Come on down and poke holes in our plan!

[LivinThatSnipeLife]

Preface: 

• First, a big thank you to the community.  We've learned a lot from you all after lurking here for more than half a decade.
• All figures are annualized and in thousands.  Currency is in Spacebucks.

Situation:  Family of three.  Potential to become 4 at some point.  We are in our early 30s with a young baby boy.  We recently moved to be closer to family (hence, the high property taxes) as a last ditch effort to keep us in the area (coastal, HCOL) - basically, see if being ultra-close to family is worth the extra years of work to fund the higher cost of living.  Meanwhile, we've always wanted to live in a more rural, scenic area to be closer to nature and partake in our outdoor hobbies more (e.g., hiking, kayaking).  We are landing on the extra years of work and inability to have a more outdoorsy life not being worth it.


Plan:   Move to a LCOL area in a nice location (nice land but modest house) as soon as reasonable.  We expect a house and land to cost ~$400k.  We think this would be close to 4 years from now.  One of us would work part-time (salary of ~$20k) for the first 5-10 years of FIRE to allow our investments to continue to grow and the other would step back from a more demanding, less-fulfilling career to spend more time with the family.  We expect both of us would work in some capacity thereafter for fun, but job/salary would be unknown.


Questions for you:
-  Do the economics work out in our plan?  Are we being too optimistic (or cautious) in our timeline?
-  Does our "FIRE" budget seem reasonable?  Anything we are missing?
-  Any risks you see with our asset allocation?
-  Other input is also welcome!


Current financial summary:
-  Salary:  $250
-  Fed/state taxes / FICA:  ($50)
-  Expenses:  ($50) [we've tracked our expenses to the dollar for years so we feel confident in this figure]
-  Yearly investments:  $150
-  Assets:  $1,257
-  Liabilities:  ($380) [30-yr home mortgage at mid-2% fixed interest rate]
-  Net worth:  ~$880


FIRE financial summary:
-  SWR:  3.3%
-  FIRE expenses:  $39
-  Investable assets required, assuming $400k, paid-off house:  $1,216


Current financial detail:

Annual expenses:  ($50)
- Healthcare, dental, vision premiums:  ($3.7)
- Healthcare costs:  ($1.0) [assumed higher costs in early years for baby]
- Mortgage interest:  ($9.4)
- Property taxes:  ($9.0)
- Home insurance:  ($0.7)
- Home maintenance:  ($2.0) [older house, we do all work ourselves]
- Utilities:  ($4.0) [will improve insulation / air seal ourselves, but water, sewer, and trash are way too expensive here]
- Transportation:  ($2.3) [two 5+ year old, paid off cars]
- Groceries and toiletries:  ($5.0)
- Entertainment:  ($2.0) [includes phone plan, internet, eating out, video games, Disney+ for kid]
- Gifts:  ($1.4) [family is really big on getting gifts; we tried proposing gift reductions and met considerable pushback; we gave up and will tolerate it]
- Hobbies:  ($1.0)
- Personal:  ($0.6) [this includes clothing and haircuts; we'll likely be half this amount as we now give our own haircuts]
- Trips:  ($1.5) [small family trips; mostly includes gas and groceries while we are on our trip]
- Miscl:  ($6.0) [this is a plug for the baby until I figure out how much this kid costs us]

Net worth: $880
- House:  $96
- 401k:  $423
- ROTH IRA:  $58
- HSA:  $28
- Brokerage:  $247
- Pension:  $25
- Cash:  Minimal

Allocation:  75% total stock market, 20% international, 5% bonds (all Vanguard)


FIRE estimates:  The first number is today; the second is the FIRE estimate

Annual expenses:  ($50 | 39)
- Healthcare, dental, vision premiums:  ($3.7 | 3.0) [will no longer be penalized for putting spouse with access to own health insurance on the same plan*]
- Healthcare costs:  ($1.0 | 2.0) [most years we'll have minimal costs, so this is extra cushion]
- Mortgage iInterest:  ($9.4 | 0.0) [paid off house]
- Property taxes:  ($9.0 | 2.0) [LCOL area]
- Home insurance:  ($0.7 | 0.7) [kept the same though this would likely be lower]
- Home maintenance:  ($2.0 | 2.0) [assume similar as today]
- Home upgrades:  ($0.0 | 1.0) [assume we'll update the kitchen, bath, etc. every 10-15 years]
- Utilities:  ($4.0 | 2.0) [we want to go back to a smaller home in a more temperate climate]
- Transportation:  ($2.3 | 3.0) [assume we'll take more road trips in FIRE]
- Groceries and toiletries:  ($5.0 | 5.0) [should be similar]
- Entertainment:  ($2.0 | 2.0) [should be similar]
- Gifts:  ($1.4 | 1.4) [should be similar]
- Hobbies:  ($1.0 | 2.0) [assume we'll spend more here]
- Personal:  ($0.6 | 0.5) [expect similar]
- Trips:  ($1.5 | 4.0) [more trips]
- Miscl:  ($6.0 | 8.0) [this is a plug for all kid costs, which includes food, clothing, education]

* Employer makes family HSA contribution that makes it slightly worth incurring fee

[maisymouser]

Posting to follow and my own kiddo is pulling my attention away at the moment, but one very short thought is: your planned grocery bill is pretty fantastic now, but if you add a 4th kid that will probably go up, especially as your current kid grows, yeah? Same for the clothing budget- shoes, clothes & outerwear alone for a family of 4 can add up, even when shopping used.

