Let's talk about your FI # and family income [Financial Independence]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
ram
Posts: 934
Joined: Tue Jan 01, 2008 10:47 pm
Location: Midwest

Re: Let's talk about your FI # and family income

Post by ram » Fri Sep 15, 2017 9:55 pm

Current HH income >400K. (but highly variable over our lifetime)
Target FI >5 M.

At one point my income was 50K (in today's dollars) with my wife being SAHM. At that time some months savings was <0%.
As income increased we increased our spending but initially spent $1 of every extra $2 earned , later $1 of every extra $3 earned etc.

Currently working on reducing income, i.e. decreasing workload.
Ram

User avatar
pjshen
Posts: 17
Joined: Sun Mar 25, 2012 5:58 pm

Re: Let's talk about your FI # and family income

Post by pjshen » Fri Sep 15, 2017 10:06 pm

Household income: $225k (until recently, $400k+)
Target portfolio value for FI: $2m in today's dollars (but aiming for $2.5m for extra cushion -- by age 55)

I, too, disagree that expenses are wholly unrelated to income, especially when you're looking to put the kids through (top) colleges. We strive for higher income during those years when, assuming you can afford it, expenses increase dramatically.

Interesting that folks with lower incomes than ours don't believe that they would reach financial independence until they surpass $2m -- too conservative (under 3%) withdrawal rate, tastes for luxury sans matching salaries, or just don't mind leaving money on the table?

blevine
Posts: 1736
Joined: Sat Feb 27, 2010 3:57 pm
Location: Paradise

Re: Let's talk about your FI # and family income

Post by blevine » Sat Sep 16, 2017 8:27 am

livesoft wrote:
Fri Sep 15, 2017 1:56 pm
Oh, I dunno about assuming too much. Once you have everything, you don't have to spend that much.
"HAVE TO" being the important part. There isn't much you HAVE TO spend.

Heat in winter - move to warm climate
AC in summer - move to cold climate
Food - get food stamps, eat Ramen noodles
clothing - what's wrong with my current clothes ?
medical care - stay healthy
Property tax - live in your motor home at highway rest stops
electricity - stop using the internet and sit in the dark

hulburt1
Posts: 287
Joined: Tue Jul 15, 2014 9:17 pm

Re: Let's talk about your FI # and family income

Post by hulburt1 » Sat Sep 16, 2017 8:51 am

Never more then 90000.
At 60000-spend less
64-61=2.3m
I don't know or care how much I'd have if I had made $250000 a year. I'm happy :beer

hulburt1
Posts: 287
Joined: Tue Jul 15, 2014 9:17 pm

Re: Let's talk about your FI # and family income

Post by hulburt1 » Sat Sep 16, 2017 8:57 am

This year we lived on about $60000. But have made averaged $1000 a day. Bought Facebook long time ago. I have always been cheap or wise.
Retired at 55 with 1m now at 2.2m :beer

Ron Ronnerson
Posts: 789
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Let's talk about your FI # and family income

Post by Ron Ronnerson » Sat Sep 16, 2017 9:53 am

Income: $150k
Expenses: $80k/yr
FI number without pension and and s.s.: $2.5M
FI number with pension and s.s.: $500k

User avatar
TheTimeLord
Posts: 4932
Joined: Fri Jul 26, 2013 2:05 pm

Re: Let's talk about your FI # and family income

Post by TheTimeLord » Sat Sep 16, 2017 9:55 am

flyingaway wrote:
Fri Sep 15, 2017 1:30 pm
I think a pension will make a big difference.
Bingo! I think this is an undercurrent that plays into so many questions here. Size of portfolio for FI, ability to retire early, where you are withdrawing from your portfolio in retirement. And of course ability to take risk. It is a far different task to retire on a portfolio alone than retiring with a 80+% pension. Same would go for being able to continue on company medical benefits.
Run, You Clever Boy! [9062]

User avatar
TheTimeLord
Posts: 4932
Joined: Fri Jul 26, 2013 2:05 pm

Re: Let's talk about your FI # and family income

Post by TheTimeLord » Sat Sep 16, 2017 10:00 am

bigred77 wrote:
Fri Sep 15, 2017 3:01 pm
Household income is about 185k

My goal portfolio to consider myself FI is about $2M in today's dollars. My goal portfolio to retire is about $5M in today's dollars because I want to live pretty high on the hog once I stop working. If I hit 55 and am still working, I'll retire and make due with what I've got. We'll see how the next couple of decades play out.
Just curious what you project your annual spending to be at 55 with a $5 million portfolio? It seems like it will be well above your current income, much less your current spending.
Run, You Clever Boy! [9062]

BanquetBeer
Posts: 139
Joined: Thu Jul 13, 2017 5:57 pm

Re: Let's talk about your FI # and family income

Post by BanquetBeer » Sat Sep 16, 2017 10:05 am

pjshen wrote:
Fri Sep 15, 2017 10:06 pm
Household income: $225k (until recently, $400k+)
Target portfolio value for FI: $2m in today's dollars (but aiming for $2.5m for extra cushion -- by age 55)

I, too, disagree that expenses are wholly unrelated to income, especially when you're looking to put the kids through (top) colleges. We strive for higher income during those years when, assuming you can afford it, expenses increase dramatically.

