Looking for input on high income earners with phased FIRE approach

[MaybeBabyMustache]

We have a somewhat unusual situation, and I'm looking for anything obvious we may be missing as we plan the next few phases of life. While I always welcome feedback on our non-mustachian ways, I'm looking for the big picture financial input that we may be missing more than an income to expense ratio conversation. Of course, feel free to toss in anything you think we aren't properly thinking through. I haven't seen much on the boards or other blogs in the way of a phased FIRE strategy, so welcome any insights or input.

Background: wife (me) - 42, husband - 50. Two kids, 11 & 12.
Income - wife makes $500K, husband makes $475K or so.
Edited to add: our income has gone up by about $200k/year since we moved to California, due to stock vest accumulation.

Assets:
Retirement accounts (401Ks) - $1.4M. Both will continue to max for as long as employed.
Liquid/investments (non-retirement accounts) - $800K
Property value/equity - $1.4M in house values (primary residence + vacation)
Kids college accounts are about 1/2 funded. We likely will continue to add money every year with leftovers/gifts, but are comfortable if we make no further contributions in this area (unlikely).

Other:
We live in the bay area, in a very HCOL. Our current expenses are astronomical on the housing front. Outside of that, our expenses our reasonable in our minds (around $45K for everything minus mortgages/property tax). Obviously, still plenty of fat, but nothing insane after our housing expenses. We're relatively satisfied with our balance of expenses, again, minus housing. We've agreed to stay where we are until our youngest son is out of high school. He starts middle school in the fall, so we have 7 years left.


Here's the current way I'm thinking of our life phases, and welcome feedback.

Phase 1: (Current)
I'm planning to work in my current career/job for the next 6-12 months. This allows us to save an extra $60-$100K, depending on when I leave.

Phase 2: (6-12 months from now)
I'll take six or so months off, and then find something flexible, with reduced hours. Haven't put a ton of thought in this, as I'm struggling to figure out "what I want to do" after 20 years in tech. I'm not counting any potential income from my job in the future phases, because I haven't ironed this out. I do plan to still work part-time, after some time off. But, want to be conservative & not include that in the planning.

Phase 3: (next 6-7 years)
We will leverage our liquid savings to cover the gap between my husband's income & our expenses, living off of our investments for the remainder. My husband will remain employed, and works for a stable company. If things look risky at any point, I'd go back to work full time. At our current run rate, we will be more than covered for the full duration of time that we "need" to live in our house. If something should (God forbid) happen to my husband, we have appropriate life insurance & coverage for this scenario.

Phase 4: (7 years from now)
My husband & I will now have zero kids at home, and can sell our house. We will use equity from the house to buy something outright. We may stay in the area, or move to Washington, depending on the health of my parents, etc. We can use remaining equity from house to live off of for a few years, but my husband (at this point) plans to still be working full time.

Phase 5: (9+ years)
Husband can begin to access his 401K (1/2 of our existing 401K balance). Does that matter for accessing 401k, as there's a large age spread between us?

Assuming Social Security is still a thing, he'll still be a ways off of that.

My husband has no plans to retire (at this point) & is happy to keep going. I'd like something a lot more flexible (currently lots of international travel, evenings, and I have a health condition that while currently in check, would do better with a more flexible life). But, before I leave the big money maker job, I want to make sure we're not missing anything substantial.

[ysette9]

I saw this thread title and thought “oh cool, someone else in the higher income Bay Area bucket income maybe learn from”. Then I saw some of your numbers and realized we may live in the same place, but are in very different leagues. Honestly, it is hard to tell without more fi numbers. The details will tell whether your plan is doable or not. At a first glance I am concerned about your net worth as compared to your ages and salaries. I think we are in a similar-ish boat to you with respect to net worth in invested assets (not quite as much in retirement accounts); we don’t have the real estate equity that you have however. We are a good decade younger than the average of your ages though and our incomes are less than half. Are your salaries somewhat new being as high as they are? I think pretty much anyone around here will deliver face punches for having a vacation home.
Have you looked at selling that sucker, investing the proceeds, and just renting a nice place whenever you go on vacation? I bet you would come out way ahead. If your core expenses really are $45k a year then you are talking about a lot of additional heads of work solely to pay for those houses. Is that worth it to you?

[MaybeBabyMustache]

I saw this thread title and thought “oh cool, someone else in the higher income Bay Area bucket income maybe learn from”. Then I saw some of your numbers and realized we may live in the same place, but are in very different leagues. Honestly, it is hard to tell without more fi numbers. The details will tell whether your plan is doable or not. At a first glance I am concerned about your net worth as compared to your ages and salaries. I think we are in a similar-ish boat to you with respect to net worth except we are younger and earn less than half of what you do. I completely get the high housing costs; our monthly expenditure there is almost $5k as we just bought a house, finally. Are you in a multi-million dollar house or something? Where is all of that money going? It is possible to spend less on housing while still enjoying living in the wonderful place that is the Bay Area.

We've been making these salaries for around 4 years since we moved to the area (both salaries more than doubled from previous roles). Our net worth is over $3M, so I'm not terribly concerned that we're not on track for our ages, but your mileage may vary. :-)

Yes, we live in a multi million dollar house, which was the cheapest in the school district we started in. We should have moved a few years ago (had 3 weeks to relocate from another state, and then didn't want to move the kids again). We're planning to stay put until the kids are out of school, so housing isn't an area we're going to adjust barring a major life change.

Edited to answer your additional questions in your revised post:
Regarding our vacation house, it's a very small portion of our housing expenses. Our primary residence is the beast. The vacation house is near my family, and we may live there part time in the future. I considered quitting earlier, but pressed on so we could keep the house.

[Ben Kurtz]

I'm having a hard time understanding the cash flows involved here.

I see gross salary of about $975,000 per year. Pre-tax savings opportunities at this income level (for regular wage earners) are trivial percentages -- let's assume $50,000 across 401ks, HSAs, whatever else. Income taxes in California are punitive, so I assume this all translates to $550,000 in take-home pay.

