Fam of 4 Ready for FIRE? (2024 - 3 YEAR UPDATE)

[2KidFIRE]

Added a new 3 year update post on 3/12/2024!  Scroll down for anyone interested.

Added a new 2 year update post on 3/12/2023!  Scroll down for anyone interested.

Life Situation:
The wife and I (both late 30's / early 40's) live in a MCOL suburb in California (if anywhere in CA can be called a MCOL) with our two boys, ages 4 and 6.  Over the past few years our lives have mostly revolved around the kids and work and we're both just tired.  Pre-pandemic we tried to take at least one big trip each year, even with the kids, as we want them to have the same love of travel that my wife and I share.

We are fortunate to have white collar jobs that we've been able to perform remotely since March of 2020.  Our plan is to finish out 2021 while we work our way through the Pre-FIRE Checklist, continue to add to our 'stache and see how the economy/market trend as we (hopefully) move into the living-more-normally-with-COVID world.  The goal is to "Chubby" FIRE as of January 1, 2022!

Gross Salary/Wages:
Self:   $162,000 / year
Wife:  $138,000 / year
Bonuses:  Varies, $0-$40k ($14,000 in 2020)

Individual amounts of each Pre-tax deductions:
401k:  $39,000 / year
Daycare FSA:  $3,500 / year
Insurance (M/D/V):  $5,500 / year

Qualified Dividends & Long Term Capital Gains:
Dividends:  $17,000 / year

Adjusted Gross Income:
$269,000 / year

Taxes:
$99,000 in 2020

Current MONTHLY Expenses:
Mortgage:  $1,120 (PI) + $560 (TI) = $1,680 
Mortgage (Additional Principal): $1,320

Kids Daycare/School:  $2,300
Groceries  $1,000
Kids 529 Deposits:  $800
Health Insurance Premiums:  $460
Restaurants:  $400
Utilities:  $400
Household Maintenance:  $350
Medical:  $300 (avg. over past 4 years)
Kids (Clothes, books, activities, etc):  $250
Self Discretionary:  $200
Wife Discretionary:  $200
Joint Discretionary:  $200
Auto Other:  $150
Cell Phones:  $130
Household Supplies:  $100
Auto Insurance:  $100
Coffee:  $85
Gas:  $80
Internet:  $55
Disney+Netflix:  $21

• Total Monthly:  $10,581
• Total Annual:  $126,972

Expected ER expenses:
Same as above, except the following changes:
Kids Daycare/School:  $0
Kids:  $1,000 / month (increased)
Mortgage (Additional Principal): $320 / month
Cell Phones:  $45 / month
Travel:  $12,000 / year

• Total Monthly:  $8,196 $8,946
• Total Annual:  $98,352 $107,352

Assets:
House:  $600,000 current value (purchased for $400,000)
Cash (HYSA+Checking):  $197,000
Taxable (Vanguard Index Funds):  $920,000
Taxable (Employer ESPP):  $379,000
401k Accounts:  $1,620,000
Roth IRAs:  $151,000
529 Accounts:  $66,000
2 Cars:  $14,000

• Total Assets (excluding house, cars, 529's):  $3,267,000

Liabilities:
Mortgage:  $243,000

• 30-year fixed @ 3.25%
• Refinanced in 2020

Specific Question(s):
1. Does anything see any major concerns with our FIRE plans?

2. Any thoughts on expenses?  I realize that there is a lot of fat both in our pre-FIRE and post-FIRE numbers, which I look at as potential opportunities to trim in the future.

3. Comments on our planned draw-down, which will be, in order:

• Taxable accounts (or cash if market is down)
• Conversions from standard 401k to Roth
• Roth accounts

4. Healthcare will be via the ACA.  We will likely have some issues managing to keep our MAGI within the ACA limits if we want to do Roth conversions (which we do).  Any feedback from folks who have had to balance the same is welcome

5. Our current allocation is currently ~88% stocks, ~6% bonds and ~6% cash.  I'm working on adjusting it to 70% stocks, 20% bonds, 10% cash.  Any input or observations about our allocation?

[formerlydivorcedmom]

You seem to have plenty of assets to retire now, BUT I am not an expert in taxes and trying to stay in the sweet spot for ACA limits.

You might want to review your budget, though.  Your kids haven't hit school yet.  They get more expensive!

Medical expenses will likely go up for them - braces, broken bones, etc.  Probably for you as well (my body fell apart when I hit 40.)
Extracurricular expenses - club dues?, band?, sports fees?, tutoring?  (My 15-yo costs us $10k/year for club volleyball (incl travel) and another $1k/year for band expenses)

[MaybeBabyMustache]

You're doing great on the asset front. I'll echo that kids get more expensive (by a lot) as they get older. So, you're no longer paying daycare, but I would consider then increasing your kids line item. Sports gear, club fees, activities, etc, are not cheap, and with two kids, $125/month is pretty lean as they get older. You could absolutely make it work if you needed to, of course, but it may be unrealistic depending on your expectations for the kids & their activity levels.

You're also already spending $1400/month on food, and your kids are young. I've got a 14 & 15 y.o boy at home (both playing lots of sports) & our grocery bill has doubled since they were the age of your kids. And, that's with quite a bit of effort to hold it in check. I think $1400 is a very generous food budget, but you'd need to change your habits & purchase patterns to maintain that as they get older & eat more.

[2KidFIRE]

You seem to have plenty of assets to retire now, BUT I am not an expert in taxes and trying to stay in the sweet spot for ACA limits.

You might want to review your budget, though.  Your kids haven't hit school yet.  They get more expensive!

Medical expenses will likely go up for them - braces, broken bones, etc.  Probably for you as well (my body fell apart when I hit 40.)
Extracurricular expenses - club dues?, band?, sports fees?, tutoring?  (My 15-yo costs us $10k/year for club volleyball (incl travel) and another $1k/year for band expenses)

Thanks for the input!  The kids expenses are based on what I know right now, but you're right that I haven't factored in increased spending as they get older.  $10k just for volleyball?  Holy cow!

You're doing great on the asset front. I'll echo that kids get more expensive (by a lot) as they get older. So, you're no longer paying daycare, but I would consider then increasing your kids line item. Sports gear, club fees, activities, etc, are not cheap, and with two kids, $125/month is pretty lean as they get older. You could absolutely make it work if you needed to, of course, but it may be unrealistic depending on your expectations for the kids & their activity levels.

You're also already spending $1400/month on food, and your kids are young. I've got a 14 & 15 y.o boy at home (both playing lots of sports) & our grocery bill has doubled since they were the age of your kids. And, that's with quite a bit of effort to hold it in check. I think $1400 is a very generous food budget, but you'd need to change your habits & purchase patterns to maintain that as they get older & eat more.

I've taken both of your advice and revised the expenses above to factor in $1,000/month for the kids ($500 each).  We'll probably be well under that in the early years, and then if we start to go above in later years the initial savings should help offset things.

I agree that our food budget needs some work.  We recently got a Costco membership and a fridge/freezer for the garage so we're going to work on buying more in bulk and saving what we don't use.  The six year old already eats more than I do at some meals, so I know it's only going to get worse!  I looked at our average annual grocery budget for the 3 years pre-kids and it was ~$3,700/year.  In the three years since the second kid was born the average has been ~$10,000.  Out eating-out bill has gone down in comparison, but only by about ~$2k/year, so not nearly enough to offset the huge increase in groceries.  I swear that 50-60% of our grocery bill is on produce; my kids are fruit-bats.  Each one eats 1/2 to 1lb of fruit PER DAY!