Interesting that folks with lower incomes than ours don't believe that they would reach financial independence until they surpass $2m -- too conservative (under 3%) withdrawal rate, tastes for luxury sans matching salaries, or just don't mind leaving money on the table?
I'm more interested in how you plan to go from $225-400k income down to $80-100k income? At those salaries you could easily reach your number in 15-20 years so it seems like you spent most of it. Unless you spent something crazy on school for the many kids...

I tossed in 20k at birth to 529 so maybe 60k at college age. Plan to cover remainder out of income but don't see any benefit to the cost of private schools, especially for undergrad. I think my degree cost $45k+jobs+scholarships at state u and landed me a job at a fortune 100 along side MIT/Stanford/rice/Yale grads. So my ability to imagine >$30k/kid/yr cost is not there

Slacker
Posts: 471
Joined: Thu May 26, 2016 8:40 am

Re: Let's talk about your FI # and family income

Post by Slacker » Sat Sep 16, 2017 10:18 am

HH Income (excluding rental properties): $200K to $250K range
FI number: $800K-950K (depending on number of years until pension can be drawn - more years requires the higher number to bridge the gap)
Target retirement number: $1,750K

Low expenses currently with intention to increase spending upon retirement.
Will be using a 5.5% withdrawal rate until pensions kick in which will push our withdrawal rate down to roughly 3.0%

User avatar
meowcat
Posts: 370
Joined: Wed May 09, 2012 5:46 am

Re: Let's talk about your FI # and family income

Post by meowcat » Sat Sep 16, 2017 10:38 am

saveinvestbecomefree wrote:
Fri Sep 15, 2017 1:08 pm
I agree with others that income is not the relevant factor, expenses are.
In the draw down phase, this is true. During the accumulation phase, income is everything.
More people should learn to tell their dollars where to go instead of asking them where they went. | -Roger Babson

Slacker
Posts: 471
Joined: Thu May 26, 2016 8:40 am

Re: Let's talk about your FI # and family income

Post by Slacker » Sat Sep 16, 2017 11:03 am

Admiral wrote:
Fri Sep 15, 2017 1:49 pm
livesoft wrote:
Fri Sep 15, 2017 1:23 pm
Yep, it is all about expenses and almost nothing to do with family income.

And I'll throw out another twist: I think in 2006 our investable assets were about 6X family income and we could have been considered financially independent (we know how to live well below our means). But 2008-2009 our investable assets dropped by an almost 7-figure amount to get us back to the 2006 level. I would like now to always have a million dollars more the minimum necessary to be considered financially independent.
Here's the thing, though. In GENERAL, people's expenses rise as their incomes rise. Not always, of course, but when you have more, you tend to spend more. You may also save more. But I would venture to guess that few people on this board who make $400,000 a year live on $5,000 a month. That's my guess, I'm sure some cardiologist will post about his 1987 Chevette. The point (which I make above) is that people's expenses are tied in some manner to their incomes. COULD they live on rice and beans? Of course. But many choose not to. Therefore, if we assume that spending is in some way correlated to income, then it stands to reason that savings for the future is also tied to income.
I believe the question is of the "GENERAL" case for boglehead respondents to this query. Do bogleheads uniformly raise their expenses much as their incomes rise? I bet there are thresholds such that someone making $50,000/yr who starts making $100,000/yr may increase their spending while someone making $200,000/yr who starts making $250,000/yr will be unlikely to increase their spending (other than spending on taxes). Not just people who post on the forum who recently found bogleheads, but rather the people who have been living by LBYM (boglehead) principles for a decade or three.

Slacker
Posts: 471
Joined: Thu May 26, 2016 8:40 am

Re: Let's talk about your FI # and family income

Post by Slacker » Sat Sep 16, 2017 11:08 am

meowcat wrote:
Sat Sep 16, 2017 10:38 am
saveinvestbecomefree wrote:
Fri Sep 15, 2017 1:08 pm
I agree with others that income is not the relevant factor, expenses are.
In the draw down phase, this is true. During the accumulation phase, income is everything.
income minus expenses. You can always spend what you bring in - that is easy, so easy the majority of residents of the USA manage to accomplish it. Even wealthy people like Johnny Depp and former professional athletes manage to spend their entire sizeable incomes. Granted, there is also a minimum level of income that makes it unreasonable to apply an income minus expenses equation due to the cost of living day to day - but few around here are likely to have that problem.

Plus, many people find their ability to continue to increase their incomes limited (whether or not that means they just aren't thinking out of the box enough or applying enough "grit" in their work is not relevant, because they still hit an income ceiling regardless of the reasons why it occurs).

bigred77
Posts: 1971
Joined: Sat Jun 11, 2011 4:53 pm

Re: Let's talk about your FI # and family income

Post by bigred77 » Sat Sep 16, 2017 12:35 pm

TheTimeLord wrote:
Sat Sep 16, 2017 10:00 am
bigred77 wrote:
Fri Sep 15, 2017 3:01 pm
Household income is about 185k

