Toll   100
Car Insurance/Repair   200
Water   100
Gas and Electricity   100
Cable and Phone   150
Grocery   800
Eat Out   500
Clothes   100
Vacation   100
Education   200
Gifts   50
Entertainment Toys   50
Electronics   50
Furnitture   50
Other   50
Total   7420
   
Reduced Cost after FIRE and paying off mortgage
Mortgage   0
Day Care   0
Property Tax   1100
House Repair   50
Medical   200
Gas   100
Toll   20
Car Insurance/Repair   200
Water   100
Gas and Electricity   100
Cable and Phone   90
Grocery   600
Eat Out   0
Clothes   0
Vacation   0
Education   100
Gifts   0
Entertainment Toys   0
Electronics   0
Furnitture   0
Other   0
Total   2660

Currently the job I have is not very stable and I may have to take an 80k job next year, so the total income will decrease to 134K, it will slow down my FIRE process significantly. I had a late start and had 0 networth six years ago. I don’t like the high stress jobs. I really want to achieve FIRE ASAP.  Currently I am able to save about 10k per month, but I can only save about 3k per month after changing the job.

Based on my calculation, my total investment and saving can reach 1 million after working at the new job for 3-4 years.  I may work for 1-2 years to pay down the mortgage, so totally I need at least 5 years to reach FIRE, around 2023. I will be around 43 years old and wife will be about 38 years old. My wife is on board and she is willing to work for a few additional years to 2028. Hopefully her pay can cover the living expenses between 2023 to 2028. The investment should be able to reach 1.5 M in 2028 and it should be able to generate 60k per year before she retires.

Please provide some input and let me know if any optimization can be done to my FIRE plan. Thank you!

[ixtap]

Your house maintenance seems a bit low. A single appliance replacement could wipe out your year's budget without actually doing any house maintenance.

You aren't going to buy any more clothes after you retire? No more gifts for anyone? No vacations? No soap? Why will the phone and cable bill be less?

Why not try a few of those things now and see how it goes?

What do you picture yourself doing in retirement?

[chasedream2002]

Thank you for your reply.

The post FIRE cost list is more of a calculation of my minimal spending in the worst case scenario.

If I reach 1M saving, I should be able to have a 40k spending budget per year, so the max I can spend should be around 3300 per month. If there is any major item purchase, the buffer should be able to fill the gap.

I plan to do some part time job after FIRE. I do not like office job because of the stress.

[FoundPeace]

These are the main areas I see that can improve without knowing more.

Car Insurance/Repair200- this seems a bit high to me, what kind of coverage do you have?

Cable and Phone150- do you really need the cable?

Grocery800
Eat Out500
That’s a combined $1300 on food... Do you live in a very high cost of living area? This really seems like a lot. For what it’s worth, my family of four keeps it under $500.

Electronics 50-what do you do with $50 worth of elections a month? Does that go towards phones or something?


Sent from my iPhone using Tapatalk

[MDM]

Please provide some input and let me know if any optimization can be done to my FIRE plan. Thank you!

Didn't see amounts being contributed to specific retirement funds.  How do the suggestions in Investment Order match what you are doing?

[chasedream2002]

Thank you for your reply. My car is very old and it requires repair a lot. My insurance for two cars is about 100 dollars per month, but usually I am spending a few hundred dollars each year on repair, so totally it is about 200 dollars per month. My car has 130k miles on it.

I do not have cable TV, but I need the Comcast Internet about 80 dollars per month, phone cost is about 70 dollars, but it will go down after one year because I am finishing up payments on my phone.

I agree my food cost is a little high. I will try to reduce it to half.

Thank you for your input!

These are the main areas I see that can improve without knowing more.

Car Insurance/Repair200- this seems a bit high to me, what kind of coverage do you have?

Cable and Phone150- do you really need the cable?

Grocery800
Eat Out500
That’s a combined $1300 on food... Do you live in a very high cost of living area? This really seems like a lot. For what it’s worth, my family of four keeps it under $500.

Electronics 50-what do you do with $50 worth of elections a month? Does that go towards phones or something?


Sent from my iPhone using Tapatalk

[chasedream2002]

I am contributing 18k to 401k, 5k to Roth IRA, wife is contributing 12k to simple IRA.

