Semi-Retire by 40-45, possible/realistic?

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Chuck474
Posts: 17
Joined: Mon Jun 26, 2017 6:52 pm

Semi-Retire by 40-45, possible/realistic?

Post by Chuck474 » Tue Jul 17, 2018 7:45 pm

Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck

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whodidntante
Posts: 3940
Joined: Thu Jan 21, 2016 11:11 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by whodidntante » Tue Jul 17, 2018 7:55 pm

If your part time earnings will cover most of your expenses (which are really low) then sure. If you're envisioning frequent luxury vacations and lounging around, then no.

The Wizard
Posts: 12165
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Semi-Retire by 40-45, possible/realistic?

Post by The Wizard » Tue Jul 17, 2018 7:58 pm

Not sure you have enough millions to cut loose in a decade.
Let's see what happens going forward.
If you're self employed, big things can happen...
Attempted new signature...

Pigeon
Posts: 158
Joined: Mon Mar 06, 2017 8:50 am

Re: Semi-Retire by 40-45, possible/realistic?

Post by Pigeon » Tue Jul 17, 2018 8:37 pm

Put your heads down and keep saving and see where it goes. If you aren't already following it, find MrMoneyMustache online for a group of people who live extremely frugal lives with the aim of early retirement.

Kid are expensive, in my experience. They aren't so expensive as babies (although daycare is expensive). As they get older and there are activities they become involved in, the costs mount. You can do bare bones and not let them do sports, lessons, music, camps, etc. You can also decide whether you want to pay or help with college. For us, we absolutely wanted to provide a college education and things like music and dance which are their passions.

A huge wildcard is healthcare.

Chuck474
Posts: 17
Joined: Mon Jun 26, 2017 6:52 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by Chuck474 » Wed Jul 18, 2018 6:02 pm

Pigeon wrote:
Tue Jul 17, 2018 8:37 pm
Put your heads down and keep saving and see where it goes. If you aren't already following it, find MrMoneyMustache online for a group of people who live extremely frugal lives with the aim of early retirement.

Kid are expensive, in my experience. They aren't so expensive as babies (although daycare is expensive). As they get older and there are activities they become involved in, the costs mount. You can do bare bones and not let them do sports, lessons, music, camps, etc. You can also decide whether you want to pay or help with college. For us, we absolutely wanted to provide a college education and things like music and dance which are their passions.

A huge wildcard is healthcare.
Thanks for the responses! I don't follow MrMoneyMustache, but I know his story. I have listened to some podcasts where he has been interviewed.

I guess we just keep saving and stay the course. We will see where we're in a decade or so.

Thanks,
Chuck

Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: Semi-Retire by 40-45, possible/realistic?

Post by Katietsu » Wed Jul 18, 2018 10:02 pm

You hope to have 1 million dollars and to withdraw 2% to use for expenses. That seems feasible. But here is where I am confused. Where are you getting the additional savings you will eventually need to fully retire? Do you expect the remaining assets from the $1 million dollars to grow enough to cover all your expenses? That does not seem like a bet I would want to make. Will you have another pension? Your social security will be on the low side with all those years of part time work. Have you accounted for the cost of healthcare as you age? Some people do not realize the costs even with Medicare let alone those years just before. Have you accounted for inflation? Given your age, you have been saving during a very favorable time in market gains. Do you realize this will not likely continue indefinitely? Just trying to figure out what you envision for finances at 65 or 70.

I think your plan to LBYM, save and reassess in a decade is a good one.

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Sandtrap
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Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Semi-Retire by 40-45, possible/realistic?

Post by Sandtrap » Wed Jul 18, 2018 10:25 pm

Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck
Ages 31
Income 120k/yr
Debt 286k including mortgage.
Expenses 45k/year
Emergency Fund 100k
Current investment portfolio 340k
Children pending.

1 Not sure where or when the 1 million comes into play. Expectations of portfolio growth? By when?
2. What is your current home value? Is that the reason for a 2 million umbrella insurance?
3. If you retire early, what will cover health insurance costs from then until 65/Medicare?
4. Current income is 60k each at full time. Even at an increase over time, how much would part-time earn?
(a bit different going "part time" if one is earning 300k/year for one person.
5. If 2-3 children and spouse has limited employment, even in the present scenario, can ends be met with the income of just one person? Barely? With a margin of safety?
6. Even if retiring with a 1 mil portfolio. What would be the expected pension between both of you, plus SS at the time of retirement, at age 65, etc.?