My goal portfolio to consider myself FI is about $2M in today's dollars. My goal portfolio to retire is about $5M in today's dollars because I want to live pretty high on the hog once I stop working. If I hit 55 and am still working, I'll retire and make due with what I've got. We'll see how the next couple of decades play out.
Just curious what you project your annual spending to be at 55 with a $5 million portfolio? It seems like it will be well above your current income, much less your current spending.
Would love to have 180k after taxes in today's dollars at 55. Would allow me to travel 3-6 months a year and live pretty lavishly. Wife has a pension that she can take at 55. That plus a 4% withdrawal rate of $5M would be more than enough. Our current spending is about 100k per year, so obviously quite an increase but I would have no problem spending more if I had the means :mrgreen:

livesoft
Posts: 58387
Joined: Thu Mar 01, 2007 8:00 pm

Re: Let's talk about your FI # and family income

Post by livesoft » Sat Sep 16, 2017 12:47 pm

It was shown in another thread that folks who keep saving to reach $5MM may end up with less to spend and less time to spend it than folks who stopped saving earlier and started spending / traveling. I did start traveling a lot more with less saved, so I think it works.
This signature message sponsored by sscritic: Learn to fish.

User avatar
TheTimeLord
Posts: 4932
Joined: Fri Jul 26, 2013 2:05 pm

Re: Let's talk about your FI # and family income

Post by TheTimeLord » Sat Sep 16, 2017 12:47 pm

bigred77 wrote:
Sat Sep 16, 2017 12:35 pm
TheTimeLord wrote:
Sat Sep 16, 2017 10:00 am
bigred77 wrote:
Fri Sep 15, 2017 3:01 pm
Household income is about 185k

My goal portfolio to consider myself FI is about $2M in today's dollars. My goal portfolio to retire is about $5M in today's dollars because I want to live pretty high on the hog once I stop working. If I hit 55 and am still working, I'll retire and make due with what I've got. We'll see how the next couple of decades play out.
Just curious what you project your annual spending to be at 55 with a $5 million portfolio? It seems like it will be well above your current income, much less your current spending.
Would love to have 180k after taxes in today's dollars at 55. Would allow me to travel 3-6 months a year and live pretty lavishly. Wife has a pension that she can take at 55. That plus a 4% withdrawal rate of $5M would be more than enough. Our current spending is about 100k per year, so obviously quite an increase but I would have no problem spending more if I had the means :mrgreen:
Especially if you will both receive any meaningful SS benefit later.
Run, You Clever Boy! [9062]

User avatar
TheTimeLord
Posts: 4932
Joined: Fri Jul 26, 2013 2:05 pm

Re: Let's talk about your FI # and family income

Post by TheTimeLord » Sat Sep 16, 2017 12:49 pm

livesoft wrote:
Sat Sep 16, 2017 12:47 pm
It was shown in another thread that folks who keep saving to reach $5MM may end up with less to spend and less time to spend it than folks who stopped saving earlier and started spending / traveling. I did start traveling a lot more with less saved, so I think it works.
I started traveling was a priority for me long before financial independence. Pretty sure there are trips I took I could replicate today.
Run, You Clever Boy! [9062]

visualguy
Posts: 420
Joined: Thu Jan 30, 2014 1:32 am

Re: Let's talk about your FI # and family income

Post by visualguy » Sat Sep 16, 2017 2:11 pm

All in today's dollars:

Annual expenses (including taxes): $125K
Money needed for retirement in mid-to-late 50s (spouse will be in early 50s): Paid-off house + $4M.

Beyond annual expenses, the total needed includes some money allocated for long-term care for the first person to need it, and the second person will rely on selling the house if not enough is left in the portfolio. This also includes money for the inevitable house renovations. It assumes social security and Medicare stay similar to what they are today (which is somewhat questionable). I would feel more comfortable with house + $4.5M, but don't see that happening for us by that age, unfortunately. Neither one of us has a pension or retiree health benefits.

Health and LTC costs are a huge problem in the US, and that just keeps getting worse. We could do with quite a bit less if those expenses weren't egregious.

WanderingDoc
Posts: 468
Joined: Sat Aug 05, 2017 8:21 pm

Re: Let's talk about your FI # and family income

Post by WanderingDoc » Sat Sep 16, 2017 2:15 pm

livesoft wrote:
Sat Sep 16, 2017 12:47 pm
It was shown in another thread that folks who keep saving to reach $5MM may end up with less to spend and less time to spend it than folks who stopped saving earlier and started spending / traveling. I did start traveling a lot more with less saved, so I think it works.
An even better idea is to travel extensively in your 20s and 30s. Where on average, we are healthier, more mobile, more social (less jaded by people and their stupidity), and often more naive and inquisitive (makes travel more fun), often seeking more raw and off the beaten path experiences. Older folks tend to be more risk averse which often leads to less rich and less spontaneous experiences. Could you do all the same type traveling as you are older? Possible but exponentially less likely the older we get. IMO.
I'm not looking to get rich quick (crypto), I'm not looking to get rich slow (index funds).. I'm looking to get rich, for sure (real estate).