We are told that living expenses ex-housing are $50,000 per year, and that if the wife works another year at her $500,000 per year job the family will be able to save an incremental $100,000 -- I assume after tax. When the wife stops working, the family will be cash flow negative on the husband's $475,000 per year job. This implies that the family is spending $400,000 per year, after tax, on housing. ($550,000 after-tax take home, less $50,000 in living expenses, less $100,000 taxable savings). Maybe it's more like $350,000 or $300,000 per year, if there's another $50,000 to $100,000 in after-tax savings and/or stealth luxury living expenses that have somehow been unaccounted for (contributions to kids' college funds? frivolous spending that the wife conveniently overlooks?). All this implies a monthly mortgage payment (PITI) in the $25,000 to $35,000 range.

What have you guys done? Bought a $5,000,000 house with $1,000,000 down? Are you enduring yearly property tax bills in the $50,000 to $100,000 range? Do you have any idea how insane that all sounds? No wonder you were cagey about putting down your monthly / annual budget figures by category, including housing costs. You'd be laughed out of this forum.

I know California has a fetish for plutocrats pretending to be normal middle-class Americans with mortgages 'n' car payments 'n' stuff -- dressed in hoodies instead of the Monopoly Man outfit -- but for crying out loud develop some self-awareness!
 
You are playing with sums of money that, in any normal / sane part of America would enable you to retire to a big house in the fanciest neighborhood in the best school district with work being 100% optional. You seem to be tying yourself down entirely on the basis that you don't want to move while your youngest kid is still in high school. I know parents sacrifice for their children, but this is taking things to a fetishistic extreme. You and your husband have been and will be sacrificing years in the office and years away from family back east just so your youngest kid can learn how to smoke pot from his existing friends, as opposed to having to do so from some new friends he'll make in a new school. School children move cities all the time. It's not that big a deal.

Yes, you plan will work. There are even a number of ways to tunnel money out of a 401k before retirement age, without paying the 10% penalty, if you need that to make the cash flows work. Look up the Roth IRA ladder and the 72t SEPP withdrawal program. I'd be a bit concerned that you are concentrating a lot of net worth and therefore a lot of risk in a single asset, but you could lop a million dollars off your existing net worth and still have plenty to retire on, so I'm not sweating it too much.

But before doing all that, on your next family vacation take a road trip across America to visit family back east, and try to reconnect with this vast country of ours and with a bit of common sense. You're post gives off the vibe of living in a very peculiar California bubble, which seems to be blinding you to what your real options and choices are.

[MaybeBabyMustache]

Thanks for the very direct feedback, Ben. It's appreciated. We do very much feel like we live in a bubble. Which, quite frankly is one of the many reasons we want to stop working at this rate. It's not worth it. We moved to California from Seattle for work, where we had a much more standard (although, certainly upper middle class experience). I'm not a lover of the bay area. People get crazy about money and cost starts to mean nothing.

The numbers are accurate, but what's not included is that we didn't factor my husband's stock in. He's taxed on his vesting, so the $475k/year is how much he's making, but is never guaranteed yearly because of the volatility of the stock market & he has chosen to hold his stock. Because of that, I chose to include only his salary (less than 1/2 of his total compensation) for purposes of the evaluation.

We understand that our housing costs are insane. We get it. We have the option of slogging away for 7 more years in this area, with an opportunity of making a very high salary(ies), or to move somewhere less expensive. We opted to stay. My husband loves his job, and wanted to stay with this particular employer for a longer period of time. There are obvious tradeoffs.

Due to my health issues, we selected a neighborhood that reduced our commute time to under 20 minutes for the standard commute. Again, that is a crazy narrow window given our employer's location. There are many ways we can reduce our housing costs by extending our commute or relocating the kids.

Housing costs are obviously crazy, but less crazy than your numbers indicate. We're at about $160K for housing costs, including mortgages & property tax.

I grew up in small town america, and we plan to go back. I could continue to work at my sweet salary, and spend all of the money, but that's not our goal. We want to be done and living a different kind of life soon. I've worked for an extra year to be able to help family, etc. It's fine & we understand the absolute luxury of having a high income. In our particular neighborhood, almost all of our neighbors are house poor, so things are less crazy than you might think. Most people, outside of housing costs, are keeping their expenses reasonably aligned with values, which is one of the reasons we like the neighborhood given overall options.

Everything I've read on this board has been about maximizing your income, reducing expenses, and getting out (if you should want to) on a quick path. We've taken a very strong approach to the first, not done the second with housing, and are doing the third. We couldn't make the salaries in any other part of the country, so some of that goes together. There are cheaper options & we know people living in 2 bedroom apartments with four kids. It can certainly be done. We've not opted to take that path, which extends our mandatory work time. I understand it's not the traditional approach, which is why I want feedback.

[ysette9]

I appreciate the additional info. Not factoring your husband’s stock into the numbers is wise. I still find myself scratching my head a bit though trying to figure out how things add up.

As a fellow Bay Area-er (though unlike you I adore this place and have no plans on leaving) I get the high housing prices and how people from other places don’t understand it. There is a spectrum even here though and still took to make choices. It sounds like you have thought about it and are not making decisions in a vacuum, but it still feels to me like you are not embracing the full extent of control you have over your situation. It sounds like you really value keeping your kid in the same school/district. I get that, but at what cost? You’re talking about opportunity costs in the order of several hundreds of thousands of dollars a year versus moving somewhere else that is still nice and still here in the Bay Area. That is huge. If your long term plan isn’t even to stay here, why such enormous sacrifice in the short term? With your current net worth and claimed non-housing expenses of $45k/year, you could retire this instant if you sold and moved to Seattle or your hometown or even a less fancy neighborhood here.

The bottom line from how we see it on the outside is that you are working solely to support a big house that is solely to allow your kid to continue going to a specific school. If you detach that particular requirement then suddenly you don’t need this enormous housing expense which means you don’t need to work which means you don’t need to worry about commute times. Am I missing something here?

[ysette9]

I grew up in small town america, and we plan to go back. I could continue to work at my sweet salary, and spend all of the money, but that's not our goal. We want to be done and living a different kind of life soon

I just noticed this. Your net worth is $3M and your self-stated spending is $45k/year if you had a paid-off house. Why haven't you moved to small town america already? With that kind of net worth you could buy a stupendously silly mansion in cash and still have more than enough to support your lifestyle.

