Reader Case Study - Looking to FIRE late 2018

[FLStache]

Hi, I have been gleaning lots of great information from the forum and hoping for some perspective on my plan to FIRE in late 2018. 

I’m single, 49, and have two kids, ages 16 and 20.  As a result of an upcoming restructure I will benefit from a severance package likely during Q4 2018.

At the time of my FIRE here is my portfolio forecast (including my continuing contributions, but not compounded interest over the next 12 months):

401K:               $600,000
IRAs:               $32,000
Mutual Funds:            $235,000
Credit Union:             $26,000
Severance pkg (after taxes):      $115,000

Total:               $1,008,000

Kids 529 plans:  should be more than adequate for both my son to finish his Master’s degree in the Fall of 2019 and for my daughter to attend a public in-state university for her BA.

Pension will be available when I’m 55 in 2023:   $41,160 annually

Social Security – could start it when I’m 62 (but will likely hold off).  $21,408 annually

I’m now fine-tuning my annual budget (not something I’ve tracked diligently in the past), but I think it’s going to come in at about $55,000 – 60,000 (including my health insurance once I FIRE) while I’m still supporting my kids.  Should drop thereafter as I offload their major expenses such as car insurance, stupid smart phone plans, college expenses not covered by the 529, etc.  No debt – houses and cars all paid for. The XH should be able to add the kids to his health plan (he’s checking on that for me now).

Other income:
I’ll likely work part-time at least for a few more years at something I enjoy:  ~$20,000 annually.
Sometime in the next 10 – 20 years I will receive an inheritance of about $250,000+.

As I look at this portfolio, it seems I can live off of the Mutual Funds and severance (plus part time work income) from 2019 until mid-year 2023 and still have some left over. Worst case scenario (such as if the market tanks) I can likely be rehired by the company I currently work for – just at a lower salary.

In the interim I understand I can utilize a Roth pipeline to move $ from my 401k to my Roth IRA in order to supplement my pension from 2023 until I’m 59.5 (2028) when I can start to draw from my 401k as needed.

So, what am I overlooking?  Does this seem realistic?  Any suggestions? 

[Raenia]

That looks perfectly realistic to me, congrats on being FI (soon)!  Your pension will cover 2/3 of your annual budget, and SS will cover the remaining 1/3, so your savings really only have to make it until you start drawing the pension and SS.  The mutual funds and severance could take you most of the way even if you weren't planning on part-time work.  I'd start 'priming the pump' for the Roth Pipeline now, so the funds will be available when you need them, and then get ready to enjoy your retirement!

[marty998]

Looks pretty good to me too.

Just make sure those mutual funds are of the low fee variety if you really want to optimise.

[FLStache]

Thanks Raenia and Marty998 for your replies!  My intention had always been to work until I'm 55 and then retire 'early,' but this deal seems too good to pass up.  Plus the alternatives, either relocating to a metro area and incurring housing costs or taking a demotion and having to work a stressful 50+ hour work week, just aren't palatable at this stage in my life.  I find myself vacillating between anxiety and excitement so appreciate your responses.

I am thinking through the timing on the Roth Pipeline - my taxable income will remain high through 2019 as I'm able to defer my severance to 2019.  I'll probably still need to go ahead and move some over, but it would be better once my taxable income is low in 2020.

And as a perk for working for a financial services company my mutual funds have been fee free.  I need to check into if that will continue once I'm no longer an employee.  If there is a cost and it's more than negligible, I'll combine w/ my Vanguard fund.

Thanks again!