Author Topic: Case Study: Am I done?  (Read 23939 times)

Optimus Primal

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Case Study: Am I done?
« on: December 01, 2015, 05:14:14 AM »
Am I able to FIRE with this asset and spending profile?
« Last Edit: April 28, 2018, 08:31:26 AM by Optimus Primal »

ShoulderThingThatGoesUp

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Re: Case Study: Am I done?
« Reply #1 on: December 01, 2015, 05:54:35 AM »
If you move to a lower cost of living area you certainly could be.

nereo

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Re: Case Study: Am I done?
« Reply #2 on: December 01, 2015, 05:55:00 AM »
I'd say you can, but with some alterations. 
You have $2.2MM $2.4MM in taxable + retirement accounts, which yields $88k $96k at 4%WR and $66k $72k at 3%  Even without your wife's salary and without reducing any expenses you would require a 5% WR. Eliminate child-care entirely during retirement and you are at 3.3%  combined with your wife's salary and the elimination of child-care expenses you would meet your expense needs quite easily (you'd actually need a mere 1.8WR 0.8%WR if you dropped childcare entirely and your wife still brought in $60k).

A few face punches - Vacation and Clothes are incredibly high.  $4k for 'yardwork' seems ridiculous, especially for someone who will be retired soon.  Utilities at $583/mo are on the high side too... I'm guessing you have some serious energy-sucks going on and would consider plugging those ASAP.

A final note:  how does your wife feel about your retirement hinging on her still working?  You certainly could both retire if you reduced expenses and/or moved outside your current HCOL area - you'd actually have more purchasing power and more financial safety with neither of you working by doing this. What happens if her job really starts to suck or she gets downsized - will you decide to adjust your spending or will one or both of you start looking for work?

EDIT:  numbers adjusted to fix math errors. 
« Last Edit: December 01, 2015, 01:38:54 PM by nereo »

tomorrowsomewherenew

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Re: Case Study: Am I done?
« Reply #3 on: December 01, 2015, 12:52:26 PM »
I'd also say you can quit, especially if you can make a few changes.

Childcare is insane. But, if you are staying home, there is no reason to drop 40k on daycare. You should also be able to cut back on food a few thousand without feeling much. Ditch the yard work, buy more reasonable clothes. There is a ton of fat that can be trimmed off your spending.

If the wife were to lose her job, you could both be retired if you moved to a more reasonable area. 

justajane

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Re: Case Study: Am I done?
« Reply #4 on: December 01, 2015, 12:56:23 PM »
I think you can do it, but how much do you intend to reduce child care expenses? To me, that's the biggest question I have with your plan.

mxt0133

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Re: Case Study: Am I done?
« Reply #5 on: December 01, 2015, 01:03:34 PM »
You assume you can cut down on the expenses.  My two cents would be to start reducing your expenses now without impacting your quality of life.  Also your kids will not be in daycare forever so that will end eventually.  So if you work for another year or two you can see what adjustments you can make on your expenses and see where you are.

If after a year or two you can maintain that level of spending and still not impact your quality of life then yes you are good to go.  Hopefully by then your daycare expenses will have dropped and you have a clearer picture of what your expenses will be to make a decision.

NV Teacher

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Re: Case Study: Am I done?
« Reply #6 on: December 01, 2015, 06:28:13 PM »
What about trying it for a year and see how it goes? 

FIREby35

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Re: Case Study: Am I done?
« Reply #7 on: December 01, 2015, 07:42:48 PM »
Of course, you can do whatever you like but I think you are fine to pull the plug. Cut your expenses as is possible and use your wife's income first. The whole 3%,4% deal is already conservative and includes lots of assumptions that are safe. I'd check out the MadFientist post he just did about the 4% rule and gocurrycracker's article about sequencing return risk which is far more important than "adding a couple hundred grand."

Again, more power to you if you like work but you definitely CAN make it work immediately.

rmendpara

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Re: Case Study: Am I done?
« Reply #8 on: December 01, 2015, 09:29:25 PM »
You're definitely close.

1.6m gets you to around 48k @ 3% SWR (may be appropriate for an early retiree), then add in 60k in wife's income and you are very close to your 120k. Make a few adjustments, and you could probably retire today.

Add another few hundred thousand in savings, and you can reduce risk even further.

Few adjustments that could change things a lot:
- move to a cheaper cost of living area (could cut wife's incmoe, but likely will make up for itself in savings)
- daycare will be done in <5 years when kids start school
- yardwork and some other things can be cut if you start having more time around home

Seems your budget could hit 80k by the time your kids get to school, and probably 70k with some light pruning. At that level, downsizing your home and planning access to your retirement accounts could get you to age 60 with another boost of assets.

