FIRE AMA

[yetanothermmae]

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

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 agree it is amazing. Way less than I expected.

I PMed you our state. We applied using $86k income, but depending where exactly our income actually lands, we may owe or get back more at tax time.

[chpmnk1015]

way to go and congrats. read through the posts and many of the questions i had were answered. Good luck recalibrating your marriage- I think changes like that are a lot.. we had a big change at one point (used to work opposite schedules, then both got laid off and were home together and then always off at the same time) and it is a huge adjustment.. but with time we figured it out. hoping you do too!

[ellipses84]

Do you pay quarterly taxes?

Are any taxes withheld by the financial institution when you receive investment income distributions?

[mrsmayhem]

Congrats!!

Here are my questions:

Did you like your jobs?
What made you feel ready to retire?
How did you decide on your retirement budget?
What are some things you hope to do / accomplish during retirement?

[jobae1234]

You’re living on $87,500 pretax? And your house isn’t paid off yet. Would you share your monthly budget? I’m getting $7291 pretax and $4739 post tax as your monthly income.

[yetanothermmae]

Jun 15, 2024 18:42:49 GMT -5 Pom said:

I will try and retype again with info that I would have found helpful before retiring.

I would be very interested in this!

[yetanothermmae]

Jun 15, 2024 19:58:07 GMT -5 chpmnk1015 said:

way to go and congrats. read through the posts and many of the questions i had were answered. Good luck recalibrating your marriage- I think changes like that are a lot.. we had a big change at one point (used to work opposite schedules, then both got laid off and were home together and then always off at the same time) and it is a huge adjustment.. but with time we figured it out. hoping you do too!

Thank you <3

[yetanothermmae]

Jun 15, 2024 20:20:11 GMT -5 ellipses84 said:

Do you pay quarterly taxes?

Are any taxes withheld by the financial institution when you receive investment income distributions?

No. Although you have me a tad worried, haha. This year is weird because spouse officially left after Jan 1st and received his vacation time payout and stuff. So we did have taxes withheld. I expect we'll be ok this year due to that. Hopefully we can find a CPA to help with our other withdrawals and they can advise re: withholding.

[yetanothermmae]

Jun 15, 2024 21:04:37 GMT -5 mrsmayhem said:

Did you like your jobs?

Sometimes! It was very gratifying to solve tough problems. Our companies were really decent to us both, on the whole. It felt good to make a lot of money. Both of us have had bad years here & there where we were unhappy with the work and/or the teams we were on. I put a lot of pressure on myself so sometimes it was hard on my self-confidence and I felt like a failure (although I pretty much always got positive reviews).

Jun 15, 2024 21:04:37 GMT -5 mrsmayhem said:

What made you feel ready to retire?

We both scaled back and weren't satisfied to stop there regarding work:life balance. And mostly, it was just a numbers thing. Covid also made us rethink a lot.

Jun 15, 2024 21:04:37 GMT -5 mrsmayhem said:

How did you decide on your retirement budget?

It is more or less our pre-retirement budget, minus the savings and forgoing some things we figured we could go without if we had more time and less money (eg lawn service).

Jun 15, 2024 21:04:37 GMT -5 mrsmayhem said:

What are some things you hope to do / accomplish during retirement?

#1 for me is to maximize time with my kids before they become too cool to hang out with me.

I am really hoping to scale up a particular volunteer passion I have. I joined the board of a local org and I am trying to convince them to let me start a program. If not, I may start my own 501(c)(3).

My spouse has a lot of goals. Wants to focus on health, improving our home, and also his hobbies. So far, he has not devoted much time to his hobbies, which surprises me! He also wants to maximize family time and recreation activities (especially those which also improve fitness).

[yetanothermmae]

Jun 16, 2024 4:50:29 GMT -5 jobae1234 said:

You’re living on $87,500 pretax? And your house isn’t paid off yet. Would you share your monthly budget? I’m getting $7291 pretax and $4739 post tax as your monthly income.

