Portfolio Question: can we achieve our FIRE goal by age 40?

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Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
sailaway
Posts: 2526
Joined: Fri May 12, 2017 1:11 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by sailaway »

Regarding FIRE, a lot depends on your current spending and your FIRE plans. You certainly have more than we had 30 and we will likely FIRE before 40, but we have pretty low expenses and no mortgage to offset most of our net worth.

As for whether or not to invest in rental property, that depends on the market you invest in and your tolerance for the BS of being a landlord.
tashnewbie
Posts: 1161
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by tashnewbie »

Are the TIRAs rollovers from prior employers' 401(k) plans? Why not transfer to your current 401(k)s, as they seem to have good choices (unless there are high non-MF fees)? Your wife's TIRA balance is so low, I would just go ahead and convert it into Roth. Maybe same for you, but it might be better to transfer to 401(k), assuming your plan allows it.
bloom2708
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Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by bloom2708 »

I do not think FI by 40 (10 years) with a $450k mortgage and 2-3 kids is really possible.

Not trying to burst your bubble. You have great incomes. You can't have a $630k house and all the operating expenses and expect to live slim.

If you could save $100k/year for 10 years, that is $1 million+. That would give you ~$25k for 35-40 years.

Not enough really. $2 million. $3 million? Big inheritance?

FI is a great goal. It gives you options, but will you be willing to get spending in a $36k to $40k range and raise kids, health insurance, pay for college?

50 might be in play. Who knows. Maybe your family is the type to just pull the plug and live small.

www.rootofgood.com

Read this blog. He retired at 33. 3 kids. Saved up ~$2 million. Spends about $30k/year. A good case study.
Last edited by bloom2708 on Fri May 15, 2020 1:19 pm, edited 1 time in total.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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retired@50
Posts: 4115
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by retired@50 »

nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
...
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
It's hard to say whether or not you're on track for FIRE by 40 because I don't see any estimate of your living expenses.
Have you done any projections in this area?
Do you plan on paying for college for 2-3 kids?
Have you considered health insurance for the 5 of you?

Having a truckload of money is great, but for a successful l-o-n-g retirement that could last 50 years or more you'll likely need to be using a withdrawal rate of around 3% -3.5%. You'll also need to have enough of that truckload of money in an account you can access without penalty. Reading up on IRS rule 72t might be of interest to you.

https://www.bogleheads.org/wiki/Substan ... c_payments

Regards,
This is one person's opinion. Nothing more.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

tashnewbie wrote: Fri May 15, 2020 9:59 am Are the TIRAs rollovers from prior employers' 401(k) plans? Why not transfer to your current 401(k)s, as they seem to have good choices (unless there are high non-MF fees)? Your wife's TIRA balance is so low, I would just go ahead and convert it into Roth. Maybe same for you, but it might be better to transfer to 401(k), assuming your plan allows it.
Yeah the TIRAs are rollovers from prior employers or mega backdoor conversions. We both have access to mega backdoor aka after tax 401k contributions and have been utilizing them. The TIRAs are at Vanguard in low cost funds, so I am not concerned there and like consolidating them there. Thanks for the response.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

retired@50 wrote: Fri May 15, 2020 10:11 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
...
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
It's hard to say whether or not you're on track for FIRE by 40 because I don't see any estimate of your living expenses.
Have you done any projections in this area?
Do you plan on paying for college for 2-3 kids?
Have you considered health insurance for the 5 of you?

Having a truckload of money is great, but for a successful l-o-n-g retirement that could last 50 years or more you'll likely need to be using a withdrawal rate of around 3% -3.5%. You'll also need to have enough of that truckload of money in an account you can access without penalty. Reading up on IRS rule 72t might be of interest to you.

https://www.bogleheads.org/wiki/Substan ... c_payments

Regards,
Yes, thank you we have looked at https://www.madfientist.com/how-to-acce ... nds-early/ and the roth conversion ladder as well.
Yes, we are going to try 529 accounts for each at the basic public in state university funding level.
Yes, health insurance is going to be the most tricky. We may have some sort of gradual slow down, where one person works for say 2 years and the other person doesn't and try to swap. I am not sure if the swapping or slow down will work, but it is something to look into.
Living expenses are pretty low now, but as you pointed out it will change with kids. Currently around 90K all in expenses with mortgage (where the mortgage is larger as it's 15 years fixed). Leaving us a good amount of room for savings/investments given our income.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

bloom2708 wrote: Fri May 15, 2020 10:03 am I do not think FI by 40 (10 years) with a $450k mortgage and 2-3 kids is really possible.

