Author Topic: F.I.R.E.  (Read 1780 times)

ACyclist

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F.I.R.E.
« on: November 17, 2017, 10:31:54 AM »
The forum's search feature seems to leave me stranded trying to learn about FIRE. We max out the pre-tax stuff.  We currently have 6 times the amount saved, considering if we currently made an annual income of $55,000.  That should be enough to pay for insurance and a modest lifestyle, considering that we would no longer have debt, or need to save for the "nest egg." Or so I think.

If you FIRE before you can access the post 59 stuff, how much would one need to save to have enough.

I'm lost.  We have a bunch of money and investments, but this overwhelms me. 

Can anyone link data for how you figure out what you may need?  We can live on about $2000 a month pretty easily.  I would then need to add how much I expect to pay for a health policy.

 

ixtap

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Re: F.I.R.E.
« Reply #1 on: November 17, 2017, 10:51:20 AM »
1) When searching, use google, not the in forum search feature.

2) Read through the stickies. There are ones covering each of your questions.
     2.1) Consider posting a case study, after reading through the how to sticky

3) Be specific: "six times the amount" Amount of what? Current income? Current expenses?

Sailor Sam

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Re: F.I.R.E.
« Reply #2 on: November 17, 2017, 11:07:38 AM »
Pro Tip: When using google, use the term: site:forum.mrmoneymustache.com in front of your search term.

Example: site:forum.mrmoneymustache.com should I buy a car?

That will limit your google search to just the MMM forum.

ACyclist

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Re: F.I.R.E.
« Reply #3 on: November 17, 2017, 11:18:12 AM »
1) When searching, use google, not the in forum search feature.

2) Read through the stickies. There are ones covering each of your questions.
     2.1) Consider posting a case study, after reading through the how to sticky

3) Be specific: "six times the amount" Amount of what? Current income? Current expenses?

1.  Thanks

2.  Got it

3.  6x $55K saved (330K) with 55K being the amount we want to make per year.  Essentially no debt to pay for, except for taxes and insurance, utilities and food.   55K should about cover that easily.  We may have a little left to save for trips, bikes and dirt suits.   :)

solon

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Re: F.I.R.E.
« Reply #4 on: November 17, 2017, 11:29:07 AM »
See this thread for a way to make searching the forum even easier: https://forum.mrmoneymustache.com/forum-information-faqs/how-to-search-the-forum/

ACyclist

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Re: F.I.R.E.
« Reply #5 on: November 17, 2017, 11:33:40 AM »
You need 25x your expenses saved. So 1.375M would be your goal.

Google: Shockingly simple math behind early retirement

and read anything on the 4% rule here in the forum.

That sounds high.  There is no way can I reach that amount of cash, even by the time I am 65. 

I figured 650K + we have a rental valued around $150K

My math is way off.

seattlecyclone

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Re: F.I.R.E.
« Reply #6 on: November 17, 2017, 11:37:03 AM »
You need 25x your expenses saved. So 1.375M would be your goal.

Google: Shockingly simple math behind early retirement

and read anything on the 4% rule here in the forum.

That sounds high.  There is no way can I reach that amount of cash, even by the time I am 65. 

I figured 650K + we have a rental valued around $150K

My math is way off.

If you're saving cash in a savings account, you're probably right. You need to invest in the market to get your money working for you.

ixtap

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Re: F.I.R.E.
« Reply #7 on: November 17, 2017, 11:52:01 AM »

3.  6x $55K saved (330K) with 55K being the amount we want to make per year.  Essentially no debt to pay for, except for taxes and insurance, utilities and food.   55K should about cover that easily.  We may have a little left to save for trips, bikes and dirt suits.   :)

You have basically saved enough for 6 years, as you will be drawing down faster than all but the most amazing of investments could possible keep up with. This might be OK if you are looking to just stretch until a pension kicks in, but is not much of a long term plan.

However, you mention a rental, what is the value of that real estate?

Are you willing to downsize your house and pull some of the equity out for long term investments?

Can you comfortably downsize your budget? Does it include health care and taxes?

