Family of 3 - about to pull the rip chord - does my plan look solid?

[omy-forever]

Hey,

I'm planning to quit my lucrative (but soul crushing) corporate job this year. I want to get some eyes on my plan to make sure it's reasonable. Currently, the biggest risks I see in my plan are

1. healthcare costs... I estimated only $10k a year for this, but given the current ACA subsidy range I'm in, this seems accurate? It's disorienting to me though when I hear so many others say I need over double that. It makes me think I must be missing something
2. College tuition for my daughter. I'm sitting at around a %3.3 SWR right now without a good plan for college. I'm hoping between scholarships and the 11 years between now and then that I'll come up with a way to help support her. My expectation is that she'd go to an in-state school like my wife and I did, which probably puts her education at around a $20-40k investment. I don't have that in my plan, but I'm hoping I can sort of YOLO that... Am I being dumb?
3. Does my plan have enough safety margin? I amortized some expenses like car purchases and home maintenance into the plan, but I don't have enough data to prove those are accurate estimates. Do they look reasonable?

Due to the way my bonus structure is at work, if I work another half a year, I'll probably gain around another $100k in savings... I just don't want to spend another minute there than I have to. Knowing that I could always work longer for more security really messes with my head though. I want to be done, but also have enough safety margin that I don't regret quitting. In a weird way, this all feels like I'm doing some kind of messed up trust fall that this plan will actually work.

Anything else I should consider?!

Family/location

Location: MCOL USA, no state income tax, low property tax.
Family size: 3
Ages: 42m (me with the soul sucking corporate job), 41f (wife sahp), 7f (daughter)

Assets:
House: $800k (paid off, great school district, we’re here to stay)
VTI and VTSAX: $1.6m (this is across a 401k and brokerage. Pretend like it’s one bucket, I know how to do roth conversions and stuff)
Ibonds, money markets, CDs: $600k
2 cars less than 5 years old

So, essentially $2.2m invested with paid off house and two newish cars

Yearly Budget

TOTAL YEARLY: ~$73k

I've been tracking this and reducing costs for the past year. We're within this 73k window, but I'm nervous about lumpy costs or how accurate this really is over longer time horizons.

Fixed costs ~$50k

$6000 ($500 monthly) House Expenses (insurance, taxes)
$2400 ($200 monthly) Car and umbrella insurance
$7000 ($583 monthly) Maintenance for house (roof, hvac, appliances), car (repairs), and other expected and unexpected maintenance
$3000 ($250 monthly) cost of buying a new car every 10 years or maybe a lightly used one every 7 years.

$1800 ($150 monthly) ACA health insurance premiums (bronze) ~18k family out of pocket max
$7800 ($650 monthly) What I estimate medical costs will actually be for my family (huge variability here)

$4200 ($350 monthly) utilities (electricity, propane, water, internet)
$1500 ($125 monthly) car gas for normal putting around town
$13,800 ($1150 monthly) groceries and household supplies

$1800 ($150 monthly) misc essentials, like haircuts and clothes
$840 ($70 monthly) phones

Variable (flexible) costs ~$23k

$9600 ($800 monthly) family entertainment, vacations, eating out, stuff like that
$3120 ($260 monthly) random home improvement stuff, gardening, etc…
$6720 ($560 monthly) discretionary spending, whatever we want this to be, could be subscriptions like netflix, could be some new toy or hobby, birthday gifts, whatever…
$3000 ($250 monthly) kid activities, summer camps, classes, etc…

What I'm Retiring to

honestly... I feel like the word retirement is weird here. I have so many projects I want to work on, but I have very little confidence any of them will generate any money.

Anyways, thanks for any advice you all might have.

[lhamo]

Re:  college costs, you should have plenty of time to plan your income generation/living expenses strategy so that you minimize taxable income for four years starting in your DD's junior year of high school.  The FAFSA looks at taxable income for the prior prior year when determining the Student Aid Index (formerly the Expected Family Contribution), and keeping your taxable income below certain thresholds (and especially qualifying for expanded Medicaid, if your state offers it) will automatically qualify you for a federal Pell grant, which then typically leads to other types of need-based funding.  Our daughter is getting a full ride at the local state flagship university because we were able to structure our income/taxes in this way. 

[MaybeBabyMustache]

@lhamo has way more experience on the college side, but I personally wouldn't feel comfortable with this approach. Maybe because my DH is still working (therefore, income is higher), or DS18 has a learning disorder + COVID that really jacked with his grades one year & was pretty much limited to out of state schools, or maybe because we want the flexibility to keep our income higher some years.... if you follow @lhamo's plan, I agree that you can make this work. If you have higher income, your child will be penalized & not receive much or any aid. What would you do in that scenario?

Given DS18's learning disorder, I'm not comfortable having him work his first year of college (but, after that, assuming grades are fine, I'm very supportive), so that's another factor in our approach. Before I quit (just FIREd/got laid off in April), I wanted enough to pay for out of state tuition for two kids ($220k/each). that's of course the totally opposite end of the spectrum, and I only need this because I have a super strong inner bag lady, but in your case, I'd probably try to meet somewhere in the middle & have more saved.

[MaybeBabyMustache]

Oh, and where would college be a $20-40k investment? Is that per year?