And do you plan to include any costs of selling your home in your calculations (e.g. 3% fee to seller's agent and 3% to buyer's agent)?

Apart from that I am really impressed with your current expenses in a HCOL.

OK, back to my toddler...!

[legalstache]

I'm not a post-FIRE expense expert, but for the most part looks pretty good...

What are your plans for kids' education? I.e., how are the schools in the area(s) you're looking at?

Also, if you work another 4 years and invest 150 a year, wouldn't you have well over your FIRE number saved at that point? Your investments are 756 right now; 4 years * 150 / year = 600; 756 + 600 = 1,356. And that assumes no growth in the market.

Even 3 years of investing 150 a year should get you there. With that, plus planning to bring in 20 a year, the numbers seem fairly solid.

Personally, your post is interesting because we also have one young kiddo and likely one more coming. I've considered pulling the plug in the next few years and bringing in 20k or so a year as well. Like you, we currently live near family but could find something much cheaper if we were willing to move away. Don't think we'll be able to do that, though. Outside of these forums, there are virtually no FIRE role models so I'm curious to see how your journey goes!

[reeshau]

Overall, I think you have realistic expectations and a plan that is flexible enough that you will be able to adjust it when you are hit with surprises.

We expect a house and land to cost ~$400k.

...

- Property taxes:  ($9.0 | 2.0) [LCOL area]

One question on this:  you don't have a line item for income tax.  Are you explicitly expecting not to owe income tax?  State and Federal?  If you move to a no-income-tax state, your expectation of property taxes is low, given your expected house cost.  My house is $350k, and my property taxes are $5k.  The money has to come from somewhere.

[terran]

What about large occasional expenses like replacing cars? Is $2k/year in home maintenance enough to replace things like appliances, HVAC or a roof, or only ongoing annual maintenance? Health insurance might be a little low -- double check ACA subsidies for your expected income in retirement.

[LivinThatSnipeLife]

Thanks, everyone, for the feedback!  You've given us a lot of good stuff to think about.

Posting to follow and my own kiddo is pulling my attention away at the moment, but one very short thought is: your planned grocery bill is pretty fantastic now, but if you add a 4th kid that will probably go up, especially as your current kid grows, yeah? Same for the clothing budget- shoes, clothes & outerwear alone for a family of 4 can add up, even when shopping used.

And do you plan to include any costs of selling your home in your calculations (e.g. 3% fee to seller's agent and 3% to buyer's agent)?

Apart from that I am really impressed with your current expenses in a HCOL.

OK, back to my toddler...!

Child costs:  Good point on the increase in bills with the extra children.  Right now, we have a plug in our FIRE budget of $8k ($4k per kid per year), which would include food, clothing, etc.  We realize costs can vary drastically (e.g., based on buying used, how much you want to spend on their wants).  Perhaps ~$300 per month per child ($4k / 12 mo) is too aggressive.  Not sure if others farther down this path have any advice.

Buying / selling costs for house:  We didn't consider this.  We've done some remodel work ourselves on the house, which could net us an extra $25k when all is done, so it's possible it's a wash.  Currently, we're assuming we sell it for what we bought it for.

I'm not a post-FIRE expense expert, but for the most part looks pretty good...

What are your plans for kids' education? I.e., how are the schools in the area(s) you're looking at?

Also, if you work another 4 years and invest 150 a year, wouldn't you have well over your FIRE number saved at that point? Your investments are 756 right now; 4 years * 150 / year = 600; 756 + 600 = 1,356. And that assumes no growth in the market.

Even 3 years of investing 150 a year should get you there. With that, plus planning to bring in 20 a year, the numbers seem fairly solid.

Personally, your post is interesting because we also have one young kiddo and likely one more coming. I've considered pulling the plug in the next few years and bringing in 20k or so a year as well. Like you, we currently live near family but could find something much cheaper if we were willing to move away. Don't think we'll be able to do that, though. Outside of these forums, there are virtually no FIRE role models so I'm curious to see how your journey goes!

Our assumption is that, in addition to the $1.2M in investable assets, we'd need an extra $300k (on top of our current home equity) to buy a house with no mortgage.  I think we can get there with some modest market gains.

Schools in the areas we are looking at are fairly decent for being farther away from big cities.  There is an open question regarding college and how/if we will fund it.  One of us feels our kids need to make their own way (i.e., fund 0%) while the other wants to fund 50-75% of the costs (assuming community college for years 1/2 + in-state college for years 3/4).  The second approach isn't built into the plan if that's where we land.

Also, it's funny how similar our plans are!  I'd be interested to see how things go for your family!  :)

One question on this:  you don't have a line item for income tax.  Are you explicitly expecting not to owe income tax?  State and Federal?  If you move to a no-income-tax state, your expectation of property taxes is low, given your expected house cost.  My house is $350k, and my property taxes are $5k.  The money has to come from somewhere.