[MaybeBabyMustache]

Kids eat A LOT! Both our kids eat more than either adult in our house. We also go through a tremendous amount of produce, so Costco helps with that.

[waltworks]

You're fine, but keeping your AGI under the ACA limits might be challenging to at least some extent, though I'm not sure how the new law will affect that.

Regardless, you have so much fat to trim if needed, you shouldn't spend any time worrying about it. There's probably no reason to work the rest of 2021, it's not going to change your FIRE outlook. I mean, just not paying extra on the mortgage (why are you doing that?) and doing road trips instead of air travel would get you through any market downturn with ease.

-W

[2KidFIRE]

You're fine, but keeping your AGI under the ACA limits might be challenging to at least some extent, though I'm not sure how the new law will affect that.

Regardless, you have so much fat to trim if needed, you shouldn't spend any time worrying about it. There's probably no reason to work the rest of 2021, it's not going to change your FIRE outlook. I mean, just not paying extra on the mortgage (why are you doing that?) and doing road trips instead of air travel would get you through any market downturn with ease.

-W

I agree that there is a lot of fat in the budget.  We could easily cut back (or cut out) spending in multiple areas in down years or as needed:

• Self/Wife/Joint Discretionary
• Additional Mortgage Principal
• Travel
• Coffee

The reason I'm paying the extra mortgage is that we just refinanced in 2020 and we did a 30 year instead of a 15 year with the intention of paying it off sooner if we can.  There is no real, rational need to pay it off sooner, it's more of an emotional compromise between paying it off completely or keeping it for the full 30 years.

As far as why we're waiting until 2021 to retire instead of just pulling the ripcord now, there are a few reasons:

• I have a ~$45,000 bonus that I would have to repay if I quit before the end of the year
• We wanted to see how the markets/country/world progress as we (hopefully) come out of the most serious parts of the COVID pandemic
• It's taken a while for my wife to get on board with the idea of not having a salary, so this hopefully let's her fully embrace the plan

[waltworks]

$45k is meaningless. Would you pay $45k for another 6-9 months of life? I would in a hot second.

You don't need it, don't worry about it. Bringing your spouse along to a life-optimization mindset is probably priority number 1 here. You won the money game, you don't have to play anymore unless you want to.

-W

[MMMWannaBe]

Thanks for sharing - our situation looks strikingly similar to yours (assets NOT income).  About 5 years ago this group helped me see the light on how to figure out a cash flow challenge I was having that was making me consider returning to the workforce after escaping my soul crushing corporate job.  In that 5 year time-frame our investments have more than doubled and are about the same as yours.

My husband still likes his job so he is working.   

And I will concur that as the kids get older they are more expensive.  Ours are 11 and 13 and we have entered the stage of private music lessons.  And then there is soccer and swim team and Scouts (couple thousand for summer camp).

And I do appreciate seeing your discretionary budget.  We used to be bare bones, but as my husband's salary has expanded in the past couple of year we have relaxed and been a little more spendy.  I tend to put the smack down on spending, but with him still working when he could be retired I am trying to make myself loosen up.

[2KidFIRE]

$45k is meaningless. Would you pay $45k for another 6-9 months of life? I would in a hot second.

You don't need it, don't worry about it. Bringing your spouse along to a life-optimization mindset is probably priority number 1 here. You won the money game, you don't have to play anymore unless you want to.

-W

Thanks Walt.  I agree that we could walk away now if we wanted to.  We continue our conversations, and the drag of working from home for another year is definitely weighing on both of us.  We'll see how things go, but we may ultimately decide to make a change sooner :)

Thanks for sharing - our situation looks strikingly similar to yours (assets NOT income).  About 5 years ago this group helped me see the light on how to figure out a cash flow challenge I was having that was making me consider returning to the workforce after escaping my soul crushing corporate job.  In that 5 year time-frame our investments have more than doubled and are about the same as yours.

My husband still likes his job so he is working.   

And I will concur that as the kids get older they are more expensive.  Ours are 11 and 13 and we have entered the stage of private music lessons.  And then there is soccer and swim team and Scouts (couple thousand for summer camp).

And I do appreciate seeing your discretionary budget.  We used to be bare bones, but as my husband's salary has expanded in the past couple of year we have relaxed and been a little more spendy.  I tend to put the smack down on spending, but with him still working when he could be retired I am trying to make myself loosen up.

Thanks for the insight MMMWannaBe, I appreciate your shared insight.  Our spending has definitely crept up over the years, especially since having the kids.  With our salaries being what they are it's just easy to spend the money without having to worry about it.  I keep a very good "budget" tracking our spending, so I have a good sense of where things are going, but generally if we go over budget we just note it and move on rather than spending a lot of time trying to reign it in.  I do think we will use the remainder of this year to try and get certain categories under tighter control in advance of the paychecks stopping.

[ericrugiero]

With your assets, you shouldn't be working in jobs that you don't like.  You mentioned you are tired. Consider taking a break.  See how you like FIRE (or find something part time).  You have so much money it's time to stop doing jobs you don't like or that wear you down.  You both have some valuable skills so it's very likely that you will choose to earn some money in the future.  Also, if you have more time on your hands you can do a better job of managing your spending.  With both of you working full time and raising kids you are probably so tired you can't focus on optimizing your spending.  Their is plenty of fat there that could be trimmed if you wanted to optimize.

[MiatAccountant]

Overall, your financial situation looks great.

One thing you may want to look, if you haven't already, is to do the calculation on your withdrawals from your non-retirement accounts (which appears to be $1.5M pre-tax) till you and your wife turns 59 1/2 years old to see if it is sufficient (I don't think you posted your age but based on your kids' ages, I assume you are in late 30's, early 40s which means you have long ways to go before you can touch the retirement account to avoid penalty?). I would also check the scenario, with your 70/20/10 mix scenario to see if the stock drops 20 to 30% in the near future, will you still be ok with it?

[reeshau]

The reason I'm paying the extra mortgage is that we just refinanced in 2020 and we did a 30 year instead of a 15 year with the intention of paying it off sooner if we can.  There is no real, rational need to pay it off sooner, it's more of an emotional compromise between paying it off completely or keeping it for the full 30 years.

Just to follow up on this re: paying extra on the mortgage.  Doing that is a personal decision, of course, and being comfortable or not with a mortgage after FIRE is more than a financial decision.  But even paying $1,000 extra a month is half of the reason you are above the 400% cutoff.  Take a look at @seattlecyclone 's blog for a good look at how the subsidies work, and compare the ACA "tax rate" to your mortgage interest rate--that will clarify the financial side, anyway.

Of course, we all have a 2 year reprieve from the ACA cliff to work on getting it right.  But there still is a loss of subsidy as your AGI increases.  And the cliff resumes in 2023, barring further legislation.  Given the financials--both the subsidy and your substantial stash--could you just plan to pay it off in a lump sum the day you sign up for Medicare?

[2KidFIRE]

With your assets, you shouldn't be working in jobs that you don't like.  You mentioned you are tired. Consider taking a break.  See how you like FIRE (or find something part time).  You have so much money it's time to stop doing jobs you don't like or that wear you down.  You both have some valuable skills so it's very likely that you will choose to earn some money in the future.  Also, if you have more time on your hands you can do a better job of managing your spending.  With both of you working full time and raising kids you are probably so tired you can't focus on optimizing your spending.  Their is plenty of fat there that could be trimmed if you wanted to optimize.

