High-level early retirement plan - What do y'all think?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

High-level early retirement plan - What do y'all think?

Post by Grifin »

Hi Bogleheads,

I have been lurking around for a few years and appreciate all the thoughtful banter on this forum. I have learned so much. Thank you!

My wife and I are looking forward to retiring early. First, she plans to retire in one year (2022), then I will follow in 3-4 years (2024-25). We have a simple high level plan and we would like to get some opinions from the forum.

A little about us:
He: 42, engineer $175k/yr
She: 42, engineer, $110k/yr
Kid: 4yo
additional income: We are generously gifted $30k/yr from my parents, which seems to highly likely to continue

Annual Expenses: $110k all-in

Assets:
Taxable - stocks/bonds/cash: $1.46M
Tax deferred retirement accounts - stocks/bonds: $1.81M
Primary home in San Antonio, TX: $900k ($150k owed, plan to pay off in the next couple years)
Total investible net worth: $3.27M

No other debt beyond the mortgage

Our goal is to retire with $4M in investible assets at/around 45 years old while maintaining our current standard of living. Our planned budget on Year 1 of retirement is $120,000, which includes health insurance & taxes. Essentially, we are shooting for a 3% withdrawal rate. Financially, we are not planning to work ever again.

Eventual college expenses will be paid for on the fly as we have decided (for a few reasons) not to fund a 529 plan. The kid has a UTMA currently with $50k where all the generous gift money she receives is deposited. Her UTMA is intended to be used toward college. We plan to cover the rest.

My wife is confident that this plan will be more than enough to cover us financially into the future. I tend to be more conservative and gravitate to 'buffering-the-buffer' for the unknown.

I am curious to what the community thinks.

Cheers!
:sharebeer
lazynovice
Posts: 1522
Joined: Mon Apr 16, 2012 10:48 pm

Re: High-level early retirement plan - What do y'all think?

Post by lazynovice »

3% withdrawal rate is pretty safe. And you are not considering social security at all in that calculation. And you are not counting on the continued gifts either or what sounds like an inheritance at some point. And if something comes up, you can pick up a part time job that will get you some extra cash. A lot of buffers in there.

The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
User avatar
LatentStoic
Posts: 22
Joined: Sun Jul 29, 2018 10:28 am
Location: Midwest USA

Re: High-level early retirement plan - What do y'all think?

Post by LatentStoic »

Acknowledging that you've characterized this as a simple high level plan, I'll just suggest adding to it an asset allocation strategy that both you and your wife are good with, since you haven't explicitly stated one here.

That could prove especially important if (perhaps) the next 2-3 years prove to be rough in the US and international equity markets, landing you below that stated $4 million goal.
"Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient." - Warren Buffett 1991 shareholder letter.
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

OP,

Is the 110K annual expense include or exclude the mortgage payment?

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
coalcracker
Posts: 730
Joined: Sat Feb 04, 2012 12:25 pm

Re: High-level early retirement plan - What do y'all think?

Post by coalcracker »

I tend to be more conservative and gravitate to 'buffering-the-buffer' for the unknown.
At 3% withdrawal, the vast majority would say your plan is solid. If it were me, "buffering-the-buffer" would include a plan in mind for return to work in some capacity, should the need or desire arise.

FWIW I am the same age with almost identical investable assets and home equity, and two young children. My wife is going to 2 days per week this summer, and I will continue to work FT with generous time off. We both still enjoy our jobs (for now). Good luck! :sharebeer
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

Re: High-level early retirement plan - What do y'all think?

Post by Grifin »

Thanks for all the replies!

I was debating on whether to include our asset allocation... In both taxable and retirement, we are pretty much 80% VOO, 10% BND, and 10% VEA. And we hold about $200k in cash, mostly to sleep well at night. Of course that could change, but I am envisioning an 80/20 to 70/30 allocation going in retirement.

Our current $110k budget does include the mortgage; about $12k a year. Our new budget has some puts and takes; mortgage going away, add health insurance, no more daycare, etc.

Also, with our retirement budget, I plan to ebb and flow our spending. If times are good, we may go as high at 4%. But if things get hairy, we can clamp down and use the cash cushion to avoid fire selling equities. Of course, I have a couple years to build that plan out.

As for bailing on our duties as engineers in the corporate world.... I feel there are many other ways that I can use my skills to help the community in the next chapter. At work, there are some promising junior engineers that will more than cover the void I will leave. :D
fullplay2024
Posts: 47
Joined: Tue Apr 23, 2019 3:07 pm

Re: High-level early retirement plan - What do y'all think?

Post by fullplay2024 »

Congratulations on being financially independent. You’re doing great.

We’re more or less in a similar spot although we’re a few years older, have older kids, and with a slightly larger portfolio.

Your numbers look solid. But, the biggest challenge for both of you will now be to figure out what you’ll do with all the “free” time. If you have a plan for that, you’re all set.

If for some reason, market tanks and things don’t go planned, one of you can always pick up a part time gig or cut down discretionary spending.

All in all, great job. All the best.
User avatar
JoeRetire
Posts: 8337
Joined: Tue Jan 16, 2018 2:44 pm

Re: High-level early retirement plan - What do y'all think?