Some things to ponder.
j

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BolderBoy
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Location: Colorado

Re: Semi-Retire by 40-45, possible/realistic?

Post by BolderBoy » Wed Jul 18, 2018 10:44 pm

IMO, not realistic. You can have it as a goal, but don't despair if 55 is the earliest you can pull it off (even that could be a stretch).

You won't believe how expensive kids are.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

jacoavlu
Posts: 498
Joined: Sun Jan 06, 2013 12:06 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by jacoavlu » Wed Jul 18, 2018 10:48 pm

Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so.
This is my problem with your plan. The main factors are what you earn and what you spend. You need a high savings rate. Your plan is much more likely to succeed if you can earn more and spend less. It won’t be your portfolio performance that does it.

jjface
Posts: 2551
Joined: Thu Mar 19, 2015 6:18 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by jjface » Thu Jul 19, 2018 3:17 am

Probably the wrong forum to be seeking advice on early retirement or downsizing work. These just aren't priorities for BHs. BH focus on saving and investing and once they have enough they can do whatever they want whatever that may be.

The general idea you have is decent enough. Problem is a lot can happen in 10-15 years. Kids, recession, job changes, opportunities, set backs. You can make a general goal but keep it flexible. Right now it is probably best to focus on generally saving and investing and in 10 years you'll have a much clearer picture of what you can or cannot do.

It also depends on your expenses. If you spend 40k then yes your plan seems good but $60k+ is pushing it.

Kids don't have to be expensive and that does not mean you will deprive them of things/experiences. Just like with your own spending and life choices. A lot of people have everything they desire and spend a fraction of what some BHs spend.

I'd just focus on total stock in taxable. You can add bonds later if you need to. You want your taxable to grow and be tax efficient. You'll have 15 yrs + of roth contributions you can tap before 59.5 as well if you need to. I wouldn't worry about withdrawal strategies just yet. Your savngs plan seems decent enough and provides diversity pretax after tax and taxable

sjt
Posts: 82
Joined: Fri May 26, 2017 3:03 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by sjt » Thu Jul 19, 2018 7:08 am

As someone who is of similar age and similar income, I think it's not possible if you decide to have kids. Like others have said, kids are incredibly expensive (but worth it). We pay $10k per kid for 10 months of preschool. Thankfully it's our last year of preschool. If you choose to have one parent stay home, that's an income lost for several years. Either way, it's not cheap.


I think you need to outline a plan in excel showing current state. Input how much you'll be saving each year (add to current assets), assume a modest amount of growth, and see where it will put you at age 40 / 45.

Like another poster said, healthcare is also a consideration. If nothing changes with legislature, I'll want to maintain my kids on my health insurance until they have jobs or healthcare of their own. If this country adopts some sort of universal healthcare system in the next 15-20 years, I may be able to pull the retirement trigger a bit earlier (currently planning on age 55)
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

lostdog
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Re: Semi-Retire by 40-45, possible/realistic?

Post by lostdog » Thu Jul 19, 2018 7:12 am

Read Mr money mustache blog. I think he has two children. You can learn a lot from him. He is also semi-retired and makes a ton from his blog.

In regards to your portfolio. Since you seem to like world market cap weighting, you could go with Vanguard's new Total World Bond Index ETF to cover your bond side. Place that in one of your IRA's. I assume the new bond fund will be released this fall.
Hear the clock ticking? That’s your life flying by while you listen to market pundits and watch stock prices fluctuate. -Humble Dollar

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teen persuasion
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Re: Semi-Retire by 40-45, possible/realistic?

Post by teen persuasion » Thu Jul 19, 2018 9:23 am

Read Mr Money Mustache forums. Check out RootofGood's blog. He retired at 33 with 3 kids, and is very transparent about their finances every month.