I am also putting 50k-60k into taxable account each year.

Please provide some input and let me know if any optimization can be done to my FIRE plan. Thank you!

Didn't see amounts being contributed to specific retirement funds.  How do the suggestions in Investment Order match what you are doing?

[MDM]

I am contributing 18k to 401k, 5k to Roth IRA, wife is contributing 12k to simple IRA.

I am also putting 50k-60k into taxable account each year.

Is the Roth contribution going via the Backdoor Roth IRA route?

If you can make direct Roth contributions, why not have your wife do so also?

[chasedream2002]

I am doing backdoor roth IRA every year, but my wife has a simple IRA account and it is not feasible to backdoor roth ira.

I am contributing 18k to 401k, 5k to Roth IRA, wife is contributing 12k to simple IRA.

I am also putting 50k-60k into taxable account each year.

Is the Roth contribution going via the Backdoor Roth IRA route?

If you can make direct Roth contributions, why not have your wife do so also?

[ysette9]

Keep in mind when reading the investment order sticky thread that when it talks about waiting to pay off low interest debt your mortgage probably falls into that category. You don’t have to have it paid off to retire. In fact you may well be able to retire earlier by not paying it off early and investing the difference instead.

[Ricksun]

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

[chasedream2002]

Thank you! Currently the mortgage is 15 year, 3%, but keeping the mortgage may require a higher cash flow and I am afraid I won't be able to generate the cash flow with 1M investment. I am planning to accumulate 1M and pay off mortgage before FIRE.

Keep in mind when reading the investment order sticky thread that when it talks about waiting to pay off low interest debt your mortgage probably falls into that category. You don’t have to have it paid off to retire. In fact you may well be able to retire earlier by not paying it off early and investing the difference instead.

[chasedream2002]

Thank you! I am planning to do some part time work after FIRE and some part time positions may offer a health care plan. I may also consider ACA helath plan. The worst case my wife may continue to work for a few years after I leave my job. I just cannot stand the stress anymore after working for 14 years. My wife has been working in office for only 5 years and she does not hate working as much as I do.

So you suggest I should work for 10 more years due to the unexpected cost? I really want to leave office job after 5 years. The new job will be less pay and less stress, but still I hate sitting in office all day.

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

[ysette9]

It is your personal decision, obviously, but I’d just like to point out that it will cost you MORE money to pay off that mortgage and save up $1M invested than if you didn’t pay off the mortgage early and instead invested enough to cover your higher monthly cash flow needs that include a mortgage payment. The reason for this is that the long term expected appreciation of stock market investments is greater than the low interest rate you have on your mortgage. I do realize there is an emotional element to this, but the math is the math. Head over to the never-ending debate in the Don’t Pay Off Your Mortgage Early Club thread for more details.

The other thing you can do is model your situation using cFIREsim.com to see how the probability of success changes in an early mortgage payoff scenario versus investing the difference and keeping mortgage in retirement. For my personal situation in the extreme (keep 30 year versus pay cash for house) it requires working a couple of extra years to pay off the mortgage early.

[chasedream2002]

Thank you for your input and information. It is very helpful.

I think it is a good idea to keep the mortgage because it is 3%. I will do my planning again.

It is your personal decision, obviously, but I’d just like to point out that it will cost you MORE money to pay off that mortgage and save up $1M invested than if you didn’t pay off the mortgage early and instead invested enough to cover your higher monthly cash flow needs that include a mortgage payment. The reason for this is that the long term expected appreciation of stock market investments is greater than the low interest rate you have on your mortgage. I do realize there is an emotional element to this, but the math is the math. Head over to the never-ending debate in the Don’t Pay Off Your Mortgage Early Club thread for more details.

The other thing you can do is model your situation using cFIREsim.com to see how the probability of success changes in an early mortgage payoff scenario versus investing the difference and keeping mortgage in retirement. For my personal situation in the extreme (keep 30 year versus pay cash for house) it requires working a couple of extra years to pay off the mortgage early.

[onlykelsey]

I think the big points have been hit, but did you explain why you're keeping 150K in cash?  That generally isn't considered optimal in these parts unless you have something on the horizon.

