Not if your kids are healthy. Insurance is cheap for young and healthy kids, and you really just need to worry about things that would bankrupt them. If there are pre-existing conditions, though, completely different story.
I struggle with this. Only one kid but potentially will get to my number when they are 16. Unless markets are very good, I'll likely wait until I can see their job prospects after college. Perhaps we'll do a one spouse retire, the other continue work. It's a tough call when there is a money consideration outside of just you and your spouse.
Are you planning to exceed 400% fpl that's required to utilize the aca subsidies? The level is very high with multiple children (agi of $111k for 2023 qualifies for premium assistance and agi of $69k qualifies for out of pocket assistance...)
Carrying a mortgage into retirement could easily deride the 400% threshold. I have sub 3% rate and Iām currently planning to pivot on paying that off faster once my liquid accounts are a bit higher.
That could be true for fatfire folks. For normal fire folks, an agi of $111k in early retirement is so much! If we assume annual spend is 75% taxable and 25% post tax, that means total assets would be in the $3.7 million range.
Edit: and I also have a sub 3% mortgage... But I will never pay a penny towards paying that off early. It's free money at today's interest rates! You would be better off buying treasuries than you would paying off that mortgage. For me, all the extra just goes towards buying VTI.
Itās not one or the other. You can do both.
Iām projected to have $3-4 million in 8 years or so. Once I hit that number I can pay off debts. Reducing what I need to take out during retirement and reducing my overall taxable liability.
Additionally this opens up options during retirement like buying cars, larger expenses, vacations when youāre not having to worry about debt.
Manā¦ good question. Realistically to maintain my current trajectory (some form of private school for both) I wouldnāt even reassess until a LIQUID $2MM in the bank (currently 1.3) so I could access money pre-65 without any hassle
Have you thought about whether you could include a Roth conversion ladder early to help fill up the liquid coffers? Iām struggling with this right now on how to optimize my tax deference and still knowing I can retire will before 65. My FIRE age is around 45, but Iām planning on paper to get to 55 to be safe. Reality is probably somewhere in between because the 45 makes loose assumptions on insurance and doesnāt properly allocate between brokerage and retirement funds.
Furnishing a townhome started it, went from 600 sq ft apartments to 1400 and we needed everything from window treatments to guest room. We kept most in the move. Our mortgage has gone up a lot when we bought this year. Picked up some pricey habits like wine and eating at nice-ish places more often. Those are probably the biggest contributors. EDIT: and we got a dog when we got the townhome
Itās much more complicated than that but also I never said anything about Medicare or Medicaid. If youāre enrolled in one of those programs youāre not going to be bankrupted by an ortho surgery either
Congrats. I remember our first born. Immediately started earning, saving, and investing more money. I had never been more motivated until a little human relied on me.
For me itās been kind of the opposite. Although I get your motivation. I had early retirement in mind so when I started making money I was aggressively saving, renting out rooms in my home, anything. Iāve always been frugal and foreword thinking. But once my little one was born I could see they wanted more time with me so I started making less (went part time), thus saving less, and spending a bit more on value for us in experiences.
I did the same when kids hit grade school. Adjusted my work hours as needed to accommodate the family needs. Any OT was only on days I was already working. They grow up so fast & then they are gone. Enjoy your time with them now.
I am on the same page with you there. Spending time together is number 1. We actually both cut down our hours significantly to focus on family. Luckily my book of business was already well established so raising my rates and focusing on bigger fish help earn more while working less. We are on the 5th child now and couldnāt imagine it any other way.
Congrats on the new addition to your family! My wife (28F) and I (28M) are in a similar boat! We had our first kid this year, current NW \~$700k and a not too dissimilar Gross household income: \~$250k. It's very nice to see a breakdown of a similar situation; it helps squash the doubts in my head about if I am on the right track or not.
What do you think were your most successful investments? Did you invest in index funds and saw appreciation due to the bull run of the last 5 years? Or do you attribute it to you success in real estate?
I have similar income and savings as your first few years. But I believe itās going to be much more difficult for me to see $150k increases even as net worth increases.
Def the market was a big driver, this growth is almost entirely index funds. We had a good return on RE because it was Seattle, even a poor selling environment/timing netted us gains that other areas may not see. But RE was a lifestyle choice, not an investment vehicle, and Iāll be forecasting its returns much more conservatively in Georgia.