A while back I read something interesting that basically asked you/me to think about someone looking at our lives from the outside as a neutral observer. Would that person be able to identify what we say are our top goals and values? Put another way, do our actions line up with what we say is important? That is something that kind of haunts me regularly because I say I value my family, being outside, exercising, traveling, and so forth, but in practice I have to squeeze all of that in around this JOB thing. I console myself by recognizing that this is a temporary situation and at this point we are just sprinting to the finish line. I have to be truthful to myself and acknowledge that I do value those things, but I also value staying where I am with everything that has to offer. I too could move to small town america and be done working today, but I would be miserable if I did that.

The biggest message I get from MMM is to be conscious with spending and make sure it aligns with your values. You sound like you have been putting a lot of thought into that, but there is a pretty big gap between what you say is important to you and what your actions are showing.

[MaybeBabyMustache]

I appreciate the additional info. Not factoring your husband’s stock into the numbers is wise. I still find myself scratching my head a bit though trying to figure out how things add up.

As a fellow Bay Area-er (though unlike you I adore this place and have no plans on leaving) I get the high housing prices and how people from other places don’t understand it. There is a spectrum even here though and still took to make choices. It sounds like you have thought about it and are not making decisions in a vacuum, but it still feels to me like you are not embracing the full extent of control you have over your situation. It sounds like you really value keeping your kid in the same school/district. I get that, but at what cost? You’re talking about opportunity costs in the order of several hundreds of thousands of dollars a year versus moving somewhere else that is still nice and still here in the Bay Area. That is huge. If your long term plan isn’t even to stay here, why such enormous sacrifice in the short term? With your current net worth and claimed non-housing expenses of $45k/year, you could retire this instant if you sold and moved to Seattle or your hometown or even a less fancy neighborhood here.

The bottom line from how we see it on the outside is that you are working solely to support a big house that is solely to allow your kid to continue going to a specific school. If you detach that particular requirement then suddenly you don’t need this enormous housing expense which means you don’t need to work which means you don’t need to worry about commute times. Am I missing something here?

It's a bit more complex in my mind. My husband wants to stay with his current employer. The commute time matters quite a bit, as I'm sure you're aware, and based on employee locations, there is not a huge variance in housing prices. We could be saving more (when we priced this a year ago, let's say about $15K/year) by choosing a house in another school district, but holding commute time the same. In our minds, that tradeoff wasn't worth moving the kids.

I'm interested in switching to a flexible role/part time. My husband loves where he's at & doesn't want to retire. He'd like to continue until 60. Given what he does, there are few areas in the country where he can do his role. So yes, we can absolutely move to another part of the country. We debated moving back to Seattle at great length before we purchased a house here. However, he would have to leave his company/line of work, and he's not interested in doing that unless it's required. 

[MaybeBabyMustache]

I grew up in small town america, and we plan to go back. I could continue to work at my sweet salary, and spend all of the money, but that's not our goal. We want to be done and living a different kind of life soon

I just noticed this. Your net worth is $3M and your self-stated spending is $45k/year if you had a paid-off house. Why haven't you moved to small town america already? With that kind of net worth you could buy a stupendously silly mansion in cash and still have more than enough to support your lifestyle.

A while back I read something interesting that basically asked you/me to think about someone looking at our lives from the outside as a neutral observer. Would that person be able to identify what we say are our top goals and values? Put another way, do our actions line up with what we say is important? That is something that kind of haunts me regularly because I say I value my family, being outside, exercising, traveling, and so forth, but in practice I have to squeeze all of that in around this JOB thing. I console myself by recognizing that this is a temporary situation and at this point we are just sprinting to the finish line. I have to be truthful to myself and acknowledge that I do value those things, but I also value staying where I am with everything that has to offer. I too could move to small town america and be done working today, but I would be miserable if I did that.

The biggest message I get from MMM is to be conscious with spending and make sure it aligns with your values. You sound like you have been putting a lot of thought into that, but there is a pretty big gap between what you say is important to you and what your actions are showing.

I think we posted at the same time, so I missed this question. It's a really good call out. I did want to move back to Seattle very much a couple of years ago. We had lots (and, lots) of long drawn out discussions on this topic. In the end, we agreed to stay because my husband was passionate about his work, and I was not passionate about mine. We also agreed to close the discussion about location unless something substantial changed that required us to revisit it. We have a very strong marriage, but having ongoing discussions where you both have different perspectives was a challenge.

Therefore, I'm trying to do what you've advised (ensure alignment between stated goals & actions) while keeping marital harmony & allowing my husband to keep a job/career he really wants. At 50, this is the last go for him (likely last 10 years of a "real" career, in his mind). I felt like that was a fair ask. I'm planning on going part time or not working for a while, which was also part of the agreement of staying here. So, we're left with a bit of a half & half situation & have optimized rather uniquely, I realize.

When I posted, I was mostly looking for a sanity check as to whether the plan was feasible from a numbers perspective, but I can definitely appreciate why it's caused the larger, "WTF are you doing" questions. All totally fair & valid as well. :-)

[ysette9]

Marriage is a compromise and if he is set on staying in your current situation, then that is the box you are in. The best you can do is save as much as you possibly can and live your own half of your joint life to your values, as much as you can.

As for your original question, your plan seems doable, though again, without actual numbers it is hard to know for sure. Have you given cFIREsim a whirl? That is my favorite retirement calculator.

[affordablehousing]

I think these are the questions that keep therapists employed in the bay area;) Sounds to me like you're doing great and have an embarrassment of choices to make. If it were me I'd say suit up, enjoy the ride, and find some ways to enjoy the bay area, there's a lot of interesting parts to explore, just not in silicon valley where all you are buying is a commute and a school. To that end, you may find a better trade off just putting your kids in a good private school. It would save you on housing costs, probably cost only ~$30K per kid in tuition, and have the added benefit of making you feel a little poor again compared to other parents, which might help with the feelings of listlessness. It sounds to me that the bigger issue is that your husband embraced all this, and you don't.

The plan to pull the cord and move to nowhere sounds to me like, currently, idle dreaming, kind of like those that buy an RV and have it sit in the driveway for years. Maybe the goal should be to make some even shorter than your phased approach goals to try out cutting back, or getting more engaged in reality, or being more "present" or focusing on health. As they say, very small accomplishments completed in regular daily fashion really improve happiness.

