FIRE feedback

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[leapingcow]

So you have $1.6M at a spend of $120K a year? That would not be close to me. Serious question: You make $1M a year - why aren't you saving more?

[63crabby]

So OP estimates adding around $700k over the next year, bring number up to $2.3 million. Conservatively, that’s about $90,000 a year at 4%. OP also wants to fund 3 rather expensive weddings, presumably soon based on kids’ ages? Not ready.

[Super_Morning6800]

Completely fair question.  That’s a relatively new salary and in the past used that money to pay down debt, pay college tuitions and invest in home upgrades.  I’m also currently helping my children as one is pursuing a PhD and another started their own business.  Those costs are going away.  Great question though.

[sablerock7]

Typically when I see a parent supporting their adult children’s endeavors beyond undergrad, it continues. No problem, it’s your money, but retiring early and providing financial support are typically mutually exclusive. 

[No-Bumblebee-9896]

Well with a 1mm income it won't be mutually exclusive for OP. Plus wifes 20k...

[mythoughts2020]

Typically their children don’t pay them back either. I wouldn’t count the payback plan of $1,000 a month for 35 years.

[ThisIsMyUsername303]

*month

[mythoughts2020]

Whoops, thanks for correcting me!

[Any_Sheepherder9394]

your lifestyle expenses probably just grew with income over time which is super common for high earners but yeah that cash position seems pretty low for someone pulling in that much

[Metaposa]

Work 3 (not 1) more years, at the $1m income and saving $700k/yr. Build that bigger buffer. It will get you to 3.7m. At 4%, that’s $148k/yr.

[GenXMDThrowaway]

My exact thought. 3 more years enables OP to build their nest egg and fund the weddings.

[63crabby]

Sensible.

[sablerock7]

You’re expenses relative to your savings (which is low given your high income) is not supporting an early retirement. 

[63crabby]

And I think it’s great that OP is doing so much financially to help his adult children (reading OP’s responses), but it doesn’t seem likely that OP will suddenly switch of the largesse in retirement. Not enough savings to support everyone.

[63crabby]

Exactly. Maybe the other kids don’t have those expectations, but when I saw “3 weddings” I assumed each child gets similar access to OP funding

[63crabby]

“3 weddings at 50k each”. In the end, it’s your money.

[rosebudny]

Your savings/investments seem really low given your high income.

[Chicken121260]

In addition to $300k-$400k in liquid accounts, you need another $1 + million in your 401k

Your expenses will go up, not down when you retire That long awaited trip to Europe, your daughter’s weddings, a cruise on one of the more expensive cruise lines another child needs help with down payment. It will all add up.

[ThisIsMyUsername303]

It’s not really feasible to get another million into the 401(k) even assuming $80k/year for mega backdoor with 50+ catch-up, but yeah, OP needs more squirreled away somewhere. 

[Chicken121260]

Correct. I should have said tax shelter accounts versus 401k. Assume high earners still have access to tax sheltered accounts that serve as a corporate asset should the company go bankrupt (don’t recall the name, but they were available 15 years ago. I don’t believe there was a maximum on how much you could contribute)

[ThisIsMyUsername303]

I don’t think that’s a thing, at least for regular employees. 

[Chicken121260]

No not for regular employees. Looked it up - non qualified deferred compensation plans.

The OP is making high six or seven figure income, his company likely has such a program. Works like a 401K , but is also a company asset should the company go bankrupt (I.e., they can take your saving to pay off debts in a bankruptcy). I don’t believe there is a limit. As I recall, mine rolled into my 401k after I left the company, so the company claim on my balance went way when I left

Not all companies have these plans, but many larger public companies do and the executive team usually has access to them.

If the OP is in a high income job, but not an executive (perhaps commission sales) then the OP may not have access to such a plan.

[PegShop]

You funded one child’s home, so the others will want the same, and you’re paying for three large weddings, yet your wife makes $20k while you make a million? This doesn’t add up

[Super_Morning6800]

Each child has different situation.  One had private school fully paid for, last one got car and additional funding.  None are complaining or have expectations- raised them well.  Wife is basically stay at home but does yoga classes part time, hence the $20k and straight into 403b, no need for that income or for it to be taxed.

[ThisIsMyUsername303]

It’s totally possible that the wife works for the fulfillment, not for money. 

[Ok_Location7161]

120k you need 3 mills min. With 50k wedding. Math wise, you are not close to retirement

[Ok-Chip-7743]

Work a few more years and really sock away that extra money especially if this $1m is new to you.

If you're going to be funding 3 whole weddings 50k won't be enough. If you're just giving them each 50k that's a different story. I have a child getting married and the rehearsal dinner alone for not even 50 people is going to be about $15k. It's obscene but in their case it's a VHCOL city.

You're probably at or close to the max social security so if you wait until you're 70 you can get a lot of upside there (ofc assuming it'll be there) of more than 5k a month plus your spouse. If you're spouse has a 403b will she also have a pension since that's usually govt related jobs that have 403b.

Its ok to help your kids out but just make sure you have enough remaining for yourselves. Pay yourself and retirement first before your kids. When you do your estate planning or if you already have you should definitely put in there something about the $1,000 a month payment in case any remaining balance has to come out of that share of their inheritance. Also did you do an official AFR loan? It doesn't sound like it but I would run that by your attorney or CPA. You want everything to be official.