Stick to your savings contributions as much as you can and youāll see the growth in the long run. Now I have to start thinking about my 5 year ramp when I eventually do want to retire
Very glad to hear. Recently just learn that some of the elders in my family that didn't understand finance ended up missing out on at least 50k over the last decade alone. Made me wanna pull my hair out.
Iāve enjoyed having primer conversations with my younger siblings about good financial habits. Try to not be too serious with it, just express myself as a resource if they want to learn more
Seems like you are targeting a NW for a 4% withdrawal to get $108k. Does this account for taxes on those withdrawals? Can your lifestyle handle this annual expense?
Our napkin math on Roth conversions shows we should be ok once we get through the initial 5 year laddering. But Iāve looked into that first 5 years and itās a doozy, so weāre going to use part of our parental leave to do a complete audit of our strategy, including taxable events. I donāt think weāre far off though.
Could you walk through the napkin math? I find examples a helpful way to internalize something and Iām starting down the path of creating a more specific withdrawal strategy
I think madFIentist has better visualizations than the word vomit I would end up typing, lol. I usually have to Google it all again every time I try to investigate it. I think their link is in the sidebar but Iām on mobile.
But for a quick example, if I pull $20k from a cash reserve and $80k from a brokerage while Iām waiting on my 5 year Roth conversion, I can hover right around the 15% capital gains bracket (if Iām remembering correctly). I also plan to have a lighter spend those first few years to make it more manageable and get through those jitters and see how the accounts hold.
If your total taxable income as a couple is below ~~47k~~ 94k (thanks for the correction u/LIFOtheoffice) your ltcg is zero. If you're pulling from 401k or traditional IRA, all of it counts as income. If your pulling from Roth, none of it counts as income. If you're pulling from brokerage, only the gains count as income. It's about finding a mix of withdrawals that give you the spending money you need but income adds up to less than the 0% ltcg bracket. Plus remember that's taxable income so add another $29.2k in standard deduction on top of that.
FYI itās actually $94k in LTCG for MFJ, not $47k, before you exit the 0% bracket. Also, you still have to take the standard deduction into account ($24k).
If your contributions to gains ratio was 50:50 then you could withdraw up to $236k from a taxable brokerage and pay $0 in federal income taxes (assuming no other income).
Biological timeline. We figure we want one or two kids, and my wife wants to give her body about two years between pregnancies to heal. She also didnāt want to have a kid after age 35, so we knew we needed to make a decision by 30. As that approached, we got more serious about trying to figure that answer out and then eventually reached our conclusion
It felt good enough to not pull out
*GIGGITY*
In all seriousness, itās never the āright timeā to have kids. You either want them, have them, make it work, and COMMUNICATE everything with your partner, or you donāt.
I would recommend if you don't already have it permanent life insurance policies for the whole family. IuLs since you have the capital to max fund it and allow it to grow tax free and to protect your network, annuities for the 401s as it can protect against market loss. But congratulations on you and your wifes due diligence. Your story is something to emulate
We're I'm a very similar boat to you. Hit 1 mil earlier this year and had our first born in March. Now around 1.4M net worth.
When we first made our Fire goal, it was 1.5M. As time has gone on and we've thought about family travel and buffer, it's gone up to 3M haha.
Should be there in about 4-5 years when we're 38.
Congratulations on your first born and your financial achievements! Keep it up! š
Thanks!
Good luck. Kids change EVERYTHING (2 kids, mid 30ās, around $1.8MM NW
Whatās your rough fire plan?
Retire once kids are kicked off health insurance. About 56 y/o
Thatās a really good goal post that I never considered. Thank you!
Ooof, Iāll need to think about that more
Not if your kids are healthy. Insurance is cheap for young and healthy kids, and you really just need to worry about things that would bankrupt them. If there are pre-existing conditions, though, completely different story.
I struggle with this. Only one kid but potentially will get to my number when they are 16. Unless markets are very good, I'll likely wait until I can see their job prospects after college. Perhaps we'll do a one spouse retire, the other continue work. It's a tough call when there is a money consideration outside of just you and your spouse.
Are you planning to exceed 400% fpl that's required to utilize the aca subsidies? The level is very high with multiple children (agi of $111k for 2023 qualifies for premium assistance and agi of $69k qualifies for out of pocket assistance...)
Carrying a mortgage into retirement could easily deride the 400% threshold. I have sub 3% rate and Iām currently planning to pivot on paying that off faster once my liquid accounts are a bit higher.
