Author Topic: Case Study: Ready to Fire or Inch Out Another Year  (Read 1087 times)

xan

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Case Study: Ready to Fire or Inch Out Another Year
« on: July 09, 2018, 06:00:28 PM »
Hey all,
Just found this forum a couple months ago and this is my first post here.  As we get pretty close for FI, I just hoped to get some feedback from others who think deeply about the subject.  My wife is retired now (for all intents and purposes) but has some residual income from a well-timed layoff and severance package.  We went to a fee-based financial advisor a couple years ago thinking we could pay him a fee to analyze our situation and make recommendations.  It wasn't very useful and we never went back.  Other than that, I have never shown this to anyone outside my marriage and just need to know that there are no holes in the plan.  All tax deferred plans (401k, IRAs, Coverdell) are fully funded for 2018, and we have since redirected all savings towards the mortgage.  Our goal is to pay off the remaining $70k before the end of the year and then for me to retire either right away or at least within a year.

My Stats:
Me - 40 years old
Wife - 43 years old
Children (1) - 10 years old
We live in a LCOL area in the southern midwest. 

Our expenses are about 60k/year.  I am planning about 12k/year for health insurance after RE (source: healthcare.gov).  So, I expect retirement expenses of about 72k/year.  Using the 4% rule, I need about 1,800,000 to sustain that.  And, that amount is congruent with what I have in investable assets.  I think this plan is pretty congruent with the way people think about FIRE here, but would love to get any thoughts that I may have missed.

I do hope to find ways to monetize hobbies/interests in retirement, but nothing organized into any real business plan.  So, the financial conservative in me won't allow me to factor that in at all.

Other than that, here is a direct question that I can't get my habnds around. I would intend to live on the taxable accounts until we eventually reach 59 1/2 (16 years) or until the taxable account is exhausted.  Is it reasonable to think that my tax bracket would be zero for any LT capital gains as long as I keep sales and other retirement income under $77,400 (2018 brackets).  Or, should I be thinking of my $72k in living expenses as net after taxes... and I really need a larger number for my plan to work using the 4% rule.

And last, before the numbers, would you guys still consider pulling the trigger with CAPE10 at the record-high levels we are at today?

A few comments about the numbers, before the numbers:
 - We do a pretty good job of tracking/recording expenses.  There is always some normalization in the numbers when trying to isolate a "normal" month, but I feel pretty confident in the numbers below.
 - I assume everyone does this, but some things are obviously amortized over the year to compute a monthly number (gifts are mostly around christmas, travel is typically one time in the summer)
 - I am tracking future dependent education expense as a liability in present value terms just because I don't consider that account to be savings that should contribute to my net worth since it is already comitted.  Personal preference, IMO.
 - I have not really done anything to adjust expenses for a post-FIRE lifestyle.  I'm inclined to think that overall it would even out.
 - For now, I am assuming we will drop most forms of life insurance (there are a few)
 - I know there is some red meat for face punching to follow.  But, life is about trade-offs, and I just hope most would agree that I am owning (and funding) my indulgences.  But please, punch away

Monthly Income Statement
Monthly
Income Wife$7,500
Income Me$20,000
-
Taxes (Fed, State, Payroll)-$7,443
Medical Premiums-$510
Life Insurance-$170
-
Expenses:
Mortgage Interest-$200
Mortgage Interest-$200
Homeowners Association-$50
Homeowner's Insurance-$315
Property Taxes-$440
Electricity-$140
Natural Gas-$80
Internet-$110
Satellite TV-$120
Garbage-$33
Water-$18
Housing Total-$1,506
-
Gasoline-$225
Auto Insurance-$150
Transportation Total-$375
-
Cell Phone Service-$114
Grocery-$580
Childcare-$120
Clothes-$75
Lawncare-$100
Toiletries-$40
Household Repairs-$5
Haircuts-$50
Out-of-pocket Healthcare-$63
Non-Discretionary Total-$1,147
-
Eating Out-$250
School Breakfast/Lunch-$57
Kids Toys-$5
Massage-$65
Pet Expense-$38
Online Subscriptions-$46
Admissions/Recreation-$275
Gifts-$167
Vacations-$150
YMCA Membership-$60
Child Tutoring-$250
Misc-$25
Discretionary Total-$1,388
-
Dependent Education Savings-$367
-
Total Expenses:-$4,783
Net Monthly Savings$14,594

