Author Topic: Case Study help and ideas  (Read 2515 times)

LAL

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Case Study help and ideas
« on: June 01, 2013, 07:48:21 AM »
Case Study -

I never considered early retirement until I read MMM about retiring at 30 with $800k. I used to run a blog pre-kids and I can honestly say we're mustachian but we live in a very HCOLA.  We are 34 and 35 with 2 kids 3 and 1.

Summary of net worth
$200k home equity
$385k retirement
$140k taxable
$10k college

2 kids, 1 income that is VERY high.  My DH grosses around $130k/year.  With bonuses he probably makes around $160k/year. Our gross income last year was $196k - $25k Roth IRA conversion from 2010.

He brings home $2400/month every 2 weeks.  We stash the rest or it goes to taxes.  So we live on $5k/month.  Yes there are two extra paychecks but those usually just get saved.

Sounds like a lot but realize that our mortgage is $2200/month PITI and we pay $210 HOA so about 50% of our net take home is in our mortgage expenses.  Yes our condo is very expensive $600k.  We live in a HCOLA like I said.  We've always lived this way since we have never lived somewhere cheap.  I don't feel we live a super expensive life, actually I don't feel we live much more luxuriously than when we were graduate students.  Our living expenses are around $2500/month if that.  I guess the thing is we always knew our bottom line has been paying our mortgage/rent and everything else had to fall into line.

I wonder if we moved somewhere that we could own a home outright could we retire early?  When and how would we accomplish this?   Also the health insurance is what really handcuffs us. I am not sure what to do if we don't have employer provided coverage. 

How much should we have for my DH to stop working?  Can we do this?

footenote

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Re: Case Study help and ideas
« Reply #1 on: June 01, 2013, 08:31:08 AM »
Regarding healthcare, the Affordable Care Act which goes into effect Jan 2014, eliminates:

- the need to be employed to have healthcare insurance
- being turned down for healthcare insurance due to pre-existing conditions

There are no asset tests. It will be more expensive than employer-subsidized insurance, of course, because you will pay 100%. But at least you know you can buy it.

On assets required to retire, check out firecalc.com. As posted elsewhere here, the younger you are at retirement, the more safety margin you may need to have. If you expect to live to 90, 55 years is a long period to fund safely.

DoubleDown

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Re: Case Study help and ideas
« Reply #2 on: June 03, 2013, 12:54:42 PM »
In case you haven't read this post, it will give you the math behind what is needed to retire:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

How much you will need to retire is completely a function of how much (or how little) you can live comfortably on. Certainly by moving to a lower cost area you can turn your current home equity into a cash flow that can help provide for your early retirement. Once you figure out your expected annual expenses, you will know how much you will need to retire (25 times your annual expenses if you feel comfortable with a 4% SWR).

You can also purchase health insurance on your own as MMM has done and explains in another post which you can find on the blog.

Good luck!