Am I/we ready for Coast FIRE?

[bigsur18]

Hi,

I am thinking I might be ready for coasting, but I am looking for some advice.

One of my concerns is that it's hard to stop investing when the market is so low, so I might try to keep contributing for a while.

We assume we will pay as we go for college for kids while we are still working, at a state school rate.

Here are the numbers:

41 Year Old Dad-Working Part Time-Will likely continue, at least for a few years, current income $45K
35 Year Old Mom-Working full time at stable job-likely working to 55-has pension and early retirement option, current income $70K, probably about $110K when kids hit college
2 kids 6 and 8

Typical yearly expenses:
Paid off home MCOL Area-Taxes $5000
Utilities $1800
Home Insurance $600
Car Payment - $4700
Car Insurance $1050 (Financed Car, Paid off Truck, Paid off Camper Van)
Gas $1200
Phones + Phone Plan $1380
Groceries/Eating out $14000
Gifts, Birthdays $2000
Vacation Home $2400
Vacations $3000-10000
Medical Co-pays, etc. $2000
Garden, Woodworking Hobbies $2000
Kids Activities  $1200
Other, subscriptions, unexpected repairs, something, etc. $5000

Yearly Expenses without retirement contributions $47,330

Assets:

Paid off house - Market Value $375,000
Retirement Accounts, HSA, Stocks  $450,000

Future potential income in 20 years when wife retires:

$100,000 in today's dollars, inflation adjusted

Future potential income in 26 years from Social Security: $20000 in todays dollars, at 75% of current estimate (if SS trust Fund is not funded)

Future Potential Income in 32 Years from Social Security: $25000 in todays dollars, at 75% of current estimate (if SS trust Fund is not funded)

Approximate Future Value of investments in 20 Years, Vanguard Low fee Index funds, if no more contributions, at 7%:    $1,750,000   $61K at 3.5%

Approximate Future Value of investments in 20 Years, Vanguard Low fee Index funds, if no more contributions, at 7%:    $3,500,000   $122K at 3.5%


We like spending money on experiences, so it is unlikely that we will buy expensive things with ongoing maintenance costs and payments like luxury cars, boats, etc. in retirement.
We will likely spend most of our money beyond our base expenses on trips to foreign countries(coinciding with solar eclipses), road trips in camper van, gardening and homesteading, woodworking. Any of the excess money from not contributing to retirement will likely go towards building up a large cash buffer, and more/bigger vacations/experiences.

How are my calculations, and what am I missing/not thinking of? I am a little unsure about how inflation affects retirement calculations. And should I be doing Roth conversions of my traditional 401K? Maybe Roth conversions is another topic, but thought I'd ask.

Thanks

Edited to fix calculations on utilities.

[uniwelder]

It doesn't sound like you're asking about coast-fire, but about being a stay at home dad.  You should be asking your wife this question.  The biggest potential financial problem you need to watch out for is a divorce.  Does she want to work 20 more years while you quit your job?

edited to add-- this isn't important to the conversation, but I'm curious how your annual utilities cost $150.  Is that the monthly average?  Or do have a well for water, solar panels, heat pump, and no garbage collection?

[bigsur18]

It doesn't sound like you're asking about coast-fire, but about being a stay at home dad.  You should be asking your wife this question.  The biggest potential financial problem you need to watch out for is a divorce.  Does she want to work 20 more years while you quit your job?

edited to add-- this isn't important to the conversation, but I'm curious how your annual utilities cost $150.  Is that the monthly average?  Or do have a well for water, solar panels, heat pump, and no garbage collection?

Thanks for the reply. I am already a stay at home dad, errand runner, etc.  Part time work is remote. We have discussed it, and I will likely remain part-time, and she likes her job currently.  We can always adjust as necessary to avoid divorce/strife.

And you are correct, that was the monthly average, so I edited original post.

[lucenzo11]

I'm surprised you haven't gotten more responses on this. Here are my thoughts:

1. I'm a little unclear on what you are trying to do. You are already part time but your wife plans to work another 20 years at her current job. Wanting to CoastFIRE implies that one or both of you would be cutting back. You mention part time for a few more years, but does your wife cut back at any point too? Or are you just trying to find a way to declare that you've hit FIRE?

2. You've presented current expenses. Any expected changes for once you hit real retirement?

3. Please confirm that your groceries/eating out number is correct. Currently over $1,100 a month.

4. So that $100,000 income you mentioned when your wife retires. That is what you estimate her pension to be? Or does that include some other income stream?