I made a chart. Hope this helps. As mentioned above, we have W-2 income this year from final payouts from spouse's job. We are going to try to keep traditional withdrawals fairly flat to keep taxable income predictable. Pull the difference from Roth contributions first, then when those are spent we will pull from our taxable account. When that is gone, we will have to pull entirely traditional until we hit 59.5. We have a 30 year projection just for feasibility checking, but we expect that all kinds of things will change and so we consider going beyond 5-10 years to be pretty much wild guessing. Taxable income will increase after Roth contributions are depleted. Also, that $86k number we used for health insurance is affected by some other stuff (eg converting an inherited IRA to 529s) and was intended to be conservative (high) so we don't have issues with health insurance/taxes.

And here is our high level budget. In reality it is not very rigid. This year we are spending more on the house and less on cars, for example.

[RockNVoll]

Thank you for posting, this is super interesting and I appreciate your willingness to share.  I can't get over how low those healthcare costs are.  When DH priced it out for the two of us (no kids), it came to $25k/year.

A lot of the questions I would've had have largely been answered.  I feel like I should have more but I think I'm too tired to think straight right now, LOL.  Oh, are there any particular blogs, forums, calculators, or other resources you found particularly helpful as you prepared to take this step?  I frankly have not really spent time in FIRE communities and probably should read more perspectives given we're thinking of retiring in the next nine months or so...

[midwestmama]

I would love if DH and I could FIRE. We're both early 40s, but it won't happen. At this point, our goal is to retire from corporate jobs by age 55 at the latest, but then we will probably need to have hobby jobs for at least a few years.

[yetanothermmae]

Jun 16, 2024 20:22:03 GMT -5 RockNVoll said:

Oh, are there any particular blogs, forums, calculators, or other resources you found particularly helpful as you prepared to take this step?

I have skipped around various blogs. A lot of them have since moved on to the next phase - many made a bunch of money from their site and shifted focus/stopped updating.

My favorite has been ournextlife.com/ by Tanja Hester. There is a lot of good archived content but again, not really contemporaneous updates.

The Fioneers are interesting, talking about Coast FI, where you have saved enough for retirement so you can downshift work to just cover expenses. thefioneers.com/category/our-journey-to-fi/

Other resources I have found useful: Mad Fientist, White Coat Investor, and Bogleheads. Reddit CAN be, although a lot of posts are obnoxious or wrong. I am always careful about filtering things I'm reading there. r/financialindependence, r/Fire, r/FatFIRE and r/ChubbyFIRE (sorry for the terminology; it's not my favorite but that's where the community went) all have interesting posts sometimes.

The AARP tax calculator has been very helpful. I can't seem to find the simulator we used the most, I will keep looking.

[simpsongal]

Thank you for sharing! That's a brave leap to take even w/all the number crunching and whatnot. I don't think I could pursue FIRE since I'm banking on a pension, but it's helpful to see what goes into it and borrow some of the concepts.

Are you thinking of making a bucket list or any particular goals/plans for the time you've got now? Esp the time before the kids go to college?

[yetanothermmae]

Jun 17, 2024 13:37:29 GMT -5 simpsongal said:

Thank you for sharing! That's a brave leap to take even w/all the number crunching and whatnot. I don't think I could pursue FIRE since I'm banking on a pension, but it's helpful to see what goes into it and borrow some of the concepts.

Are you thinking of making a bucket list or any particular goals/plans for the time you've got now? Esp the time before the kids go to college?

Haha, y'all sound like my husband. He is more of a goals person whereas they tend to stress me out and I feel like a failure if I can't 100% my lists.

I have loose lifestyle goals - maximize quality time with family, seek fulfillment through projects while the kids are in school, and make memories. I am pretty pro-active and hands-on with my kids' education and activities, but I'm trying to focus on creating opportunities for them rather than aiming for a particular goal (eg ivy league education or something). There are a lot of things that sound appealing travel-wise. I am intrigued by some bloggers who take extended trips. I just haven't really figured out how to make that work financially and with our kids' school schedules. I am very wary of trying to take on any kind of homeschool situation.

I do love that we have the freedom to explore things that come up, whether that be consulting-type things, big hobby projects, or big trips. We'll see! But that was not the motivating factor to quit our jobs.

