The spreadsheet calculators suggest that if I stayed the course I would hit the break even point for FI in just THREE YEARS. Can this be right?Maybe. Depends primarily on
Paycheck frequency: | Annual | Annual | |
Paycheck Items | Earner #1 | Earner #2 | Annual |
Gross Salary/Wages | $89,491 | $0 | $89,491 |
Pretax Health/Dental/Vision Ins. | $321 | $0 | $321 |
Employer-sponsored HSA | $500 | $0 | $500 |
FICA base salary/wages | $88,670 | $0 | $88,670 |
401(k) / 403(b) / TSP / etc. | $18,500 | $0 | $18,500 |
W-2 Box 1 | $70,170 | $0 | $70,170 |
Subtractions for AGI | Annual | Annual | Annual |
Traditional IRA | $5,500 | $0 | $5,500 |
1040 AGI | $64,670 | ||
Payroll Taxes | Annual | Annual | Annual |
Social Security | $5,498 | $0 | $5,498 |
Medicare | $1,286 | $0 | $1,286 |
Income Taxes | |||
Federal tax | $7,272 | 2018, S, item. | $7,272 |
State+local tax | $3,079 | UT state calc'n | $3,079 |
Total income taxes | $17,134 | $17,134 | |
Monthly | |||
Income before other expenses | $3,961 | $47,536 | |
Monthly Average Expenses | Comments | ||
Mortgage | $1,022 | Input to Item. Ded. | $12,259 |
Property Tax | $179 | Input to Item. Ded. | $2,152 |
Home/Rent Insurance | $50 | $600 | |
Car Insurance | $53 | $634 | |
Car Maintenance, Registration, etc. | $40 | $480 | |
Charitable contributions | $20 | Input to Item. Ded. | $240 |
Electricity | $46 | $552 | |
Emergency Fund | $200 | $2,400 | |
Fuel/Public Transport | $40 | $480 | |
Gas/Oil for heating | $49 | $588 | |
Groceries | $300 | $3,600 | |
Internet | $60 | $720 | |
Miscellaneous | $160 | $1,920 | |
Pets | $100 | $1,200 | |
Phone (cell) | $35 | $420 | |
Recycling/Trash | $54 | $648 | |
Sports/Recreation | $100 | $1,200 | |
Non-mortgage total | $1,486 | $17,834 | |
Total Expense | $2,508 | $30,093 | |
Total to invest | $1,454 | $17,443 | |
Summary: | |||
"Gross" income | $7,458 | $89,491 | |
Income taxes | $1,428 | $17,134 | |
After-tax income | $6,030 | $72,357 | |
IRA+401k/403b/TSP/457 | $2,000 | $0 | $24,000 |
HSA | $42 | $0 | $500 |
Living expenses | $2,534 | $30,414 | |
After-tax investable | $1,454 | $17,443 | |
Time to FI?: | |||
Guess at time to FI | 4.75 | years | |
Safe Withdrawal Rate | 4.00% | percent | |
Real return on tax-deferred investments | 5.00% | percent | |
Real, after tax, return on taxable investments | 4.25% | percent | |
Current Savings | |||
Taxable stocks & bonds | $30,000 | ||
Tax-deferred (e.g. trad. IRA/401k) | $236,700 | ||
Roth + HSA | $68,000 | ||
Projected Savings at Retirement | |||
Taxable | $126,278 | ||
Tax-deferred (e.g. trad. IRA/401k) | $423,622 | ||
Roth + HSA | $88,343 | ||
Total projected stash | $638,243 | ||
Projected Expenses in Retirement | |||
Non-loan, non-work expenses | $17,834 | ||
Annual non-tax retirement expense | $17,834 | ||
Income taxes | $33 | ||
Total | $17,867 | ||
Total loan principal due at FI | $190,922 | ||
Stash needed for retirement @4.0% SWR | $637,595 | ||
Have $647 extra. |
Filing Status | 1 | 1=S, 2=MFJ, 3=HOH | |
Adult #1 | |||
Age | 42 | ||
Full-time student? | 0 | 0 | |
AGI | $64,670 | ||
Std. Deduct. | $12,000 | ||
Act. Deduct. | $13,157 | ||
Exemption | $0 | ||
Taxable | $51,513 | ||
1040 Tax | $7,272 | ||
Tax after n-r credit | $7,272 | ||
Net Tax | $7,272 | ||
Mtg. Int. (approx.) | $7,686 | 1000000 | |
State tax | $3,079 | UT | |
Prop tax | $2,152 | ||
Charity | $240 | ||
Item. Deduct. | $13,157 | ||
Version | V10.05 |
Loans: | Orig. Prin. | Orig. Length | Curr. Prin. | Yrs left | Rate |
Mortgage | $224,000 | 30 | $214,181 | 28 | 3.625% |
Is it reasonable for me to even contemplate this? For my sanity? Is it worth taking a lower paying job, even a much lower paying one, in a slightly different field probably, maybe in a different (cheaper?) part of the country, for my health and peace of mind, even if it means I have to work longer to retire? Should I do it? Would you do it?
