2.75M nest egg, 84K expenses: Can we take a break/slow down?
- PhinanceMD
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2.75M nest egg, 84K expenses: Can we take a break/slow down?
We are a younger couple asking the question to the BH community, can we slow down work/take a mini-retirement with the below data?
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
60/30/10
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Be careful.
Two young children. One of you are approaching entry into middle age.
Have sufficient life insurance in the event one of you die, leaving the other to rear and educate young children?
Have long-term care health insurance?
Define mini-retirement. Both of you? Will one of you have access to employer sponsored health insurance?
What percent of reduction in salaried income will you experience in mini-retirement?
Do you have tax-deferred investments in your assets? You are years away from penalty free access to IRA/401k.
You are wise to ask for the opinions of others.
eace
Two young children. One of you are approaching entry into middle age.
Have sufficient life insurance in the event one of you die, leaving the other to rear and educate young children?
Have long-term care health insurance?
Define mini-retirement. Both of you? Will one of you have access to employer sponsored health insurance?
What percent of reduction in salaried income will you experience in mini-retirement?
Do you have tax-deferred investments in your assets? You are years away from penalty free access to IRA/401k.
You are wise to ask for the opinions of others.
eace
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Recently on BH there's been a rash of posts of folks in their 30s with millions spending all of $25k/yr asking if they can now finally ride off into the sunset- the OP turns ghost. This doesn't appear to be one of them, so yes with 2.75m and $84k/ yr spend you can take a break.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
If I were applying a SWAG to this for such a long time I would probably invoke a safe withdrawal rate of 2.5% on a portfolio of $2.75M with historically random return and project that you could get away with spending about $70k/year increased by historically random inflation every year. I would apply a contingency to that for expenses such as you have mentioned and to anticipate needing to fund end of life care.
The methodology to apply to this would be Monte Carlo simulation or historical returns simulation such as in FireCalc, all taken with a large dose of uncertainty.
A dilemma in using safe withdrawal rates on variable return portfolios is that SWR is a worst case while real retirements would be more successful than that much of the time.
You can also look at some of the models that adjust spending as one goes along depending on financial experience. Also for such long times the optimum stock allocation would probably be closer to 75% rather than 50%.
You might try out this question at the Early Retirement Forum https://www.early-retirement.org/forums/
The methodology to apply to this would be Monte Carlo simulation or historical returns simulation such as in FireCalc, all taken with a large dose of uncertainty.
A dilemma in using safe withdrawal rates on variable return portfolios is that SWR is a worst case while real retirements would be more successful than that much of the time.
You can also look at some of the models that adjust spending as one goes along depending on financial experience. Also for such long times the optimum stock allocation would probably be closer to 75% rather than 50%.
You might try out this question at the Early Retirement Forum https://www.early-retirement.org/forums/
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I know you are asking about a mini-retirement and not permanent retirement. But it is risky IMO for two wage-earners in their 30s to both stop working. It can be hard to re-enter the work force, health issues might come up, your skills can get rusty, etc.
With the above in mind, at your age a 2% withdrawal rate is the most I personally would withdraw if I were contemplating both my spouse and I quitting our jobs. In your case that would be $55k to cover everything - living expenses, healthcare, income taxes, periodic expenses such as a new car/home repair, and kid expenses including education.
If the $55k is not sufficient and you really need $84k per year, some options are:
1. Take turns - one spouse mini-retires while the other works
2. Reduced working schedule for each
3. Cut your expenses to $55k/year in the U.S or abroad
4. Work another 5 years and re-evaluate
With the above in mind, at your age a 2% withdrawal rate is the most I personally would withdraw if I were contemplating both my spouse and I quitting our jobs. In your case that would be $55k to cover everything - living expenses, healthcare, income taxes, periodic expenses such as a new car/home repair, and kid expenses including education.
If the $55k is not sufficient and you really need $84k per year, some options are:
1. Take turns - one spouse mini-retires while the other works
2. Reduced working schedule for each
3. Cut your expenses to $55k/year in the U.S or abroad
4. Work another 5 years and re-evaluate
Last edited by HomeStretch on Tue Nov 30, 2021 1:10 pm, edited 1 time in total.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Can you spend what amounts to 3% of your assets to take a year off?