You're killing me, reeshau!  Yeah... we need to include taxes.  With $40k in income ($20k salary, $20k cap. gains/divs), I don't think we'd pay any federal taxes after the standard deduction and $2k/child tax credits.  For state taxes, we're looking at multiple states, but we can take the max amount of $1.2k.  FICA would be $1.5k, so that amount we could take off the $20k in salary as we wouldn't have to pay it in the out-years when we fund everything with cap. gains and dividends.

What about large occasional expenses like replacing cars? Is $2k/year in home maintenance enough to replace things like appliances, HVAC or a roof, or only ongoing annual maintenance? Health insurance might be a little low -- double check ACA subsidies for your expected income in retirement.

Transportation:
I baked it into a per mile cost and assumed 17 cents per mile all-in.  This assumes:
- 7 cents per mile for a car:  $7k for a used hybrid (like a Prius) that has another 100k miles left
- 6 cents per mile for gas:  45 MPG at $2.70 per gallon (obviously, this would move around, and we'd adjust our driving in response)
- 4 cents per mile for tires, oil, and misc repairs

We assume we'd drive 10-15k miles per year but took the higher of the two.  We also added on $300 for insurance and $300 for license registration (assuming we go down to 1 car).

House repairs:  Yeah, I agree maintenance is a little low.  It's probably closer to $3k.

Health insurance:  When I use a subsidy calculator (I used KFF but perhaps there is a better one), they estimate ~$1,700 per year in premium for a family of 4 in the locations we are considering, assuming $40k in total income.  I put $3k just to be safe.  Let me know if I'm missing anything here - I'd really appreciate it.

____________________________________________

Overall, looks like the total damage (so far) is: an extra $1k in maintenance costs and an extra $1k in state taxes

[legalstache]

Our assumption is that, in addition to the $1.2M in investable assets, we'd need an extra $300k (on top of our current home equity) to buy a house with no mortgage.  I think we can get there with some modest market gains.

Schools in the areas we are looking at are fairly decent for being farther away from big cities.  There is an open question regarding college and how/if we will fund it.  One of us feels our kids need to make their own way (i.e., fund 0%) while the other wants to fund 50-75% of the costs (assuming community college for years 1/2 + in-state college for years 3/4).  The second approach isn't built into the plan if that's where we land.

Also, it's funny how similar our plans are!  I'd be interested to see how things go for your family!  :)

Gotcha regarding the extra being to pay off the house. How did you land on paying it off versus carrying a mortgage?

That's good about the schools. I have the same issues regarding college costs, and my wife and I also have different viewpoints. Her parents didn't pay anything towards her college and she'd lean that direction for our kid(s). My parents helped generously with college and law school, which gave me a big head start towards FI.

Given that, I lean towards contributing something towards our kid(s) college, but it's hard to imagine shelling out hundreds of thousands of dollars for it. We have about 9k in a 529 for our 1 year old but I'm ambivalent about how much more to fund it. I feel like we'll end up contributing what we can when the time comes, but I don't think it will dictate our career/FI choices.

[LivinThatSnipeLife]

Our assumption is that, in addition to the $1.2M in investable assets, we'd need an extra $300k (on top of our current home equity) to buy a house with no mortgage.  I think we can get there with some modest market gains.

Schools in the areas we are looking at are fairly decent for being farther away from big cities.  There is an open question regarding college and how/if we will fund it.  One of us feels our kids need to make their own way (i.e., fund 0%) while the other wants to fund 50-75% of the costs (assuming community college for years 1/2 + in-state college for years 3/4).  The second approach isn't built into the plan if that's where we land.

Also, it's funny how similar our plans are!  I'd be interested to see how things go for your family!  :)

Gotcha regarding the extra being to pay off the house. How did you land on paying it off versus carrying a mortgage?

That's good about the schools. I have the same issues regarding college costs, and my wife and I also have different viewpoints. Her parents didn't pay anything towards her college and she'd lean that direction for our kid(s). My parents helped generously with college and law school, which gave me a big head start towards FI.

Given that, I lean towards contributing something towards our kid(s) college, but it's hard to imagine shelling out hundreds of thousands of dollars for it. We have about 9k in a 529 for our 1 year old but I'm ambivalent about how much more to fund it. I feel like we'll end up contributing what we can when the time comes, but I don't think it will dictate our career/FI choices.

Regarding paying off the house, I think it depends on interest rates.  If rates were to stay as low as they are now (unlikely, but I can dream!), we'd probably carry a mortgage.  If rates are closer to +4% by the time we pull the trigger, then I'd lean towards not carrying a mortgage.  I know it's still financially beneficial to hold a mortgage at those rates, but I'd feel better not having one.

How are you thinking about holding a mortgage vs. having a paid-off house?

On the topic of college, it's funny how similar our situations are.  I feel guilty not contributing when my parents helped pay for a portion of my tuition.  That said, I also don't want to contribute too much so they don't have any skin in the game.

I also worry as the rest of my family has stated they will be paying 100%, so I worry my kids will see their cousins and wonder why we're not helping at all or helping as much.  I think this comes down to how we discuss finances and our decisions, but I don't yet have a plan for how we will do it.  Not super pressing just yet, but it's been on my mind as we plan for the future.