Thanks for the support Eric.  I agree that we shouldn't be working at jobs we don't like, but I'm not sure it's fair to say that we don't like our jobs.  It's more that we're both just... ambivalent? ... about them?  I've been in the same industry since I graduated from university and it's gotten to the point where I'm just not as motivated as I used to be.  My wife actually switched from her high-stress job over a year ago into a lower pressure industry job.  She's much more relaxed and the work/life balance is greatly increased, but she's also not really very motivated at the new company and doesn't really feel like she fits in, you know?

I also agree that lots of our budget probably falls into the "convenience" area.  We have had more time since our commutes went to 0 once COVID hit, but we haven't done a great job of taking that time and translating it into reduced expenses.  I definitely think that once we no longer have the regular drum beat of job-job-job every day we'll be better able to focus on such things and hopefully be able to make some meaningful improvements!

Overall, your financial situation looks great.

One thing you may want to look, if you haven't already, is to do the calculation on your withdrawals from your non-retirement accounts (which appears to be $1.5M pre-tax) till you and your wife turns 59 1/2 years old to see if it is sufficient (I don't think you posted your age but based on your kids wage, I assume you are in late 30's, early 40s which means you have long ways to go before you can touch the retirement account to avoid penalty?). I would also check the scenario, with your 70/20/10 mix scenario to see if the stock drops 20 to 30% in the near future, will you still be ok with it?

Thanks Miat.  You're correct that our pre-tax accounts total around $1.5M currently.  You're also correct that we are both in our late 30's / early 40's (that obvious huh)?  So that's ~20 years we'll need to manage before we can start withdrawals from the 401k's, which is a pretty long time.  Firecalc gives a ~72% chance of success to go 20 years at our spending rate with $1.5M to start, so we might not make it.  We will be looking to do Roth conversions from our 401k's as needed, although we know that can cause issues with the ACA subsidy's.  Details, details :)

As far as sticking with things if the market drops, obviously we won't know until it happens but we plan to stay with our plan.  Part of the reason we're opting for the 10% cash is to increase my wife's comfort level in case of such a drop so we don't have to sell our stocks in a down market.  Obviously it's a drag on our portfolio, but with bonds being what they are I'm not sure that cash is really all that much worse at the moment.  If things change we may shift more cash into bonds, but the plan would be the same and we'd sell those rather than stocks if the market is down.

Just to follow up on this re: paying extra on the mortgage.  Doing that is a personal decision, of course, and being comfortable or not with a mortgage after FIRE is more than a financial decision.  But even paying $1,000 extra a month is half of the reason you are above the 400% cutoff.  Take a look at @seattlecyclone 's blog for a good look at how the subsidies work, and compare the ACA "tax rate" to your mortgage interest rate--that will clarify the financial side, anyway.

Of course, we all have a 2 year reprieve from the ACA cliff to work on getting it right.  But there still is a loss of subsidy as your AGI increases.  And the cliff resumes in 2023, barring further legislation.  Given the financials--both the subsidy and your substantial stash--could you just plan to pay it off in a lump sum the day you sign up for Medicare?

Thanks reeshau for the comments regarding the ACA and our mortgage.  I was planning on dropping the extra principal payments down to 'only' $320/month once we stop working, but you're right that it will still impact the ACA subsidies.  Looking at a quick comparison of $107,000 per year vs. $103,000, even that small difference results in a $1,200 premium reduction for the year if we can get our income down to the lower amount!  I have looked at @seattlecyclone 's blog, but I think you're right that it involves some further research and planning.

[joe189man]

Overall, your financial situation looks great.

One thing you may want to look at, if you haven't already, is to do the calculation on your withdrawals from your non-retirement accounts (which appears to be $1.5M pre-tax) till you and your wife turns 59 1/2 years old to see if it is sufficient (I don't think you posted your age but based on your kids wage, I assume you are in late 30's, early 40s which means you have long ways to go before you can touch the retirement account to avoid penalty?). I would also check the scenario, with your 70/20/10 mix scenario to see if the stock drops 20 to 30% in the near future, will you still be ok with it?

i would echo the above comments, you appear to be in a great place

TAXES could impact your non-retirement account withdrawals to the point that you need to do the roth conversion ladder stuff pre 59.5 y/o, so keep an eye on that and the timing as i think it takes 5 years to get money out? (I havent researched that one much yet, others can point to the exact posts)

I see more of a ~50% chance of success over 20 years assuming a 20% tax rate and $1.5 mill at $107k spend

on the extremely positive side, at a 7% ROR your retirement accounts should grow to ~$3.4 mil by ~age 50 and ~$6.8 mill by ~age 60

congrats, you've won the game, your fire budget is sub 4%, more like 3.4%

[seattlecyclone]

Yeah getting yourself set up for success on the healthcare front can be important.

I admit your mortgage strategy is a bit new to me. Usually people go to extremes: either pay it off as soon as possible, or make minimum payments to take maximum advantage of the leverage with their other investments. You're taking something of a middle path and that's interesting.

To be a bit more concrete about your mortgage, your $243k balance is allowing your taxable mutual funds to be that much larger. Before tax this generally looks like a great deal because your mortgage rate is 3.25% and you can generally expect the stock market to do better than that. Suppose you expect your investments to return 7.25%, 4% more than your mortgage rate. That's an extra $9,720 added to your Vanguard in a typical year from keeping the mortgage instead of nuking it. This is the main thesis behind the "don't pay off your mortgage" club.

This money doesn't come for free though. You'll need to make some extra withdrawals to cover the mortgage payments. With a pretty typical 2% dividend yield your $243k will throw off roughly $5,000 in annual dividends. You can put that toward your mortgage payments and you still need to come up with about $8,500 more to make the minimum principal/interest payments. If your taxable shares were bought pretty recently (so the cost basis is a significant fraction of the current value), this $8,500 withdrawal will generate perhaps a couple thousand of capital gains income. This dividend and capital gains income will add a bit to your insurance premiums and maybe federal/state income tax as well. Still, at this point the cost of holding the extra investments and servicing the mortgage out of that is a fraction of the benefit you expect to get that year.

The problem comes a decade down the line when you've paid off a significant chunk of the principal. Making minimum payments you'll have paid off about a quarter of the balance, so the expected pre-tax benefit of holding that debt has gone down proportionally (to more like $7,500 per year). Meanwhile you need to keep making the same monthly payments as before, and these payments will throw off more income than before because your taxable shares have presumably increased in value, so selling a given value of stock will be more gains and less principal. Same will be true for the stock you sell for your other living expenses, so you may find that your tax bracket is increasing and/or you need to reduce your Roth conversions to keep your income consistent.

Perhaps it still looks like a positive thing to hold on to that mortgage in the tenth year, but not as much as in the first year, and the gap is narrowing quickly. Once those lines cross, you have a choice to make: do you pay off the mortgage in one lump sum and take a pretty big tax hit from withdrawing a six-figure sum from your brokerage account, or take a small hit year after year from withdrawing constant monthly payments against a shrinking amount of mortgage principal? Whichever choice you make, hopefully the benefit you got early on was high enough to offset the cost later. In many cases it will be, but the stock market is variable enough that this is far from guaranteed. Holding the mortgage into FIRE basically compounds your sequence of returns risk. In my case I made the decision to pay off the mortgage in the first year of FIRE while the capital gains hit was still pretty low. This sets us up to sustain a lower income going forward.

