Race from $2M to $4M...and Beyond!

[Car Jack]

I do understand that many here feel that once we hit a huge number like $2M, we *MUST* declare FI and retire.  I'm not there and have an age retirement plan rather than a number and know that DW will feel better, the bigger that number is on the spreadsheet showing total invested assets.  Since my big "2" seems like it's going to stick (RSUs vested today, ESPP the first of March and $10k sitting in a Citi account to get that $400 bonus releases mid March), I think the next goal is the next big number, and the number of the counting shall be....3.

As with the "2" thread, I'm counting investable assets.  Not house, not rental property, not cars, not silver coins.  Too easy to cheat with stuff that needs to be valued, in my humble opinion.

I've seen others note that the first $M is hard, the second easier and the 3rd, 4th etc progressively easier.  I guess we'll see and since I plan to retire about 2 years from now, we'll see how that works when the traditional big income (well.....100k ish engineer's salary) stops and I take odd jobs at hardware stores or driving for Uber or plowing snow from business parking lots for fun.

I'm a recent Bogle follower and only looked at my finances in the last 5 years.  Someone mentioned that people should know the expense ratios of all of their investments.  That made sense to me.  It also dawned on me that I didn't even know what all of my investment accounts were.  A spreadsheet was started, ERs were filled in and comparisons between Contrafund and Total Market Index were performed.  Once convinced that index funds perform relatively equally to actively managed ones, everything was switched over to Index.  Conglomeration was done, moving tiny, old 401k's, 403b's, selling wholevariablewhoknows policies, maxing tax advantaged space and opening a taxable account to put the excess.  All the while, my older son hit college and FAFSA laughed in my face for aid but my mom and DWs dad have been generous, directly paying part of the tuition bill every semester.  Son #2 hit a private high school after his public one totally failed him.  Not a hoidy toidy $70k high school.....$8500 all in a year.  As an aid, I sold off my toy car....a Lotus Elise and replaced it with a car my son could drive to his summer job and use in college....an 04 Outback (45k miles!) bought from the father in-law who bought it new. 

So the plan going forward.  Stay the course.  As the money becomes available, invest more in taxable (Schwab ETFs) and keep the cars as long as possible.  I'm a car guy with a track history, but haven't seen the track from inside a racecar in maybe 7 years (I instructed for a dozen years before this).  So not having a racecar and all that goes with it for expenses has reduced expenses.  We instead visit Lime Rock a few times in the summer and watch the pros do it out there.  I do a bit of credit card and bank account churning for bonuses and have signed up with the new tradeline company to try to cash in on that.....<anxiously awaiting>.  My "life" spreadsheet is broken down by year and events expected and I fill in reality as it happens. 

So I am interested in stories from others and their plans going forward.

[bigchrisb]

Sounds like you are well on your way!  Out of curiosity, do you have a home mortgage and own your own home?  I found it psychologically necessary to track home equity while I was paying down the home, as otherwise I had a propensity to over-leverage myself.  Now that I've fully offset the debt, I'm more agnostic about it.  Depending on approaches, I belong either in the race to $2m or the race to $3m, as net worth including residential property is about $2.75m, while net worth of just liquid stocks, bonds and cash is more like $1.75. 

Sounds like you are on auto-pilot and will cruise over your target given a bit of time.

For me, I think I'm about to see a slowdown in the accumulation rate - taking a sabbatical/trial FIRE while my wife does an overseas posting, and thinking about throwing some kids into the mix.  I'm expecting the next million target to take a few years, and be more in the hands of the markets than determined by my earned income.

 

[Car Jack]

I paid off my house about 15 years ago.  Back then, I was an overly cautious investor, having bought company stock during the '87 selloff.  So paying off debt and the mortgage was the only ways I invested.

There's nothing wrong with tracking net worth and using that number for goals to attain.  I constantly change my goals once one is reached.  I had the $2M goal for quite a while for investments only.  Then it was to hit $1M within just my rollover IRA (not quite there).  When I hit that, I'll set some new, short term, attainable, arbitrary goal.  I've actually got one small goal in my Vanguard account to get back to zero.  It's been in developed international for about 2 years and is still under water.  I'm $2900 from getting to zero on a $250k account.

I still sweat the small stuff.  From the tradeline thread, I read about low balance forgiveness and tried it on several of my cards.  $0.98 forgiven on Barclays and $1.96 forgiven on discover.  Sounds like mouse nuts but free money is free money.  I showed my wife the Discover statement which also gave me $0.10 in rewards because I spent that $1.96 on gas, which is a 5% category this quarter.  And yah.....I pick up pennies on the sidewalk.

[TheAnonOne]

I do understand that many here feel that once we hit a huge number like $2M, we *MUST* declare FI and retire.

Well, you MUST declare FI because you are FI either way.

RE has never been a requirement here, the point is doing what YOU want after that point because BEFORE FI you are more or less forced to work to survive.


All that being said....by the time someone hits FI, work starts to have an ever decreasing effect on your networth. When someone is saving 100k a year, and only has 100k in the bank, work is pushing them 100% higher!

If they have 2 million in the bank, that same 100k is only 5% so ultimately, one person working and one person NOT working will go from 2 to 3 million at a somewhat similar rate.

To make it a bit more extreme. If you had 100mil in the bank, would you keep work a whole year to go from 100,000,000 to 100,100,000? Probably not.