User avatar
Pajamas
Posts: 3063
Joined: Sun Jun 03, 2012 6:32 pm

Re: Let's talk about your FI # and family income

Post by Pajamas » Sat Sep 16, 2017 2:20 pm

WanderingDoc wrote:
Sat Sep 16, 2017 2:15 pm
more social (less jaded by people and their stupidity)
:beer

User avatar
TheTimeLord
Posts: 4932
Joined: Fri Jul 26, 2013 2:05 pm

Re: Let's talk about your FI # and family income

Post by TheTimeLord » Sat Sep 16, 2017 2:31 pm

WanderingDoc wrote:
Sat Sep 16, 2017 2:15 pm
livesoft wrote:
Sat Sep 16, 2017 12:47 pm
It was shown in another thread that folks who keep saving to reach $5MM may end up with less to spend and less time to spend it than folks who stopped saving earlier and started spending / traveling. I did start traveling a lot more with less saved, so I think it works.
An even better idea is to travel extensively in your 20s and 30s. Where on average, we are healthier, more mobile, more social (less jaded by people and their stupidity),
Or just travel to more remote areas.
Run, You Clever Boy! [9062]

North Texas Cajun
Posts: 176
Joined: Sun Jul 02, 2017 8:56 am

Re: Let's talk about your FI # and family income

Post by North Texas Cajun » Sat Sep 16, 2017 3:04 pm

flyingaway wrote:
Fri Sep 15, 2017 1:30 pm
I think a pension will make a big difference.
I think you are right. According to some sources, 40% of Bomer couples will have an employer-funded defined benefit pension. Almost all will have SS pensions. For my retired household, those two income sources account for almost all our non-discretionary spending requirements.

bigred77
Posts: 1971
Joined: Sat Jun 11, 2011 4:53 pm

Re: Let's talk about your FI # and family income

Post by bigred77 » Sat Sep 16, 2017 3:10 pm

livesoft wrote:
Sat Sep 16, 2017 12:47 pm
It was shown in another thread that folks who keep saving to reach $5MM may end up with less to spend and less time to spend it than folks who stopped saving earlier and started spending / traveling. I did start traveling a lot more with less saved, so I think it works.
I 100% agree with this but my employer won't let me take more than 2 consecutive weeks off (I'm sure I'm not alone with that problem).

TheHouse7
Posts: 277
Joined: Fri Jan 13, 2017 2:40 am

Re: Let's talk about your FI # and family income

Post by TheHouse7 » Sat Sep 16, 2017 4:58 pm

Income: 80k
FI #: 1.1M
8-)
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

jsh84
Posts: 76
Joined: Thu May 15, 2014 9:32 am

Re: Let's talk about your FI # and family income

Post by jsh84 » Sat Sep 16, 2017 7:01 pm

There have always been a couple of challenges in answering this question for me (us).

1) Our income is variable. My spouse is essentially in commission only sales. Our income fluctuates a lot from year to year making estimates difficult. We can use an average yes, but its still not a guarantee.

2) We have significant expenses right now like daycare that will not factor into our "retirement" spending, and really don't bear any weigh on being FI. I would estimate that in a few years once the kids are in school we may spend almost 50% less than we do now for a variety of reasons.

Retirement calculators are difficult because they tend to focus on current gross income and assume we want to replace that. I have no need to replace our level of income now to be FI.

For me, its basically 25 or 30x estimated early retirement or "semi employed" annual expenses. I would be happy with 1.5M I think.

jsh84
Posts: 76
Joined: Thu May 15, 2014 9:32 am

Re: Let's talk about your FI # and family income

Post by jsh84 » Sat Sep 16, 2017 7:06 pm

EddyB wrote:
Fri Sep 15, 2017 1:34 pm
Grt2bOutdoors wrote:
Fri Sep 15, 2017 1:21 pm

3.5% at age 30? I'd think 2.5% if you wanted to be close to bulletproof.
You may be interested in listening to, to reading the transcript of, the interview with Michael Kitces here: http://www.madfientist.com/michael-kitces-interview/
Totally agree, great episode!

Fire2030
Posts: 10
Joined: Mon Jul 17, 2017 9:03 am

Re: Let's talk about your FI # and family income

Post by Fire2030 » Sat Sep 16, 2017 8:42 pm

Household Income : 250K (up for the last 2 yrs.. hope it stays there for a while :D )
FI# : 2.5M + 320K (2017 $ in 529) (Target Age : 50 )
Retire : 4.0M (Hoping for 60 if not sooner.. depends on Healthcare :) )

User avatar
pjshen
Posts: 17
Joined: Sun Mar 25, 2012 5:58 pm

Re: Let's talk about your FI # and family income

Post by pjshen » Sat Sep 16, 2017 9:02 pm

BanquetBeer wrote:
Sat Sep 16, 2017 10:05 am
pjshen wrote:
Fri Sep 15, 2017 10:06 pm
Household income: $225k (until recently, $400k+)
Target portfolio value for FI: $2m in today's dollars (but aiming for $2.5m for extra cushion -- by age 55)

I, too, disagree that expenses are wholly unrelated to income, especially when you're looking to put the kids through (top) colleges. We strive for higher income during those years when, assuming you can afford it, expenses increase dramatically.

Interesting that folks with lower incomes than ours don't believe that they would reach financial independence until they surpass $2m -- too conservative (under 3%) withdrawal rate, tastes for luxury sans matching salaries, or just don't mind leaving money on the table?
I'm more interested in how you plan to go from $225-400k income down to $80-100k income? At those salaries you could easily reach your number in 15-20 years so it seems like you spent most of it. Unless you spent something crazy on school for the many kids...