[yetanothermmae]

RockNVoll, this was our most-referenced simulator. We like using the CAPE >20 numbers since the market is relatively high. Also I like that they have a tab on life expectancy to help keep things in perspective.

earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/

You can add in things like higher withdrawals in certain years, income payments (eg Social Security), etc. But it's also not as simple as some other options (firecalc, cFIREsim, etc).

[aprilsails]

I really want DH to pursue this, for his own mental health and my benefit as well. He has an easy job and he's still struggling at the moment, but he values economic stability for our kids very highly and is saving aggressively for their future. I don't think he's taken into account that his parents have spent precisely none of their millions of dollars in retirement thus far, and there is a good chance we can toss that money straight over to the kids.

He doesn't have significant plans for retirement and I know he would be quite happy taking care of the house and investing his time in his hobbies. In the meantime, I'm unlikely to leave work before 60 due to my role. However, there is a lot of precedence for people in my role to take extended annual vacations (3-6 months) as they continue to work past 60.

[jobae1234]

Jun 16, 2024 10:54:31 GMT -5 yetanothermmae said:

Jun 16, 2024 4:50:29 GMT -5 jobae1234 said:

You’re living on $87,500 pretax? And your house isn’t paid off yet. Would you share your monthly budget? I’m getting $7291 pretax and $4739 post tax as your monthly income.

I made a chart. Hope this helps. As mentioned above, we have W-2 income this year from final payouts from spouse's job. We are going to try to keep traditional withdrawals fairly flat to keep taxable income predictable. Pull the difference from Roth contributions first, then when those are spent we will pull from our taxable account. When that is gone, we will have to pull entirely traditional until we hit 59.5. We have a 30 year projection just for feasibility checking, but we expect that all kinds of things will change and so we consider going beyond 5-10 years to be pretty much wild guessing. Taxable income will increase after Roth contributions are depleted. Also, that $86k number we used for health insurance is affected by some other stuff (eg converting an inherited IRA to 529s) and was intended to be conservative (high) so we don't have issues with health insurance/taxes.

View Attachment

And here is our high level budget. In reality it is not very rigid. This year we are spending more on the house and less on cars, for example.

View Attachment

I feel like such an idiot because that budget makes it look like you’re living on 110k post tax, but you keep saying 87k pretax is the number you based insurance premiums off of and are “living off of.” What am I missing?

[fryjack2]

First, nice! Congrats!

Second, curious how much you inherited? FIREing with never cracking 300k with two kids and 40ish is impressive!

Third, your annual travel budget seems low for a family of 4, but I know everyone travels differently

[yetanothermmae]

Jun 19, 2024 15:11:00 GMT -5 fryjack2 said:

First, nice! Congrats!

Second, curious how much you inherited? FIREing with never cracking 300k with two kids and 40ish is impressive!

Third, your annual travel budget seems low for a family of 4, but I know everyone travels differently

Thanks!

Inherited $300k 20 years ago. Some went toward college tuition, some went into wedding & house DP, some went into 529s for our kids, and some (~$800k) is still invested and included in the totals in OP. The S&P 500 has gone up ~5.5x since then, for reference.

I agree the travel budget is low. We've mostly been doing trips to see family (or trips with family). I do hope to travel more now that we don't have to contend with work schedules.

[yetanothermmae]

Jun 19, 2024 14:41:59 GMT -5 jobae1234 said:

Jun 16, 2024 10:54:31 GMT -5 yetanothermmae said:

I made a chart. Hope this helps. As mentioned above, we have W-2 income this year from final payouts from spouse's job. We are going to try to keep traditional withdrawals fairly flat to keep taxable income predictable. Pull the difference from Roth contributions first, then when those are spent we will pull from our taxable account. When that is gone, we will have to pull entirely traditional until we hit 59.5. We have a 30 year projection just for feasibility checking, but we expect that all kinds of things will change and so we consider going beyond 5-10 years to be pretty much wild guessing. Taxable income will increase after Roth contributions are depleted. Also, that $86k number we used for health insurance is affected by some other stuff (eg converting an inherited IRA to 529s) and was intended to be conservative (high) so we don't have issues with health insurance/taxes.

