Too much money in retirement accounts?

[onourjourney]

Life Situation:
Married filing jointly.
I’m 44, husband is 51.
Two kids, 12 and 14.
Living in Southeast U.S. in average COL area.

Gross Salary/Wages: Before any deductions
235,000 combined

Individual amounts of each Pre-tax deductions:
We are both maxing out 401k accounts at 19,000/yr + 5000 company match each for total annual 401k contributions of 28,000 (correction: 53,000)

Other Ordinary Income:
No other income sources ATM, but this is what I’m currently focused on... I’m starting to create digital assets that can pay a small amount of recurring income and grow that over time. I’m wondering if saving up cash to buy a rental property so it will pay out each month (minus repairs, maint, insurance, and taxes) is a good idea.

Adjusted Gross Income:
$207,000 if my math is correct

Taxes:
I don't have the tax info specifically, but our take home pay combined after income taxes, healthcare, and pretax retirement savings is $138,494

Current expenses:
Food and Dining: 2,700/mo (Edit: We only eat out once a quarter. This number includes paper products, fem products, and other occasional cooking supplies. It IS still very high for a family of four. I'm working to get it down while still buying fresh, organic, and local foods as well as gluten free items for "essentials" like bread which cost at least 3x regular bread - due to Celiac disease.)

Financial (health insurance, car ins, life ins, etc): 285/month
Cars (maint, gas, ins): 400/mo
Utilities and house-related bills: 460
Discretionary spending: 400
Home improvement/supplies: 200
Pets: 50
Entertainment: 100
Gifts: 150
Kids: 950
Health (supplements, copays): 300
Significant yearly trip: 6000 (500/mo)
Swim club: 75/mo
Misc: 150
Total expenses (rounded): 7,000/month or 84,000/year

No mortgage, no car payment.
Taxes and insurance on the house is 6000/yr and HOA is 720/yr

Assets
Retirement accounts:
401k accounts: 595,000
IRAs (rollovers from previous employers): 545,000
Roth IRAs: 98,000
Retirement account total: 1,238,000

Taxable accounts:
Vanguard index fund: 4,000
Cash savings: 60,000
Taxable total: 64,000

College savings:
529: 60,000 (total for both kids)

Home Value: 495,000
Car Values: Negligible
Land: 22,000 (really close to selling using owner financing at 8% for 3.5 years)

Edited to add projected SS benefits (if worked until 67 -  I don't know how to calculate the benefit for earlier retirement):
Me: 2,612/month
Husband: 2,781/month

Liabilities:
No debt!

Networth:
1,324,000 (not counting the house)
1,819,000 (if I count the market value of the house)

Specific Question(s):
Using the 4% rule of thumb, 25x annual expenses is 2,100,000. If that is right, then we are either $798,000 or $276,000 away from FI (depending on how I calculate net worth). I’m figuring retirement plus taxable accounts to arrive at that gap.

If we continue our pretax contributions of 28,000, we should have an additional 72,000 to save each year.

My questions are:

• Should I include the value of our house in the net worth? If I do, the Mustache Calc estimates 1.7 years to FI. If I don’t it’s over 5 years to FI. Big difference, so I’d love to hear some opinions!
• Since most of our money is in retirement accounts, what are our options for saving between now and FI in order to have money to live off of during the early years of retirement?
  

[ixtap]

The house is part of your net worth, but I would not considerate it as part of your stache, if you plan to continue to live in it. This will provide a buffer for retirement planning, as you can draw on it if necessary, but it is also realistic if you consider this your long term home.

For savings: do you have access to after tax savings in your 401ks that you could convert to Roth (mega backdoor Roth)? Is your health insurance HSA eligible? Is the 51yo making catch up contributions? Are you both making Roth IRA contributions? With your income, it might make sense to wait until you do taxes each year, in order to confirm eligibility, assuming the large traditional IRA balance is split between both of you.

For living off your retirement funds, look into the Roth conversion ladder.

[ysette9]

A couple of quick thoughts:

1) the 4% rule-of-thumb only works for invested assets, not total net worth. Unless you are planning on selling your house and renting or otherwise living for free, the equity in your house is mostly meaningless.
So if you need to spend $80k/yr then you need $2m of invested assets.

