Author Topic: Reader Case Study – Semi - RE and let my assets grow or keep working?  (Read 2110 times)

wahooman2010

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Topic Title: Reader Case Study – Semi - RE and let my assets grow or keep working?

Life Situation: 30yo MFJ. 1 child (6mo) planning on a couple more before we’re done.

Gross Salary/Wages: Me: $107,000 Base 15% yearly bonus; SO: $75/hr Works PT. LY W2 $108,000

Pre-tax deductions 401k: $36,000 (employers match an additional $10K/year). HSA: $6750.

Adjusted Gross Income: LY $170,000

Taxes: Approx. $50,000.
Monthly take-home: Averages $10,000/month

Current expenses:
Rent: $1,200
Charity: $600
Child Care: $600
Car Payment: $533 (0% APR; 1 year left)
Travel: $430
Groceries: $375
Restaurants: $300
Utilities: $150
Student Loan: $125
Phone: $112
Professional Licensing: $100
General Merch: $100 (mostly wedding gifts and some baby supplies LY)
Insurance: $83
Pet: $75
Gym: $60
Entertainment: $50 (Shared Netflix account and some Redbox rentals)
Monthly Expenses: $4,931/month
 
Expected ER expenses: Approximately $4,000/month without loans, licensing, and smaller cell phone/charity bill

Assets:
401K: $157,000 VSTAX and S&P tracker (0.05% ER)
Savings Account: $18,000 at 1% for Home down payment in a couple years
HSA: $9,750
Brokerage Acct: $30,500
Roth IRA: $16,500
529: $24,050
Total: $255,750
 
Liabilities:
Student loan: $18,000 3.4% (we're currently discussing emptying the HDP savings account and finally getting rid of this loan - it's what's remaining from our $125,000 of grad school loans)
Car Loan: $6400 0%
Total: $24,400

Specific Question(s): Since our first child was born, my wife has scaled back to 3 days a week.  She’s still health insurance and 401K eligible.  We tested it last year, and we can live safely off of her income alone.  I’m at a fork in the road where I can either work another 7-10 years and get fully FIRE’d. Or, we could grind out another 3-5 years at our same savings rate of approximately $120,000/year and then scale back to the SO working 3 days a week (I’d also work PT for a local non-profit I’ve been plugged in to as a volunteer for a couple years which would add an additional $10K+ a year).  At which point, we would cover only our living expenses and let our investments do all the heavy lifting for another decade; fully retiring at the ripe old age of 45.

My question for the MMM community is two-fold:
1. Have I overlooked anything major?
2. Would you rather work hard for 10 years for full FI, or would you choose to work hard for half the time but be forced to do some sort of more enjoyable but still paid work for an additional 5 years beyond what you would have been forced to do?  That was pretty wordy. 2 choices:
10yrs hard work
5yrs hard work. Then another 10yrs of PT more enjoyable work.

I’m leaning towards the latter because it helps mitigate the health insurance concerns we have, and it gets both of us out of full time demanding jobs while our kids are still young. 
Thanks for the input!

lisa_mustache

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #1 on: February 15, 2017, 03:46:58 PM »
My heart says to do the 5/10 plan, because you get to what you want to be doing sooner, while still earning money toward the end goal.  You can also reevaluate in 5 years, and see if you can stick it out for 5 more at that point.  But I will live vicariously through you and pick #2!

MDM

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #2 on: February 15, 2017, 10:04:34 PM »
From a quick look it appears you are doing a lot of good things financially.  You might consider putting less (or nothing) in the 529s until you have filled your own retirement accounts to your satisfaction.

Do you have to make a work choice now or can you continue with status quo for the next several years, then pop your heads up and see how things look?

wahooman2010

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #3 on: February 16, 2017, 07:53:55 AM »
At this point, we're done putting money in the 529.  We get a 7% state income tax deduction, but we feel we've got enough in there for this child.

We don't have to make a decision right now, but what prompted this question is I've been offered a promotion that comes with a small raise but a significant increase in responsibility and stress.  If the game plan is to grind it out for 5yrs and pivot to a less stressful career, then I'll turn down the promotion.  If the game plan is to push until full FI, then I'd be willing to take on more stress if it puts us at FI a couple years sooner.

Thanks for contributing!

mxt0133

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #4 on: February 16, 2017, 08:27:31 AM »
At this point, we're done putting money in the 529.  We get a 7% state income tax deduction, but we feel we've got enough in there for this child.