Balance Sheet
Assets:
Taxable   Investments$627,101
Tax Free Investments (Roth)$327,318
Tax Deferred Investments $846,281
Health Savings(HSA)$39,478
Total Invested Assets$1,840,178
Primary Residence$520,000
College Savings Accts$80,486
Total Assets$2,440,664
-
Liabilities:
Mortgage$72,280
PV of College (discounted at 5%)$89,521
Total Liabilities$161,801
-
Total Net Worth:$2,278,863

sailinlight

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #1 on: July 09, 2018, 06:07:24 PM »
Well you're definitely FI. At your spending rate, you'd only need about 1.5MM in investable assets.
How do you get such a high number for health insurance? Your source is healthcare.gov, so I assume you expect ACA to be around for a while. Whenever I run the numbers, it tells me that either I'll be on medicaid or the subsidy would render the insurance premiums to be near zero.

Also, your mortgage is almost paid off, have you thought about re-running the numbers if you refinance to see if that improves your FIRE success rate and/or spend level?

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #2 on: July 09, 2018, 06:55:29 PM »
I am realizing from just your question that I have not spent enough time researching healthcare.  I appreciate that.  If there are other reasonable healthcare options out there for early retirees, I am not familiar with what those are.  And while my wife or I may end up in places that offer benefits, I really never wanted to execute a plan that was dependent on that.  So in regards to your implied suggestion that ACA would not be around forever, I haven't spent enough time thinking about it.  But, it seemed to me to be the only option available that I could be sure would never drop me.  What do others do?

The exchange does say I may be eligible for medicaid (which I assume I am not) if I put in a sufficiently low income, but it still shows me plans.  And those plans range from $800-1400/month for me in Oklahoma.

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #3 on: July 09, 2018, 07:45:53 PM »
I always like to inquire more about people with relative low net worth to income. Did you recently start making this income? At a savings rate of $168k/year something is off. Did you just start to have MMM principles? If you were consistently savings through 2008-2018 even a 1/4 of what you been savings you should have significantly more.

Also, do you do any 401k pretax or is the 14k all after tax?

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #4 on: July 09, 2018, 08:15:48 PM »
We definitely did not always make the income we make today.  Admittedly, I could have also done a better job of disciplined investing (my only financial regret).  Here is my history (a couple of the latter year's income are just estimates as I don't have exact numbers in front of me now or the year is not yet finished).  Never owned a new car.  Never left the continent.  Nothing extravagant.  I actually think I have always had the MMM principles I have today (albeit less hard core).  Interested to hear your opinion.

Year   Gross Income   Net Worth
2009    173,854.72     400,100.94
2010    177,660.50     586,024.85
2011    219,361.48     694,708.64
2012    229,657.69     864,777.19
2013    221,876.40     1,154,641.80
2014    240,072.84     1,347,947.88
2015    282,088.32     1,457,597.88
2016    300,000.00     1,664,429.57
2017    325,000.00     2,062,703.00
2018    350,000.00     2,278,863.00

« Last Edit: July 09, 2018, 08:45:04 PM by xan »

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #5 on: July 09, 2018, 08:25:15 PM »
Oh yeah.  Missed your last question.  Until this year one of our 401ks were Roth.  This year, all are switched to pretax.  (Another financial regret I missed before).  My taxes are too high for after-tax contributions to have really been a good idea.

ysette9

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #6 on: July 09, 2018, 08:46:05 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesn’t count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isn’t a liability! It is a great thing that you set aside and use to find your kid’s education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we don’t include the college savings accounts because they aren’t “ours”, but they certainly are not a liability.
"It'll be great!"

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #7 on: July 09, 2018, 08:51:13 PM »
We definitely did not always make the income we make today.  Admittedly, I could have also done a better job of disciplined investing (my only financial regret).  Here is my history (a couple of the latter year's income are just estimates as I don't have exact numbers in front of me now or the year is not yet finished).  Never owned a new car.  Never left the continent.  Nothing extravagant.  I actually think I have always had the MMM principles I have today (albeit less hard core).  Interested to here your opinion.

Year   Gross Income   Net Worth
2009    173,854.72     400,100.94
2010    177,660.50     586,024.85
2011    219,361.48     694,708.64
2012    229,657.69     864,777.19
2013    221,876.40     1,154,641.80
2014    240,072.84     1,347,947.88
2015    282,088.32     1,457,597.88
2016    300,000.00     1,664,429.57
2017    325,000.00     2,062,703.00
2018    350,000.00     2,278,863.00

From 2009 -2018 shows great net worth growth, probably to much to ask the savings % throughout the years, most of the net worth growth can be contributed to the market.