2) I don’t think you are anywhere near “too much” in retirement accounts. If you will retire before one of you is 59.5 then you will need enough money in taxable accounts to cover your spending for five years while you set up your Roth conversion ladder. After that point you can live off of your retirement accounts. https://www.madfientist.com/how-to-access-retirement-funds-early/

3) I say this as someone who eats well and doesn’t do grocery store sales or anything: you spend an epic shit ton on food and dining. You would benefit a lot from taking a hard look at that and seeing if it is bringing you a ton of joy in life. Using the 25x/4% rule of thumb you need $810kin invested assets just to cover food in your bellies in retirement.

Compare that to our fairly luxurious $700/mo and you need to save $600k more than me to cover eating in FIRE. That is multiple years of work and saving, as you well understand. Put another way, you would basically be FIRE today if you didn’t spend any money on food, so everything you need save between now and FIRE is your food budget.

[MaybeBabyMustache]

Ditto what ysette said, with a big second call out on the food spending. We live in a HCOL with two teen boys (13 & 14, so close to yours) & spend about 1/3 of what you spend. I also don't shop sales or spend that much time & effort trying to cut things to the bone.

Is the majority of your spending on groceries or eating out? I also don't think you have too much in your retirement accounts.

Are you willing to work additional years to continue to fund that kind of spending, or are you interested in trimming your expenses & get to FIRE faster? If so, this board can be a great source of information on how to cut that back while still having lots of great food.

[Feivel2000]

If the plan is to retire early, you probably need money in accounts you can use.
60k in cash is a lot.

Your food bills are unbelievable high.

If you decide to retire early, I guess your healthcare costs (and other costs probably as well) will change. So with FIRE so close (>2 to 5 years), it's probably worth to create a FIRE budget instead of the rule of thumbs with the current expenses.

Great work, btw, you are in a very good shape!

[SailingOnASmallSailboat]

Adding in here that $60,000 in 529 plans for 2 kids, the older one of which will be heading off fairly soon, is not going to pay for much at all. Yes, Virginia is not a cheap place for higher education, but our older son spent 2 years at one of the less expensive state schools and it cost, all in including room and board and textbooks, just over $25,000 a year.

Might be that you're not planning on covering a lot of school expenses (which is totally your call and fine if that's your choice), but college costs might really shock you when they come around.

I don't think you have too much in retirement accounts.

I'll echo what others said on the food thing. I thought we were being extravagant with a food bill of around $900 a month for a family of 4 (including our alcohol); we cook at home almost exclusively and I'm good with leftovers but I also don't stress about buying my favorite coffee to make at home.

[onourjourney]

A couple of quick thoughts:

1) the 4% rule-of-thumb only works for invested assets, not total net worth. Unless you are planning on selling your house and renting or otherwise living for free, the equity in your house is mostly meaningless.
So if you need to spend $80k/yr then you need $2m of invested assets.

2) I don’t think you are anywhere near “too much” in retirement accounts. If you will retire before one of you is 59.5 then you will need enough money in taxable accounts to cover your spending for five years while you set up your Roth conversion ladder. After that point you can live off of your retirement accounts. https://www.madfientist.com/how-to-access-retirement-funds-early/

3) I say this as someone who eats well and doesn’t do grocery store sales or anything: you spend an epic shit ton on food and dining. You would benefit a lot from taking a hard look at that and seeing if it is bringing you a ton of joy in life. Using the 25x/4% rule of thumb you need $810kin invested assets just to cover food in your bellies in retirement.

Compare that to our fairly luxurious $700/mo and you need to save $600k more than me to cover eating in FIRE. That is multiple years of work and saving, as you well understand. Put another way, you would basically be FIRE today if you didn’t spend any money on food, so everything you need save between now and FIRE is your food budget.

[dadbod]

Regarding your second question, you may want to talk to an accountant about the Rule of 55 for your husband.  As I understand it, if you retire from your job in the year you turn 55 you can withdraw funds from your 401k at that job without penalty.  There are lots of caveats about it, though, such as the company you work for needs to permit it.  Good luck!

