FIRE AMA

[yetanothermmae]

As of the beginning of this year, my spouse and I decided to stop working. We are using FIRE principles to manage our money and draw an income stream. I am going to post some details, in the hope of having a conversation about it. AMA (though I may not answer everything, especially if it makes me identifiable). There are some things that we are still figuring out.

Anyway, here are the high level numbers:
Net worth: $4.25MM
Taxable: $700k
Roth (401k & IRA): $700k
Traditional (& similar): $2.1MM
Home equity: $750k

Mortgage: $160k @ 2.62% (not paying off early due to interest rate)

We are budgeting to withdraw about $110k/year. 

This was basically our pre-retirement budget plus health insurance, and we more or less decided to stop working when we saw that we could fit that number into a reasonable 'safe withdrawal rate'. We were not comfortable at 4% SWR; we retired at a projected 3.2% withdrawal rate excluding home equity and 529s. We are purchasing health and dental insurance on the marketplace. We are both ~40 and have two kids in elementary school and we have some 529 savings not included above. We have inherited money in the past (accounts for ~1/3 of NW after growth) but do not expect to inherit any more. We both worked relatively lucrative jobs but never cracked $300k combined income. We graduated with minimal student debt and started maxing retirement contributions ASAP.

Some things we are still working out, like specifically what order to access money. I'm generally not intimidated by tax stuff but it's more complicated than the FIRE blogs make it sound, and also the IRS guidelines are not totally fixed or even fully fleshed out. Since we have 20 years until we can access our accounts without penalty, inflation makes things more tricky (we expect to need about double our current income by then for the same real dollars).

On the human side, it has been interesting. It's a weird thing to tell people IRL. I usually say that I'm a SAHM and that spouse is 'on sabbatical'. It's bringing up tensions with our extended families a bit due various financial dynamics there. We are trying to re-tool our marriage to adapt, also, but we have fairly different desires for how to use our time. The kids do not think it's weird at all and they love having us come to school stuff, have school breaks off together, etc. But I am aware that this is just adding to their substantial privilege. The whole thing feels very weird and surreal. I simultaneously feel super rich and also tense about spending money. I have a lot more I could write but I'm trying to keep this a reasonable length, so... AMA?

[jinkies]

How are each of you spending your time?

Do you anticipate either of you ever getting a "hobby job" in the future, or do you expect to be done working for good?

If I'm reading correctly, you more than halved your income-- has it been difficult to live within the new budget, or was most of the rest going into savings vehicles anyway?

How much do you pay for health insurance for a family of 4? Not that I have the savings to retire, but if I did, I always felt like the insurance cost would be a major obstacle.

How would you classify the cost of living in your area (HCOL, MCOL, LCOL)?

[wise_rita]

My only questions have already been asked: what do you do all day and what is your insurance cost?

I'd also be interested in how your friends react. People who you can't feed the SAHM/sabbatical line to.

[yetanothermmae]

How are each of you spending your time?
I am doing a lot of volunteering and school-oriented stuff. And a lot of naps, tbh. Spouse is suddenly into bullet journaling, self improvement, etc. Spends former work time on sports/exercise and home projects (which we have a backlog of).

Do you anticipate either of you ever getting a "hobby job" in the future, or do you expect to be done working for good?
I actually technically have a hobby job. I earn ~$1,500 a year doing what I consider volunteer work but have to be officially employed to do it. I have considered going back to school to do it full time, but that would be less helpful to the org and would require a huge commitment from me, so I don't think I will. Spouse also has a hobby that could make money but to my surprise, has been less into it since retiring. Has always been more interested in open sourcing than trying to make money off it.

If I'm reading correctly, you more than halved your income-- has it been difficult to live within the new budget, or was most of the rest going into savings vehicles anyway?
Pretty much just the rest went to savings. We did cut a couple smaller luxuries, but spouse did not want to go Mr. MMM frugal in order to retire.

How much do you pay for health insurance for a family of 4? Not that I have the savings to retire, but if I did, I always felt like the insurance cost would be a major obstacle.

$4,300/yr is our estimate for a Gold level health insurance plan for the 4 of us. It will ultimately depend on our income so the number is not guaranteed. Retail cost of plan is ~$15k. We expect some years to have higher income and the cost will be around $11k/yr (in today's equivalent). 

$1,200/yr for dental insurance, no subsidy.

How would you classify the cost of living in your area (HCOL, MCOL, LCOL)?
MHCOL, I think. Not a NY/CA type place but suburbs of a growing metro area. Similar to Connecticut or Portland, Oregon.