Nevertheless, you seem to admit that in the past the core principles of saving and investing were not always met. Do you feel more confident in your abilities now? Your net worth looks awesome, however being disciplined enough to not have W2 is all about controlling your expenses for the next 30+ years. Going from 330k/year to 60-70k is a big leap.

Also why do you have 2 mortgage interest line items?
Also, if your wife is retired why is there a line item for child costs albiet, it is very small for child costs.
Internet of 110/month is very high with the 120/month cable, there isn't a bundle in your neighborhood?

I am not going to go through the "Discretionary Total", this tells me you have a lot of fat if hard times would come through.


Off topic, are you in oil and gas? I connect Oklahoma with that industry and this pay.

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #8 on: July 09, 2018, 08:57:33 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.


I think his intentions were to offset the asset column sort of like an accounts payable.

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #9 on: July 09, 2018, 09:02:17 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.



I think his intentions were to offset the asset column sort of like an accounts payable.

You are definitely right and I should have been more clear (or really just less wrong) in my explanation.  The college savings are on my balance sheet as an asset (as you correctly point out it should be).  The PV of the future college expense offsets that as a liability (so you'll see it in liabilities too).  The end result is that my Balance Sheet equity section, which I think of Total Net Worth, does not include the college savings.  Or better said, includes any shortfall/excess in that future obligation if there is any.
« Last Edit: July 10, 2018, 06:15:41 AM by xan »

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #10 on: July 09, 2018, 09:04:01 PM »

Other than that, here is a direct question that I can't get my habnds around. I would intend to live on the taxable accounts until we eventually reach 59 1/2 (16 years) or until the taxable account is exhausted.  Is it reasonable to think that my tax bracket would be zero for any LT capital gains as long as I keep sales and other retirement income under $77,400 (2018 brackets).  Or, should I be thinking of my $72k in living expenses as net after taxes... and I really need a larger number for my plan to work using the 4% rule.

You need to start looking into back door roth conversions. There is ways people have taken money out of the 401k earlier with no penalty

And last, before the numbers, would you guys still consider pulling the trigger with CAPE10 at the record-high levels we are at today?

You have a lot of fat in your budget and a decent net worth included a projected paid for house. You will be fine, question is though, will you be OKAY with cut backs if needed? This is a look in the mirror question nobody can answer for you.

A few comments about the numbers, before the numbers:
 - We do a pretty good job of tracking/recording expenses.  There is always some normalization in the numbers when trying to isolate a "normal" month, but I feel pretty confident in the numbers below.
 - I assume everyone does this, but some things are obviously amortized over the year to compute a monthly number (gifts are mostly around christmas, travel is typically one time in the summer)
 - I am tracking future dependent education expense as a liability in present value terms just because I don't consider that account to be savings that should contribute to my net worth since it is already comitted.  Personal preference, IMO.
 - I have not really done anything to adjust expenses for a post-FIRE lifestyle.  I'm inclined to think that overall it would even out.
 - For now, I am assuming we will drop most forms of life insurance (there are a few)
 - I know there is some red meat for face punching to follow.  But, life is about trade-offs, and I just hope most would agree that I am owning (and funding) my indulgences.  But please, punch away   I would get rid of the 170/month life insurance, if you die you have plenty of assets and SSI income to fall back on, you are making "DA MAN" rich with this...


ysette9

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #11 on: July 09, 2018, 09:06:38 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.

I think his intentions were to offset the asset column sort of like an accounts payable.

I always did struggle with that particular concept in accounting. Perhaps that is why I am an engineer instead.
But then why not just not include the college savings instead of discounting it to present value and ending up subtracting more than is actually in that account today? ..... Never mind, it probably isn't important in the grand scheme of things.
"It'll be great!"

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #12 on: July 09, 2018, 09:08:11 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.



I think his intentions were to offset the asset column sort of like an accounts payable.

You are definitely right and I should have been more clear (or really just less wrong) in my explanation.  The college savings are on my balance sheet as an asset (as you correctly point out it should be).  The PV of the future college expense offsets that as a liability (so you'll see it in liabilities too).  (I develop/install accounting systems for a living and have probably absorbed too much).  The end result is that my Balance Sheet equity section, which I think of Total Net Worth, does not include the college savings.  Or better said, includes any shortfall/excess in that future obligation if there is any.