[reeshau]

Perhaps it still looks like a positive thing to hold on to that mortgage in the tenth year, but not as much as in the first year, and the gap is narrowing quickly. Once those lines cross, you have a choice to make: do you pay off the mortgage in one lump sum and take a pretty big tax hit from withdrawing a six-figure sum from your brokerage account, or take a small hit year after year from withdrawing constant monthly payments against a shrinking amount of mortgage principal? Whichever choice you make, hopefully the benefit you got early on was high enough to offset the cost later. In many cases it will be, but the stock market is variable enough that this is far from guaranteed. Holding the mortgage into FIRE basically compounds your sequence of returns risk. In my case I made the decision to pay off the mortgage in the first year of FIRE while the capital gains hit was still pretty low. This sets us up to sustain a lower income going forward.

Great summary!  Particularly the mental image of the tailing off of the benefits.

I would also point out to the OP that with $197k of cash, you have options in how to approach a payoff, if you want to, and avoid a good deal of further capital gains taxes on a mortgage payoff.  If that was your goal, then you may want to plan on withdrawals from your taxable account for your expenses, and maintaining your cash.  (Using it as a buffer against market lows, rather than drawing it down)  or even build it up some, if you decide to pay it off sooner, when the mortgage balance is higher.   That would be a way to front-load the gradual withdrawals.  Of course, having that much cash for up to 10 years will be a hit to your returns, but it would be for a specific goal.

[formerlydivorcedmom]

Would it be okay if you retire before your wife?  If she isn't comfortable being without a salary...maybe she needs to see you embracing early retirement and your funds still doing well before she will be ready to pull the plug.

[MiatAccountant]

As far as sticking with things if the market drops, obviously we won't know until it happens but we plan to stay with our plan.  Part of the reason we're opting for the 10% cash is to increase my wife's comfort level in case of such a drop so we don't have to sell our stocks in a down market.  Obviously it's a drag on our portfolio, but with bonds being what they are I'm not sure that cash is really all that much worse at the moment.  If things change we may shift more cash into bonds, but the plan would be the same and we'd sell those rather than stocks if the market is down.

I like this plan. It's wise to keep 3 years worth of cash for three reasons......1. Wife's comfort level.  2. Wife's comfort level. 3. Wife's comfort level.

Oh...and not having to sell stocks and be able to cover for 3 years of your expenses is also a great idea.

Likely scenario is your wife gets comfortable over time, you didn't use much cash as you thought you would, and you would have option to make additional investments back in stocks after the "correction" since it's never "if" but "when".

I also agree on bonds. Not enough yield, too much risk for the return you get. Cash is better.

[2KidFIRE]

I would echo the above comments, you appear to be in a great place

TAXES could impact your non-retirement account withdrawals to the point that you need to do the roth conversion ladder stuff pre 59.5 y/o, so keep an eye on that and the timing as i think it takes 5 years to get money out? (I havent researched that one much yet, others can point to the exact posts)

I see more of a ~50% chance of success over 20 years assuming a 20% tax rate and $1.5 mill at $107k spend

on the extremely positive side, at a 7% ROR your retirement accounts should grow to ~$3.4 mil by ~age 50 and ~$6.8 mill by ~age 60

congrats, you've won the game, your fire budget is sub 4%, more like 3.4%

Thanks joe.  We except a significantly lower tax rate over the next 20 years, as we will be aiming to stay in the 0% Federal tax bracket for capital gains as much as possible while drawing from our taxable accounts, and will likely be in the 7% bracket for California.  We may get pushed a bit higher for some years if we do Roth conversions, but shouldn't be the norm.

Yeah getting yourself set up for success on the healthcare front can be important.

I admit your mortgage strategy is a bit new to me. Usually people go to extremes: either pay it off as soon as possible, or make minimum payments to take maximum advantage of the leverage with their other investments. You're taking something of a middle path and that's interesting.

...

Perhaps it still looks like a positive thing to hold on to that mortgage in the tenth year, but not as much as in the first year, and the gap is narrowing quickly. Once those lines cross, you have a choice to make: do you pay off the mortgage in one lump sum and take a pretty big tax hit from withdrawing a six-figure sum from your brokerage account, or take a small hit year after year from withdrawing constant monthly payments against a shrinking amount of mortgage principal? Whichever choice you make, hopefully the benefit you got early on was high enough to offset the cost later. In many cases it will be, but the stock market is variable enough that this is far from guaranteed. Holding the mortgage into FIRE basically compounds your sequence of returns risk. In my case I made the decision to pay off the mortgage in the first year of FIRE while the capital gains hit was still pretty low. This sets us up to sustain a lower income going forward.

Thank you @seattlecyclone for the interesting take and analysis.  I know the "right" answer tends to be to keep the mortgage when you have an interest rate as low as 3.25%, but I think that your response as well as ERN's assessment of keeping a mortgage in retirement show that it's not always as cut-and-dried as people think.  I love the idea of not carrying a mortgage into retirement, but ~240k is a pretty big chunk to pay off.

You mention that you paid off your mortgage in the first year of retirement.  I assume you had to liquidate a large amount of taxable assets to do it?  We would essentially have to sell ~$340k worth of assets during the year in order to both fund our spending + pay off the mortgage.  It would likely push us into the 15% federal and 9.3% CA brackets, so not an insignificant amount of taxes...

I would also point out to the OP that with $197k of cash, you have options in how to approach a payoff, if you want to, and avoid a good deal of further capital gains taxes on a mortgage payoff.  If that was your goal, then you may want to plan on withdrawals from your taxable account for your expenses, and maintaining your cash.  (Using it as a buffer against market lows, rather than drawing it down)  or even build it up some, if you decide to pay it off sooner, when the mortgage balance is higher.   That would be a way to front-load the gradual withdrawals.  Of course, having that much cash for up to 10 years will be a hit to your returns, but it would be for a specific goal.

I want to make sure I understand what you're suggesting @reeshau.  You are correct that the cash is meant to be a buffer against SORR during the first few years of retirement.  Ideally it will just sit, being a drag, and we won't ever have to use it and we would continue to sell from the taxable accounts for our annual spending.  Were the market to head downward for a significant amount of time, we would look to switch to using our cash for annual expenses.  Depending on how we feel, and how our expenses look, we may alternatively use some of the cash to purchase additional stocks at a discount.

I'm not sure I understand your point about how if we're using the cash as a buffer that also would factor into paying off the mortgage early?  I may just be misreading your post...

Would it be okay if you retire before your wife?  If she isn't comfortable being without a salary...maybe she needs to see you embracing early retirement and your funds still doing well before she will be ready to pull the plug.

I'm not sure how she'd feel about me not working while she continues.  If she loved her job or was passionate about it I think it would be a more attractive option to her, but based on her current feelings towards her work I'm not sure it would be a good fit.  Yes, comfort level would be higher but the desire to get out of the workforce (at least in her current position) would still be there.

I like this plan. It's wise to keep 3 years worth of cash for three reasons......1. Wife's comfort level.  2. Wife's comfort level. 3. Wife's comfort level.

Oh...and not having to sell stocks and be able to cover for 3 years of your expenses is also a great idea.

Likely scenario is your wife gets comfortable over time, you didn't use much cash as you thought you would, and you would have option to make additional investments back in stocks after the "correction" since it's never "if" but "when".