[legalstache]

Regarding paying off the house, I think it depends on interest rates.  If rates were to stay as low as they are now (unlikely, but I can dream!), we'd probably carry a mortgage.  If rates are closer to +4% by the time we pull the trigger, then I'd lean towards not carrying a mortgage.  I know it's still financially beneficial to hold a mortgage at those rates, but I'd feel better not having one.

How are you thinking about holding a mortgage vs. having a paid-off house?

On the topic of college, it's funny how similar our situations are.  I feel guilty not contributing when my parents helped pay for a portion of my tuition.  That said, I also don't want to contribute too much so they don't have any skin in the game.

I also worry as the rest of my family has stated they will be paying 100%, so I worry my kids will see their cousins and wonder why we're not helping at all or helping as much.  I think this comes down to how we discuss finances and our decisions, but I don't yet have a plan for how we will do it.  Not super pressing just yet, but it's been on my mind as we plan for the future.

Gotcha. I wasn't sure if you were trying to lower MAGI for insurance/Roth conversion reasons, although it looks like you will have employer insurance coverage. Our interest rate is 2.75% so a lot of my planning has involved keeping the mortgage, but maybe that would change.

Yeah, guilt is definitely a factor in the college contribution equation. Plus, I really liked my college experience and probably wouldn't have gone where I did without help, so part of it is wanting my kid to have the same opportunity, but I think I'd be a lot less inclined to help significantly if I hadn't gotten help.

Interesting that you mention siblings. The brother closest to me in age has a kid that's basically the same age as ours. I'm sure he and his wife will be paying 100% of the cost of their kids' school. They are both doctors though so the comparison is obviously a little skewed, but still, there will be a comparison. I'm sure there will be some good ways to discuss when the time comes, which thankfully isn't for a while.

[robartsd]

- Home upgrades:  ($0.0 | 1.0) [assume we'll update the kitchen, bath, etc. every 10-15 years]

Not sure if you mean updating the kitchen and bath every 10-15 years or doing one major upgrade project (a kitchen or a bath, not both) every 10-15 years. Considering that you've also budgeted twice this amount for maintenance, I think it's fairly reasonable for the either or situation. If you meant both every 10-15 years I think it might be quite a stretch to stay in this budget.

[jeroly]

My parents more or less paid for my undergraduate education, and I feel it was an obstacle to my succeeding - I had very little skin in the game, and wasn't particularly motivated to finish on time or do well in classes that didn't interest me.  In pursuit of fixing that, we required our daughter to contribute $1,000 each year from part-time or summer jobs.  (We were flexible though - when she went from earning $13.50/hour fulltime in the summer of '08 ($540/wk) to $8/hour and only 15 hours/week ($120/wk) thanks to the GFC, we cut back the requirement to $100)

I don't know what part that had to play in it, but she graduated in 4 years despite only getting about 10 credits her first year.  She succeeded beyond our expectations and we all were very proud of her achievement.

You can also consider giving your child options.  Let's say that you are willing to pay 100% of the costs of two years of CC followed by two years at a state college.  Say that would cost, in 2038 dollars, around $100k (I'm guessing that your $9k of savings for your 1-year-old has already funded about a third of that!).  You can give your kid the option of going to a private school and coming up with the other $100-200k or so (feel free to strongly discourage this unless they get scholarships), or to a state school for four years for around another $60k, but you should also work through with the kid what the implications of these choices would be on their net earnings after college.

[legalstache]

My parents more or less paid for my undergraduate education, and I feel it was an obstacle to my succeeding - I had very little skin in the game, and wasn't particularly motivated to finish on time or do well in classes that didn't interest me.  In pursuit of fixing that, we required our daughter to contribute $1,000 each year from part-time or summer jobs.  (We were flexible though - when she went from earning $13.50/hour fulltime in the summer of '08 ($540/wk) to $8/hour and only 15 hours/week ($120/wk) thanks to the GFC, we cut back the requirement to $100)

I don't know what part that had to play in it, but she graduated in 4 years despite only getting about 10 credits her first year.  She succeeded beyond our expectations and we all were very proud of her achievement.

You can also consider giving your child options.  Let's say that you are willing to pay 100% of the costs of two years of CC followed by two years at a state college.  Say that would cost, in 2038 dollars, around $100k (I'm guessing that your $9k of savings for your 1-year-old has already funded about a third of that!).  You can give your kid the option of going to a private school and coming up with the other $100-200k or so (feel free to strongly discourage this unless they get scholarships), or to a state school for four years for around another $60k, but you should also work through with the kid what the implications of these choices would be on their net earnings after college.

All good points. I really like the idea of having some skin in the game. I'm glad it worked well for your daughter.

A friend of mine from high school had an option similar to what you describe. Basically, her parents would pay 100% of the cost of state school and anything extra was on her. She went to a fancy private school for 1 year before transferring to state school, and I think she was better off for it. I think I may have done better myself having skin in the game or at least an honest discussion with my parents about the costs of education, trade offs, etc.

My wife's parents strongly encouraged her to attend our state flagship over private school and she ended up going to the state school and graduating with minimal loans. I think that discussion and paying off the loans instilled pretty good financial discipline in her.

@LivinThatSnipeLife I hope I'm not hijacking your thread with the discussion of college costs! The rest of your plan seems pretty solid though and this issue is a potential bugaboo.

[dougules]

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust. 