How we doing compared to the fee based retirement counsel? Also, how much you pay? It's an anonymous board :)  We can all laugh about it!

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #13 on: July 09, 2018, 09:10:20 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.

I think his intentions were to offset the asset column sort of like an accounts payable.

I always did struggle with that particular concept in accounting. Perhaps that is why I am an engineer instead.
But then why not just not include the college savings instead of discounting it to present value and ending up subtracting more than is actually in that account today? ..... Never mind, it probably isn't important in the grand scheme of things.

We get the point, and don't discount your engineering brain, accounting is just simpler numbers! I'm engineer pursuing MBA so it's fresh in my brain.

ysette9

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #14 on: July 09, 2018, 09:16:10 PM »
As you say, you have enough invested assets now to cover a 4% withdrawal at your estimated $72k/year spending. Personally I am not convinced that I know enough about the CAPE's inner workings to know whether it is a solid enough indication that the US market is "overvalued" or not. That said, to hedge against that kind of a situation we are doing a couple of things. First, our equities are diversified in US and international (60/40) per Vanguard recommendations, so even if the US market doesn't provide stellar returns in the future, it isn't the majority of my portfolio. Secondly, we are going to employ the reverse equity glidepath / "bond tent" approach. (https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/) Our plan is to have an asset allocation of 60% equities, 40% bonds/cash at FI, and then spend down the bonds/cash portion first to arrive at 100% equities. You can read a ton more in the thread about not worrying about the 4% rule stickied in the Investor Alley section of these forums, but the basic idea is that if you can get past the first 10 years or so of FIRE then your portfolio should be to big to fail.

https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/
"It'll be great!"

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #15 on: July 09, 2018, 09:22:15 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.



I think his intentions were to offset the asset column sort of like an accounts payable.

You are definitely right and I should have been more clear (or really just less wrong) in my explanation.  The college savings are on my balance sheet as an asset (as you correctly point out it should be).  The PV of the future college expense offsets that as a liability (so you'll see it in liabilities too).  (I develop/install accounting systems for a living and have probably absorbed too much).  The end result is that my Balance Sheet equity section, which I think of Total Net Worth, does not include the college savings.  Or better said, includes any shortfall/excess in that future obligation if there is any.


How we doing compared to the fee based retirement counsel? Also, how much you pay? It's an anonymous board :)  We can all laugh about it!

He actually just said it looked like I was doing fine and there wasn't much he felt he could do for me during the initial consultation.  We really are nice people, so not sure why.  Maybe my net worth was not high enough.  But, there is literally only one fee-only adviser in my city.  So after that, there were no other options.

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #16 on: July 09, 2018, 09:28:12 PM »
We definitely did not always make the income we make today.  Admittedly, I could have also done a better job of disciplined investing (my only financial regret).  Here is my history (a couple of the latter year's income are just estimates as I don't have exact numbers in front of me now or the year is not yet finished).  Never owned a new car.  Never left the continent.  Nothing extravagant.  I actually think I have always had the MMM principles I have today (albeit less hard core).  Interested to here your opinion.

Year   Gross Income   Net Worth
2009    173,854.72     400,100.94
2010    177,660.50     586,024.85
2011    219,361.48     694,708.64
2012    229,657.69     864,777.19
2013    221,876.40     1,154,641.80
2014    240,072.84     1,347,947.88
2015    282,088.32     1,457,597.88
2016    300,000.00     1,664,429.57
2017    325,000.00     2,062,703.00
2018    350,000.00     2,278,863.00

From 2009 -2018 shows great net worth growth, probably to much to ask the savings % throughout the years, most of the net worth growth can be contributed to the market.

Nevertheless, you seem to admit that in the past the core principles of saving and investing were not always met. Do you feel more confident in your abilities now? Your net worth looks awesome, however being disciplined enough to not have W2 is all about controlling your expenses for the next 30+ years. Going from 330k/year to 60-70k is a big leap.

Also why do you have 2 mortgage interest line items?
Also, if your wife is retired why is there a line item for child costs albiet, it is very small for child costs.
Internet of 110/month is very high with the 120/month cable, there isn't a bundle in your neighborhood?

I am not going to go through the "Discretionary Total", this tells me you have a lot of fat if hard times would come through.


Off topic, are you in oil and gas? I connect Oklahoma with that industry and this pay.

