Author Topic: Case Study: What's the possibility of retiring in 10 years or less  (Read 15739 times)

bkmnky72

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Want to retire or partially retire in 5-10 years. 

Life Situation: Married Filing Jointly, no kids, 38 & 44, CA

Gross Salary/Wages: $188K

Pre-tax deductions: 401k ($36K), Insurance ($1,800).  2nd 401k is yet to start this year.

Rental Income, Actual Expenses, and Depreciation: $3,600 net

Adjusted Gross Income: $154K

Taxes, etc: ($44K)

Net take home pay: $110K

Current monthly expenses:
P&I $1,900
T&I, MIP $600
Life Ins $120
Cell $150
Gas, car maintenance $200
Car Insurance $150
Utilities $150
Alarm $50
Water Filtration: $65
Cable, Internet, Netflix $165
Groceries: $300
Restaurant: $400
Travel: $200
Charity: $150
Gift: $150
Gym: $30
Clothing, grooming $100
Home Misc: $120
Total: $5,000 x 12 = ($60K)/year

Other savings: IRA ($11K)
Save to spend: ($12K)
Net: $27K we also have bonuses but they are hard to count on

Expected ER expenses: fairly similarly ($60K) or less

Assets:
Primary $524K
Rental $352K
401k, Iras $142K
Other Savings: $20K

Liabilities:
Primary Home Mortgage: $397K, 4%, $2,500 monthly
Rental Mortgage: $197K, 4%, $1,520 monthly
SL1 $10K, 6%, $200 monthly.  Were paying down $1K\month with a goal to $0 by end of year
SL2 $44K, 6%, $400 monthly.  Will pay down once SL 1 is paid in full.  Target payment end of 2018
Water Filtration: $4,400, 7%, $65 monthly.  Will pay to $0 by end of year

Specific Question(s): Need to know if its doable to FI by 2027 or earlier (ages 50 & 55).  Preferably ages 45 & 50 (2022).
More specifically want to have:
Liquid assets of $1M
Paid in full home
Passive rental income of $60K\year

Strategy 1: Sell rental, cash flow $120K, put as 20% dp towards a 4-plex with a net cash flow of $1k\month or more and keep purchasing 4-plexes every 2-3 years in order to generate target $5K/month passive rental income

Strategy 2a: Hold off selling rental.  We have about $2,500 a month or $30k\year left to pay down debt.  So stay the course and pay off:
Water Filtration, SL1 and part of SL 2 on year 1 (about $30K max)
Part of SL2 on year 2 (about $30K max)
 
Strategy 2b: After paying off non-mortgage debts by mid-2018, sell rental and get a 4-plex (they go about $600K here, renting about $1-$1.5\psf).  Ideal cash flow is $1K-$2K, depending on the building/location.  Use that cash flow of about $20K\year to put as dp toward another 4-plex every other year along with our $30K annual pay excess, generating $1K-$2K\month, and so on in order to reach a goal of $5K\month passive income

Strategy 3?

My back of the envelope calculation says 15 years which is still okay, but I may be missing something here.
« Last Edit: May 05, 2016, 04:04:03 AM by bkmnky72 »

Gin1984

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #1 on: May 05, 2016, 04:58:08 AM »
With you both earning income, do you need that level of life insurance?  If not, that could be a cut.
Also can you refi SL #2?  I'd cut cell phones and car insurance by getting other quotes, they both seem high to me.  You could also cut cable to save a ton (my mom lives in Ca and bought a TV device to cut cable and made it back in two months).  Even at a conservative amount that would cut over 6% of your current budget for saving (which also would cut the amount you need to save for).  I'm not even looking at the restaurant spending which I assume you know you could cut and have chosen to keep.
I would put all extra on your water filtration (7% is insane) and pay it off in three months or less.  While that is happening refi the SLs but if not possible to get under 4% pre-pay them as well.
I think you need to put some money in index funds outside of your 401k to not rely on real estate alone.  That said, you would need to save up 30% for a new rental (25% for down payment and 5% for closing).  I think a modified two would be the best, cut some expenses, save in index funds, save for the next fourplex while you pay off your debt.
« Last Edit: May 05, 2016, 06:34:34 AM by Gin1984 »

MustachianAccountant

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #2 on: May 05, 2016, 05:06:47 AM »
Expected ER expenses: fairly similarly ($60K) or less
 
...