Sure. But you do need to figure out the health insurance premiums, which will add to your withdrawals. And you need a plan to reenter the workforce.
Can you do that indefinitely, with plans to buy a house and pay for your kids’ education?
Not likely. As least not without lowering your annual expenses.
Sure. But you do need to figure out the health insurance premiums, which will add to your withdrawals. And you need a plan to reenter the workforce.
Can you do that indefinitely, with plans to buy a house and pay for your kids’ education?
Not likely. As least not without lowering your annual expenses.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
- cflannagan
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
If you want your AA to last you 50 years at least, your AA of 50/25/25 is probably too conservative. Especially with your annual expense increasing as your kids grow up.
Against historical returns (meaning not guaranteed for future), if you retire now, 25% of the time your portfolio would run out of money. 25% is way too high.
I'd take a serious look at your AA. If you change your AA to 60/40, which is still pretty conservative, CFireSim reports 100% success rate against historical data.
But as I said, your expenses will increase. If you want your portfolio to last, with annual expenses bumped up to say, $100k a year, with 100/0 equities/bond mix, your success rate would be 94% against historical data.
Note that above simulations doesn't take into account any social security income you might have when you hit FRA (full retirement age). That might improve your chance of success some.
Against historical returns (meaning not guaranteed for future), if you retire now, 25% of the time your portfolio would run out of money. 25% is way too high.
I'd take a serious look at your AA. If you change your AA to 60/40, which is still pretty conservative, CFireSim reports 100% success rate against historical data.
But as I said, your expenses will increase. If you want your portfolio to last, with annual expenses bumped up to say, $100k a year, with 100/0 equities/bond mix, your success rate would be 94% against historical data.
Note that above simulations doesn't take into account any social security income you might have when you hit FRA (full retirement age). That might improve your chance of success some.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
You can retire tomorrow with a 3% SWR til SS kicks in and then something much less. You will be fine. You can manipulate your income to get large ACA credits and the like. Even dropping like 200k on the kids college funds is easily doable. And if by some chance something worse than the great depression starts up tomorrow, you are young enough to go get a job.Phinance wrote: ↑Tue Nov 30, 2021 12:34 pm We are a younger couple asking the question to the BH community, can we slow down work/take a mini-retirement with the below data?
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
Or of course you can work another 10 years and get to spend 150k/year for life. Your choice...
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I don't see the math you're looking at.randomguy wrote: ↑Tue Nov 30, 2021 1:28 pmYou can retire tomorrow with a 3% SWR til SS kicks in and then something much less. You will be fine. You can manipulate your income to get large ACA credits and the like. Even dropping like 200k on the kids college funds is easily doable. And if by some chance something worse than the great depression starts up tomorrow, you are young enough to go get a job.Phinance wrote: ↑Tue Nov 30, 2021 12:34 pm We are a younger couple asking the question to the BH community, can we slow down work/take a mini-retirement with the below data?
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
Or of course you can work another 10 years and get to spend 150k/year for life. Your choice...
They're looking at home purchase in 2024; given red-hot RE, I'd budget 1M for that (unless M/LCOL). Which only leaves them with 1.75M in their AA.
Last edited by Marseille07 on Tue Nov 30, 2021 1:58 pm, edited 1 time in total.
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Wow, very helpful and great questions. If we both took off we would not have access to employer HP, and would have to purchase one further increasing our expenses. I will work on increasing our stock allocation (towards 60%) and reassess in a few years. Also correct, no great plan for funding higher education if we stop contributing to current 529. Lots to chew on, probably going to start with:
-reducing work loads for both of us
-increasing stock allocation to 60%
-reassess in a few years
Thank you so much
-reducing work loads for both of us
-increasing stock allocation to 60%
-reassess in a few years
Thank you so much
60/30/10
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I'll offer a more optimistic interpretation.
Of course you can take a break or slow down. You have nearly $3 million dollars! Keep your expenses in check and enjoy some time off.
But I would not be in the mindset of permanent retirement for two reasons. One, predicting expenses for 50 years when you are just starting to raise two children is way more risk than I would take. Two, that's a long time to spend with yourself. Use your time and space over the next couple of years to figure out what you want to do next. Based on how much you've accumulated this early in life (unless you inherited it) you and your spouse clearly have skills and insights that will serve you well when you decide to start working again.