Ultimately, it's up to you, that's the best part about FI! Though, for many here, @ 2 million, the desire to work and indeed the effectiveness both decline.

Sent from my SM-G935T using Tapatalk

[PathtoFIRE]

Congrats on reaching 2, and looking forward to seeing you hit 3.  We are also on the race to 3, having just crossed over to 1 literally today (at least for the first time, who knows how many times we'll zigzag in the next few years).

[Bateaux]

Best part about being a Mustacian between $2M and $3M is that no one knows.
Mustacians in this savings bracket don't stick out as presenting an image of being "rich."
Most people who display the image of being rich really are living paycheck to paycheck.

A guy bought in iPhone 5 off me via Craigslist about a month ago. He was in the US from Costa Rica in order to skydive at 7 different locations. He drove a 1990s VW van (not old enough to have value and definitely not running well). He looked like a 50 year old hippy, yet I would wager that he is more financially independent than most of my gold-collar friends.

Stealth wealth is the place for me.  I'm just not comfortable letting people know my NW has crested 2M.  Since we still work it doesn't show much.  I shop at the dollar store and Goodwill.   My vehicle is 9 years old.  We haven't moved out of the home we bought in 1992.

[farmecologist]

Best part about being a Mustacian between $2M and $3M is that no one knows.
Mustacians in this savings bracket don't stick out as presenting an image of being "rich."
Most people who display the image of being rich really are living paycheck to paycheck.

A guy bought in iPhone 5 off me via Craigslist about a month ago. He was in the US from Costa Rica in order to skydive at 7 different locations. He drove a 1990s VW van (not old enough to have value and definitely not running well). He looked like a 50 year old hippy, yet I would wager that he is more financially independent than most of my gold-collar friends.

Stealth wealth is the place for me.  I'm just not comfortable letting people know my NW has crested 2M.  Since we still work it doesn't show much.  I shop at the dollar store and Goodwill.   My vehicle is 9 years old.  We haven't moved out of the home we bought in 1992.

Me too!  While we are not quite at 2M yet ( see the other thread ), we should be there soon.

Stealth wealth is awesome.  We also stayed in our original home in a modest neighborhood.  I really don't feel the need to do the 'keeping up with the Joneses' thing like so many are starting to do again.  I can guarantee you that many who do that are only presenting an image.

[Koogie]

Just crested into this bracket recently on the back of the market surge (based on our liquid portfolio only).  I have a feeling we'll dip into and out of this bracket over time based on returns.  Have no real plans to hit 3MM (since we are both already semi-RE)   but you never know what the future holds.
 

[Bateaux]

I'm probably working till about June 2019.  I want to say I retired at 50 and that's the last month to make the claim.   Gives us time to fund two more rounds of 401ks and Roth IRAs.  Will start HSA then as well.  Our youngest is headed to trade school and should finish up about then.  Gives me time to hike the AT SOBO south from Maine.   Going to use vacation time to start working north from GA early 2019 for a few hundred miles. 
Then not sure presently where we go.  Hope to spend about half of what the 2M will yield so it can grow. Will probably find work if it dips below 2M for very long.

[markbike528CBX]

Replying to sneak in by cheating (counting house equity for this purpose).
1.9M liquid (90% equities) and net house equity  ~0.3M.

I'm  hoping to be in honestly (liquid NW only) soon.

[Bateaux]

Replying to sneak in by cheating (counting house equity for this purpose).
1.9M liquid (90% equities) and net house equity  ~0.3M.

I'm  hoping to be in honestly (liquid NW only) soon.

Lots of us will be legitimate soon.  We'll have the option of hanging out with those slouches on the 1M to 2M thread till then.  ;)

[Bateaux]

Just crested into this bracket recently on the back of the market surge (based on our liquid portfolio only).  I have a feeling we'll dip into and out of this bracket over time based on returns.  Have no real plans to hit 3MM (since we are both already semi-RE)   but you never know what the future holds.

You made it this far I'd think 3M is on autopilot.

[Bateaux]

Best part about being a Mustacian between $2M and $3M is that no one knows.
Mustacians in this savings bracket don't stick out as presenting an image of being "rich."
Most people who display the image of being rich really are living paycheck to paycheck.

A guy bought in iPhone 5 off me via Craigslist about a month ago. He was in the US from Costa Rica in order to skydive at 7 different locations. He drove a 1990s VW van (not old enough to have value and definitely not running well). He looked like a 50 year old hippy, yet I would wager that he is more financially independent than most of my gold-collar friends.

Stealth wealth is the place for me.  I'm just not comfortable letting people know my NW has crested 2M.  Since we still work it doesn't show much.  I shop at the dollar store and Goodwill.   My vehicle is 9 years old.  We haven't moved out of the home we bought in 1992.

Me too!  While we are not quite at 2M yet ( see the other thread ), we should be there soon.

Stealth wealth is awesome.  We also stayed in our original home in a modest neighborhood.  I really don't feel the need to do the 'keeping up with the Joneses' thing like so many are starting to do again.  I can guarantee you that many who do that are only presenting an image.

 
Hard to believe it's really real at times.