Kids are as expensive as you make them. We've got 5, yet we managed on one low income for nearly 20 years (I'm working part-time now), paid off student loans and an ugly 9.75% mortgage 15 years early before ramping up retirement savings in our 40s. I'm looking for us to hit FIRE ~ age 55. You guys each make what we make combined - make it count, save as much as possible every year. Eliminate debts and unnecessary expenses. Spend your money thoughtfully, on what you truly value and enjoy.

KyleAAA
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Re: Semi-Retire by 40-45, possible/realistic?

Post by KyleAAA » Thu Jul 19, 2018 10:01 am

It's possible but the kid may end up being more expensive than you think. Based on your numbers it seems realistic, but I would invest more aggressively than 70/30 for a semi-retirement that long. How long do you plan ti wirk part Time? Your portfolio will need to at least double in real terms before you actually retire unless you're going to keep working until SS kicks in.

indexonlyplease
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Re: Semi-Retire by 40-45, possible/realistic?

Post by indexonlyplease » Thu Jul 19, 2018 10:23 am

The best you can do is save and invest wisely. Then when you are thinking about retirement look to see if it is possible. To many people are getting caught up reading the blogs on early retirement. Sure, some have been lucky but not realistic for most of us. Also, how many of us will have a successful blog or buisness making income during retirement.

Rupert
Posts: 3571
Joined: Fri Aug 17, 2012 12:01 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by Rupert » Thu Jul 19, 2018 10:24 am

Kids are going to change your lives so drastically in ways that you cannot now anticipate that I think it would be foolish to make plans like the plans you are proposing before you actually have the kids. Yes, theoretically, you can raise children very cheaply, but, in reality, expensive stuff happens that you can't always plan for, e.g., you have a special-needs child. As my kids say, "You get what you get and you don't fuss a bit." So just keep saving as much as you can, and keep your options open as much as possible. The best plan is a flexible one. (Edited to add: Finding a job that you actually enjoy is always a good plan; it helps with the flexibility.)

Also, as others have noted, these early retirement threads always seem to turn into healthcare threads because health insurance is a huge problem/expense for all early retirees in this country. Without a plan for health coverage, you have no plan.
Last edited by Rupert on Thu Jul 19, 2018 10:44 am, edited 1 time in total.

moehoward
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Re: Semi-Retire by 40-45, possible/realistic?

Post by moehoward » Thu Jul 19, 2018 10:31 am

I started to answer this post but then noticed you didn't have any children yet. "Forget about it", repost after you have had kids for 10 years.

JBTX
Posts: 3945
Joined: Wed Jul 26, 2017 12:46 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by JBTX » Thu Jul 19, 2018 10:40 am

Sandtrap wrote:
Wed Jul 18, 2018 10:25 pm
Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck
Ages 31
Income 120k/yr
Debt 286k including mortgage.
Expenses 45k/year
Emergency Fund 100k
Current investment portfolio 340k
Children pending.

1 Not sure where or when the 1 million comes into play. Expectations of portfolio growth? By when?
2. What is your current home value? Is that the reason for a 2 million umbrella insurance?
3. If you retire early, what will cover health insurance costs from then until 65/Medicare?
4. Current income is 60k each at full time. Even at an increase over time, how much would part-time earn?
(a bit different going "part time" if one is earning 300k/year for one person.
5. If 2-3 children and spouse has limited employment, even in the present scenario, can ends be met with the income of just one person? Barely? With a margin of safety?
6. Even if retiring with a 1 mil portfolio. What would be the expected pension between both of you, plus SS at the time of retirement, at age 65, etc.?

Some things to ponder.
j
So basically $160k net worth at 31 and wants to semi retire at 40 and at the same time have kids. Tall order.

To get to $1 million you will need to save about $84000 per year over 10 years on $120k of gross income. It isnt mathematically possible. I would not count on significant investment growth over the next 10 years due to current market valuations. If it does, great, but don't count on it. And once you get to $1 million you really should only pull $30k per year.

Why do you want to retire at 40? Do you hate working that badly? Seems to me you either decide to retire very early, with no kids, and live a very miserly lifestyle, or you have kids and probably work until your 50s, and even then it will require serious saving to get there.