[Metalcat]

I also don't understand the thread title, how is this a case of too much in retirement accounts?

I won't comment too much on your spending as you haven't actually asked us to comment on how you could spend less, although it's a given here that that's the advice you will get. I will, however, say that you could hire someone to grocery shop for you and cook all of your meals for substantially less than your current food spend, and it would probably be healthier.

As other people have already said, your net worth doesn't actually matter if you are planning to live in your house. If you are planning on selling it and downsizing, then you could add that value to your 'stache, and if you are planning on selling and renting, then you could add the total value, but you would need a bigger 'stache to cover rent.

It's also not really as simple as 25X annual spend. That's more of a very, very rough estimate, which you will need to look at closely, customize it to your own situation, and work backwards from there. You have to think of things like your kids education, if you want to be able to help them financially in the future, if you have aging parents you may want/need to help, what kind of medical needs you yourself may have in the future and how much you want to plan for that.

On a more basic planning front, you need to determine your flexibility and risk tolerance, which will influence what withdrawal rate you feel comfortable with. 25X equals a 4% WR, and a lot of people here find that far too aggressive while others find it too conservative. Withdrawal rates can range anywhere from 1% to 8% depending on timeline, risk tolerance, flexibility in spending, other sources of income, etc, etc.

Your FIRE number is a deeply personal thing, so spend some time getting to know it.

[onourjourney]

I also don't understand the thread title, how is this a case of too much in retirement accounts?

I won't comment too much on your spending as you haven't actually asked us to comment on how you could spend less, although it's a given here that that's the advice you will get. I will, however, say that you could hire someone to grocery shop for you and cook all of your meals for substantially less than your current food spend, and it would probably be healthier.

As other people have already said, your net worth doesn't actually matter if you are planning to live in your house. If you are planning on selling it and downsizing, then you could add that value to your 'stache, and if you are planning on selling and renting, then you could add the total value, but you would need a bigger 'stache to cover rent.

It's also not really as simple as 25X annual spend. That's more of a very, very rough estimate, which you will need to look at closely, customize it to your own situation, and work backwards from there. You have to think of things like your kids education, if you want to be able to help them financially in the future, if you have aging parents you may want/need to help, what kind of medical needs you yourself may have in the future and how much you want to plan for that.

On a more basic planning front, you need to determine your flexibility and risk tolerance, which will influence what withdrawal rate you feel comfortable with. 25X equals a 4% WR, and a lot of people here find that far too aggressive while others find it too conservative. Withdrawal rates can range anywhere from 1% to 8% depending on timeline, risk tolerance, flexibility in spending, other sources of income, etc, etc.

Your FIRE number is a deeply personal thing, so spend some time getting to know it.

[zolotiyeruki]

Here's my take:
1) it depends on what you want to calculate your net worth for.  If you're looking at a 4% WR, and you expect to stay in your current home, then don't include it.  If you plan to relocate/downsize/etc, then you could add the leftover home equity to your NW (but only if you invest that money after selling your home!)
2) It's great that you're looking at where your first few years' of income will come from.  Others have already brought up the mega backdoor Roth, and you should definitely look into that.  Alternatively, you could simply start plowing lots of money into taxable accounts.  Since your spending is within the 0%-capital-gains-tax-rate range, you would be spared the taxes on that when you withdraw it.

[MaybeBabyMustache]

@onourjourney - I'm not following along with the parts where you are quoting. Are you also trying to add your own comments? If so, we can't see them - it's just the quote of original poster. You can quote & then move below that block of text to add your own comments, thoughts or responses.

[ysette9]

A couple of quick thoughts:

1) the 4% rule-of-thumb only works for invested assets, not total net worth. Unless you are planning on selling your house and renting or otherwise living for free, the equity in your house is mostly meaningless.
So if you need to spend $80k/yr then you need $2m of invested assets.

2) I don’t think you are anywhere near “too much” in retirement accounts. If you will retire before one of you is 59.5 then you will need enough money in taxable accounts to cover your spending for five years while you set up your Roth conversion ladder. After that point you can live off of your retirement accounts. https://www.madfientist.com/how-to-access-retirement-funds-early/

3) I say this as someone who eats well and doesn’t do grocery store sales or anything: you spend an epic shit ton on food and dining. You would benefit a lot from taking a hard look at that and seeing if it is bringing you a ton of joy in life. Using the 25x/4% rule of thumb you need $810kin invested assets just to cover food in your bellies in retirement.

