When can I retire

[mobileagent]

Friends, this is my first post. I have been reading the MMM blog for the past year and I am very inspired by Mustachian philosophy. I finally want to convert and make the necessary changes so that we could retire in 9 years. Please see below for more information.

About Me: Age 41 and spouse's age 37. 2 kids aged 10 and 7.

Financial: Household income of $400K. Live in a state with no income tax. Annual expenses of $60K (ignoring the principal payment on the house and reduced living expenses by $20K from last year). Current saving rate of 77% from take home (adding principal payment to savings)

Home Equity of $825K. Mortgage of $175K on a home valued a little over $1M
Retirement/Investments/Liquid $550K.

Net worth of $1.375M

I hope to retire by the time I reach 50 in 9 years. I do like my work and don't need to quit it soon. My spouse is fine with her work as well, but she says she wouldn't work if we don't need the money. My spouse is supportive of an early retirement as long as we can fund college expenses and retirement. Our annual expenses are pretty high in my opinion, but we are able to still save close to 75%-80% of our take home while living a life with many luxuries. Our net worth is tied too much to our house and we hope to increase both savings and liquidity portion by the time we can retire so that we can stay in the current house.

If you are in my shoes, what would you do to retire early and what would you differently? Thanks for your advice and feedback.

[RWD]

You can retire this year if you sell your house and reduce your expenses. $1.375 million is enough to support expenses of $55k per year by the 4% rule. This is more than enough for a family of four.

But you want to pay for two college educations and stay in your million dollar house. So let's do that math. I'm assuming your current $60k annual expenses include taxes and maintenance on your house. Based on your savings rate I'm assuming your take home pay is about $260k. It should take about 5 years, assuming 5% returns after inflation.

Year 0: 550k invested
Year 1: 778k invested
Year 2: 1,016k invested
Year 3: 1,267k invested
Year 4: 1,531k invested
Year 5: 1,807k invested

Subtract the $175k mortgage payoff and two $50k college educations and you're left with $1,532k in investments which is enough to support $61k/year at 4%. Though it's even better than that because you won't need to start spending the college education money for another 3 years.

What would I do differently? I'd cut back spending to retire even earlier and spend more time with the kids before they leave for college. I also personally believe that paying for your kid's college is not in their best interests. It's hard to value something as much when it's handed to you for free. Your kids are more likely to be successful if they have to make their own way.

[fartface]

Wow, you're doing well.

So...in terms of net worth...you have $550K in retirement/cash/investments plus $825K in home equity?

I think as soon as you sell your $1M dollar home you can FIRE. Period.

I'm the same age as you and have a NW of $800K. My target FIRE number is $1.5M after selling/downsizing our home. Retirement calculator puts us there there in less than 7 years.

[Retired To Win]

Several commenters have already advised you to sell/downsize your house because doing so would allow you to FIRE right now.  I'll agree, but with a twist.  Do sell your house.  But don't downsize/downgrade.  Instead, find yourself a lower cost location to move to where you can get the "same" house you have now for a lot less money.  That's what we did.  Worked like a charm.

(And, oh, just remember that, once you do FIRE, commuting distance considerations are totally moot.  And that, as far as family visiting goes, you can live 100 to 150 miles away and still manage those weekly visits without too much fuss.)

Good luck.

[mobileagent]

Thank you all for your advice and perspectives. It is gives me a piece of mind to know that we could FIRE now if we really wanted. We are not quite ready emotionally to retire immediately :) 5 year plan sounds quite reasonable if we want to keep the house and fund college for our kids. I do wonder how some of you are walking away from your peak earning years without getting into X+1 syndrome. Is there anyone who has walked away too soon and then regretted the decision?

[kpd905]

What does the property tax and insurance cost on that house, and is that included in your $60k?  Can you outline your expenses?  I am surprised that you spend only $60k with 2 kids and a million dollar house.

[mobileagent]

Here is the breakdown of the monthly expenses

- Property taxes & insurance: $1010
- Utilities, maid, lawn services: $930
- Auto related (2 cars fully paid) : $475
- Kids activities: $450
- Insurance (health insurance is covered by employer for the family): $85
- Groceries, restaurants, and shopping: $1325
- Entertainment: $130

total: $4405

- Misc (buffer for travel etc.): $595

Thanks

[surfhb]

Those expenses are fantastic based on your income.   I think your plan to cover school costs and retire in 5 years are great. 

What are your passions in life?   If you don't have one you might want to seriously find one before you stop working. ;)

I scratch my head when I hear someone talk about "walking away to soon" from a job which takes up most of the time you could spend on something you really like.   Doesn't compute

[mobileagent]

Good question on my passions in life. I am blessed to be in a career and a role that I enjoy, and where I get to learn new things every week. I am one of those people, who enjoys their work and learning every day:) In retirement, I should be able to find occasional consulting gigs to keep my curious mind occupied. There are hobbies like reading, travel, outdoors, and movies besides spending time with family. I agree that I do need to figure out how we will spend time in retirement. It is less of a concern at this time. Thanks.

[mandy_2002]

- Utilities, maid, lawn services: $930
- Auto related (2 cars fully paid) : $475
- Kids activities: $450
- Insurance (health insurance is covered by employer for the family): $85
- Groceries, restaurants, and shopping: $1325
- Entertainment: $130

Thanks

When calculating how much your 'stache should be with the 4% SWR, remember that some things will change.  If you're retired, you can probably do your own yard work and cleaning.  Your gas costs will change, probably going down, unless you focus more on road trips with the fam.  Insurance will surly increase.  Restaurant trips could decrease (or increase if you just need to try everything).  Entertainment can go all over the place.  Your plans in retirement should be discussed with a loose spending breakdown created (not for us, but for your family). 

[mobileagent]

Agreed. Even with some changes in how we will spend our budget, I expect $60K to cover the retirement expenses if we were to retire now. If we want to be more aggressive, we could relocate to a more cost effective place or downsize our house to reduce the costs a bit more.