[yetanothermmae]

Jun 14, 2024 15:30:31 GMT -5 wise_rita said:

I'd also be interested in how your friends react. People who you can't feed the SAHM/sabbatical line to.

It can be awkward! It varies person to person, it really seems to depend on the circumstances of the person themselves. I'm a fairly private person so I don't really volunteer info about it.

My friend from HS who is very direct peppered me with questions. She asks very frankly what we make, how much we have, and how it all works. She has since asked me for investment advice.

My friend who is a SAHM was very sweet and said we should have a retirement party and stuff like that. I went to a dinner for her birthday and in the guise of helping me make conversation with her friend from college, she just said directly "and they're retired!" I was flustered. Lol.

Most people just say, "oh wow!" and ask a few basic questions like "what do you do all day?" or "how is it?".

Some people assume we now have limited funds or the opposite (like if we go out to dinner socially). It's really interesting, actually, how different the responses are.

[themoneytree]

How old are you?

Congrats - I think it sounds wonderful.

[yetanothermmae]

Jun 14, 2024 17:11:11 GMT -5 themoneytree said:

How old are you?

Congrats - I think it sounds wonderful.

40ish

Thank you! I highly recommend, lol.

I do have concerns about my marriage, but hopefully we find a new groove.

[jobae1234]

Can you talk more about the impact to your marriage?

[sadlebred]

Congratulations! FIRE is my dream, and it isn't happening!

If health care gets to be too much, could one of your work part-time somewhere that offers health insurance? Even retail many times offers it to part timers.

[heygrey]

Thanks for sharing! I find FIRE so interesting and my question (that you answered) is always "but how do you save that much money?!"

H and I are very good savers, but we did not choose lucrative careers. We also had lots of student loan debt and some other financial set backs that prevented us from saving aggressively in our 20s. We're doing a decent job of making up for lost time now, but we'll never get to FIRE.

[noodleoo]

Wow, that’s amazing! Congrats!

H and I have been huge savers and I think we could got the FIRE route if we really wanted to, however it scares the shit out of me. Did you work with a financial advisor or do it all yourself? Do you have any fear/anxiety about being without an income and if so, how do you deal with it? Do you worry about getting bored?

I think the social aspect is very interesting. I quit my career to work part time after having kids and I was surprised how difficult it was emotionally and how much of my identity was tired to my former occupation.

How do you plan to pay for the kids college? Do you have separate savings for that?

[ellipses84]

Congratulations! That’s a huge accomplishment and it’s great you can spend more time with kids and volunteering!

Do you have a plan for the future in case you decide you want /need to bring in some extra income?

Do you have any plans to travel?

What are your plans for the kids’ college beyond the 529s and how does your investment income factor into that? I know the FAFSA changed this year so you may not know the answer but that may be something to track.

Are you getting discounted healthcare based on investment income and how does it work, especially for this first year? Do you base it on your yearly tax return or just self report what you consider monthly income?

For others asking, I have a state healthcare exchange plan (ACA / Obamacare) for a family of 4 and it’s about $1,000 month for a mid-level, silver PPO plan. Our OOP costs aren’t too bad. If our income was around $110k/yr we might get a $250-500/ month discount. We pay $50/month for basic dental and pay OOP costs. One year we paid $160/mo for a better plan but we still ended up paying a lot OOP. I’m tempted to skip a dental plan and pay OOP to a dentist that has good cash rates.

DH and I have a pact if we ever won the lottery or inherited a bunch of money we wouldn’t tell anyone. There would be signs but we don’t live close to family and our friends have no clue what we make now.

I grew up with close family friends who lived off investment income from an unexpected inheritance starting in the 1980s. She became a SAHM who homeschooled and he had a woodworking hobby. Sometimes when they weren’t making enough interest, they would take on part time work, like he’d take woodworking and treehouse building commissions and she’d teach a few classes to other homeschooled kids. In response to the What do you do? question, they’d tell people carpenter and teacher.

[mae0111]

This is awesome! I am impressed with your health insurance costs. DH and I are self-employed (DH owns a company with 7 other employees, and I am a contractor for him as of 2 weeks ago - before that I was a contractor elsewhere). We pay $2300/month for a HDHP - $7500 deductible. If we went slightly cheaper, we would have to pay OOP for our kids weekly therapy and quarterly med management.

I’m also interested in the family and friend dynamic. DH is having conversations that could allow us to do what you’re describing in about 3-5 years. This is an area of concern for me.

Thank you for posting!!

