Author Topic: Case Study - Retire at 50, on the right path?  (Read 1844 times)

The Stoic

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Case Study - Retire at 50, on the right path?
« on: June 16, 2018, 07:01:26 AM »
Hello to all!  As is the case with many others, I wish I had stumbled upon this site years ago!  I wanted to lay out my current situation and would greatly appreciate any feedback or advice on where Im at.   Ive really put a concerted effort into changing our shitty spending/investing ratio over the past year and will continue to make adjustments.

I am 39, married, and have three kids who are 12, 10, and 7 who are very active in sports/activities.  My goal is to retire from my current full time job in 11 years once my youngest is in college.  At that point, we are planning on relocating from upstate NY to Hawaii and would likely pick up some contract part-time work to cover health insurance expenses.   I like my job and am happy with where my life is at today, but looking ahead, I would love to start spending my days in a warmer climate surfing, kayaking, hiking, and fishing.

Income: 
$128k, 26 paychecks per year.  I budget around 2 per month which is $6400 take home pay, and the other 2 bonus checks are allocated to my property/school taxes.  I adjust my withholdings for a target zero Fed/State Income tax liability.  My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.

Expenses:
No credit card debt
Mortgage:  $1200.  Approx. $165k remaining @ 3.5%
HELOC:  $600.  Approx $9500 remaining @ 5.75%!
Home/Auto Ins:  $100
Food:  $1k  Current focus point, includes groceries and going out to eat
Cell:  $80 for 2 phones
Gas/Elec/Water:  $250 average
Guitar Lessons:  $100  Ending this month
Gymnastics:  $75  Ending this month
Gas:  $300  Looking into EV for me which would cut this in half
Pets:  $50
Misc Kids Activities:  $100
Betterment Contribution:  $1k
Vacation Budget:  $250
Misc (entertainment and anything else I cant think of): $100
Home Expenses:  $750  Tough to ballpark this one, new windows this year, roof next, landscaping, etc
Extra gets applied towards mortgage or HELOC

Assets:
529 Plans (for kids college):  $80k
IRAs:  $300k
Home:  $350k
401k:  $48k  Im now investing 18k per year with a $7800 per year company match.
Betterment:  $10k
Savings Account:  $0.  Been using my HELOC as needed

Short Term Strategy:
Suspend Betterment contributions to pay off HELOC and build up a $10k savings account buffer.
Curtail Food Spending
Payoff Mortgage in 6 years, once clear, extra $ will be invested.
Exchange current shitty car for EV

Long term Goal:
Aggressively targeting a $1.8M net worth by 50.  Would plan on pulling $40k per year and using 800k for new home.  Income supplemented by part time work.
Help pay for kids college.

Thank you again, and Im grateful to have found such a wonderful community!

FiveSigmas

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Re: Case Study - Retire at 50, on the right path?
« Reply #1 on: June 16, 2018, 11:18:06 AM »
My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.

Hi Stoic. Welcome!

Why not include your both your wife's income and the expenses it covers in the above analysis? It might add some additional pertinent information (e.g., what your car loan APR is). It also might help gain deeper insight into what your expenses will be post-retirement.

CrispKale

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Re: Case Study - Retire at 50, on the right path?
« Reply #2 on: June 16, 2018, 12:23:02 PM »
Quickly calculating out the income/assets/and expenses given looks like you currently have a savings rate of about 25%(going to betterment & mortgages). I removed out the expenses that were ending this month as those no longer matter and with no further cutting or payoffs I see it will take about 7 years and a couple of months to reach 1.2 million (4% withdrawal rate, 7%annual growth). So if you are targeting 11 years and 1.8 million you are well on track to reach both your net worth goal and your retirement age. If you do wipe the mortgage payment out and cut expenses you of course will be able to reduce the time required to get there.

Just for fun motivation the graph that accompanies my expense calculator tells me that with your numbers the given amount spent on groceries is costing you almost 1.81 years of the stated 7.

reeshau

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Re: Case Study - Retire at 50, on the right path?
« Reply #3 on: June 16, 2018, 03:15:05 PM »
My wife also earns about $1k per month, but that income coves her car loan, and misc expenses for herself and the kids so I will exclude that from this study.

