Author Topic: FIRE Progress Check and what to do next?  (Read 3961 times)

dhlogic

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FIRE Progress Check and what to do next?
« on: May 27, 2018, 02:17:14 PM »
Hi everyone,

I first heard of MMM in 2013 and really started to get serious about FIRE shortly after. Luckily I have always been somewhat frugal and didn't have to make any drastic changes. I've always been the one among my friends to encourage saving for retirement and generally read about it more than anyone I know. With that being the case, it always seems like I'm the one giving advice or introducing ideas/strategies to achieve FIRE. What I would really appreciate is a different perspective outside of my own or from my coworkers/friends who just learned the difference between a roth and traditional 401k. I have some questions below.

Life Situation: I'm 35, single, 0 dependents, and currently live near Milwaukee, WI. Looking to FIRE in the next 5-6 years or so in this area.

Gross Salary/Wages:

$1,200-1,300 a week from employment. From that amount $315 is tax free due to an employer per diem program.

$315 per week tax free from the VA Post 9/11 GI Bill Apprenticeship Program, will end in Nov 2019.

$200 per week tax free from VA disability. I received separation pay in a lump sum upon separation from the Armed Forces. I won't see this disability pay directly until this balance is repaid, which will take 5 years or so. I also expect have this pay decrease to about $60 a week, but will have then have it for life.

Total:  $79,000 annually

Individual amounts of each Pre-tax deductions:

401k: Around $600 per week until $18,500 is reached
Medical/Dental/Vision: $38.25 per week

Adjusted Gross Income:

~$60,000 annually.

Taxes:

While contributing 60% of my pretax income to my 401k, and $315 of my paycheck being tax free, this is what my taxes look like with 2 allowances:

Fed Withholding: $7.24
Fed MED/EE: $11.67
Fed OASDI/EE: $49.92
WI Withholding: $6.92

Total: $75.75 per week

I don't itemize and take the standard deduction.

Current expenses per month:

Rent - $400 (includes all utilities, internet, insurance)
Cell Phone - $53.68 (unlimited data plan from a Verizon MVNO, I need 10GB+ of data a month for job)
Groceries - $300 (includes everything spent on eating out as well)
Car Insurance - $22 (300k/500k bodily injury, 300k property, UIM 300k/500k, no collision/comprehensive on an older 90s Honda)
Car Maintenance - $85 (Usually go years without spending anything, when it does happen its usually several hundred dollars on normal maintenance/repair items)
Car Fuel - $20 (Drive 150-200 miles per month, use company vehicle for nearly all driving)
Gifts - $15 (Christmas/Birthdays/etc averaged out over the year)
Donations - $435 (Tithe and charities)
Clothing - $25 (Usually go years before buying anything, but then usually replace quite a bit, like all socks and underwear get replaced at one time)
Household goods - $25 (hygiene products, cleaning supplies, random house stuff)
Hobbies/Fun - $100 (Music, PC hardware/software, electronics, live events, etc)

Total: $1,480.68

Assets:
Checking - $14,800 (Will be buying more VTSAX in my taxable account shortly)
Trad 401k - $200,000 (All VTSAX)
Roth 401k - $143,000 (All VTSAX)
Roth IRA - $86,500 (All VTSAX)
Trad IRA - $5,500 (All VTSAX)
Taxable - $192,500 ($110k in VTSAX and $92.5k in VSCGX a 40% stock / 60% bond fund)

Total: $642,000

Liabilities: None

Additional Information:

Social Security estimates payments of $21k per year at 70 years old

My employer's 401k match isn't great, 10% on 6% of contributions, I max it out anyways. 5 years to be 100% vested.

Employee Stock Ownership Program - Employer contributes 11.2% of my salary after deductions, eligible to participate after 1 year of employment, then 5 years to be 100% vested

Questions:

I've been able to keep expenses moderately low and dutifully save a decent portion of my paycheck. While not perfect, I think I'm doing okay in the area of expenses and assets saved so far. After 6 more years of saving $18.5k in my 401k, $5.5k in an IRA per year, and having accumulated ~$50k in my ESOP, I will have around $836k in assets even with no further appreciation. With planned spending of $30-35k per year in FIRE, it looks like I'm on track to FIRE at 40 in 2023. Is there anything I'm overlooking?

I'd like to own a house before FIRE and have it paid off by then. I was initially toying with the thought of owning rental properties, but I don't think I want to add that kind of complication to my life. Originally the purpose of the $92.5k of VSCGX in my taxable account was to buy rental properties/primary residence, which is why the balance is so high. While I don't have a specific property or timeline in mind, I'm looking to buy a house in the $150k range. What would you do with the $92.5k I have? Use $30k to make a down payment, put the rest in VTSAX and pay off the remaining $120k before I FIRE? Use all of it for a down payment? Get a VA loan, put all $92.5k in VTSAX and pay the entire $150k off in 6 years?