[MaybeBabyMustache]

I think these are the questions that keep therapists employed in the bay area;) Sounds to me like you're doing great and have an embarrassment of choices to make. If it were me I'd say suit up, enjoy the ride, and find some ways to enjoy the bay area, there's a lot of interesting parts to explore, just not in silicon valley where all you are buying is a commute and a school. To that end, you may find a better trade off just putting your kids in a good private school. It would save you on housing costs, probably cost only ~$30K per kid in tuition, and have the added benefit of making you feel a little poor again compared to other parents, which might help with the feelings of listlessness. It sounds to me that the bigger issue is that your husband embraced all this, and you don't.

The plan to pull the cord and move to nowhere sounds to me like, currently, idle dreaming, kind of like those that buy an RV and have it sit in the driveway for years. Maybe the goal should be to make some even shorter than your phased approach goals to try out cutting back, or getting more engaged in reality, or being more "present" or focusing on health. As they say, very small accomplishments completed in regular daily fashion really improve happiness.

We've certainly discussed moving at length, but the commute is more of an issue then the schooling. The tradeoff would be a 60-90 minute commute each way for my husband, at a minimum. It would also make any part time job options for me pretty much off the table unless they are remote.

I plan to scale back on work within the next year, so that's not idle dreaming. The moving to nowhere is something we've discussed post the kids leaving the house, so it's definitely more of a discussion. We've considered moving to a slower pace of life in California (we do like the weather). We are also open to other areas.

I feel pretty engaged in reality and goal setting. Did you have something specific in mind to recommend? There's a lot of aggressive management of my health condition that I do to stay healthy & functional - lots of sleep, working out, eating well, etc. I'm by no means perfect & would love to lose those last 20 pounds, train for a half marathon or whatever, but it's a hard balance right now with work, kids & traveling. My current job doesn't allow for a scale back, which is why I'll be quitting.

[MaybeBabyMustache]

Marriage is a compromise and if he is set on staying in your current situation, then that is the box you are in. The best you can do is save as much as you possibly can and live your own half of your joint life to your values, as much as you can.

As for your original question, your plan seems doable, though again, without actual numbers it is hard to know for sure. Have you given cFIREsim a whirl? That is my favorite retirement calculator.

Thanks, ysette. I have had a heck of a time running any models given our situation of one person working, one person not working, using part of our savings/investments technically "pre retirement", etc. I gave it a shot with cFIREsim and assuming I used it correctly, it gave us 100% chance of success.

Also, to be fair to my husband, the location (which, necessitates the house) is his only real ask in the equation. It's obviously a huge ask, but putting that aside, we are pretty much fully aligned on our other spending. So, it wouldn't be accurate to assume that he is living the full life style of spend, spend, spend. IMO, that would be an insurmountable problem. And, we've aligned that we don't want the kids to grow up like that, as we think it sets a bad example.

[4alpacas]

When I posted, I was mostly looking for a sanity check as to whether the plan was feasible from a numbers perspective, but I can definitely appreciate why it's caused the larger, "WTF are you doing" questions. All totally fair & valid as well. :-)

Without numbers, how did you expect the conversation to go?

[seattlecyclone]

I'm just reading this thread for the first time now. I'll point out some thoughts I had as I read.

Income - wife makes $500K, husband makes $475K or so.

Okay, you make quite a lot of money even for the Bay Area. Should be able to have at least one of you quit your job if that's what you want.

Assets:
Retirement accounts (401Ks) - $1.4M. Both will continue to max for as long as employed.
Liquid/investments (non-retirement accounts) - $800K
Property value/equity - $1.4M in house values (primary residence + vacation)
Kids college accounts are about 1/2 funded. We likely will continue to add money every year with leftovers/gifts, but are comfortable if we make no further contributions in this area (unlikely).

Doing pretty well there. Your liquid assets (including retirement accounts) would be enough to support $88k of spending per the 4% rule. Probably not enough to sustain your current housing situation, but you're definitely on the right track and have the earning power to zoom to FIRE even in your current location if that's a priority for your family.

We live in the bay area, in a very HCOL. Our current expenses are astronomical on the housing front. Outside of that, our expenses our reasonable in our minds (around $45K for everything minus mortgages/property tax).

Very reasonable non-housing expenses. Not bare-bones by any means, but it's such a small percentage of your salary that reducing this part of your budget won't meaningfully move the needle.

Phase 3: (next 6-7 years)
We will leverage our liquid savings to cover the gap between my husband's income & our expenses, living off of our investments for the remainder. My husband will remain employed, and works for a stable company. If things look risky at any point, I'd go back to work full time. At our current run rate, we will be more than covered for the full duration of time that we "need" to live in our house. If something should (God forbid) happen to my husband, we have appropriate life insurance & coverage for this scenario.

Wait, what? Your husband earns $475k, your non-housing spending is $45k, and there's still going to be a "gap" if you quit your job? Just how expensive is this house?

The numbers are accurate, but what's not included is that we didn't factor my husband's stock in. He's taxed on his vesting, so the $475k/year is how much he's making, but is never guaranteed yearly because of the volatility of the stock market & he has chosen to hold his stock. Because of that, I chose to include only his salary (less than 1/2 of his total compensation) for purposes of the evaluation.

Ahh...I see. Much has been written about how holding large quantities of your employer's stock is a terrible idea for most people. Why is your husband's case any different? Even with $160k of housing costs, you should have plenty of income to live indefinitely in your current location on your husband's income alone, without drawing down your savings a bit, if only he decided to cash in his stock as it vests.

I think you need to push back on this one point. You've already acquiesced to his desire to stay put in the Bay Area and work in his dream job. I don't take issue with that at all. But you're taking that constraint, combining it with his idea that he shouldn't sell his employer stock, and that seems to be creating a bunch of unnecessary uncertainty in your plans for the next decade.

Another thing to consider: does your location allow for the construction of a backyard cottage or "granny flat" in your home? Might be worth looking into this, to find a tenant to help cut down on your housing bill.

[MaybeBabyMustache]

Thanks, @seattlecyclone - super helpful. I like the idea of building a model where my husband sells his stock quarterly. I think it will take some doing, but don't see that being a problem.