[begood]

*waves* Hi! I'm coming over from the Race to $1M to $2M thread. Copied my intro info from over there:

Our net worth is at 2.3 right now. My husband maxes out his 403(b), which, including maxing catch-up contributions  and the employer match, added up to $30.5K last year. But it read as "noise" (redacted poorly worded phrasing) didn't affect our  overall net worth much. The additions we are making don't make a big difference when the market goes up, and they won't make a big difference when the market goes down.

We live in provided housing at my husband's job, and we don't want to be landlords, so we haven't had real estate since we lost $80K on the sale of our house in 2009. We have REITs but no equity. So aside from 7% we keep in money market accounts and a CD because if my husband lost his job, we'd lose both his income and housing, our entire stache is out there in "Return is Not Guaranteed Land", which feels darker and more foreboding the older I get.

We made our first million by saving in a corporate culture where most of our peers spent. The climb to the second million got a huge boost with a $300K inheritance in 2014. But now I don't see a way to 3 or 4, so I would love to hear more from libertarian4321 about why those are easier/inevitable. Frankly, I'm more worried about that value dropping in half than I am convinced it will double.

Besides not having any home equity, the looming truth of eventual COLLEGE COSTS is starting to set in. I've got a bright, artistic, introverted, straight-As ninth grader who to date has absolutely tanked her standardized tests and would flounder in a big university environment. So we are looking at small liberal arts colleges (SLAC) that cost umpteen dollars a year.

And the whole healthcare thing is literally giving me headache today. Aging is a preexisting condition - we're all going to get it eventually. Even at 52, I'm basically uninsurable on the open market. Do we all just hope we can keep jobs with health insurance?

[farmecologist]

*waves* Hi! I'm coming over from the Race to $1M to $2M thread. Copied my intro info from over there:

Our net worth is at 2.3 right now. My husband maxes out his 403(b), which, including maxing catch-up contributions  and the employer match, added up to $30.5K last year. But it read as "noise" (redacted poorly worded phrasing) didn't affect our  overall net worth much. The additions we are making don't make a big difference when the market goes up, and they won't make a big difference when the market goes down.

We live in provided housing at my husband's job, and we don't want to be landlords, so we haven't had real estate since we lost $80K on the sale of our house in 2009. We have REITs but no equity. So aside from 7% we keep in money market accounts and a CD because if my husband lost his job, we'd lose both his income and housing, our entire stache is out there in "Return is Not Guaranteed Land", which feels darker and more foreboding the older I get.

We made our first million by saving in a corporate culture where most of our peers spent. The climb to the second million got a huge boost with a $300K inheritance in 2014. But now I don't see a way to 3 or 4, so I would love to hear more from libertarian4321 about why those are easier/inevitable. Frankly, I'm more worried about that value dropping in half than I am convinced it will double.

Besides not having any home equity, the looming truth of eventual COLLEGE COSTS is starting to set in. I've got a bright, artistic, introverted, straight-As ninth grader who to date has absolutely tanked her standardized tests and would flounder in a big university environment. So we are looking at small liberal arts colleges (SLAC) that cost umpteen dollars a year.

And the whole healthcare thing is literally giving me headache today. Aging is a preexisting condition - we're all going to get it eventually. Even at 52, I'm basically uninsurable on the open market. Do we all just hope we can keep jobs with health insurance?

Us too!  Our 12th grader does great in school but also has not-so-great standardized test scores.  It was the same way with my wife and I.  Frankly, I think standardized tests are a complete joke ( because I'm not good at them..I'm sure ).  She is going to go to our in-state university though.  However, even that can really add up.

And I'm in the same boat with the healthcare issues.  Our family DOES have someone with a 'pre-existing'' condition and it is downright scary to think what might happen.  Folks only seem to be against all of these 'pre-existing' condition protections until it happens to them or someone in their family.  I have seen it time and time again.  It just boggles my mind...

[markbike528CBX]

.............. So we are looking at small liberal arts colleges (SLAC) that cost umpteen dollars a year.

While your situation might be different, I note that there are scholarships and the like out there, sometimes linked to a specific school and situation (see below).  I found Juniata College to be affordable, a great school (as opposed to a big frat house party).   I mention it since your location is Middle-Atlantic.

When I visited (34 years ago) I was given a tour by a full professor of chemistry, who explained Nuclear Magnetic Resonance in a single, simple sentence.  That professor is finally slimming down his hours this year.  Going back for 30th reunion this year.


 One of the few scholarships for left-handed students is the Frederick and Mary F. Beckley Scholarship, which was created in 1979 at Juniata College in Pennsylvania. Worth $1,000 to $1,500 annually, this scholarship is reserved for lefties who have completed at least their freshman year at Juniata with top academic achievement above the 3.3 GPA mark and campus leadership. Applications must include two personal references, proof of financial need, and certification of grades.

[begood]

.............. So we are looking at small liberal arts colleges (SLAC) that cost umpteen dollars a year.

While your situation might be different, I note that there are scholarships and the like out there, sometimes linked to a specific school and situation (see below).  I found Juniata College to be affordable, a great school (as opposed to a big frat house party).   I mention it since your location is Middle-Atlantic.

When I visited (34 years ago) I was given a tour by a full professor of chemistry, who explained Nuclear Magnetic Resonance in a single, simple sentence.  That professor is finally slimming down his hours this year.  Going back for 30th reunion this year.