Chuck474
Posts: 17
Joined: Mon Jun 26, 2017 6:52 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by Chuck474 » Fri Jul 20, 2018 5:28 pm

Sandtrap wrote:
Wed Jul 18, 2018 10:25 pm
Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck
Ages 31
Income 120k/yr
Debt 286k including mortgage.
Expenses 45k/year
Emergency Fund 100k
Current investment portfolio 340k
Children pending.

1 Not sure where or when the 1 million comes into play. Expectations of portfolio growth? By when?
2. What is your current home value? Is that the reason for a 2 million umbrella insurance?
3. If you retire early, what will cover health insurance costs from then until 65/Medicare?
4. Current income is 60k each at full time. Even at an increase over time, how much would part-time earn?
(a bit different going "part time" if one is earning 300k/year for one person.
5. If 2-3 children and spouse has limited employment, even in the present scenario, can ends be met with the income of just one person? Barely? With a margin of safety?
6. Even if retiring with a 1 mil portfolio. What would be the expected pension between both of you, plus SS at the time of retirement, at age 65, etc.?

Some things to ponder.
j
Our current home value that Redfin says is at about 310K. We bought it for 255K in 2014. I guess part time would be just cutting our income in half, so 60K between us. Plus 2% from portfolio which would be 20K. There won't be a pension, and I have no idea how SS will look in 30 years, so I'm not really counting that into the equation. Is 2M too much umbrella insurance? It helps me sleep at night knowing we have that back up if something were to happen. Who knows where we will be a decade from know. Thanks for bringing up these questions to think about.

Chuck474
Posts: 17
Joined: Mon Jun 26, 2017 6:52 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by Chuck474 » Fri Jul 20, 2018 5:34 pm

JBTX wrote:
Thu Jul 19, 2018 10:40 am
Sandtrap wrote:
Wed Jul 18, 2018 10:25 pm
Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck
Ages 31
Income 120k/yr
Debt 286k including mortgage.
Expenses 45k/year
Emergency Fund 100k
Current investment portfolio 340k
Children pending.

1 Not sure where or when the 1 million comes into play. Expectations of portfolio growth? By when?
2. What is your current home value? Is that the reason for a 2 million umbrella insurance?
3. If you retire early, what will cover health insurance costs from then until 65/Medicare?
4. Current income is 60k each at full time. Even at an increase over time, how much would part-time earn?
(a bit different going "part time" if one is earning 300k/year for one person.
5. If 2-3 children and spouse has limited employment, even in the present scenario, can ends be met with the income of just one person? Barely? With a margin of safety?
6. Even if retiring with a 1 mil portfolio. What would be the expected pension between both of you, plus SS at the time of retirement, at age 65, etc.?

Some things to ponder.
j
So basically $160k net worth at 31 and wants to semi retire at 40 and at the same time have kids. Tall order.

To get to $1 million you will need to save about $84000 per year over 10 years on $120k of gross income. It isnt mathematically possible. I would not count on significant investment growth over the next 10 years due to current market valuations. If it does, great, but don't count on it. And once you get to $1 million you really should only pull $30k per year.

Why do you want to retire at 40? Do you hate working that badly? Seems to me you either decide to retire very early, with no kids, and live a very miserly lifestyle, or you have kids and probably work until your 50s, and even then it will require serious saving to get there.
Redfin says our house is worth about 310K. That should help our net worth which I didn't mention in my original post. Our house has appreciated about 50K in the last 4 years. Not sure if that helps enough though.

It's not that I want to fully retire my 40/45, it's that I want more flexibility with my time and more freedom to take time off here and there. I enjoy my job but I don't want to do it forever. I understand that kids will throw a wrench into this plan. So I guess we just need to save and see where we end up.

davidsorensen32
Posts: 367
Joined: Wed Jul 24, 2013 9:57 am

Re: Semi-Retire by 40-45, possible/realistic?

Post by davidsorensen32 » Fri Jul 20, 2018 10:57 pm

Got any inheritance coming ?
Chuck474 wrote:
Tue Jul 17, 2018 7:45 pm
Hi Bogleheads,

I have learned so much from you guys and am very thankful for this site. Looking forward to the responses.

My wife and I would like to transition into part time work by the time we hit age 40-45 depending on how our portfolio performs in the next decade or so. We want to spend more time with family and just have more freedom in general. I wanted to get your thoughts on our strategy on doing this and if this is realistic. We are planning to start having kids in the next year or so. Currently our expenses are around 45K.