[wanderingback]

Thanks for sharing!
I’m seriously wondering how you get a health insurance plan for $4300/year for 4 people?! Is that a "normal" commercial plan?

Not that I ever can or want to FIRE, but health insurance is a huge stressor for us right now because my partner is self employed and I’m part time and contractor employed so no longer have employer sponsored health plan. I’m paying $3478 per month for the 3 of us using COBRA. And through my state’s exchange for the "best" shitty plan it’s about the same. So $4300/year is blowing my mind!

[jinkies]

I am also super surprised at the health insurance costs! H has been self employed in the past, and also for a while he worked somewhere that only covered his insurance, we had to pay oop for the rest of us. It wasnt great insurance and it was well over $1000/month, and that was 5+ years ago.

Glad to see that there seems to be better options now, at least in your state.

[bdubs419]

This is fascinating to me. We are 39 and 46 and are around the ~3.6M mark. I think we are many years off from retirement at this point but I get there are so many moving pieces. Trying to look at your mix… when you say traditional? What do you mean? Traditional retirement account like a 401K? Sorry if I just don’t get all the lingo.

[yetanothermmae]

Jun 14, 2024 20:59:15 GMT -5 jobae1234 said:

Can you talk more about the impact to your marriage?

Oof, it's complicated. We have been together since early college and we've both changed a lot. I think FIRE added more strain in terms of our values. We did talk a lot about expectations (he hoped we would become closer and spend more time together, I wanted to protect my time so I could pursue my passions/volunteering).

Like I mentioned, he's been really focused on self improvement. He's lost weight, wants to eat better, wants to make/keep our home really nice. I... am not interested in that stuff, really. I am more of the YOLO mindset and trying to really focus on the things that I care about - taking my volunteering to the next level, creating experiences for our family, and also just enjoying myself. He's also taken over a lot of the logistics for FIRE and for managing house projects, where I have always been the spreadsheets and details person. This is weird for us as it's all pretty much the opposite how it was for us 5-10 years ago!

So we're dealing with some resentment and have had a number of fights over his requests on me and my time.

We did a bunch of modeling to feel good about not running out of money and one conclusion was that the odds of divorce (which would probably mean we'd both have to go back to work) or death dwarfed the chances of stocks crashing to the point where we'd end up running out of money. So the divorce scenario feels like the biggest risk to FIRE for us.

ETA also I actually quit a year or so before him and had a nice system for the summer with the kids, but now he wants to approve everything and join us on a lot of stuff. Which, to be fair, he has stepped up his responsibility for childcare a lot, but I kind of miss doing things unilaterally. 🤣

[yetanothermmae]

Jun 14, 2024 21:29:06 GMT -5 sadlebred said:

Congratulations! FIRE is my dream, and it isn't happening!

If health care gets to be too much, could one of your work part-time somewhere that offers health insurance? Even retail many times offers it to part timers.

Thank you! I have been thinking, so so so many things went just right for this to be possible for us. We have been very lucky.

I think the work part time for health insurance thing is known as Barista FIRE. Spouse would prefer instead to work career job and make $$$ if it came to that. Of course, there is a risk that we would not be able to re-enter our careers, especially the longer we're out. I think we would, especially spouse since his hobby is work-adjacent. If I were to go back, I would probably change careers.

I expect we'll reach a tipping point in 5-10 years where we either have so much money that we won't be in danger of running out, or the markets do so poorly that we start to worry. Hopefully with our low withdrawal rate and the rebalancing we did, we have minimized the risk of running out.

[yetanothermmae]

noodleoo
Wow, that’s amazing! Congrats!
Thanks!

H and I have been huge savers and I think we could got the FIRE route if we really wanted to, however it scares the shit out of me. Did you work with a financial advisor or do it all yourself? Do you have any fear/anxiety about being without an income and if so, how do you deal with it?
We used financial advisors a few times when we were young. For the last 10+ years we've been purely DIY. We tried to find someone to talk with when we were developing our FIRE plan, but weren't able to find a professional that actually knows much about it! That's one of the reasons we still haven't figured out exactly how to withdraw - we are now trying to find a CPA who is knowledgeable in early retirement withdrawals.

Do you worry about getting bored?
Not me! I worry about my spouse being bored.

I think the social aspect is very interesting. I quit my career to work part time after having kids and I was surprised how difficult it was emotionally and how much of my identity was tired to my former occupation.
Yeah, I agree with this. I have been easing out since having kids, though, so it's gotten better.