Compare that to our fairly luxurious $700/mo and you need to save $600k more than me to cover eating in FIRE. That is multiple years of work and saving, as you well understand. Put another way, you would basically be FIRE today if you didn’t spend any money on food, so everything you need save between now and FIRE is your food budget.

Like @maybebabymustache said above, if you meant to post a reply here I didn’t get it. I’ll keep an eye out if you do an update.

[Laura33]

First, I'm not following your math -- how are you only getting $28K/yr pretax if you're maxing out?  You should both have $24K (max + match), and your DH has another $5K catch-up contribution, so that should be $53K total to pre-tax. 

Second: since you're edging closer to normal retirement age, SS will likely be more significant for you than for many early-FIRE folks.  I would recommend checking with SS to see what your estimated benefits would be at various ages so you can fact that into how much you will need. 

For your situation, you may be able to get a better grip on what you need by doing the "bucket" method:  first, plot out what you think may be your income and expenses over the rest of your anticipated lifetimes -- not year-by-year, but focused on major changes (like when one of you claims SS, when the kids to go to college, etc.).  Each of those periods where the income/expenses is the same is a separate bucket; multiply those annual expenses x the number of years in that bucket, and that tells you how much you will need to have saved by the first year of that bucket to fill that bucket; then use a present-value calculator to figure out how much you need saved today to have that figure by that date.  Once you have figures for all of the buckets, you "apply" your current investments, starting from the furthest out time.  Once you have enough money now to fill all of those future buckets, you are ready to FIRE.

Super simplified example with one kid, assume you plan to contribute an extra $10K/yr out of cash flow.  So you have:

2020-2024:  need $80K/yr x 5 years = $400K to fill this bucket
2024-2028:  kid in college, need $90K/yr x 4 years = $360K to fill this bucket -- but you don't need it for another 4+ years, so plug that into a present-value calculator and you probably need something like $300K now to have $360K in 2024.
2028-2031:  kid out of college, revert to $80K/yr x 3 years = $240K; present value say $200K.
2031-2038:  DH collects SS -- assume $25K/yr.  Reduces income needs to $55K/yr x 7 years = $385K -- but now we're more than 10 years out, so the you probably need only about $175K today to have $385K by 2031.
2038-XXXX:  you collect SS.  Etc.

Rinse, repeat until the end of your planning period.  Then start applying your current investments from the farthest-out period.  At this point, you're probably not going to have enough to cover everything.  But I bet you have at least enough currently invested to cover your expenses from, say, 2028 on.  So now what you need to do is work and invest enough to cover the period between now and 2028.

I mention this because when we ran our estimates this way, we came up with a much lower number than the 4% rule would suggest, because we are older and both worked for a long time and so are going to have two good SS figures that will cover a huge chunk of expenses.  Plus, frankly, the degree of granularity involved in thinking about life changes -- travel plans, college plans, long term care needs, etc. -- is valuable in and of itself.

Oh:  and yeah, you don't have too much in pre-tax accounts, at least not based on the current retirement math, as your DH should be able to access his retirement assets by the time you're ready to retire.  But do remember also that all of that money will be taxed as ordinary income when withdrawn, so you need to account for taxes when you are looking at the buckets (as the buckets are the amounts you will need, not the amounts you will need to withdraw to meet those needs).

[ysette9]

Personally I like using cfiresim to, in essence, do what @Laura33 is talking about with buckets, except just simulate the entire scenario in one go. So what I mean is you input your current stash, how much you save each year, social security, pension, and any expenses such as college or mortgage that won’t last forever.

Then you can see how your scenario would have performed over a bunch of different past market conditions to get a sense of how well it may perform in the future. I like playing around with variables like asset allocation and spending flexibility to get an intuitive feel for where weaknesses and strengths lie in our financial situation. That gives me more confidence in our FIRE number.