Post by JoeRetire »

Grifin wrote: Sat May 15, 2021 1:21 pm Annual Expenses: $110k all-in

Total investible net worth: $3.27M

Our goal is to retire with $4M in investible assets at/around 45 years old while maintaining our current standard of living. Our planned budget on Year 1 of retirement is $120,000
So you plan to increase your expenses in year 1 of retirement?
I am curious to what the community thinks.
If your estimates regarding income and expenses is accurate, it sounds like a viable plan - at least at a high level.
You'll have a lot of retirement years, which makes variance against your estimates more likely. But you'll probably be fine.
Last edited by JoeRetire on Sat May 15, 2021 3:09 pm, edited 1 time in total.
Just remember: it's not a lie if you believe it.
marcopolo
Posts: 4364
Joined: Sat Dec 03, 2016 10:22 am

Re: High-level early retirement plan - What do y'all think?

Post by marcopolo »

Grifin wrote: Sat May 15, 2021 2:30 pm Thanks for all the replies!

I was debating on whether to include our asset allocation... In both taxable and retirement, we are pretty much 80% VOO, 10% BND, and 10% VEA. And we hold about $200k in cash, mostly to sleep well at night. Of course that could change, but I am envisioning an 80/20 to 70/30 allocation going in retirement.

Our current $110k budget does include the mortgage; about $12k a year. Our new budget has some puts and takes; mortgage going away, add health insurance, no more daycare, etc.

Also, with our retirement budget, I plan to ebb and flow our spending. If times are good, we may go as high at 4%. But if things get hairy, we can clamp down and use the cash cushion to avoid fire selling equities. Of course, I have a couple years to build that plan out.

As for bailing on our duties as engineers in the corporate world.... I feel there are many other ways that I can use my skills to help the community in the next chapter. At work, there are some promising junior engineers that will more than cover the void I will leave. :D
You are in great shape.
We took a similar approach.
Good luck, and enjoy your retirement.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

Grifin wrote: Sat May 15, 2021 2:30 pm
Our current $110k budget does include the mortgage; about $12k a year. Our new budget has some puts and takes; mortgage going away, add health insurance, no more daycare, etc.
Grifin,

A) How much is the house's property tax and insurance? They do not go away even when you pay off the mortgage.

B) What is your plan for health insurance? How much do you budget for health and dental insurance? The amount could be around 10K to 20K per year.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: High-level early retirement plan - What do y'all think?

Post by willthrill81 »

OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

Re: High-level early retirement plan - What do y'all think?

Post by Grifin »

Hi Klangfool,

This might help. Here is my back of the napkin budget for Year 1 retirement. As you can see, I have a buffer in there as it only adds up to $100k vs. the $120k budget. 8-)

Daycare $-
Groceries $12,000 (We eat well)
General Merchandise/Crap $15,000
Property Taxes $17,500
Utilities $5,000
Mortgage $-
Travel $5,000
Restaurants/Dining $5,000
Insurance - Home/Auto/PUP $6,000
Health $18,000
Cash Withdrawls $1,000
Home Improvement $10,000
Gasoline/Fuel $1,000
Automotive Expenses $3,000
Entertainment $2,000
$100,500
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

Grifin wrote: Sat May 15, 2021 3:01 pm Hi Klangfool,

This might help. Here is my back of the napkin budget for Year 1 retirement. As you can see, I have a buffer in there as it only adds up to $100k vs. the $120k budget. 8-)

Daycare $-
Groceries $12,000 (We eat well)
General Merchandise/Crap $15,000
Property Taxes $17,500
Utilities $5,000
Mortgage $-
Travel $5,000
Restaurants/Dining $5,000
Insurance - Home/Auto/PUP $6,000
Health $18,000
Cash Withdrawls $1,000
Home Improvement $10,000
Gasoline/Fuel $1,000
Automotive Expenses $3,000
Entertainment $2,000
$100,500
Grifin,

1) I think your plan will work as long as you budgeted around 10K to 20K per year for medical/dental insurance and expenses.

2) You probably have to spend a bit more time planning for tax management with 100+K of annual expense. What is your budget for federal income taxes?

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

Re: High-level early retirement plan - What do y'all think?

Post by Grifin »

Thanks for taking a look, Klangfool.

I have run a few scenarios in turbo tax assuming a few thousand in interest income (~$5k), dividends in my taxable (~$12k) plus selling equities (for example, $100k proceeds on a $50k basis) Most of my income will be capital gains. I was actually surprised by the bill coming out to near zero if keep my total income below $85k or so. Of course, when I begin pulling from my 401k, I understand the IRS bill will go up.
Dandy
Posts: 6526
Joined: Sun Apr 25, 2010 7:42 pm

Re: High-level early retirement plan - What do y'all think?

Post by Dandy »

You are in very good financial shape.

I worry with almost any retirees retiring with possibly 40 or more years to fund retirement. The longer the retirement the harder it is to predict what will be needed. What will life look like that far down the road? Health Care? Stocks? Climate Change? Pandemics? Taxes? Personal Health?

Equities have been on a nice roll for quite awhile. That tends to dull the risk sensitivity --not long after retirement most of us face declining employment possibilities as skills get outdated and contacts fade away. Also, I've noticed a big difference when you are withdrawing from a declining nest egg in retirement than when that happened while I was earning a nice income and making contributions to my 401k and getting a company match.

Just some things to keep in mind as you make such an important decision. Wish you the best.
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: High-level early retirement plan - What do y'all think?