5. If you are willing to share, it would be helpful to see a breakdown of your investments. It would be good to see how much is in each type of account and what they are invested in.

6. What's your e-fund/cash reserves like?

In response to your questions:
Are we Coast FIRE? Probably. If your wife is getting a pension in 20 years at $100,000 and her income will continue to pay for all your expenses before she retires, then yes you are good on retirement. But that isn't really Coast FIRE since there is no coasting if she keeps working full time. Even if she doesn't get that pension, your current investments will continue to grow and adding it to them will give you a very nice pot in 20 years.

How are my calculations? Fine, although I don't see a difference between your two calcs that result in $1.75M and $3.5M. Should probably account for inflation too, but that could already be included in your 7%.

Inflation? Inflation is tricky. Some people account for it in their return rate by just subtracting out inflation. So they'll say 10% return minus 3% inflation is 7%. But if you don't think index funds will continue 10% average annual return, then you can revise your 7% down.

Roth conversions? Tough to answer without seeing your investment breakdown. But in general, probably don't need to do this anytime soon when you still have working income. Going from traditional to Roth will require paying income tax on it, so bets to wait to do so to a time when your income is reduced.

Hope this helps!

[uniwelder]

I'm surprised you haven't gotten more responses on this. Here are my thoughts:

1. I'm a little unclear on what you are trying to do. You are already part time but your wife plans to work another 20 years at her current job. Wanting to CoastFIRE implies that one or both of you would be cutting back. You mention part time for a few more years, but does your wife cut back at any point too? Or are you just trying to find a way to declare that you've hit FIRE?

I don't understand the question either.  Humblebrag?  I'm not sure.

They're already pretty well set-- paid off house, 1/2 million in savings.  If he quits work completely, the wife is still making a surplus of money and intends to continue doing so until she gets a pension, whereupon they will bring in an even bigger surplus of money.

Maybe what OP needs to figure out is setting up a trust fund or charities to donate to with this excess of income.

[Laura33]

I agree that the question doesn't seem so much about "coast FIRE" as just about coasting. 

OP, you are in a very good place and have what looks like a very good plan, with lots and lots of slop in both the budget and savings if things change.  So yeah, you can coast from this point, if by "coast" you mean continuing to do what you're doing, maybe cut back a little at work over time, etc., while your investments continue to do their thing without you having to worry about it.  As long as you avoid hedonic adaptation, you're golden.  Congrats! 

[bigsur18]

I'm surprised you haven't gotten more responses on this. Here are my thoughts:

1. I'm a little unclear on what you are trying to do. You are already part time but your wife plans to work another 20 years at her current job. Wanting to CoastFIRE implies that one or both of you would be cutting back. You mention part time for a few more years, but does your wife cut back at any point too? Or are you just trying to find a way to declare that you've hit FIRE?

2. You've presented current expenses. Any expected changes for once you hit real retirement?

3. Please confirm that your groceries/eating out number is correct. Currently over $1,100 a month.

4. So that $100,000 income you mentioned when your wife retires. That is what you estimate her pension to be? Or does that include some other income stream?

5. If you are willing to share, it would be helpful to see a breakdown of your investments. It would be good to see how much is in each type of account and what they are invested in.

6. What's your e-fund/cash reserves like?

In response to your questions:
Are we Coast FIRE? Probably. If your wife is getting a pension in 20 years at $100,000 and her income will continue to pay for all your expenses before she retires, then yes you are good on retirement. But that isn't really Coast FIRE since there is no coasting if she keeps working full time. Even if she doesn't get that pension, your current investments will continue to grow and adding it to them will give you a very nice pot in 20 years.

How are my calculations? Fine, although I don't see a difference between your two calcs that result in $1.75M and $3.5M. Should probably account for inflation too, but that could already be included in your 7%.

Inflation? Inflation is tricky. Some people account for it in their return rate by just subtracting out inflation. So they'll say 10% return minus 3% inflation is 7%. But if you don't think index funds will continue 10% average annual return, then you can revise your 7% down.

Roth conversions? Tough to answer without seeing your investment breakdown. But in general, probably don't need to do this anytime soon when you still have working income. Going from traditional to Roth will require paying income tax on it, so bets to wait to do so to a time when your income is reduced.

Hope this helps!