Specific Question(s): Need to know if its doable to FI by 2027 or earlier (ages 50 & 55).  Preferably ages 45 & 50 (2022).
More specifically want to have:
Liquid assets of $1M
Paid in full home
Passive rental income of $60K\year


If your expenses in retirement are expected to be $60k, why do you feel the need to have liquid assets of $1M plus $60k passive rental income? What is the $1M for?
Also, does your current $60k/year spending include your mortgage payment on the house? (It looks like it - $1,900/month) Because you're saying that will be paid off before retirement as well.

First blush, looks like you're overshooting the goal here.

« Last Edit: May 05, 2016, 05:58:05 AM by MustachianAccountant »

boarder42

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #3 on: May 05, 2016, 06:05:21 AM »
Wait you want to have passive rental income of 60k/year AND you have 1MM in liquid(invested i assume) assets. 

you have 100k worth of living expenses covered if you do this.

but here is how you can cut the BS. and retire earlier.





Current monthly expenses:
P&I $1,900
T&I, MIP $600
Life Ins $120  WHY DO YOU HAVE THIS YOU DONT HAVE KIDS
Cell $150       THIS SHOULD BE 50 DOLLARS A MONTH MAX
Gas, car maintenance $200
Car Insurance $150   TOO HIGH SHOULDNT BE OVER 100 FOR TOO CARS
Utilities $150
Alarm $50          DO YOU REALLY LIVE IN THAT BAD A NEIGHBORHOOD
Water Filtration: $65
Cable, Internet, Netflix $165             GET RID OF CABLE NO REASON TO HAVE CABLE AND NETFLIX
Groceries: $300          THIS IS GOOD
Restaurant: $400      THIS IS AWFUL
Travel: $200
Charity: $150
Gift: $150
Gym: $30
Clothing, grooming $100       YOU REALLY SPEND 1200 A YEAR ON CLOTHES AND HAIRCUTS?  CUT THIS TO 200 BUCKS ANNUALLY
Home Misc: $120                 2400 ON MISC. NEED TO CATEGORIZE THIS.
Total: $5,000 x 12 = ($60K)/year

so we have 5k - 120(LI) - 100(Cell) - 50(car INs) - 50(alarm) - 100(cable) - 300 (eating out)  - 80(clothes) = 4200x12 =50,400 a year

and i just cut low hanging fruit. Thats an extra 10k per year you can save and dont need now at savings of 60k per year and just your 401k/IRA you will have just over 1MM in your liquid assets in 10 years. 

i dont do real estate so i can comment there
« Last Edit: May 05, 2016, 06:15:55 AM by boarder42 »

NonprofitER

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #4 on: May 05, 2016, 07:10:50 AM »
Per others, I'd price out the alarm cost. This looks like you're paying an "ADT" type company but there are many smaller outfits that charge less. We're in TX and Smith Thompson alarm monitoring costs $11/mo, no contract.  There's also lots of people who do their own security rigging with apps/ gadgets like "Ring" and "Blink" etc. that you can get online.  Also, Amazon sells semi-realistic looking fake cameras you can hang to *look* like you have an alarm. Pair that with a "Beware of Dog" sign and any thief will move on to an easier target. 

Like others have said, you're life insurance looks high. We pay closer to $50 total for two policies (one each) of $1M.  For reference, we're mid-30's and have a family.


nereo

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #5 on: May 05, 2016, 07:25:43 AM »
Quote
Expected ER expenses: fairly similarly ($60K) or less

Assets:
Primary $524K
Rental $352K
401k, Iras $142K
Other Savings: $20K

Specific Question(s): Need to know if its doable to FI by 2027 or earlier (ages 50 & 55).  Preferably ages 45 & 50 (2022).
More specifically want to have:
Liquid assets of $1M
Paid in full home
Passive rental income of $60K\year

Color me baffled by your post.  If you expect to spend $60k or less in ER I have no idea why you would shoot for liquid assets of $1MM PLUS $60k in rental income.