My regret is not having enough in the market in 2009/2010 after the financial crisis.  But, I am pretty confident in our spending.
Two mortage interest lines was an oversight.
The childcare is not forward looking.  But, you are right, it will end now.
I got no good answer on the cable/internet :)  You are right there too.

I work peripherally in oil and gas.
« Last Edit: July 10, 2018, 06:12:18 AM by xan »

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #17 on: July 09, 2018, 09:32:18 PM »
Just a quick a quick comment on the college savings. I agree with you that it doesnít count towards your retirement savings, and therefore not towards your net worth for the sake of calculating whether you are FI, but it certainly isnít a liability! It is a great thing that you set aside and use to find your kidís education 8 years in the future. Are you trying to indicate that the amount you have saved is insufficient to the tune of $80k?

In our own calculations we donít include the college savings accounts because they arenít ďoursĒ, but they certainly are not a liability.



I think his intentions were to offset the asset column sort of like an accounts payable.

You are definitely right and I should have been more clear (or really just less wrong) in my explanation.  The college savings are on my balance sheet as an asset (as you correctly point out it should be).  The PV of the future college expense offsets that as a liability (so you'll see it in liabilities too).  (I develop/install accounting systems for a living and have probably absorbed too much).  The end result is that my Balance Sheet equity section, which I think of Total Net Worth, does not include the college savings.  Or better said, includes any shortfall/excess in that future obligation if there is any.


How we doing compared to the fee based retirement counsel? Also, how much you pay? It's an anonymous board :)  We can all laugh about it!

He actually just said it looked like I was doing fine and there wasn't much he felt he could do for me during the initial consultation.  We really are nice people, so not sure why.  Maybe my net worth was not high enough.  But, there is literally only one fee-only adviser in my city.  So after that, there were no other options.

They see dollar signs and probably saying you look good continue working. They are not trained in the things that are talked about here, how to avoid paying 401k & Roth penalties before 59 1/2...

He probably said something along the lines of continue investing and your allocation looks great!


Nevertheless, you are doing good, I am thinking you budget is on the extreme high with a paid off house. Next, you need to find out the 401k to roth conversion, i haven't studied this but know people do it but there is a certain income threshold you need to be under.

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #18 on: July 09, 2018, 09:36:16 PM »
We definitely did not always make the income we make today.  Admittedly, I could have also done a better job of disciplined investing (my only financial regret).  Here is my history (a couple of the latter year's income are just estimates as I don't have exact numbers in front of me now or the year is not yet finished).  Never owned a new car.  Never left the continent.  Nothing extravagant.  I actually think I have always had the MMM principles I have today (albeit less hard core).  Interested to here your opinion.

Year   Gross Income   Net Worth
2009    173,854.72     400,100.94
2010    177,660.50     586,024.85
2011    219,361.48     694,708.64
2012    229,657.69     864,777.19
2013    221,876.40     1,154,641.80
2014    240,072.84     1,347,947.88
2015    282,088.32     1,457,597.88
2016    300,000.00     1,664,429.57
2017    325,000.00     2,062,703.00
2018    350,000.00     2,278,863.00

From 2009 -2018 shows great net worth growth, probably to much to ask the savings % throughout the years, most of the net worth growth can be contributed to the market.

Nevertheless, you seem to admit that in the past the core principles of saving and investing were not always met. Do you feel more confident in your abilities now? Your net worth looks awesome, however being disciplined enough to not have W2 is all about controlling your expenses for the next 30+ years. Going from 330k/year to 60-70k is a big leap.

Also why do you have 2 mortgage interest line items?
Also, if your wife is retired why is there a line item for child costs albiet, it is very small for child costs.
Internet of 110/month is very high with the 120/month cable, there isn't a bundle in your neighborhood?

I am not going to go through the "Discretionary Total", this tells me you have a lot of fat if hard times would come through.


Off topic, are you in oil and gas? I connect Oklahoma with that industry and this pay.

My regret is not having enough in the market in 2009/2010 after the financial crisis.  But, I am pretty confident in our spending.
Two mortage interest lines was an oversight.
The childcare is not forward looking.  But, you are right, it will end now.
I got no good answer on the cable/internet :)  You are right there too.

I work peripherally in oil and gas.  A software company that services oil and gas companies.