I tossed in 20k at birth to 529 so maybe 60k at college age. Plan to cover remainder out of income but don't see any benefit to the cost of private schools, especially for undergrad. I think my degree cost $45k+jobs+scholarships at state u and landed me a job at a fortune 100 along side MIT/Stanford/rice/Yale grads. So my ability to imagine >$30k/kid/yr cost is not there
Bingo. We did, in fact, recently attain the $2m portfolio in under 15 years of high incomes and we've since been adding cushion albeit at a slower rate (because of the kids and the reduced income). So, no, we didn't spend most of it. I think $80-100k per annum would fund a very comfortable lifestyle but YMMV. (As the beneficiaries of OOS/private undergraduate education, we believe that we have been greatly enriched from our college and graduate school experiences -- and perhaps least importantly from a financial perspective -- but off-topic for a separate thread.)

DA200
Posts: 129
Joined: Fri Feb 06, 2015 3:47 pm

Re: Let's talk about your FI # and family income

Post by DA200 » Sat Sep 16, 2017 9:40 pm

50/49 yrs old now with 11 yr old child and $3.4M
Salary: $250K/ yr
Need $4M and paid off house now with no pension
or
$3M and paid off house with $45K/yr pension at 56

Bigbonds
Posts: 94
Joined: Wed Jun 07, 2017 11:51 am

Re: Let's talk about your FI # and family income

Post by Bigbonds » Sat Sep 16, 2017 11:22 pm

Grt2bOutdoors wrote:
Fri Sep 15, 2017 1:21 pm
DVMResident wrote:
Fri Sep 15, 2017 1:14 pm
ved wrote:
Fri Sep 15, 2017 12:51 pm
Wouldn't the target FI number depend on the age?
A 30 year old FI number would be much larger than a 60 year old FI number
Surprisingly, the SWR difference at those ages is relatively small (medical coverage in the pre-ACA days and the SS are bigger issues). A 60 year old may use a 4% SWR while a 30 year old probably should use a 3.5% SWR. In other words, a 25x annual expenses vs 28x annual expenses. See the recent pod cast thread, play with FIRECalc, etc.
3.5% at age 30? I'd think 2.5% if you wanted to be close to bulletproof.
Where did you get the information that 2.5% is "bulletproof" but 3.5% isn't? Just a hunch or do you have any studies or sources you want to share? Why not 1.5% just to be really, really, "bulletproof"?

Admiral
Posts: 988
Joined: Mon Oct 27, 2014 12:35 pm

Re: Let's talk about your FI # and family income

Post by Admiral » Sun Sep 17, 2017 7:33 am

Slacker wrote:
Sat Sep 16, 2017 11:03 am
Admiral wrote:
Fri Sep 15, 2017 1:49 pm
livesoft wrote:
Fri Sep 15, 2017 1:23 pm
Yep, it is all about expenses and almost nothing to do with family income.

And I'll throw out another twist: I think in 2006 our investable assets were about 6X family income and we could have been considered financially independent (we know how to live well below our means). But 2008-2009 our investable assets dropped by an almost 7-figure amount to get us back to the 2006 level. I would like now to always have a million dollars more the minimum necessary to be considered financially independent.
Here's the thing, though. In GENERAL, people's expenses rise as their incomes rise. Not always, of course, but when you have more, you tend to spend more. You may also save more. But I would venture to guess that few people on this board who make $400,000 a year live on $5,000 a month. That's my guess, I'm sure some cardiologist will post about his 1987 Chevette. The point (which I make above) is that people's expenses are tied in some manner to their incomes. COULD they live on rice and beans? Of course. But many choose not to. Therefore, if we assume that spending is in some way correlated to income, then it stands to reason that savings for the future is also tied to income.
I believe the question is of the "GENERAL" case for boglehead respondents to this query. Do bogleheads uniformly raise their expenses much as their incomes rise? I bet there are thresholds such that someone making $50,000/yr who starts making $100,000/yr may increase their spending while someone making $200,000/yr who starts making $250,000/yr will be unlikely to increase their spending (other than spending on taxes). Not just people who post on the forum who recently found bogleheads, but rather the people who have been living by LBYM (boglehead) principles for a decade or three.
I agree that yes, once one achieves a level of relatively high income and all the basic needs are taken care of, then discretionary spending would not rise, in percentage terms, at the same level as one who has a lower income. (With the exception I noted about child-related spending. I'd also add more/pricier vacations to the mix.)

However, I posted the original question because I believe, overall, that people save in order to achieve a FI-funded lifestyle that is commensurate (or better) than what they experience while working. I also believe that most people, even those who LBYM, probably tie their spending/lifestyle to their incomes. A doctor probably has a relatively late-model car, and car insurance, and upkeep, even if it's a Toyota and not a Benz. An attorney probably takes a few vacations per year, even if they are not trips to Asia. A mid-career engineer probably has a house and r.e. taxes and not a small rented apartment. These might be things that someone making 40k a year would not be able to afford. Therefore, it seems likely to me that they would consider a FI # that allows them to continue this lifestyle.

Hope this makes sense.