Emergency Fund: 10 months
Credit Card Debt: 0
School Loans: 90K, but will be using REPAY which will come out to be about $550 for 120 payments.
Car Loans: 6K @ .9%, 20K @ 3.99%.
Mortgage: 190K @ 4.25%
Tax Filing Status: MFJ
Tax Rate: 25%,
State: IL
Age: Him 31, her 31
Desired AA: Currently about 100% equities
Desired International AA: World Market Cap/whatever Vanguard has for TD funds which is 40% I believe

Total Current Investments: 340K
Taxable:
Vanguard 260K, 100% VTWSX, Vanguard Total World Stock Market Index, ER .19%

His Roth:
Vanguard 29K, 100% VTWSX
Her Roth:
Vanguard 11K, 100% VTWSX

Her 401K:
3K, 70% Fid 500 Index Inst, ER .02%
30% Fid Intl Index Pr, ER .04%

Her 403B:
.5K, 100% Vanguard Target Date 2050, ER .09%

Her Traditional IRA:
37K, 100% VTWSX, ER .19%

We are going to max out her 403B and both our Roth IRAs and put whatever else we can into the taxable. I don't have access to a 401K.

His Income: 60K
Her Income: 60K

When we hit ages 35, I want to put are tax advantaged accounts all in a TD fund. We would leave those in the TD funds until those funds hit the AA of 60/40 and then move them to the Life Strategy Moderate Growth and just keep that 60/40 forever. My strategy for the taxable is to start putting the dividends into a total bond fund in our taxable. I know this isn't the most tax efficient, but I wanted to lower our exposure to equities when we start withdrawing from taxable. By the time we hit semi retirement I was thinking we could be 70/30 between VTWSX/Total bond. The goal would be to have 1M in investments when we start withdrawing 2%. I'm assuming our investments will continue to grow if we are taking 2% out.
I'm thinking that part time for us would cut our income in half or maybe less. I know kids are expensive, but will this plan still work even if we have 2 or 3 kids?
Is this the best way to do it or should we utilize the 72t rule so then we can keep our AA as one big portfolio among all our accounts? Or should we be converting money to a Roth and using that so that we can keep bonds out of our taxable account? Are bonds in the taxable that big of a deal? At what tax rate are tax exempt bonds funds better than total bond? What is the best way to bridge the gap from age 40-45 to 59.5? I would love to hear other strategies about this and what you think of mine here.
Let me know if there is other information needed. Or if you have thoughts on other things we should be doing that I have not mentioned, please let me know!
We each have enough term life insurance. We also have 2M of umbrella insurance. We both have disability insurance.

Thanks everyone,
Chuck

BogleBike
Posts: 52
Joined: Wed Jun 27, 2018 2:26 pm

Re: Semi-Retire by 40-45, possible/realistic?

Post by BogleBike » Fri Jul 20, 2018 11:47 pm

It depends on multiple factors:
1. Whether your expenses of 45k have netted out mortgage repayment. (I'll assume no, a favorable assumption)
2. Whether your expenses include all debt repayments (I'll assume yes, but if not, my conclusions are off!)
3. How expensive you raise the kids
4. Health care (therefore whether Affordable Care Act remains stable, or is replaced by something as helpful)
5. Whether you increase lifestyle spending over time, or increase thrift skills over time

Roughly speaking, 40 does not look likely without some thrift improvements, but 45 is conceivable.

One way to approach it is to use current costs and savings rates, applying them in the savings rate vs years to retirement table at http://www.mrmoneymustache.com/?s=math. You could adjust the calculation to account for your debt, existing investments, and mortgage payoff, plus the factors 1 through 4 above. Then you have to be realistic about item 5...increasing thrift is a good goal, but a risky planning basis.

Just using 120k income and subtracting 25k for taxes (a made up number), you are already at just over a 50% savings rate. Supposing all the factors above netted out to zero (free kids? unlikely!) you would be in the ballpark of 45 as the earliest plausible retirement age. The closer your real life gets to these estimates, the closer you will be to that goal.

TL;DR - It depends on more details than you gave, but you'd have to be very careful about costs.

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