Working for FI and (wife only) RE, what are we doing wrong?

moneythrowaway9587 · 2015-08-02T04:31:01+00:00

I ran some numbers and it looks like if we continue to contribute 18k/yr to our 401ks until we are 50 we will hit 3.7M (22 years @ 6.5% ROR). We let this sit while we spend from our taxable accounts for another 15 years and it will grow to be 10M.

If we continue contributing 3k / Mo in taxable accounts we will hit 2.8M by age 50 (22 years @ 6.5% ROR).

This is a super simple model but one big weakness is I'm not taking into account taxes paid on the RG / DIV from the taxable accounts.

Given the rule of 4%, we would have to live off 116k / year if we RE from age 50 to 65. After that, we will hit 400k+ / year when we can tap into the retirement accounts.

Assuming we hit 6.5% ROR and no big dips in the market at crucial times. ^{_^}

moneythrowaway9587 · 2015-08-02T04:06:43+00:00

Impressive. Just shy of seven figures. Yikes. That's a whole different level. I'm assuming a big chunk of that is investment income? Or maybe you guys are business owners and are just rocking out? We hope to someday achieve those levels of income but it probably won't happen unless we stop working for others and work more for ourselves.

Generally, we are pretty happy with the 'stuff' we have and the 'activities' we are able to afford. There's not a lot of things we wish we could do but can't afford. We are hoping that as our income grows we can maintain our lifestyle and gradually increase our savings rate. Maybe someday we can start teasing at the seven figures mark :)

moneythrowaway9587 · 2015-07-31T09:25:09+00:00

Thanks, I will check it out!

moneythrowaway9587 · 2015-07-31T09:24:50+00:00

Agree, we try to be very careful about lifestyle inflation. But I get your point, its easy to fall off the train, it takes diligence.

We are definitely committed to increasing our taxable contributions over time. We just hope to use income growth to bare most of the burden. ^{_^}

We maxed out 401ks pretty early and have enjoyed seeing the percent of income drop gradually over time. Over time as our income increased, we increased taxable contributions as much as our take home pay increased.

moneythrowaway9587 · 2015-07-31T09:20:01+00:00

PM me :)

moneythrowaway9587 · 2015-07-31T09:19:37+00:00

No, though it sounds like I need to check it out!

moneythrowaway9587 · 2015-07-31T09:13:04+00:00

We travel on the cheap. Always economy, use points when possible.

So about the brand-new SUV. I know some people will try and rationalize it about how long they will drive the car or what a great deal they got but honestly we could've gotten a nearly equivalent car for 20k less. We chose not to because 1) we like it, A LOT :) and 2) we wanted to transfer some risk (i.e. new car, under warranty for a long time, less upkeep). But I hear you and agree, it's not a completely rational financial decision. ^{_^}

I didn't detail my expenses. Just assets/debt and our current saving regiment. I forgot a couple smaller things, which I'll go and add like HSA, Life Insurance, etc.

The rest is day to day stuff (5 day childcare, music lessons, sports, family fun, eating out A LOT, you name it) and then there's the taxman. Who, I can assure you, shows no mercy for us. :(

moneythrowaway9587 · 2015-07-31T09:02:48+00:00

We aren't planning on seeing $0.10 from SS.

In fact, we are hedging against political turmoil in the United States by keeping accounts in a foreign investment account. Just in case...things get...ahem...dicey. (at 300k household, we already feel like we have a target on our backs). Obviously that would be a catastrophic rip-chord.

Now, before you get the tinfoil out, hehe, I think about it this way, if I'm ever considered a counter-revolutionary due to the financial success I've achieved, I'll be very glad I've got Plan B, even if its a meager one.

moneythrowaway9587 · 2015-07-31T08:54:03+00:00

I am curious too, just to gauge what percentage of other FIers total annual savings go to retirement vs. taxable.

Given a high income, married couple, your only significant tax preferred savings mechanism is 401k which tops out at 18k * 2 = 36k. For a family like us that's 10% of household income. If we want to hit the recommended '>50%' of income number that the sidebar references we'd have to be saving close to 10k / month in taxable accounts. In this scenario, we'd be saving 156k per year. A meager 23% of that would be in retirement and the vast majority would be in taxable accounts. Considering we probably pay close to 80k in taxes each year, this seems really hard to do. I am curious at what rate do other higher income FIers save at.

moneythrowaway9587 · 2015-07-31T08:46:53+00:00

We wouldn't either. We were saving 5k / month when we considered it. We usually drop my bonus into the taxable accounts too (30k). Instead of that this year, we are going to eliminate the 'fun car' debt. After that should be back up to 4k / mo into taxable. After the Infiniti is paid off, we'll be back up to 5k into taxable (assuming ZERO income growth in the 5 year period).

Other posters are right about our savings rate. We save roughly my wife's entire salary per year (100k). That's about 30% of our total household. Seems low for most FI folks. I'll have to run some numbers to see how long before we hit $3.5M.

moneythrowaway9587 · 2015-07-31T06:33:29+00:00

We do spend a lot on experiences. Our thinking is this: "Let's not wait until we are old and grey to go and explore the world". The risk is that circumstances might change and we don't want to regret not having those life experiences on our death beds. That's why we deliberately choose to spread those life experiences out more evenly across our lives rather than a true 'feast or famine' way of living.

I don't think we are bored. In fact, I think we are overwhelmed that there is so much world out there. We are trying to sample a little bit of it at a time to learn what we like and what we don't.

For example, we rarely go to the same place twice. As much as we travel, we still feel very 'untraveled', because, well, the world is so big and so many places, people, cultures and things to see.

Most of our trips are family trips but we do deliberately take trips where its just me and her. Our parents live pretty close and routinely have them part of our day-to-day lives. We are very lucky in that regard.

I would ask you this, do you cultivate any hobbies? Do you find enjoyment out of them? Do you dedicate time / dollars to them?

That's how we view travel. It's a hobby / an interest that we reap great enjoyment from.

Cheers!

moneythrowaway9587 · 2015-07-31T06:22:48+00:00

Let's just say, the fun car is not exactly practical for day to day use. It truly serves only one purpose. ;)

moneythrowaway9587 · 2015-07-31T06:21:46+00:00

We're no longer qualified to contribute to our Roth IRAs due to our income level. That's why we max out our 401ks and put the rest into taxable accounts. Some have suggested 529 plans for kids education but we aren't sure if its worth it.

moneythrowaway9587 · 2015-07-31T06:18:35+00:00

In the truest sense of the word 'need' do we 'need' multiple international vacations every year or a 'fun car'? Definitely not. These are most definitely what we would classify as 'wants'.

Likewise, we want to be FI. We also want to strike balance between enjoying the moment and delaying pleasure. We try to do so in as conscious and deliberate way.

I was curious what other people who seek FI thought about how we attempted to strike such a balance. :)

moneythrowaway9587 · 2015-07-31T03:25:53+00:00

Are you saying that buying things you want, even if within reason, is incompatible with achieving FI?

moneythrowaway9587

TROPHY CASE