 One of the few scholarships for left-handed students is the Frederick and Mary F. Beckley Scholarship, which was created in 1979 at Juniata College in Pennsylvania. Worth $1,000 to $1,500 annually, this scholarship is reserved for lefties who have completed at least their freshman year at Juniata with top academic achievement above the 3.3 GPA mark and campus leadership. Applications must include two personal references, proof of financial need, and certification of grades.

Thanks for that info on Juniata, markbike528CBX. As luck would have it, my daughter is a leftie! However, we will not have "proof of financial need", since we're here on this thread. :)

We're going to look at test-optional schools. She should have a pretty darn good art portfolio to offer up instead of SAT scores, and my understanding is that a lot of colleges do just sort of wave their hands and "grant" lower tuition than the sticker price, at least once you're down below the Top 50 in the rankings.

[PathtoFIRE]

There are a number of smaller colleges that provide free tuition. I did a google search, and the number vary, here is one of the top links, but take a look yourself
http://www.valuecolleges.com/top-25-tuition-free-colleges/

[Car Jack]

I think you'll indeed find that the lower ranked a school, the more merit aid your daughter will attract.  My son nearly flunked out freshman and sophomore year of high school and spent junior and senior years bringing his overall gpa slightly above average.  He went to a lower ranking technical private college his first year and received 25% of total cost in merit aid.  We get zip through FAFSA. 

It's definately tough.  Have a job and you make too much (anything above the government's official poverty level is "available to pay for college") but retire early and with health insurance so up in the air, how do you pay for that?

I've got one half way through college and another who is a freshman in high school.  With both of them, there is the expectation that they're not just "going to college".  If there is not a well defined career from the chosen major, I'll be funding plumbing or HVAC school.  The cost of a Lamborghini Huracan (what my older son's college costs.....no, really, the MSRP is a direct match) for an engineering degree I can handle.  For an underwater basket weaving degree?  Nope.

[begood]

I hear you, Car Jack. I feel like things are different now. When I went to college in the early 1980s, college was when you figured out what you wanted to do with your life. Now we expect high school kids to know by the time they pick a college, so that college can match their career goal.

I'm hoping my daughter doesn't get star-struck at the idea of an art college. I'd much much rather she go to a LAC and double major - art and business, art and economics, graphic design and marketing, or major/minor. I have always told her that she IS an artist, but that vocation and avocation are not always the same thing, and she does need to be able to support herself.

But life is long and people change and grow. My dad didn't start his life's work until 40. He didn't start college until age 31, after serving in WWII. He didn't know as a soldier from a small mill town in New Jersey that he'd end up dean of a top journalism school twenty-five years later.

[Car Jack]

Art and business is a good match.  I played in our church band for several years and our best singer was a music college grad.  Between services, she lamented that she didn't take at least music business, rather than just music performance because at 25, she had no choice but to live in her parents basement.

Another example I'll throw out there is my sister.  She received and art degree but finding no jobs in art, took a legal admin type course.  She's worked in law offices for many years doing the background work that law offices do.  She still does her art for fun (we have great paintings of our cats) but makes no money from it.

Changing majors can be ok.  My older son did this.  He was in a computer engineering program and just didn't intuitively get it.  I'm a EE and noticed his inability to look at a circuit and figure out generally what it did.  He could go through the 9 pages of math and come up with the equation defining it but not understand what's going on.  He switched to civil engineering where things made much more sense.  This was a great thing to realize.  Sure, some credits were somewhat lost but he didn't end up at the end of a Bachelors degree with an occupation that he would grow to hate. 

[itchyfeet]

I thought I might throw a marker in here.

I hope I don't fall to the temptation to actively join the race to $3M, but fear I might.

Firstly, our progress thus far.....

In March we passed $2.5M AUD. not so long ago that would have been $2.5M USD, but not so anymore. I should pass $2M USD at some point this year, all going to plan.

We are currently renting, but do own 2 houses which are rented out, one was our former home before we moved Overseas for work. We are not sure whether we will move back there or sell. Currently the plan is to sell and buy something significantly cheaper. The other place was bought purely as a rental. We do plan on buying a home at some point, so our invested NW will take a hit at some point.

So with financial introductions done, back to the fear that I might be tempted to race to $3M USD.....

.... are you ready for some MMM blasphemy.... :-O

Whilst $2.5M is a lot of money, i am a little tempted with the thought that if I don't touch that money, then 10 years from now it will most likely be worth $5 million, and 20 years from now, when I would be a normal retirement age, it could potentially be worth $10 million.

$10 million is a crazy amount of money!!!!.... even if it is only Aussie dollars.

I struggle to imagine how we could possibly spend $500,000 a year. I certainly can't even fathom being worth $10 million, but somehow we have put ourselves in a position where, even if we never save another cent, we could end up very wealthy with a NW of $10 million. Maybe our mustachian selves will need a makeover. Maybe we will buy a second car. Lol.

So where to from here.....

My DW is a school teacher and loves her job. She is still in her 30s (just) with no plans of retiring. She wants to work maybe 6 months a year once I stop work. Her part time wage From 6 months/ year of work will cover about 60% of our expenses, so for us to keep piling up money by not touching the stash at all, I would only need to find something that pays a fraction of what I currently earn. I definitely don't want to work more than 6 months a year, but would definitely contemplate some form of contract/ seasonal work, maybe a few company directorships or something like that.