[onourjourney]

2) It's great that you're looking at where your first few years' of income will come from.  Others have already brought up the mega backdoor Roth, and you should definitely look into that.  Alternatively, you could simply start plowing lots of money into taxable accounts.  Since your spending is within the 0%-capital-gains-tax-rate range, you would be spared the taxes on that when you withdraw it.

My current company doesn't offer the Mega Backdoor. I'm not sure if my DH's company does. I ran this topic by my financial advisor (with Personal Capital) and he said the Roth conversion is great for passing money on after death, but not so great for my retirement goals. I can't say I walked away from that call with a good understanding of why he said that.

Great reminder about the capital gains tax brackets. So to take advantage of that, we would both need to be retired with no W2 income to take advantage of that bracket.

[onourjourney]

@Laura33 I really like the bucket approach to planning our remaining years. I'll give this a try with DH as well as check out the cfirecim @ysette9 recommended.

You are also correct...I didn't include SS benefits. I'm trying to be super conservative because who knows what dear president will do with it if he continues with another term. It would be great to count on it since we've paid into it for our entire working lives. Am I being too conservative by ignoring SS? (I also worked for the RR for 7 years and feel I have a little bit more SS protection from that time period.)

[ysette9]

2) It's great that you're looking at where your first few years' of income will come from.  Others have already brought up the mega backdoor Roth, and you should definitely look into that.  Alternatively, you could simply start plowing lots of money into taxable accounts.  Since your spending is within the 0%-capital-gains-tax-rate range, you would be spared the taxes on that when you withdraw it.

My current company doesn't offer the Mega Backdoor. I'm not sure if my DH's company does. I ran this topic by my financial advisor (with Personal Capital) and he said the Roth conversion is great for passing money on after death, but not so great for my retirement goals. I can't say I walked away from that call with a good understanding of why he said that.

Great reminder about the capital gains tax brackets. So to take advantage of that, we would both need to be retired with no W2 income to take advantage of that bracket.

I think the Roth conversion thing is specific to each person’s situation. For the early retiree who is living primarily off investments and can tailor their income to be in a zero of very low tax bracket, it is awesome. If you are older and have SS or a pension or are having to take RMDs, then you may be pushed into a higher tax bracket already which would make Roth conversions not make sense. That could be your situation, but of course we can’t know with the info you have provided.

[zolotiyeruki]

2) It's great that you're looking at where your first few years' of income will come from.  Others have already brought up the mega backdoor Roth, and you should definitely look into that.  Alternatively, you could simply start plowing lots of money into taxable accounts.  Since your spending is within the 0%-capital-gains-tax-rate range, you would be spared the taxes on that when you withdraw it.

My current company doesn't offer the Mega Backdoor. I'm not sure if my DH's company does. I ran this topic by my financial advisor (with Personal Capital) and he said the Roth conversion is great for passing money on after death, but not so great for my retirement goals. I can't say I walked away from that call with a good understanding of why he said that.

Great reminder about the capital gains tax brackets. So to take advantage of that, we would both need to be retired with no W2 income to take advantage of that bracket.

I think the Roth conversion thing is specific to each person’s situation. For the early retiree who is living primarily off investments and can tailor their income to be in a zero of very low tax bracket, it is awesome. If you are older and have SS or a pension or are having to take RMDs, then you may be pushed into a higher tax bracket already which would make Roth conversions not make sense. That could be your situation, but of course we can’t know with the info you have provided.

True, but either way, you want/need to have a substantial amount of money available for withdrawal, either as Roth contributions or in taxable accounts.

[Laura33]

SS:  Yes, you are being too conservative.  In the history of SS, the one constant is that they phase in changes, so the people who have planned their retirement around receiving the benefits aren't completely screwed over -- meaning that the closer you get to retirement age, the smaller the changes you will see.  You may not get what is currently projected, but you will get something.  FWIW, we also did our projections based on an assumption of no SS or pension, but now that we are just a few years out, we are starting to consider those, because our right to some portion of that is more certain. 