I also agree on bonds. Not enough yield, too much risk for the return you get. Cash is better.

Thanks Miat.  Yes, I'm hoping/feeling that we'll be able to bring down our expenses once we retire and thus need a smaller buffer.  The whole bonds vs. cash thing is a tough one.  Tradition says bonds, and at some point (maybe soon?) they may become viable again, but they just don't seem very attractive right now, especially with lack of inverse movement to the stock market that has been seen historically.  It's a tough one.

[reeshau]

I'm not sure I understand your point about how if we're using the cash as a buffer that also would factor into paying off the mortgage early?  I may just be misreading your post...

My idea was that if you survived your first years with that wad of cash intact, that would pay off the majority of your mortgage--you wouldn't need a large lump sum withdrawal (and concurrent tax hike) to pay it off.  In fact, you could build it up somewhat over that period of time so that it would cover a 100% payoff, if and when you wanted to, with no tax consequences in that year.  This is not typically considered a use for cash, because people usually go into retirement set in their ways on a mortgage, either in or out.

[seattlecyclone]

Thank you @seattlecyclone for the interesting take and analysis.  I know the "right" answer tends to be to keep the mortgage when you have an interest rate as low as 3.25%, but I think that your response as well as ERN's assessment of keeping a mortgage in retirement show that it's not always as cut-and-dried as people think.  I love the idea of not carrying a mortgage into retirement, but ~240k is a pretty big chunk to pay off.

You mention that you paid off your mortgage in the first year of retirement.  I assume you had to liquidate a large amount of taxable assets to do it?  We would essentially have to sell ~$340k worth of assets during the year in order to both fund our spending + pay off the mortgage.  It would likely push us into the 15% federal and 9.3% CA brackets, so not an insignificant amount of taxes...

You're planning to retire at the beginning of 2022, right? If you think getting rid of the mortgage is the right long-term play, you could get started on that in earnest this year. Keep maxing out those retirement accounts, and whatever amounts you were going to put into taxable investments could go toward the mortgage instead. That should take care of a good chunk of it. You could use your cash for another chunk of it. I know you want to have a good buffer in case of a market downturn early in FIRE, and that's fine. Right now you have about two years' worth of your expected expenses in cash. Your mortgage represents about a quarter of those expected outflows. Seems like you could then use a quarter of your cash to help pay down the mortgage without affecting the length of your cash runway. No tax on your savings account withdrawals. After that you would need to sell some stock. You could go with shares you bought more recently to minimize the amount of capital gains tax on this. In your shoes I might also be tempted to tap into the ESPP for much of the stock, even if the taxes would be higher. Keeping 10% of my net worth in a former employer's stock would not allow me to sleep well at night.

[Goldielocks]

I think you have enough to FIRE, especially if you don't increase your house cost / size / location in future.  e.g., buying a vacation property and a ski boat is not in the future for you, unless the market does something amazing, that is.

Kids do start to cost a lot more, but only for the next 12-14 years. (Assuming you have a college plan in place and already saved).  After that, I found the expenses to drop precipitously.  I mean, just getting them into part time jobs at age 17 for personal spending dropped both the cash out of my pocket for "fun" allowance money, but also meant that they dropped many costly extra-curriculars to only one or two at a time that they chose as most important.  They started to choose walking over to a coffee shop with friends over some sports.

There is a $$ bump for driving costs (insurance, or car, etc) at 16+ and then one for graduation year costs (especially girls), but it balances out with the fewer extras you are paying for yourself.

So why I am not worried about age 6-17 which I personally found hugely expensive?  Because you have a large travel budget that you could trim to offset, if you choose to spend it on the kids.  AND you will find that you self-select kids extra costs based on your budget.  You already have a nice budget here, for a moderate / modest family spend, with some trade offs but nothing lacking.  On this budget, your kids will get all the medical/dental needed and can ski OR sail OR horseback ride OR competitive sports, but not all four, etc.

Good luck, and get your FIRE on!  You are ready.

--  Point of view from someone who FIRE'd with less than half your assets in 2017, to very part time work (<$US 20k/yr), and whose kids are now 18 and 21.   --

[2KidFIRE]

Good luck, and get your FIRE on!  You are ready.

Thank you Goldie for your input; it's awesome hearing from someone with kids who has gone through it already!  Right now they don't really cost us that much, and I imagine it's not going to change for a least the next 2-3 years.  I agree that we don't expect to allow them to sign up for band, AND football, AND swimming, AND camp, and and AND.  At some point there will be "or" choices they have to make.

The travel budget is definitely a huge variable.  I just put the $1,000/month as a placeholder.  We plan to use credit card points where possible and prefer AirBnB over fancy hotels, so our trips don't tend to be budget-breaking.  We can definitely dial it back if needed, but we do love to travel so we don't want to cut it out completely.  We are also open to road trips, as there is tons to see just in California.

As previously noted in this thread we also need to knock our crazy $1,400/month on groceries + eating out down to a more reasonable amount.  I have no doubt it will creep back up as the kids get older and eat more, but if we don't get it under control now then I shudder to think where it will be once they are older.

[2KidFIRE]

Hello MMM community!  It's been exactly one year since I posted my Case Study and I wanted to provide an update to the group.

Life Situation (as of 3/12/22)
My initial plan was to retire at the end of 2021, but I am currently still working.  However, I have put in my notice that I am planning to take an unpaid leave starting at the end of May through the end of 2022.  Depending on how things go, I'll make the decision on whether I want to go back or not.

My wife actually left her job at the end of September, 2021 and hasn't worked since.  She's definitely been enjoying the free time and flexibility, but is also feeling a bit adrift.

We have plans to travel this summer with the kids out of school and COVID appearing to be somewhat more under control.  Once they are back in school in August we'll have more time to figure out what our FIRE life is going to look like!

Below are our current numbers as of the end of February, 2022:

Gross Salary/Wages:
Self:   $177,000 / year
Bonus:  Varies, $0-$20k

Individual amounts of each Pre-tax deductions:
Roth 401k:  $20,500 / year
Insurance Premiums (M/D/V):  $6,300 / year

Dividends + Interest:
Dividends:  $20,000 / year

Adjusted Gross Income:
$170,200 / year

Taxes:
$93,000 in 2021 (assuming they will be lower in 2022)

Current MONTHLY Expenses:
Mortgage:  $1,130 (PI) + $620 (TI) = $1,750
Kids - Pre-K:  $1,475
Travel:  $1,250
Groceries  $900
Kids - 529 Deposits:  $800
Health Insurance Premiums:  $590
Household Maintenance:  $500
Restaurants:  $400
Utilities:  $350
Medical:  $300 (avg. over past 4 years)
Kids - Other (Clothes, books, activities, etc.):  $250
Auto - Other (Maint, registration, etc.):  $208
Self Discretionary:  $200
Wife Discretionary:  $200
Joint Discretionary:  $200
Auto - Gas:  $200
Household Supplies:  $100
Auto - Insurance:  $95
Cell Phones:  $91
Coffee:  $85
Internet:  $55
Disney+Netflix:  $22

• Total Monthly:  $10,021
• Total Annual:  $120,252

Expected ER expenses:
Same as above, except the following changes:
Kid's - Pre-K:  Decrease from $1,475/month to $0/month
Household Maintenance:  Increase from $500/month to $800/month
Kids - Other:  Increase from $250/month to $650/month

• Total Monthly:  $9,246
• Total Annual:  $110,952

Assets (as of 2/28/22):
House:  ~$700,000 current value (purchased for $400,000)
Cash (HYSA+Checking):  $370,000
Taxable (Vanguard Index Funds):  $1,005,000
Taxable (Employer ESPP):  $335,000
401k/IRA Accounts:  $1,440,000
Roth 401k/IRAs:  $490,000
529 Accounts:  $76,000
2 Cars:  $14,000

• Total Liquid Assets (excluding house, cars, 529's):  $3,640,000

Liabilities:
Mortgage:  $233,000

• 30-year fixed @ 3.25%
• Refinanced in 2020

Parting Thoughts
It's been quite a year, with COVID, my wife leaving her job, and me putting in notice with my work.  The fact that our liquid assets rose from ~$3.3M to ~$3.6M in the past year is awesome, although we are down ~$300k since the beginning of 2022.  However, that's why we have a large cash position to help weather a poor SOR during the first 2-3 years, so I'm not sweating anything just yet.