Down time has a way of changing what you thought you wanted two years ago, as do the different stages of raising kids, as does getting older. The great news is you'll have freedom to make those choices because of the foundation you've laid.
Of course you can take a break or slow down. You have nearly $3 million dollars! Keep your expenses in check and enjoy some time off.
But I would not be in the mindset of permanent retirement for two reasons. One, predicting expenses for 50 years when you are just starting to raise two children is way more risk than I would take. Two, that's a long time to spend with yourself. Use your time and space over the next couple of years to figure out what you want to do next. Based on how much you've accumulated this early in life (unless you inherited it) you and your spouse clearly have skills and insights that will serve you well when you decide to start working again.
Down time has a way of changing what you thought you wanted two years ago, as do the different stages of raising kids, as does getting older. The great news is you'll have freedom to make those choices because of the foundation you've laid.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
The question that I always ask in these sorts of situations is how easy will it be for you to pick up your career again if you take time off in your prime years? In my area of engineering, I would have expected that after any extended absence would have been very difficult to step back in at the same or similar level. While I know people do this, and perhaps things have changed somewhat, but at the very least I would advise keeping your network alive and well. Going totally off grid and losing touch with your industry may well make a reentry very difficult.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
It’s really impressive that you’ve managed to accumulate such a substantial net worth at a young age with only a 50% stock allocation. Each person is different, but in my view you’re being far too conservative with your asset allocation. Long-term it’ll be a substantial drag on your portfolio.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Does the 7000 a month include the cost of health insurance and income taxes?
In your position I would plan to set a date 5 years from now to formally reevaluate. You ll have an event to look forward to, and with your continued accumulation, a reduction in work might seem more secure. Just as important, you ll get some understanding of the expenses of raising children. And you ll have a chance to think about accumulating a college fund for each child.
Continue to read this forum. It is a great teaching tool.
Congratulations on your accumulation so far. Well done.
In your position I would plan to set a date 5 years from now to formally reevaluate. You ll have an event to look forward to, and with your continued accumulation, a reduction in work might seem more secure. Just as important, you ll get some understanding of the expenses of raising children. And you ll have a chance to think about accumulating a college fund for each child.
Continue to read this forum. It is a great teaching tool.
Congratulations on your accumulation so far. Well done.
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Thank you for the encouraging words, will do.
60/30/10
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
+1 for this approach. There's every reason to be positive! You're off to a great start, and you can absolutely ease up or coast in a hundred different ways, depending on health and personal interests. I would say you're a little short of just straight-up retiring, but you have all the freedom in the world to pursue any of the following:cbs2002 wrote: ↑Tue Nov 30, 2021 1:45 pm I'll offer a more optimistic interpretation.
Of course you can take a break or slow down. You have nearly $3 million dollars! Keep your expenses in check and enjoy some time off.
But I would not be in the mindset of permanent retirement for two reasons. One, predicting expenses for 50 years when you are just starting to raise two children is way more risk than I would take. Two, that's a long time to spend with yourself. Use your time and space over the next couple of years to figure out what you want to do next. Based on how much you've accumulated this early in life (unless you inherited it) you and your spouse clearly have skills and insights that will serve you well when you decide to start working again.
Down time has a way of changing what you thought you wanted two years ago, as do the different stages of raising kids, as does getting older. The great news is you'll have freedom to make those choices because of the foundation you've laid.
* find similar jobs with different/better environments
* take a pay cut for a less demanding version of your current job
* keep your job but negotiate part-time/shorter hours
* find part-time work elsewhere, preferably with benefits
* take turns between spouses, one maintaining benefits and insurance while the other takes a break
* take a long shot at a dream job, because you've got plenty of room to fail
* totally change careers
* take the chance to go back to school and use that for the next phase
Or mix and match or branch off from any of the above.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Sure but now they are no longer paying rent. A 1 million dollar house would be 4-6k/month in most areas so now they will only need like 2-4k/month to live on after buying the house. 1.75m is plenty.Marseille07 wrote: ↑Tue Nov 30, 2021 1:34 pmI don't see the math you're looking at.randomguy wrote: ↑Tue Nov 30, 2021 1:28 pmYou can retire tomorrow with a 3% SWR til SS kicks in and then something much less. You will be fine. You can manipulate your income to get large ACA credits and the like. Even dropping like 200k on the kids college funds is easily doable. And if by some chance something worse than the great depression starts up tomorrow, you are young enough to go get a job.Phinance wrote: ↑Tue Nov 30, 2021 12:34 pm We are a younger couple asking the question to the BH community, can we slow down work/take a mini-retirement with the below data?