Post by willthrill81 »

Dandy wrote: Sat May 15, 2021 3:36 pm I worry with almost any retirees retiring with possibly 40 or more years to fund retirement. The longer the retirement the harder it is to predict what will be needed. What will life look like that far down the road? Health Care? Stocks? Climate Change? Pandemics? Taxes? Personal Health?
One can play the 'what if' game all day long. But the historic likelihood of 3% withdrawals resulting in approximately double the current U.S. median household income failing seems remote to me.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

Grifin wrote: Sat May 15, 2021 3:23 pm Thanks for taking a look, Klangfool.

I have run a few scenarios in turbo tax assuming a few thousand in interest income (~$5k), dividends in my taxable (~$12k) plus selling equities (for example, $100k proceeds on a $50k basis) Most of my income will be capital gains. I was actually surprised by the bill coming out to near zero if keep my total income below $85k or so. Of course, when I begin pulling from my 401k, I understand the IRS bill will go up.
Grifin,

<<I have run a few scenarios in turbo tax assuming a few thousand in interest income (~$5k), dividends in my taxable (~$12k) >>

Then, you probably want to do Roth conversion of your 401K/IRA up to your standard deduction. Then, sell stock and capital gain harvest 0% long-term capital gain.

<<I was actually surprised by the bill coming out to near zero if keep my total income below $85k or so>>

Actually, the 80+K is taxable income. So, the actual income is 85K plus standard deduction ~ 100K. My number is probably off without accounting for your kids.

But, if you are going to use the ACA health insurance, you have to keep the income at below 400% Federal Poverty Line level.

It is probably useful for you to start learning about the Personal Finance Toolbox.
https://www.bogleheads.org/wiki/Tools_a ... ce_toolbox

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
Dandy
Posts: 6526
Joined: Sun Apr 25, 2010 7:42 pm

Re: High-level early retirement plan - What do y'all think?

Post by Dandy »

One can play the 'what if' game all day long. But the historic likelihood of 3% withdrawals resulting in approximately double the current U.S. median household income failing seems remote to me.
Fair point. But we may be talking possibly 45 or more years to fund. What did the median household income look like 30 or 45 years ago?

The original 4% "rule" was formulated when there were reasonably decent interest rates and I believe was to fund your withdrawals for 30 years and then be worth zero.

A 3% "rule" seems like a reasonable adjustment but who knows? We are experiencing historic low interest rates and some countries have had negative rates--did anyone predict that? The pace of change is more important --the longer the timeframe the less reliable prior "rules" tend to be -- in my opinion.

The OP will probably be ok but needs to think through the possibilities even if they might be somewhat remote.
Jimsad
Posts: 307
Joined: Mon Mar 20, 2017 5:54 pm

Re: High-level early retirement plan - What do y'all think?

Post by Jimsad »

I wonder about the effect on the 4 year old seeing his parents retired . Children look upto their parents and to see them work May instill a strong work ethic in them
My kids know my work schedule and seem to respect me more for that
I think I personally would continue some sort of work but work fewer hours .
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

Jimsad wrote: Sat May 15, 2021 4:40 pm I wonder about the effect on the 4 year old seeing his parents retired . Children look upto their parents and to see them work May instill a strong work ethic in them
My kids know my work schedule and seem to respect me more for that
I think I personally would continue some sort of work but work fewer hours .
Jimsad,

<<Children look upto their parents and to see them work May instill a strong work ethic in them >>

What is the effect of the kids seeing their parents working hard and stayed loyal to the employer for 20+ to 30+ years but discarded by their employer when their location is outsourced to India? They choose to be FIRE.

When the employer choose to see the employee as disposable, don't come crying when the employee see them as disposable too.

My location doubled and tripled our revenue and profit during the Telecom Bust. This is in spite of the quarterly 5% to 8% laid off at our location across 5+ years. As a reward of our excellence effort, the location was shut down and outsourced to India.

KlangFool
Last edited by KlangFool on Sat May 15, 2021 4:55 pm, edited 2 times in total.
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
delamer
Posts: 11578
Joined: Tue Feb 08, 2011 6:13 pm

Re: High-level early retirement plan - What do y'all think

Post by delamer »

Jimsad wrote: Sat May 15, 2021 4:40 pm I wonder about the effect on the 4 year old seeing his parents retired . Children look upto their parents and to see them work May instill a strong work ethic in them
My kids know my work schedule and seem to respect me more for that
I think I personally would continue some sort of work but work fewer hours .
There’s retiring to volunteering/active hobbies/travel, and there’s retiring to playing video games all day.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
delamer
Posts: 11578
Joined: Tue Feb 08, 2011 6:13 pm

Re: High-level early retirement plan - What do y'all think?

Post by delamer »

If your parents are gifting you $30,000/year, I’m guessing that you expect a fairly large inheritance in the future?

I wouldn’t use that for planning (and you haven’t apparently), but it would make me lean toward your wife’s confidence rather than your conservatism.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Jimsad
Posts: 307
Joined: Mon Mar 20, 2017 5:54 pm

Re: High-level early retirement plan - What do y'all think?

Post by Jimsad »

Jimsad wrote: Sat May 15, 2021 4:40 pm I wonder about the effect on the 4 year old seeing his parents retired . Children look upto their parents and to see them work May instill a strong work ethic in them
My kids know my work schedule and seem to respect me more for that
I think I personally would continue some sort of work but work fewer hours .
Also in terms of paying for college ‘on the fly’ : May not be that easy unless you have your kids pay for their own
We have a significant chunk in their 529s but are still weary
lazynovice
Posts: 1522
Joined: Mon Apr 16, 2012 10:48 pm

Re: High-level early retirement plan - What do y'all think?