View Attachment

And here is our high level budget. In reality it is not very rigid. This year we are spending more on the house and less on cars, for example.

View Attachment

I feel like such an idiot because that budget makes it look like you’re living on 110k post tax, but you keep saying 87k pretax is the number you based insurance premiums off of and are “living off of.” What am I missing?

In the OP I said we are drawing $110k/yr. 

The 87k is our estimated AGI for tax purposes. The Roth contribution withdrawals don't count, for example. When we draw from our brokerage account, only the portion that is capital gains or dividends will count. The health insurance marketplace uses your gross income as shown on your tax forms.

[jobae1234]

Jun 19, 2024 23:49:04 GMT -5 yetanothermmae said:

Jun 19, 2024 14:41:59 GMT -5 jobae1234 said:

I feel like such an idiot because that budget makes it look like you’re living on 110k post tax, but you keep saying 87k pretax is the number you based insurance premiums off of and are “living off of.” What am I missing?

In the OP I said we are drawing $110k/yr. 

The 87k is our estimated AGI for tax purposes. The Roth contribution withdrawals don't count, for example. When we draw from our brokerage account, only the portion that is capital gains or dividends will count. The health insurance marketplace uses your gross income as shown on your tax forms.

Oops, got too far down thread and forgot to go back to the OP. Thank you!

[shaynaatl]

Congrats, that is awesome!

Did you ever track your savings rate as a % of gross income? If so, I'd be curious what that was.

I've heard that FIRE people typically save 50% or more.

[formerlyak]

What are your plans for the increased costs of kid as they get older? For example, car insurance when they drive? Or just general costs as they get closer to college such as AP test ($100 per test), SAT registration fees, college application fees (average $80 per application). Senior year alone, I spent $3000ish on school related costs like testing fees, college application fees (just the fees - I didn’t hire a college counselor), grad night, basic senior pictures offered through school and buying his cap and gown.

[fortnightlily]

Any favorite Excel formulas?

I don't know whether I can truly FIRE but I've been trying to see if we can coastFIRE.

I know our FIRE number (annual expenses x25, or x33 to be conservative) but I'd like to calculate the other direction too: based on what we currently have saved, what would be a safe withdrawal rate starting today if we wanted to start reducing income and withdrawing investments, or alternatively, how many years of expenses could our current investments sustain before running out.

[yetanothermmae]

Jun 20, 2024 7:48:31 GMT -5 shaynaatl said:

Congrats, that is awesome!

Did you ever track your savings rate as a % of gross income? If so, I'd be curious what that was.

I've heard that FIRE people typically save 50% or more.

We didn't set out to FIRE or write a blog or anything, lol. I was curious from your question though and tried to compile the data. Here's a chart with the numbers I cobbled together.

(Add up all the bars and that's our gross wages. Any gains/dividends were reinvested and are not included.)

@@@

When we were DINKs, we were saving ~40% of our gross income. Post kids (and with daycare) it went down to ~30% on average. It varied year to year like if we made a big purchase (eg car).

[yetanothermmae]

Jun 20, 2024 9:13:03 GMT -5 formerlyak said:

What are your plans for the increased costs of kid as they get older? For example, car insurance when they drive? Or just general costs as they get closer to college such as AP test ($100 per test), SAT registration fees, college application fees (average $80 per application). Senior year alone, I spent $3000ish on school related costs like testing fees, college application fees (just the fees - I didn’t hire a college counselor), grad night, basic senior pictures offered through school and buying his cap and gown.

We haven't planned for that per se. We do spend a good amount on kid activities currently and we have plenty of fluff in our budget that we could cut. But we also believe there will be a good chance that the markets will do well and we'll be able to loosen up over time. Our withdrawal rate right now is conservative (we hope...).

[yetanothermmae]

Jun 20, 2024 9:53:50 GMT -5 fortnightlily said:

Any favorite Excel formulas?

LOL! Yes because I am a nerd, but they aren't related to FIRE.