[swashbucklinstache]

How about setting aside funding for late in life care? Or a slush fund for any troubles a second child might introduce from a health perspective. Might be as little as a one time 50k deposit to cover both, with the idea being the former will be covered by growth + digital security + regular withdrawals when the time comes.

I'd consider another invested lump sum for "what if our hobbies change when we're in our 60s?" but that's a great case for part-time work, or even, gasp, going back to work sometime between now and then.

[LivinThatSnipeLife]

- Home upgrades:  ($0.0 | 1.0) [assume we'll update the kitchen, bath, etc. every 10-15 years]

Not sure if you mean updating the kitchen and bath every 10-15 years or doing one major upgrade project (a kitchen or a bath, not both) every 10-15 years. Considering that you've also budgeted twice this amount for maintenance, I think it's fairly reasonable for the either or situation. If you meant both every 10-15 years I think it might be quite a stretch to stay in this budget.

I'm thinking it will be one or the other but not both.  I agree it wouldn't work out otherwise.  We've done full bathroom renovations for $3-4k and kitchens have come out to +$15k (but that's including new, fancy cabinets, which I would want to last way more than 10 years).

My parents more or less paid for my undergraduate education, and I feel it was an obstacle to my succeeding - I had very little skin in the game, and wasn't particularly motivated to finish on time or do well in classes that didn't interest me.  In pursuit of fixing that, we required our daughter to contribute $1,000 each year from part-time or summer jobs.  (We were flexible though - when she went from earning $13.50/hour fulltime in the summer of '08 ($540/wk) to $8/hour and only 15 hours/week ($120/wk) thanks to the GFC, we cut back the requirement to $100)

I don't know what part that had to play in it, but she graduated in 4 years despite only getting about 10 credits her first year.  She succeeded beyond our expectations and we all were very proud of her achievement.

You can also consider giving your child options.  Let's say that you are willing to pay 100% of the costs of two years of CC followed by two years at a state college.  Say that would cost, in 2038 dollars, around $100k (I'm guessing that your $9k of savings for your 1-year-old has already funded about a third of that!).  You can give your kid the option of going to a private school and coming up with the other $100-200k or so (feel free to strongly discourage this unless they get scholarships), or to a state school for four years for around another $60k, but you should also work through with the kid what the implications of these choices would be on their net earnings after college.

All good points. I really like the idea of having some skin in the game. I'm glad it worked well for your daughter.

A friend of mine from high school had an option similar to what you describe. Basically, her parents would pay 100% of the cost of state school and anything extra was on her. She went to a fancy private school for 1 year before transferring to state school, and I think she was better off for it. I think I may have done better myself having skin in the game or at least an honest discussion with my parents about the costs of education, trade offs, etc.

My wife's parents strongly encouraged her to attend our state flagship over private school and she ended up going to the state school and graduating with minimal loans. I think that discussion and paying off the loans instilled pretty good financial discipline in her.

@LivinThatSnipeLife I hope I'm not hijacking your thread with the discussion of college costs! The rest of your plan seems pretty solid though and this issue is a potential bugaboo.

@jeroly I really like the idea of having the kid contributing towards their college fund.  Was that expected during the summers in between college, or even before with high school jobs?

@legalstache No worries!  This is helpful for me as well.

Overall, I want my children to feel the weight of their decisions while not feeling crushed by the financial stress.  I know when I went to school, I received so much help that I didn't think too much about my major and the long-term impacts of it.  Obviously, things turned out ok, and I graduated on time.  I think that came more from having close friends that had it together, and I didn't want to feel left behind.  I'm not sure how to replicate that!

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

How about setting aside funding for late in life care? Or a slush fund for any troubles a second child might introduce from a health perspective. Might be as little as a one time 50k deposit to cover both, with the idea being the former will be covered by growth + digital security + regular withdrawals when the time comes.

I'd consider another invested lump sum for "what if our hobbies change when we're in our 60s?" but that's a great case for part-time work, or even, gasp, going back to work sometime between now and then.

I think those are all valid points!  My thinking is that unexpected costs will be made up by a combination of having:
- A 3.3% SWR vs. a 4.0% SWR, which means we'll have saved an extra $200k
- One spouse working part-time in an in-demand industry, which can easily be cranked back up to full-time work (this will be for our children's pre-teenage years only, most likely)

Right now, all of our hobbies should be easily translatable to 60+ (I haven't listed the main hobbies to make us less easily identifiable).  We're often ribbed for having old-man / old-woman hobbies!

Lastly, I think both of us will definitely be doing some sort of work, but it will be less for the paycheck and more to feel like we're contributing to something meaningful.

[dougules]

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

What's the back-up plan if you decide you want to move back to an HCOL area?  It sounds like your spouse could easily spool their career back up to get up to HCOL FIRE.  Could you, too?  Or maybe Coast FIRE?

Also, what's the back-up plan if one of you ends up in a situation that requires a lot more health-care expenses?  I'm not well-versed on ACA plans, but it seems like most of them have a pretty high out-of-pocket maximum. 

[maisymouser]

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

What's the back-up plan if you decide you want to move back to an HCOL area?  It sounds like your spouse could easily spool their career back up to get up to HCOL FIRE.  Could you, too?  Or maybe Coast FIRE?