Post by lazynovice »

willthrill81 wrote: Sat May 15, 2021 2:56 pm OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
Of course, but if you raise a kid in a 900k neighborhood in San Antonio, these are the things his peers will have plus fancy vacations etc. His peers parents won’t be living on 120k. You can explain that he can’t have them because you retired at 45 or you can plan to fund them. Or you can move to an area where others are living on 120k.

Even so, the OP has a lot of cushion in both the expense and income side of his budget and it sounds like he knows it.

I am logging off now so I don’t have to read all the “I walked to school uphill both ways and it made me the man I am” Boglehead replies. Going to have a mask free margarita.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
stoptothink
Posts: 9507
Joined: Fri Dec 31, 2010 9:53 am

Re: High-level early retirement plan - What do y'all think?

Post by stoptothink »

lazynovice wrote: Sat May 15, 2021 6:12 pm
willthrill81 wrote: Sat May 15, 2021 2:56 pm OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
Of course, but if you raise a kid in a 900k neighborhood in San Antonio, these are the things his peers will have plus fancy vacations etc. His peers parents won’t be living on 120k. You can explain that he can’t have them because you retired at 45 or you can plan to fund them. Or you can move to an area where others are living on 120k.
Talk about different parenting perspectives, I have no problem telling my 9yr old she can't have a smartphone even though all her friends have them. Move to a different area because your kids may not go on fancy vacations like some of their peers :shock: ?
fortunefavored
Posts: 389
Joined: Tue Jun 02, 2015 8:18 pm

Re: High-level early retirement plan - What do y'all think?

Post by fortunefavored »

Numbers-wise, you're totally fine.. plus in a worst case scenario you can easily ask the parents for more money if they're throwing down $30K/year already. If your family can't make early retirement work, I doubt anyone could!

I think the only thing that would derail you would be something unexpected: divorce, debilitating illness, or some other dramatic life circumstance change.

re: engineers leaving early, maybe if corporate america wasn't such a dystopian nightmare, people would want to continue working in their jobs. It gets worse every year, so if people can escape, I am all for it. Maybe we'll see something like the current fast food worker revolution but for knowledge workers? That'd be nice!
Flyer24
Moderator
Posts: 3112
Joined: Sun Apr 08, 2018 4:21 pm

Re: High-level early retirement plan - What do y'all think?

Post by Flyer24 »

A long series of off-topic posts were removed that derailed the thread. Please stay focused on the OP and the early retirement plan.
User avatar
Watty
Posts: 22696
Joined: Wed Oct 10, 2007 3:55 pm

Re: High-level early retirement plan - What do y'all think?

Post by Watty »

Grifin wrote: Sat May 15, 2021 1:21 pm My wife is confident that this plan will be more than enough to cover us financially into the future. I tend to be more conservative and gravitate to 'buffering-the-buffer' for the unknown.
My situation was much different when I was deciding to retire but when I was playing around with retirement calculators they would often give results as X% chance of success and Y% chance of failure.

The problem with that was that "failure" sort of implies that you keep spending mindlessly until you are broke and homeless so it sounds sort of dire.

In reality unless you were planning on a bare bones retirement "failure" would more likely mean something like you might have to cut your spending by 10 or 20 percent when you are in your 70s if your portfolio is declining faster than planned.

There is also a little mentioned twist to these retirement planning calculators. You could be following a spending plan which make it look like you have a significant risk of running out of money but even if you are headed towards that path you may die before you run out of money. This is one of the few retirement calculators that I have seen which tries to predict the possible outcomes as "Rich, Broke, or Dead"

https://engaging-data.com/will-money-last-retire-early/

You can play with the numbers but when you consider the chance that you will die first the risk of running out of money is a lot less.

One weakness of this calculator is that if only does the calculation for one person. For a couple the odds that one of you will live a long time is a lot greater.

You also need to keep in mind that your income needs will be a different at different ages. For example when your kid grows up and goes out on her own your expenses will decline. Another big change will be when you get on Medicare.
User avatar
willthrill81
Posts: 25278
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: High-level early retirement plan - What do y'all think?

Post by willthrill81 »

lazynovice wrote: Sat May 15, 2021 6:12 pm
willthrill81 wrote: Sat May 15, 2021 2:56 pm OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
Of course, but if you raise a kid in a 900k neighborhood in San Antonio, these are the things his peers will have plus fancy vacations etc. His peers parents won’t be living on 120k. You can explain that he can’t have them because you retired at 45 or you can plan to fund them. Or you can move to an area where others are living on 120k.
Keeping up with the Jones' is not likely to be a high priority for the OP or else retiring at 45 would almost certainly not be on the table.
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

Re: High-level early retirement plan - What do y'all think?

Post by Grifin »

I appreciate all the thoughtful comments.

In order to keep things objective and focused on the our proposed plan, I purposely left off why we plan to retire early. Folks on the board did a good job reading my clues. Both of us have been working in some capacity since our childhood. The daily grind gets old. We have been fortunate as our hard work and investments have returned a strong financial backing. With that, making a incremental dollar does not provide the same value as having the freedom to spend time with our extended family, raise our child, get involved in the community or pursue an interest. Luckily, our 4yo daughter is industrious, curious and she naturally strives. The concerns raised on the board are top of mind, especially for me. Part of the approach is to 'buffer the buffer' and the other is just taking the plunge.