When you listed your rental as $3600 net currently, is that per year or per month?

If you have a paid off home and no SL debts in ER, are you still expecting to spend $60k/year?  Considering you won't be paying for a mortgage, your taxes will be lower, etc. that would be a huge INCREASE in your spending (about a 42% increase).

As others have said, there's a lot of low-hanging fruit you can cut which would net you a few extra $k per year.  Alarm, insurance, cell plans, cable etc.

i don't understand your back of the envelope calculation of 15 years at all.  My back of the envelop calculation shows about 6-10 years to get you $60k/year in ER income.

bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #6 on: May 05, 2016, 09:24:08 PM »
With you both earning income, do you need that level of life insurance?  If not, that could be a cut.
Also can you refi SL #2?  I'd cut cell phones and car insurance by getting other quotes, they both seem high to me.  You could also cut cable to save a ton (my mom lives in Ca and bought a TV device to cut cable and made it back in two months).  Even at a conservative amount that would cut over 6% of your current budget for saving (which also would cut the amount you need to save for).  I'm not even looking at the restaurant spending which I assume you know you could cut and have chosen to keep.
I would put all extra on your water filtration (7% is insane) and pay it off in three months or less.  While that is happening refi the SLs but if not possible to get under 4% pre-pay them as well.
I think you need to put some money in index funds outside of your 401k to not rely on real estate alone.  That said, you would need to save up 30% for a new rental (25% for down payment and 5% for closing).  I think a modified two would be the best, cut some expenses, save in index funds, save for the next fourplex while you pay off your debt.

Life Insurance: We have $750K each for the next 10 years I thought it's pretty decent but maybe I should shop around again. 

I can look into the SL refi. 

We were talking about switching phone services and I hardly use my car anymore (public transit paid by work as of this year).  I can likely lower this by $150 from $300

I don't mind cancelling Netflix or cable.  We just got cable after years of not having one since we moved to our new house at the beginning of the year.  I'll look into cancelling and go from there.  Without cable and keeping Netflix it will be about $100 for just the internet, so we'll see what we can do.

We can definitely cut the restaurant to at least $200.

Thank you for reminding me to look into outside retirement investing. 

bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #7 on: May 05, 2016, 09:46:42 PM »
Expected ER expenses: fairly similarly ($60K) or less
 
...

Specific Question(s): Need to know if its doable to FI by 2027 or earlier (ages 50 & 55).  Preferably ages 45 & 50 (2022).
More specifically want to have:
Liquid assets of $1M
Paid in full home
Passive rental income of $60K\year


If your expenses in retirement are expected to be $60k, why do you feel the need to have liquid assets of $1M plus $60k passive rental income? What is the $1M for?
Also, does your current $60k/year spending include your mortgage payment on the house? (It looks like it - $1,900/month) Because you're saying that will be paid off before retirement as well.

First blush, looks like you're overshooting the goal here.

The $1M would be to generate the 6% that I need $60K that will cover our expenses without relying on the $5K passive income.  Because we'd have about 50-60 more years of living, that's a lot of peaks and valleys in real estate so we know that the $5K passive income is not reliable.  Same reason for not wanting to touch the $1M is that we need to ensure the $60K minimum interest is there. But you're right we may be overshooting our goal.

The $60K/year in RE expenses does include the mortgage payment because I know that in 10 years we won't be able to pay off the house AND build enough rental portfolio to generate the passive income I had in mind.  So the $2,500 in PITI is there to either: help with the rental portfolio buildup or pay mortgage. 



bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #8 on: May 05, 2016, 09:51:35 PM »
Wait you want to have passive rental income of 60k/year AND you have 1MM in liquid(invested i assume) assets. 

you have 100k worth of living expenses covered if you do this.

but here is how you can cut the BS. and retire earlier.