So I'm FIRE at 40 and have 19 years until I get penalty free access to everything. I know about Roth contribution withdrawals, trad to roth ira conversions, 72(t) early distributions, but I can't seem to fit it all together in a solid plan. What can I do to educate myself in the area? While accumulating, MDM's investment order thread logically lays everything out in an easy to follow manner, but I'm having difficulty doing the reverse. Even though I keep getting closer to the number I need to FIRE, it seems like I can't really do it because I feel unsure on how to go forward.

Thanks for your time and any insights you have!

ysette9

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Re: FIRE Progress Check and what to do next?
« Reply #1 on: May 27, 2018, 03:07:35 PM »
Is here a reason you are planning on spending $30-35k per year in FIRE if you are spending $18k a hear now? That is a pretty big uptick, percentage-wise. At $18k a hear you could buy that $150k house outright now and be done. It is better numbers-wish to have the mortgage and invest the difference, so I merely say that as a simple illustration.

dhlogic

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Re: FIRE Progress Check and what to do next?
« Reply #2 on: May 28, 2018, 04:06:19 PM »
Well, wanted a little larger buffer as home ownership is going to be more expensive when compared to my current situation. Right now theres no need for me to budget for appliance replacement, new roofs, property taxes,etc.

Also I like to do a little travel and get back into motorcycle riding which I dont have on the budget. And there's always the unpredictable aspect of healthcare.

Basically I'd just like to be able to spend a little more than close to barebones budget I have now, if that makes sense.

Happily Irrelevant

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Re: FIRE Progress Check and what to do next?
« Reply #3 on: May 28, 2018, 05:33:52 PM »
Is health insurance in your figures and I'm just missing it?  I know at 50% the VA pays all medical, I'm not sure what the deal is below that.

dhlogic

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Re: FIRE Progress Check and what to do next?
« Reply #4 on: May 28, 2018, 08:34:13 PM »
It's included under pre-tax deductions at $38.25 per week.

I do qualify for free health care from the VA and I am enrolled, but I decided to get covered under my employer's plan as well. Probably not necessary to have both.

A portion of my service connected disability isn't permanent and I expect it to go down eventually. When FIRE though I am strongly considering using the VA. Means testing doesn't look at net worth, just income. For 2018 $32,715 and under would get you free health care and under $40,550 would get you 80% reduction in co pays.

Wayward

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Re: FIRE Progress Check and what to do next?
« Reply #5 on: May 29, 2018, 10:59:26 AM »

dhlogic

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Re: FIRE Progress Check and what to do next?
« Reply #6 on: May 31, 2018, 07:30:38 PM »
Thanks Wayward,

Looks like im going to have to play around with excel and see how different scenarios play out.

Is anyone aware of any bloggers or journals from people who have used these strategies and layout their numbers and thought process?

And for my house question, I think I'm leaning towards no a down payment VA loan, invest the 92k in VTSAX and payoff the mortgage before FIRE.

MDM

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Re: FIRE Progress Check and what to do next?
« Reply #7 on: May 31, 2018, 10:51:12 PM »
Is anyone aware of any bloggers or journals from people who have used these strategies and layout their numbers and thought process?
Somewhat duplicative of what Wayward posted, but see also How to withdraw funds from your IRA and 401k without penalty before age 59.5.

Might also be worth trying Optimal Retirement Planner - Extended Parameter Form for some ideas on sequence of withdrawals.

Rocketman

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Re: FIRE Progress Check and what to do next?
« Reply #8 on: June 01, 2018, 06:36:30 PM »
Like you said, renting is cheaper than owning your house right now. One other option is to keep renting (if you like your rental situation), keep saving, then when you decide to buy - just write a check for the entire amount. That will save you loan costs, plus interest.

You may decide you want to retire in a slightly different place that you would want while working.

harvestbook

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Re: FIRE Progress Check and what to do next?
« Reply #9 on: June 04, 2018, 07:38:09 PM »
Did you figure your social security with all the zero years figured in? The formula usually projects your social security payment based on if you make the same amount per year up to your retirement age. $21k seems like a lot for a relatively modest earner retiring at 40.

Other than that, the rest looks doable if you maintain flexibility to lower expenses if necessary.

MDM

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Re: FIRE Progress Check and what to do next?
« Reply #10 on: June 04, 2018, 09:42:33 PM »
Did you figure your social security with all the zero years figured in? The formula usually projects your social security payment based on if you make the same amount per year up to your retirement age. $21k seems like a lot for a relatively modest earner retiring at 40.
Reasonable question, but someone born in 1983 and earning a little less than half of the SS wage maximum from 2005-2023 would get that $21K at age 70, based on the 'SocialSecurity' tab in the case study spreadsheet.  E.g., that would include ~$61.4K in 2018 earnings, which is in line with the OP.