I've been debating whether to throw this out there. I want to retire on July 17th 2015. Why July 17th? Some options vesting.
I've always been frugal by nature and have been fortunate in certain things that have happened in my career so I have a pretty good stache. I would say I've been mediocre at making my money work for me, but was good on the spending side. That is until 5 years ago when I started going out with my now DW.
Here are the stats:
Net worth (not including equity in primary residence): $2.05 mil
Annual Spending: $108,000 (don't judge, I punch myself in the face regularly)
Major issues preventing retirement:
- Spending. (Obv.)
- Minimal cashflow. Our investments are mostly just stocks (more ETFs than anything), and one rental (my wife's house).
- Concerns about healthcare costs.
- Other complainy-pants voices in my head.
Plan:
- I don't know that we are that worried about our savings rate since a couple of quick punches to the face and we could retire this afternoon. That said, assuming the market goes up a bit, one stock in particular, along with our regular savings and we should get over the $2.25 mil mark in a year. At 4%, that would allow us a withdrawal rate of $90k. So we need to get our spending down to about $72k/ year. Why not $90k? Because of taxes. Even then, we'll have to look at the income shape to estimate the tax hit.
- To get to $6k/mo or $72k/year, we're taking the following steps:
1) Tracking everything. I've got about 18 months of data that I've been pouring through. It ain't pretty. But, it's also very rough I'll leave out the specifics for now. We've now installed Quicken and plan to be pretty diligent about it.
2) Pay off the house. It's pretty close now. Doing this will reduce our annual spending by about $15k.
3) Get some cash flow investments. Potentially another couple of rental units, or other cash flow generators. I'm going to try a Lending Club experiment. I've got about 15% of the portfolio in cash or cash equivalents. Those dollars need to get to work so I don't have to.
4) Get healthy. There are a couple of things we each want to get cleared up while on the Cadillac insurance policy we have through my employer.
5) Evaluate health insurance costs. This is a big concern of mine.
6) Cut spending. We've already started. I took a whack at our car insurance policies. I've started bringing my lunch to work. I am pushing to dump cable, but will be downgrading in the meantime. Eating out less. One thing DW wants is a specific budget to work towards. I've never operated that way, but in conjunction with #1 we're going to give it a shot. I'm pushing that we ditch the wine club and try to stick to cheap wine during the week, saving the expensive stuff for special occasions. We've got to get a handle on our Target habit. We spend $300+ a month on who knows what.
My hope is that we can get our ducks in a row and our spending down to about the $6k/mo point (not counting mortgage) in the next 6 months so come next July we can decide whether our hedonistic adaptation has taken over and we're cool with that spending level. My DW is on board, at least in theory, and is probably more willing to take the risk than I am. She currently is not working and points out that both of us have marketable skills and one or both of us could go back to work in a couple of years if it looks like this isn't going to work out. I'm less chipper about that. In a few years, I'll be 50. Middle manager jobs that pay anywhere near what I make are tough to come by for 50 year olds. I think if we pull the plug we we need to realize that we won't be able to come back to this income level very easily. So part of me thinks I should just suck it up and work for another 3-4 years to get a really solid cushion.
So we'll see how it goes. I may try to make a set of different gauntlets.