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
Or of course you can work another 10 years and get to spend 150k/year for life. Your choice...
They're looking at home purchase in 2024; given red-hot RE, I'd budget 1M for that (unless M/LCOL). Which only leaves them with 1.75M in their AA.
If I had to guess though, they aren't looking at 1 million dollar houses. People living on 84k/year tend not to live in places that expense.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Yeah that's actually a good point, 2.75M renter vs 2M AA + 750K house fully paid off might be comparablerandomguy wrote: ↑Tue Nov 30, 2021 5:26 pm Sure but now they are no longer paying rent. A 1 million dollar house would be 4-6k/month in most areas so now they will only need like 2-4k/month to live on after buying the house. 1.75m is plenty.
If I had to guess though, they aren't looking at 1 million dollar houses. People living on 84k/year tend not to live in places that expense.
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Great advice, Quirkz, will apply some of those suggestions. Best.
60/30/10
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
A single equation won't take into account all potential outcomes since it is only looking at a single scenario where you have straight-line return and inflation. Instead, consider using a Monte Carlo Simulator to do the analysis of the numbers in order to run thousands of scenarios. Take a look at the link below. I have plugged in the numbers for your situation. Feel free to make updates as you see fit. Based on your current numbers and my return assumptions for stocks and bonds, your portfolio would have a 45% chance of not running out of money by the end of 50 years. I'm not saying that is the answer, I am just trying to point you to the tools you can use to try to find an answer.
https://www.portfoliovisualizer.com/mon ... nt=2750000
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Great point, thank you for sharing link.
60/30/10
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
You have done a great job accumulating for your age. But, you only have a child just out of the infant stage. Kids cost money, so I think your spending is going to increase as they get older. Especially if you want them to participate in activities such as sports or music. Having one parent stay home can save significantly on day care costs, so if you're both working one person could probably stop working especially if not all that highly paid.
You haven't worked all that long to get great social security benefits. This helps both if that worker dies (survivor benefits for children) and retirement, especially for surviving spouse. You are also a long way from 59 years old, so the 401K and Trad IRAs aren't much use until then. Don't know how much is in your taxable brokerage, but you'll want to understand Roth Conversion ladders and withdraws from taxable accounts if you retire early to make sure you can ride to 59 1/2 years old. And keep your ears attuned to future legislation that threatens Roth conversions which could wreck that.
I'd say you can slow down for sure, but I would keep one person working so that SS contributions continue, as do Roth IRA and/or 401K contributions, and it probably provides lower cost health care (especially important if two parents and two kids). Letting your nest egg sit and grow is much better than drawing it down now or even skimming dividends to live. You could reduce the 401K/IRA contributions if necessary, but I'd try to get any free money (e.g. company match) if its available. Contributing during downturns is much better than withdrawing during a downturn.
The one worker could perhaps reduce their hours if possible. I recently retired, but would have kept working if I could have worked 20 hrs/week and not lose benefits. I could not, so I just quit since I had reached my minimum number to retire.
You haven't worked all that long to get great social security benefits. This helps both if that worker dies (survivor benefits for children) and retirement, especially for surviving spouse. You are also a long way from 59 years old, so the 401K and Trad IRAs aren't much use until then. Don't know how much is in your taxable brokerage, but you'll want to understand Roth Conversion ladders and withdraws from taxable accounts if you retire early to make sure you can ride to 59 1/2 years old. And keep your ears attuned to future legislation that threatens Roth conversions which could wreck that.
I'd say you can slow down for sure, but I would keep one person working so that SS contributions continue, as do Roth IRA and/or 401K contributions, and it probably provides lower cost health care (especially important if two parents and two kids). Letting your nest egg sit and grow is much better than drawing it down now or even skimming dividends to live. You could reduce the 401K/IRA contributions if necessary, but I'd try to get any free money (e.g. company match) if its available. Contributing during downturns is much better than withdrawing during a downturn.