Current monthly expenses:

P&I $1,900
T&I, MIP $600
Life Ins $120  WHY DO YOU HAVE THIS YOU DONT HAVE KIDS
Cell $150       THIS SHOULD BE 50 DOLLARS A MONTH MAX
Gas, car maintenance $200
Car Insurance $150   TOO HIGH SHOULDNT BE OVER 100 FOR TOO CARS
Utilities $150
Alarm $50          DO YOU REALLY LIVE IN THAT BAD A NEIGHBORHOOD
Water Filtration: $65
Cable, Internet, Netflix $165             GET RID OF CABLE NO REASON TO HAVE CABLE AND NETFLIX
Groceries: $300          THIS IS GOOD
Restaurant: $400      THIS IS AWFUL
Travel: $200
Charity: $150
Gift: $150
Gym: $30
Clothing, grooming $100       YOU REALLY SPEND 1200 A YEAR ON CLOTHES AND HAIRCUTS?  CUT THIS TO 200 BUCKS ANNUALLY
Home Misc: $120                 2400 ON MISC. NEED TO CATEGORIZE THIS.
Total: $5,000 x 12 = ($60K)/year

so we have 5k - 120(LI) - 100(Cell) - 50(car INs) - 50(alarm) - 100(cable) - 300 (eating out)  - 80(clothes) = 4200x12 =50,400 a year

and i just cut low hanging fruit. Thats an extra 10k per year you can save and dont need now at savings of 60k per year and just your 401k/IRA you will have just over 1MM in your liquid assets in 10 years. 

i dont do real estate so i can comment there

Noted on life and car insurance, and cable.
We have a good neighborhood better than our last, but we're new in town so I want to make sure we're fairly comfortable.  We likely can cancel in the next few months and buy "Ring"
We don't need to spend $1,200 on clothes and shoes but with trying to get promoted and role changes we needed to make sure we have decent work wardrobe.  We can likely cut it to $600/year with Goodwill purchases.
Miscellaneous I forgot included Home Maintenance, occasional cleaner for when we have people over, and $50/month in landscaping (we have a large yard).



bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #9 on: May 05, 2016, 09:55:13 PM »
Per others, I'd price out the alarm cost. This looks like you're paying an "ADT" type company but there are many smaller outfits that charge less. We're in TX and Smith Thompson alarm monitoring costs $11/mo, no contract.  There's also lots of people who do their own security rigging with apps/ gadgets like "Ring" and "Blink" etc. that you can get online.  Also, Amazon sells semi-realistic looking fake cameras you can hang to *look* like you have an alarm. Pair that with a "Beware of Dog" sign and any thief will move on to an easier target. 

Like others have said, you're life insurance looks high. We pay closer to $50 total for two policies (one each) of $1M.  For reference, we're mid-30's and have a family.

The $50/month for the both of you is crazy low.  Do you want to recommend me your insurance company?  I used Select Quote and they put us in the second tier because of our weight. 

bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #10 on: May 05, 2016, 10:11:50 PM »
Quote
Expected ER expenses: fairly similarly ($60K) or less

Assets:
Primary $524K
Rental $352K
401k, Iras $142K
Other Savings: $20K

Specific Question(s): Need to know if its doable to FI by 2027 or earlier (ages 50 & 55).  Preferably ages 45 & 50 (2022).
More specifically want to have:
Liquid assets of $1M
Paid in full home
Passive rental income of $60K\year

Color me baffled by your post.  If you expect to spend $60k or less in ER I have no idea why you would shoot for liquid assets of $1MM PLUS $60k in rental income.

When you listed your rental as $3600 net currently, is that per year or per month?

If you have a paid off home and no SL debts in ER, are you still expecting to spend $60k/year?  Considering you won't be paying for a mortgage, your taxes will be lower, etc. that would be a huge INCREASE in your spending (about a 42% increase).

As others have said, there's a lot of low-hanging fruit you can cut which would net you a few extra $k per year.  Alarm, insurance, cell plans, cable etc.

i don't understand your back of the envelope calculation of 15 years at all.  My back of the envelop calculation shows about 6-10 years to get you $60k/year in ER income.