You can slice this up in many ways and get super complicated, but you need to start with this:
- what is your target total spending in retirement
- how much could you save in living costs in a low COL area
- would wife take a pay cut in a low COL area
- which expenses can you trim and where you can add (downsize your home, do your own yardwork, and no more daycare, but spend double on an additional vacation and still come out far ahead...) --> this is a lifestyle decision that you have to make

Math suggests you could retire as is today, and take a year to figure out how to do things. Depending on your line of work, there's a possibility of doing some consulting or part time stuff in a related field, or a much smaller salary in an unrelated field? Some things to think about...

Awesome progress by the way! $3.9 Mil before age 40 is no small achievement!

Goldy

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Re: Case Study: Am I done?
« Reply #9 on: December 01, 2015, 09:53:26 PM »
What's your plan for college for the kids? 

Ricky

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Re: Case Study: Am I done?
« Reply #10 on: December 02, 2015, 03:05:22 AM »
Have you considered real estate? With good properties returning 10%, it would quickly accelerate your ability to retire quicker.

patrickza

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Re: Case Study: Am I done?
« Reply #11 on: December 02, 2015, 03:52:15 AM »
If your wife keeps working, then absolutely. If not, then probably, but I'd cut expenses to make it more comfortable. Your day care costs are jaw droppingly huge! If you could eliminate those then you're home free.

Otherwise you have 800k in your house not earning you anything. If you like the house that's fine, you've got a huge stache so why not keep it, but I'd imagine you could get a far better place, with far lower child care costs by moving to a lower cost of living area.

Expatriate

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Re: Case Study: Am I done?
« Reply #12 on: December 02, 2015, 10:27:26 AM »
Given your numbers, I wouldn't think twice about it. Go for it!

boarder42

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Re: Case Study: Am I done?
« Reply #13 on: December 02, 2015, 10:32:36 AM »
he said his wife is going to keep working.  they have more than enough for him to FIRE.  why do you need any daycare if you arent working would be my main question.

JLee

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Re: Case Study: Am I done?
« Reply #14 on: December 02, 2015, 05:18:30 PM »
My default response to these "I have millions and don't know if I can retire yet" threads is to move to a low(er) cost of living area and live happily ever after. Excluding your wife's income and factoring a conservative 4% SWR, you'd be looking at almost 2.5x the median household income in the USA.

4% is already conservative. 3% is crazy IMHO, given that you have a massive amount of expense reduction you could do if necessary (your child care costs alone exceed what many people on this forum earn (or retire on) annually, which could be eliminated entirely if you both were to stop working).  I would spend time with your kids and save the $40k/yr! :)
« Last Edit: December 02, 2015, 05:20:57 PM by JLee »

MarciaB

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Re: Case Study: Am I done?
« Reply #15 on: December 02, 2015, 05:32:55 PM »
I would slice this into two pieces:

1) Use your liquid asset base ($2.4M) and choose a withdrawal rate you're comfortable with. This income stream will be for operating needs (the household stuff you listed). You can spend on operating/household up to the ceiling of these withdrawals.

2) Use your wife's net income for long-term savings and projects like the kids' college funds, major repairs/replacements on the house, unexpected large emergencies, etc. The long-term stuff is off-limits for operating purposes.

That way you are "living within your means" in terms of your asset base, but also growing your "estate" at the same time.

Exflyboy

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Re: Case Study: Am I done?
« Reply #16 on: December 02, 2015, 06:51:02 PM »
I do have a degree of sympathy for your situation.

I am in a very similar situation in terms of liquid NW.. Not quite as much in actual stash but when I add our pensions in there our incomes would be almost the same (assuming a 4% WR) Our house is worth about half what yours is.

Having said that, it is very difficult to go from a firehose of cash coming in, to that stopping and now its going the other way.

You are going to have to downshift your lifestyle.. My Wife and I spent less than $30k total last year (she is working and gets very good health bennies).. and we figure about a $35k spend if we had to fund our own.

Now this was easy for us to do, we really weren't trying to be ultra frugal. But in your case I suspect you are spending way more than that and you'll have to get used to spending less.. A LOT less!

But in a lower COL area and doing your own maintenance, not owning a 2 new foreign SUV's etc then a much lower COL will result quite easily.

dailycycle

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Re: Case Study: Am I done?
« Reply #17 on: December 02, 2015, 07:16:50 PM »
In a similar situation here.  The main thing which would blow a hole in my future budget is if my husband rejects public school for our kids.  (Okay, I can imagine scenarios where I'd also feel it was important to be able to pursue other options.)

hoping2retire35

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Re: Case Study: Am I done?
« Reply #18 on: December 03, 2015, 08:43:11 AM »
...
Assets (Totals $3.2m):
House 800k...