[chasedream2002]

The reason why I am holding 150k cash is because my current job may get eliminated next spring. I may have to take a 100k salary cut to take on another job. I am afraid my cash flow may have stress if I don't hold 150k cash. It is about 2 years of expense and I feel better with this cash in hands.

I think the big points have been hit, but did you explain why you're keeping 150K in cash?  That generally isn't considered optimal in these parts unless you have something on the horizon.

[Ricksun]

Thank you! I am planning to do some part time work after FIRE and some part time positions may offer a health care plan. I may also consider ACA helath plan. The worst case my wife may continue to work for a few years after I leave my job. I just cannot stand the stress anymore after working for 14 years. My wife has been working in office for only 5 years and she does not hate working as much as I do.

So you suggest I should work for 10 more years due to the unexpected cost? I really want to leave office job after 5 years. The new job will be less pay and less stress, but still I hate sitting in office all day.

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

Your plan appears to be based on cutting all expenditures that don't fit into what you want your budget to be, then working part time to add back in those necessities you can't do without.

That wouldn't make me comfortable, since it's unknown what you're going to actually bring in, how secure are you in part time work, have you priced out ACA Plans, will your part time job actually be less stress, etc...  Add that to the uncertainty of what you're going to spend in retirement, I generally air on the conservative side of things. 

Don't get me wrong, I think you CAN leave in a few years under the right circumstances, but you don't have it nearly to the level of detail that would give ME the confidence to pull the trigger.  If you haven't done so already, you need to get your wife onboard with your barebones budget idea to see what she thinks is necessary.

Ricksun

[chasedream2002]

Thank you for your follow up! My wife is on board and she can work a little longer than me. The max I can do is 5-6 years more of office work. I feel sick sitting in front of a computer.

My plan is to have my wife work a little longer after we reach 1M asset and paying off the mortgage in 2023. She can make about 52K right now. Hopefully she can make 60k by then. If her salary can pay the bills for 4-5 years, the investment should be able to increase to 1.5M if the market is not crashed. Then she can retire in 2027 or 2028.

In the meantime, I will try to cut the budget a little. The biggest burden is mortgage (1600), property tax (1100) and day care cost (1600). Day care cost will be gone in 2 years because my daughter will attend a public school. By 2020, my total monthly expense can go down to 5800. If we can cut a little extra, we should be able to control monthly expense to 5000 a month.

Thank you! I am planning to do some part time work after FIRE and some part time positions may offer a health care plan. I may also consider ACA helath plan. The worst case my wife may continue to work for a few years after I leave my job. I just cannot stand the stress anymore after working for 14 years. My wife has been working in office for only 5 years and she does not hate working as much as I do.

So you suggest I should work for 10 more years due to the unexpected cost? I really want to leave office job after 5 years. The new job will be less pay and less stress, but still I hate sitting in office all day.

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

Your plan appears to be based on cutting all expenditures that don't fit into what you want your budget to be, then working part time to add back in those necessities you can't do without.

That wouldn't make me comfortable, since it's unknown what you're going to actually bring in, how secure are you in part time work, have you priced out ACA Plans, will your part time job actually be less stress, etc...  Add that to the uncertainty of what you're going to spend in retirement, I generally air on the conservative side of things. 

Don't get me wrong, I think you CAN leave in a few years under the right circumstances, but you don't have it nearly to the level of detail that would give ME the confidence to pull the trigger.  If you haven't done so already, you need to get your wife onboard with your barebones budget idea to see what she thinks is necessary.

Ricksun

[zz_marcello]

Because nobody else is mentioning it.

A $1.100 monthly property tax on a $380K house?
Thats 3.5% of the total house value just for property tax every year.

A move to a more sane place would free up another $7-9k easily every year and probably cover all your additional expenses.
(or give you more margin for current high stock market valuations together with your hopefully long retirement period)

[chasedream2002]

Yes, it is a good point. The property tax rate here is ridiculously high because it is a new community. I may sell the house after both kids going to college in about 15 years, so the property tax can be saved. The apartment rent is about 800 per month for a two bed room apartment and it can free up the 380k equity and we can put it into market for return.

Because nobody else is mentioning it.

A $1.100 monthly property tax on a $380K house?
Thats 3.5% of the total house value just for property tax every year.

