TinyHouse wrote: ↑Sat Mar 18, 2023 10:34 am
Do you have an alternative method you recommend for planning that gives some assurance to the investor about when they have enough to (mostly) stop working? Would love to hear if you have any actionable advice other than “save more”. How much more? You say it seems risky, but wouldn’t it be risky to not live the life I want to live when tomorrow might not come?
What makes you think my $42k budget is lean? Is providing a 20 to 30% cushion enough padding?
Based on your posts it sounds like you have around 1M, give or take a bit, and are figuring you can live off that for 30 years. You will have some SS (not a lot) and you clearly expect an inheritance. You believe based on ERNs work that you could have a "4% WR for 100% capital preservation." (Is that nominal or real preservation). You suspect you will always have a side job/income stream, and of course even 20k or so would make a big difference. Have I got that right?
You have tracked your budget and believe it to be sound. As I noted, I think it is pretty hard to know in your 30s what your spending in your 50s and 60s will be. But perhaps your interests and spending will remain relatively unchanged. I couldn't have made budget estimates at age 35 that were in the ballpark for 55. A lot changes in those years. And wow, a lot of people I know wind up spending money on their kids in various assorted ways that might have been hard to forsee when the kids were young.
I still think you are pretty cavalier about health care; you seem sure that in your state you can, at your income level, get an ACA plan that will result in minimal out of pocket costs after subsidies (i.e. premiums, prescriptions, copays, deductibles etc), even if you had an expensive problem. And I assume you've looked to see if the network itself is reasonable for such plans. You may be right; I've never priced the plans at that income level for a family of four. ACA plans in some locations are pretty good, others simply are not. If you quit your job, you'll likely be be paying dental and vision 100% out of pocket.
Somebody else asked this, but if you are building a 1,000 square foot cabin, what is your budget for materials (and labor, unless you are confident you can entirely build it yourself with the help of free labor from friends). That seems like a substantial expense, even with minimal labor costs.
Back to the insurance, you mentioned you carried the minimal insurance on your vehicles and I assume that includes liability. The minimum liability and property damage coverage in my state is a joke; if I caused even a moderately serious accident while driving I'd be facing major $$ issues were I dumb enough to carry minimum coverage. Is your money in a brokerage account? I assume so, since it is harder to access things like 401k money at your age. But I think lawsuits can go after taxable accounts quite easily. We have umbrella coverage on top of car and property insurance.
You probably are not planning on putting your kids in a lot of expensive after school activities (too bad if they really get excited about something, but many parents do go kinda crazy with that sort of thing), but how much help with college will you give them? A few years ago, four years in the better public schools in my state cost around 100k. Are you assuming that you can keep your income low enough to get sufficient financial aide to cover ALL costs? Or do you figure the kids can figure out a way to pay for college, if they want to go? Speaking of kids, if one of them has mental health issues, substance abuse issues, etc will the ACA plan cover counseling, etc? Or will all that come out of your pocket?
You place far far more confidence in ERNs spreadsheet calculations than I do. For example, the assumption that at 4% draw rate, you wind up in 30 years with the same size portfolio (again, nominal or real?). I think that a massive risk; many of the successful sequences in the standard SWR studies leave you with relatively little money at the end of 30 years. You succeeded, but living much longer doesn't work. But of course if you are confident of a large inheritance, maybe that's okay.
So yeah, I wonder if your budget projections are as good as you think, and I think your belief in the precision of ERN's projections is too strong.
There are really two separate issues here, right? One is simply the lifestyle you want. A person with $100M could decide to have a minimalist lifestyle, not because they have to, but maybe they want to have a smaller carbon footprint, and they don't want or need more "stuff."
But the other issue is how much financial security do you want to try and get for your family? An all consuming quest to acquire more money is bad. But putting together a big enough pile to help the kids if they need it (not just when they are kids, but as adults) and also cover any LTC needs you might have in later life, well, that doesn't sound so bad. If you really quit now, you'd potentially be throwing away the chance to accumulate enough money to make a difference later. Many people in the US live on slim budgets and it all winds up okay. But you need some luck. Having more money reduces the amount of luck you need, frankly.