Not trying to burst your bubble. You have great incomes.

If you could save $100k/year for 10 years, that is $1 million+. That would give you ~$25k for 35-40 years.

Not enough really. $2 million. $3 million? Big inheritance?

FI is a great goal. It gives you options, but will you be willing to get spending in a $36k to $40k range and raise kids, health insurance, pay for college?

50 might be in play. Who knows. Maybe your family is the type to just pull the plug and live small.

www.rootofgood.com

Read this blog. He retired at 33. 3 kids. Saved up ~$2 million. Spends about $30k/year. A good case study.
Thanks for sharing yeah it looks interesting. I think once our mortgage is gone we could get our spending pretty low. I also know this guy took advantage of his "low income" and the ACA to get essentially free health insurance. I am not sure if that would be possible for us, maybe
Wolfpack2463
Posts: 43
Joined: Wed Jun 27, 2018 8:20 am

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by Wolfpack2463 »

nptit wrote: Fri May 15, 2020 10:12 am
tashnewbie wrote: Fri May 15, 2020 9:59 am Are the TIRAs rollovers from prior employers' 401(k) plans? Why not transfer to your current 401(k)s, as they seem to have good choices (unless there are high non-MF fees)? Your wife's TIRA balance is so low, I would just go ahead and convert it into Roth. Maybe same for you, but it might be better to transfer to 401(k), assuming your plan allows it.
Yeah the TIRAs are rollovers from prior employers or mega backdoor conversions. We both have access to mega backdoor aka after tax 401k contributions and have been utilizing them. The TIRAs are at Vanguard in low cost funds, so I am not concerned there and like consolidating them there. Thanks for the response.
That’s great they are in low cost funds, but the presence of your TIRAs is hindering your ability to perform backdoor Roth contributions. That’s a valuable $12,000 a year.

I would look to roll them into your current 401ks or take the tax hit now and convert to Roth.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

sailaway wrote: Fri May 15, 2020 9:52 am Regarding FIRE, a lot depends on your current spending and your FIRE plans. You certainly have more than we had 30 and we will likely FIRE before 40, but we have pretty low expenses and no mortgage to offset most of our net worth.

As for whether or not to invest in rental property, that depends on the market you invest in and your tolerance for the BS of being a landlord.
Yes, agree on the tolerance of BS of being a landlord. My wife is interested in it, but not me IMO. I am not really convinced the "extra returns" would be there or worth it compared to simple index fund investing.
tashnewbie
Posts: 1161
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by tashnewbie »

Wolfpack2463 wrote: Fri May 15, 2020 10:23 am
nptit wrote: Fri May 15, 2020 10:12 am
tashnewbie wrote: Fri May 15, 2020 9:59 am Are the TIRAs rollovers from prior employers' 401(k) plans? Why not transfer to your current 401(k)s, as they seem to have good choices (unless there are high non-MF fees)? Your wife's TIRA balance is so low, I would just go ahead and convert it into Roth. Maybe same for you, but it might be better to transfer to 401(k), assuming your plan allows it.
Yeah the TIRAs are rollovers from prior employers or mega backdoor conversions. We both have access to mega backdoor aka after tax 401k contributions and have been utilizing them. The TIRAs are at Vanguard in low cost funds, so I am not concerned there and like consolidating them there. Thanks for the response.
That’s great they are in low cost funds, but the presence of your TIRAs is hindering your ability to perform backdoor Roth contributions. That’s a valuable $12,000 a year.