I do appreciate the advice I got on this thread, which led to some changes to our expected FIRE budget, including stopping the payment of extra mortgage principal as well as budgeting in higher expenses for the kids as they get older.  I'll make sure to stop back in to provide periodic updates to our journey as I know I love reading about others and how they have fared over the years!

Thank you everyone,
2KidFIRE

[maisymouser]

Wow, congratulations- looks like things have gotten even better. You're in an incredible place financially it seems, with numbers about triple what I'm hoping to FIRE on (then again- I have a projected spend of ~$3k/month...!). Have a fun year and hope to hear how it's going next time you post.

[2KidFIRE]

Hello MMM community!  It has now been two whole years since I first posted my Case Study (hard to believe!) and I'm here with what I hope to be an annual update.

Life Situation (as of 3/12/2023)
Many changes in a year, and many things remain the same!  I did end up taking a leave from my work from the end of May, 2022 until the beginning of March, 2023 (9 months!), and have now been back at work for a couple of weeks.  During that time we traveled quite a bit during the summer, including a month in Europe which was awesome!  Once the kids went back to school I spent my time on hobbies, projects around the house, and volunteering at their school.  It was really awesome to be able to focus on things without the normal M-F, 9-5 getting in the way.

My wife is still not working since she left her job at the end of September, 2021, which has been incredibly helpful since I started working again.  It's amazing how many things with kids just assumes that there is one parent at home all the time.  She's definitely been enjoying the free time and flexibility, but is still feeling a bit adrift and is considering going back to work if she can find a job that excites her.

The main driver for me going back to work has been the significant market downturn since December of 2021 and my wife's discomfort with not having any income as our net worth has declined over the past 15 months.  She was okay with my time away, but as each month went on with the market continuing to decline her anxiety increased.  Ultimately we decided that since I don't seriously dislike my job, it would make sense to go back for the time being.

Current Financial Situation (as of 3/12/2023)

Gross Salary/Wages:
Self:   $184,500 / year
Bonus:  Varies, $0-$20k

Individual amounts of each Pre-tax deductions:
Roth 401k:  $22,500 / year
Insurance Premiums (M/D/V):  $7,300 / year

Dividends + Interest:
Dividends:  $22,000 / year

Adjusted Gross Income:
$176,700 / year

Taxes:
$93,000 in 2021 (assuming they will be lower in 2022)

Current MONTHLY Expenses:
Mortgage:  $1,130 (PI) + $610 (TI) = $1,740
Travel:  $1,250
Groceries  $900
Kids - After School Care (youngest only):  $820
Kids - 529 Deposits:  $800
Medical:  $800 (avg. over past 4 years)
Health Insurance Premiums:  $595
Household Maintenance:  $585
Restaurants:  $400
Utilities:  $350
Kids - Other (Clothes, books, activities, etc.):  $325
Auto - Other (Maint, registration, etc.):  $210
Self Discretionary:  $200
Wife Discretionary:  $200
Joint Discretionary:  $200
Auto - Gas:  $200
Cell Phones:  $115
Household Supplies:  $100
Coffee:  $100
Auto - Insurance:  $90
Internet:  $61
Disney+Netflix:  $25

    Total Monthly:  $10,066
    Total Annual:  $120,792
    (2022 Actual):  $127,237


Expected ER expenses:
Same as above, except the following changes:
Kid's - After School Care:  Decrease from $820/month to $0/month
Kids - Other:  Increase from $325/month to $500/month

    Total Monthly:  $9,421
    Total Annual:  $113,052


Assets (as of 3/10/23):
House:  ~$672,000 current value (purchased for $400,000)
Cash Equivalents (Checking+HYSA+iBonds):  $253,500
Taxable (Vanguard Index Funds):  $900,000
Taxable (Employer ESPP):  $272,000
401k/IRA Accounts:  $1,300,000
Roth 401k/IRAs:  $427,000
529 Accounts:  $82,000
2 Cars:  $10,000

    Total Liquid Assets (excluding house, cars, 529's):  $3,152,000


Liabilities:
Mortgage:  $226,500

    30-year fixed @ 3.25%
    Refinanced in 2020


Parting Thoughts

The past year has been a roller coaster from the perspective of our liquid asset balance.  Back in March '22 we were at ~$3.6M, which climbed all the way to ~$3.9M in December '22, ultimately falling all the way to our current balance of ~$3.1M.  Obviously three million dollars is still a ridiculous amount of money and we're very fortunate, but watching $800k evaporate in a little over a year was a sharp reminder that the line does not always go up.

So I'll continue to work for now while my wife decides what she wants to do with her time, and continue to work with her to determine what her comfort level for early retirement looks like.  I still hope to be able to pull the plug within the next 1-5 years, knowing that's a big range and we definitely still have some planning to do.  I will continue to visit this forum for the great advice and discussion that I find here, and hopefully these annual updates are useful to someone besides myself!

Thank you everyone,
2KidFIRE

[waltworks]

If your wife freaks out every time the market declines, you may not ever be done working. Why did she not volunteer to go back to work, if she's adrift and freaked out about money? Seems pretty unfair to me.

C'est la vie, I suppose.

You're still right at around the 4% rule even after significant declines in the market (with zero lifestyle/spending sacrifices), and you should expect market declines to regularly happen when you do finally decide to pull the plug. So you may want to have a serious conversation about finances so that you're on the same page. If she's only ever happy when the NW number is going up, that's going to be a problem.

-W

[2KidFIRE]

Thanks for the feedback @waltworks .  We've definitely discussed her comfort with market swings before and will continue to do so.  I'm not going lie and say that going from a ~3% withdrawal rate to a ~4% one so quickly doesn't give me pause either, I just don't have as large as a reaction.  Part of her hesitation as well is that the market was declining right when I was stopping work, raising the specter of SORR.

The main reason that I was the one who went back to work for now is that I was actually on leave and could just immediately return to my old salary and position.  As she quit her job (for reasons other than financial), her "going back to work" is a bit more involved.  She has been looking for a job, and depending on what she is able to find I don't think it would be out of the question for her to continue working and me to be able to step back and spend more time at home with the kids.

Since we're partners I do want to make sure that both of us are fully onboard, even if that means OMY for now...

Thanks,
2KF

[joe189man]

Have you guys made any progress on the "what you are doing with your lives"? seems like OMY makes DW feel more secure, however with that NW and your young ages you have lots of options

[FIwithKids]

Just saying thanks for sharing.