...  Face punches?   
YES!
I could retire with nothing more than the equity in your house! $200k amazing spread in some quiet country area and a SWR 4% from $600k means I live high on the hog from now until eternity.

Gone Fishing

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Re: Case Study: Am I done?
« Reply #19 on: December 03, 2015, 08:53:52 AM »
Given your numbers, I wouldn't think twice about it. Go for it!

+1.  What are you waiting for?


JLee

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Re: Case Study: Am I done?
« Reply #20 on: December 03, 2015, 09:10:53 AM »

mm1970

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Re: Case Study: Am I done?
« Reply #21 on: December 03, 2015, 09:17:45 AM »
he said his wife is going to keep working.  they have more than enough for him to FIRE.  why do you need any daycare if you arent working would be my main question.
For sanity.

But I'd expect it would be much much less -

Going from full time/ all day/ 5 days a week
To maybe 2 or 3 half days a week.  That could cut it down to 20-30% of the current number pretty easily.

Cassie

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Re: Case Study: Am I done?
« Reply #22 on: December 03, 2015, 11:20:38 AM »
 When you have a parent that stays home the kids are their job so no need for daycare at all except for date night.  You can retire.  Enjoy!

JLee

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Re: Case Study: Am I done?
« Reply #23 on: December 03, 2015, 04:54:10 PM »
But in a lower COL area and doing your own maintenance, not owning a 2 new foreign SUV's etc then a much lower COL will result quite easily.

Yeah, I don't own two SUV's or even one.  But both my cars are mid-range Japanese cars that I bought 3 years old.  Been trying to be frugal which is how I accumulated the stash in the first place.  Expenses ramped after having kids.  I don't really know what the cars cost per year.  In my expense estimate I tried to budget in depreciation on two cars (plus insurance, gas, repairs) with the thought that we'll drive them until 10 years old or so.  But who knows?  I'm just winging this.

haha, well you're doing a damn good job of it. You're good to retire if you want to.

nereo

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Re: Case Study: Am I done?
« Reply #24 on: December 13, 2015, 09:54:48 AM »

OK, here's the rejiggered FIRE budget with explanations.  Not perfect, but this is a better straw man:

[list of projected expenses]
   
So that seems pretty achievable without cutting quality of life really at all (actually, quality of life seems improved).  That's a 3.3% WR with approximately 50k (net of taxes) of wage income on top of it coming from spouse.  The wage income would cover temporary costs like extra child care while kids young, savings for college, and any other big unplanned costs.


Yup - you are done.  You have layer upon layer of safety; a WR well under the already-conservative 4% mark.  A spouse that earns 60% of your base budget.  An ability to trim lots from your budget if absolutely necessary (e.g. $8k for a vacation).  Reduced expenses in the not-too-distant future (e.g. childcare).  SS in the distant future.

As for timing, there's no reason you can't decide to quit tomorrow if you want to.  Your wife could quit too and you'd still be very safe.

congrats.[/list]

Tjat

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Re: Case Study: Am I done?
« Reply #25 on: December 13, 2015, 10:42:02 AM »
Intuitively, it seems that you have enough. But I'm concerned that you're having trouble breaking down your expenses into more granular buckets. 8K a year (10% of your projected budget) for misc? Consider using Mint or Quicken to track your spending for a decent amount of time. However, Rather than try to nail down a number, you should determine your goals and options.

1) Do you want to pay for your children's college?
2) Are you open to moving and/or downsizing?
3) how often would you like to travel?

Once those are answered, you can then focus on your retirement expenses. I do have a few questions though

1) Why is your car line item so high? How much are your insurance premiums? I would think it difficult to be more than 2K a year. So all other expenses are $500 a month?
2) How much do you plan to fund your kids activities? Sports, clubs, etc
3) How could you possibly spend $2k per year on clothes? is it a hobby? I could see 2K to buy an entire wardrobe, but surely this isn't done annually....is it?

matchewed

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Re: Case Study: Am I done?
« Reply #26 on: December 13, 2015, 11:34:20 AM »
I'm not as gung ho as others given how much "I don't know" answers you give. You certainly have enough assets to pull off a FIRE move, you just need to understand your expenses better IMO.