I would look to roll them into your current 401ks or take the tax hit now and convert to Roth.
Exactly. Are you doing after-tax 401(k) contributions and then converting to a TIRA?
bloom2708
Posts: 8364
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by bloom2708 »

nptit wrote: Fri May 15, 2020 10:22 am Thanks for sharing yeah it looks interesting. I think once our mortgage is gone we could get our spending pretty low. I also know this guy took advantage of his "low income" and the ACA to get essentially free health insurance. I am not sure if that would be possible for us, maybe
If ACA stays on the books, health insurance might be the easy part.

What are the property taxes, insurance and maintenance on a $650k house now and in 10 years?

Right there, that likely takes 25% to 30% of a $40k budget.

When you get used to living a certain way, it is often tough to think about stepping backwards.

Our home is $450k, no mortgage. We could move to a 4/3 condo for ~$230k. Actually about the same size as our single family home. I would do it, but my wife wants nothing to do with down pricing. I guess it helps to all be on the same page.

Once kids are in the picture, daycare and spending in general are just kind of crazy. Save a lot and see what happens.

I agree on getting those Traditional IRAs out of the picture. You need Back Door Roth and if your companies do Mega Back Door Roth (post-tax to Roth 401k), those are amazing ways to save after the 2 x $19,500 to pre-tax 401k and $7k to pre-tax HSA if you have a HDHP.

Use all the tools in the toolbox. I wouldn't let FI by 40 consume you too much.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

tashnewbie wrote: Fri May 15, 2020 10:29 am
Wolfpack2463 wrote: Fri May 15, 2020 10:23 am
nptit wrote: Fri May 15, 2020 10:12 am
tashnewbie wrote: Fri May 15, 2020 9:59 am Are the TIRAs rollovers from prior employers' 401(k) plans? Why not transfer to your current 401(k)s, as they seem to have good choices (unless there are high non-MF fees)? Your wife's TIRA balance is so low, I would just go ahead and convert it into Roth. Maybe same for you, but it might be better to transfer to 401(k), assuming your plan allows it.
Yeah the TIRAs are rollovers from prior employers or mega backdoor conversions. We both have access to mega backdoor aka after tax 401k contributions and have been utilizing them. The TIRAs are at Vanguard in low cost funds, so I am not concerned there and like consolidating them there. Thanks for the response.
That’s great they are in low cost funds, but the presence of your TIRAs is hindering your ability to perform backdoor Roth contributions. That’s a valuable $12,000 a year.

I would look to roll them into your current 401ks or take the tax hit now and convert to Roth.
Exactly. Are you doing after-tax 401(k) contributions and then converting to a TIRA?
So two things: 1) convert 401k from old employers to TIRA. 2) when doing the mega backdoor roth ira the contributions go the roth IRA the earning go to the tradition ira.
Yes, I suppose we could do this. It is an optimization. I'll debate if it is worth it for us the extra calls/forms/paperwork. We are already getting a lot into our Roth IRAs via the after tax contributions which are at 20% of our base income basically the max allowed.
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geerhardusvos
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Location: heavenlies

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by geerhardusvos »

nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
VTSAX and chill
IMhooked
Posts: 81
Joined: Tue Oct 23, 2018 2:02 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by IMhooked »

nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
* By having this as a goal you're on the journey! Congrats!
* What is your target number you're looking to obtain by 40? Are you going for typical 3.5-4% rule?*
* What does your daily/annual life look like Post-FIRE?*
* How old do you anticipate your children to be at that time?*

Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate

* Nice! Mortgage only debt with some nice equity as mentioned below and good terms. At this time do you plan on keeping your mortgage for the 5 years after 40 (until 45) or are you going to get mortgage gone before 40?*

Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K

* What type of change do you forsee, if any, in your incomes when children arrive OR are you looking to FIRE before conception?
* Most obvious question is most likely what are your current rate of expenses annually or monthly? What will they be post FIRE?

Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K

* Convert this to Roth?
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?

    * If you don't unite on the idea of owning rental property I wouldn't invite it into your lives. Why does she want it? Why don't you?