The one worker could perhaps reduce their hours if possible. I recently retired, but would have kept working if I could have worked 20 hrs/week and not lose benefits. I could not, so I just quit since I had reached my minimum number to retire.
Mark |
Somewhere in WA State
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
When I plug into firecalc, I get 100% success @ 2.75M with 84K for 50yrs, are these calculators very different?
https://firecalc.com/firecalcresults.php
https://firecalc.com/firecalcresults.php
60/30/10
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
The other place to go is firecalc which does the same thing using historical data instead of made up numbers. Standard 60/40 portfolio has a 100% success rate and on average end up with 10 million (real) dollars with the worst case is having 740k (i.e. almost 10 more years of spending). Adding in SS would add in even more safety margin.EfficientInvestor wrote: ↑Thu Dec 02, 2021 4:03 pmA single equation won't take into account all potential outcomes since it is only looking at a single scenario where you have straight-line return and inflation. Instead, consider using a Monte Carlo Simulator to do the analysis of the numbers in order to run thousands of scenarios. Take a look at the link below. I have plugged in the numbers for your situation. Feel free to make updates as you see fit. Based on your current numbers and my return assumptions for stocks and bonds, your portfolio would have a 45% chance of not running out of money by the end of 50 years. I'm not saying that is the answer, I am just trying to point you to the tools you can use to try to find an answer.
Neither is really a better or worse approach. They both have limitations.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I'm so glad I never had children. I have a fraction of what you do, but since I'm child-free, car-free, and plan to be house-free when I retire, my retirement expenses will probably only be about $30-35K/year.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
That's your opinion and it's fine, but our expenses will be the about same with a car(s) and children.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
OP, one thing I wanted to add is that I think it's much easier to work when your children are younger and haven't started school yet. They are totally on your schedule then. Once the school breaks, holidays, teacher work days, etc. start, it makes it much more difficult for two people to work FT, unless one of you has a flexible schedule. Personally, I think you have plenty and can cut back, but it might be worth working three or so more years to pad everything and add to your house fund.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I fire'd almost 7 years ago more because of a Company closing at Age 50. I had about 2.6M on a 60/40 and a paid for home, no debt but had 4 kids at home. The one thing is I had there college taking care of so having younger children if you want to help them out then add that to your budget. Kids do not have to be expensive but if you get caught up in select sports and stuff it get expensive. I did get some pay back as so far all my kids have received Athletic, Academic or both. 2 done, 1 going next fall and 1 left in HS. I have no problem with you going for it as you emphasized "Taking a break which means at some point you plan on earning something. That is what we did after 2 years with concerns during the elections with HC costs. We kinda decided lets both apply and whoever gets the best job with benefits with flexibility and descent pay and we will switch off every couple years so lets go for it. My Wife got a job pretty quick which she ended up loving and with the flexibility , good benefits and Gross pay of about 60k a year I think she would rather do that then be home with me all day. Since then we have bought a new home double the price and that has gone up in value on top of that and our NW of 2.6 is more and my withdrawals are less using her income first. We budget around 110k a year. So I think your more than fine and being in your 30's I would go as far to say your a lot more capable of finding some income then we were in our 50's. Just have a good plan in place and take it a year at a time would be my advice. You guys have done well congratulations.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
You must live in a much cheaper area than me. Here in the Seattle area a decent apartment costs a minimum of $1500, probably more. Car expenses would be a minimum of $400/mo, but probably a little more. Food is a minimum of $600/mo, probably a little more.
So a housing, car, and food would conservatively be about $30K for me. If I had kids each one would be at least an additional $10K/year. I like dogs more than kids anyway.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Houses cost more money than most non owners think initially. They are a PIA but lovely long term once you’ve made the home yours (Reno’s, furniture etc).
You’ve done great. Pedal to the metal another 5 to 10 years! That’s basically the advice I got and appreciate it. Keeps me motivated until our 50th birthday when we plan to submit our resignations
You’ve done great. Pedal to the metal another 5 to 10 years! That’s basically the advice I got and appreciate it. Keeps me motivated until our 50th birthday when we plan to submit our resignations
“At some point you are trading time you will never get back for money you will never spend.“ |
“How do you want to spend the best remaining year of your life?“
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
If this was us, one of us would probably stop working as it gets closer to the delivery and the other one wait to see if kiddo #2 is perfectly healthy, as is usually the case. (DH’s much younger brother had a Downs baby early during our last pregnancy and DH spent 8 months worrying about ours, who was perfectly fine. I later found another Downs Syndrome person in his extended family.)
