I realize how ridiculous these posts sound to the vast majority of people working their way through debt, but I’d appreciate any input on how to analyze/handicap my situation.
I’m 40. My wife is 41. I would like to retire (I think—that’s the question after this one). My wife says she’s a worker bee who intends to work for a long time.
Current net worth is $1.39 million. No debts. Of that, $540k is retirement invested in VTSAX or equivalent, $100k is non-retirement invested the same. The house is paid off and (conservatively) worth $750k. Kids are 10 and 7, and wife and I will likely relocate to a smaller house once they’re off to college, etc., unlocking another $400k-$500k (conservative) in 10 years.
Our annual spending is $57k, which includes up to $10k in kids’ expenses (daycare, aftercare) that could go in retirement, so possibly $47k. Also, we pay $13k in property tax/condo fees, which should drop significantly when we move/downsize. My wife views our current spending as a lower limit and, if pressed, would probably like it to go up a little. There's also needs to be a little cushion in the number for things like a new roof, etc. That doesn't really show up in the annual spending. I also haven't included anything for kids' college, based in part on the MMM post on the topic, which I agree with. We might contribute, but I'm not funding them at $250k a pop.
We have earned enough for social security and an annuity worth a total of $40k annually beginning at 67 (in 27 years). That’s conservative, because the $10k (and growing as long as I work) annuity begins at 62, and social security would increase for additional years worked. I understand that social security is not guaranteed, but I doubt it changes by more than 20% by the time we get there.
We currently clear about $140k per year after taxes and all expenses (not counting portfolio growth). More importantly, my wife earns after tax a little more than our annual spending in a job that she tolerates but fits our lifestyle well (location, hours, etc.).
Finally, we will probably get $300k-$400k in inheritance when our parents pass away. Sad to think about, and they’re nowhere close (fortunately!), but it is a likely source of money somewhere in the distant future.
Under the 25x rule, we’re not to FIRE yet. At $47k, we would need $1,175,000 liquid, and we’re at $650k liquid. There’s another $400k-$500k to be unlocked by a house sale, but not for another 10 years.
But the 25x rule assumes no more income, and I’m not going to be one of those 2% or 3% safe withdrawal people. Math should be math, and that includes probabilities of outcomes.
The issue seems to be forecasting my wife’s current willingness to work. Obviously, if she continues to work until 65, there is no issue. I can retire now.
But even if she works just 10 more years, the $650k doubles to $1.3 million (10 years at 7% growth), and that’s enough. So long as her salary exceeds our spending, the pot just grows. And once you factor in that the money only has to last (more or less) until 67, when social security/annuity benefits kicks in and matches annual spending, it’s a blowout.
As I write this, I realize that it seems like just guessing how long my wife will definitely work, or picking an arbitrary number between our current one and the 25x amount. Can that be right?
Any thoughts are helpful. I don't want to work extra years just to “be safe.” But I’m finding it tough to assign probabilities to the different outcomes.
A final note: my job is virtually guaranteed, and almost impossible to replicate or get back. If I leave, I’m not going back to something that pays comparably for the work I put in. So if I need the extra money, I want to earn it now doing this job (which is as rewarding as I'm going to find regular work to be).
Thoughts?
Thanks for the help.