Altons Bobs

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Re: Case Study: Am I done?
« Reply #27 on: December 13, 2015, 01:08:12 PM »
Dh and I both say that you are not anywhere close!  Sorry.  You will run out of money very soon if you think you have enough to retire.  You have to downsize your home, cut your expenses to about half of what it is now, and have your wife continue working, then maybe you will have enough.

csprof

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Re: Case Study: Am I done?
« Reply #28 on: December 13, 2015, 01:52:00 PM »
But I'm concerned that you're having trouble breaking down your expenses into more granular buckets. 8K a year (10% of your projected budget) for misc? Consider using Mint or Quicken to track your spending for a decent amount of time. However, Rather than try to nail down a number, you should determine your goals and options.

1) Do you want to pay for your children's college?
2) Are you open to moving and/or downsizing?
3) how often would you like to travel?

Once those are answered, you can then focus on your retirement expenses. I do have a few questions though

1) Why is your car line item so high? How much are your insurance premiums? I would think it difficult to be more than 2K a year. So all other expenses are $500 a month?
2) How much do you plan to fund your kids activities? Sports, clubs, etc
3) How could you possibly spend $2k per year on clothes? is it a hobby? I could see 2K to buy an entire wardrobe, but surely this isn't done annually....is it?

Lots of questions there.  Thanks.  Here's my answers:

I use mint but I'm not very good at it.  A lot seems to show up in "cash" or "check" and I'm not going to go back and backtrail every one of those.  Doesn't sound like fun.

On college, I have many years before then but the plan would be to keep saving with spouse salary etc.  Not overly worried about it.

Yes, I'm open to moving or downsizing but that probably depends on spouse.  I'm basing my calcs on staying in current home or moving to a cheaper area... certainly don't need anything bigger or more expensive.

How often would I travel.  I don't know.  I want to do more camping--need a tent.  Would like to road trip around a lot.  Probably need to fly the family from one coast to another once or twice a year and then stay with relatives.  Open to doing cheap slow travel but I've never done it before because I've been a wage slave for forever and a day. 

Car--I've tried to explain this but I'm clearly struggling.  I have two used cars and I'm trying to factor in depreciation.  If I took our depreciation it would be much lower.  Open to going down to one car eventually but most likely keep both cars for the foreseeable future.

Kids activities--kids are small but is my 12k a year budget for child care too low once they need piano lessons and whatnot?  I just figured 1,000 bucks a month for the kids was probably cool, whether that's for babysitter or something else.

Clothes--I dunno.  I went back to mint and could only find one clothing purchase last year for $78.  That can't be right.  How much is a good budget for 4 people per year?  I would think I'd be good on a few hundred myself.  So 2k seems safe.   

So that's where I'm at.  Reactions?

Reaction:  Work two more months and for the next two months track these items more carefully in mint.  Don't backtrail - it's thankless and you run out of energy fast.  It's much easier to triage it all weekly as it comes in.

Rationale:  I'm in a similar boat to you (high income, high expenses, particularly childcare).  When I started tracking these in a little more detail, I (a) realized how much was going in to some categories I didn't think were so high;  and (b) found a bunch of easy ways to cut expenses.

My biggest question about your retirement plan is the tax situation.  In a best-case scenario, you might be able to:  (a)  continue contributing the max of your wife's income into a 401(k)-style tax deferred account (and possibly some other deferrals - HSA?);  and (b) draw some of the appreciation on your taxable stuff as long-term capital gains.  Done right, this could keep your tax burden impressively low.  In a worst-case scenario, you're pulling $160k/year in taxable + short-term capital gains.  This could easily make a 20k+ difference in your net yearly income, and I think it would be worth running the numbers carefully to get an accurate projection of your tax situation.  It's tricky - see, for example, http://money.stackexchange.com/questions/28968/how-are-long-term-capital-gains-taxed-if-the-gain-pushes-income-into-a-new-tax-b   and the bogleheads threads they link therein.

kaposzta

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Re: Case Study: Am I done?
« Reply #29 on: December 13, 2015, 02:35:23 PM »
Your expenses are incredibly high, but fortunately this means that there's plenty of room to cut costs. The problem is that your wife is working for virtually nothing, considering the 40k daycare and the (probably) high commuting costs. Haven't you (or she) considered that she should retire first?

msilenus

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Re: Case Study: Am I done?
« Reply #30 on: December 13, 2015, 03:05:33 PM »
Your spend rate is high enough that you could have some taxes, but you aren't budgeting for them yet.  Maybe that's okay, depending on your basis in taxable?  This could be a big gap in your analysis, but I can't really say.

If you have many years before you have to worry about college, then you should consider funding a 529 to pay for it and reduce your tax exposure in the interim, and esp. when the college bills come due.