Also, what's the back-up plan if one of you ends up in a situation that requires a lot more health-care expenses?  I'm not well-versed on ACA plans, but it seems like most of them have a pretty high out-of-pocket maximum.

This! If you or any family member ever ends up with a chronic condition, the medical expenses can easily skyrocket. As for myself, I have no other option than to plan to max out my OOP every year. I recommend other FIRE-seekers plan for the same. I mean, you never know. I was completely young and healthy (early 20s) when I came down with two conditions that will chain me for life to good health insurance with a reasonable OOP maximum. Luckily I am perfectly healthy now, as long as I stay on my $5k+/month medication...

[reeshau]

@jeroly I really like the idea of having the kid contributing towards their college fund.  Was that expected during the summers in between college, or even before with high school jobs?

I had a friend whose plan was to surprise his son by paying off his student loans on graduation.  He did have concerns about the son's motivation, but felt strongly it was something to provide him.  So that was his compromise.

[dougules]

This! If you or any family member ever ends up with a chronic condition, the medical expenses can easily skyrocket. As for myself, I have no other option than to plan to max out my OOP every year. I recommend other FIRE-seekers plan for the same. I mean, you never know. I was completely young and healthy (early 20s) when I came down with two conditions that will chain me for life to good health insurance with a reasonable OOP maximum. Luckily I am perfectly healthy now, as long as I stay on my $5k+/month medication...

$5k+/month?  Am I reading that right?  Is insurance paying for some of that?  Is it something that might eventually go generic and go down in price?  That's nuts. 

[jeroly]

My parents more or less paid for my undergraduate education, and I feel it was an obstacle to my succeeding - I had very little skin in the game, and wasn't particularly motivated to finish on time or do well in classes that didn't interest me.  In pursuit of fixing that, we required our daughter to contribute $1,000 each year from part-time or summer jobs.  (We were flexible though - when she went from earning $13.50/hour fulltime in the summer of '08 ($540/wk) to $8/hour and only 15 hours/week ($120/wk) thanks to the GFC, we cut back the requirement to $100)

I don't know what part that had to play in it, but she graduated in 4 years despite only getting about 10 credits her first year.  She succeeded beyond our expectations and we all were very proud of her achievement.

You can also consider giving your child options.  Let's say that you are willing to pay 100% of the costs of two years of CC followed by two years at a state college.  Say that would cost, in 2038 dollars, around $100k (I'm guessing that your $9k of savings for your 1-year-old has already funded about a third of that!).  You can give your kid the option of going to a private school and coming up with the other $100-200k or so (feel free to strongly discourage this unless they get scholarships), or to a state school for four years for around another $60k, but you should also work through with the kid what the implications of these choices would be on their net earnings after college.

@jeroly I really like the idea of having the kid contributing towards their college fund.  Was that expected during the summers in between college, or even before with high school jobs?

No, just in college. 

[yachi]

This! If you or any family member ever ends up with a chronic condition, the medical expenses can easily skyrocket. As for myself, I have no other option than to plan to max out my OOP every year. I recommend other FIRE-seekers plan for the same. I mean, you never know. I was completely young and healthy (early 20s) when I came down with two conditions that will chain me for life to good health insurance with a reasonable OOP maximum. Luckily I am perfectly healthy now, as long as I stay on my $5k+/month medication...

$5k+/month?  Am I reading that right?  Is insurance paying for some of that?  Is it something that might eventually go generic and go down in price?  That's nuts.

Introducing, the 20 Most Expensive Prescription Drugs in the USA
https://www.goodrx.com/blog/20-most-expensive-drugs-in-the-usa/
They range from $28K to $86K, and some of those are monthly costs!

[maisymouser]

This! If you or any family member ever ends up with a chronic condition, the medical expenses can easily skyrocket. As for myself, I have no other option than to plan to max out my OOP every year. I recommend other FIRE-seekers plan for the same. I mean, you never know. I was completely young and healthy (early 20s) when I came down with two conditions that will chain me for life to good health insurance with a reasonable OOP maximum. Luckily I am perfectly healthy now, as long as I stay on my $5k+/month medication...

$5k+/month?  Am I reading that right?  Is insurance paying for some of that?  Is it something that might eventually go generic and go down in price?  That's nuts.

You are reading that right. It's actually on the lower end of what I estimated. From manufacturer's websites:

The list price for a 30-day supply of ENTYVIO is $3,748.26

The cost for Mayzent oral tablet 0.25 mg is around $851 for a supply of 12 tablets (one tablet is a daily dose)

So, actually my meds alone cost $5800+ per month. I'm so grateful that A) these meds exist (they didn't as of 10 years ago), B) they work (I have avoided surgery and live a totally normal life), and last but not least C) they are covered by my insurance and have assistance programs. Like I said, I max out my OOP every year, typically in 1.5 months. On the plus side... I don't hesitate to go to my doctor after that first month and a half!

Come down with MS, IBD, or a vast array of other lifelong conditions and you too could have these kinds of medical costs... Healthcare in the US blows.

And I vehemently disagree with Pete that if you 'exercise and eat right' you can bank on not needing quality health insurance. I was a vegetarian and a healthy tennis player when I came down with my conditions, so f*ck that mentality.

Which is why I highly recommend planning FIRE around health insurance, regardless of whether you are healthy or not. You just never know.

