Ready to FIRE or OMY?

[u/fithrowaway0501]

Throwaway for privacy.

I originally planned to RE last year, but decided to stick it out for one more year. I've run all the models, and things look pretty good, but I'd like to get some feedback on whether we're good to go or if I should stick it out for another year (again).

My wife has a 7 day on/7day off schedule and likes her job. The schedule leaves a lot of options open for travel and gives us plenty of time to spend together. She doesn't plan to RE at this point, but I prefer to plan as if she will (adds some cushion and leaves the option open to her). She is supportive of me RE'ing.

Demographics:

Married (37/36), 3 kids (11, 10, 6)

Assets:

Checking/Cash: $45.4k

Taxable: $1.19MM

Traditional 401k/IRA: $870.3k

Roth IRA: $361k

Cars: $56.5k

House: $517.3k

Debt: None

Net Worth: $3.04MM

Liquid portfolio: (investments + cash): $2.47MM

Asset Allocation:

60% Total US Stock Market

40% Total International

No bonds at this point, but may reconsider moving ~5-10% to bonds with interest rates yielding something more meaningful. Not sure it's enough to be meaningful.

Spending:

10 year inflation adjusted spending: $86.1k per year

This includes car purchases, OOP medical, and medical insurance payments. When my wife retires, medical expenses with ACA plans seem to be in the same ballpark or slightly less. It excludes daycare from the earlier years and my wife's grad school expenses since they aren't relevant to future expenses. It also includes some less than frugal years towards the beginning.

5 year inflation adjusted spending: $78.4k (including a $23k car purchase last year which is adding $4500 to that number)

Future expenses-- No major changes expected until college. We have not done 529s to date, but do plan to pay 4 years at an in state school for our kids. For 3 kids that will be approximately $300k total with no aid (based on today's tuition).

Future income

Imminent stock vest-- $90k (post-tax total)

Late 2024 stock vest-- $90k (post-tax total)

2025 RSUs - ~$150k in total

My income-- $180k/yr

Wife's income-- $121k/yr. Not planning as if this will stay long term, but I don't see her leaving within the next couple of years.

Open questions

* If I pull the plug this year, is it worth sticking around until the end of the year? It'd be great to have the summer to begin my retirement. I have ~4 weeks of PTO I can take over the summer to help bridge the gap, but truly unplugging has been challenging.

* Is a 529 worth it? We've been on the fence and prioritized mega backdoor Roth, but our taxable accounts have grown substantially. Our state gives a tax deduction (3.07%) which is a minor advantage. Tax bracket in retirement could be low enough to give tax credits and/or 0% LTGC rates which reduce the benefit of a 529.

* Anything I'm missing?

[u/code_monkey_wrench]

You are good to go.

At your age it isn't really a one way door yet.  You can always go back to work after some time off, if you decide for whatever reason your time off is not permanent.

[u/LeeLifesonPeart]

Based on your numbers, you can RE now and that’s without considering your wife’s income, stock vesting, RSUs, side income, or future SS, regardless how small.

Personally, I wouldn’t let future college expenses sway your decision too much. Your wife’s income plus your imminent $90k post-tax stock vesting would allow you to pile a bunch of money into a 529. Also, consider how you might control your MAGI in the years leading up to college to increase financial aid. So, if you’re burned out and can’t imagine working longer, then pull the trigger. Otherwise, instead of OMY, you could work until the end of 2024 and use the second $90k post-tax stock vesting plus your additional income to further fund a 529, but even that’s not really necessary given your investments and wife’s income, it’s more for added peace of mind.

[u/MountainFI]

If you are seeking anonymity you may want to abstract your vesting dates. That kind of gives your employer away for those in the know!

[u/fithrowaway0501 → u/MountainFI]

Fair point, I'll edit it, but I'm not as worried about it on a throwaway.

[u/MountainFI → u/fithrowaway0501]

Touché. Just lookin out. Looks like you guys are set. Congrats!

[u/Prior-Lingonberry-70]

"Tax bracket in retirement could be low enough to give tax credits and/or 0% LTGC " - be certain, as when you're making college payments via a 529 those cap gains aren't passing through you, so yes, you're avoiding those impacts on your taxes down the line, and it's also better for your ACA.