A move to a more sane place would free up another $7-9k easily every year and probably cover all your additional expenses.
(or give you more margin for current high stock market valuations together with your hopefully long retirement period)

[CindyBS]

I think your FIRE budget of $600 groceries with no eating out is pretty unrealistic 5 years from now unless you are growing a lot of food.  Pre-teens and teens eat A LOT, especially boys.  Having a child going through puberty and growth spurts is almost like feeding another member of the family.


Also, no clothes for the kids?  Even buying in advance used and doing hand me downs, it would be nearly impossible to pull off at $0 clothes budget for an 8 and 13 year old.  Girls grow slower than boys, but they still go through a lot of different sizes age 9-15. 

You list no daycare, which is true if you FIRE, but there will still be other child related expenses - sports, playing an instrument, camp/classes, etc.  You *could* eliminate all those, but think about if you want to. 

[CindyBS]

I also noticed for the kids expenses - no allowance?  no spending money for them?   We spend a couple thousand per year on allowance, which sounds really high, but we give they kids' ages, so $15 and $13 per week.  They get no spending money or anything purchased for them outside of b-day and Christmas. This does not include the costs of a class or activity.

Does your future cell phone budget include the kids?  They are almost a necessity these days because there are no pay phones anymore. 

[chasedream2002]

Thanks for your input. Grandparents have been buying clothes for the kids. We rarely buy clothes for kids. We are only sending kids to some very cheap classes and average cost is 100 per month. I do agree my post-Fire budget is bare bone, but most likely it will be 4000 per month.

I also noticed for the kids expenses - no allowance?  no spending money for them?   We spend a couple thousand per year on allowance, which sounds really high, but we give they kids' ages, so $15 and $13 per week.  They get no spending money or anything purchased for them outside of b-day and Christmas. This does not include the costs of a class or activity.

Does your future cell phone budget include the kids?  They are almost a necessity these days because there are no pay phones anymore.

[chasedream2002]

Thank you! Yes, the grocery budget is a little low. Currently we are spending more than 1000 on food, but we are eating out a few times a week. Most likely we will not eat out after FIRE.

I just want to have the option of leaving the job. I have experienced massive layoffs in my company and 75% of my coworkers have been laid off. I have been living in fear in the past few years. I just want to have the option of not fearing layoff in the future. If in one day the boss lays me off, I can walk away without any stress. Currently I still need the job to make ends meet and everything I have is under the mercy of the manager/CEO. The feeling is not so great.

I think your FIRE budget of $600 groceries with no eating out is pretty unrealistic 5 years from now unless you are growing a lot of food.  Pre-teens and teens eat A LOT, especially boys.  Having a child going through puberty and growth spurts is almost like feeding another member of the family.


Also, no clothes for the kids?  Even buying in advance used and doing hand me downs, it would be nearly impossible to pull off at $0 clothes budget for an 8 and 13 year old.  Girls grow slower than boys, but they still go through a lot of different sizes age 9-15. 

You list no daycare, which is true if you FIRE, but there will still be other child related expenses - sports, playing an instrument, camp/classes, etc.  You *could* eliminate all those, but think about if you want to.

[DoNorth]

I think the plan is fine especially since you're planning on PT work. Just understand that you will likely go through multiple iterations of this plan leading up to and even after FIRE.  Case in point, when I found MMM in 2014, I had just been medically retired from the military with a generous pension of almost $5,000/month and full benefits at 36 years old.  A few months later, I had a very stable off job making $115K year-- my wife continued to work during this time.  I could have stayed in my job forever, but quit one year after reading through MMM and moved back to my hometown with no plans to work a normal office job again.  Within a month of being home, I was offered a PT 20 hour/wk job at a non-profit focused on affordable housing making $25,000/year and did well so they raised it to $32,500 by the beginning of the third year.  Over these years, I built my own house and kept working at the non-profit.  After about three years, I was offered a 3 year contract position in Europe where I'm writing this post.  I guess my point is that I could never have predicted income levels over the years especially with the PT work variable.  I also didn't plan on going back to work full time, but when the opportunity came up and seemed to offer more (financially, educationally and personally) than my now previous FIRE situation, I took it and don't regret it.   I will say that during this time, the behavioral changes I made have been far more influential on my finances than simply cutting or adjusting budget numbers or trying to get to the right SWR.  Built house with all kinds of energy saving improvements that will last a lifetime, sold SUV, sold regular car, ride bike to work, walk kids to school, cook more at home and so on.