Roth:  your financial advisor is advising against a Roth conversion because you have high current income and a high tax bracket, and any money that you would convert from traditional to Roth is counted as income in the year you do the conversion -- meaning you pay taxes on it at your marginal tax rate.  You should think about it in the future -- for example, if you retire before either of you claims SS, and your only taxes are on capital gains, you would probably want to convert some of your tIRA to a Roth that year to take full advantage of a lower tax bracket (currently you can pay zero federal tax up to a certain level of income, and the first bracket is something like 10%, which is pretty much a steal).  Basically, if you can convert some of your IRAs from pre-tax to post-tax, with zero or minimal tax consequence to yourself, that is awesome.  But, yeah, if you're currently paying like a 28% marginal tax rate, it doesn't make sense. 

Question:  can you roll your current IRA into your 401(k)?  If you can do that, then you can do a backdoor Roth:  make the annual contribution to a regular (nondeductible) IRA, then convert it to a Roth.  You don't get the tax deduction like you would for a traditional IRA, but when you convert it, you pay tax only on the gains since you set up the IRA -- so if you convert it like the next day, that's likely nothing.  Note:  you do not want to do this with $500K already sitting in a tIRA, because the IRS treats all IRAs as one big pot -- so if you add $5K and convert $5K, the IRS will assume that you converted most of that from your existing IRA, meaning you will have to pay taxes on that entire amount.  But if you can get rid of the existing IRA -- say, for example, by rolling it into your 401(k) -- then you can do the backdoor Roth every year and have a nice chunk of post-tax money waiting for you when you FIRE. 

[clarkfan1979]

well done.

[seattlecyclone]

A few things to consider:

If your husband leaves his job during or after the tax year in which he will turn 55, the law allows him to make withdrawals from that job's 401(k) right away with no early withdrawal penalty. The catch is that many companies don't want to deal with paying for the administrative costs involved with former employees making periodic withdrawals, so they put some language in their plan documents saying that once you take out even $1 as a former employee you need to close your account and move all your money elsewhere.

You'll need to read the fine print on his plan documentation to see if periodic withdrawals after 55 are an option. If they are, this might make things very easy for you. He's 51 right now, you think it will be at least four years before you retire, so no need to mess around with a Roth conversion ladder if you can just make normal withdrawals straight from his accounts from the day he leaves his job.

If the periodic withdrawals aren't an option from his 401(k) you can still benefit some from the age 55 rule. For Roth 401(k) amounts you're golden. Roll it into a Roth IRA and you can withdraw as much of it as you want right away for free. Unfortunately rollovers from traditional 401(k) to traditional IRA lose the benefit of the age 55 rule, you would be subject to the standard IRA 59½ age limit at that point. However at the time he takes his one withdrawal from the 401(k) there's nothing stopping you from moving part to your checking account, enough to cover some portion of your expenses for the next few years, and roll the rest into his traditional IRA.

[Much Fishing to Do]

Ignoring SS would be ignoring a HUGE part of the facts in front of you.  I think its a safe assumption you could cut 2k from your monthly food expenses (esp. sans kids) and cut the 1k kids expenses by the time you collect SS.  That would leave your expenses at 4k/mth.  Even retiring early you could probably live off of your SS alone at some age (maybe claiming at 67, maybe at 69, etc).  Your paid off house could be used as a huge emergency fund in many different ways.  So basically your investments don't have to last 'forever', or even 30 years, just until you hit that SS payment.

This is an extreme example, it may make more sense to claim SS earlier, and you'll likely not spend down your entire investments, but it makes the point of how large a factor SS could play in your planning.

[Cb1234567]

Other Ordinary Income:
No other income sources ATM, but this is what I’m currently focused on... I’m starting to create digital assets that can pay a small amount of recurring income and grow that over time. I’m wondering if saving up cash to buy a rental property so it will pay out each month (minus repairs, maint, insurance, and taxes) is a good idea

I am learning from this discussion, and thank you OP for prompting it. We’re going to look at the buckets approach, because our retirement (I.e. me not working early :) will be phased. The online calculators are great, except they make me nervous as a possible oversimplification of “the rest of my life”...if that makes any sense. [Also, I like the idea of checking off a list for years 1-2 are covered, years 3-8 etc etc. as we save.] We’re about the same age, btw.