Maybe. Depends primarily on
- your expenses in retirement
- actual investment returns
Good news is that it appears your federal taxes will drop ~$1000 due to the new tax law.
See below for a projection that includes
- additional ~10% spending under "miscellaneous"
- use of tIRA instead of Roth IRA
- other guesses based on the numbers in the OP
and arrives at ~4 year 9 months to FI.
You could compare with what you did and adjust as seems appropriate to you. But the investment returns will remain unknowable.
In any case, "keep up the good work!" seems as good advice as any.
@MDM Thank you for your number crunching on my behalf. Although there are unknowns, and I don't even have a full picture of what my *really* realistic expenses are (even right now, though I am going to try tracking for a few months to really flesh that out), it is really helpful for me to see that I am not completely off my rocker going down this line of thinking. We are so indoctrinated to think we have to work work work our whole entire lives, and then maybe, maybe we then get to play. It certainly takes a complete reevaluation to see that there might be other, reasonable ways of living, once one has decent savings and investments.
And that's an interesting tidbit about taxes! I had assumed that I would not itemize even this year (although I haven't looked into it yet), because of the much larger standard deduction with the tax change. Last year I only had a partial year of deductions from the house, and it wasn't enough to make itemizing worth it (it was just about sixes). I will certainly be paying attention to what will minimize my tax bill!
@CalBal, yes with $300K in retirement funds, I think you have some career choices, especially since you clearly despise the place.@freeree Is it that obvious? 😂
You could do the "coast" model that some folks talk about, where you stop contributing to the retirement fund Stache, let it roll, and take a lower stress job that's sufficient to let you earn enough to pay your expenses through your 40s and maybe 50s, even if you don't actively invest a lot more money during that time. Assuming 7% market return average until age 59, balance could jump up to around $800K range (just an estimate).
And really, with your low expenses, I'd think you could still probably contribute more $ in your taxable investments or liquid savings during your "coast years" to give you a few years of expenses, so that maybe you could pull plug on work in your early/mid 50s. Again, just an estimate.
I think you have options.
@CalBal, yes with $300K in retirement funds, I think you have some career choices, especially since you clearly despise the place.@freeree Is it that obvious? 😂QuoteYou could do the "coast" model that some folks talk about, where you stop contributing to the retirement fund Stache, let it roll, and take a lower stress job that's sufficient to let you earn enough to pay your expenses through your 40s and maybe 50s, even if you don't actively invest a lot more money during that time. Assuming 7% market return average until age 59, balance could jump up to around $800K range (just an estimate).
I wasn't sure if the 300k was enough to do something like that, but I think you are right. I think I could very likely be perfectly fine on a salary enough half of what I make now. And it might not even come to that. (I am going to dig a little deeper into my finances now that it's the weekend and really look at it.) It feels weird to stop contributing to the 401k, because of all the pressure out there to invest for retirement, but provided WWIII doesn't happen, even a crash wouldn't make much of a difference for a long time, because I'm still 20+ years away from being able to use those funds anyway.
Perhaps a different subforum or question would be a better place to ask (or an actual financial adviser, though I shudder to think about paying for one), but in the scenario where I quit this job and move to something lower paying and less stressful, what is the smart thing that does one do with their 401k? It would need to get rolled over into something, but I have never rolled one over at all (I didn't have one at all until 10 years ago at this, my current job, so I am a bit fuzzy on how that might play out.)QuoteAnd really, with your low expenses, I'd think you could still probably contribute more $ in your taxable investments or liquid savings during your "coast years" to give you a few years of expenses, so that maybe you could pull plug on work in your early/mid 50s. Again, just an estimate.