The rental is netting about $300 a month or $3,600/year

My back of the envelope calculation states 15 years as follows:
$77K/year x 7 years of savings, and paying off non-mortgage debts after compounding interest. 
By then our balance in the primary will be $397K less $42K ($500 x 12 x 7) = $355K/$77K a year = 4.5 years
The same $77K will be applied thereafter towards buying rentals to help generate the $5K/month passive income (3-5 years)





trashmanz

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #11 on: May 05, 2016, 10:41:41 PM »
What is this Water Filtration: $4,400, is this for a medical need, or is the water bad in your area?

Also I still don't follow the reasoning for working until you have 100K income for 60K spend, that is a huge buffer.  If you feel rental income is more risky than other investments why have it as part of the plan at all?


MDM

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #12 on: May 05, 2016, 10:49:33 PM »
My back of the envelope calculation states 15 years as follows:
$77K/year x 7 years of savings, and paying off non-mortgage debts after compounding interest. 
By then our balance in the primary will be $397K less $42K ($500 x 12 x 7) = $355K/$77K a year = 4.5 years
The same $77K will be applied thereafter towards buying rentals to help generate the $5K/month passive income (3-5 years)
Numbers taken from the OP and put in the case study spreadsheet (CSS) show ~11 years.  Might be worth your time to try on your own.

Given a choice, I'd believe something like cfiresim.com, firecalc.com, www.i-orp.com, etc., over the CSS so you might also try one or more of them.

Biggest unknown seems the rental strategy.  I don't know how to assign a probability of success there.

bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #13 on: May 05, 2016, 10:51:50 PM »
What is this Water Filtration: $4,400, is this for a medical need, or is the water bad in your area?

Also I still don't follow the reasoning for working until you have 100K income for 60K spend, that is a huge buffer.  If you feel rental income is more risky than other investments why have it as part of the plan at all?

Our water is really hard in our area.

We may be overshooting the $5k/month rental. 

MustachianAccountant

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #14 on: May 06, 2016, 06:17:19 AM »

The $1M would be to generate the 6% that I need $60K that will cover our expenses without relying on the $5K passive income.  Because we'd have about 50-60 more years of living, that's a lot of peaks and valleys in real estate so we know that the $5K passive income is not reliable.  Same reason for not wanting to touch the $1M is that we need to ensure the $60K minimum interest is there. But you're right we may be overshooting our goal.

Got it. And I understand the desire for a cushion, especially since you're planning on your retirement stash being in a single type of equity (RE). However, with $1M, you're buffering against ALL your RE holdings suddenly becoming vacant and/or worthless at the same time. A $1M cushion is likely too much. Also, consider a cushion of "reducing living expenses" or "going back to work" if things go south. The cushion doesn't all have to be in money.

Quote
The $60K/year in RE expenses does include the mortgage payment because I know that in 10 years we won't be able to pay off the house AND build enough rental portfolio to generate the passive income I had in mind.  So the $2,500 in PITI is there to either: help with the rental portfolio buildup or pay mortgage.

Ok. But the house payment won't always be there, so you don't need to project that $1,900/month into perpetuity. So you won't need $60k/year, but rather ~$40k/year plus enough to pay off the house. This will require a little work to figure out the number within the plan you're laying out since the spending curve will have a dropoff when the mortgage is gone.

MidWestLove

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #15 on: May 06, 2016, 07:59:02 AM »
"The $1M would be to generate the 6% that I need $60K that will cover our expenses without relying on the $5K passive income.  Because we'd have about 50-60 more years of living, that's a lot of peaks and valleys in real estate so we know that the $5K passive income is not reliable.  Same reason for not wanting to touch the $1M is that we need to ensure the $60K minimum interest is there. But you're right we may be overshooting our goal.
"

in my opinion you are way overshooting your goal and in process subjecting yourself to significantly more work than needed. it is a common thread here with many posters willing to take guaranteed and significant pain working longer for a possibility (and a slight one) of having to make some adjustment (part time work, side gig, slight expense reduction, relocation do a different COL area, etc).  not a good trade off (in my opinion).

