Author Topic: Would you FIRE with this scenario?  (Read 4887 times)

rolliefingers

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Would you FIRE with this scenario?
« on: March 04, 2017, 07:46:49 AM »
I wanted to get some opinions on whether to FIRE or not from this fine community.  Here is our current scenario:

Me - 44 years old, stressful sales job.  I enjoy it but I could also see another mode of life being more fulfilling.  Income 200k per year.
Wife - 35 years old.  She has a job that she could take or leave.  Makes around 50k per year.
We have no children and, barring a miracle, do not see any on the horizon.

Portfolio:
Cash:  $50k
Taxable:  $1MM
IRA:  $655,000
401k:  $303,000

Pensions:  I have 2 vested at this point; will bring $24K (no COLA) at 65.

Spend:
$80-100K per year
Only debt is $315K left on mortgage ($1,800 a month for next 19 years); $235K in equity

I am a slight 4% SWR skeptic over a potential 50 year retirement; I am also more than clueless about taxes for the early retirement class.

Thanks for your input!
« Last Edit: March 04, 2017, 08:20:13 AM by rolliefingers »

Accidental Fire

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Re: Would you FIRE with this scenario?
« Reply #1 on: March 04, 2017, 08:01:22 AM »
Welcome!  With no kids and a 250k income you guys should be able to skyrocket your savings!  My biggest advice would be to get your spend-rate down, 80-100k per year is a lot for a couple with no kids.

If you cut your spending down to just 50k and work one more year you should have more than enough to FIRE. Others on these forums are much better at digging into numbers so I'll let them chime in...

starguru

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Re: Would you FIRE with this scenario?
« Reply #2 on: March 04, 2017, 08:03:53 AM »
Well, you have $2M. at 4% that supports 80k a year.  So what is your actual spending?  Is it 80k or 100k? :)

Do you have your health insurance covered if you quit your job, and included in your budget?

You are close.  Many here would say 4% is too conservative (meaning overly cautious) and I tend to agree with them, especially when considering an 80-100k budget, since it should be easy tighten the budget if necessary and spend less.  This is assuming part of your 80-100k is purely discretionary, which at that level should be the case.  However, I wouldn't fault you for wanting a bit more padding. 




Malum Prohibitum

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Re: Would you FIRE with this scenario?
« Reply #3 on: March 04, 2017, 08:19:02 AM »
Well, your annual spend was 65-70K in 2015, and your wife does not share your enthusiasm for FIRE.  You now spend more, $80-100K. 

Until you get her on the same page and reduce your spending level, I am not sure I would pull the trigger.  Do you intend after stopping work to keep living in a half million dollar house, with annual spending on a mortgage that comes close to equalling some MMM followers' entire annual spending?

Mansions with debt require income.  I would not feel comfortable with your level of income in FIRE and that house, especially since your spending keeps going up, not down.

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #4 on: March 04, 2017, 08:22:37 AM »
You make an excellent point.  I would dump this home pronto but we purchased in '08 just before the slide.  Today I would likely lose 50K in a sale and I struggle with this.  Sure, we could dump it and lose the 50K and make it up, in time, in a smaller spot.  Needless to say, I am stubborn about this. Thanks for your input.

HBFI

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Re: Would you FIRE with this scenario?
« Reply #5 on: March 04, 2017, 08:26:54 AM »
As others said, it depends on where that spending is: $80k vs. $100k.  If you're uncomfortable using a 4% SWR then I doubt you'll want to use a 5% to hit the higher end.  Scaling back expenses would be the easiest if you're getting the itch.  Couple quick questions:

1) Have you analyzed your spending on a post-work basis?  Most people find that many things they spend money on while working go away.  Despite some things like health care frequently going up, a variety of other expenses may decline by a greater amount.

2) Have you considered or are you open to part-time work or projects?  Even if it's a low-paying, but enjoyable job?  Many people prefer not to rely on that, but just pulling in ~$10k per year would go a long way to bringing down your SWR% to something you might be more comfortable with.

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #6 on: March 04, 2017, 08:46:00 AM »
Good questions.  Dumping our too large for our needs home will reduce spending by 30k per year.  Taking 50k loss is my concern and sole reason it hasn't happened yet. 