The biggest problem I see is that your living expenses will creep up as the kids grow up and you buy a house. Sticking to a budget will help this.
However, keep in mind that while you have low income years, that is a great time to do Roth conversions. Think of all the future tax-free compounding that can happen in Roth instead of tax-deferred, especially if the Roth holds only stock funds. (Sorry for spending some of your savings on taxes and breaking your budget. )
The biggest problem I see is that your living expenses will creep up as the kids grow up and you buy a house. Sticking to a budget will help this.
However, keep in mind that while you have low income years, that is a great time to do Roth conversions. Think of all the future tax-free compounding that can happen in Roth instead of tax-deferred, especially if the Roth holds only stock funds. (Sorry for spending some of your savings on taxes and breaking your budget. )
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
If they have enough asset to live off of, why do they need life insurance in an event one dies? I thought you will need life insurance to replace the income (or cost savings) of the person who died.maj wrote: ↑Tue Nov 30, 2021 12:49 pm Be careful.
Two young children. One of you are approaching entry into middle age.
Have sufficient life insurance in the event one of you die, leaving the other to rear and educate young children?
Have long-term care health insurance?
Define mini-retirement. Both of you? Will one of you have access to employer sponsored health insurance?
What percent of reduction in salaried income will you experience in mini-retirement?
Do you have tax-deferred investments in your assets? You are years away from penalty free access to IRA/401k.
You are wise to ask for the opinions of others.
eace
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
People provide more than just income to kids. They also provide a huge amount of human capital. Without a spouse maybe you are paying for 5k/year more for babysitting and someone to drive your kid when you need to be in two spots at once. You would need to think about it.Yefuy.Goje wrote: ↑Sat Dec 04, 2021 3:12 pm
If they have enough asset to live off of, why do they need life insurance in an event one dies? I thought you will need life insurance to replace the income (or cost savings) of the person who died.
Personally they are well off into the safe zone so I wouldnt worry about it. Your opinion might be different.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
one other thing to consider:
when 2024 comes do you really want to pay all cash for a house or get a mortgage?? I imagine a good mortgage will be a lot easier to get with a few years of a steady work in the immediate past.
when 2024 comes do you really want to pay all cash for a house or get a mortgage?? I imagine a good mortgage will be a lot easier to get with a few years of a steady work in the immediate past.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Im sorry. You would budget a million dollars for a home purchase? Where are we talking about? I would think that the OP (who is in his 30's) and most Americans (assuming we are still here) are not doing that at all. Are the Bogleheads saying we should budget a mil for a house? I certainly wouldn't.Marseille07 wrote: ↑Tue Nov 30, 2021 1:34 pmI don't see the math you're looking at.randomguy wrote: ↑Tue Nov 30, 2021 1:28 pmYou can retire tomorrow with a 3% SWR til SS kicks in and then something much less. You will be fine. You can manipulate your income to get large ACA credits and the like. Even dropping like 200k on the kids college funds is easily doable. And if by some chance something worse than the great depression starts up tomorrow, you are young enough to go get a job.Phinance wrote: ↑Tue Nov 30, 2021 12:34 pm We are a younger couple asking the question to the BH community, can we slow down work/take a mini-retirement with the below data?
(I know there are real confounding issues including healthcare + college savings that we will need to address, appreciate any advice)
39yo+35yo with 2 kiddos (1.5yo + one on the way).
Net Worth: 2.75M (Across brokerage/401K/Roth/HSA/checking/savings)
AA: 50/25/25 (stocks/bonds/cash) **we are cash heavy, more conservative than most our age, thinking about home purchase 2024?
Expenses: 84K/yr (7k/mo)
Debts: none
I’m assuming an ROI of 5% with that AA and an inflation rate of 2%. How would you chart out whether this money will last 50 yrs? Is the equation (Net Worth)*1.05 - (Expenses)*1.02
Thanks in advance.
Or of course you can work another 10 years and get to spend 150k/year for life. Your choice...