Jun 20, 2024 9:53:50 GMT -5 fortnightlily said:

I know our FIRE number (annual expenses x25, or x33 to be conservative) but I'd like to calculate the other direction too: based on what we currently have saved, what would be a safe withdrawal rate starting today if we wanted to start reducing income and withdrawing investments, or alternatively, how many years of expenses could our current investments sustain before running out.

Yeah, our decisions now are kind of going the other way. Do we want to spend $20k on a car/trip/reno? Or do we want the $55/month forever that we would 'lose'?

[sicilygirl]

Jun 16, 2024 10:54:31 GMT -5 yetanothermmae said:

Jun 16, 2024 4:50:29 GMT -5 jobae1234 said:

You’re living on $87,500 pretax? And your house isn’t paid off yet. Would you share your monthly budget? I’m getting $7291 pretax and $4739 post tax as your monthly income.

I made a chart. Hope this helps. As mentioned above, we have W-2 income this year from final payouts from spouse's job. We are going to try to keep traditional withdrawals fairly flat to keep taxable income predictable. Pull the difference from Roth contributions first, then when those are spent we will pull from our taxable account. When that is gone, we will have to pull entirely traditional until we hit 59.5. We have a 30 year projection just for feasibility checking, but we expect that all kinds of things will change and so we consider going beyond 5-10 years to be pretty much wild guessing. Taxable income will increase after Roth contributions are depleted. Also, that $86k number we used for health insurance is affected by some other stuff (eg converting an inherited IRA to 529s) and was intended to be conservative (high) so we don't have issues with health insurance/taxes.

View Attachment

And here is our high level budget. In reality it is not very rigid. This year we are spending more on the house and less on cars, for example.

View Attachment

Congratulations on making this happen!

One question regarding your retirement withdrawals… once you pull out all of your Roth contributions, the rest of your Traditonal/Roth distributions will also come with a 10% penalty for early withdrawal (plus potentially a state penalty). Are you just planning on eating that? Or have you done tax planning to help you avoid the penalties?

[yetanothermmae]

Jul 2, 2024 18:46:36 GMT -5 sicilygirl said:

One question regarding your retirement withdrawals… once you pull out all of your Roth contributions, the rest of your Traditonal/Roth distributions will also come with a 10% penalty for early withdrawal (plus potentially a state penalty). Are you just planning on eating that? Or have you done tax planning to help you avoid the penalties?

I had typed a bunch about this for the OP and then deleted bc I thought it might be too in the weeds. But I think it's interesting!

We are only going to pull our Roth contributions because if you go beyond that, you have to pay income tax (again!) which is kind of draconian. We went fairly hard on Roth in our saving phase but it turns out to be pretty inferior for early retirement. I kind of wanted to leave the Roth alone since it has such good tax protection, but we worried that we wouldn't get to 59.5 without tapping it. We are pulling that soon because the value of what we'll be able to withdraw will effectively shrink due to inflation.

Then we looked at Roth conversion ladders and SEPP withdrawals for the traditional IRAs. To do the ladder, we would need to basically pull out double for 3-5 years (converting half and living on half), which would give us high income in those years and make taxes and health insurance really costly. So it turns out that paying the 10% early withdrawal penalty actually seems like it will cost us less. We haven't ruled out SEPPs (Substantially Equal Periodic Payments) but they are 1) capped, 2) not inflation adjusted, 3) kind of complicated (we read some fairly scary things from an accountant who has really deep dived on them) and the IRS rules are not finalized. My spouse also wants to keep flexibility in case one of us decides to return to work. You can't keep turning them on and off. We have seen some interesting tricks described online wrt rolling money between various IRA accounts but that seems sketchy.

We think we're going to be close enough to optimal with paying the early withdrawal penalty on traditional withdrawals. We are actually looking for a CPA to help check our analyses/tax forecasts and potentially set up SEPPs at some point. But it's been really hard to find anyone who has time and virtually nobody with experience with early retirement. Several CPAs have said they aren't taking that type of work, or just plain never responded to our inquiry. We did talk to a CFP from NAPFA about a project based analysis, but he said he's only had a couple clients who only did early withdrawals a couple years early. I don't know yet how much it will cost to work with him. We'll see!