The Wizard
Posts: 11257
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Let's talk about your FI # and family income

Post by The Wizard » Sun Sep 17, 2017 7:58 am

North Texas Cajun wrote:
Sat Sep 16, 2017 3:04 pm
flyingaway wrote:
Fri Sep 15, 2017 1:30 pm
I think a pension will make a big difference.
I think you are right. According to some sources, 40% of Bomer couples will have an employer-funded defined benefit pension. Almost all will have SS pensions. For my retired household, those two income sources account for almost all our non-discretionary spending requirements.
40% seems high in 2017...
Attempted new signature...

am
Posts: 2440
Joined: Sun Sep 30, 2007 9:55 am

Re: Let's talk about your FI # and family income

Post by am » Sun Sep 17, 2017 9:53 am

Household income about 400k, early 40s. Financial independence is 2.5 mil, paid off house and paid for kids college. So far paid off house and 50% to where college and retirement accounts are where I want them to be. Pension at 62 of 20k/yr from poorly funded state (big ?) and SS down the line. My biggest concern right now is when to start going part time? I am not sure I would want to completely retire until past my 50s, but who knows?

niceguy7376
Posts: 1834
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Let's talk about your FI # and family income

Post by niceguy7376 » Sun Sep 17, 2017 10:00 am

Income at 6 digits from past few years. Would love to increase that.

Expenses are max 70K with mortgage.

Portfolio need to be 1.5M for as early as possible retirement from rat race to live the life I want to.

No pensions, not much spousal SS, no inheritances.

skor99
Posts: 95
Joined: Mon Jun 26, 2017 5:51 pm

Re: Let's talk about your FI # and family income

Post by skor99 » Sun Sep 17, 2017 10:12 am

Shouldn't age be a big consideration as well ? $2MM sounds like a reasonable FI#, but it is much better to have $2 MM at age 65 than 45, if somebody wants to stop working at those ages. Quitting work at 45 would mean a much lower SWR , especially if you have teenage kids ready to go to college.

smitcat
Posts: 894
Joined: Mon Nov 07, 2016 10:51 am

Re: Let's talk about your FI # and family income

Post by smitcat » Sun Sep 17, 2017 11:08 am

skor99 wrote:
Sun Sep 17, 2017 10:12 am
Shouldn't age be a big consideration as well ? $2MM sounds like a reasonable FI#, but it is much better to have $2 MM at age 65 than 45, if somebody wants to stop working at those ages. Quitting work at 45 would mean a much lower SWR , especially if you have teenage kids ready to go to college.
Of course it does - so does the potential collection and amount of SS and medical expenses as well as present or future dollars. So if you work with your expected expenses at your FI and/or retirement age along with good estimates for potential income(s) and savings you will have a reasonable plan.

itstoomuch
Posts: 4985
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Let's talk about your FI # and family income

Post by itstoomuch » Sun Sep 17, 2017 11:41 am

At age 67/70, own, LTCi. rental. Discretionary. Early SS. Medicare F.
We can do OK on $40k. We can well on 70k. We can do very well on $100k.
Estimate ~40% of Income is Inflation protected.
Estimate 5.5% withdrawal rate will still never deplete retirement funds.
Liquidation value Sept 2017, <$1,200,000, not including SS or small pension but including GLWB annuities, Discretionary, Rental at cost.
Learn to live at each income level.
YMMV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

smitcat
Posts: 894
Joined: Mon Nov 07, 2016 10:51 am

Re: Let's talk about your FI # and family income

Post by smitcat » Sun Sep 17, 2017 1:17 pm

itstoomuch wrote:
Sun Sep 17, 2017 11:41 am
At age 67/70, own, LTCi. rental. Discretionary. Early SS. Medicare F.
We can do OK on $40k. We can well on 70k. We can do very well on $100k.
Estimate ~40% of Income is Inflation protected.
Estimate 5.5% withdrawal rate will still never deplete retirement funds.
Liquidation value Sept 2017, <$1,200,000, not including SS or small pension but including GLWB annuities, Discretionary, Rental at cost.
Learn to live at each income level.
YMMV

Perhaps know how to live at each income level.
But plan and execute to live at a level or level(s( that you have targeted is what we really want to achieve.

IMADreamer
Posts: 145
Joined: Fri May 06, 2011 12:12 pm
Location: Illinois
Contact:

Re: Let's talk about your FI # and family income

Post by IMADreamer » Sun Sep 17, 2017 2:21 pm

This threads crack me up. You guys with deep six figure incomes and you are trying to figure out retirement and such. This forum is infuriating sometimes. If I made mid six figures I'd be retired in three years and on a hillside somewhere over looking nature enjoying the hell out of life. As a small business owner I'm just trying to figure out how the hell to retire at all in 20 years and I'm a good saver, I just don't make much.

Admiral
Posts: 988
Joined: Mon Oct 27, 2014 12:35 pm

Re: Let's talk about your FI # and family income

Post by Admiral » Sun Sep 17, 2017 2:33 pm

IMADreamer wrote:
Sun Sep 17, 2017 2:21 pm
This threads crack me up. You guys with deep six figure incomes and you are trying to figure out retirement and such. This forum is infuriating sometimes. If I made mid six figures I'd be retired in three years and on a hillside somewhere over looking nature enjoying the hell out of life. As a small business owner I'm just trying to figure out how the hell to retire at all in 20 years and I'm a good saver, I just don't make much.
I'm not sure why you're infuriated. Everyone has their own income, lifestyle, expenses, needs, and wants. If I want to live in a HCOL city and not on a hillside when I'm FI, that shouldn't make you angry. People who have high incomes (like, to take one example, physicians) may have high expenses (like, for example, insurance.) Or loans. Hopefully your business is fulfilling for you, even if it's not bringing in six figures.