Thank you! I am planning to do some part time work after FIRE and some part time positions may offer a health care plan. I may also consider ACA helath plan. The worst case my wife may continue to work for a few years after I leave my job. I just cannot stand the stress anymore after working for 14 years. My wife has been working in office for only 5 years and she does not hate working as much as I do.

So you suggest I should work for 10 more years due to the unexpected cost? I really want to leave office job after 5 years. The new job will be less pay and less stress, but still I hate sitting in office all day.

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

[chasedream2002]

Thank you very much for sharing your story.

It is exactly what I want to do. I do not want to do a regular job, but I want to do some part time job and job hopping. Currently I have stress on my job because my family's survival depends on it. Once I reach 1-2 M investment level, I won't need to perform at 150% level to impress the employer to avoid job loss. I will work on and off and switch jobs more frequently. Believe it or not, I only worked on 2 jobs in my whole career and never tried other career directions.

FIRE does not mean that I will stop working permanently, but I will work on different things and do not really need super high salary. I will also have the flexibility to stop whenever I want and find another job after resting for a few years, etc. That is all I want to achieve in 5-10 years.

I will come back to visit this post often and report my progress. Thank you all!

I think the plan is fine especially since you're planning on PT work. Just understand that you will likely go through multiple iterations of this plan leading up to and even after FIRE.  Case in point, when I found MMM in 2014, I had just been medically retired from the military with a generous pension of almost $5,000/month and full benefits at 36 years old.  A few months later, I had a very stable off job making $115K year-- my wife continued to work during this time.  I could have stayed in my job forever, but quit one year after reading through MMM and moved back to my hometown with no plans to work a normal office job again.  Within a month of being home, I was offered a PT 20 hour/wk job at a non-profit focused on affordable housing making $25,000/year and did well so they raised it to $32,500 by the beginning of the third year.  Over these years, I built my own house and kept working at the non-profit.  After about three years, I was offered a 3 year contract position in Europe where I'm writing this post.  I guess my point is that I could never have predicted income levels over the years especially with the PT work variable.  I also didn't plan on going back to work full time, but when the opportunity came up and seemed to offer more (financially, educationally and personally) than my now previous FIRE situation, I took it and don't regret it.   I will say that during this time, the behavioral changes I made have been far more influential on my finances than simply cutting or adjusting budget numbers or trying to get to the right SWR.  Built house with all kinds of energy saving improvements that will last a lifetime, sold SUV, sold regular car, ride bike to work, walk kids to school, cook more at home and so on.

Thank you! I am planning to do some part time work after FIRE and some part time positions may offer a health care plan. I may also consider ACA helath plan. The worst case my wife may continue to work for a few years after I leave my job. I just cannot stand the stress anymore after working for 14 years. My wife has been working in office for only 5 years and she does not hate working as much as I do.

So you suggest I should work for 10 more years due to the unexpected cost? I really want to leave office job after 5 years. The new job will be less pay and less stress, but still I hate sitting in office all day.

Your bare-bones budget doesn't seem achievable, especially since you're accustomed to living at a certain lifestyle than you plan on downsizing to.  You're going to have MORE free time, which can easily be more expensive with trips/travel...  Has your spouse weighed in on this downgrade? 

What is your plan for health-care after retirement?  I'm assuming the $200 is in addition to either your pre-tax contributions or your employers share of the health costs?  You should ensure that those costs are accounted for accurately in your retirement planning. 

Kids expense, while reduced, likely won't go away.  Daycare will be replaced with expenditures for clothing, sports, activities, etc...  Are you planning on helping college costs?  $100/mo for education isnt going to cut it.

Also, take into account the time-value of money.  If you retire 10 years from now, your expenses should be prorated at a higher COL.  (i.e. don't just count on the investment side to grow; account for the increased expenditure costs as well)

Sorry to hear about the potential drop in income, but hopefully it'll come with less stress!