Unfortunately, while we have an okay sized lot, the house is not built in a way that would allow for an additional structure, given strict building requirements in our area.

Appreciate the input!

[MaybeBabyMustache]

When I posted, I was mostly looking for a sanity check as to whether the plan was feasible from a numbers perspective, but I can definitely appreciate why it's caused the larger, "WTF are you doing" questions. All totally fair & valid as well. :-)

Without numbers, how did you expect the conversation to go?

I didn't break out our expenses into categories or line items, but have shared all of the numbers, unless I'm missing something. Let me know if there are additional details required.

[Heinz]

Just one thought, don’t leave the workforce assuming it will be easy to return.  This is the best job market since the late 1990s and I have seen friends leave a similar high paying job (in the DC area) and the reality is there simply are not that many of them.  And the internal candidate has a leg up on the external.  Also, it is always easier to go part-time where you are than find a part-time position externally. 

For me, I was in a 24x7 high stress job - 1 international trip a month plus 2 domestic.  And I found something that I love that pays 20% of what I had, but is stress free and I leave work at 430. 

[LWYRUP]

You are overthinking this.

Ask to go part time.  DH stays at job.  You grow continuously absurdly richer. 

Now, what will you worry about now that you no longer have money to worry about?

[diapasoun]

I know this isn't the long-term FI numbers you asked about, but part of that is because I'm not certain what they'll be -- your housing costs now versus your housing costs in retirement will be different. That means I'm looking at your housing costs, and I'm just... boggling.

Why do you own a house? And why in all the hells of the cosmos do you own THIS house?

Why are you not renting a house, especially when you don't want to live here for the rest of your lives? I know that it's a sunk cost now (and I understand panicking about finding housing here, I really do). Nonetheless, have you explored what your life looks like without this place? Renting in the Bay sucks, yes, but it is still generally cheaper than buying. It certainly does not suck to the tune of $160k a year. Your housing costs are two and a half times median Palo Alto rent. You could pay $10k a month in rent on a super nice place and still come out on top (and you can definitely find a $10k rental in your preferred school district).

Your children will survive a move, especially one within your school district (and frankly, they would survive a move to a new school district, too). Packing up their stuff is not going to damage them. Moving to a less grand house is not going to damage them. If they're anything like most children, they are resilient, adaptable, and curious, and will take a short move in stride. Imo, your children are if anything an incredibly good reason to move -- to show them that health, time together as a family, and control over your own life are far more valuable than even the most spectacular piece of property out there.

This house is working directly against your stated interests, which are flexibility, health, and a better quality of life. It's an unnecessary expense that's going to draw down your investments for no good reason other than that you already own it. It's an albatross. You guys are so set, so lucky, in all of your other numbers; why keep this one?

ETA: I don't want to make you feel horribly critiqued; I just see your other awesome numbers, and then I see incredible housing expenses that have to contribute to your worries about your FI math. It seems like such a straightforward place to decrease your expenses and your worries.

[MaybeBabyMustache]

Just one thought, don’t leave the workforce assuming it will be easy to return.  This is the best job market since the late 1990s and I have seen friends leave a similar high paying job (in the DC area) and the reality is there simply are not that many of them.  And the internal candidate has a leg up on the external.  Also, it is always easier to go part-time where you are than find a part-time position externally. 

For me, I was in a 24x7 high stress job - 1 international trip a month plus 2 domestic.  And I found something that I love that pays 20% of what I had, but is stress free and I leave work at 430.

The above is definitely one of my considerations. Totally agree. This jobs are obviously super rare & hard to find. And yes, definitely relate on the stress + travel. Looking forward to exploring something much more like what it sounds like you have found.

[MaybeBabyMustache]

You are overthinking this.

Ask to go part time.  DH stays at job.  You grow continuously absurdly richer. 

Now, what will you worry about now that you no longer have money to worry about?

This board really cracks me up. As a general rule, I find replies to be more helpful, collaborative & thoughtful - far beyond the typical internet responses. People take the time to answer, challenge, & asks hard questions. All of that is welcome - it's always useful to step outside of your own perspective & see things from the point of view of others. And then there are comments like this.

 No life is without worry. What keeps me up at night is being haunted by guilt that I'm trading an income most people can never imagine - income that could be used to do amazing things for my family (extended, where no one has two dimes to rub together), our neighborhood schools, hungry kids, etc - for myself, freedom, & time. And, that's a pretty shitty feeling when you think about it. You keep asking yourself if you should slog on & make the crazy amazing salary to do good things for others, or take the time for yourself. But sure, I'll go back to being insanely rich & try to find new things to worry about. Keep up the good work!

[MaybeBabyMustache]

I know this isn't the long-term FI numbers you asked about, but part of that is because I'm not certain what they'll be -- your housing costs now versus your housing costs in retirement will be different. That means I'm looking at your housing costs, and I'm just... boggling.

Why do you own a house? And why in all the hells of the cosmos do you own THIS house?

Why are you not renting a house, especially when you don't want to live here for the rest of your lives? I know that it's a sunk cost now (and I understand panicking about finding housing here, I really do). Nonetheless, have you explored what your life looks like without this place? Renting in the Bay sucks, yes, but it is still generally cheaper than buying. It certainly does not suck to the tune of $160k a year. Your housing costs are two and a half times median Palo Alto rent. You could pay $10k a month in rent on a super nice place and still come out on top (and you can definitely find a $10k rental in your preferred school district).

Your children will survive a move, especially one within your school district (and frankly, they would survive a move to a new school district, too). Packing up their stuff is not going to damage them. Moving to a less grand house is not going to damage them. If they're anything like most children, they are resilient, adaptable, and curious, and will take a short move in stride. Imo, your children are if anything an incredibly good reason to move -- to show them that health, time together as a family, and control over your own life are far more valuable than even the most spectacular piece of property out there.

This house is working directly against your stated interests, which are flexibility, health, and a better quality of life. It's an unnecessary expense that's going to draw down your investments for no good reason other than that you already own it. It's an albatross. You guys are so set, so lucky, in all of your other numbers; why keep this one?

ETA: I don't want to make you feel horribly critiqued; I just see your other awesome numbers, and then I see incredible housing expenses that have to contribute to your worries about your FI math. It seems like such a straightforward place to decrease your expenses and your worries.