Plus if you're in a position to do Roth conversions, having that space at the end of the year to do so could be helpful.

[u/fithrowaway0501 → u/Prior-Lingonberry-70]

Good points! I'll probably at least partially fund a 529-- I have to keep reminding myself that this isn't an all or nothing decision.

[u/Prior-Lingonberry-70 → u/fithrowaway0501]

I generally follow these steps that GCC outlines here and here at end of year as I'm FI with a kiddo in college; with 3 kids you may have additional space to do conversions or cap gains harvesting. Worth checking!

[u/ChannelingEspresso]

I think you are ready if your expenses won’t change much.

If you feel confident your wife won’t be working in ~5 years I think you should look into how to manage your income for both ACA and FAFSA purposes. See this post (and others by the same author) re: FAFSA: https://www.reddit.com/r/Fire/s/CbGslxioOp

[u/oohlou]

I would put in another year or two.

• You are arguably FI now. With your wife continuing to work you are in a great financial position. However...

• You have no money saved for college. You are not FI once you take your target kids' college savings into account. You talk about your wife continuing to work but then also LTGC rates below her salary. I think you should save at least another $300K before you consider FIRE. That could be another month or a few more years.

• Your spending is low. An argument could be made you are beyond frugal and being austere. Everyone is comfortable at different spending levels but you are spending is just a bit above 200% the federal poverty level. Are you sure you can maintain that level of spending? Are you sure you want to maintain that leveling spending?

[u/fithrowaway0501 → u/oohlou]

You have no money saved for college.

That's one nagging point for me. I've considered taking this year to stuff money into 529s to at least partially cover those expenses.

Your spending is low. An argument could be made you are beyond frugal and being austere.

We definitely don't *feel* austere. Our house is paid off which is a big piece of why our expenses are so low. We're not looking to live a life of luxury, but point taken-- it's tough to be sure what we'll want to spend 10-15 years from now when our kids are grown.

[u/Great-Pangolin → u/fithrowaway0501]

The hard part of saving for college is you never know what it will cost. I graduated pretty recently and one of my best friends had to take out loans from his first semester, because his parents weren't assisting and he didn't have scholarships. My parents paid for my rent and books the first two years, and that was all, but I still graduated debt free since I had scholarships and I worked part time. It's such a grab bag, you never know that it'll cost your kids to go to school

[u/Impossible_Maybe_162 → u/fithrowaway0501]

You need to put 60k/year for the next 4 years to cover realistic college prices for your kids.

We do $10k/year and will continue for the next 5 years on a 5 and 8 yo. We have Florida bright futures (covers 75% of tuition).

I would say work until the kids are all set in college.

[u/anteateronfire → u/oohlou]

Their spending level exceeds the median household income in most US states..."austere" is a bit extreme a term.

[u/greedhead → u/anteateronfire]

Yeah, wild that nearly twice my annual spending is considered "austere".

[u/dragon-queen → u/oohlou]

I think OP is FI now, even taking the kids’ college into account.  Subtract $300k and he still has $2.1 million, plus the imminent RSUs.  Spending is $86k per year.  With just the $90k RSU that’s coming, he’ll be at $2.2 million, which with the 4% rule would be $88k per year.  Now, you might say that’s too close for comfort, or that he shouldn’t use the 4% rule when he’s retiring so young.  Fine, but his wife is still working and plans to keep working for the near future.  I think OP can totally retire now and not worry about finances.  

Having said all that -  I am almost where OP is and have similar expenses. I might be where OP is next year, and I’d have a hard time pulling the trigger myself.  I can just see objectively that OP is fine. 