you are not going to get any younger each year nor get any healthier (in general), same with ability to fully enjoy your life and time given to you. trying to go insane planning no withdrawal strategies ("not touching the principle" requirements) or absolute certainty of having passive income way above spend requirements is just silly - as MMM once posted on his blog "safety is an expensive illusion".

 for the rest of the questions - you can likely cut fair amount of expenses now if you want to (cable, insurances, etc). you are also way too heavy on real estate to my liking tying your fates to that of specific and fairly small geographic area, but I understand that some people love the landlording and all of the liability, work, and pain that goes into it.   

nereo

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #16 on: May 06, 2016, 08:37:21 AM »
Quote
Gross Salary/Wages: $188K

Net take home pay: $110K

Current monthly expenses:
P&I $1,900 $0...once paid off
T&I, MIP $600
Life Ins $120 $0 - you have sufficient assets not to need this
Cell $150 $40
Gas, car maintenance $200
Car Insurance $150 $80
Utilities $150
Alarm $50 (leaving this alone for now)
Water Filtration: $65 $20
Cable, Internet, Netflix $165 $75 - Netflix & Internet only
Groceries: $300
Restaurant: $400
Travel: $200
Charity: $150
Gift: $150
Gym: $30
Clothing, grooming $100
Home Misc: $120
Total: $5,000 x 12 = ($60K)/year
  $2665 x 12 = $31,980.  We'll bump this up to $35k/year for added safety.
Other savings: IRA ($11K)
Save to spend: ($12K) (note: I'm not sure what this means, but this now comes from bonuses)
Net: $27K we also have bonuses but they are hard to count on

Expected ER expenses: fairly similarly ($35K) or less

Assets:
Primary $524K
Rental $351100
401k, Iras $142K
Other Savings: $20K

Liabilities:
Primary Home Mortgage: $397K, 4%, $2,500 monthly
Rental Mortgage: $197K, 4%, $1,520 monthly
SL1 $10K, 6%, $200 monthly.  Were paying down $1K\month with a goal to $0 by end of year
SL2 $44K, 6%, $400 monthly.  Will pay down once SL 1 is paid in full.  Target payment end of 2018

This is just a thought exercise, and what I'd call "hypothetical scenario #3". This is merely designed to simplify your NW and calculate when you could hit your FI number.
It's likely not even the 'best' course of action, and involves only modest 'fat-trimming' from your budget.

Steps:
1) Sell the rental put the money to immediately eliminate both SL (-$55k).   Remaining $100k goes towards primary mortgage
2) Continue maxing out both 401(k)s and IRAs each year - $47,000 / year
3) Pay off primary mortgage ASAP.  Note:  I'm not normally in this camp, but remember, this is just a thought exercise.
4) Once the mortgage is gone, put all excess $ into taxable accounts.

Assumptions:
1) Real (adjusted) returns of 5%/year.  Simplistic yes, and a bit conservative historically.
2) You shift your budget as reflected above, trimming some of the fat.
3) Bonuses are not factored in.  That's $27k which may or may not be available to you
4) once your mortgage is gone you can live on $35/year.  Remember, you're not paying $1,900 in P+I ($22,800/yr)
5) no raises or job losses.

Year 1: 401k/IRA: $247,800. Taxable: $21,000. Mortgage: $253,880
Year 2: 401k/IRA: $309,540. Taxable: $22,050. Mortgage: $209,035
Year 3: 401k/IRA: $374,365. Taxable: $23,152. Mortgage: $162,397
...
Year 5: 401k/IRA: $513,907. Taxable: $25,525. Mortgage: $63,448
...
Year 7: 401k/IRA: $667,750. Taxable: $72,156. Mortgage: $0    Note:  Mortgage paid off in 2nd month of year 6. P+I applied towards investments now. 
Year 8: 401k/IRA: $750,487. Taxable: $150,764.  Note: here you would have a WR of 3.8% to cover all expenses ($35,000/yr)
...