Probably true. I haven't been very aggressive, even now, but I have been holding back a bit for the few largeish home improvements to my house that I knew would be coming up, and that I didn't want to finance.QuoteI think you have options.
Although it sounds a bit like fishing, that's really what I wanted to hear! And to get confirmation that I am not crazy for thinking about this.
A few years ago when stress was at an all-time high in our office one of my coworkers, who is now a friend, decided she couldn't take it any longer and decided she'd rather be a janitor. Long story short she talked to a lot of janitors and finally concluded that a) she'd miss her job (she finds it mentally stimulating) and b) she'd be taking on a physically demanding job with it's own demands/stresses for significantly less money.
Wouldn't it behoove you to decide whether you're running away or towards something?
2007 Toyota Yaris with 90,000 miles: KBB says around $3,500 to sell it- HA! this car is the best, this seems low. I plan on keeping it FOREVER (or at least 10 more years)
@freeree What did your friend end up doing? Did she stay with the same firm in the same capacity and "stuck it out"? Did she move to a different firm but still doing more or less the same thing? Did she quit and do something else (but not janitoring)?
I'm considering going to a career councilor for a few sessions to try to suss it out. I feel like I need some professional, objective advice and guidance that I can't get from coworkers or friends or family. A few years ago I would have never paid for such a thing, but right now, it feels like the right thing to do, since I've just been spinning my wheels on my own.
Nope, not crazy. I'm thinking of doing something similar. You would just be semi retired, not retired. I've been identifying my interests to see what kind of low income jobs I could do in a few years when I hit my semi retirement number.
I rolled over a 401k into an IRA once. It wasn't hard.
I bolded the part about not being able to use 401k funds until you are of age. Just wanted to say that's not strictly true, through Roth pipelines and 72 SEPP.
Also, while you have a job is the best time to look for a new job. If it were me and you weren't going to an industry that definitely pays $40k for people I wouldn't be shy about asking for a similar or even higher salary than what you current have. You never know if you don't ask and no need to give it away for free. You might get to be the "overpaid" one in the office :).
This isn't helpful but I also wanted to say I have a 2007 Yaris with 88,000 miles and have the same plan!
...unless you meant to write "FSA," which is an entirely different animal and not nearly as useful. :)
Shop around. Worst case, you learn that your current employer is better in the market than you thought. Best case, you land a far better job. Second-worst case is you land a job with a much better place that you can stay at longer and still reach FI. No downside.
Some people would say JUST SUCK IT UP! I have been sucking it up, for probably 5 years. I've gotten to the point where my health and mental well being are more important than money or being able to retire earlier.
Some people would say JUST SUCK IT UP! I have been sucking it up, for probably 5 years. I've gotten to the point where my health and mental well being are more important than money or being able to retire earlier.
Apologies if I'm stating the obvious here, but regarding freeree's comment above, isn't this what you're running to? What you do for paid employment is of secondary concern compared to health and mental well being. A job is just a way to make money, does not define who you are...I think viewing it in this way is freeing.
Will your degree allow you to something different? I am not sure why your options are only to go to more stressful employers doing the same exact thing.
Is there room in your $280k house to take on a roommate? Seems a bit of extra cash flow would either speed up your path to FI, or allow you to coast for much longer if you don't want to work.
From my perspective you have so many more choices than “suck it up” or, honestly, I’m not sure what you see your other choice as being. Maybe earning less money? How about a sabbatical for 6-12 months? Can you rent out your house for something approximating your expenses? How about a year off slow traveling or just sitting on a beach in a low-cost location to contemplate the rest of your life? Maybe a lower stress job, like you contemplated. Are you tied to your location? What if you moved someplace with better job prospects or lower COL or just something different? You have plenty of FU money so there is no reason to stay in a sucky job.
Quote@freeree What did your friend end up doing? Did she stay with the same firm in the same capacity and "stuck it out"? Did she move to a different firm but still doing more or less the same thing? Did she quit and do something else (but not janitoring)?
CalBal: Hmmm. We work for local government (janitors too); my friend didn't do anything. Her current goal is to retire in 1-2 yrs, same job as a few years ago. Real Estate market recovered, so some job-related stress alleviated. Our jobs aren't so bad, good benefits, pension etc.