Similar situation - live in CA and had one of us stop working 1 year ago.
Watching the market havoc has definitely been a challenge, but there is buffer for the short term as you have as well.

For the wife, explore the side hustle options. Create a new passive income stream that does pique her passions or to learn a new skill. Also allows to retain the flexibility of someone at home to manage home / kids.

Look forward to another update in a year….you didn’t really state goals or learnings from all that time off? Did you miss work? Did you set a goal by X NW increase, or time ….

[zolotiyeruki]

If the recent market swings are upsetting DW, it may be worth sitting down and discussing this question:
"What situation would make you comfortable with us quitting work permanently?"  Is it a lower withdrawal rate?  Lower volatility?

Keep in mind that the 4% rule specifically accommodates and tolerates downswings like the one we are currently in, and even worse downswings from the past.

If watching large swings in NW is uncomfortable, perhaps you'd be better off with an 80/20 or even 60/40 mix of stocks and bonds, with period rebalancing.  That would significantly reduce your own volatility, at the cost of some rate of return.

[2KidFIRE]

Have you guys made any progress on the "what you are doing with your lives"? seems like OMY makes DW feel more secure, however with that NW and your young ages you have lots of options

Hi Joe, sorry for not getting back to you last year!  I would say the answer to your question is "no".  My wife actually went back to work in July of last year (2023), taking on a lower-stress, lower-pay job that gives her something to do with her time.  It's definitely not something she's doing because she's passionate about it, but it's given her a sense of purpose for the time being.

We're still working on on the "what are we doing with our lives" question!

[2KidFIRE]

Just saying thanks for sharing.

Similar situation - live in CA and had one of us stop working 1 year ago.
Watching the market havoc has definitely been a challenge, but there is buffer for the short term as you have as well.

For the wife, explore the side hustle options. Create a new passive income stream that does pique her passions or to learn a new skill. Also allows to retain the flexibility of someone at home to manage home / kids.

Look forward to another update in a year….you didn’t really state goals or learnings from all that time off? Did you miss work? Did you set a goal by X NW increase, or time ….

Hi @FIwithKids, sorry for not replying last year!  Always glad to hear from others in similar situations :)  My wife actually ended up going back to work in July of last year (2023), which I'll detail a bit more in my annual update.

As far as my time off, it was great!  We did a bunch of traveling over the summer while the kids were out of school, which was great, but we might have overdone it a bit and would probably dial things back a bit in the future.  Once the kids went back to school things slowed down a lot.  I spent my days volunteering at the kids school, playing video games, doing things around the house, etc.

The kids being in school and being tied to their schedule definitely limits your opportunities.  I think in the future if/when we stop working I'd need to get a better routine set up so that I didn't have as quite as much "free" time.  I know that sounds crazy, but with less demands on my schedule I found myself adrift some days, just scrolling on my phone, and generally spending too much time in front of a screen.  For a longer period of time I would need to be more disciplined with my free time and spend more time doing productive things (working out, time outside, etc.).  I'd still want time for video games and such, but I think having all of that time available all of a sudden led to a bit more vegging out than would be healthy in the long-term.

[2KidFIRE]

If the recent market swings are upsetting DW, it may be worth sitting down and discussing this question:
"What situation would make you comfortable with us quitting work permanently?"  Is it a lower withdrawal rate?  Lower volatility?

Keep in mind that the 4% rule specifically accommodates and tolerates downswings like the one we are currently in, and even worse downswings from the past.

If watching large swings in NW is uncomfortable, perhaps you'd be better off with an 80/20 or even 60/40 mix of stocks and bonds, with period rebalancing.  That would significantly reduce your own volatility, at the cost of some rate of return.

Hi @zolotiyeruki , thanks for the advice, and sorry for not getting back to you last year!  I agree with you that there are several strategies that should help to reduce concerns about downturns and SORR.  Right now our target allocation is 70/20/10 Stocks/Bonds/Cash (cash being mostly in CDs earning 5+ % at this point), however we may look at further reducing our exposure to the market swings, especially since now is such an attractive time for long-term treasuries.

[2KidFIRE]

Hello MMM community!  It has now been three years since I first posted my Case Study.  Time flies!  I'm back with an annual update, as I feel like laying everything our once a year is a useful exercise.  And if any others are able to take anything useful away from the updates and discussion, so much the better!

Life Situation (as of 3/12/2024)
As I noted in last years update, I did return to my job in March of 2023 after taking a 9-month leave of absence.  Having been back at work for a year now I will say that taking some time off definitely helped me reset, and since returning to work I haven't felt the sense of "I have to get out of here" as strongly as I did before the LoA.  I can't say I'm excited to go to work every morning, but I'm certainly not dragging my feet anymore, which is a significant improvement!

My wife started a new job in July of 2023 after being out of the workforce since October, 2021.  She was able to find a local job with similar pay to what she was making before quitting her last job.  She's not super enthusiastic about the work itself, but it is filling a need for her to want to keep busy as well as bring in income.  It's also a good work/life balance, with no overtime, no weekend work, and people who respect after-hours separation from work.  She says that she would be interested in doing something else, but she just doesn't know what that something else is.

So I would say that the main reason we're both back at work is her not being comfortable with $0 in income, as well as being so tied to the kids school schedule for 9 months out of the year.  We do both agree that not having the flexibility to travel whenever we want when the kids are out of school is a major downside of both working.  Being able to pick up and go the summer of 2022 when we both were not working was amazing!  However, we can still take PTO and do have some upcoming trips planned, so it's not that we can't make it happen, it's just not as convenient.

Current Financial Situation (as of 3/12/2024)

Gross Salary/Wages:
Self:   $185,000 / year
Wife:  $130,000 / year
Bonus:  Varies, $0-$20k

Individual amounts of each Pre-tax deductions:
Roth 401k:  $23,000 / year
401k:  $23,000 / year
Insurance Premiums (M/D/V):  $7,900 / year

Dividends + Interest:
Dividends:  $25,400 / year
Interest:  $10,600

Adjusted Gross Income:
$328,000 / year

Taxes:
$93,000 for 2021 tax year (we haven't done our 2023 taxes yet, and 2022 was significantly lower, so using this number as it will likely be similar to this for 2024)

Current MONTHLY Expenses:
Mortgage:  $1,130 (PI) + $610 (TI) = $1,740
Travel:  $1,250
Groceries  $1,000
Kids - 529 Deposits:  $800
Medical/Dental/Vision:  $750 (Premiums + out of pocket, avg. over past 4 years 2020-2023)
Household Maintenance:  $585
Utilities:  $400
Restaurants:  $350
Kids - Summer Camp (averaged over 12 months):  $270
Household - Goods / Furniture / Appliances:  $250
Auto - Other (Maintenance, registration, etc.):  $210
Self Discretionary:  $200
Wife Discretionary:  $200
Joint Discretionary:  $200
Auto - Gas:  $200
Household Supplies:  $140
Auto - Insurance:  $105
Kids - Activities:  $100
Kids - Other (Clothes, books, activities, etc.):  $100
Coffee:  $100
Cell Phones:  $92
Household Goods:  $80
Gardiner:  $80
Kids - Clothes:  $75
Internet:  $71
Pest Control:  $51
Christmas Gifts (averaged over 12 months):  $40
Kids - Friend Birthday Gifts:  $33
Kids - Birthdays (averaged over 12 months):  $33
Kids - School:  $30
Umbrella Insurance:  $29
Netflix+Amazon Prime:  $28
Kids - Books:  $15