They're looking at home purchase in 2024; given red-hot RE, I'd budget 1M for that (unless M/LCOL). Which only leaves them with 1.75M in their AA.
- bhwabeck3533
- Posts: 462
- Joined: Thu Sep 21, 2017 6:25 am
- Location: Baldwin County, AL
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
I scanned ahead and did not see the healthcare costs get specifically addressed by the OP. My wife and I are retired, and we paid almost $2,000/month for a BCBS HDHP before I turned 65 (thank you Medicare). It's impractical to think a young couple with children can live off the remaining $5,000 per month.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Yes.
If you actually did "take a break" what would you do?
Do you feel confident that your expenses will remain constant for the next 50 years?
Even with young children growing up?
Even with a potential home purchase?
My advice: 50 years is a long, long time. You are young. Many changes in your life are in your near future. Consider taking a break when you are older and have fewer unknowns, over fewer years, ahead of you.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Of course you can take a break. It’s up to you how long that lasts. As other posters said, you can always go back to work to earn your annual expense amount if you want/need to.
Yes, there are unknowns in life, financial or otherwise. Don’t let that stop you.
Yes, there are unknowns in life, financial or otherwise. Don’t let that stop you.
- AnnetteLouisan
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Check out Leslie Bennetts, The Feminine Mistake (book and YouTube presentations), about the perils of leaving the workforce and difficulties of reentry.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
If you are talking about a 6 to 12 month break, you are golden.
How much cash will be going towards a down payment and what does a projected mortgage payment do to your expenses where you live? I would just use 5% increase in housing cost per year as a worst case scenario for this projection (honestly, I doubt many metros will appreciate anywhere close to that fast each year over the next 2 years).
For 2022, health insurance will be at a cost of 8.5% your MAGI. Given that you may use cash for expenses, I recommend either doing some Roth conversions or tax gain harvesting in 2022 to "create" taxable income at the level that maximizes your subsidy and prevents you from being on Medicaid. On the surface, it looks like you will be able to get a silver plan nearly free for 2022 which would match up well with a mini retirement that is only 12 months or less.
How much cash will be going towards a down payment and what does a projected mortgage payment do to your expenses where you live? I would just use 5% increase in housing cost per year as a worst case scenario for this projection (honestly, I doubt many metros will appreciate anywhere close to that fast each year over the next 2 years).
For 2022, health insurance will be at a cost of 8.5% your MAGI. Given that you may use cash for expenses, I recommend either doing some Roth conversions or tax gain harvesting in 2022 to "create" taxable income at the level that maximizes your subsidy and prevents you from being on Medicaid. On the surface, it looks like you will be able to get a silver plan nearly free for 2022 which would match up well with a mini retirement that is only 12 months or less.
- bhwabeck3533
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- Joined: Thu Sep 21, 2017 6:25 am
- Location: Baldwin County, AL
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
+1 to Slacker....Slacker wrote: ↑Sun Dec 05, 2021 7:15 am
For 2022, health insurance will be at a cost of 8.5% your MAGI. Given that you may use cash for expenses, I recommend either doing some Roth conversions or tax gain harvesting in 2022 to "create" taxable income at the level that maximizes your subsidy and prevents you from being on Medicaid. On the surface, it looks like you will be able to get a silver plan nearly free for 2022 which would match up well with a mini retirement that is only 12 months or less.
From my research: "For the 2022 tax year, the ACA affordability threshold will decrease to 9.61%. According to IRS Revenue Procedure 2021-36 all health plans offered by employers beginning January 1, 2022, will need to be no more than 9.61% of an employee's household income for employer-sponsored self-only coverage to be ACA affordable."
OP, I recommend getting on the ACA website immediately if you are pulling the trigger on a 12-month "retirement". With your cash reserves you should qualify for a 100% PTC for healthcare for tax year 2022.
Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
No.
Kids are expensive. When my kids were that age our expenses were like yours. Now they are $130-140k/year.
Kids are expensive. When my kids were that age our expenses were like yours. Now they are $130-140k/year.
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
- PhinanceMD
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Re: 2.75M nest egg, 84K expenses: Can we take a break/slow down?
Thank u all for the variance of helpful advice, I will continue working with less hours and reassess with blog in a few years. Cheers
60/30/10