A few years ago I was assigned to a boss from hell. Upper management didn't seem to care since my boss was a team player and produced results. Finally the situation deteriorated to a point where I'd be dreading Monday, and it was only Saturday. The prick retired a couple of years ago. His parting shot was to leave something for the replacement supervisor. It was a 2-3" thick file full of p/work: my productivity stats, performance reviews, emails, his scribbled notes about me etc.
After that painful episode was over I started to hate my job, I found it boring and repetitive. One of my coworkers had a side-gig and was willing to advise me. I looked into the life/career coach 'thing' and even attended a group session (an interesting, uncomfortable eye-opener). Based on this one group session I realized I didn't know what I wanted (duh, stating the obvious), and ultimately decided to concentrate on other aspects of my life.
If your job really does suck then I wouldn’t be too worried about them replacing you if you took a break. If they don’t offer a sabbatical then just quit. I expect you are skilled enough to be able to get another job at some point down the line.
Your animals are a consideration and I understand not wanting to uproot them now. How about setting a plan now for doing something wild once they do pass? If you have the FU money to quit at any moment, can you change your perspective at work and not care as much? Can you use that mental freedom to push back on some of the worst aspects of the job?
I highly recommend Now What (http://amzn.to/2G0b6zp). It's basically a series of career coaching sessions put into a book.
Opinions vary on this matter. Personally I like MMM's generic allocation of 2 parts stock to 1 part bonds, which is more "conservative" rather than less. Since I'm also sympathetic to the idea that interest rates are supposed to rise (making bonds go down), I can see keeping the average bond length lower than usual.
The usual trade off in stocks vs bonds is that stocks are more volatile. If you quit and the stock market drops 50% in the next 12 months, will you be comfortable having started with 96% in stocks instead of 86%? You'd be looking at a portfolio value of 52% of the original, and selling stock to pay the bills even though the stock is on sale. Not trying to say the proposal is wrong, just wanting you to visualize what it means. I've been through a couple of crashes - it's worth noting that stocks really can drop a lot. Visualizing is not the same as being there but it's better than nothing. Best of luck regardless of portfolio decision.
You do have a lot options though. If you really hate your job, maybe finding a better one is a good idea even if it takes longer to FIRE. In the end, a judgment call. Explore as much as you can.
One advantage of wanting to leave is that you could slack off. Would the stress go down if you just allowed yourself to do a less careful effort? Or took more risks in refusing to accept extra work?
Hi @CalBal - I can relate so much. We actually had some layoffs and people were getting severances. I was hoping I'd get it, but my area is performing well so it's unlikely. I've been looking for a position for almost a year now and now that I'm over $300k, I'm quoting a number 20% lower than what I make now. I've run the scenarios in Excel and it won't make that much of a difference in time to FIRE. I'm deeply unhappy in my job so I just need to get out. I've decided to sacrifice salary at a minimum, but still on the fence about just quitting.
@Dee18 I have been on the SS site, but it seemed as though the calculator assumed you would be drawing SS as soon as you "retired" (and not paying into the system). Is that not true?There are various assumptions either built in or selectable, depending on which version of "the SS calculator" one uses.
@MDM I think I was using whatever the default was. Thanks for those links! I hadn't remembered the case study spreadsheet had a tab.The spreadsheet? Just enter fewer than 35 years. :)
Hm, hold up. It seems to be predicated on having 35 years worth of earnings. What if you don't have that many?
The spreadsheet? Just enter fewer than 35 years. :)
I only contribute via payroll deduction $500/year, and it looks like I can't change that until open enrollment.That's too bad, and seems employee-unfriendly. There are places at which You can change the amount you contribute to your HSA at any time during the plan year. (https://www.connectyourcare.com/tools/faqs/health-savings-account-faqs/)
However, when I look at the plan manager's website, it appear you can make your own contributions as well (outside of payroll deduction). Is that true?Yes.
How does that work then? Do you get a tax form at the end of the year that puts that money into some "pre-tax" bucket, or something like that?Something like that. You do get form 5498-SA for contributions, but not until after the April filing deadline, so you have to keep your own records. You fill out and file form 8889 with your return. For 8889, remember that pre-tax contributions via payroll deduction go on line 9, while contributions outside of payroll deduction go on line 2.
Also, it appears the plan charges a fee of $4.50/month, regardless of balance. This is a plan offered through my employer, so I don't really get a choice. However, I am wondering if this is typical?For perhaps more than you ever wanted to know, see http://www.madfientist.com/ultimate-retirement-account/,