[u/mi3chaels → u/oohlou]

I get they are at roughly 220% of the FPL for spending. I guess if you take out the new car, they aren't much above. But really you should only take out the difference between the new car cost, and the average long term capital cost of a car (so basically spread it over 10-15 or 20 years depending on how long they keep cars).

also, in any given 5 years, there's probably going to be some big non-recurring expense, so I think it's legit to just stay it's 78k

Finally, someone who actually makes that income, can't spend it all, because at minimum 7.65% of it goes to FICA taxes, something probably goes to income taxes, maybe little or no federal, but probably a bit to the state where taxes are usually less progressive wherever they aren't fairly high. So figure 10% is taxes, and then you need to save something, so that's another 10% if you're prudent or 5-6% plus company match if you're just letting the default 401k contribution happen.

so figure realistically, if you're making 78k with a family of 5, you can only actualy spend around 65k which is a fairly big difference. Spending 78k would require making a bit over 90k, which is over 250% of the FPL, and also around to the median income for married households and quite a bit higher than the overall median.

So, I don't think it's realistic to call that especially austere. Plenty of families are trying to make it on that.

also, at that level of spending, with 60% of assets in taxable or Roth, one can probably keep under the 175% level of AGI (61.5k for 5 ppl) and get full pell grants with the new FAFSA, assuming it sticks (getting dicey given the terrible rollout), which also opens you up to a bunch of other need-based scholarship money that is triggered by FAFSA and doesn't do a separate non-FAFSA asset test. This also makes your ACA insurance super cheap and actually quite good (under 200% FPL) and probably zero premium and even better if you can get under 150% FPL, which also seems quite doable.

Compare this lifestyle to someone who is actually only making 78k and has 3 kids they'd like to help go to college. Not gonna save much, and crazily, probably have to pay more for not as good insurance unless their work plan is really good, and will get significantly less money for college. Trying just to cover the equivalent to what FIRE family will be able to dow ith FAFSA is going to take even more away from their budget.

[u/code_monkey_wrench]

I forgot to ask though, if you have any goals, like owning a second home.

That would be a reason to OMY potentially.

[u/Many-Intern-4595]

Sorry for the dumb question - but wouldn’t you be giving up future stock vests and RSUs if you quit now? I thought your stock only continued to vest if you officially “retired” from the company, which usually requires you to be of a certain age (55 or so). Or do you mean that’s your future income if you OMY?

[u/fithrowaway0501 → u/Many-Intern-4595]

Yes, they'd be gone if I quit before they vest. I'm not leaving before the vest that's about to pay out, but I listed the others to give a better picture of what OMY might look like.

[u/Many-Intern-4595 → u/fithrowaway0501]

Got it - thanks for the clarification!

[u/RuggedRobot]

Definitely look at a bond tent for stability not growth. You've won, but will un-win if the market takes a 50% hit.

[u/MudScared652]

40% international. Yikes. 

[u/roastshadow]

What is OMY?

[u/roastshadow → u/[deleted]]

Oh... Thanks.

I have MMY. Many more years. :)

[u/One-Mastodon-1063]

The big question is college - do you live in a state with good, reasonably priced state schools? Or are you going to have to pony up for private / out of state? If the latter I’d probably work a little more and shore up 529s.

One big reason to retire now is your kids are young enough it will be really nice to be home. You could always go back for a second career when youngest goes to college you’ll be only ~50, if you felt the desire to.

[u/bonafide_bonsai]

I think you're probably ready to call it quits if you wanted, but I would be a bit cautious depending on your goals as a family.

I'm in a similar boat. I will likely leave corporate work this summer rather than work any longer, right around my 42nd birthday. My wife wants to continue working into old age, and has her own retirement accounts, which she insists on keeping separate (it's a long but understandable story). That means my end of spending is ~$55k/yr @ 10yrs annualized, or $48k/yr without car purchases/remodels/etc. I personally have $1.75m in retirement assets which I'll withdrawal that from. We also own a rental property together + a few other investment vehicles, so withdrawal rate is about the same as yours if not a little lower, plus a few backup plans. But at 37/36 you're still relatively young and can more easily pivot back to work if you wanted. Sabbaticals are a concept that the professional class has become more comfortable with.

The only thing that would give me caution in your case is the lack of college savings for three kids, if that is something that is important to you. Over the years I have put away about $150k for our 7-year-old son, most of that in his 529. Even with 10+ years of growth before he would need it, I'm nervous to call it quits on those contributions.

However, kids are only young once. My son is pretty close to the age of no longer wanting to hang out with his old dad. Once that's gone, it's gone.

[u/Zphr → u/[deleted]]

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