Just before I was about the take off on Friday from work, someone that works for me mentioned that we will be 'out for awhile' because in a routine colonoscopy, a malignant tumor was found that was 'so big that that the doc couldn't get the scope by it'. He will need a CT scan to see what is going on. This guy can't be more than 50 years old. It affected me and is my motivation to ask the Bogleheads if the plan that my wife and have crafted over the past 10 years is doable.

I appreciate everybody's input. There's a lot of insightful, smart people on the board.

Cheers! :sharebeer
PowderDay9
Posts: 412
Joined: Fri Oct 12, 2018 12:29 pm

Re: High-level early retirement plan - What do y'all think?

Post by PowderDay9 »

Grifin wrote: Sat May 15, 2021 2:30 pm Thanks for all the replies!

I was debating on whether to include our asset allocation... In both taxable and retirement, we are pretty much 80% VOO, 10% BND, and 10% VEA. And we hold about $200k in cash, mostly to sleep well at night. Of course that could change, but I am envisioning an 80/20 to 70/30 allocation going in retirement.

Our current $110k budget does include the mortgage; about $12k a year. Our new budget has some puts and takes; mortgage going away, add health insurance, no more daycare, etc.
With $4M investible and a 3% withdrawal rate, you are in a very solid financial position to retire early. I would consider if you really need 70-80% in equities. I'd lean towards 60/40 or 50/50 because I don't think you need to take that much risk anymore.

How would you feel if you were 80/20 and a few years after you retire, stocks drop 50%? The $4M portfolio would drop to $2.4M. It's much easier to stay the course when you are both employed covering your expenses and buying $100k+ in stocks each year.
delamer
Posts: 11578
Joined: Tue Feb 08, 2011 6:13 pm

Re: High-level early retirement plan - What do y'all think?

Post by delamer »

Grifin wrote: Sat May 15, 2021 8:27 pm I appreciate all the thoughtful comments.

In order to keep things objective and focused on the our proposed plan, I purposely left off why we plan to retire early. Folks on the board did a good job reading my clues. Both of us have been working in some capacity since our childhood. The daily grind gets old. We have been fortunate as our hard work and investments have returned a strong financial backing. With that, making a incremental dollar does not provide the same value as having the freedom to spend time with our extended family, raise our child, get involved in the community or pursue an interest. Luckily, our 4yo daughter is industrious, curious and she naturally strives. The concerns raised on the board are top of mind, especially for me. Part of the approach is to 'buffer the buffer' and the other is just taking the plunge.

Just before I was about the take off on Friday from work, someone that works for me mentioned that we will be 'out for awhile' because in a routine colonoscopy, a malignant tumor was found that was 'so big that that the doc couldn't get the scope by it'. He will need a CT scan to see what is going on. This guy can't be more than 50 years old. It affected me and is my motivation to ask the Bogleheads if the plan that my wife and have crafted over the past 10 years is doable.

I appreciate everybody's input. There's a lot of insightful, smart people on the board.

Cheers! :sharebeer
That’s a shame about your colleague.

And it is an unfortunate truth that you’ll be hearing more storues like his from your peers as you hit age 50 and onward. It does make you think hard about what you want to do with your life.

Through hard work and some good luck, you and your family have more choices than most. I hope it all works out for you.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
lazynovice
Posts: 1522
Joined: Mon Apr 16, 2012 10:48 pm

Re: High-level early retirement plan - What do y'all think?

Post by lazynovice »

stoptothink wrote: Sat May 15, 2021 6:23 pm
lazynovice wrote: Sat May 15, 2021 6:12 pm
willthrill81 wrote: Sat May 15, 2021 2:56 pm OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
Of course, but if you raise a kid in a 900k neighborhood in San Antonio, these are the things his peers will have plus fancy vacations etc. His peers parents won’t be living on 120k. You can explain that he can’t have them because you retired at 45 or you can plan to fund them. Or you can move to an area where others are living on 120k.
Talk about different parenting perspectives, I have no problem telling my 9yr old she can't have a smartphone even though all her friends have them. Move to a different area because your kids may not go on fancy vacations like some of their peers :shock: ?
OP’s parents are gifting 30k a year to their adult child and spouse who make mid-six figures and live in a million dollar neighborhood. And Bogleheads suggest the kid buy her own car and pay her own insurance. That, with all due respect, is talking about some different parenting perspectives.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

OP,

1) My older brother and older sister early retired at 49 years old.

2) My oldest brother retired at retirement age and passed a full physical exam without problem. A few months later, he fainted in the bath room and rushed to the hospital. They found an inoperable brain tumor in his head. He died soon afterward.

3) My younger sister died of an accidental house fire.

4) The employer will get rid of you when it is not worthwhile for them to employ you. You should get rid of the employer when it is not worthwhile for you to work for them.

Life is too short. You only lived once.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
lazynovice
Posts: 1522
Joined: Mon Apr 16, 2012 10:48 pm

Re: High-level early retirement plan - What do y'all think?

Post by lazynovice »

KlangFool wrote: Sat May 15, 2021 9:50 pm OP,

1) My older brother and older sister early retired at 49 years old.

2) My oldest brother retired at retirement age and passed a full physical exam without problem. A few months later, he fainted in the bath room and rushed to the hospital. They found an inoperable brain tumor in his head. He died soon afterward.

3) My younger sister died of an accidental house fire.

4) The employer will get rid of you when it is not worthwhile for them to employ you. You should get rid of the employer when it is not worthwhile for you to work for them.

Life is too short. You only lived once.

KlangFool
So sorry for your losses. These things change the way you look at things.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
chipperd
Posts: 1059
Joined: Sat Sep 24, 2011 5:58 am
Location: here and now

Re: High-level early retirement plan - What do y'all think?