Hi Stoic. Welcome!

Why not include your both your wife's income and the expenses it covers in the above analysis? It might add some additional pertinent information (e.g., what your car loan APR is). It also might help gain deeper insight into what your expenses will be post-retirement.

This was exactly my first thought, too.  Stoic, you mention you need to work on your car, but what about your wife's?  And you quote $100 in miscellaneous, but really there is some multiple of that, which you attribute to your wife's income.  Separating incomes and expenses is tying one arm behind your back--money is fungible; it doesn't differentiate among sources or uses.

Or, thinking on step further, is your family on board with this plan?  Or is this a dream you have not shared with them?  For sure, you won't be able to take such a big step unless you are all pulling together.

ixtap

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Re: Case Study - Retire at 50, on the right path?
« Reply #4 on: June 16, 2018, 03:43:07 PM »
I am interested in the $40k budget with a $800k home. Even with the cheapest Hawaii taxes, you are down to 37,000, so about $3k a month. What is included there? Airline tickets for the college kid(s) to come to Hawaii? Higher cost of food in Hawaii?

Does your family not wear clothes? Regular vehicle maintenance? Internet?

How do you plan on paying for this new to you electric vehicle. Can you charge it at home?

Dee18

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Re: Case Study - Retire at 50, on the right path?
« Reply #5 on: June 17, 2018, 10:04:32 AM »
With 3 kids, active in sports, plan ahead for the teen years.  Some possible ideas: make clear that kids will be responsible for the cost of their own cell phones and cell service, expect kids to start supplying their own spending money at certain ages for certain things, beware of kids getting involved in expensive club teams that involve paying for coaches and travel, etc.

Also, if your children are raised on the mainland, are they going to go to college there?  Are you going to want to be that far away from all of them during their college/ young adult years?  I say this only because my plan was similar to yours, but now that my daughter is finishing college I realize that I dont want to be more than an easy days drive away.

The Stoic

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Re: Case Study - Retire at 50, on the right path?
« Reply #6 on: June 17, 2018, 02:29:26 PM »
Thank you all very much for the responses, they are appreciated and have given us some things to think about!

Just to answer a few of the questions in this thread, my wife's car payment is about $530 per month 4.5 years left @ 1.9% (ugh) for a 2016 Toyota Highlander to haul the kids around.  She is coming on board with our new approach as we've drastically reduced wasteful spending over the past year, cut our ridiculous cable bill in half, and this car was actually a step down from a 45k car she had her heart set on.  Outside of the car and the food budget, it feels like we've done a fairly decent job of streamlining our expenses.

To another question about college, we very well may end up hanging around here until my youngest is out of college (also would depend on where she goes).  I don't want to bail on them if it is too early so we may end up staying in our current home a few years after I retire or go part time at 50. 

The 1M:800k ratio for savings/house was just a ballpark.  We would like to ultimately build a small 2 bedroom home so the 800k might be a bit high.  I would be working a bit while there, so the 40k in retirement would be supplemented by part time income / social security post 66.   

Regarding my vehicle, I'm in the process of selling my Mazda 6 which has a blue book around 8k and purchasing a used Leaf which I have seen go for 10-12k in my area.

Great point someone also made about teenage years.  We've limited activities like travel sports and guitar lessons (since I can now teach my son) and are already holding off the 12 year old who is asking for a cell phone!  That being said, I think they kids are costing more than I indicated in the expense breakdown above!
« Last Edit: June 17, 2018, 02:40:23 PM by The Stoic »

Kierun

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Re: Case Study - Retire at 50, on the right path?
« Reply #7 on: June 26, 2018, 03:50:21 PM »
The 1M:800k ratio for savings/house was just a ballpark.  We would like to ultimately build a small 2 bedroom home so the 800k might be a bit high.  I would be working a bit while there, so the 40k in retirement would be supplemented by part time income / social security post 66.   
Which island are you planning on building this home on and which part of the island?  That'll make a substantial difference in cost.  You should consider that question when budgeting for that future.  These are prices now, who knows how high it'll be 10 years down the road, but in some areas you might find a 5,000 sq ft vacant lot for 700k or you can look at Puna where it's a fire volcano sale going on.