Author Topic: When Is it Enough  (Read 3367 times)

itsfrugaltime

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When Is it Enough
« on: November 18, 2019, 07:07:12 AM »
Hello!  First time poster here but been reading for months now.   Just wanted to post my numbers, somewhat as a release as I can't talk about it and also for advice.

House: $400k
Investments/Cash: $1.1M
Debt: $0

Net wage: $8k-8.5k

Family: Couple (40&39) with 4 children (age 2-10)
Location: Somewhere with free health care

Current Spend: $4.5-6k per month
Spend after Kids: $3-4k
Public Pension at 65: ~$2.2-3.5k   -- the lower number is if we quit today, the higher number is if we work until 58

I am keeping my numbers at a high level for now but what we have is investments that are near to "our" retirement figure.  Just trying to think through what our options are.   I have basically accepted that retirement is not possible until the kids are bigger but I am starting to wonder if we should continue to work as much.   If you look at our numbers, our public pensions alone would almost cover our expenses and yet we have investments as well that should mostly cover us.  It seems we have a lot of buffer and quite some time to get there. 

I am wondering if we should consider pulling back in a few years and just coasting until the kids are more grown up?  Or even doing that almost immediately?   With the way that the taxation system is built, we could drop our employment income in half and our take home would still be around $5.5k.  We could even hit our investments for a small amount (~1% per year) if we needed a little more.   I don't know, I am not quite sure if it's a good idea but I want to at least explore it.   We have had some family pass in the last while and I am realizing not to take things for granted.  We have to enjoy life while we are young and have already done the hard savings work.

The other perspective is that we are making good money, we don't quite hate our jobs and there is a chance that one or both of us could lose our jobs.  We would find more work but probably have to take 20% or more pay cuts.  There is this conservative side of me which just says that I'm not done yet, the stock market is unpredictable and maybe in a bubble and who knows what future expenses there are.

The one other idea I am thinking of is putting the investments to the side and conceptually investing towards a bridge fund that will cover our expenses until the kids are bigger at which point we can more safely pull our stash.

This isn't the best organized so appreciate anyone who made it through.  Just throwing out quite a bit of random ideas I have been working on.
« Last Edit: November 18, 2019, 08:17:10 PM by itsfrugaltime »

Linea_Norway

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Re: When Is it Enough
« Reply #1 on: November 18, 2019, 07:26:47 AM »
Your current pension savings is enough to get you through the period from age 65 and onward, at least I presume you have looked at what you have saved up so far, not what you will have 20 years later?
In addition you have 1.1M $ in investments. No, there is no reason why both or you should continue to work full time jobs with high pay.

I wouldn't take your public pension for granted. We know that future rules can change, so don't presume that your pension is untouchable. Maybe you might get less than expected in the future and you might set aside a bit of more money for that.

Currently you are living below your means, while having investments as well. If you would start to live of 4% of 1.1M right now, that would generate 44K netto per year. Currently you are using 72K at the most. So you would need to work a little beside the 44K to make ends meet, but there is no need to make your current 96K per year. Or work a bit more if you want to keep building up more stash.

The other option you could consider, is eating up (part of) your 1.1M, as you won't need that whole sum when you reach 65. That is what we are planning to do. We count on getting enough pension from age 67 and will eat up our FIRE budget until then. But if we need more money, we know that we will have a paid down house that we could sell and then rent somewhere cheaply.

By the way, in the last year, we still didn't have confidence to FIRE completely and decided to work a year more. But we also didn't need our entire incomes. So we both started to work 80%, which has given a better life-work balance in that last year. We probably won't be saving 75% of our income like last year, but as you save, enough is enough.
« Last Edit: November 18, 2019, 07:28:41 AM by Linea_Norway »

Laura33

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Re: When Is it Enough
« Reply #2 on: November 18, 2019, 08:14:56 AM »
You have plenty to allow you to cut back right now.  You have $1.1M invested.  Even if you can just cover your expenses and not spend another penny, based on your current plans, you have plenty of time for that to grow quite significantly between now and when you fully retire.  That is also a really, really big safety net if one or even both of you lose your job.

Really, what's your worst-case scenario?  You go part-time, and then you both get laid off, and any new jobs require you to take a paycut?  So what?  You know you have your retirement covered with your pension.  You have $1.1M more to tide you over.  Your new jobs need to cover only your expenses -- and really, with an extra $1.1M floating around, you don't even need that. 

You know what your real worst-case scenario is?  You continue with your nose to the grindstone for the next decade because you're terrified that something bad might happen, and you miss quality of life you could have had had you realized you already had plenty. 

As people say here all the time, you can always make more money, but you can't make more time.

dandarc

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Re: When Is it Enough
« Reply #3 on: November 18, 2019, 08:21:18 AM »
I try to remind myself of how insignificant the risk of running out of money is in the grand scheme from time to time.