So plan A is to FIRE in 2 years once we hit $3M AUD in net worth (2.25M USD). We will then take a long trip, maybe a year or so and relocate back to Australia..... we can then live quite a spendypants FIRED life with no more work.

Plan G (for greedy) is the same as plan A, but once we get back to Oz we seek to cover our costs through part time work, and watch our NW climb over time to $5M, and maybe even $10M in the extreme case.

I don't think we will be able to make a decision until after I pull the pin on the current job 2 years from now. Counting down the days to our first FIRE.

[Dicey]

One word, itchyfeet: philanthropy.

PTF. If I include the value of DH's defined benefit pension, we're there. I'm not counting our paid-for 1.3M home or the equity in our (lightly mortgaged) SFH rental properties. We're not racing anymore though, just cruising along, enjoying life, and the scenery, and smelling the roses.

[begood]

One word, itchyfeet: philanthropy.

PTF. If I include the value of DH's defined benefit pension, we're there. I'm not counting our paid-for 1.3M home or the equity in our (lightly mortgaged) SFH rental properties. We're not racing anymore though, just cruising along, enjoying life, and the scenery, and smelling the roses.

Dicey, if you don't mind my asking, how do you assign a value to your husband's defined benefit pension? My husband should get about $27K/year (flat,non-COLA'd, 50% joint survivor) starting in 13 years. He worked for the MNC (multinational corporation) for 20 years, then moved on to a second career at age 43. He could take the pension earlier, but the amount would drop precipitously, so we hope to wait until he's 65. The pension is insured by PBGC.

We also have the option of retiree health insurance through the company, but would have to pay both the employer and employee amounts, currently $18K/year. In the current unstable environment, that might be the only way I could get health insurance at all if my husband lost his job. Expensive as it would be, at least it is an option we can keep in our back pocket.

[Car Jack]

Caught the spread sheet up to date since the new values of my savings bonds have clicked over for May.  Now at $2.1M.

I think I'm also ultra conservative on my numbers.  I have a very small pension coming where I could take $53k lump sum right now if I wanted (I left the job in 1993) and do not include it in any of my numbers.  I probably should count it but I guess I always look for any downside that might happen.  I'm happy that the pension is at Fidelity now (the original company no longer exists). 

I love doing mouse nuts kinda things.  My insurance was due so I went online and made 3 payments.  First 2 were with new cards that I had to get the spend to collect the bonus.  Then I overpaid the thing with my double cash.  Just got an overpayment check Friday, so there's $20 in undeserved points that I'm happy to keep.  :D

[Laura33]

Dicey, if you don't mind my asking, how do you assign a value to your husband's defined benefit pension? My husband should get about $27K/year (flat,non-COLA'd, 50% joint survivor) starting in 13 years.

Well, you didn't ask me :-), but what I do is divide by .04, to figure how how much the "'stache-equivalent" amount is.  E.g., to take out $27K/yr at the 4% rule, I'd need $675K.  Now, that is the 'stache-equivalent in 13 years, when he is eligible for that $27K/yr.  So if you want the current value of that, you could present-value it back to today's dollars.  But personally, I don't care that much -- I just like to know that, hey, in 13 years, I will have the equivalent of $675K more in my 'stache. 

But actually, even that is bass-ackwards, because the whole point of the 'stache is to throw off income -- so when you already know the income, you don't even need to calculate an equivalent 'stache value.  So in your case, I'd just knock the $27K off of the annual income you need, and then figure out how much else you need to save to cover the delta.  E.g., I need $40K/yr, I have $27K/yr already guaranteed, so my delta is $13K/yr.  Ergo, 4% rule, I need $13K x 25 = $325K more in my 'stache in 13 years. 

[begood]

Dicey, if you don't mind my asking, how do you assign a value to your husband's defined benefit pension? My husband should get about $27K/year (flat,non-COLA'd, 50% joint survivor) starting in 13 years.

Well, you didn't ask me :-), but what I do is divide by .04, to figure how how much the "'stache-equivalent" amount is.  E.g., to take out $27K/yr at the 4% rule, I'd need $675K.  Now, that is the 'stache-equivalent in 13 years, when he is eligible for that $27K/yr.  So if you want the current value of that, you could present-value it back to today's dollars.  But personally, I don't care that much -- I just like to know that, hey, in 13 years, I will have the equivalent of $675K more in my 'stache. 

But actually, even that is bass-ackwards, because the whole point of the 'stache is to throw off income -- so when you already know the income, you don't even need to calculate an equivalent 'stache value.  So in your case, I'd just knock the $27K off of the annual income you need, and then figure out how much else you need to save to cover the delta.  E.g., I need $40K/yr, I have $27K/yr already guaranteed, so my delta is $13K/yr.  Ergo, 4% rule, I need $13K x 25 = $325K more in my 'stache in 13 years.

Laura33, I could hug you! Thank you for laying it all out so clearly for me. That's pretty awesome. And it reassures me that we probably did the right thing not taking a lump sum when it was offered a couple of years ago, since it was less than 1/3 of the equation you posted above. I realize we're rolling the dice on the annuity being what's promised. The pension is insured with PBGC, so he should get something.

[itchyfeet]

I have a small defined benefit pension entitlement as well from 55, that will be CPI adjusted, with 50% to be paid to DW after I croak.