Thanks for your comment. I don't feel horribly critiqued - not to worry. :-)

We could have rented, and did rent for 3+ years before we bought. We considered renting long term, but the availability in our neighborhood is very volatile and there are few long term rentals. I'm admittedly a worrier, and the idea that we couldn't control whether we could stay in any particular house/location for beyond a year with two kids in school. . . wasn't something I was comfortable with. Totally agree with your overall perspective - it's a giant drain on our overall financial picture. We assume that the housing market will at least remain stable. If it does, we will clear quite a bit & will have a nice secondary investment when we sell.

The perspective on overall mortgage interest + property tax was obviously different when we bought. Given the changes in the tax code. .. well, it definitely changes the math. We have no plans to immediately sell. Mostly because of the tax implications of doing so, but it's a discussion point for once we've ticked off the requirements on the capital gains exclusions. Thanks for your thoughtful input!

[affordablehousing]

I really like this discussion because I think a lot of us feel this, that we have an embarrassment of riches and this is the only comfortable free place to emote about them. My comment before about making the phased approach real through daily efforts is that it might be worth trying some ways to disassociate from work in baby steps, before just cutting back in 6-12 months.

To make the discussion easier, my take on the original question, is that you obviously could do this plan with no worries, no change in lifestyle, and continue to spend the $400K in annual expenses or so for living expenses, PITI, and stock taxes. We have a lot of friends in the bay area who have done just this, been high earners (not founders) who for health reasons and family reasons have one spouse stop working. All of them had concerns about continuing their lifestyle, all of them have had no financial worries since, and all have had very accretive net worths since retiring, not even including what's naturally happened in the bay area with real estate. And these are folks who have been out of work some for decades.

More the challenge I've seen is the emotional change that happens when you stop working and leave the field. In all of the cases we know, the person in your situation had a tough time, sometimes for decades. Not sure what side of the field you're in but I always thought if you can be a venture partner or industry advisor with a VC that would be a graceful way to scale back but have a foot firmly in the door and a finger on the pulse. Or why not take an advisor role with an incubator/accelerator or guest teach some classes at Stanford. The part I see these folks struggle with most is with not feeling relevant in discussions with peers that did continue, or with their spouses' peers.

Take the job seriously of finding something else to do as passionate and rewarding as your life now, which very much may be just focusing on health and raising kids. Best wishes!

[LWYRUP]

You are overthinking this.

Ask to go part time.  DH stays at job.  You grow continuously absurdly richer. 

Now, what will you worry about now that you no longer have money to worry about?

This board really cracks me up. As a general rule, I find replies to be more helpful, collaborative & thoughtful - far beyond the typical internet responses. People take the time to answer, challenge, & asks hard questions. All of that is welcome - it's always useful to step outside of your own perspective & see things from the point of view of others. And then there are comments like this.

 No life is without worry. What keeps me up at night is being haunted by guilt that I'm trading an income most people can never imagine - income that could be used to do amazing things for my family (extended, where no one has two dimes to rub together), our neighborhood schools, hungry kids, etc - for myself, freedom, & time. And, that's a pretty shitty feeling when you think about it. You keep asking yourself if you should slog on & make the crazy amazing salary to do good things for others, or take the time for yourself. But sure, I'll go back to being insanely rich & try to find new things to worry about. Keep up the good work!

I object to this response.  My response was well thought out and accurate.  I accurately stated your problem and offered an excellent solution, then I proposed a profound philosophical question.  You squirmed and dodged the question and instead talked about how difficult your life is.  That's your choice I suppose.

I get the sense that you would be more impressed by a response that's longer.  I am not of the belief that more words is always better. 

I also get the sense that your are looking for people to empathize with you and not actually try to work through your problems with you.   (This is a common male / female divide actually).  If that's the case, then I fully agree -- I am much more of  logical thinker so best to look for other posters for empathy.

My question to you was not an insult.  It was an extraordinary important and meaningful question.  One I am starting to try to grapple with myself.  One that 99% of the world (and even probably many of the folks on this forum) are not blessed enough to be able to answer until they are towards the end of their life.  If you choose to ignore it you are wasting a great opportunity. I suppose that is your choice. 
 

[MaybeBabyMustache]

You are overthinking this.

Ask to go part time.  DH stays at job.  You grow continuously absurdly richer. 

Now, what will you worry about now that you no longer have money to worry about?

This board really cracks me up. As a general rule, I find replies to be more helpful, collaborative & thoughtful - far beyond the typical internet responses. People take the time to answer, challenge, & asks hard questions. All of that is welcome - it's always useful to step outside of your own perspective & see things from the point of view of others. And then there are comments like this.

 No life is without worry. What keeps me up at night is being haunted by guilt that I'm trading an income most people can never imagine - income that could be used to do amazing things for my family (extended, where no one has two dimes to rub together), our neighborhood schools, hungry kids, etc - for myself, freedom, & time. And, that's a pretty shitty feeling when you think about it. You keep asking yourself if you should slog on & make the crazy amazing salary to do good things for others, or take the time for yourself. But sure, I'll go back to being insanely rich & try to find new things to worry about. Keep up the good work!

I object to this response.  My response was well thought out and accurate.  I accurately stated your problem and offered an excellent solution, then I proposed a profound philosophical question.  You squirmed and dodged the question and instead talked about how difficult your life is.  That's your choice I suppose.

I get the sense that you would be more impressed by a response that's longer.  I am not of the belief that more words is always better. 

I also get the sense that your are looking for people to empathize with you and not actually try to work through your problems with you.   (This is a common male / female divide actually).  If that's the case, then I fully agree -- I am much more of  logical thinker so best to look for other posters for empathy.

My question to you was not an insult.  It was an extraordinary important and meaningful question.  One I am starting to try to grapple with myself.  One that 99% of the world (and even probably many of the folks on this forum) are not blessed enough to be able to answer until they are towards the end of their life.  If you choose to ignore it you are wasting a great opportunity. I suppose that is your choice. 
 

@blinx7  - if you are honestly saying that your reply was in good faith, and not intended to be snarky, then I apologize. That's not at all how I read it, or it came across to me. Short message board posts are fine, but can be easier to misinterpret.