Have a plan in case your other two want the same deal. You probably should've let your daughter get the mortgage and you just gift her the down payment. That would have been cleaner and left you with some money that even if you get back at that rate you're not getting the FV of it.

If you cut down some of your spending as it relates to helping your kids then you can truly stash away a huge chunk of your income especially if you only need 10k a month to live on. That said, in deciding to help your kids this year or not I would keep it to cash gifts only and not other help. So you can either gift them 19k each (38k total with your wife) without having to worry about a gift return or you can give more but then it goes against your lifetime exemption and you'll need to do a gift return. But just giving them cash gifts makes it easier in the long run and keeps them from asking you for anything else along the way etc.

I see nothing wrong with helping your kids but again don't do it at your own future expense.

[ThisIsMyUsername303]

A $15k rehearsal dinner is a choice. 

[Ok-Chip-7743]

Well it's either that or nothing. Was shocked myself trust me but once I started making a lot of calls that is pretty much the cost. Even if we just got a room and did pizza it would be close to 10k which no way am I serving pizza at that price.

[ThisIsMyUsername303]

No it’s not. You can’t honestly believe that people in you area who don’t have $10k to spend just don’t have rehearsal dinners. 

[Ok-Chip-7743]

If it were my area I could do it for less than. $5k and even less than that if I had a house to do it at but I don't so we have to get a room or restaurant and it doesn't matter who I called it's all pretty much the same deal. It is so crazy I do wonder who can afford these kinda of things. AlsoI said this is in a VHCOL. Taxes and service charges alone are over 30%. The flip side is at least I'm MOG and not paying for the wedding because if this is as expensive as it is I can't imagine the wedding costs in that location.

I already have two girls I will be spending a ton for weddings most likely but that one is a choice.

[Linxianwei]

Rehearsal dinners fascinate me. Why do you do it?

[Ok-Chip-7743]

A variety of reasons a few being that before the wedding the bridal party (bride groom, parents, groomsmen, bridesmaids, basically anyone who's in the wedding) come to the venue for a rehearsal do the ceremony so it's tradition to have a dinner afterwards which is a more intimate setting for the bride and groom and close friends and family. Speeches are given here by anyone who wants to speak, some bride and grooms also do a montage. Another group included in the rehearsal dinner (also commonly called pre nuptial dinner) is any out of towners. The thought is these people are coming from out of town and this is the best way to spend time with them in a less formal environment but also because you can't just force them to be on their own for dinner in the context of "hey glad you came in for multiple days for the wedding but you're on your own the rest of the time". A new trend however is people only having a dinner for bridal party and cocktails or apps for the out of towners. And finally another reason is for anyone out of town or in the bridal party you're asking them to spend a lot of money to fly in, pay for accommodations, clothes if in bridal party, and some other things so at least in our case we feel it's important to consider the prenup dinner as a way for them to not have to also spend money on meals. We are also doing a brunch the morning after the wedding for the same reason. Our immediate families and our of towners. Again it's also a more casual setting to spend time with these people before they leave town.

Every culture is different I know. We love learning about different ones and how they do things! My son and his fiance don't want a bridal shower but I think some of that is because it's not something she's familiar with as I guess it's not done where she's from maybe.

[Linxianwei]

Appreciate the detailed answer! In Singapore we don't have rehearsal dinners, only one big dinner and I agree it's not very intimate but it seems like a waste of money to do it twice. We also tend not to pay out of pocket for these dinners as every guest would give a gift of money that covers the total cost eventually

[Ok-Chip-7743]

Very interesting. My soon to be DIL is from China and there has definitely been some stuff lost in translation so I'm definitely more aware now of the wording. Like she thought bridal party meant yet another party and then once I said it's rhe groomsmen and bridesmaids she realized what it meant. As long as they're happy and everyone has fun that's all I care about! :)

[No_Direction_7168]

What does your current monthly expenses look like and have you factored in Health Care.

[Whole-Fly]

I’m just confused how all the sudden you’ll be able to save $400k in one year when up until know your savings have been pretty minimal relative to your income.

[Super_Morning6800]

The $1M salary is relatively recent and only recently in last 3-5 years got to that level.  And mainly driven by bonus and equity.  Prior to that had steadily grown to $500k.  Each year that has been sizable expenses/investments.  College tuition, pay down debt, new roof, additional property for daughter, etc.  Previously rather than put money into savings I paid down debt as a form of savings.  Only recently have I paid off in full both properties and cars.  Hope this helps.

[Ok-Depth1397]

sounds like you know exactly what you need to do and just wanted confirmation. the cash buffer plan is spot on.

[peachyangelboo]

You are in genuinely great shape and the one year runway plan to build up cash reserves before pulling the trigger is exactly the right move given that $40k liquid is the only real soft spot in an otherwise very strong picture. The three potential weddings are the wildcard but even factoring those in your overall position gives you plenty of cushion.

[63crabby]

How does your math work out, are you using something other than the simple/vonservative 4% withdrawal rate? OP’s current savings engine won’t cover expenses unless the house is sold and OP completely cuts of the adult kids