I definitely recommend putting at least $50k into a donor advised fund, starting with your most appreciated taxable securities.  ($50k implies a 4% SWR of 2k/yr --your charitable budget.)  This will effectively let you take all your charitable deductions for the rest of your life right now --while they're still worth a lot of money.  This will also sterilize a lot of capital gains.  You have 18 more days this year to do this for your 2015 taxes.  Fidelity and Vanguard both have DAFs.  Here's a rundown on how they work:
     http://jlcollinsnh.com/2012/02/08/how-to-give-like-a-billionaire/

It's unclear if this would be better to do in 2015 or to split across 2015 and 2016.  Depends on where your income falls, and how much longer you'll work.

Your spending is crazy and you should optimize it.  Your catch-22 argument is bad.  Use vacation time to simulate retirement life if you have to.  But you can get a lot done with weekend projects, too.

EDIT: I think food+utilities+child care+yard work+clothes are where you're going to find your leaks.  The rest look reasonable.
« Last Edit: December 13, 2015, 03:20:34 PM by msilenus »

tj

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Re: Case Study: Am I done?
« Reply #31 on: December 13, 2015, 03:05:42 PM »
Quote
Car--I've tried to explain this but I'm clearly struggling.  I have two used cars and I'm trying to factor in depreciation.  If I took our depreciation it would be much lower.  Open to going down to one car eventually but most likely keep both cars for the foreseeable future.

What purpose is calculating the depreciation on your cars? You already paid for them right? You'll sell them at some point, even if just as scrap metal at the bitter end. I don't know why the depreciation is remotely helpful for you to keep track of on your personal balance sheet.

You have plenty to retire tomorrow. If you cut all the extra expenses like yardwork and childcare by taking over those duties, you'll be fine.

You'll also have drastically lower tax burden which you should not ignore IMO.

msilenus

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Re: Case Study: Am I done?
« Reply #32 on: December 13, 2015, 03:24:32 PM »
What purpose is calculating the depreciation on your cars?

He's effectively budgeting for replacement.

tj

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Re: Case Study: Am I done?
« Reply #33 on: December 13, 2015, 03:44:48 PM »
Quote
Depreciation is meant to be an allocation of a capital cost over time because buying a car is a nonrecurring capital expenditure that needs to be anticipated (assuming current cars will not last 50 years).  So if you pay 20k for a car once every 10 years I would allocate something like 2k of cost per year to the budget for that car and not call it a 20k hit in one random year.  I'm open to doing it another way if there is a smarter way to do it.  Yes I own the cars outright.  No they will not last forever.  So this portion of the budget is trying to factor in how much to budget on an annual basis towards the next vehicle (which may be 10 years from now).

This makes sense. I might even add this to my own budget.  Are you planning to purchase any vehicles for your children when they turn 16-ish? Any other high-dollar anticipated consumer good replacements ? Perhaps a mattress?
« Last Edit: December 13, 2015, 03:46:39 PM by tj »

nereo

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Re: Case Study: Am I done?
« Reply #34 on: December 13, 2015, 05:55:17 PM »
Dh and I both say that you are not anywhere close!  Sorry.  You will run out of money very soon if you think you have enough to retire.  You have to downsize your home, cut your expenses to about half of what it is now, and have your wife continue working, then maybe you will have enough.

What?  How did you reach this conclusion?  In your opinion, what would an acceptable WR to retire around 40?  What other layers of security would you like to see?

Effectively you are arguing that the OP needs to have a WR around 0.9% in order to call it quits.  really??

Altons Bobs

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Re: Case Study: Am I done?
« Reply #35 on: December 13, 2015, 06:21:12 PM »
Dh and I both say that you are not anywhere close!  Sorry.  You will run out of money very soon if you think you have enough to retire.  You have to downsize your home, cut your expenses to about half of what it is now, and have your wife continue working, then maybe you will have enough.


Bummer.  What amount of money do you think is sufficient for these facts and how did you come up with it?  That will give me a better sense for how far you believe I am and why you hold that view. 

Also--are you basing your calcs on my current expenses or my proposed FIRE budget and do you have any views on either budget?  If my fire budget seems reasonable why do you believe the stash would be exhausted so quickly, especially considering spouse wage income?

I'm just going by what firecalc says.  I don't count your house as an asset, but emergency if you need to sell it and use the money. So you effectively have $2.4mil to draw from.  Firecalc only has data for 49 years, so that's the max you want to put in for the number of years you need your money to last.  But historical data does not guarantee future returns even though most people here believe otherwise. Firecalc is a little optimistic, so with the $60k, I add in another $10k to it to be safe, so now it's $70k, plus you will have $6k to pay taxes, plus whatever your wife brings in to pay taxes and other expenses. 