[omy-forever]

>Oh, and where would college be a $20-40k investment? Is that per year?

that $20k-$40k range is total, for a 4 year degree. Tennessee has the hope scholarship and we have a good university in town.

[reeshau]

1. healthcare costs... I estimated only $10k a year for this, but given the current ACA subsidy range I'm in, this seems accurate? It's disorienting to me though when I hear so many others say I need over double that. It makes me think I must be missing something

...

Assets:
House: $800k (paid off, great school district, we’re here to stay)
VTI and VTSAX: $1.6m (this is across a 401k and brokerage. Pretend like it’s one bucket, I know how to do roth conversions and stuff)
Ibonds, money markets, CDs: $600k

Yearly Budget

TOTAL YEARLY: ~$73k

The key thing with ACA costs is that the money you spend has very little to do with your MAGI.  If you withdrew from your traditional IRA or 401k, each dollar would be a dollar of income.  If you withdrew from your brokerage account, only the gains are counted as income.  So, a fund that has appreciated 100% will have only 50% of the withdrawal count as income.  (And that, largely taxed at 0%, for long-term gains)  And a withdrawal of cash (or from a Roth) counts as zero!

So, you could live for several years near a $0 income.  (Of course, you still have interest and dividends coming in)  You can, essentially, look as poor as you choose to.  Do you want to go big? You could dive down to Medicaid territory.  If you want to stay with the ACA, you can "select" your income to optimize your subsidies.

I am in year 5 of this situation.  I came from work with a large cash severance + home equity.  I have enough in our taxable brokerage that I don't need to touch the IRA early.  Toward the end of each year, I play a balancing game to tune planned withdrawals to optimize our ACA cost, while also utilizing any non-refundable tax credits we get.  The natural flow is that I have some "surplus" credits, so I absorb those with a Roth conversion at the end of the year.  I could be more aggressive and fill the lower tax brackets with additional conversions, but I don't think that will be necessary at this time.

We will cruise like this until 59 1/2, when direct IRA withdrawals also come I to play, and as 75 comes closer, for RMD considerations.

[omy-forever]

You can, essentially, look as poor as you choose to.  Do you want to go big? You could dive down to Medicaid territory.  If you want to stay with the ACA, you can "select" your income to optimize your subsidies.

yeah, given my cost basis right now, I could optimize this for quite some time. I think I'm concerned about having my "declared" income drop below 250% (<$65k for us) which kind of forces us into CHIP territory for my daughter. I'm nervous that CHIP will limit what kind of options we have for medical care... This is mostly a feeling though. Maybe I should start calling around to the providers we use and to get a real idea of who accepts CHIP and who doesn't.

[reeshau]

You can, essentially, look as poor as you choose to.  Do you want to go big? You could dive down to Medicaid territory.  If you want to stay with the ACA, you can "select" your income to optimize your subsidies.

yeah, given my cost basis right now, I could optimize this for quite some time. I think I'm concerned about having my "declared" income drop below 250% (<$65k for us) which kind of forces us into CHIP territory for my daughter. I'm nervous that CHIP will limit what kind of options we have for medical care... This is mostly a feeling though. Maybe I should start calling around to the providers we use and to get a real idea of who accepts CHIP and who doesn't.

Yes, for sure!  I would also ask them what their relations are like with your planned provider.  We were quite inconvenienced when DS's pediatrician up and dropped our insurer in the middle of a plan year.  We ended up OK, but it was quite a scramble for a while.

[lhamo]

I am in a different city/state with different economics, healthcare systems and politics, but FWIW I have been on Medicaid for all but a few months (when DS had a high paid tech internship that inflated our monthly household income for a summer) since 2016 and have had no problem accessing care for me or my kids.  Wait times for specialist visits are longer post-Covid, but that is true across the system.  Here in Seattle the largest medical network (UW Medicine) takes Medicaid (Apple Health -- I use Molina) and offers excellent care.  I've had cataract and retinal surgeries, a skin cancer removal, and all the regular preventative stuff fully covered. 

One thing you might try is looking for clinics/practices that take CHIP and take your kids there for screenings, immunizations, etc.  Paying out of pocket for a visit or two wouldn't be too costly, and it would give you a sense of whether the service they offer is acceptable to you.  For a long time I was going to the neighborhood clinic that mostly serves the very low income/homeless population.  I didn't have any issues with it except that the providers I liked kept leaving.  I wanted to have all my primary and specialist care within the same network so eventually I switched my primary to UW medicine.  I still get dental care through the neighborhood clinic, though.

[TimCFJ40]

We're in a somewhat similar boat, also in TN, but with two kids and about $600k behind on the stash.

Could you work the next 6 months, throw $50k in a college fund (529 or just taxable account for the purpose of college) and take the college worry out of it?  That would be awfully tempting if I were in your shoes but if the job is that bad, maybe not. 

We have about $50k for each of our kids that we seeded with $10k for each of their first three years.  That plus Hope should pretty well take care of college in state I'd think. 

[omy-forever]

Could you work the next 6 months, throw $50k in a college fund (529 or just taxable account for the purpose of college) and take the college worry out of it?

Yep. I hate it, but this is likely what I’ll end up doing. I kind of I dependently came to the same conclusion after writing my situation out. It’s funny how just writing something out that others will read brings clarity to a situation

I know col varies a lot even within states, but I’m curious how close my fire number is to what you’re targeting