How do you plan to pay for the kids college? Do you have separate savings for that?
Yes, we have 529 savings not included in NW. Our mortgage will also end around that time so can probably reallocate that. As alluded to above, there is a decent chance that in 10 years, our money will have grown enough that we can loosen up a lot, which I imagine we will direct largely toward launching our kids.

[yetanothermmae]

ellipses84

Congratulations! That’s a huge accomplishment and it’s great you can spend more time with kids and volunteering!

Thank you! It's been amazing.

Do you have a plan for the future in case you decide you want /need to bring in some extra income?

We have some options on the table. I have contemplated another career. Spouse has some opportunities for freelancing. But really, if it came to it, spouse would probably choose to go back to his career. The money is too good.

Do you have any plans to travel?

We are traveling a bunch this summer, less expensive trips that are not very far, but we have still exceeded our budget already. If the markets are doing well, I am pushing for a bigger trip next year. Our kids have never been abroad. And since we do not have to take time off of work, I am trying to get better at cheaper, slower travel.

What are your plans for the kids’ college beyond the 529s and how does your investment income factor into that? I know the FAFSA changed this year so you may not know the answer but that may be something to track.

We will have to figure this out when the kids go. Spouse is less inclined to help, but I think it will really depend on our financial situation in 10 years and the kids' choices. There are big changes proposed right now for in-state colleges, too. So it just feels futile to try to predict.

Are you getting discounted healthcare based on investment income and how does it work, especially for this first year? Do you base it on your yearly tax return or just self report what you consider monthly income?

Yes, we are getting subsidies through the marketplace. Without subsidies it would be about $15k. It is based on taxable income, so basically what we earn (minimal through hobby job) plus what we withdraw from 'traditional' accounts.

For others asking, I have a state healthcare exchange plan (ACA / Obamacare) for a family of 4 and it’s about $1,000 month for a mid-level, silver PPO plan. Our OOP costs aren’t too bad. If our income was around $110k/yr we might get a $250-500/ month discount. We pay $50/month for basic dental and pay OOP costs. One year we paid $160/mo for a better plan but we still ended up paying a lot OOP. I’m tempted to skip a dental plan and pay OOP to a dentist that has good cash rates.
Interesting! Yeah, we have had the same thought about dental. The dental insurance is pretty expensive for what little it covers.

[yetanothermmae]

Jun 15, 2024 6:19:04 GMT -5 mae0111 said:

This is awesome! I am impressed with your health insurance costs. DH and I are self-employed (DH owns a company with 7 other employees, and I am a contractor for him as of 2 weeks ago - before that I was a contractor elsewhere). We pay $2300/month for a HDHP - $7500 deductible. If we went slightly cheaper, we would have to pay OOP for our kids weekly therapy and quarterly med management.

I’m also interested in the family and friend dynamic. DH is having conversations that could allow us to do what you’re describing in about 3-5 years. This is an area of concern for me.

Thank you for posting!!

When we started our FIRE plan, were originally budgeting $14k for health insurance so I am also surprised at the cost.

We do have a high deductible. So we have already spent $1,500 when our kid needed stitches. Oh well. Really we care about protecting against risk of major illness costs, such as cancer treatment.

[yetanothermmae]

Jun 15, 2024 7:08:27 GMT -5 wanderingback said:

Thanks for sharing!
I’m seriously wondering how you get a health insurance plan for $4300/year for 4 people?! Is that a "normal" commercial plan?

Not that I ever can or want to FIRE, but health insurance is a huge stressor for us right now because my partner is self employed and I’m part time and contractor employed so no longer have employer sponsored health plan. I’m paying $3478 per month for the 3 of us using COBRA. And through my state’s exchange for the "best" shitty plan it’s about the same. So $4300/year is blowing my mind!

Wow, that's expensive! I think COBRA was going to be about $2k a month for us.

We have a Cigna Gold EPO plan from our state's marketplace, unsubsidized it would be ~$1,300 per month. I was surprised that it was so low, and we had other options as well. I am very thankful for the ACA and glad that our state has done a good job with the marketplace.

[yetanothermmae]

Jun 15, 2024 8:50:20 GMT -5 bdubs419 said:

This is fascinating to me. We are 39 and 46 and are around the ~3.6M mark. I think we are many years off from retirement at this point but I get there are so many moving pieces. Trying to look at your mix… when you say traditional? What do you mean? Traditional retirement account like a 401K? Sorry if I just don’t get all the lingo.