That's just my opinion, and I already know most people here will disagree.  Go ask in Bogleheads board, you will get very different answers there than here.

iamlindoro

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Re: Case Study: Am I done?
« Reply #36 on: December 13, 2015, 06:38:47 PM »
I'm just going by what firecalc says.  I don't count your house as an asset, but emergency if you need to sell it and use the money. So you effectively have $2.4mil to draw from.  Firecalc only has data for 49 years, so that's the max you want to put in for the number of years you need your money to last.  But historical data does not guarantee future returns even though most people here believe otherwise. Firecalc is a little optimistic, so with the $60k, I add in another $10k to it to be safe, so now it's $70k, plus you will have $6k to pay taxes, plus whatever your wife brings in to pay taxes and other expenses. 

That's just my opinion, and I already know most people here will disagree.  Go ask in Bogleheads board, you will get very different answers there than here.

I suspect you must have made an error in your data entry into FireCalc, or have another misunderstanding somewhere. 

The Trinity Study shows us that if future performance is no worse than the WORST periods in our history, including the great depression, a portfolio of 75-25 stocks-bonds will sustain a 4% withdrawal rate effectively indefinitely (30 year+ periods), with a success rate of 95%+. It a vast majority of those cases, the simulated period ended with a balance vastly higher than the starting balance.  Assuming the OP had roughly this asset allocation, a 4% safe withdrawal rate would be $96,000 per year on what they already have, which is well within reach.

But let's assume that you conclude that the market's future holds a crisis 25% worse than the worst period in US market history, AKA a depression 25% worse than the Great Depression.  So, you use a 3% withdrawal rate.  That still gives the OP $72,000 per year to work with, which is absolutely doable with some moderate adjustments.

It's alright to suggest that a 4% SWR is not going to be sustainable going forward, but to make a plausible argument, you need to provide data that suggests the future will be worse than the worst periods of the entire history of our market.

As with everything FIRE, nobody should just blindly withdraw 4% and hope for the best.  You're withdrawing so little each year that you have ample warning to make changes if conditions shift.

Also, where do you get the idea that FireCalc only has 49 years of data?

ETA: All of this also ignores the mitigating power of Social Security, which will eventually give a huge boost to the OP.  Pro Tip: Use cFireSim, not FireCalc.  OP is as close to bulletproof w/ ~96K a year of spending as it gets.
« Last Edit: December 13, 2015, 07:16:32 PM by iamlindoro »

TomTX

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Re: Case Study: Am I done?
« Reply #37 on: December 14, 2015, 05:21:48 AM »
Bogleheads? Yeah, they are good for their focus, but WAY WAY WAY conservative. It's a race to the lowest SWR. If you suggest 4% as a withdrawal rate over there you might as well suggest going over Niagara Falls without the barrel.

Bogleheads "risky" is a 2% SWR targeted at a budget with a lot of trimmable fat for downturns, plus paid off house, plus another 5 years in a CD ladder, plus another 2 years in cash in a different bank, because you don't have another side stash of money and you're not "keeping a hand in" by working part time at the practice after you "retire"

Bogleheads don't risk "One More Year" syndrome. They embrace "One More Decade."

nereo

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Re: Case Study: Am I done?
« Reply #38 on: December 14, 2015, 06:26:08 AM »

I'm just going by what firecalc says.  I don't count your house as an asset, but emergency if you need to sell it and use the money. So you effectively have $2.4mil to draw from.  Firecalc only has data for 49 years, so that's the max you want to put in for the number of years you need your money to last.  But historical data does not guarantee future returns even though most people here believe otherwise. Firecalc is a little optimistic, so with the $60k, I add in another $10k to it to be safe, so now it's $70k, plus you will have $6k to pay taxes, plus whatever your wife brings in to pay taxes and other expenses. 

That's just my opinion, and I already know most people here will disagree.  Go ask in Bogleheads board, you will get very different answers there than here.

Ok, I think your response comes from a combination of a misreading of the OP's data as well as a misunderstanding of how FireCalc and other simulators works.  Much has been covered by other posters, but a few points I'd highlight
1) including wife's wages, the OP needs $30k to meet his $80k projection not $60k as stated.
2) adding "$10k just to be safe" is a rather large and annual increase to a budget.  I could understand wanting to hold a large "ER fund" (though I wouldnt do it) - but as a single expense, not in perpetuity.
3) Firecalc has over 100 years of data, not 49.  Sample sizes decrease as you increase the period (time), but one method aroudn this is to "bootstrap' the data.  In essence, bootstrapping is taking the results from one simulation and 'feeding' it back to see how those ending values would work going forward.  It has its own pitfalls but can be very powerful when used correctly.  You can even eyeball this by looking at how many periods after 30 years results in less funds.  If you have more money after 30 years than you started with, than the chances that it will succeed the next 30 years are by definition higher. 
4) I cannot understand where you got an additional $6k in taxes. 
5) the OP's expenses are projected to decrease substantially, not increase, as large items like childcare disappear from his budget
6) the OP has SS in 27 years.