Grt2bOutdoors
Posts: 17527
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Let's talk about your FI # and family income

Post by Grt2bOutdoors » Sun Sep 17, 2017 2:41 pm

Bigbonds wrote:
Sat Sep 16, 2017 11:22 pm
Grt2bOutdoors wrote:
Fri Sep 15, 2017 1:21 pm
DVMResident wrote:
Fri Sep 15, 2017 1:14 pm
ved wrote:
Fri Sep 15, 2017 12:51 pm
Wouldn't the target FI number depend on the age?
A 30 year old FI number would be much larger than a 60 year old FI number
Surprisingly, the SWR difference at those ages is relatively small (medical coverage in the pre-ACA days and the SS are bigger issues). A 60 year old may use a 4% SWR while a 30 year old probably should use a 3.5% SWR. In other words, a 25x annual expenses vs 28x annual expenses. See the recent pod cast thread, play with FIRECalc, etc.
3.5% at age 30? I'd think 2.5% if you wanted to be close to bulletproof.
Where did you get the information that 2.5% is "bulletproof" but 3.5% isn't? Just a hunch or do you have any studies or sources you want to share? Why not 1.5% just to be really, really, "bulletproof"?
Ten year treasury currently yields 2.2% - that is full faith payment of principal and interest of a AAA rated government bond. That is bullet proof. However, it's not inflation proof, so you can mix and match your assets to hold TIPs - those are inflation proof with a small coupon these days, but not deflation proof. You can also hold a risk portfolio of diversified equities, that should provide you with 2.8%+ in return: dividends yield 1.8% + risk premium.

Can you get 3.5% guaranteed AAA rated today?- no, you have to step out on the risk curve and even then you are not assured of getting it, nor are you assured of getting your principal back either.

Sure you can make it 1.5% if you want to think of your portfolio as a perpetuity and a big IF you can save/accumulate that much in assets to permit you to have a 1.5% WR.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

am
Posts: 2440
Joined: Sun Sep 30, 2007 9:55 am

Re: Let's talk about your FI # and family income

Post by am » Sun Sep 17, 2017 3:12 pm

IMADreamer wrote:
Sun Sep 17, 2017 2:21 pm
This threads crack me up. You guys with deep six figure incomes and you are trying to figure out retirement and such. This forum is infuriating sometimes. If I made mid six figures I'd be retired in three years and on a hillside somewhere over looking nature enjoying the hell out of life. As a small business owner I'm just trying to figure out how the hell to retire at all in 20 years and I'm a good saver, I just don't make much.
Mid six figures after taxes, insurance, retirement accounts, mortgage in a metro suburban area with kids leaves you with barely enough to retire by 50s assuming you live fairly modestly compared to similar neighbors and adhering to boglehead principles. Many Americans will never be able to retire comfortably judging by the state of retirement savings in this country and debt levels.

itstoomuch
Posts: 4985
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Let's talk about your FI # and family income

Post by itstoomuch » Sun Sep 17, 2017 6:23 pm

IMADreamer wrote:
Sun Sep 17, 2017 2:21 pm
This threads crack me up. You guys with deep six figure incomes and you are trying to figure out retirement and such. This forum is infuriating sometimes. If I made mid six figures I'd be retired in three years and on a hillside somewhere over looking nature enjoying the hell out of life. As a small business owner I'm just trying to figure out how the hell to retire at all in 20 years and I'm a good saver, I just don't make much.
We ARE 67/70. Never approached 6 figures but will do so within the next 4 years as we take the option to turn on annuities. We do live on a hill side with view of the valley floor and have done so for the last 40 years. We never made much either. Recognizing good offers and exploring opportunities helps. Luck helps too but you got to recognize luck.

Odd thing is that we should really take more Income because it's there to be taken, but taxed, and will last a lifetime without regard to any Market Downs. See thread on Learning to Spend.

YMMV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

MikeG62
Posts: 617
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Let's talk about your FI # and family income

Post by MikeG62 » Sun Sep 17, 2017 6:56 pm

Grt2bOutdoors wrote:
Fri Sep 15, 2017 2:20 pm
...I'm always skeptical of folks who espouse strategies that they design that will protect you or provide you with something "extra". Curiously enough, I don't see any disclosure on their website of how well those strategies worked out in 2008-2009. (if you can find it and it meets/complies with GIPS standards, post it). He's a partner in that firm so he must believe in that philosophy as well and those fees seem to be much higher. http://www.pinnacleadvisory.com/investment-philosophy/
This article Kitces wrote back in 2015 talks to how well the 4% rule has worked for those who retired in 2000 or 2008...

https://www.kitces.com/blog/how-has-the ... al-crisis/

Numbers would look even better if updated to 2017.