About the rental question: there is a lot of valuable content in MMM and also check the Bogleheads forum (very experienced, wise contributors and more conservative in some respects, which may suit you, as you own your home free and clear, no debts, and cash savings - you’ve set yourselves up as very secure at home). We have decided against rentals due to the area in which we live (too rural), not wanting the hassle (I decided that a management company would not run them as carefully as we would), and we can do just as much with investments/dividends without being tied down.

That said, some people really like rentals, right?
 My general advice would be that there seems to be two types of people in the rental world:
1.) Those leveraged up to their eyeballs with very little capital actually in the rental property, who calculate their ROI based on how much cash they have in the rental versus how much they earn ... a whole lot of money seems to be flying around, but I’m not ever quite sure if they’re really making money (of course, they’ll show you how they’re “making a killing”), especially enough to justify having 4 properties with 4-5 loans attached,
...or...
2.) Folks who own rental property(s) and receive rental payments they get to keep, as in, I get $1250 a month from my rental, which is $1000 after taxes and insurance, and the house has a $20K fund for repairs/vacancy set aside. [made up numbers, obviously].

A lot of the first category seem to go bust eventually - or just sell and get out once the unit starts to fall apart -  and it seems awfully complicated for the little amount they actually get. The later IMHO quietly go about their lives and do simple math without worry. I could understand and predict my income in the later version. The leveraged version? Too risky for me in my retirement.

Just a few thoughts!

[onourjourney]

Thanks for chiming in @Cb1234567

I completely agree with you regarding the two types of rental property owners. I have FB friends who flaunt their 'riches' but are financed to the max. I've extinctively known that type of risk isn't for us (as you can likely tell by our decision to pay off our primary). When I was commuting to work pre-COVID, I'd often listen to the Afford Anything podcast. She is a more conservative/less leveraged realestate investor and find her discussions interesting. I'm not sure if we will ever own a rental again, but I won't rule it out (we owned a STR that did quite well, but I felt too leveraged).

I've opened bogleheads on a new tab and am already hooked. Thanks a lot (I think). :o)

[ericrugiero]

I'll second lots of comments above.  You don't have too much in retirement accounts.  Use cfiresim or other calculators to look as your success rate rather than just the 4% rule.  You can count on getting some money from SS. (maybe assume 75% of what they predict?) The rule of 55 could help you get from retirement to 59 1/2 if your husband retires after age 55 with a healthy 401k balance at his current job.  Your food/dining expenses are crazy high.  Is it really worth working several extra years to pay for you to eat out? 

One thing I haven't seen mentioned is that you could use a SEPP plan to access your retirement money.  https://www.investopedia.com/terms/s/sepp.asp  This is basically taking equal payments from your traditional IRA for at least five years until you turn 59.5.  I don't think it's a good option for someone who is 40 because 20 years is such a long time and things change.  If it's just 5 years then locking yourself in doesn't seem so bad.  You do have to be careful because if you don't take the equal payments for the whole time then you owe the 10% penalty for ALL payments you have taken. 

[Car Jack]

You've got plenty of time to save in different ways, including evaluating where you're spending.

As the parent of a son who for various reasons including a transfer and a major change took 6 years for his bachelor's degree, I'll say that you don't really know what college is going to cost until it's done.  And be careful of people who spout "oh, you can't take out a loan for retirement but your kids can take out loans for college".  Ask the person who says that exactly where those student loans are.  Staffords are it.  There are no other loans without a cosigner (meaning it's your loan).  My older son has a great job in his engineering specialty and is looking to going to night school to get his Masters starting in a year or so.  Cost for his college?  About the average cost of a Lamborghini Huracan.

On the 25 times spending thing (4% rule), that is spendable assets.  So you don't typically use net worth unless you plan to sell your home and rent....then add rent to your spending.  Also, since that came from the Trinity study, it's a gauge of whether you'll run out of money in 30 years.  So your age at retirement and lifetime matter. 

[Goldielocks]

Life Situation:
Married filing jointly.
I’m 44, husband is 51.
Two kids, 12 and 14.
Living in Southeast U.S. in average COL area.

[
Current expenses:
Food and Dining: 2,700/mo (Edit: We only eat out once a quarter. This number includes paper products, fem products, and other occasional cooking supplies. It IS still very high for a family of four. I'm working to get it down while still buying fresh, organic, and local foods as well as gluten free items for "essentials" like bread which cost at least 3x regular bread - due to Celiac disease.)