Just thought I'd throw one last thing out there - as one of many calculations, I like to just see how many years a person's portfolio would last with 0% real return.  That's a pretty pessimistic projection.  In the OP's case, it would be 48 years with no further spending reduction, which is slightly greater than his average life expectancy. 

That's my analysis and reaction - feel free to make counter-arguments; that's how we learn here.

Cycling Stache

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Re: Case Study: Am I done?
« Reply #39 on: March 05, 2016, 10:38:24 AM »
You are completely done.  But that's not the "real" question, right? 

The real question is can I really turn off the firehose of cash that my salary is bringing in right now, even though everyone I know is going to think I'm crazy and tell me about how expensive life is and what if x, y, z catastrophe happens.

That's the way I read this post.

Your expenses are absurd.  I know because I've been there.  You will go through some withdrawal as you start cutting, but it will pass quickly and you will hardly notice it after a year or so. 

Right this second, you have all the money you will ever need.  You just have to decide if you can be the person who "threw away the big salary" to sit around all day.  Because that's what the popular view is going to be among your peers.

The answer on this forum is a resounding yes.  And that's almost certainly the right answer.  See an article called Top Five Regrets of the Dying.  But to me this sounds much more like the psychological question whether you can let go.  It's easier for people to say than actually do, which is why you get 10 million posts about 2% and 3% safe withdrawal rates, and this safety cushion, that safety cushion, etc.  It's not about needing the money.  It's about is it really okay to just let go of the massive influx of cash and walk away.

The forums have posts of people who have done it, and seem much happier as a result.  Arebelspy.  JonSnow.  You have the ability to be one of those people tomorrow.  If you want to.

Caveat: I'm struggling with this issue now (although with much lower numbers than yours), and haven't been able to pull the plug yet.  When you get close--unless you're absolutely committed--actually pulling the plug gets tougher, it seems to me.  Even beyond the financial issues.  It's is this really okay, what I should be doing, etc.  If you get stuck, just spend some time going after expenses for the next 3 months (treat it like a game), realize you'll have a little bit of temporary withdrawal, and then it will pass and you'll be way happier as you see expenses get under your control.

Good luck!

kudy

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Re: Case Study: Am I done?
« Reply #40 on: March 05, 2016, 10:39:13 AM »
You could cut some travel expenses out, if you wanted to pick up travel hacking as a bit of a hobby in retirement. Speaking of hobbies - do you have any? Are those expenses already factored in here? Do you expect to pick up any additional hobbies that might add expenses to your budget?

I agree with everyone else though, even without knowing every detail of your expenses moving forward, you are well stocked as long as you have a baseline attitude of avoiding any (further) lifestyle inflation and actively reducing expenses where you can in retirement!

SeanMC

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Re: Case Study: Am I done?
« Reply #41 on: March 05, 2016, 11:16:00 AM »
I think a big part of this is how your family will adjust to a much more frugal budget combined with the narrative that you don't have a high paying job anymore.

You won't have to make "extreme" choices, certainly not with your wife's income, but the attitude of not even worrying about things that add up will have to change for all of you. What happens when the kids don't get expensive packaged snacks? When spa/yoga visits have to be reduced? When you switch to cheaper phones? When you can't just go out for expensive meals and get a sitter? Etc.

I think it would be a good experience to decide which of your runaway expenses are the lowest hanging fruit in your family (meaning your wife and kids won't care much if they disappear) and start cutting these costs now to see how it goes. Is everyone on board with the attitude shifting where the idea of a "budget" even exists and not every want is granted? Are you able to reduce spending very easily with things that are low hanging fruit?

Sure, your biggest expense cuts will be in a big categories like day care and maintenance, but all these other items do add up. More important, though, they demonstrate how capable your lifestyle is for downshifting.




Exflyboy

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Re: Case Study: Am I done?
« Reply #42 on: March 05, 2016, 11:52:22 AM »
So when are you going to quit?...:)

Exflyboy

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Re: Case Study: Am I done?
« Reply #43 on: March 05, 2016, 12:48:34 PM »
So when are you going to quit?...:)

The $64,000 question.  (which coincidentally is about what I need the stash to earn per year) 
:)

Haha.. You don't NEED to earn another penny as long as you live.. Nor do I for that matter, but I personally choose to because I enjoy my part time hobby job and the Wife is still working.