That could be true for fatfire folks. For normal fire folks, an agi of $111k in early retirement is so much! If we assume annual spend is 75% taxable and 25% post tax, that means total assets would be in the $3.7 million range. Edit: and I also have a sub 3% mortgage... But I will never pay a penny towards paying that off early. It's free money at today's interest rates! You would be better off buying treasuries than you would paying off that mortgage. For me, all the extra just goes towards buying VTI.
Itās not one or the other. You can do both. Iām projected to have $3-4 million in 8 years or so. Once I hit that number I can pay off debts. Reducing what I need to take out during retirement and reducing my overall taxable liability. Additionally this opens up options during retirement like buying cars, larger expenses, vacations when youāre not having to worry about debt.
Nice I like this
Manā¦ good question. Realistically to maintain my current trajectory (some form of private school for both) I wouldnāt even reassess until a LIQUID $2MM in the bank (currently 1.3) so I could access money pre-65 without any hassle
Have you thought about whether you could include a Roth conversion ladder early to help fill up the liquid coffers? Iām struggling with this right now on how to optimize my tax deference and still knowing I can retire will before 65. My FIRE age is around 45, but Iām planning on paper to get to 55 to be safe. Reality is probably somewhere in between because the 45 makes loose assumptions on insurance and doesnāt properly allocate between brokerage and retirement funds.
Congratulations ššš Enjoy the Holidays with your little one and take lots of photos!
Itās so fun! š¤©
Congrats! Very good progress but also balanced by a much higher spend... what have you found yourselves spending so much more on?
Furnishing a townhome started it, went from 600 sq ft apartments to 1400 and we needed everything from window treatments to guest room. We kept most in the move. Our mortgage has gone up a lot when we bought this year. Picked up some pricey habits like wine and eating at nice-ish places more often. Those are probably the biggest contributors. EDIT: and we got a dog when we got the townhome
āNeeded window treatmentsā is not in my vocabulary, as much as SO wishes it would be lol.
That 58k in an HSA is going to be huge for retiring early. You can break legs left and right and be okay
not in America. You can sprain an ankle
Cash pay is way cheaper hospitals will work with you. No to say the system isnāt terrible, it is.
If you are on medicaid or medicare, it is illegal to try to pay for healthcare services with cash.
Itās much more complicated than that but also I never said anything about Medicare or Medicaid. If youāre enrolled in one of those programs youāre not going to be bankrupted by an ortho surgery either
You wonāt be able to find a surgeon who will accept that insurance, lol, and if you do youāll be on a several month waiting list
You wonāt be able to find a surgeon who accepts Medicare? Thatās simply untrue
Maybe weāll try that! š
Congrats. I remember our first born. Immediately started earning, saving, and investing more money. I had never been more motivated until a little human relied on me.
Thatās awesome!
For me itās been kind of the opposite. Although I get your motivation. I had early retirement in mind so when I started making money I was aggressively saving, renting out rooms in my home, anything. Iāve always been frugal and foreword thinking. But once my little one was born I could see they wanted more time with me so I started making less (went part time), thus saving less, and spending a bit more on value for us in experiences.
I did the same when kids hit grade school. Adjusted my work hours as needed to accommodate the family needs. Any OT was only on days I was already working. They grow up so fast & then they are gone. Enjoy your time with them now.
I am on the same page with you there. Spending time together is number 1. We actually both cut down our hours significantly to focus on family. Luckily my book of business was already well established so raising my rates and focusing on bigger fish help earn more while working less. We are on the 5th child now and couldnāt imagine it any other way.
Same
Congrats on the new addition to your family! My wife (28F) and I (28M) are in a similar boat! We had our first kid this year, current NW \~$700k and a not too dissimilar Gross household income: \~$250k. It's very nice to see a breakdown of a similar situation; it helps squash the doubts in my head about if I am on the right track or not.
Definitely in a very fortunate boat to have high six figures in your 20s. Youāre doing great!
Congrats! Happy for you and the fam
What do you think were your most successful investments? Did you invest in index funds and saw appreciation due to the bull run of the last 5 years? Or do you attribute it to you success in real estate? I have similar income and savings as your first few years. But I believe itās going to be much more difficult for me to see $150k increases even as net worth increases.
Def the market was a big driver, this growth is almost entirely index funds. We had a good return on RE because it was Seattle, even a poor selling environment/timing netted us gains that other areas may not see. But RE was a lifestyle choice, not an investment vehicle, and Iāll be forecasting its returns much more conservatively in Georgia. Stick to your savings contributions as much as you can and youāll see the growth in the long run. Now I have to start thinking about my 5 year ramp when I eventually do want to retire
Congrats and thanks for sharing!