And, I didn't "squirm" and not answer your question. I didn't think it was a real question. I don't know that I would consider it a profound question, because we will always worry about money & other things. Worry in the sense of ensuring it aligns with our values, and ensuring that we are helping others. I have non-money worries, the same as anyone else. I don't think money changes that. Are we good parents? Are we helicopter parenting, or involved enough to create maturity & independence? How can I help a family member through a bad breakup? What do I do as my parents age but require more help? How do I allow them to have more independence? My husband's side of the family is an entirely different set of worries. So, none of that changes with money.

I appreciate you taking the time to clarify your response. Can you share a bit more insight into how you view the worries of your life changing as money is no longer something to worry about? (I do agree completely that a baseline of worries is immediately removed when you are financially secure. I'm wondering what sort of new level of worry relief these particular changes would yield.)

[MaybeBabyMustache]

I really like this discussion because I think a lot of us feel this, that we have an embarrassment of riches and this is the only comfortable free place to emote about them. My comment before about making the phased approach real through daily efforts is that it might be worth trying some ways to disassociate from work in baby steps, before just cutting back in 6-12 months.

To make the discussion easier, my take on the original question, is that you obviously could do this plan with no worries, no change in lifestyle, and continue to spend the $400K in annual expenses or so for living expenses, PITI, and stock taxes. We have a lot of friends in the bay area who have done just this, been high earners (not founders) who for health reasons and family reasons have one spouse stop working. All of them had concerns about continuing their lifestyle, all of them have had no financial worries since, and all have had very accretive net worths since retiring, not even including what's naturally happened in the bay area with real estate. And these are folks who have been out of work some for decades.

More the challenge I've seen is the emotional change that happens when you stop working and leave the field. In all of the cases we know, the person in your situation had a tough time, sometimes for decades. Not sure what side of the field you're in but I always thought if you can be a venture partner or industry advisor with a VC that would be a graceful way to scale back but have a foot firmly in the door and a finger on the pulse. Or why not take an advisor role with an incubator/accelerator or guest teach some classes at Stanford. The part I see these folks struggle with most is with not feeling relevant in discussions with peers that did continue, or with their spouses' peers.

Take the job seriously of finding something else to do as passionate and rewarding as your life now, which very much may be just focusing on health and raising kids. Best wishes!

All of this really resonanted with me. And, thanks for clarifying your first paragraph. It's something my husband has been advocating for the last five years. Something I've really struggled with. My job doesn't provide much flex in this regard (or, maybe this is all in my mind, & I'm just not creative enough to find it), but I've taken a few steps. I manage a global team, and my west coast team is smallest. So, time zones mean Friday afternoons tend to be my quietest, and I work from home on Fridays frequently. This has been a huge step. I have also been pushing back on travel, extending time between trips, etc.

On the "what next", my husband is also concerned with that side & worries I'll be bored silly. In some ways, I think I need to embrace the boredom & use time, patience, creativity, & multiple experiments to discover my passion. I know that I love coaching & mentoring. It's hands down the best part of my job. I'm hoping I can find a way to apply that into a new role, but don't want to plan out another full career until I take some time to decompress.

Thanks again for your thoughtful response - really appreciate it.

[Gin1984]

I'm still trying to figure out your mortgage payment, total remaining loans, and insurance/property taxes.  I'm from the bay, I get the expense, but you should be able to run most families, even if the more expensive areas on $475,000, so I am confused.

[MaybeBabyMustache]

I'm still trying to figure out your mortgage payment, total remaining loans, and insurance/property taxes.  I'm from the bay, I get the expense, but you should be able to run most families, even if the more expensive areas on $475,000, so I am confused.

Sure. Here you go:
Expenses:
Mortgage payment on primary residence - $110K/year
Property tax on primary residence - $36K/year
Mortgage/insurance/taxes on vacation house - $17K/year
Standard yearly run rate for all other expense - $45K

No other debt of any kind. Total expenses = $208K. I've assumed a significant reduction in taxes & no childcare for the numbers above, given I won't be working/earning at the same rate. Our current tax burden is quite a bit higher.

As I noted above (apologies - this wasn't laid out well in original email), I only counted my husband salary portion of his overall comp in understand what we could cover with his salary. I didn't factor in his stock. I did this to err on the conservative side, as he has been holding his stock vs selling. Some of the other posters wisely pointed out that this wasn't a wise financial move regardless of what else we have going on, so we'll be working through that. If we are using his full compensation for our expenses, we can cover everything. I'm conservative & just wanted to not assume he'd have that kind of stock package for the remainder of his working career. However, the math still works out, AFAICT. Basically, for years that he has the stock, we use that. In the event he switches careers, wants flexibility to go to a startup, etc, we'd dip into our savings. Does that make sense? 

[Gin1984]

I'm still trying to figure out your mortgage payment, total remaining loans, and insurance/property taxes.  I'm from the bay, I get the expense, but you should be able to run most families, even if the more expensive areas on $475,000, so I am confused.

Sure. Here you go:
Expenses:
Mortgage payment on primary residence - $110K/year
Property tax on primary residence - $36K/year
Mortgage/insurance/taxes on vacation house - $17K/year
Standard yearly run rate for all other expense - $45K

No other debt of any kind. Total expenses = $208K. I've assumed a significant reduction in taxes & no childcare for the numbers above, given I won't be working/earning at the same rate. Our current tax burden is quite a bit higher.

As I noted above (apologies - this wasn't laid out well in original email), I only counted my husband salary portion of his overall comp in understand what we could cover with his salary. I didn't factor in his stock. I did this to err on the conservative side, as he has been holding his stock vs selling. Some of the other posters wisely pointed out that this wasn't a wise financial move regardless of what else we have going on, so we'll be working through that. If we are using his full compensation for our expenses, we can cover everything. I'm conservative & just wanted to not assume he'd have that kind of stock package for the remainder of his working career. However, the math still works out, AFAICT. Basically, for years that he has the stock, we use that. In the event he switches careers, wants flexibility to go to a startup, etc, we'd dip into our savings. Does that make sense?

That makes a lot of sense.  How much do you still owe on the vacation and main homes?