Interestingly work has become a whole lot more fun when you don't need to do it..:)

Cassie

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Re: Case Study: Am I done?
« Reply #44 on: March 05, 2016, 01:28:47 PM »
Is your wife fine with you quitting while she works?  There will still be room in your budget for traveling. Also as the kids get older they will cost more but not by the amount you are paying for daycare right now.

Frs1661

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Re: Case Study: Am I done?
« Reply #45 on: March 05, 2016, 02:31:38 PM »


...  I think psychologically one element of this is that I don't ever want to end up not being seen as a good provider to the family.  So I feel like the stash needs to be big enough that even in a 1966-1981 scenario (very bad return period) I'm not on food stamps or otherwise making the family feel unsafe financially.  But of course I also don't want the kids to think I spent my whole life doing things out of obligation versus pursuing dreams. 

Another poster asked about hobbies--yes, a bunch of hobbies and they are all cheap.  I could easily spend over 24 hours a day on them which is why the wage job is kind of a drag.  But I don't want the family to ever suffer and say I let people down to pursue my hobbies.

This post contains a lot of fear. I think that's natural. But at the end of the day you need to weigh your fears rationally against historical data and math. If you cannot do this you won't retire even with 10 MM in the best . With 2.4 MM in the stock market, your worst case scenario is not food stamps, it's some moderate budget downsizing. Which is not as  scary as it might seem.

The real risk for you today is unnecessarily working another 1, 2, or 10 years to spend more today on stuff or leave a larger inheritance.

I'm surprised that there aren't more face punches in this thread. My 3 person household lives quite comfortably in a HCOL area on $50k/yr, half of which is a mortgage. I thought I was on ER.org for a minute!

You are in an enviable position, and I wish you all the best :)

Exflyboy

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Re: Case Study: Am I done?
« Reply #46 on: March 05, 2016, 04:26:44 PM »

Haha.. You don't NEED to earn another penny as long as you live.. Nor do I for that matter, but I personally choose to because I enjoy my part time hobby job and the Wife is still working.


We are lucky dudes.  I just need to get over the fear of failure here.  I'm thinking we're talking months now.  95% there. 

Addendum--to be clear I'm not sure if the 95% refers to the stash or my need for psychological face punches but I think I'm 95% any way you slice it...

Yes we are indeed.. Of course doing a little more work has the advantage of not having to face the fer of running out of money as well!

I fully admit to suffering from this fear and talk about it at length in my journal.

I think I have eventually gotten over it but I guess until I actually refuse work (which is a bit pointless cus I rather enjoy being paid to be sat on an airplane accumulating airmiles and hotel points) I really won't know if the fear has been fully dealt with.

Logically its hard to see how we could physically run out of money at this point, especially as our spend the year before last was $30k for 2 of us and we had $2M liquid before the pullback.

krishnamba

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Re: Case Study: Am I done?
« Reply #47 on: March 08, 2016, 02:43:43 PM »
Hey

I don't want to be rude but how was the $1.6 MM in after tax earned.

Was it high earnings saved in index stocks
or
small amounts put into good buys?

Was it strategy etc. some details if not too personal.

thanks
Jay

boarder42

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Re: Case Study: Am I done?
« Reply #48 on: June 15, 2016, 05:36:24 PM »
Congratulations!!

Food for thought

Doesn't every new chapter in your life make you feel nervous.

Starting kindergarten
High school
College
First real job
If you change jobs
Retiring

It's just normal to feel that way bc its new

tonysemail

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Re: Case Study: Am I done?
« Reply #49 on: June 16, 2016, 10:58:27 AM »
Congrats!

I'm in a similar situation.
Here are some things that I've been doing, which you may want to think about.

1) travel-
I agree that travel hacking is a good hobby to learn and will help pay for your airfare.
Just don't get all crazy about it (like me ;)

2) charity-
I started a DAF to donate to the local public schools.
It's great to take your deductions while working and spread out the donations over time.
I plan to donate 1k per year per child, so I socked away 25k in appreciated securities.

3) clothing-
2k per year seems like a lot.  i would shoot for $500 per year.
i'd rather own fewer clothes and wash them multiple times a week.

4) daycare-
I would keep a signficant budget for this item.
I find good value in the after school programs that I send my kids to.
There are also loads of summer camps which are expensive, but great fun for the little ones.
They are a discretionary spending item that I would cough up for on most years, but cut back if my plan was in danger.