Post by chipperd »

Grifin wrote: Sat May 15, 2021 1:21 pm Hi Bogleheads,

I have been lurking around for a few years and appreciate all the thoughtful banter on this forum. I have learned so much. Thank you!

My wife and I are looking forward to retiring early. First, she plans to retire in one year (2022), then I will follow in 3-4 years (2024-25). We have a simple high level plan and we would like to get some opinions from the forum.

A little about us:
He: 42, engineer $175k/yr
She: 42, engineer, $110k/yr
Kid: 4yo
additional income: We are generously gifted $30k/yr from my parents, which seems to highly likely to continue

Annual Expenses: $110k all-in

Assets:
Taxable - stocks/bonds/cash: $1.46M
Tax deferred retirement accounts - stocks/bonds: $1.81M
Primary home in San Antonio, TX: $900k ($150k owed, plan to pay off in the next couple years)
Total investible net worth: $3.27M

No other debt beyond the mortgage

Our goal is to retire with $4M in investible assets at/around 45 years old while maintaining our current standard of living. Our planned budget on Year 1 of retirement is $120,000, which includes health insurance & taxes. Essentially, we are shooting for a 3% withdrawal rate. Financially, we are not planning to work ever again.

Eventual college expenses will be paid for on the fly as we have decided (for a few reasons) not to fund a 529 plan. The kid has a UTMA currently with $50k where all the generous gift money she receives is deposited. Her UTMA is intended to be used toward college. We plan to cover the rest.

My wife is confident that this plan will be more than enough to cover us financially into the future. I tend to be more conservative and gravitate to 'buffering-the-buffer' for the unknown.

I am curious to what the community thinks.

Cheers!
:sharebeer
Based on the numbers, you and your wife are clearly financially independent. Congrats on that score for sure!
Not sure what you might be considering with regards to funding higher ed. If you are planning to pay full ride, ignore the next few paragraphs.
Under the way today's higher education industrial complex works, based on your income, you and your wife are also wise not to bank any $ in a 529. It seems it would be worth a fair amount of time to explore how to best position your collective assets prior to your child's sophomore year, again, assuming no changes in the way higher ed is funded.
Also along those lines, would be worth your time to play around with net price calculators for a few schools, including your state flagship U, to see how your current asset structure vs a few hypothetical asset structures impact your family's net price for child's higher ed.
If you have any questions about this, feel free to private message me, as the way my wife went about securing funding college for our three really riled up some folks and got a thread shut down.
You are clear for takeoff. Enjoy the ride! :sharebeer
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
Derpalator
Posts: 82
Joined: Sun Nov 15, 2015 2:52 pm

Re: High-level early retirement plan - What do y'all think?

Post by Derpalator »

Dandy wrote: Sat May 15, 2021 4:28 pm
One can play the 'what if' game all day long. But the historic likelihood of 3% withdrawals resulting in approximately double the current U.S. median household income failing seems remote to me.
Fair point. But we may be talking possibly 45 or more years to fund. What did the median household income look like 30 or 45 years ago?

The original 4% "rule" was formulated when there were reasonably decent interest rates and I believe was to fund your withdrawals for 30 years and then be worth zero.

A 3% "rule" seems like a reasonable adjustment but who knows? We are experiencing historic low interest rates and some countries have had negative rates--did anyone predict that? The pace of change is more important --the longer the timeframe the less reliable prior "rules" tend to be -- in my opinion.

The OP will probably be ok but needs to think through the possibilities even if they might be somewhat remote.
I tend to focus on http://www.aaii.com/files/images/articl ... gure-1.jpg


This ongoing "but what about the current low bond rates!" thing going on everywhere in the investing intrawebs is getting old. willthrill81 has mentioned repeatedly: we have lots of history where bond real yields were negative for decades. See that period from the late 40's to the early 80's?

But what about the current high CAPE for equities? Well that can change overnight and we'd be back to better expectations. In fact that seems to happen quite a bit.

For the extremely long retirements, can't help but think that the above image tells the story. It represents the modern history of man and his achievements, with all of the noise included.

You are good for retirement. Enjoy.
Jimsad
Posts: 307
Joined: Mon Mar 20, 2017 5:54 pm

Re: High-level early retirement plan - What do y'all think?

Post by Jimsad »

chipperd wrote: Sun May 16, 2021 5:50 am
Grifin wrote: Sat May 15, 2021 1:21 pm Hi Bogleheads,

I have been lurking around for a few years and appreciate all the thoughtful banter on this forum. I have learned so much. Thank you!

My wife and I are looking forward to retiring early. First, she plans to retire in one year (2022), then I will follow in 3-4 years (2024-25). We have a simple high level plan and we would like to get some opinions from the forum.

A little about us:
He: 42, engineer $175k/yr
She: 42, engineer, $110k/yr
Kid: 4yo
additional income: We are generously gifted $30k/yr from my parents, which seems to highly likely to continue

Annual Expenses: $110k all-in

Assets:
Taxable - stocks/bonds/cash: $1.46M
Tax deferred retirement accounts - stocks/bonds: $1.81M
Primary home in San Antonio, TX: $900k ($150k owed, plan to pay off in the next couple years)
Total investible net worth: $3.27M

No other debt beyond the mortgage

Our goal is to retire with $4M in investible assets at/around 45 years old while maintaining our current standard of living. Our planned budget on Year 1 of retirement is $120,000, which includes health insurance & taxes. Essentially, we are shooting for a 3% withdrawal rate. Financially, we are not planning to work ever again.