I value it similar to you. Ie: Entitlement in today's $ x 25, inflated forward 10 years at 3% inflation and discounted at 7%.

Being a spreadsheet nerd, the thing I like about the inflating/ discounting is that every month I unwind the inflation/discount by another month, and my stash grows :-)

I use a multiple of 25x to honor the 4% rule, but in the context of SWRs the pension is worth more, because it's not subject to sequence of returns risk, so you could prob even user a higher multiple, as you could technically take a riskier view on your remaining stash thanks to the pension. There is 100% certainty my pension will last 30, 40 or 50 years. However long I live post 55. Just as long as the Govt doesn't go bankrupt.

I do agree that once I am receiving the pension, the most correct way to factor in its value into planning is just to reduce the expenditure to be covered by the "stash" by the amount of the pension. But for today, for NW calculations, I like to assign a value to it. It makes me feel closer to my goal.

[wannabe-stache]

I paid off my house about 15 years ago.  Back then, I was an overly cautious investor, having bought company stock during the '87 selloff.  So paying off debt and the mortgage was the only ways I invested.

There's nothing wrong with tracking net worth and using that number for goals to attain.  I constantly change my goals once one is reached.  I had the $2M goal for quite a while for investments only.  Then it was to hit $1M within just my rollover IRA (not quite there).  When I hit that, I'll set some new, short term, attainable, arbitrary goal.  I've actually got one small goal in my Vanguard account to get back to zero.  It's been in developed international for about 2 years and is still under water.  I'm $2900 from getting to zero on a $250k account.

I still sweat the small stuff.  From the tradeline thread, I read about low balance forgiveness and tried it on several of my cards.  $0.98 forgiven on Barclays and $1.96 forgiven on discover.  Sounds like mouse nuts but free money is free money.  I showed my wife the Discover statement which also gave me $0.10 in rewards because I spent that $1.96 on gas, which is a 5% category this quarter.  And yah.....I pick up pennies on the sidewalk.

i am curious.  at what point do you loosen up?  when you have $3M, will you be "ok" spending $ on going out to eat?  buying a nice bottle of wine? etc.?

i am new to this line of thinking.  i have always been a big saver but i had jobs that allowed me to spend as well.  i have approx. $1M of savings (my wife has an additional $500K) and we are only 37 and 33 respectively. i suppose i could have saved more but i wouldn't trade our trips to greece or israel or italy for anything.

[Car Jack]

i am curious.  at what point do you loosen up?  when you have $3M, will you be "ok" spending $ on going out to eat?  buying a nice bottle of wine? etc.?

i am new to this line of thinking.  i have always been a big saver but i had jobs that allowed me to spend as well.  i have approx. $1M of savings (my wife has an additional $500K) and we are only 37 and 33 respectively. i suppose i could have saved more but i wouldn't trade our trips to greece or israel or italy for anything.

So, that's something that most people have to answer for themselves.  I have not been a model Mustachian by any means.  I drive a Wrangler, I used to own a Racecar and a Cobra replica and then a Lotus Elise.  I've owned an E30 M3.  I go to lunch everyday at work (Subway).  Wife and I don't drink so we've likely saved lots of money there.  But we watch our money.  I do nearly all of our car repairs (my garage has a lift and just about any tool you could name......remember I had a racecar).  We're older parents (1st born when I was 40, second I was 44) so we still have one in college and one in high school.  I'm figuring that at 2.5M, I'm going to be "fine".  We believe in providing the best education we can for the kids so, yah....I make too much to get financial aid and the bill is $60k a year.  That's fine.  We won't go to Europe until the second is at least in college. 

[Bateaux]

We're going to Puerto Vallarta Saturday for a week of vacation.   I'm seriously thinking of expatriating in a few years.   Mexico is a possibility, but there are many possibilities. I'm working at least two more years to keep health care for my kids.  Will likely keep citizenship, just move residential status to Florida maybe.

[Dicey]

Dicey, if you don't mind my asking, how do you assign a value to your husband's defined benefit pension? My husband should get about $27K/year (flat,non-COLA'd, 50% joint survivor) starting in 13 years.

Well, you didn't ask me :-), but what I do is divide by .04, to figure how how much the "'stache-equivalent" amount is.  E.g., to take out $27K/yr at the 4% rule, I'd need $675K.  Now, that is the 'stache-equivalent in 13 years, when he is eligible for that $27K/yr.  So if you want the current value of that, you could present-value it back to today's dollars.  But personally, I don't care that much -- I just like to know that, hey, in 13 years, I will have the equivalent of $675K more in my 'stache. 

But actually, even that is bass-ackwards, because the whole point of the 'stache is to throw off income -- so when you already know the income, you don't even need to calculate an equivalent 'stache value.  So in your case, I'd just knock the $27K off of the annual income you need, and then figure out how much else you need to save to cover the delta.  E.g., I need $40K/yr, I have $27K/yr already guaranteed, so my delta is $13K/yr.  Ergo, 4% rule, I need $13K x 25 = $325K more in my 'stache in 13 years.

Laura33, I could hug you! Thank you for laying it all out so clearly for me. That's pretty awesome. And it reassures me that we probably did the right thing not taking a lump sum when it was offered a couple of years ago, since it was less than 1/3 of the equation you posted above. I realize we're rolling the dice on the annuity being what's promised. The pension is insured with PBGC, so he should get something.