    * You guys are doing very well thinking about your offensive plan! Are you also thinking about playing defense? Term Life Insurance, Disability Insurance, and as mentioned many times by others Health Insurance--given your ages and your current health/health history are you guys eligible for High Deductible Insurance Plan and a subsequent HSA bucket? Could be a means for giving your another tool towards your goals.
.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
User avatar
geerhardusvos
Posts: 1565
Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by geerhardusvos »

nptit wrote: Fri May 15, 2020 11:23 am
geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
Really nice work, I’m impressed. We have a very very similar situation and age as you but my wife has chosen to stay home with the kids so our family take-home pay is 200K and we live on about 65K/year. After taxes our savings rate is about 60%. We plan to retire on my 40th birthday with a ~2M 80-20 portfolio pulling around 3.5% annually initially, and we’ll do a variable withdrawal strategy.

I would say you are even more golden than we are especially if you have a paid off house or if you are able to keep your spending around 70 to 80 K during retirement. We will likely make a little money here and there, so that dramatically helps our portfolio longevity, but we are planning to mostly travel, keep costs low, and enjoy life with the kids. We don’t own a home anymore, we just rent, so that’s an added expense for us, but we just sold our HCOL area house at a decent profit.

Keep up the great work and I think 8-10 years from now you will be in a very healthy position to make a change.

I would recommend staying in equities until you’re maybe 2-5 years from FI. 70-30 is the most conservative I would go in your position, especially if you have a paid off house. You can comfortably pull 3.5% indefinitely on your portfolio. I recommend looking at variable withdrawal strategies on this blog/forum, as well as early retirement now SWR series. Cheers!

Image
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Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

geerhardusvos wrote: Fri May 15, 2020 11:43 am
nptit wrote: Fri May 15, 2020 11:23 am
geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
Really nice work, I’m impressed. We have a very very similar situation and age as you but my wife has chosen to stay home with the kids so our family take-home pay is 200K and we live on about 65K/year. After taxes our savings rate is about 60%. We plan to retire on my 40th birthday with a ~2M 80-20 portfolio pulling around 3.5% annually initially, and we’ll do a variable withdrawal strategy.

I would say you are even more golden than we are especially if you have a paid off house or if you are able to keep your spending around 70 to 80 K during retirement. We will likely make a little money here and there, so that dramatically helps our portfolio longevity, but we are planning to mostly travel, keep costs low, and enjoy life with the kids. We don’t own a home anymore, we just rent, so that’s an added expense for us, but we just sold our HCOL area house at a decent profit.

Keep up the great work and I think 8-10 years from now you will be in a very healthy position to make a change.

I would recommend staying in equities until you’re maybe 2-5 years from FI. 70-30 is the most conservative I would go in your position, especially if you have a paid off house. You can comfortably pull 3.5% indefinitely on your portfolio. I recommend looking at variable withdrawal strategies on this blog/forum, as well as early retirement now SWR series. Cheers!

Image
Yeah, was debating on asset allocation we would get to 80/20 is a consideration as well.
Yes, 3.5% withdrawal rate is likely/reasonable IMO. Where it would be variable, less in down years when we see fit.
So our house would be mostly paid off 10 years from now, which will definitely help with cash flow/confidence once the time comes but will see.
Thanks for the input!
Also VTSAX and chill is a great footer ;)
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geerhardusvos
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Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by geerhardusvos »

nptit wrote: Fri May 15, 2020 11:58 am
geerhardusvos wrote: Fri May 15, 2020 11:43 am
nptit wrote: Fri May 15, 2020 11:23 am
geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
Really nice work, I’m impressed. We have a very very similar situation and age as you but my wife has chosen to stay home with the kids so our family take-home pay is 200K and we live on about 65K/year. After taxes our savings rate is about 60%. We plan to retire on my 40th birthday with a ~2M 80-20 portfolio pulling around 3.5% annually initially, and we’ll do a variable withdrawal strategy.

I would say you are even more golden than we are especially if you have a paid off house or if you are able to keep your spending around 70 to 80 K during retirement. We will likely make a little money here and there, so that dramatically helps our portfolio longevity, but we are planning to mostly travel, keep costs low, and enjoy life with the kids. We don’t own a home anymore, we just rent, so that’s an added expense for us, but we just sold our HCOL area house at a decent profit.

Keep up the great work and I think 8-10 years from now you will be in a very healthy position to make a change.