Eventual college expenses will be paid for on the fly as we have decided (for a few reasons) not to fund a 529 plan. The kid has a UTMA currently with $50k where all the generous gift money she receives is deposited. Her UTMA is intended to be used toward college. We plan to cover the rest.

My wife is confident that this plan will be more than enough to cover us financially into the future. I tend to be more conservative and gravitate to 'buffering-the-buffer' for the unknown.

I am curious to what the community thinks.

Cheers!
:sharebeer

Under the way today's higher education industrial complex works, based on your income, you and your wife are also wise not to bank any $ in a 529.
I do not understand in what way it is ‘wise’ not to take advantage of tax sheltered growth in a 529
Can you please explain.
KlangFool
Posts: 20996
Joined: Sat Oct 11, 2008 12:35 pm

Re: High-level early retirement plan - What do y'all think?

Post by KlangFool »

lazynovice wrote: Sun May 16, 2021 1:43 am
KlangFool wrote: Sat May 15, 2021 9:50 pm OP,

1) My older brother and older sister early retired at 49 years old.

2) My oldest brother retired at retirement age and passed a full physical exam without problem. A few months later, he fainted in the bath room and rushed to the hospital. They found an inoperable brain tumor in his head. He died soon afterward.

3) My younger sister died of an accidental house fire.

4) The employer will get rid of you when it is not worthwhile for them to employ you. You should get rid of the employer when it is not worthwhile for you to work for them.

Life is too short. You only lived once.

KlangFool
So sorry for your losses. These things change the way you look at things.
Thanks.

KlangFool
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
User avatar
LadyGeek
Site Admin
Posts: 73104
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: High-level early retirement plan - What do y'all think?

Post by LadyGeek »

An off-topic discussion regarding the "FIRE revolution" has been removed. The thread was derailed.

Please stay on-topic.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
angelescrest
Posts: 1371
Joined: Tue May 27, 2008 10:48 am
Location: MCOL, no state income tax

Re: High-level early retirement plan - What do y'all think?

Post by angelescrest »

Grifin wrote: Sat May 15, 2021 3:01 pm Property Taxes $17,500
This was my first question—how much are your property taxes with a home worth $900k? I think you have a fine plan, but your TX property taxes are an unreasonable percentage for retiring early, even at your net worth. Personally, I’d downsize to a 500k house. You don’t have a large family.
stoptothink
Posts: 9507
Joined: Fri Dec 31, 2010 9:53 am

Re: High-level early retirement plan - What do y'all think?

Post by stoptothink »

lazynovice wrote: Sat May 15, 2021 9:38 pm
stoptothink wrote: Sat May 15, 2021 6:23 pm
lazynovice wrote: Sat May 15, 2021 6:12 pm
willthrill81 wrote: Sat May 15, 2021 2:56 pm OP, you've clearly thought through your plan well, and it looks good to me. A targeted 3% withdrawal rate will be outstanding, and I'm sure that you'll be in great shape.
lazynovice wrote: Sat May 15, 2021 1:34 pm The only thing that would cause me to be uncertain is having a 4 year old. If you have 50k at 4, you are in good shape to be able to fund a Texas public college by 18. Assuming you can cash flow things like camp, extracurriculars, car and car insurance for a teenager in that 120k, then you are in good shape.
With planning on spending about double the median household income, I'm sure that a resourceful and financially savvy couple will find a way to make ends meet. :wink:

Camp and extracurriculars are 'maybe nice to have' things, not remotely necessary. And teenagers potentially can buy their own car and insurance; my wife did. Heck, many teenagers these days aren't even interested in driving, and self-driving cars may be all the rage in ~12 years.
Of course, but if you raise a kid in a 900k neighborhood in San Antonio, these are the things his peers will have plus fancy vacations etc. His peers parents won’t be living on 120k. You can explain that he can’t have them because you retired at 45 or you can plan to fund them. Or you can move to an area where others are living on 120k.
Talk about different parenting perspectives, I have no problem telling my 9yr old she can't have a smartphone even though all her friends have them. Move to a different area because your kids may not go on fancy vacations like some of their peers :shock: ?
OP’s parents are gifting 30k a year to their adult child and spouse who make mid-six figures and live in a million dollar neighborhood. And Bogleheads suggest the kid buy her own car and pay her own insurance. That, with all due respect, is talking about some different parenting perspectives.
And? OP's current net worth is $4M and their expected annual expenses are $120k/yr, something tells me his single kid is not going to be deprived of anything.
Wanderingwheelz
Posts: 1262
Joined: Mon Mar 04, 2019 9:52 am

Re: High-level early retirement plan - What do y'all think?

Post by Wanderingwheelz »

The comment made about being 70/30 going into retirement is a small concern. You’re planning for retirement now, so I’d consider reducing my equities now.

90/10 is aggressive when arrangements are being made for retirement IMO. You only have to get rich once, after all.
3 Fund Portfolio. 70/30 AA. No mortgage. Simplicity is key.
smitcat
Posts: 7954
Joined: Mon Nov 07, 2016 10:51 am

Re: High-level early retirement plan - What do y'all think?

Post by smitcat »

Wanderingwheelz wrote: Sun May 16, 2021 8:03 am The comment made about being 70/30 going into retirement is a small concern. You’re planning for retirement now, so I’d consider reducing my equities now.

