Author Topic: Pulling the trigger  (Read 4981 times)

badassprof

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Pulling the trigger
« on: September 18, 2016, 08:01:13 PM »
When did you know it was time to pull the trigger? How do you check your fears and anxieties?


Our situation:  we currently make about 250,000, which includes 31,400 from renting an in-law unit in our house.

Our expenses are roughly 100,000 (not very mustachian, I know. We are working on it)53,000 of our expenses  is taxes and mortgage. We are in a relatively high cost of living area and do not plan to retire here. We owe around 680,000 on a house currently valued at 1.4 million. We have about 600,000 in our 401ks at the moment and around another 100,000 in savings and company stock.  We are on track to have this at about a million by the time we retire at 55 and to buy a house  outright in an area close to our family where the cost is significantly less then it is now.

I have crunched the numbers and it seems very doable for us to retire at 55, although a lot of that will depend on house values in a few years, I suppose. But my partner and I both grew up poor and we find it so hard to think about taking the leap of faith.  The numbers seem to suggest we can do it, but then we start wondering...what about health insurance? what about illness? what about? what about?

Any thoughts on how to quell those anxieties and worries? and for those of you who are FIRE, what do you wish you had thought about or planned for now, retrospectively.

Thank you for any insights.


frompa

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Re: Pulling the trigger
« Reply #1 on: September 19, 2016, 03:17:13 PM »
No plan is fool proof, of course, but one thing to throw in the mix as you contemplate retirement is this:  You could well have health crises, health insurance difficulties, and all sort of "what if's" that you'd rather not.  If life in general is any indication, you probably will not be able to dodge all bullets.  BUT, with a basic income as assured as it can be by your life savings and frugal habits, you will have more security to weather these storms.  My own experience includes having a family member hit with a major illness a few years ago, and because I had worked my life to have low expenses and a 'stache, I was able to focus on doing what needed to be done, without having to freak out.  Sure, that interruption in my working and earning $ delayed my FI by a few years, but it was TOTALLY worth it.  The flexibility afforded by my long term plan gave me confidence in my longer term plan.  "Anxieties and worries" as you phrase it are going to be there no matter what - but I'd sure rather face them with a hefty stache and freedom from having to earn, than any other way.  Your numbers look good. 

h2ogal

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Re: Pulling the trigger
« Reply #2 on: September 19, 2016, 06:16:02 PM »
I think your target numbers and where you are at now look fine.  Im sure you could find ways to reduce your spending now to do even better, sooner.

With your net worth, you can cover basic living expenses.  You should be able to sell your house and buy a new house in a lower COL area outright when you are ready.  You guys are on the right track.

My advise would be to track spending and estimate costs carefully to avoid as many surprises as you can.  I retired a year earlier than planned, and my biggest surprise was the cost of health care premiums and deductibles.

That said, when you do pull the trigger you will surely feel some anxiety regardless of how well you plan.   I recently retired, have a decent stache, lots of cash, a paid for house and DH is still working at a successful business and I STILL feel anxious about $. 

I think the only way to get over the nervousness is to just do it and after 6 months or a year you will feel fine.

badassprof

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Re: Pulling the trigger
« Reply #3 on: September 19, 2016, 10:17:43 PM »
Thank you, everyone, for these thoughtful replies.

The point about needing 25,000 less if one reduces one's spending by 1,000, definitely is some food for thought. Housing and property taxes are definitely our biggest expenditure (half our budget). We are lucky, though, to have the apartment to mitigate some of those costs. And we plan to get out of this spends town once we retire. But we could definitely tighten up our food budget: we have gotten a bit lax on that front!

I think my main worry is health care, which would run us about 1000 a month based on my preliminary research. That is for a basic plan too--I didn't realize it was so expensive. We do have a retirement account where we can drop funds for future health expenses--sort of an HSA for retirement. We save my income--I should drop more of it in that fund.

herbgeek

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Re: Pulling the trigger
« Reply #4 on: September 20, 2016, 04:26:36 AM »
A million dollars and a paid for house is really not a lot of money (@4%, we're talking 40,000).  You'll likely need to save additional sums outside of your 401k.  Or significantly reduce your expenses. 

badassprof

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Re: Pulling the trigger
« Reply #5 on: September 20, 2016, 08:06:34 AM »
No, I don't think that would be enough either. If we sold our house today, we'd have another 800,000 for the coffers, but who knows if that would be applicable 7 years from now. I agree that reducing savings is the best way to go!

badassprof

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Re: Pulling the trigger
« Reply #6 on: September 20, 2016, 10:40:25 AM »
Ha--meant to type reducing spending!

marty998

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Re: Pulling the trigger
« Reply #7 on: September 20, 2016, 03:50:02 PM »
A million dollars and a paid for house is really not a lot of money (@4%, we're talking 40,000).  You'll likely need to save additional sums outside of your 401k.  Or significantly reduce your expenses.

More than enough for most people on this forum.

That million from age 55 will easily see them through to the "normal" retirement age... then they can access their 401k money.