[LivinThatSnipeLife]

@dougules and @maisymouser :  Yeah, I think you both zeroed-in on the elephant in everyone's FIRE room :).  When I go to the ACA's website and input our planned FIRE location and income, the annual premium is ~$1,800 for a plan with a family OOP of ~$6k.  This is assuming my spouse cannot get coverage through her employer (or she quits after 5-10 years).

If things get really tight, I think we could make up for it by cutting trips ($4k), entertainment ($2k), or transportation ($3k), which is heavily tied to the travel cost.  The alternative is that our 3.3% SWR would become ~3.5% if we simply increased our expenses by $6k (again, assuming neither of us are working).

That said, I know the OOP max only includes what is covered by carriers, so - if there is something chronic - is it reasonable to assume we'd incur more than the OOP?  If so, what is possible for additional OOP that is not covered?  We've never incurred significant medical costs, so I have no idea what to expect.

Looking again at our SWR:  Increasing to a 4% SWR would be equivalent to an additional ~$13k in annual healthcare expenses.  So, anything above that would be concerning to have to incur annually.

Regarding re-entry into the workforce, I'd have a much tougher time.  I have a good education and decent network, but that will erode each year I'm out.  I think I could secure a job at roughly half the salary I make now, so it would be possible, but we wouldn't be making what we make now.

I'd be curious to hear how others are planning for serious medical expenses.  It's obviously the most unwieldy FIRE expense to plan for.

[reeshau]

I'd be curious to hear how others are planning for serious medical expenses.  It's obviously the most unwieldy FIRE expense to plan for.

I have my HSA for that, with bout $70k in it.  I do not use it for routine medical expenses.  It's there (for now) exactly for some major medical event: to pay for it, and to avoid inflating our income from raising funds to pay for it.  Remember, there will be knock-on effects for lifting your budget, including eroding your ACA subsidy.

After we reach 59 1/2, we have our full Roths for that.  And until then, we still have our Roth contributions as backup, too.  But for now the HSA is on the front lines.  Once we pass the point of its unique role, we will probably start to drain it down.

[dougules]

The conservative SWR is a decent mitigation probably.  I'm personally planning like we will hit the OOP max every year, but that the ACA will cover premiums.  Really, though, I haven't totally nailed down my assumptions there.  It would be interesting to hear from other folks who are more knowledgeable. 

On the note of moving to a LCOL area, what would your withdrawal rate if you plug in the expenses for staying in your HCOL area?  Your conservative WR maybe a mitigation there too.   

[joe189man]

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

What's the back-up plan if you decide you want to move back to an HCOL area?  It sounds like your spouse could easily spool their career back up to get up to HCOL FIRE.  Could you, too?  Or maybe Coast FIRE?

Also, what's the back-up plan if one of you ends up in a situation that requires a lot more health-care expenses?  I'm not well-versed on ACA plans, but it seems like most of them have a pretty high out-of-pocket maximum.

I Would be quite concerned about the HCOL to LCOL switch. Depending on where you are vs where you want to go your perceived quality of life can change quite a bit and depending on tastes, amenities, and available resources could cause some strife. You say you have family or a family vacation home near one option, have you spend time there in the off season? what about the other LCOL options? why not stay put till the kids are graduated then move anywhere? you already have your expenses dialed in for HCOL and likely have friends in your area

[swashbucklinstache]

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

What's the back-up plan if you decide you want to move back to an HCOL area?  It sounds like your spouse could easily spool their career back up to get up to HCOL FIRE.  Could you, too?  Or maybe Coast FIRE?

Also, what's the back-up plan if one of you ends up in a situation that requires a lot more health-care expenses?  I'm not well-versed on ACA plans, but it seems like most of them have a pretty high out-of-pocket maximum.

I Would be quite concerned about the HCOL to LCOL switch. Depending on where you are vs where you want to go your perceived quality of life can change quite a bit and depending on tastes, amenities, and available resources could cause some strife. You say you have family or a family vacation home near one option, have you spend time there in the off season? what about the other LCOL options? why not stay put till the kids are graduated then move anywhere? you already have your expenses dialed in for HCOL and likely have friends in your area

Alternatively, can you move there and rent for six months before pulling the plug? Even if you overpay for six months that could be way cheaper than the downside.. Sorry if that was already covered.

[LivinThatSnipeLife]

The conservative SWR is a decent mitigation probably.  I'm personally planning like we will hit the OOP max every year, but that the ACA will cover premiums.  Really, though, I haven't totally nailed down my assumptions there.  It would be interesting to hear from other folks who are more knowledgeable. 

On the note of moving to a LCOL area, what would your withdrawal rate if you plug in the expenses for staying in your HCOL area?  Your conservative WR maybe a mitigation there too.

What SWR are you planning for after including maxing OOP each year?  Just curious.

Are you sure you will be happy in your new LCOL area?  If you don't have prior experience living there or somewhere similar, you may or may not find it easy to adjust.

That's definitely something I worry about.  I don't think we'll fully know until we do it.  The top area on our list is very close to a family vacation house, so we'd have regular visitors and we've also thoroughly scoped the area out.  We're considering other places farther away, and I think that raises the risk of your point greatly.