90/10 is aggressive when arrangements are being made for retirement IMO. You only have to get rich once, after all.
"The comment made about being 70/30 going into retirement is a small concern"
Interesting - 70/30 would be our choice at this point with his/her situation.
30% of 4 million would be $1.2M which covers more than 12 years of expenses.
delamer
Posts: 11578
Joined: Tue Feb 08, 2011 6:13 pm

Re: High-level early retirement plan - What do y'all think?

Post by delamer »

Wanderingwheelz wrote: Sun May 16, 2021 8:03 am The comment made about being 70/30 going into retirement is a small concern. You’re planning for retirement now, so I’d consider reducing my equities now.

90/10 is aggressive when arrangements are being made for retirement IMO. You only have to get rich once, after all.
The OP hopefully will have a 40 to 50 year retirement. Nothing too aggressive about 70/30 under those circumstances.

Having 5 years of expenses in cash is a good idea though.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
Wanderingwheelz
Posts: 1262
Joined: Mon Mar 04, 2019 9:52 am

Re: High-level early retirement plan - What do y'all think?

Post by Wanderingwheelz »

smitcat wrote: Sun May 16, 2021 9:01 am
Wanderingwheelz wrote: Sun May 16, 2021 8:03 am The comment made about being 70/30 going into retirement is a small concern. You’re planning for retirement now, so I’d consider reducing my equities now.

90/10 is aggressive when arrangements are being made for retirement IMO. You only have to get rich once, after all.
"The comment made about being 70/30 going into retirement is a small concern"
Interesting - 70/30 would be our choice at this point with his/her situation.
30% of 4 million would be $1.2M which covers more than 12 years of expenses.
Maybe my comment was misunderstood. It would be my preference to be 70/30 also. My wife and I are 70/30 and our situation isn’t too much different than theirs other than the fact our daughter is 20 year older and our mortgage is paid off.
3 Fund Portfolio. 70/30 AA. No mortgage. Simplicity is key.
User avatar
teen persuasion
Posts: 1560
Joined: Sun Oct 25, 2015 1:43 pm

Re: High-level early retirement plan - What do y'all think?

Post by teen persuasion »

Grifin wrote: Sat May 15, 2021 3:23 pm Thanks for taking a look, Klangfool.

I have run a few scenarios in turbo tax assuming a few thousand in interest income (~$5k), dividends in my taxable (~$12k) plus selling equities (for example, $100k proceeds on a $50k basis) Most of my income will be capital gains. I was actually surprised by the bill coming out to near zero if keep my total income below $85k or so. Of course, when I begin pulling from my 401k, I understand the IRS bill will go up.
Do some projections of what your taxes will look like with income coming from tax deferred instead of taxable. If you are planning to tap taxable first, tax deferred will continue to grow in the meantime. It's $1.8m now; several more years contributions + decades of growth.
What will your RMDs be, and the tax bill on them?

You are likely better to balance your tax bill over the long term, instead of having zero years followed by high tax bills later. Take advantage of filling the lowest few tax brackets every year. Convert some tax deferred to Roth every year, at least to slow the growth of tax deferred, but possibly/preferably to shrink it over time. Kitces explores balancing between taking advantage of zero capital gains and Roth converting in the zero bracket (within the standard deduction) and low brackets: https://www.kitces.com/blog/navigating ... versions/

Some of each (each year) may be much better than sequentially tapping taxable, then tax deferred. You also have the CTC for your child now - you can use that to offset Roth conversion taxes, especially if/when it reverts to partially nonrefundable.
Topic Author
Grifin
Posts: 11
Joined: Wed Apr 22, 2020 9:30 pm
Location: SATX

Re: High-level early retirement plan - What do y'all think?

Post by Grifin »

Teen persuasion,

Thanks for the link in addition to your suggestion. I found it very helpful to visualize what you and Klangfool are advocating. Totally makes sense
reader79
Posts: 46
Joined: Sat Jan 16, 2021 12:42 am

Re: High-level early retirement plan - What do y'all think?

Post by reader79 »

Think of it this way: the money you have invested now should compound to more than $2M by the time you reach standard retirement age. So, you are already a future multi-millionaire even if you didn't realize it. But more to the point: the most common thing I hear in the personal finance world is, "I wish I could go back to my 20s and invest more." Every dollar you invest today is so much more powerful than any dollar you will invest 5, 10, or 20 years into the future. I think you would get a lot of value from Ramit Sethi's book, "I Will Teach You to be Rich." You can get it free online through the Libby app at the public library. He incorpates budgeting for fun money, which I have done and is one of the best ways to keep the motivation to save a lot and reduce spending on things I don't value. Something like that will make things a lot easier. (We do 15% fun money in our annual budget and we still save and invest more than 50% of our income.)
VTI: 48.75%, QQQM: 28.75%, QQQJ: 9%, VB: 9%, BTC: 2.5%, ETH: 2%
livesoft
Posts: 76665
Joined: Thu Mar 01, 2007 8:00 pm

Re: High-level early retirement plan - What do y'all think?

Post by livesoft »

Grifin wrote: Sat May 15, 2021 3:23 pmI have run a few scenarios in turbo tax assuming a few thousand in interest income (~$5k), ...
I think you can be more tax-efficient. We just did our Federal tax return and had $2 in interest income which is taxed at our full marginal rate. For tax-efficiency we avoid interest income and would rather have qualified dividends which are taxed at a lower rate of 0% for us.
Wiki This signature message sponsored by sscritic: Learn to fish.
Post Reply