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 SheetAssets: | | | |
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 |