I would recommend staying in equities until you’re maybe 2-5 years from FI. 70-30 is the most conservative I would go in your position, especially if you have a paid off house. You can comfortably pull 3.5% indefinitely on your portfolio. I recommend looking at variable withdrawal strategies on this blog/forum, as well as early retirement now SWR series. Cheers!

Image
Yeah, was debating on asset allocation we would get to 80/20 is a consideration as well.
Yes, 3.5% withdrawal rate is likely/reasonable IMO. Where it would be variable, less in down years when we see fit.
So our house would be mostly paid off 10 years from now, which will definitely help with cash flow/confidence once the time comes but will see.
Thanks for the input!
Also VTSAX and chill is a great footer ;)
Great work, keep it up! :beer

70/30 is the Toyota Camry of AAs. It just keeps going and going no matter what!

Remember to enjoy your family and focus on what matters
VTSAX and chill
BW1985
Posts: 2058
Joined: Tue Mar 23, 2010 6:12 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by BW1985 »

geerhardusvos wrote: Fri May 15, 2020 11:43 am
nptit wrote: Fri May 15, 2020 11:23 am
geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
Really nice work, I’m impressed. We have a very very similar situation and age as you but my wife has chosen to stay home with the kids so our family take-home pay is 200K and we live on about 65K/year. After taxes our savings rate is about 60%. We plan to retire on my 40th birthday with a ~2M 80-20 portfolio pulling around 3.5% annually initially, and we’ll do a variable withdrawal strategy.

I would say you are even more golden than we are especially if you have a paid off house or if you are able to keep your spending around 70 to 80 K during retirement. We will likely make a little money here and there, so that dramatically helps our portfolio longevity, but we are planning to mostly travel, keep costs low, and enjoy life with the kids. We don’t own a home anymore, we just rent, so that’s an added expense for us, but we just sold our HCOL area house at a decent profit.

Keep up the great work and I think 8-10 years from now you will be in a very healthy position to make a change.

I would recommend staying in equities until you’re maybe 2-5 years from FI. 70-30 is the most conservative I would go in your position, especially if you have a paid off house. You can comfortably pull 3.5% indefinitely on your portfolio. I recommend looking at variable withdrawal strategies on this blog/forum, as well as early retirement now SWR series. Cheers!

Image
What does your variable withdrawal strategy look like? 40 is also our plan.
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?
User avatar
geerhardusvos
Posts: 1565
Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by geerhardusvos »

BW1985 wrote: Fri May 15, 2020 12:56 pm
geerhardusvos wrote: Fri May 15, 2020 11:43 am
nptit wrote: Fri May 15, 2020 11:23 am
geerhardusvos wrote: Fri May 15, 2020 10:55 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
Here is our Portfolio:

Emergency funds: 20K in checking, 72K in vanguard money market account
Debt:
mortgage 450K at 15 yrs 2.875% interest rate
Tax Filing Status:
Married Filing Jointly
Tax Rate:
upper 24% federal tax, 0% state tax
Age:
both age 30, expecting first child soon, would like to have 2-3 children
Income:
his TC 200K, her TC 170K
Current retirement assets

Taxable
VFIAX 102K VFWAX 89K
His 401k Low-cost S&P 500 fund 21K Company match? 3%
His Roth IRA at Vanguard
VTI 90K VXUS 61K
His Traditional IRA at Vanguard
VTI 35K VXUS 33K
Her 401k
Low-cost S&P 500 fund 61K
Her Roth IRA at Vanguard
VTIAX 22K
Her Traditional IRA at Vanguard
VXUS 0.3K
Real Estate: 630K as before 450K of that is the mortgage
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
Sorry if I missed it, but what is your summarized asset allocation (current and desired)? What is your monthly spending? What percentage of your take-home pay after tax are you saving?

With your high incomes, you should be able to retire by 40 if you are able to save 50-70% of your take-home. But we need more information
Our current asset allocations is 100% stocks. Split between domestic and international. Desired: We will add more to bonds over the coming years to get to likely 70% stocks 30% bonds. We are pretty comfortable and having been buying as usual during the pandemic actually, which is a good test.