What's the back-up plan if you decide you want to move back to an HCOL area?  It sounds like your spouse could easily spool their career back up to get up to HCOL FIRE.  Could you, too?  Or maybe Coast FIRE?

Also, what's the back-up plan if one of you ends up in a situation that requires a lot more health-care expenses?  I'm not well-versed on ACA plans, but it seems like most of them have a pretty high out-of-pocket maximum.

I Would be quite concerned about the HCOL to LCOL switch. Depending on where you are vs where you want to go your perceived quality of life can change quite a bit and depending on tastes, amenities, and available resources could cause some strife. You say you have family or a family vacation home near one option, have you spend time there in the off season? what about the other LCOL options? why not stay put till the kids are graduated then move anywhere? you already have your expenses dialed in for HCOL and likely have friends in your area

Alternatively, can you move there and rent for six months before pulling the plug? Even if you overpay for six months that could be way cheaper than the downside.. Sorry if that was already covered.

One thing I'll add is that, irrespective of FIRE, we'd want to move to a LCOL of area.  The benefit is actually in our ability to partake in our hobbies year-round and be closer to nature.  It's merely a benefit to be able to save money while moving there.  Even if the costs were comparable to where we are now, we'd still try to move to our target area.

The greatest change from our side will be being farther from family, which is a concern and worth testing as @swashbucklinstache suggests.  Friends aren't a concern as all of them (literally) have moved all over the U.S. (and the world) over the last 10 years due to various work opportunities, which is unfortunate.  They are unlikely to return anytime soon, so we aren't planning to stay in case they do.

After mulling it over, one idea we like is having me keep my job for the first year post-relocation.  I can likely work remotely with few difficulties.  It would keep my foot in the door with the company, while giving us a chance to test the new location.  Thanks to all who responded that helped form that idea :)

[dougules]

The conservative SWR is a decent mitigation probably.  I'm personally planning like we will hit the OOP max every year, but that the ACA will cover premiums.  Really, though, I haven't totally nailed down my assumptions there.  It would be interesting to hear from other folks who are more knowledgeable. 

On the note of moving to a LCOL area, what would your withdrawal rate if you plug in the expenses for staying in your HCOL area?  Your conservative WR maybe a mitigation there too.

What SWR are you planning for after including maxing OOP each year?  Just curious.

Honestly I'm pretty conservative.  I don't want to start a war about SWR, so I won't go into it.  I also honestly am still wrestling with my assumptions since I'm just now getting to the point where I need to even start considering it.  I may dial back my risk aversion a little when I stop procrastinating nailing down the nitty-gritty numbers. 
 
Another complicating factor is that I live in a LCOL area right now, but I'd really like to move to a M/HCOL area after FIRE.  Sometimes you get what you pay for.  I may just plan at 4% based on projected spending there plus the OOP max.  Then if the economic end of the world happens, my mitigation can be to begrudgingly move back to where I am now. 

After mulling it over, one idea we like is having me keep my job for the first year post-relocation.  I can likely work remotely with few difficulties.  It would keep my foot in the door with the company, while giving us a chance to test the new location.  Thanks to all who responded that helped form that idea :)

That seems like a good idea if you're not 99% sure you'll be happy with the move. 

[LivinThatSnipeLife]

@dougules - Why are you thinking of moving to a M/HCOL area?  Are there aspects of LCOL you dislike?

I love the idea, and I'm someone who is right there with you on risk tolerance--my personal SWR is within 10 bps of yours.

What I would caution: you're cutting it awfully tight on the margins.  I know personally that making that kind of income usually involves sacrifices that make one eager to leave the career, but I would stick it out until you're a little safer on the margins.  E.g., you can expect healthcare expenses to go up (that's everyone's pain in the USA), possible tax changes, and so on, any one of which might derail you when your cushion is that tight.  You could also mitigate that way for sequence of returns, in case we have a bad few years coming up.   

I hear you on the risk mitigation.  How did you set your target?  Are you bumping up expected costs for certain categories (e.g., healthcare, property/state taxes)?

In terms of lowering the risk on our side, we've discussed the following:

• My wife works part-time, earning an estimated ~$20k (this is conservative and would likely be higher) for our first 5-10 years post-FI.  For these years, our SWR would be 1.6% and then would be 3.3% when she quits.
• I can continue to work remotely in my current role as long as I can stand it - at least for the first year, but I may be able to gut it out more years.  Each year we both work, we'd be able to save +$100k, depending on how my salary is adjusted for geo. differences.  Moving may rejuvenate me as I'd have a happier quality of life outside of work in our targeted location.

[dougules]

dougules - Why are you thinking of moving to a M/HCOL area?  Are there aspects of LCOL you dislike?

A few things.  For one it's pretty conservative culturally here, so I don't feel like I fit in very well.  Also, I'd like to go somewhere that's not so car-oriented.  And being somewhere bigger where there's more going on would be nice, too.  I lived in a city out west for a couple years when I was younger, and I loved it.  Where I am now has been good for my career and very good for DH's, but once we're free of that it would be nice to leave.  We're fortunate that our snowball is rolling so fast just a couple more years of working would put us in a place to be able to go somewhere with a better quality of life even if a bit more expensive. 

You may very well enjoy your move to a LCOL place, especially if you select an area that may be a particularly good fit for you.  Just don't take that for granted.