More hugs for Laura33 then, because I have no idea. We don't count it that specifically. This may sound weird, but here's why. Our house and cars are paid for, we have three rental properties, we have a boatload of money in equities, a shit-ton of money in cash waiting for whatever we decide to do with it next, and DH is still working, so we're not tapping any of it yet. I've never run a Fire Calc or whatever it's called. I don't use YNAB or whatever the latest budgeting tool is. All we ever did was spend less than we earned and tried to invest the difference wisely. Now, however you slice it, we'll have enough. I mentioned on another thread today that DH's pension plus our SS estimates add up to more than we earn now. We're gonna be fine, so why spend too much time doing endless calculations?

[itchyfeet]

Dicey, if you don't mind my asking, how do you assign a value to your husband's defined benefit pension? My husband should get about $27K/year (flat,non-COLA'd, 50% joint survivor) starting in 13 years.

Well, you didn't ask me :-), but what I do is divide by .04, to figure how how much the "'stache-equivalent" amount is.  E.g., to take out $27K/yr at the 4% rule, I'd need $675K.  Now, that is the 'stache-equivalent in 13 years, when he is eligible for that $27K/yr.  So if you want the current value of that, you could present-value it back to today's dollars.  But personally, I don't care that much -- I just like to know that, hey, in 13 years, I will have the equivalent of $675K more in my 'stache. 

But actually, even that is bass-ackwards, because the whole point of the 'stache is to throw off income -- so when you already know the income, you don't even need to calculate an equivalent 'stache value.  So in your case, I'd just knock the $27K off of the annual income you need, and then figure out how much else you need to save to cover the delta.  E.g., I need $40K/yr, I have $27K/yr already guaranteed, so my delta is $13K/yr.  Ergo, 4% rule, I need $13K x 25 = $325K more in my 'stache in 13 years.

Laura33, I could hug you! Thank you for laying it all out so clearly for me. That's pretty awesome. And it reassures me that we probably did the right thing not taking a lump sum when it was offered a couple of years ago, since it was less than 1/3 of the equation you posted above. I realize we're rolling the dice on the annuity being what's promised. The pension is insured with PBGC, so he should get something.

More hugs for Laura33 then, because I have no idea. We don't count it that specifically. This may sound weird, but here's why. Our house and cars are paid for, we have three rental properties, we have a boatload of money in equities, a shit-ton of money in cash waiting for whatever we decide to do with it next, and DH is still working, so we're not tapping any of it yet. I've never run a Fire Calc or whatever it's called. I don't use YNAB or whatever the latest budgeting tool is. All we ever did was spend less than we earned and tried to invest the difference wisely. Now, however you slice it, we'll have enough. I mentioned on another thread today that DH's pension plus our SS estimates add up to more than we earn now. We're gonna be fine, so why spend too much time doing endless calculations?

Or..... why keep working?!!! :-)

[Dicey]

Oh, hey, Itchyfeet! I've covered it before, so sometimes I skip details so as not to sound like an ol' broken record.

DH works because:

1. His mom has Alzheimer's and she lives with us. He likes to stay busy, so being trapped here would drive him nuts!
(Yeah, FIRE doesn't look a bit like what I imagined right now, but for me, it still beats the hell out of working.)

2. He has 17 out of 20 years needed to hit the sweet spot for his Defined Benefit Pension. Why give that up?

3. He loves his job, has every other Friday off, gets every holiday paid, earns tons of vacation time and has months and months of accrued sick time accumulated. His office is 3.5 blocks from our house. On workdays, we get up early, I make his breakfast, pack his lunch while he eats, and we walk to work together at 5:45. Then I come home and go back to sleep :-)

4. Our current health care coverage has no premiums, no deductibles and tiny co-pays. At 20 years of service, we get $550/month for healthcare, AND we get to stay on the company's healthcare plan at the retiree rate. This is huge. I've had cancer and he obviously has Alzheimer's in the family tree, so to stay on the company's plan will save a boatload of money in healthcare costs for the rest of our lives.

It just wouldn't be frugal or even sensible to leave so much on the table.

[itchyfeet]

Hey Dicey. Sorry to make you cover old ground again.

You never know,  might do 3 more years myself. We are taking 6 month at a time....

[farmecologist]

Oh, hey, Itchyfeet! I've covered it before, so sometimes I skip details so as not to sound like an ol' broken record.

DH works because:

1. His mom has Alzheimer's and she lives with us. He likes to stay busy, so being trapped here would drive him nuts!
(Yeah, FIRE doesn't look a bit like what I imagined right now, but for me, it still beats the hell out of working.)

2. He has 17 out of 20 years needed to hit the sweet spot for his Defined Benefit Pension. Why give that up?

3. He loves his job, has every other Friday off, gets every holiday paid, earns tons of vacation time and has months and months of accrued sick time accumulated. His office is 3.5 blocks from our house. On workdays, we get up early, I make his breakfast, pack his lunch while he eats, and we walk to work together at 5:45. Then I come home and go back to sleep :-)

4. Our current health care coverage has no premiums, no deductibles and tiny co-pays. At 20 years of service, we get $550/month for healthcare, AND we get to stay on the company's healthcare plan at the retiree rate. This is huge. I've had cancer and he obviously has Alzheimer's in the family tree, so to stay on the company's plan will save a boatload of money in healthcare costs for the rest of our lives.