There is a lot of fat in your budget, a lot...

ysette9

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #19 on: July 09, 2018, 09:36:54 PM »
If a financial advisor is something you would really like to take a last look before you pull the trigger, you certainly are not limited to the only one in your town. The Garrett Planning Network and XY Advisors are fiduciary advisors who can do virtual consultations. I am looking into whether one might be a good fit for us as well for a second set of eyes on our plan. The other thing I have toyed with is Root of Good who does retirement consulting on the side. https://rootofgood.com/early-retirement-consulting/ I have no idea how qualified he is in the details, but he is living the FIRE life that we all aspire to, so he at least understands the nuances of our particular situations, which is more than most financial advisors are likely to get.
"It'll be great!"

gpyros85

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #20 on: July 09, 2018, 09:40:46 PM »
If a financial advisor is something you would really like to take a last look before you pull the trigger, you certainly are not limited to the only one in your town. The Garrett Planning Network and XY Advisors are fiduciary advisors who can do virtual consultations. I am looking into whether one might be a good fit for us as well for a second set of eyes on our plan. The other thing I have toyed with is Root of Good who does retirement consulting on the side. https://rootofgood.com/early-retirement-consulting/ I have no idea how qualified he is in the details, but he is living the FIRE life that we all aspire to, so he at least understands the nuances of our particular situations, which is more than most financial advisors are likely to get.

Justin @ root of good would definitely help unlock those taxable assets! Also, he has a similar net worth but much less spending.

xan

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #21 on: July 09, 2018, 09:56:00 PM »
Thanks to you both for your input.  Your feedback has been enlightening!  I've got a minimum 6 more months before I do anything, so I have some time to research/enact some of your suggestions.

ltt

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #22 on: July 11, 2018, 04:07:05 AM »
Any thoughts as to downsizing home?  A $500,000+ home in a LCOL area in the southern Midwest is, more than likely, a very large house, especially as there are just the 3 of you.

SuperSecretName

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #23 on: July 11, 2018, 06:27:20 AM »
Other than that, here is a direct question that I can't get my habnds around. I would intend to live on the taxable accounts until we eventually reach 59 1/2 (16 years) or until the taxable account is exhausted.  Is it reasonable to think that my tax bracket would be zero for any LT capital gains as long as I keep sales and other retirement income under $77,400 (2018 brackets).
for clarity to others, you are filing MFJ.  So, the answer is yes

reeshau

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Re: Case Study: Ready to Fire or Inch Out Another Year
« Reply #24 on: July 12, 2018, 02:52:51 AM »

Other than that, here is a direct question that I can't get my habnds around. I would intend to live on the taxable accounts until we eventually reach 59 1/2 (16 years) or until the taxable account is exhausted.  Is it reasonable to think that my tax bracket would be zero for any LT capital gains as long as I keep sales and other retirement income under $77,400 (2018 brackets).  Or, should I be thinking of my $72k in living expenses as net after taxes... and I really need a larger number for my plan to work using the 4% rule.

You need to start looking into back door roth conversions. There is ways people have taken money out of the 401k earlier with no penalty


To first answer xan's question:  yes, as long as your sales from the taxable accounts are qualified, long-term capital gains, those would be at 0% for those in the 10% or 12% tax bracket, or $77,200 for 2018.

Now, the caveats:  if you engage in back-door Roth, that adds taxable income to your returns now.  Your planned spending is pretty close to the limit already, so your room for backdoor is pretty small.  If you plan to approach this, I would also make sure you have a sufficient emergency fund, so that large, unplanned expenses don't drive you to have to cash in more than planned, and spoil the whole thing.  (over by $1, and you pay CG on the whole thing)

Second caveat:  this is argued at length elsewhere xan, but since you bring it up:  remember that the 4% rule was formulated for a 30 year retirement.  As others have said here, you have plenty of fat in your budget to trim in down years.  The 4% rule also does not take into account any such adjustment, which allows the margin of safety to do initial planning for longer timespans.  But, some would prefer to de-rate the spending amount as another means of compensating for it.

Third caveat:  While you asked about taxes during your taxable withdrawal period, clearly when you move to using the pre-tax account, this will be ordinary income and your budgeting will have to allow for this.  Your question seemed detailed enough to anticipate this, but you didn't state it outright, so I thought I would mention it.

For spending items:  One thing not yet mentioned is your transportation spending.  I would hope, unless you are planning on long road trips, that your gas would go down.  Also, be sure to tell the insurance company you are no longer commuting on a daily basis, and your insurance should go down too.