    Total Monthly:  $8,707
    Total Annual:  $104,484
    (2023 Actual):  $99,600


Assets (as of 2/29/24):
House:  ~$702,000 current value (purchased for $400,000)
Cash Equivalents (Checking+HYSA+CDs):  $362,000
Taxable (Vanguard Index Funds):  $1,142,000
Taxable (Employer ESPP):  $345,000
401k/IRA Accounts:  $1,640,000
Roth 401k/IRAs:  $538,000
529 Accounts:  $110,000
2 Cars:  $8,000

    Total "Liquid" Assets (excluding house, cars, 529's):  $4,027,000


Liabilities:
Mortgage:  $220,320

    30-year fixed @ 3.25%
    Refinanced in 2020


Parting Thoughts

I would assume that anyone reading this knows that 2023 was a much, much better year for the markets than 2022.  Since last year's update when we had "liquid" assets of ~$3.1M, we have climbed all the way to a little over $4M, which actually exceeds our previous high of ~$3.9M at the end of December 2022.  The market giveth and the market taketh away indeed!  It's obviously much easier to watch the line go up than to crash downwards like we saw in 2022, and we feel much better about our financial picture than we did a year ago.

As you can see above we were able to reduce our expenses (both planned and actual) from 2022 to 2023.  Not having to pay for after-care anymore for the kids is such a relief!  We continue to refine our budget and see where we can trim and where we expect things might go up in the future.  My older son (8) has really gotten in to flag football and soccer at the rec level, but we know that could turn into significant expenses if he really wants to pursue club sports.  I'm not sure we're prepared for that level of commitment though :D

For now my wife and I will continue to add to the stash while continuing to try and answer that "what do we do with our life" question.  I continue to discuss with my wife what would make her truly comfortable with an early retirement, and I hope we'll be able to come to a consensus at some point in the not-to-distant future.  My wife will be 43 this year and I'll be 42, and I'd really like to stop the 9-5 by the time I'm 45 at the latest, so we shall see what the next couple of years brings.  I do continue to (mostly) lurk on the forums and enjoy all the great advice, feedback, and information that is shared so freely!

Thank you everyone,
2KidFIRE

[zolotiyeruki]

Time to rev up a ranty Facepunch.  Sorry in advance, but...

I overheard a near-retirement relative of mine say this:

You have to answer three questions in order to retire:
1) Do you have enough (money)?
2) Have you had enough? I.e. are you emotionally ready to leave the workforce?
3) Will you have enough to do?

Clearly, you've satisfied question #1, but you're struggling with #2, and falling flat on your faces with #3. 

The two of you seem to be obsessed with the one piece of the puzzle you've already solved

You've gone from a hypothetical 3% WR to 2.5%, and you're still BOTH working!? I'm not sure if you and your wife realize how utterly irrational your fear of market swings really is, especially with the stash you have built up.

Literally, you could take all of your money, stick it in freakin' TIPS, never work another day in your life, and still have enough money to last into your 80's, beyond the current life expectancy.  And that ignores social security, medicare, etc.

You're looking for ways to save more money, but it's a waste of time for you,  because you're never going to live long enough to spend it.  The whole point of mustachianism is to not spend money on stupid stuff, so that you can spend it on the stuff that actually makes you happy, whether that be an earlier retirement, more travel, a hobby, time with family, whatever. 

I have to conclude that the reason you haven't retired has nothing to do with how much you have saved up.  Rather, it's a combination of:
1) DW's irrational fear of not having earned income. She (and you) need to learn how to emotionally cope with the transition from accumulation to potential depletion.  I say "potential" because it's overwhelmingly more likely that your money will continue to accumulate after you quit your jobs than it is for your total balance to drop over any period greater than about 3 years.
2) The two of you don't have anything to retire TO.  This also needs solving, unless you really, really enjoy spending your precious hours working at a job more than literally anything else, earning money you'll never need.

Have you ever tried plugging your numbers into the Rich, Broke, or Dead calculator?  Here, I did it for you.  According to every simulation, you have a 0% chance of running out of money, and by age 65, you're more likely to be dead than to have a balance lower than what you started with.

[Freedomin5]

To answer the “what do I do with my life” question, the book Designing Your Life by Bill Burnett and Dave Evans may be helpful. I’m going through the book right now as we are planning to transition to FIRE, and the exercises in the book are extremely helpful. I also appreciate the fact that the book was written by Stanford professors who base their writings on research, and that the book is based on one of the most popular classes at Stanford.

[WorkingToUnwind]

Just chiming in to say I hope you can find a way to stop working soon. If your job doesn't give your life meaning and you don't need the money, then let it go. Maybe you could volunteer somewhere?

[waltworks]

FFS you are worried about the expense of club sports?

These posts just get sadder every year, honestly. Go do something more fun or meaningful with your life.

-W

[joe189man]

Assets (as of 2/29/24):
House:  ~$702,000 current value (purchased for $400,000)
Cash Equivalents (Checking+HYSA+CDs):  $362,000
Taxable (Vanguard Index Funds):  $1,142,000
Taxable (Employer ESPP):  $345,000
401k/IRA Accounts:  $1,640,000
Roth 401k/IRAs:  $538,000
529 Accounts:  $110,000
2 Cars:  $8,000

    Total "Liquid" Assets (excluding house, cars, 529's):  $4,027,000


Liabilities:
Mortgage:  $220,320

    30-year fixed @ 3.25%
    Refinanced in 2020


Parting Thoughts

I would assume that anyone reading this knows that 2023 was a much, much better year for the markets than 2022.  Since last year's update when we had "liquid" assets of ~$3.1M, we have climbed all the way to a little over $4M, which actually exceeds our previous high of ~$3.9M at the end of December 2022.  The market giveth and the market taketh away indeed!  It's obviously much easier to watch the line go up than to crash downwards like we saw in 2022, and we feel much better about our financial picture than we did a year ago.

For now my wife and I will continue to add to the stash while continuing to try and answer that "what do we do with our life" question. I continue to discuss with my wife what would make her truly comfortable with an early retirement, and I hope we'll be able to come to a consensus at some point in the not-to-distant future.  My wife will be 43 this year and I'll be 42, and I'd really like to stop the 9-5 by the time I'm 45 at the latest, so we shall see what the next couple of years brings.  I do continue to (mostly) lurk on the forums and enjoy all the great advice, feedback, and information that is shared so freely!

Thank you everyone,
2KidFIRE

I am glad you were in and continue to be in such an amazing position, congratulations, you have still won the game. But... i have to agree with the above commenters - Why are you and your wife working? We are of similar age, similar incomes, with similar aged kids, but you guys have about 4x our net worth. Saving a few bucks here and there to optimize category X is meaningless to you now, one of you has the income to support your annual spending.  i guarantee we wouldn't be working if we had that net worth - especially in buckets  of taxable vs 401k income - you are set up perfectly for retirement.

Think of it this way - you could go all cash - with your cash equivalents and taxable and still have enough saved to get to 59 ($1.849 million divided by $100k is 18 years). In 18 years, at age 59, your $2.29 million in retirement accounts will have grown to $5.8 million at 6% interest

i think you even posted in my journal called "What are we doing with our lives" so we are grappling with the same questions. i think the difference is, for you and your family - you can do just about anything right now, like today. Maybe try some deep work on what you two want - i would focus on that.