Year 10: 401k/IRA: $928,580. Taxable: $319,967. 4% WR = $50k/yr
...
Year 12: 401k/IRA: $1,124,927. Taxable: $506,514 4% WR = $65k/yr

bkmnky72

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Re: Case Study: What's the possibility of retiring in 10 years or less
« Reply #17 on: May 06, 2016, 10:43:23 PM »
Quote
Gross Salary/Wages: $188K

Net take home pay: $110K

Current monthly expenses:
P&I $1,900 $0...once paid off
T&I, MIP $600
Life Ins $120 $0 - you have sufficient assets not to need this
Cell $150 $40
Gas, car maintenance $200
Car Insurance $150 $80
Utilities $150
Alarm $50 (leaving this alone for now)
Water Filtration: $65 $20
Cable, Internet, Netflix $165 $75 - Netflix & Internet only
Groceries: $300
Restaurant: $400
Travel: $200
Charity: $150
Gift: $150
Gym: $30
Clothing, grooming $100
Home Misc: $120
Total: $5,000 x 12 = ($60K)/year
  $2665 x 12 = $31,980.  We'll bump this up to $35k/year for added safety.
Other savings: IRA ($11K)
Save to spend: ($12K) (note: I'm not sure what this means, but this now comes from bonuses)
Net: $27K we also have bonuses but they are hard to count on

Expected ER expenses: fairly similarly ($35K) or less

Assets:
Primary $524K
Rental $351100
401k, Iras $142K
Other Savings: $20K

Liabilities:
Primary Home Mortgage: $397K, 4%, $2,500 monthly
Rental Mortgage: $197K, 4%, $1,520 monthly
SL1 $10K, 6%, $200 monthly.  Were paying down $1K\month with a goal to $0 by end of year
SL2 $44K, 6%, $400 monthly.  Will pay down once SL 1 is paid in full.  Target payment end of 2018

This is just a thought exercise, and what I'd call "hypothetical scenario #3". This is merely designed to simplify your NW and calculate when you could hit your FI number.
It's likely not even the 'best' course of action, and involves only modest 'fat-trimming' from your budget.

Steps:
1) Sell the rental put the money to immediately eliminate both SL (-$55k).   Remaining $100k goes towards primary mortgage
2) Continue maxing out both 401(k)s and IRAs each year - $47,000 / year
3) Pay off primary mortgage ASAP.  Note:  I'm not normally in this camp, but remember, this is just a thought exercise.
4) Once the mortgage is gone, put all excess $ into taxable accounts.

Assumptions:
1) Real (adjusted) returns of 5%/year.  Simplistic yes, and a bit conservative historically.
2) You shift your budget as reflected above, trimming some of the fat.
3) Bonuses are not factored in.  That's $27k which may or may not be available to you
4) once your mortgage is gone you can live on $35/year.  Remember, you're not paying $1,900 in P+I ($22,800/yr)
5) no raises or job losses.

Year 1: 401k/IRA: $247,800. Taxable: $21,000. Mortgage: $253,880
Year 2: 401k/IRA: $309,540. Taxable: $22,050. Mortgage: $209,035
Year 3: 401k/IRA: $374,365. Taxable: $23,152. Mortgage: $162,397
...
Year 5: 401k/IRA: $513,907. Taxable: $25,525. Mortgage: $63,448
...
Year 7: 401k/IRA: $667,750. Taxable: $72,156. Mortgage: $0    Note:  Mortgage paid off in 2nd month of year 6. P+I applied towards investments now. 
Year 8: 401k/IRA: $750,487. Taxable: $150,764.  Note: here you would have a WR of 3.8% to cover all expenses ($35,000/yr)
...

Year 10: 401k/IRA: $928,580. Taxable: $319,967. 4% WR = $50k/yr
...
Year 12: 401k/IRA: $1,124,927. Taxable: $506,514 4% WR = $65k/yr

Wow thank you for all of these.  I have yet to digest them but I will get back to you.  I'm excited about the numbers. 

BTW our annual bonuses are not $27K (I wish).  Mine is budgeted by my employer at $10K but I may not get it this year due to a recent huge raise.  SO is about $2K, so we're looking at maybe $12K max.