Financial (health insurance, car ins, life ins, etc): 285/month
Cars (maint, gas, ins): 400/mo
Utilities and house-related bills: 460
Discretionary spending: 400
Home improvement/supplies: 200
Pets: 50
Entertainment: 100
Gifts: 150
Kids: 950
Health (supplements, copays): 300
Significant yearly trip: 6000 (500/mo)
Swim club: 75/mo
Misc: 150
Total expenses (rounded): 7,000/month or 84,000/year

No mortgage, no car payment.
Taxes and insurance on the house is 6000/yr and HOA is 720/yr

Can I just say that now my youngest is 18 and graduated, I have tremendously fewer expense categories (and expenses), with the kids having to pay for their own things / activities.   I just pay tuition and books and groceries.

I remember how hectic things were when they were younger.  Some of our costs looked like yours.  Now I get to spend on things that I want, for me, when I want.  It is so liberating!    So, know that in future costs will go down, unless you choose to spend on travel or entirely new spending categories.

Anyway, this post is to say that you made my day by making me reflect how far I have come in our monthly costs.

[onourjourney]

Thanks for all the responses.
Update on our food budget...I'm getting it down!!

Changes I've made:
- I set a limit for each store we shop from so that I'm more aware of the overall spend each month. For example, I've determined that I can order from Imperfect Foods 4 times a month but each order should be less than $70 in order to stay within the overall monthly budget. I've done this for all the sources of food we order/shop from.

- I vastly reduced the amount of packaged stack foods I buy. Instead, I'm making more things to fill that snack need.

- I identified gluten free bread, cookies, and kombucha as some of the items we spend most on (except for meat). So I learned how to make kombucha (growing the scoby now) and got some gf sour dough for baking all kinds of things, include breads and snack foods.

These changes are making a huge difference! I ended August with $1,685 food spend and that was only having implemented the changes partway through the month! Now, some of that savings I can attribute to eating through what we had in the pantry and freezer, but still a vast improvement. So September, I'm aiming for $1600 or less.

Thanks for the punch in the face. It kicked me into gear to shop smarter for our food.

[ysette9]

NIce progress! Keep it up.

[soccerluvof4]

Thanks for all the responses.
Update on our food budget...I'm getting it down!!

Changes I've made:
- I set a limit for each store we shop from so that I'm more aware of the overall spend each month. For example, I've determined that I can order from Imperfect Foods 4 times a month but each order should be less than $70 in order to stay within the overall monthly budget. I've done this for all the sources of food we order/shop from.

- I vastly reduced the amount of packaged stack foods I buy. Instead, I'm making more things to fill that snack need.

- I identified gluten free bread, cookies, and kombucha as some of the items we spend most on (except for meat). So I learned how to make kombucha (growing the scoby now) and got some gf sour dough for baking all kinds of things, include breads and snack foods.

These changes are making a huge difference! I ended August with $1,685 food spend and that was only having implemented the changes partway through the month! Now, some of that savings I can attribute to eating through what we had in the pantry and freezer, but still a vast improvement. So September, I'm aiming for $1600 or less.

Thanks for the punch in the face. It kicked me into gear to shop smarter for our food.

I know when I did this (4 kids) as I started to figure it out it got easier and the savings is well worth the time you put into doing it. I cut our food budget 50% in a year as I learned the few stores I use and when they price things etc... No real extra work or coupons I dont have time for that. Just being conscientious you should see it going down even more.

[TomTX]

Personally I like using cfiresim to, in essence, do what @Laura33 is talking about with buckets, except just simulate the entire scenario in one go. So what I mean is you input your current stash, how much you save each year, social security, pension, and any expenses such as college or mortgage that won’t last forever.

I prefer Rich, Broke or Dead - a perspective which I think can be overlooked on FI sites, with the prime example being Bogleheads. By focusing too much on the "super safe" approach - you guarantee far fewer years of retirement.

Presuming retirement is the goal, of course. If you enjoy working - more power to you!

https://engaging-data.com/will-money-last-retire-early/