Yearly spending is ~90K. Take home on 370K would be ~280K. So savings rate is (280-90)/280 = 67%. Yes, that will be adjusted once the kids come. But hopefully we can still keep the savings rate above 50%.
Really nice work, I’m impressed. We have a very very similar situation and age as you but my wife has chosen to stay home with the kids so our family take-home pay is 200K and we live on about 65K/year. After taxes our savings rate is about 60%. We plan to retire on my 40th birthday with a ~2M 80-20 portfolio pulling around 3.5% annually initially, and we’ll do a variable withdrawal strategy.

I would say you are even more golden than we are especially if you have a paid off house or if you are able to keep your spending around 70 to 80 K during retirement. We will likely make a little money here and there, so that dramatically helps our portfolio longevity, but we are planning to mostly travel, keep costs low, and enjoy life with the kids. We don’t own a home anymore, we just rent, so that’s an added expense for us, but we just sold our HCOL area house at a decent profit.

Keep up the great work and I think 8-10 years from now you will be in a very healthy position to make a change.

I would recommend staying in equities until you’re maybe 2-5 years from FI. 70-30 is the most conservative I would go in your position, especially if you have a paid off house. You can comfortably pull 3.5% indefinitely on your portfolio. I recommend looking at variable withdrawal strategies on this blog/forum, as well as early retirement now SWR series. Cheers!

Image
What does your variable withdrawal strategy look like? 40 is also our plan.
This is a great place to start and we will likely use this:

https://www.bogleheads.org/blog/2019/02 ... -of-money/

Search for threads on Time Value of Money as well, but look into other variable methods
VTSAX and chill
User avatar
Tamarind
Posts: 2357
Joined: Mon Nov 02, 2015 2:38 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by Tamarind »

nptit wrote: Fri May 15, 2020 10:19 am
retired@50 wrote: Fri May 15, 2020 10:11 am
nptit wrote: Fri May 15, 2020 9:43 am Hi, bogleheads users, We are here to seek some sincere advice regarding our current financial situation. Are we on track of achieving our FIRE goal by age 40?
...
Questions
  • What could we do better for our assessment allocation?
  • Wife wants to invest in a rental property, should we consider this option?
.
It's hard to say whether or not you're on track for FIRE by 40 because I don't see any estimate of your living expenses.
Have you done any projections in this area?
Do you plan on paying for college for 2-3 kids?
Have you considered health insurance for the 5 of you?

Having a truckload of money is great, but for a successful l-o-n-g retirement that could last 50 years or more you'll likely need to be using a withdrawal rate of around 3% -3.5%. You'll also need to have enough of that truckload of money in an account you can access without penalty. Reading up on IRS rule 72t might be of interest to you.

https://www.bogleheads.org/wiki/Substan ... c_payments

Regards,
Yes, thank you we have looked at https://www.madfientist.com/how-to-acce ... nds-early/ and the roth conversion ladder as well.
Yes, we are going to try 529 accounts for each at the basic public in state university funding level.
Yes, health insurance is going to be the most tricky. We may have some sort of gradual slow down, where one person works for say 2 years and the other person doesn't and try to swap. I am not sure if the swapping or slow down will work, but it is something to look into.
Living expenses are pretty low now, but as you pointed out it will change with kids. Currently around 90K all in expenses with mortgage (where the mortgage is larger as it's 15 years fixed). Leaving us a good amount of room for savings/investments given our income.
I don't think you'll make it by 40 given those expenses - you bought a lot of house for someone who wants to FI. But you have a reasonable shot by the time you pay off your mortgage and I see no reason you can't make it by 50.

If you can get your expenses low enough or get your taxable accounts large enough that your income doesn't exceed the ACA cliff amount of 4x poverty level, you'll likely be pleasantly surprised at how much subsidy you get for a marketplace plan. There is no guarantee this will still be available when you reach FI but something to consider.

Have you both checked to see if the Mega Backdoor Roth is an option with your work plans?

In my opinion, a rental property is an extra job, not a source of "passive income" despite what the blogs say. Don't take on any more debt now. If you want to consider switching to landlording when you are ready to downshift, buy at that time.
delamer
Posts: 10669
Joined: Tue Feb 08, 2011 6:13 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by delamer »

Congratulations on your soon-to-be baby!