See: https://engaging-data.com/will-money-last-retire-early/ for what I'm talking about. We tend to be overly worried about that tiny sliver of red indicating "broke", when it is much more likely the money will outlive us.

Anyway, I'm with the others - you may well be fine to retire immediately, and surely are good enough for cutting back to "just covers expenses" amounts of work if that is what you want to do. A million bucks may not be what it once was, but it is still a lot of money.

zolotiyeruki

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Re: When Is it Enough
« Reply #4 on: November 18, 2019, 08:23:03 AM »
I think we can ignore the pension income for now.  The question is how to get from here to 65 without exhausting the $1.1m savings.  Here's where you should fire up cFireSim or Firecalc and start running scenarios

Option 1: retire now
Assuming you spend $6k/mo for the next 25 years, both cFireSim and FireCalc give a 50-60% chance of success.  That, however, is a worst-case scenario.  Dropping your monthly spend to $4,500 increases your chance of success to 85% or so.  Keep in mind, also, that kids are more expensive as teens.  They eat more and typically have more expensive activities/hobbies.

Option 2: go part time until age 65
Let's say that you quit working full time, and take on work that brings in....oh, let's say $30k/year, and you keep spending $72k (worst-case scenario).  cFiresim and FireCalc both give you a 100% success rate.

Option 3: keep working full-time for a few years
If you worked for 5 more years, contributing $24k each year, and getting 7% return, that'll leave you with $1.68M, which will only have to cover 20 years' worth of expenses.  Even at your highest spending rate, you get 100% success.
If you worked for 3 more years, with the same assumptions, you get an 87% success rate at a $6k/mo spend, and 100% success at $4500/mo spending

itsfrugaltime

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Re: When Is it Enough
« Reply #5 on: November 18, 2019, 08:30:38 PM »
Thanks for the response LineaNorway.  You are right about the pension, I have to think through this more carefully.   I think the more accurate pension numbers are $2.2k if we were to quit today and never work again.  If we work until our late 50's then it would be $3.5k. These numbers are already a bit padded too.  I agree that we should be conservative with these pensions but I also think that the economy will grow over the next 25 years.   There is also our stash.  So long as we have $750k, that would be $30k / year and if we had to we could live completely on that.   I would prefer to have just a touch more though.

We also could look at moving houses to one with a suite and renting it out.  That could bring in somewhere around an extra $1k.  Right now it doesn't seem worth it but to be retired or even as a safety net if things go south it could be an option.

I appreciate all of the responses.  I am just happy nobody yelled at me!  I feel I need to spend some more time on it.  I am probably going to end up being a serial OMY poster but so be it.  Right now, the job is not that bad and the future is murky.  When I think of that and with children it seems I would be more comfortable if the numbers were a bit higher.  I think I will keep going and look at this again in 6 months.

I just wonder though, if this ever ends.  I saw a thread about going from $2m to $3m.   I hope at some point I am able to pull the rip cord.
« Last Edit: November 18, 2019, 08:43:41 PM by itsfrugaltime »

kei te pai

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Re: When Is it Enough
« Reply #6 on: November 18, 2019, 09:05:59 PM »
How does your wife feel? In your situation I would be prioritising health, happiness, family time, and putting money thoughts nearer the back of the queue. You are pretty well covered financially. You dont need to obsess about all possible doom and gloom scenarios.
Instead start forming some visions of how life could be wihout work commitments. Or with dramatically reduced work obligations. Think of what could go right, not what could go wrong!
Im not sure how much your wife is working in paid employment, but with 4 young children I am sure you are both pretty busy. How would the pace of life change if you worked less?

nancyfrank232

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Re: When Is it Enough
« Reply #7 on: November 18, 2019, 09:17:05 PM »
With 4 kids, this doesn’t seem nearly enough

AO1FireTo

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Re: When Is it Enough
« Reply #8 on: November 18, 2019, 09:41:02 PM »
The one question I would ask you, is what are you plans for your kids education?   With four kids, I'd want to ensure I had enough saved to at least get them through their undergraduate degrees, so that could be quite expensive.  That alone might be worth working a few more years to build up their education fund.  I don't think as parents we are obligated to pay for their university, I think paying their own way, at least partially by working is good for them.  Depends on your philosophy.

The rest looks great, well done, you've saved a lot by a relatively young age, the future looks bright.

Linea_Norway

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Re: When Is it Enough
« Reply #9 on: November 19, 2019, 12:57:02 AM »
Even if you decide to OMY or several years, consider to work less than fulltime while you do this. Even working 4 days a week will give you a lot more life (50% longer weekends). Maybe you and your wife would both like a day off alone?

DH and I have chosen to have our day off on the same day (Friday), to be able to have more long weekend together.