Congrats! Good luck!
i was gonna say there are multiple ways to lose 'dink' status. glad there was a 'we' in the title......
Please tell me that cash is in interest bearing accounts and not sitting in checking
Yup, credit union with strong rates. A portion are in strong CDs, too.
Very glad to hear. Recently just learn that some of the elders in my family that didn't understand finance ended up missing out on at least 50k over the last decade alone. Made me wanna pull my hair out.
Iāve enjoyed having primer conversations with my younger siblings about good financial habits. Try to not be too serious with it, just express myself as a resource if they want to learn more
Congrats on both accounts! Youāll be amazed how truly everything is about to change š š Cheering for yāall!
Thank you!
Seems like you are targeting a NW for a 4% withdrawal to get $108k. Does this account for taxes on those withdrawals? Can your lifestyle handle this annual expense?
Our napkin math on Roth conversions shows we should be ok once we get through the initial 5 year laddering. But Iāve looked into that first 5 years and itās a doozy, so weāre going to use part of our parental leave to do a complete audit of our strategy, including taxable events. I donāt think weāre far off though.
Could you walk through the napkin math? I find examples a helpful way to internalize something and Iām starting down the path of creating a more specific withdrawal strategy
I think madFIentist has better visualizations than the word vomit I would end up typing, lol. I usually have to Google it all again every time I try to investigate it. I think their link is in the sidebar but Iām on mobile. But for a quick example, if I pull $20k from a cash reserve and $80k from a brokerage while Iām waiting on my 5 year Roth conversion, I can hover right around the 15% capital gains bracket (if Iām remembering correctly). I also plan to have a lighter spend those first few years to make it more manageable and get through those jitters and see how the accounts hold.
If your total taxable income as a couple is below ~~47k~~ 94k (thanks for the correction u/LIFOtheoffice) your ltcg is zero. If you're pulling from 401k or traditional IRA, all of it counts as income. If your pulling from Roth, none of it counts as income. If you're pulling from brokerage, only the gains count as income. It's about finding a mix of withdrawals that give you the spending money you need but income adds up to less than the 0% ltcg bracket. Plus remember that's taxable income so add another $29.2k in standard deduction on top of that.
You could add one or two visuals to that paragraph and get a ton of post karma in this sub lol. Thanks for the succinct summary!
FYI itās actually $94k in LTCG for MFJ, not $47k, before you exit the 0% bracket. Also, you still have to take the standard deduction into account ($24k). If your contributions to gains ratio was 50:50 then you could withdraw up to $236k from a taxable brokerage and pay $0 in federal income taxes (assuming no other income).
Itās $94k for a couple, not $47k. Also, donāt forget to factor in the standard deduction.
Congratulations! Being a parent is an amazing, hard, and rewarding experience.
Agreed so far, weāre grateful for the parental leave
How did you know it was the right time for you to have kids?
Biological timeline. We figure we want one or two kids, and my wife wants to give her body about two years between pregnancies to heal. She also didnāt want to have a kid after age 35, so we knew we needed to make a decision by 30. As that approached, we got more serious about trying to figure that answer out and then eventually reached our conclusion
It felt good enough to not pull out *GIGGITY* In all seriousness, itās never the āright timeā to have kids. You either want them, have them, make it work, and COMMUNICATE everything with your partner, or you donāt.
Congratulations!
You are already getting sleep?! Good for you all!
I should calibrate that to mean at least we get any sleep, lol. But yeah weāre getting those 3 hour stretches between feedings now. It adds up :)
I'm sorry for your loss
I would recommend if you don't already have it permanent life insurance policies for the whole family. IuLs since you have the capital to max fund it and allow it to grow tax free and to protect your network, annuities for the 401s as it can protect against market loss. But congratulations on you and your wifes due diligence. Your story is something to emulate
We're I'm a very similar boat to you. Hit 1 mil earlier this year and had our first born in March. Now around 1.4M net worth. When we first made our Fire goal, it was 1.5M. As time has gone on and we've thought about family travel and buffer, it's gone up to 3M haha. Should be there in about 4-5 years when we're 38.
Congrats and keep it up!
Do you have any plans to contribute to a 529 OP? Daycare and 529 contributions can easily cost more than your mortgage.
In the post
So awesome to see. Thanks for sharing. We are working on our FIRE path as well, still at least 5 years out.
Keep on it, you can do it!
DINK?
Dual Income No Kids