Ready for Chubby Fire?

[J.R. Ewing]

Topic Title: Ready for Cubby Fire?

Life Situation: Married Me (43), DW (40), & two kiddos (8,5)

Gross Salary/Wages: Wife - ~$200,000/yr, Me - ~$140,000/yr

Current Take Home Expenses: Estimated because 2020 & 2021 were low from pandemic.
 
Tithe                          34,000
Daycare                         16,000
Shopping & Gifts           9,000
Grocery                         8,000
Property & State Tax           7,400
Medical Out of Pocket         7,200
HOA & Home Maintenance   6,500
Vehicle Ownership & Gas   5,700
Utilities/Internet/Phone   3,500
Restaurant                   3,500
Fun Stuff                           3,000
Travel                           2,500
Subscriptions                   1,300
   
Sum                         107,600

Expected ER expenses: Tithe will drop, and Daycare will go away, but travel will increase & I may max out my out-of-pocket maximum for an ACA plan.

Tithe                            5,000
Daycare                                 0
Shopping & Gifts           8,000
Grocery                        8,000
Property & State Tax          7,400
Medical Out of Pocket       24,400
HOA & Home Maintenance   6,500
Vehicle Ownership & Gas   5,700
Utilities/Internet/Phone   4,500
Restaurant                   3,000
Fun Stuff                           4,000
Travel                          12,500
Subscriptions                    1,300
   
Sum                           90,300


Assets:  Combined 401K ($669,000), Combined Roth ($196,000), HSA ($12,000), Combined taxable ($1,553,000), 529s ($60,000)     INVESTIBLE TOTAL - $2.49M   PAID HOUSE - $630,000

Liabilities: None
General Plan: Pull the cord next year, assuming assets are similarly priced to today.  We could stay put or we could move back to the mountains, but our expenses would be similar except for ~200,000 more we might need to pony up for a new house up there.

Specific Question(s): 

Following the 4% rule it seems like we should be good.  4% of our investible total is about 100,000.  We can certainly shave some of the costs off here and there, but travel is important to us.

What gives me pause are healthcare and college costs.  Most years we shouldn’t use that full $24,400 for premiums and out of pocket maximums through the ACA, but some years we might. 

College costs are also a concern.  $60,000 is a start for two years, but what will in state colleges look like in 15 years?

We both get SS, and I get a $2000 monthly pension at 65.  What am I missing?

Thanks for the comments.  We're natural worriers. 

[lhamo]

Check and see what the income limits are for financial aid at your state schools + any privates you might consider -- if the latter do not use the CSS profile a strong student with limited taxable family income often gets substantial aid these days (some schools waiving tuition for families under certain thresholds).  With your asset base it should not be too difficult to set things up so that you limit taxable income in the years your kids will be headed for college -- FAFSA does a 2-year look back so you will need to reign in taxable income starting the year your oldest is a sophomore.  And if it is really necessary you can always pick up some additional income those years to help them get through.  Probably won't need it, though.  Even with the market drop we still have around 100k in DD's college savings, which should be plenty to fund 4 years of in state costs (including dorm) regardless of financial aid.

[former player]

Congratulations on those very nice incomes and very substantial savings.  I probably wouldn't include the 529 (which needs to accumulate) or even the HSA (which may need to be spent) in the stash from which you will draw your 4% though.

First, expenses.   You could be FIREd for 40 years, which means that you need to take account of some big costs that I'm not seeing included in your year to year expenses, including allowing for updating your tech, getting new cars probably at least once in that period, and probably some major housing maintenance costs (updating wiring and plumbing and quite possibly some cosmetic stuff too, unless you think you would be be happy if you were currently living in a house that hadn't been cosmetically updated since the 1980s).

If the house you move to is $200k more expensive does that mean the taxes and utilities will also be more expensive?   Are the costs for the childrens' sports and hobbies and educational extras included in "fun stuff"?

There is obviously plenty of scope in your expected expenses for making reductions or moving money between categories.  But are you both mentally prepared to make those changes if it seems necessary, or would lowering one or more categories of expenses to make way for others (eg you don't currently have anything accounting for the costs of illness/disability/old age) make one or both of you unhappy?  If you are both practical people with a realistic attitude to money and the ability to change course as necessary you will be fine.

Secondly, in 40 years the world is going to look very different.  Most of those ways we don't know about, but the one we do know about is climate change.  If you are looking at moving location you need to factor in what the climate will be like there in 40 years' time.

[SailingOnASmallSailboat]

College costs even at state institutions for in state students vary wildly. In Virginia, one of the less expensive state schools (because there's a range) right now is $25,000 a year including room and board. If either of our kids had gone to UVA (also a state school), it would be $35,000 a year. (Out of state students pay $55k for the first school and $70k for UVA.) That's current, 2022 prices. In 10 years? I'd have to imagine you'd be adding easily $10k/year to each of those. Sounds like other states are more affordable.

[We be free if we try]

I think you’re close (well done!), but it’s a long retirement and your kids are young yet. I’m wondering if you both plan to really never earn money again? Seems like taking a couple years off, then eventually finding a “paying hobby” that you control, that you like to do, that earns even $20k or so a year would help ease the worry of having to make one pile of money last for 55+ years, given all the “unknown unknowns”. it’s how I look at my retirement - how flexible am I willing to be in order to get what I want, which is to not work my first career anymore. Turns out I’m willing to imagine a lot of flexibility.

[ATtiny85]

Be sure to give some thought about larger expenses, replacement HVAC, replacement vehicles, replacement roof, and so on. You seem to have enough flexibility in your line items to cover those things, but good to at least list some of those and see how big of a bubble it can be.

[zolotiyeruki]

I think you’re close (well done!), but it’s a long retirement and your kids are young yet. I’m wondering if you both plan to really never earn money again? Seems like taking a couple years off, then eventually finding a “paying hobby” that you control, that you like to do, that earns even $20k or so a year would help ease the worry of having to make one pile of money last for 55+ years, given all the “unknown unknowns”. it’s how I look at my retirement - how flexible am I willing to be in order to get what I want, which is to not work my first career anymore. Turns out I’m willing to imagine a lot of flexibility.

^^^ This!  Kids do, unfortunately, get more expensive as they grow up.

Here are a couple of other thoughts:
1) Why do you want to retire early?  I don't see any mention in your post about what your goals are.  Do you hate your current jobs?  Are you burned out?  Just want to spend more time with the kids?  Want to spend time on other pursuits?  It's been said that in order to retire, you need to have enough money, have something to retire to, and be emotionally ready to leave the workforce.  Can you answer those three things?
2) You're kind of on the edge, financially, assuming the 4% rule and expected higher expenses with the kids.  As I look at your budget, I can't help but think that you guys are due some facepunches.  Over $650/mo for "shopping and gifts" is a LOT of money, and a similar amount for groceries for a family of 4 is pretty high as well.  That home maintenance budget also seems really high, unless it includes a sinking fund.  I'm guessing, based on your state taxes not changing in retirement, that you're currently in a state with no income tax?
The point of talking about those numbers is this:  making some fairly painless (IMO) modifications to your spending can push you from "probably ok" to "yeah, you'll be fine" very quickly. 
3) The good news is that even if the numbers are marginal, they are also not permanent.  If some sort of hardship arises, or the market experiences a long-term malaise, or you acquire a new, expensive hobby, you are still young enough to find a job to supplement your income.