Slee_stack

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Re: Pulling the trigger
« Reply #8 on: September 22, 2016, 10:21:54 AM »
I'd be nervous in having more net worth in my primary residence than in all my other investments combined.  We are also at about $250k/yr income but our primary residence accounts for about 20% of our networth.

Its good that your house also serves as an income stream, but that's too much risk in a single basket for my personal comfort level.  I also cringe at the overall carrying costs you must incur for a house like that.  $53K in tax/mortgage alone?  Ouch ouch ouch ouch!  No wonder you are pushing 100k spending per year.  We couldn't spend that if we tried.

Mortgage deductions are great, but there's still an outrageous amount of your money that's just flowing down a government drain.  That would drive me batty.  Almost nearly as absurd is the likely $100k+ in transaction costs you'll probably have to pay just to offload the house.  Ick.  I think I'd be selling the house tomorrow, pocketing the $800k and be on the first train out of Dodge before another housing market correction occurs.

HCOL areas are evil.




badassprof

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Re: Pulling the trigger
« Reply #9 on: September 23, 2016, 02:01:55 AM »
It makes me nervous too, slee-stack, and is part of the reason I wonder if we should just pull the trigger now.. But at the same time we are pretty new to the mm way of life, and I worry that we don't yet have our spending ducks in a row to commit to retiring in our mid 40s. We have been good savers, but also good spenders up until the last couple of years. My partner, I know, isn't ready to take the plunge. We could just do what our savvy neighbor did and sell now, but buying another house (or even finding a rental) is a nightmare in Berkeley at the moment, especially with furry friends.

I agree HCOL areas stink. It is no small irony that my colleagues from graduate school think I made a deal with the devil because I've gotten two great jobs in big cities. I would have been the one happy to teach in some small town in the mountains!

Metric Mouse

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Re: Pulling the trigger
« Reply #10 on: September 25, 2016, 06:45:42 PM »
It makes me nervous too, slee-stack, and is part of the reason I wonder if we should just pull the trigger now.. But at the same time we are pretty new to the mm way of life, and I worry that we don't yet have our spending ducks in a row to commit to retiring in our mid 40s. We have been good savers, but also good spenders up until the last couple of years. My partner, I know, isn't ready to take the plunge. We could just do what our savvy neighbor did and sell now, but buying another house (or even finding a rental) is a nightmare in Berkeley at the moment, especially with furry friends.

I agree HCOL areas stink. It is no small irony that my colleagues from graduate school think I made a deal with the devil because I've gotten two great jobs in big cities. I would have been the one happy to teach in some small town in the mountains!

So sell the house and move to the mountains? You only go around once; no sense in letting fear and anxiety hold you back from what you could be doing.

MntnFIRE

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Re: Pulling the trigger
« Reply #11 on: September 26, 2016, 01:05:14 PM »
I too grew up poor and have never completely banished my inner bag lady fears. My overall approach to achieving happiness, freedom, etc.  is to plan for the negative events but hope for the best (or even the average).

I am friends with an older couple who retired in their 50s right before the Great Recession/housing market collapse. So they experienced the full effect of sequencing risk when they retired. I found their experience to be both inspiring and cautionary. They owned a house in a HCOL area with significant equity. They had retirement assets that they did not plan to access until later. I believe one of them had a small pension from an earlier job. They bought a small cabin in a ski area for their retirement home with the plan to sell their main home, make a modest addition to the cabin and live off the remaining house proceeds until they could access the retirement accounts.

Well, they retired and moved but the bottom fell out of the housing market before they sold their former primary house. When they realized they could not sell it without wiping out all the equity they had counted on, they rented it out so it was at least cash-flow neutral. Their retirement accounts dropped nearly in half so they did not want to make withdrawals at a low. They got part-time seasonal minimum wage jobs at ski resorts (which also gave them free ski passes). They took SS at 62 instead of waiting until later as they had planned. They did not do any travel beyond local camping trips. They did not do the addition to their retirement home. They lived like this for several years until the housing and stock market recovered. At that point they sold the old home, did the addition, started to travel again, etc.

When my friend told me this I found it inspirational because we had been friends through all those years and all I saw was 2 happy people skiing, biking, hiking, etc. while living in a beautiful area. Neither ever complained about the things they weren't doing. Also, they ultimately did have the total retirement experience they envisioned. They just had to wait a bit and they did the waiting while retired, rather than while working at high stress jobs.

I also found it cautionary because their ability to get through the recession was based on having the ability to meet their basic needs even after their "stash" had been essentially cut in half. They did have a relatively low cost place to live. They were both healthy and so could work at jobs that included a physical component. In some way (I think through a former employer) they had access to low-cost health care. Their main source of enjoyment (which I think is as important as shelter, food, etc.) is outdoor activities that are free given that they already owned any needed equipment. They had the mental flexibility to change their plans based on the external financial reality.

Of course it is possible to dream of combinations of terrible events that no one could get through. But it is possible to plan for some, especially events that are not that uncommon. If you plan so that you will be "OK" if one person gets sick, if the economy tanks, if a natural disaster causes a loss, etc. then you will be more than fine most of the time when things are just cruising along normally.