Not sure if this meets your GIPS standard criteria though :wink:

aristotelian
Posts: 3445
Joined: Wed Jan 11, 2017 8:05 pm

Re: Let's talk about your FI # and family income

Post by aristotelian » Sun Sep 17, 2017 7:16 pm

MikeG62 wrote:
Sun Sep 17, 2017 6:56 pm
Grt2bOutdoors wrote:
Fri Sep 15, 2017 2:20 pm
...I'm always skeptical of folks who espouse strategies that they design that will protect you or provide you with something "extra". Curiously enough, I don't see any disclosure on their website of how well those strategies worked out in 2008-2009. (if you can find it and it meets/complies with GIPS standards, post it). He's a partner in that firm so he must believe in that philosophy as well and those fees seem to be much higher. http://www.pinnacleadvisory.com/investment-philosophy/
This article Kitces wrote back in 2015 talks to how well the 4% rule has worked for those who retired in 2000 or 2008...

https://www.kitces.com/blog/how-has-the ... al-crisis/

Numbers would look even better if updated to 2017.

Not sure if this meets your GIPS standard criteria though :wink:
True, but I get somewhat concerned when people model based on 2008 as a worst case scenario. While the market crash was significant, the recovery was quick. The S&P came back within a year or so and has kept going ever since. Of course people who stuck it out through '08 did fine. How about Japan, which has never rebounded from '89, or Europe, which is still down from '08?

Running $1M 80/20 Pacific Stocks/Total US Bond with $40K inflation adjusted withdrawal from 1989, that portfolio goes bankrupt in 2008, or 19 years.

80/20 European Stock backtested to '08 would be sitting at $700K right now, giving it about a 40% failure rate for the next 30 years.

Finance-MD
Posts: 315
Joined: Sun Mar 26, 2017 9:27 am

Re: Let's talk about your FI # and family income

Post by Finance-MD » Sun Sep 17, 2017 7:21 pm

HH income > $600 (md x2)
Started almost $500k in loan debt 2 years ago.
Initial goal was to be FI within 5 years of starting jobs with 2M net worth.
Will probably hit that in 4 years unless one of us cuts back hours before then (not unlikely)

will probably get closer to 2.5-3M before feeling FI with the lifestyle we enjoy living now

User avatar
market timer
Posts: 5821
Joined: Tue Aug 21, 2007 1:42 am

Re: Let's talk about your FI # and family income

Post by market timer » Sun Sep 17, 2017 7:33 pm

HH income: $400K
Annual expenses: $100K
FI number: $2mn

Our expenses could easily be cut in half. Rather than aiming for retirement, I'm aiming for a good work/life balance, which I think I have right now.

User avatar
LadyGeek
Site Admin
Posts: 42416
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Let's talk about your FI # and family income [Financial Independence]

Post by LadyGeek » Sun Sep 17, 2017 8:49 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).

I retitled the thread to help with the acronym.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
Hyperborea
Posts: 422
Joined: Sat Apr 15, 2017 10:31 am
Location: Silicon Valley

Re: Let's talk about your FI # and family income

Post by Hyperborea » Sun Sep 17, 2017 9:22 pm

am wrote:
Sun Sep 17, 2017 3:12 pm
IMADreamer wrote:
Sun Sep 17, 2017 2:21 pm
This threads crack me up. You guys with deep six figure incomes and you are trying to figure out retirement and such. This forum is infuriating sometimes. If I made mid six figures I'd be retired in three years and on a hillside somewhere over looking nature enjoying the hell out of life. As a small business owner I'm just trying to figure out how the hell to retire at all in 20 years and I'm a good saver, I just don't make much.
Mid six figures after taxes, insurance, retirement accounts, mortgage in a metro suburban area with kids leaves you with barely enough to retire by 50s assuming you live fairly modestly compared to similar neighbors and adhering to boglehead principles. Many Americans will never be able to retire comfortably judging by the state of retirement savings in this country and debt levels.
I've seen this term used, "mid six figures", in this thread and other times on this site. I think most of you are using it as meaning something like $150K-ish and not $500K-ish. The term seems to me to mean $500K-ish as that is midway to 7 figures.

Most of those making a true mid six figure income don't get there to later in their career so the number of years that one makes that amount may not be that long particularly if one plans to retire early. That means they don't have long to save from it but they also don't have long to inflate their lifestyle.

We had a discussion along these lines on an early retirement board maybe 15 years ago and one of the insights into this was that many of those who can retire early are those who are first generation professionals. They grew up in a working class / blue collar household and don't have expensive tastes but enter a professional career where they make a lot of money. Those two factors let them save a lot and give them the ability to retire early. It was suggested that because of that working class background they may have impostor syndrome and not feel at home in such an environment and that may be a factor that leads them to want to retire early. Interesting idea but there was no data just anecdotes.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

BanquetBeer
Posts: 139
Joined: Thu Jul 13, 2017 5:57 pm

Re: Let's talk about your FI # and family income [Financial Independence]

Post by BanquetBeer » Sun Sep 17, 2017 9:47 pm

If you made mid 6 figures (150 or 500, however you look at it) sure you can (and I do save a lot) but do you really want to quit at 30 and live in a rural are for the rest of your life? Medical risk flashes for me.

I've saved agressively - roughly half my income since I started working but it takes a while to amass a retirement portfolio. After 8 years, why would I quit 160k/yr to live on 30k? Sure by living cheaply I could be fine on 2mil but why not do a few more years to make 3-4? If I have to tighten my belt I would rather fly coach vs eating beans over meat.

Once you add in all the taxes (property, income, ssi, sales, etc) we probably end up paying $100k/yr. As Trump would say 'believe me'... we don't live anywhere near fancy for our income. (House = 1 year gross, cars combined = 16% new vs gross)

Post Reply