I am very open to working after my current station.  A reduction in stress is my primary motivator so if I find a way to make 20k in the ER world, then I am all for it.

HBFI

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Re: Would you FIRE with this scenario?
« Reply #7 on: March 04, 2017, 08:52:47 AM »
I can understand the psychological pain associated with absorbing a loss.  But as with stocks, try to separate the emotional aspect of a "loss".  If I understand you correct, you would get ~$30k per year by taking a one-time $50k cost? 

If so, I would recommend thinking of that "cost" or "loss" instead as an investment with a 1.67 year payback period which then generates a ~$30k annuity for the rest of your life.  Probably the best investment option your ever going to find.  Plus, you get the intangible benefits of peace of mind through a lower SWR and you get to pull the trigger ASAP.

Congrats on your truly awesome position!

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #8 on: March 04, 2017, 08:57:15 AM »
Right you are.  Thanks for the perspective and kind words.

goateeman

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Re: Would you FIRE with this scenario?
« Reply #9 on: March 04, 2017, 09:49:19 AM »
Welcome OP!  I make over six figures as well, but have a far more modest expenditure lifestyle:  http://forum.mrmoneymustache.com/welcome-to-the-forum/life-long-saver-possibly-forced-to-fire/

If I were spending the amount you spend, I would be shitting in my pants.  I make close to $200k in some good years, but holy cow if I spent $100k I'd be looking at myself closely and understand WTF I was doing.

You are ready to FIRE if you can drastically cut your spending.  Where does your spending go?  Especially with no children, you should have FIREd way before I did, and have far less expenses as well?

You can FIRE, but you will have to change your consumption and lifestyle somewhat. That may be the main barrier.

Monkey Uncle

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Re: Would you FIRE with this scenario?
« Reply #10 on: March 05, 2017, 06:23:30 AM »
As others have stated, you first need to get a handle on what your spending level is likely to be in FIRE.  Then go run your numbers in cFiresim:

http://www.cfiresim.com/

Don't forget to plug in your pension when it kicks in, and also account for the reduction in spending when your house is paid off.  At your age, you should also include expected SS benefits (or some reduced fraction of expected benefits, if you believe that Congress isn't going to fix that program's financing problems).  You can estimate SS benefits here: https://www.ssa.gov/retire/estimator.html

Will your wife continue to work?  If so, you can include her salary as extra income.

And keep in mind that cFiresim doesn't predict the future.  It shows you how you would have fared if you had retired with your current financial situation in each year since the 1870s.  So implicit in accepting cFiresim output is the assumption that the future will be no worse than the worst years of the past.

PseudoStache

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Re: Would you FIRE with this scenario?
« Reply #11 on: March 05, 2017, 02:39:46 PM »
How did you manage to get $655K into IRAs by 44?  Any tips?

swashbucklinstache

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Re: Would you FIRE with this scenario?
« Reply #12 on: March 05, 2017, 03:01:25 PM »
Keep in mind that if your current expenses are x, at levels of spending in the 80-100k range you'll likely need to think about capital gains tax as an extra "hidden" expense.

This article has some points around this though: http://www.gocurrycracker.com/never-pay-taxes-again/

Bateaux

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Re: Would you FIRE with this scenario?
« Reply #13 on: March 06, 2017, 10:04:48 AM »
I'd do at least OMY and work on cutting expenses as well as consider moving to a low cost of living area.  You have the stash to make this happen.  Just have to get the spending in line. I still think the 4% rule makes a good guide to FIRE.  If you spend less then the odds of sucess increase even more.

BurtMacklin

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Re: Would you FIRE with this scenario?
« Reply #14 on: March 06, 2017, 10:13:44 AM »
How did you manage to get $655K into IRAs by 44?  Any tips?

+1

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #15 on: March 06, 2017, 03:12:20 PM »
How did you manage to get $655K into IRAs by 44?  Any tips?
  I have maxed my 401k every year since 21 years old & rolled inactive ones to IRA.  In 2008 when everything was turning to dust I moved to cash.  Other than these two points, I have done little I can consider to be special.
« Last Edit: March 07, 2017, 05:39:39 AM by rolliefingers »

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #16 on: March 06, 2017, 03:14:34 PM »
I'd do at least OMY and work on cutting expenses as well as consider moving to a low cost of living area.  You have the stash to make this happen.  Just have to get the spending in line. I still think the 4% rule makes a good guide to FIRE.  If you spend less then the odds of sucess increase even more.
  What is "OMY"?  We are in a city which offers many lower cost options than our too big home now.  Cutting this cash drain is first on the docket.  We ought to get our spend down to 60K or so in years we do not have to travel to see relatives.  Appreciate your input.

