Personal Finance (Not Investing) • FIRE at 42?

Seeking advice on my FIRE plan. I think I’ve made it but would like people’s opinions on anything I’ve missed.

Age: 42, 42 (married)

Assets:

• $1M Zillow estimate on forever home
  $260k mortgage @ 1.99% (matures in 10 years)
• $160k Zillow estimate on rental apartment
• $1.4M retirement accounts
• $550k taxable accounts
• $50k cash

Total excluding home/apartment equity: ~$2M


Spending Targets:

1. Mortgage: $28k/year for 10 more years
2. Annual fixed spending target: $66k
   This is non-negotiable spending that pays for taxes, utilities, reasonable groceries/restaurants, gas, ACA medical care, physical fitness instructors, shopping, etc… This is a target we’ve found works for us and we can live on very comfortably.
3. Annual discretionary target: $35k
   This is just extra fun money for shopping, travel, vacations, whatever.

If the market ever tanks or our investments do poorly, we can easily cut our discretionary budget and return to our base level of $66k annual spend.

Income Scenarios:
The spouse and I both intend on working fun part-time jobs which will likely provide health coverage reducing our fixed spending target. But, to be safe, I’m targeting as if we will be paying ACA out of pocket each month. Additionally, if the market tanks, we will increase our part time hours to help cover our fixed spending to relieve the pressure on our investments.

The apartment is stably rented and cash flows $13k/year increasing by 3-4% each year. We are weary of being landlords though and will sell the apartment when the tenant ever moves out.

1. Scenario 1: Market is up, investments are good, balances are higher than they were at retirement
   • $13k rental free cash flow
   • $25k combined part time job income when spouse and I are not traveling
   • $91k SWR of 4.6% from $2M (for 10 years until mortgage is paid off and then reduced)
     Total Income: $129k = $66k + $35k + $28k (mortgage)
2. Scenario 2: Market is down, balances are less than they were at retirement
   • $13k rental free cash flow
   • $60k increased part time jobs working all year as we will not be traveling
   • $20k SWR of 1% from $2M letting the investments ride out the slump
     Total income: $93k = $66k + $28k (mortgage)

Caveats:

• Apartment sale. If the renter ever moves out, I will sell it and, after taxes, be able to deposit $120-140k depending on how much it actually sells for and when. I will then no longer receive the $13k rental free cash flow, but the SWR will pull on a slightly higher balance.
• My understanding of SS calculations is that the lower income partner begins drawing their SS as early as possible and the higher income partner begins drawing as late as possible. Therefore, we expect the following cash injections:
  1. Partner SS @ age 62: $12k
  2. My SS @ age 70: $44k
• We don’t intend to work our fun PT jobs for forever but most models/calculators that I’ve used show we really only need the extra income in the very beginning of our early retirement. By about age 48 or so, we could quit entirely if desired.

One of the many calculators I've used which shows a 5% failure rate but a 10% chance I'll be dead anyway. Seems like ok odds.



I don’t hate my job so I am not planning on quitting yet but I would like to know if I can go ahead and pull the plug at any moment I so choose. What do you all think?

Statistics: Posted by hallowides — Thu Sep 26, 2024 5:42 pm — Replies 0 — Views 85

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