Yeah, sorry, I was trying to be intentionally vague. I mean tax-deferred accounts where there is no capital gains or dividends but you do pay income tax on withdrawals. It's mostly 401(k)s but we have some other accounts that have similar rules. For example, a rolled over employer-funded pension plan.

[mae0111]

yetanothermmae, I have names of professionals that would definitely be able to help you withdraw the right way and plan , etc. if you’d like, I can PM you. Just let me know.

[wise_rita]

Another one: what fields were you in to earn good incomes?

[yetanothermmae]

Jun 15, 2024 11:38:45 GMT -5 wise_rita said:

Another one: what fields were you in to earn good incomes?

STEM/tech

[yetanothermmae]

Jun 14, 2024 23:04:17 GMT -5 noodleoo said:

Do you have any fear/anxiety about being without an income and if so, how do you deal with it?

I realized I missed this question. 

For sure we had/have fears around it. It took us awhile to pull the trigger and for spouse to leave his job. We spent months putting together detailed plans, consolidating our money, running models, etc. I was very worried about a market downturn - I've been waiting for that shoe to drop for years now. I have been casually interested in FIRE for a long time and knew that Sequence of Returns Risk is a big threat. We read this and it made a lot of sense: earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/. They recommend doing the opposite of what a typical target retirement fund does, and glide from bonds into stocks. We decided to immediately change our asset allocation and instead transition from 65% back to 90% stocks over the next 10 years. I feel a lot less anxious about a downturn at the moment, given that we reduced our stock position substantially.

Also, it is a process. For the first few months we spent virtually nothing on discretionary items, basically because the retirement thing was top of mind and scary. Now we're already pretty much back to our old habits (read: eating out, traveling, etc). It helps immensely that the market is so far doing well. When I log in and see that our account value has increased by $200k YTD and know that we've only spent $55k, it is easy to feel better. I am quite worried about our emotions during a downturn, though. Fortunately we do have some experience investing through downturns and we both value rationality so hopefully we will be able to ride it out without panicking.

[sadlebred]

yetanothermmae Thank you for sharing all of this! If I'd known about FIRE in my 20s I would have saved more (10 years of a bad marriage cost me a LOT to get out of...so I lost 10 years, too), but we also have to take what comes our way in life.

[wanderingback]

Jun 15, 2024 10:50:42 GMT -5 yetanothermmae said:

Jun 15, 2024 7:08:27 GMT -5 wanderingback said:

Thanks for sharing!
I’m seriously wondering how you get a health insurance plan for $4300/year for 4 people?! Is that a "normal" commercial plan?

Not that I ever can or want to FIRE, but health insurance is a huge stressor for us right now because my partner is self employed and I’m part time and contractor employed so no longer have employer sponsored health plan. I’m paying $3478 per month for the 3 of us using COBRA. And through my state’s exchange for the "best" shitty plan it’s about the same. So $4300/year is blowing my mind!

Wow, that's expensive! I think COBRA was going to be about $2k a month for us.

We have a Cigna Gold EPO plan from our state's marketplace, unsubsidized it would be ~$1,300 per month. I was surprised that it was so low, and we had other options as well. I am very thankful for the ACA and glad that our state has done a good job with the marketplace.

I’m still confused haha. How do you get it for $4300/year?
I guess you’re saying you’re getting it subsidized which is about $358/month for 4 people instead of $1300/month, but how are you getting it so subsidized?

I mean $1300/month for 4 people is amazing in this country anyway. I guess you’re being vague and not sharing what state you’re in but I would love to know.

[Pom]

Jun 15, 2024 16:46:32 GMT -5 wanderingback said:

Jun 15, 2024 10:50:42 GMT -5 yetanothermmae said:

Wow, that's expensive! I think COBRA was going to be about $2k a month for us.

We have a Cigna Gold EPO plan from our state's marketplace, unsubsidized it would be ~$1,300 per month. I was surprised that it was so low, and we had other options as well. I am very thankful for the ACA and glad that our state has done a good job with the marketplace.

I’m still confused haha. How do you get it for $4300/year?
I guess you’re saying you’re getting it subsidized which is about $358/month for 4 people instead of $1300/month, but how are you getting it so subsidized?

I mean $1300/month for 4 people is amazing in this country anyway. I guess you’re being vague and not sharing what state you’re in but I would love to know.

I just made a whole ACA post but lost it.

Our silver plan is $547/mo ($830ish subsidy). 2 adults. Ages 53/54
I will try and retype again with info that I would have found helpful before retiring. Ugh. Our reported income for this subsidy is $86,500 since we just retired. Michigan.