[MaybeBabyMustache]

I'm still trying to figure out your mortgage payment, total remaining loans, and insurance/property taxes.  I'm from the bay, I get the expense, but you should be able to run most families, even if the more expensive areas on $475,000, so I am confused.

Sure. Here you go:
Expenses:
Mortgage payment on primary residence - $110K/year
Property tax on primary residence - $36K/year
Mortgage/insurance/taxes on vacation house - $17K/year
Standard yearly run rate for all other expense - $45K

No other debt of any kind. Total expenses = $208K. I've assumed a significant reduction in taxes & no childcare for the numbers above, given I won't be working/earning at the same rate. Our current tax burden is quite a bit higher.

As I noted above (apologies - this wasn't laid out well in original email), I only counted my husband salary portion of his overall comp in understand what we could cover with his salary. I didn't factor in his stock. I did this to err on the conservative side, as he has been holding his stock vs selling. Some of the other posters wisely pointed out that this wasn't a wise financial move regardless of what else we have going on, so we'll be working through that. If we are using his full compensation for our expenses, we can cover everything. I'm conservative & just wanted to not assume he'd have that kind of stock package for the remainder of his working career. However, the math still works out, AFAICT. Basically, for years that he has the stock, we use that. In the event he switches careers, wants flexibility to go to a startup, etc, we'd dip into our savings. Does that make sense?

That makes a lot of sense.  How much do you still owe on the vacation and main homes?

Hi @Gin1984 . We owe $220K on the vacation house (could pay it off, but are keeping the cash liquid instead, as we have a great rate @2.5%). For our primary residence, we owe $1,950,000. House is worth about ~$3M. Interest rate is 3.625%

[Tuskalusa]

Hello There. I’m also in the Bay Area. I totally get wanting to leave Tech after 20 years. However, I’m not sure your numbers quite add up to your being able to leave yet. Or, I guess I wouldn’t be comfortable yet. Here are the things I’d want to do before letting go of a $500k salary.

- Pay off the house.
- Pay off or sell the vacation house.
- Fully fund college for the kids.
- Significantly fund a donor advised fund

I think this is totally doable in a year or so, given your income and Home location. There are areas in the Bay Area with good schools and decent commutes. Selling your current home and exploring some of these other options (probably south of you), could allow you to be very comfortable. Many tech employers have employee buses, which could help a commute. One of these buses stops down the street from me.

I also really think it’s worth exploring your monthly non-housing costs, to make sure your run rate is really at $45k. Living on $3,750 per month seems low, given the area and other spending. Maybe look at using YNAB for 6 months.

Finally, I agree that it’s not safe to assume that a job that pays as amazingly well as yours will be there if you decide you want to come back. That job will fill quickly, and the others available could pay less, especially when a downturn hits. (And it eventually will...always does.)

Many people are focused on certain areas in the Bay. The reality is that there are regular neighborhoods with regular people. Yes, these “affordable” areas are more expensive than other parts of the world, but I don’t know a single person who spends $13k per month on housing. You can find more affordable options that are less than an hour away from your husband’s job. I think you should really look more at optimizing before you pull the plug on you job.

[MaybeBabyMustache]

Thanks for the input @Tuskalusa . We have enough in cash to sell the vacation house, but the rate is extremely low (2.5%), so that doesn't seem like a worthy investment at this time. We've also considered dumping a bunch of money into our primary mortgage & then recasting the loan. If we chose to deploy our existing investments this way, over the next year we could do both: pay off the vacation house (again, could do that now), and get our primary loan down to about $1,150,000. This makes the monthly payment $5200 + property taxes.

All of the traditional wisdom on this board (totally get that our situation isn't the norm posted for input on the "should we pay down our mortgage) is to not do that. Particularly with the vacation house, that just doesn't seem like a good approach.

We haven't been in the house long enough to claim the capital gains exclusion, so selling right now doesn't make sense. Additionally, the costs of selling a house at this price point is staggering. Excluding taxes (which, we'd still need to pay, as our gains are more than $500K at this point), we'd be at close to $300k in costs. If we'd owned the house for longer, and made more on the market overall, I don't think it would hurt as much. At this point, the tradeoff and the costs of selling just feel too high. We'll continue to evaluate as our financial situation changes.

In terms of fully funding the college account for the kids, our current approach is that we're comfortable (philosophically) with the funding where we're at now. They are half funded. We are okay with the kids working through school, or taking out loans as needed. We will likely be able to cash flow either way once they are in school, and will offer this as an option if they are keeping their grades up. I'm not sure we'd delay any major career decisions in order to fund the remainder, but that's just our approach.

I like the idea of a DAF. We've currently been having the money auto deducted from our paychecks to get the full corporate match, but I'll look into the options around a DAF as well. Thanks for the recommendation.

ETA: Forgot to mention that we've been tracking our expense for about 10 years, so are pretty comfortable with the projected run rate of spend.

[MaybeBabyMustache]

You are overthinking this.

Ask to go part time.  DH stays at job.  You grow continuously absurdly richer. 

Now, what will you worry about now that you no longer have money to worry about?

Agreed.  You can quit, IMHO. 

In fact, on a recent vacation we met a woman in similar situation who took her kids out of school for a year to travel full time around the world, focusing on cultural and learning experiences in each location. We met them on a ferry in Chile.  The teen kids, after some travel experience are now helping plan the trip and we now see them on Facebook.  What a unique gift.

You are in a situation to enable life changing experiences beyond accumulating money for an easy second half of life.  Consider using that incredigle wealth to generate experiences for your kids, and frankly I think a kid raised in the tech renaissance need ti see how the world really is, and how scarce capital is for ordinary people.

So for me, I would diversify out of company stock, there will be plenty of upside and I know friends that had 7 figure net worth 90% in company stocks that went to 0 suddenly (company on cover of Fortune, then broke).  I would also consider skipping part timemphase for an extended experience with your kids.

The rest of the advice seems solid.  With your spending style, you already will likely have a hard time spending your wealth, once your housing costs are reasonable.

Thanks, @PizzaSteve . We've discussed that quite a bit - how can we expose our kids. There are some options around my husband's family (they do not live in the US, and live in a very different culture/environment), but current political tensions make that impossible. Totally agree - it will be important to give kids a balanced life view, and I feel personally pretty responsible on the tech side, given my job. :-)