We don't have to make a decision right now, but what prompted this question is I've been offered a promotion that comes with a small raise but a significant increase in responsibility and stress.  If the game plan is to grind it out for 5yrs and pivot to a less stressful career, then I'll turn down the promotion.  If the game plan is to push until full FI, then I'd be willing to take on more stress if it puts us at FI a couple years sooner.

Thanks for contributing!

Why do you think the promotion will be more stress?  I too took a promotion but did not let the stress get to me. You control how much stress you want to take on.  That's the beauty of FU money which you have.

Take the promo and parley it into a higher paying job at or with another employer.

2Birds1Stone

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #5 on: February 16, 2017, 08:47:32 AM »
5/10 plan for me.
"A small house can hold as much happiness as a big one." - Fortune Cookie

29 Months till FI - Stop by, or stay a while.....
https://forum.mrmoneymustache.com/journals/fire-by-thirty-five-chronicles-36-months-till-sabbatical!/

wahooman2010

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #6 on: February 16, 2017, 08:55:22 AM »
Right now, I'm an individual contributor.  The promotion comes with a team of 5 direct reports and P&L responsibility of $600 Million.  So the buck stops with me if I take the promotion whereas right now I'm relatively shielded from the ups and downs of the business (i.e. in the event of poor sales results, it would be my job on the line, but right now I'm pretty immune to any layoffs because of the nature of my department and my role).

FU money gives me freedom to not do things I see as immoral or a waste of resources, but unfortunately, I'm too driven to not give 110% and work weekends/nights to make sure the business hits its targets.  Also, I have another 2 years until I'm fully vested in my 401K ($15K) and I have a contractual agreement with my current employer that would require me to pay back my sign-on bonus ($25K) and my relocation assistance ($15K) if I leave before next Summer.  So I won't be moving to another company any time soon.

Good thought, though.

Larsg

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Given that you have some debt, I might consider scaling back the charity each month until you have all your debts paid for. Also your car payment looks to be quite high. I might consider a nice used car as an alternative. Sell that one and buy a used car in cash. The stronger you are financially, the more you will be able to contribute to the world. Today, you are in essence, borrowing to pay for charity while you are in debt. I know it feels great but there are a lot of way to give. For example, I might take that 600 per month, put that towards your student loan, car payment, or mortgage debt, calculate the annual savings in interest from doing so, take those savings and apply them to your next interest breading loan. Let it be a game that you involve your child in if old enough :). It's a great math exercise. Then think of ways you can give that are not cash related that you can do as a family until all of your debts are paid off.

MrsWolfeRN

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I agree with your idea of paying off the student loan with the HDP fund. At your income/spending it would only take 4 months to save up another 18k, and meanwhile that money could be earning more than 1%.  My income is much smaller than yours and I only keep $2,000 between checking and savings unless I have a large expense coming in the next 2 months.

  You can afford to keep giving to charity if it makes you feel good about yourself. It will affect your FIRE timeline a bit, but you are not in a hair on fire emergency. Same goes for the car, restaurants, and travel.

 You could look into cheaper prepaid phones such as google fi or Republic. Also maybe switch to a cheaper brand of pet food.

Does your current industry have part time/ consulting options? If you each work 3 days/week you will not need daycare. You could probably afford to drop to  2 days each and still have a reasonable savings rate if you cut some of the above expenses. You can take turns being the SAHP so it doesn't become a daily grind.

frugal_c

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I like the idea of working 5 and coasting another 10.  That way if things don't work out with the markets you can always stretch that 10 to 11 or 12 as needed.  The only issue I see is whether you view your wife's opportunity to work as reliable.  If she keeps working 3 days a week would that endanger her career or is it a career that could potentially disappear over the next 10 years?  If you drop out would you be able to get back in?  With some careers, where there is some long term threat to them, you might be better of getting it done with.  If you are in something quite stable, healthcare for instance, then for sure I would do this.
« Last Edit: March 15, 2017, 08:14:07 PM by frugal_c »

erae

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Re: Reader Case Study – Semi - RE and let my assets grow or keep working?
« Reply #10 on: March 17, 2017, 08:44:22 AM »
Am curious where you landed on accepting/declining that promotion, mxt0133. I made a similar move two years ago from individual contributor to management. A management role definitely makes you more vulnerable in some ways, but - depending on the organization - turning down a promotion could also make you more vulnerable to layoffs and hurt your career in other ways if it indicates to higher ups that their carrots aren't working.