Malum Prohibitum

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Re: Would you FIRE with this scenario?
« Reply #17 on: March 06, 2017, 03:17:51 PM »
We are in a city which offers many lower cost options than our too big home now.  Cutting this cash drain is first on the docket. 
  I do not see any way to ask other than to be nosy - is your wife on board with this?

swashbucklinstache

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Re: Would you FIRE with this scenario?
« Reply #18 on: March 06, 2017, 04:34:45 PM »
I'd do at least OMY and work on cutting expenses as well as consider moving to a low cost of living area.  You have the stash to make this happen.  Just have to get the spending in line. I still think the 4% rule makes a good guide to FIRE.  If you spend less then the odds of sucess increase even more.
  What is "OMY"?  We are in a city which offers many lower cost options than our too big home now.  Cutting this cash drain is first on the docket.  We ought to get our spend down to 60K or so in years we do not have to travel to see relatives.  Appreciate your input.

OMY = One More Year

Bicycle_B

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Re: Would you FIRE with this scenario?
« Reply #19 on: March 06, 2017, 06:14:15 PM »
Rollie, everyone's asking great questions.  You and your wife can do anything you both want to do, as soon as you are both ready to do it.

rolliefingers

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Re: Would you FIRE with this scenario?
« Reply #20 on: March 07, 2017, 04:59:23 PM »
We are in a city which offers many lower cost options than our too big home now.  Cutting this cash drain is first on the docket. 
  I do not see any way to ask other than to be nosy - is your wife on board with this?
  Yes

PizzaSteve

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Re: Would you FIRE with this scenario?
« Reply #21 on: May 26, 2017, 01:38:59 PM »
If you go for it, i would have a backup plan with measurable trigger points you both agree to in advance.   For example, if costs dont track or portfolio drops to x, we will work another year, cut vacation budget, or find a side gig, etc.

The scenario planning should help avoid disagreement over what to do in the future if a bad case arises.

jlcnuke

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Re: Would you FIRE with this scenario?
« Reply #22 on: May 26, 2017, 02:38:53 PM »
Would I FIRE in your shoes? Not likely with the assumptions I'm making. As your spending has apparently been going up from what I'm reading here, I'm going to assume that the $80-100k should just read $100k/year. That's spending, I'm assuming taxes not included yet. We'll get back to that though.

I popped your numbers into FIRECalc -$78.4k/year spending (removed the mortgage from that amount assuming you're paying taxes/insurance separately), 50 year retirement (probably should use longer as that only takes your wife to 85, but the numbers generally don't move much after that), $21.6k/year spending for the next 19 years for the mortgage PI, $24k pension starting in 2038. For that scenario, FIRECalc gives an 82.3% success rate. It doesn't take into consideration any further lifestyle creep, taxes, or other potential increases in spending moving forward which would make those odds worse

IF, on the other hand, I'm wrong and you're spending is actually $80k/year including taxes and the mortgage, AND you can both commit to not increasing it at all in the future, then FIRECalc says you're good to go even adding in a 10% effective tax rate. Oh, and this plan probably goes to hell if your relationship doesn't last forever (even retired people get divorced, sometimes all that free time can hurt a relationship studies have shown).

Alternatively, you might consider just leaving the job you seem to hate and trying to find something you would enjoy doing (even if for less money) until the numbers are a bit more conservative.

Saving4Fire

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Re: Would you FIRE with this scenario?
« Reply #23 on: May 26, 2017, 03:07:42 PM »
No, I would not.   Your expenses are too high compared to your savings and being so young that adds quite a bit of extra variance to your retirement success.  A few more working years and downsizing your home would do wonders for your chances of success. 

If your job is super stressful consider looking for a new one.
« Last Edit: May 26, 2017, 03:12:26 PM by PopMegaphone »