Thanks for the reply. I'll try to address these here:

1. To clarify, coast FIRE is probably the wrong word, what I really am trying to figure out is if we can coast with regard to my 401K contributions, essentially stop contributing to my 401K. I expect to work part time until my wife retires in 20 years.
2. I expect our expenses may change in retirement, especially in the first few years after my wife retires, as we will probably do some major traveling.  But from the calculations if correct, it seems like we will have more than enough.
3. Yes, number is correct. Includes parties and vacation meals. We cook a lot of good meals when at home, but eat out often on vacations.
4. That is the estimate based on the calculator.
5. HSA-$15,000
    401K Traditional-  $385,000
    401K Roth - $15,000
    401K Taxable - $10,000
    Vanguard Traditional IRAs - $24,000
    Betterment Roth/Traditional - $5,000
6. Emergency fund is $6,000, has been depleted recently, building back up.  Aiming for $20K

Thanks for the advice, it does help!

[bigsur18]

I'm surprised you haven't gotten more responses on this. Here are my thoughts:

1. I'm a little unclear on what you are trying to do. You are already part time but your wife plans to work another 20 years at her current job. Wanting to CoastFIRE implies that one or both of you would be cutting back. You mention part time for a few more years, but does your wife cut back at any point too? Or are you just trying to find a way to declare that you've hit FIRE?

I don't understand the question either.  Humblebrag?  I'm not sure.

They're already pretty well set-- paid off house, 1/2 million in savings.  If he quits work completely, the wife is still making a surplus of money and intends to continue doing so until she gets a pension, whereupon they will bring in an even bigger surplus of money.

Maybe what OP needs to figure out is setting up a trust fund or charities to donate to with this excess of income.

Yes, I worded it poorly, see other response.

And you're right, I probably do need to figure something out. Land preservation and forest restoration is one idea, we live on a family farm with unhealthy woods (Emerald Ash Borer) in a quickly developing area.

[bigsur18]

I agree that the question doesn't seem so much about "coast FIRE" as just about coasting. 

OP, you are in a very good place and have what looks like a very good plan, with lots and lots of slop in both the budget and savings if things change.  So yeah, you can coast from this point, if by "coast" you mean continuing to do what you're doing, maybe cut back a little at work over time, etc., while your investments continue to do their thing without you having to worry about it.  As long as you avoid hedonic adaptation, you're golden.  Congrats!

Thanks!  Just hard to think of backing off on contributing to retirement accounts, as I have been maxing them out as long as I have known about MMM.

[Laura33]

I agree that the question doesn't seem so much about "coast FIRE" as just about coasting. 

OP, you are in a very good place and have what looks like a very good plan, with lots and lots of slop in both the budget and savings if things change.  So yeah, you can coast from this point, if by "coast" you mean continuing to do what you're doing, maybe cut back a little at work over time, etc., while your investments continue to do their thing without you having to worry about it.  As long as you avoid hedonic adaptation, you're golden.  Congrats!

Thanks!  Just hard to think of backing off on contributing to retirement accounts, as I have been maxing them out as long as I have known about MMM.

But why would you back off now?  I'd understand it if you were planning on quitting and living off a tight budget, with no room for saving.  But for as long as you work even part-time, you've got plenty of room for savings -- and even if you quit entirely, I bet your wife's salary still provides some room for savings. 

Of course, if you just want to know for that feeling of security, then yes, you're in good shape to walk away whenever, as long as SS remains around in some form (very likely).  Congrats!  And any savings you add between now and then just increases your likelihood of long-term success/allows your wife to walk away earlier if she decides to.

[Villanelle]

So you want to see if you are okay not contributing to retirement anymore.  Does that mean you just want to start spending a lot more?  I don't quite understand.  I see you mention a land conservation effort.  So you'd basically stop contributing to savings and retirement, and start spending on land preservation? 

Sure, you can probably afford it, as long as your wife is fine working another 20 years and the pension plan doesn't change significantly.  For me, those would be huge what-ifs that I wouldn't be willing to risk so much on, especially since it sounds like your PT gig isn't unpleasant or terribly burdensome.  If anything, it would make more sense to me for you to continue working so your wife could scale back, plan to leave earlier, or similar.  You quitting now so you wife can keep work for 20 years, or you continuing not-unpleasant part-time work for 10 years so your wife can retire in 15 years instead (or whatever the exact numbers look like)?   That would be an easy choice for me.