Ricksun

[chasedream2002]

6 months update:

Investment increased to 660k
Mortgage balance decreased to 170k
Completely stopped eating out and also reduced grocery spending to 600 per month
Day care cost is down to 500
I also got a cheap phone plan costing 12 dollars a month
Job is still unstable, but trying to make to the last day

My new expense level:

Mortgage 1620 (10 years left on mortgage at 3%)
Day Care 500 (day care cost will be gone in 2 years)
Property Tax 1100
House Repair 50
Medical 100
Gas 200
Toll 100
Car Insurance/Repair 200
Water 80
Gas and Electricity 100
Cable and Phone 50
Grocery 600
Eat Out 0
Clothes 50
Vacation 100
Education 200
Gifts 50
Entertainment Toys 50
Electronics 50
Other 50
Total 5200

[blingwrx]

Great job on reducing food expenses.

I just wanted to say I think holding onto 150k cash is too much of an emergency fund even with a lay off that is looming, investing more of it should help you reach your FIRE goal sooner. If you do the math with your new expenses which is now down to $5200 and your wife still brings in around 3k after taxes and you'd be able to collect unemployment at about $1600 a month depending on your state. You would really only be short about $600 a month which works out to $7200 to cover a year of expenses. Most people actually only keep up to 6 months expenses, I think 2 years is too extreme. I would say keep around 50k since you never know if there's a major house repair or medical bills, but I'd definitely don't think 150k is necessary. I also think since the unemployment rate is the lowest it's been and if your open to the lower 80k salary as you mentioned you should be able to get right back on the horse within a few weeks or few months so have some confidence in yourself, I'm sure your company does to pay you that much. I was in a similar situation where everyone in the company was getting laid off and after 2 years they let me go too, but I wasn't worried as I knew from talking to my co workers that they were giving out decent severance packages around 3-4 months pay, cashing out vacation days and covering health insurance for that time frame. There was somewhat of an inside joke that those guys won the lottery, since it seems most of us wanted to quit anyway as the company wasn't doing well. So the severance alone could be enough to cover a year of your expenses. So maybe find out from old coworkers what the deal is, it could put your mind at peace a little bit knowing you'll get something for sticking around until the last day. Otherwise if they're not giving you anything but the boot, I'd start browsing around now to see if there was any decent paying jobs you might like vs later when you'll feel pressure to finding something asap to put food on the table and have to explain to potential new employers why you got laid off.

[chasedream2002]

Thanks for your comments.

I did deploy 50k cash into VTSAX during the December downturn.

Currently I hold about 100k cash and 560k in index funds.

I want to have a peace of mind with 100k. Less than this number makes me nervous.

My wife's job is not stable either. These days most of the jobs can be cut easily.

My work area is very narrow and very few companies are doing this type of work.

I can switch to a different area, but the pay will be much less.

I plan to hang on to this job as long as possible and see how things go.

Great job on reducing food expenses.

I just wanted to say I think holding onto 150k cash is too much of an emergency fund even with a lay off that is looming, investing more of it should help you reach your FIRE goal sooner. If you do the math with your new expenses which is now down to $5200 and your wife still brings in around 3k after taxes and you'd be able to collect unemployment at about $1600 a month depending on your state. You would really only be short about $600 a month which works out to $7200 to cover a year of expenses. Most people actually only keep up to 6 months expenses, I think 2 years is too extreme. I would say keep around 50k since you never know if there's a major house repair or medical bills, but I'd definitely don't think 150k is necessary. I also think since the unemployment rate is the lowest it's been and if your open to the lower 80k salary as you mentioned you should be able to get right back on the horse within a few weeks or few months so have some confidence in yourself, I'm sure your company does to pay you that much. I was in a similar situation where everyone in the company was getting laid off and after 2 years they let me go too, but I wasn't worried as I knew from talking to my co workers that they were giving out decent severance packages around 3-4 months pay, cashing out vacation days and covering health insurance for that time frame. There was somewhat of an inside joke that those guys won the lottery, since it seems most of us wanted to quit anyway as the company wasn't doing well. So the severance alone could be enough to cover a year of your expenses. So maybe find out from old coworkers what the deal is, it could put your mind at peace a little bit knowing you'll get something for sticking around until the last day. Otherwise if they're not giving you anything but the boot, I'd start browsing around now to see if there was any decent paying jobs you might like vs later when you'll feel pressure to finding something asap to put food on the table and have to explain to potential new employers why you got laid off.