Author Topic: Help me plan my FIRE  (Read 1430 times)

BoyOhBoy

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Help me plan my FIRE
« on: July 25, 2017, 10:31:44 AM »
I've been participating in the forum for a few months now. I made a new user name to help protect my identity a bit. I just started to take FIRE serious about 1 year ago.

I maxed out my 401k for the first time last year, this year I'm maxing it and my Roth out.

My goal is to FIRE by 45 at the latest, I'd like to do it by 42 if possible. I'm current 32.

Married with ~1 year old child. We are planning a second baby in 1-2 years, then snip snip for me.

Our current budget is about 40k/yr, which includes our mortgage.

We want to use a 3.5% SWR, targeting a yearly budget of 40-50k. We'd like to stay on the higher end to account for health care, cost of raising kids, and travel.

I calculate a nest egg of about 1.4MM to achieve. Does that sound correct?
   
Salary    $95,000.00
Bi-Weekly    $3,653.85
Local Taxes    $164.42
401k & HSA    $828.52
Fed Taxes    $673.77
After Deduction Bi    $1,987.14
After-Tax Yearly    $51,665.53
After-Tax Monthly    $4,305.46

My Assests:   
401K    - $7,800.00
Roth IRA   -  $5,900.00
tIRA    - $200,000.00 (from two previous employer 401k's)
Taxable   -  $17,000.00 (e-fund, goal is to get to 40k)
Savings   -  $9,200.00
"Kids" fund    -  $7,100.00 (Long term savings for kids - college, emergencies, weddings?)
HSA   -  $1,000.00 (will be 2k + 1K employer match at end of year, will add more if cashflow available in last quarter)

Wife Assets   
401k    - $80,000.00
Roth IRA   -  $40,000.00

Total   -  $368,000.00

Home   
Worth about 225k   
Owe 116k @3.25%, will be paid off in 10 years (11/2027)   

                          Monthly Expenses      Yearly
Mortgage                     $1,102.00     $13,224.00
Property Tax                $349.54     $4,194.52
Groceries/Dining                $450.00     $5,400.00
Life Insurance                $190.00     $2,280.00
Home/Auto Ins                $180.56     $2,166.76
Medical                        $364.02     $4,368.26
Dental                          $32.41     $388.96
Vision                          $17.36     $208.26
Legal                                  $18.01     $216.06
Phone                          $80.00     $960.00
Electric                         $122.28     $1,467.36
Gas                                   $60.44     $725.29
Water/Sewage/Trash           $50.00     $600.00
Internet                           $35.00     $420.00
Hulu/Netflix                   $22.00     $264.00
Auto (gas, car wash, etc)   $65.00     $780.00
YMCA                           $66.67     $800.00
Misc                              $150.00     $1,800.00 (home improvement, toiletries, hair cuts, clothing, etc)
Total    $3,355.29     $40,263.47


How does the budget look? Am I missing anything major? I think we are pretty streamlined for expenses. I'm trying to talk my wife into switching to Google FI or Ting to save on cell phone.
My bigger questions concern my wife. She was planning to go back to work after the baby, but now she doesn't want to, so we are losing her salary (86k/yr).
We've kept separate finances up to this point and are looking to combine.
Am I allowed to roll her 401k into my tIRA?
Am I allowed to make additional Roth contributions for a non-working spouse?
Please facepunch me.
« Last Edit: July 25, 2017, 10:35:27 AM by BoyOhBoy »

onewayfamily

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Re: Help me plan my FIRE
« Reply #1 on: July 25, 2017, 10:55:59 AM »
No facepunch from me - I think you're doing great so far. I'll even challenge you to reach FI in less than 10 years, I definitely think it's possible for you.

Yes you should combine finances...much simpler and a lot of economies of scale to be had, not to mention less mental clutter.

You can probably get your phone costs down a bit - there are lengthy discussions on here if you do a search for Google Fi and the like.

I'll allow the others to come through and further scrutinize!
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2Birds1Stone

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Re: Help me plan my FIRE
« Reply #2 on: July 25, 2017, 11:10:00 AM »
Looks good, life insurance looks really high for 32 year old healthy person.

Is this is term policy?
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BoyOhBoy

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Re: Help me plan my FIRE
« Reply #3 on: July 25, 2017, 11:18:09 AM »
Looks good, life insurance looks really high for 32 year old healthy person.

Is this is term policy?

It is a whole life (I know, I know) + term for wife and I. It was a lot higher because we also had a whole life for my wife. I cancelled hers about a year ago. Its a long story, but basically I feel we were taken advantage of by an insurance sales man. He talked us into whole life policies when we were fresh out of school and making a good salary for the first time. I didn't know anything about money at the time. Mine is finally "positive" so I'm not cancelling it. Cash value is around 10k and increases each month.