ACyclist

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Re: F.I.R.E.
« Reply #8 on: November 17, 2017, 12:21:02 PM »

3.  6x $55K saved (330K) with 55K being the amount we want to make per year.  Essentially no debt to pay for, except for taxes and insurance, utilities and food.   55K should about cover that easily.  We may have a little left to save for trips, bikes and dirt suits.   :)

You have basically saved enough for 6 years, as you will be drawing down faster than all but the most amazing of investments could possible keep up with. This might be OK if you are looking to just stretch until a pension kicks in, but is not much of a long term plan.

However, you mention a rental, what is the value of that real estate?

Are you willing to downsize your house and pull some of the equity out for long term investments?

Can you comfortably downsize your budget? Does it include health care and taxes?

The rental is valued at 150K. It's paid off.

I figured a 55K is a decent pre-tax income needed, annually. We have about $230,000 in roth, 403B and the like.  All of it is invested mostly in index funds and target date funds.

Our annual expenses are way less than 24K a year.     We can easily live on 2000 a month (property taxes, home insurance, auto insurance, food, moderate gas spending, chain lube, etc.).  We may need to supplement our income to help pay for a health insurance policy.   Insurance is the crazy wildcard. 

ACyclist

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Re: F.I.R.E.
« Reply #9 on: November 17, 2017, 12:44:25 PM »
I read this about 10x saved to reach retirement. 10x 55K is 550K.  I added some extra to help cover some medical, so 625K.    Why was 25x suggested?

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By the time you’re 30, aim to have 1x your annual income set aside for retirement. At 40, 3x; at 50, 6x; at 60, 8x; and by retirement, 10x."

Where is this 10x coming from?

ACyclist

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Re: F.I.R.E.
« Reply #10 on: November 17, 2017, 12:49:31 PM »
Wait, her math isn't working out for the 10x figure.

:(

We are looking terrible, with the 25x figure. 

ixtap

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Re: F.I.R.E.
« Reply #11 on: November 17, 2017, 12:52:47 PM »
I read this about 10x saved to reach retirement. 10x 55K is 550K.  I added some extra to help cover some medical, so 625K.    Why was 25x suggested?

"Jean Chatzky‏Verified account
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By the time you’re 30, aim to have 1x your annual income set aside for retirement. At 40, 3x; at 50, 6x; at 60, 8x; and by retirement, 10x."

Where is this 10x coming from?

That involves 10x income, assuming full retirement age with benefits such as SS.

For 25x, x = expenses. This formula allows you to withdraw 4% of your original stash annually, adjusted for inflation. Historically, this has an incredibly high success rate over 30 years.

All of your questions are why it is important to read the stickies for general information and if you still have questions, post a case study for answers to your specific questions.

neil

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Re: F.I.R.E.
« Reply #12 on: November 17, 2017, 01:04:30 PM »
You should really work out your financial details (and post if you'd like) but if you do a zero-based budget and account for all your outflows, it sounds like your breakdown is something like this:

Taxes: 5-10K
Personal expenses: 20K
Saving/investing: 25K

That third category goes away when you retire.  There isn't a need to for your assets to "earn" 55K in retirement because the need to save for retirement is officially gone.  Taxes will likely go down with no earned income to tax.  Personal expenses may go up or down depending on your circumstances (no need for daily driver, but perhaps you'd like to expand on hobbies or travel).  Based on your actual retirement expenses and the way you choose to invest, you can come up with a retirement nest-egg number that suits your lifestyle.  Using current income to measure your required nest egg is a terrible metric because your income is based on what you do for a living and how many hours you work.  Your nest egg needs to sustain your expenses and there's no good reason that needs to correlate with your working income.

I agree that all the details are overwhelming if you try to absorb everything today.  The great news is you don't have to do that!  You have a strong foundation already and there is no need to overhaul your entire life tomorrow to prepare for retirement.  Lay out a few topics that bother you the most and make a plan to knock out one or two of them per month.  As you learn things, continually assess your situation and see if anything needs a tweak.  A lot of the conventional wisdom has holes in it and as you learn what is and is not possible to do, your financial path will become less cloudy over time.
« Last Edit: November 17, 2017, 01:07:33 PM by neil »