It just wouldn't be frugal or even sensible to leave so much on the table.

Pensions are a great reason to work a few more years, if you are lucky enough to have one.  People sometimes don't realize what an incredible asset a defined pension can be.  Too bad fewer and fewer people will have them as time goes on.

[Dicey]

You're right, farmecologist.

In his late thirties, DH realized he'd earned a lot of money as a painting contractor,  but didn't have much to show for it. He did his research and applied for his current position, specifically for the retirement benefits. He took a huge pay cut at first. To bridge the gap, he continued painting on the side, which is how we met in 2001. He was married to his high school sweetheart and they had two kids. Fast forward eleven years. I called him to paint my house again. He was a widower by then. We started talking. He painted my house. We kept talking and got married three months later. He doesn't do side jobs much these days, 'cause together we're FI. Instead of working for others on the side, we BRRR houses for fun.

As a bonus, his company is about as solid as they come, so the likelihood of collecting said pension is quite high. Wouldn't derail us if it wasn't all that was promised, but let's hope we never have to find out. We have charitable plans for our excess retirement income.

Hey Dicey. Sorry to make you cover old ground again.

You never know,  might do 3 more years myself. We are taking 6 month at a time....

Thank you, but no apology is necessary, Itchyfeet!

Six months at a time sounds like an excellent plan.

[markbike528CBX]

Replying to sneak in by cheating (counting house equity for this purpose).
1.9M liquid (90% equities) and net house equity  ~0.3M.

I'm  hoping to be in honestly (liquid NW only) soon.

I'm now in the "race" fair and square (>$2M liquid), although I'm think I'll be stepping out of the race and let the gains to heavy lifting (they already are) soon.   Hope you all pass me by and wave on your way to $3M.

[Car Jack]

Replying to sneak in by cheating (counting house equity for this purpose).
1.9M liquid (90% equities) and net house equity  ~0.3M.

I'm  hoping to be in honestly (liquid NW only) soon.

I'm now in the "race" fair and square (>$2M liquid), although I'm think I'll be stepping out of the race and let the gains to heavy lifting (they already are) soon.   Hope you all pass me by and wave on your way to $3M.

Just hop on and draft behind us.  Makes us faster too.

[Bateaux]

Congrats on the new milestone!

[itchyfeet]

KABOOM!!!

Just tallied up my 30 June numbers and thanks to a weaker USD I have crossed the $2M USD of Net Worth.

Sweet 😁

[markbike528CBX]

I'm now in the "race" fair and square (>$2M liquid), although I'm think I'll be stepping out of the race and let the gains to heavy lifting (they already are) soon.   Hope you all pass me by and wave on your way to $3M.

Just hop on and draft behind us.  Makes us faster too.

I wouldn't have thought of that car racing analogy on a financial forum, but it makes sense.
Just reading the forum gives one lots of ideas to add speed to FIRE. Posting helps me think through my logic.

[Car Jack]

I was thinking or bicycle racing when I wrote that but car racing works too.  Either way, a bunch of us moving along help each other by staying in a close pack.

[Bateaux]

I'm so ready to post here with 2M liquid, NW I'm pretty legit.   Y'all are the cool kids!

[Mr Griz]

Just checked Personal Capital and it shows us at $2.25M, not including the mortgage-free house.

Sadly I didn't realize until recently that things were looking so good.  We've felt for several years that we were in good shape but never had an accounting of all our various IRA's, 401k's and cash accounts until recently.  I stumbled across jlcollinsnh a couple of months ago and that led to MMM and a more focused way of looking at finances.  DW retired a few years ago and I plan to bail this time next year.  (I have some deferred incentive compensation that will vest then).  In the meantime I'm consolidating everything into a couple of Vanguard accounts (one taxable, the other an IRA) and putting our excess cash to work.

The cool thing is that our two pensions should easily cover living expenses.  The 'stache should grow to $3M in a few years without any withdrawals.

[itchyfeet]

Contratulations Mr Griz. The world is now your playground :)

[Exflyboy]

I wasn't sure if I graduated to this group as our "liquid" includes $519k in pensions.. so assuming they are still there when we plan to start using them then liquid NW is $2.344M.

House (includes two rentals on the same property) I am guessing will net us $400k.. but it currently pays about $20k in rent so its hard to sell..:)

We are both RE'd now

[SingleMomDebt]

I wasn't sure if I graduated to this group as our "liquid" includes $519k in pensions.. so assuming they are still there when we plan to start using them then liquid NW is $2.344M.

House (includes two rentals on the same property) I am guessing will net us $400k.. but it currently pays about $20k in rent so its hard to sell..:)

We are both RE'd now

Congrats ExFB!

[Exflyboy]

I wasn't sure if I graduated to this group as our "liquid" includes $519k in pensions.. so assuming they are still there when we plan to start using them then liquid NW is $2.344M.

House (includes two rentals on the same property) I am guessing will net us $400k.. but it currently pays about $20k in rent so its hard to sell..:)

We are both RE'd now

Congrats ExFB!

Thanks Chip..:)

[Bateaux]

Well done Exflyboy.