CowboyAndIndian

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Re: Help me plan my FIRE
« Reply #4 on: July 25, 2017, 12:16:24 PM »
Am I allowed to roll her 401k into my tIRA?
No. Remember, retirement plans are individual, not joint programs. She should roll her 401k into a Vanguard account in HER name.

Quote
Am I allowed to make additional Roth contributions for a non-working spouse?
I think you can make a spousal IRA contribution. Not sure of a Roth.

Quote
Please facepunch me.

Minor face punches.

As 2Birds said your Insurance is high. Close the whole life and get a term life policy for about 20% of that cost. It just does not make sense. Do the math on this.

As you said, the cell phone expenses are high.

fuzzy math

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Re: Help me plan my FIRE
« Reply #5 on: July 25, 2017, 04:01:15 PM »
You're both doing really well! I don't see travel as a yearly budget item though.

You both can contribute $5500 to an IRA -- some of that may not be deductible since you have accounts at work, check with an accountant. if not deducible definitely do a Roth. your combined incomes appear to be below the ROTH threshold.

You're paying almost $2500 a year to keep $10k worth of insurance? Every 4 years you've paid for that $10k again and again. You're never going to end up ahead of them... you lost the race. Drop out.

If you guys wait closer to 2 years for the next kiddo then your wife could work those last 2 yrs before staying at home. I'm going to assume you're both maxing out your 401k ?
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jlcnuke

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Re: Help me plan my FIRE
« Reply #6 on: July 25, 2017, 04:21:24 PM »
Don't forget to budget for infrequent expenses, like replacing stuff around the house (roof, A/C, etc), getting another car eventually, etc. Those should be "planned" expenses since you can anticipate their need, if not the exact date of that need.

Also, what recurring legal bills do you have each year? I paid for my legal docs (will, medical directives etc) once and don't expect to need to do anything with them for years.
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BoyOhBoy

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Re: Help me plan my FIRE
« Reply #7 on: July 26, 2017, 06:00:44 AM »
You're both doing really well! I don't see travel as a yearly budget item though.
...
You're paying almost $2500 a year to keep $10k worth of insurance? Every 4 years you've paid for that $10k again and again. You're never going to end up ahead of them... you lost the race. Drop out.
...
I'm going to assume you're both maxing out your 401k ?

Thanks, we don't do much travel right now since we have a young baby and are planning for the next. We plan to travel more when the kids are older.

For the insurance, it is a 10k cash value right now and grows every month. The insurance policy itself is 140k whole + 400k term for me and 300k term for my wife. I calculated it about a year ago, but can't find the file. I'll end up paying something like 63k into it for a cash value of 140k. Not great, but not terrible. IIRC its high 3 or low 4% return. I'll re-evaluate again.

I am maxing my 401k. My wife hasn't been working for the past year, she has been with the baby. Before that it was a struggle to get her to put just 10% in her 401k.

BoyOhBoy

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Re: Help me plan my FIRE
« Reply #8 on: July 26, 2017, 06:04:29 AM »
Don't forget to budget for infrequent expenses, like replacing stuff around the house (roof, A/C, etc), getting another car eventually, etc. Those should be "planned" expenses since you can anticipate their need, if not the exact date of that need.

Also, what recurring legal bills do you have each year? I paid for my legal docs (will, medical directives etc) once and don't expect to need to do anything with them for years.

Yes, that is a very good point and I learned that lesson last night. Our fridge died and we had to go out an buy a new one. When did fridges get so expensive? Last time I bought a fridge about 10 years ago it was less than $600. The cheapest we could find that was a decent size was $999. The one my wife wanted was $1900. Talked her into a model that was $1499. Yesh.

I don't have any recurring legal bills. I signed up for the legal plan this year to get our wills, living wills, and a trust set up since we just had a baby. Total cost with legal plan will be about $250. Without it I would have paid about $1500 to have a good lawyer set it up. I'll cancel the coverage during next years benefit enrollment.

Roots&Wings

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Re: Help me plan my FIRE
« Reply #9 on: July 26, 2017, 11:20:35 AM »
Don't forget to budget for infrequent expenses, like replacing stuff around the house (roof, A/C, etc), getting another car eventually, etc. Those should be "planned" expenses since you can anticipate their need, if not the exact date of that need.

+1. Typically 1% of the value of your home per year is recommended savings for maintenance items. Other potential major budget omissions I saw were travel, gifts, and as your stash grows, estimated taxes.