You said yearly spending is $90K now. Without any children. You are going to need daycare, more food, diapers, more expensive health insurance and out-of-pocket costs, child clothing, etc. with one child. All of which will increase with each additional child.

So your spending is going to increase and your ability to save decrease once your child comes along, unless you can reduce other expenses.

You likely have the ability to FIRE, but you should think about one (or both) of you working part-time or switching to a lower stress, fewer hours job now rather than going full tilt now in order to FIRE later.

(We weren’t aiming to FIRE, but I stepped back from my career into part-time when our kids were young. It made life easier. Once they were older and in school most of the day — and year — I went back to full time.)
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Duckie
Posts: 7837
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by Duckie »

nptit wrote:So two things: 1) convert 401k from old employers to TIRA.
No. You're using confusing terminology. If you're talking about the current Traditional IRAs (his with VTI and VXUS and hers with VXUS) either roll them into the current 401k plans or convert them to Roth IRAs. Since her TIRA is $300 converting that is a no-brainer. Since his TIRA is $68,000 rolling to his 401k, if allowed, would be better. Emptying those two TIRAs opens up the backdoor Roth method (annually contribute $6K to each TIRA and immediately convert to the Roth IRA).
2) when doing the mega backdoor roth ira the contributions go the roth IRA the earning go to the tradition ira.
You can roll the earning to the TIRAs if you choose NOT to use the backdoor Roth method. But if you're going to do the backdoor Roth method (not the mega backdoor Roth method) you cannot have anything in your TIRAs as of 12/31 in the year of the conversion. That means if you make after-tax contributions to your 401k and roll them in-service to a Roth IRA you need to roll 100% of the after-tax account to the Roth IRA. You will pay taxes on the earnings.
Topic Author
nptit
Posts: 57
Joined: Sun Mar 29, 2015 5:51 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by nptit »

Duckie wrote: Fri May 15, 2020 5:36 pm
nptit wrote:So two things: 1) convert 401k from old employers to TIRA.
No. You're using confusing terminology. If you're talking about the current Traditional IRAs (his with VTI and VXUS and hers with VXUS) either roll them into the current 401k plans or convert them to Roth IRAs. Since her TIRA is $300 converting that is a no-brainer. Since his TIRA is $68,000 rolling to his 401k, if allowed, would be better. Emptying those two TIRAs opens up the backdoor Roth method (annually contribute $6K to each TIRA and immediately convert to the Roth IRA).
2) when doing the mega backdoor roth ira the contributions go the roth IRA the earning go to the tradition ira.
You can roll the earning to the TIRAs if you choose NOT to use the backdoor Roth method. But if you're going to do the backdoor Roth method (not the mega backdoor Roth method) you cannot have anything in your TIRAs as of 12/31 in the year of the conversion. That means if you make after-tax contributions to your 401k and roll them in-service to a Roth IRA you need to roll 100% of the after-tax account to the Roth IRA. You will pay taxes on the earnings.
Yes I understand like I said
Yes, I suppose we could do this. It is an optimization. I'll debate if it is worth it for us the extra calls/forms/paperwork. We are already getting a lot into our Roth IRAs via the after tax contributions which are at 20% of our base income basically the max allowed.
aristotelian
Posts: 8591
Joined: Wed Jan 11, 2017 8:05 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by aristotelian »

What is your savings rate? Looks like you have a good start but it is very tough to achieve FIRE within 10 years
You probably want a savings rate of at least 50% plus some good luck from the market. https://www.mrmoneymustache.com/2012/01 ... etirement/
Annabel Lee
Posts: 85
Joined: Sat Nov 24, 2018 9:18 pm

Re: Portfolio Question: can we achieve our FIRE goal by age 40?

Post by Annabel Lee »

I think you can make this happen. You’re off to a great start.

One thing many in the thread are neglecting is that depending on professions, your incomes will likely not be static in 5-7 years — as they increase from already healthy figures today, you can really begin to make progress on FI.

Again depending on employers, this is also the time when “golden handcuff” compensation packages start getting offered which could keep you employed longer than 40.

Good luck. Rooting for you & your family.
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