Hello all -
I may have spent too much time at the bogelheads forum recently. I got a bit discouraged reading case study after case study of people 50+ with net worth north of $1M, $2M, and being told they don't have enough...
I am hoping fellow mustachians can give me some level headed guidance, on what my FI amount should be, so I have a proper goal to work towards. Thank you in advance.
Life Situation: single, age 39.
Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. -
this is the first year I plan to do them all: 18K 401K, 2.4K HSA, 5.5K backdoor IRA.
Other Ordinary Income: ebay resales. $6K to $12K revenue annually.
Current goal for ebay is to have close to zero addition to income (or small negative) after home office use, miles, share of house expense during wage slave years.
I have completely slacked off on this after I paid off my mortgage last year. If I need cash I can probably crank it up and get $1K/month on part time hours to supplement living expenses.
For the first 5 years of ER I plan to keep doing this part time, travel part time, and do roth ladder conversions.
In my future income estimates I do not consider US social security and Canada CPP (worked in Canada for a couple of years too). If they are still around by the time I retire, they will be nice extras.
Taxes: 28% federal tax bracket, no state.
Expenses:
$27K total annual expense, using relevant average figures $24K for last 6 years, and add $3K for health insurance in the future.
$20K necessary expenses:
$8K home related bills (I have already excluded mortgage P+I since they are gone, prop tax and insurance are still in here, plus electricity, condo fees, garbage, internet etc.).
$4K perishables (all things that will disappear such as groceries, toiletries etc.)
$2.5K car, gasoline
$5.5K finance, fees, mom's bills (mom's bills after my sister reimburses 50%, fancy credit card annual charges - about $1K can be reduced if needed. I have budgeted health and dental care at $3K/ year based on an online enrollment form I filled out today. I am open to medical tourism to get basic stuff done such as regular check ups or teeth cleaning)
$7K discretionary expenses:
$5K books, stuff, clothing (I have not been frugal...)
$1K take out and dine out
$1K travel (limited travel, most of what I do is currently subsidized by employer and/or credit cards)
In my ER years I think my books, stuff, clothing category will go down but travel will go up, so holding this category constant. I find that lifestyle inflation is super easy, but each year I hold myself accountable to a $24K budget by selling more personal items or eating out less, or cancelling pre-booked trips.
If I travel during ER for a couple weeks/months I am also planning to rent out my home/ a room to help offset the cost.
Assets:
~$500K investable assets excluding principal residence. Quickly increasing each month to the tune of 5K -10K per month now since I am debt free.
By the time I pull my trigger I will either have 3 fund or permanent portfolio set up properly, with the right amount of emergency funds. Right now I have way too much cash, so immaterial dividends to include in this analysis. But eventually I see myself holding 50% of my invest-able asset in a total equity fund, some combination of VTI + VTSAX, plus fidelity/ schwab equivalents.
~$375K+ principal residence no plan to sell.
Liabilities: None
Specific Question(s):
(1) My main question is how much buffer I should have before I pull the trigger.
If I only take my necessary expense $20K * 25 = 500K I have the amount. If I include discretionary expenses I will reach it soon (may be in a year or two)? But 600K-700K assets include no buffer.
Common rounded numbers I have seen include 1M or 2M but they are commonly couples/ families numbers. How should I set the right goal for 1 person?
Common ways to include buffer including taking down SWR to 2% or 3%. Should I just make my buffer at 2% SWR? This seems to be what the bogelheads would have done for early retirement people. So 27K/2% or 1.35M. Rounding up for more buffer very soon you get to 2M.
(2) What else should I budget for? common answers seem to be (a) health insurance (b) travel (c) helping low income family out.
First two I have already included in my 27K budget but may be not enough. Again, lifestyle inflation can be super easy...
My mom will need some help during her life (winter jacket as gifts, heating bill that kind of thing. She lives in Canada so I don't expect crazy medical bills). But I'm also expecting a small inheritance from my dad eventually so I think the parents bucket will even out, with obviously a timing difference.
One final thing to note, my 2 grandmas died shortly before 100, (96, 97, 98?) in relatively good health, living alone or with part time help. So in all my calculations I have life expectancy set to age 120. I don't plan to live at fancy assisted living facilities or be fed through a tube to maintain my life.
It would take me till I am 48 to reach $2M, saving $100K a year at 6% return. 48 seems too long , working at where I am now... It's not really early retirement... Do I really need 2M? Or can I quit no matter what once I hit a number (say 1.35M? 1.5M?), plus some magical age (43? 45?)
I look forward to your collective advice, thanks again!