[USER]

Can we retire early?
My wife (36) and I (37) have two children, ages 2 and 8 months.

We both work and have a combined income of $270,000 per year.

We have $132,000 left on a 3.25% mortgage of a property that has been recently appraised at $310,000.

We live in a LCOL area of a HCOL state.

Our joint retirement assets are at $264,000.

Each month, we contribute $2,000 to our employer-sponsored retirement accounts.

Our joint taxable brokerage accounts are at $188,000. Currently, we deposit $3,100 per month into our brokerage accounts.

I feel pretty optimistic that our retirement accounts, plus Social Security (although not relying on it), will be in a good place for use in our retirement after 59.5.

The question I have trouble getting a solid answer on is: if my wife and I continue to contribute towards our taxable brokerage (currently at $188,000), at what age realistically could we retire with enough that would be the bridge to get us to 59.5?

Our expected annual expenses would be around $70,000.

Any other advice is welcome. Thank you!

[Heather]

Wait until your kids get older. Those expenses really rack up and then they head off to, college!!

[Andrae]

I think the big question for many people considering early retirement is how to bridge health insurance and medical care… assuming you’re in the US.

[Sean]

You’re saving 61k on 270k of income, are you sure your spend is only 70k? Seems like it’s almost double that at least now.

But assuming that’s right you’d be FI just before 50.

But if you’re spending everything that you aren’t saving or paying in taxes, it would be around mid 50s.

[Brendan]

$70k annual expenses mean you need $1.75mm under the 4% rule.

I don’t have Excel in front of me right now but set up a spreadsheet with your current balances, contributions, and expected return (8%ish if in a VTSAX equivalent).

You’ll likely see that you’ll be over your target working and contributing until 59.5.

Experiment with lowering or zeroing out the contributions as you approach coast FI in 10-15 years (might be lower/higher, I’m just guessing. Probably lower for you.)

When you’re ready to slow down, do you want to give up working jobs with the employer match?

Prioritize barista FI?

One retires and one doesn’t?

Both chase retirement before you have access to traditional retirement funds?

These lifestyle decisions will further inform what you might want to do when you reach the point where you can take your foot off the gas.

[Sarah]

What’s your childcare situation and do you intend to send your kids to private school at any point?

I would want to make sure that the 2k+3k/mo invested is realistic through the kid’s “pricier” years.

[Chris]

Keep in mind that in addition to what others said, your estimated annual expenses will increase with inflation, so $70,000 today will be $94,000 in 10 years assuming 3% annual inflation.

So the roughly 10 years people are saying is probably a few years beyond that before you can retire.

[Chris]

I’m guessing No. You contribute 5k per month. (60k per year) salary is 270k.

Savings rate is less than 25%.

Your net worth is still too low to get a 4% that would cover the spread.

But you are making great progress! Keep it up.

[Sean]

I’m curious when you say your family of four will only need 70k a year or when anyone comes up with that number.

Does that include a mortgage, car payments, kids things like sports, every day living?

[Ella]

Your FI number should be close to $1.7M (70k x 25) but I’d go up to $2M just in case you are not accounting for medical insurance and taxes.

Using a compounding calculator it seems to me you’d be there in approximately 10-11 years.

So YES!

You should be able to retire early!

[Rick]

I expect you will find a lot of benefit to your plan if you were to drive down your expenses considerably.

The big three will almost always have the biggest impact.

Housing, vehicles,and food.

A paid off house, while not free especially given high insurance and taxes most homeowners are facing recently, still reduces your expense a lot.

And much lower expense means much lower taxable income needed to cover them.

Next consider where you can get non taxable income. Regular brokerage account sales will be partially cost basis (non taxable) and gains (taxable), ignoring loses in my example.

Roth contributions are tax free.

Cash savings are tax free and can cover many years of expenses if they came from a previous large asset sale.

You can build a plan that gives you the $70k you want, or lower if you do reduce your needs per paragraph one above, but a taxable income of a much much lower amount.

Combine those two and your taxable income is low, much lower than $70k in your post, and now health insurance is much cheaper and college for your kids is much cheaper.

And now you can either or both save/invest less and retire earlier.

[Peter]

I’d recommend looking into maxing out both of your 401k’s. That’s 46k a year off of your 270k income.

Maxing them out and taking the standard deduction would completely eliminate the 24% tax bracket for ya all.

Saving you some serious money that you could then invest (rough math is $9200 a year).

Invest any extra in brokerage account.

Ya all are well on your way to retiring early!

[Kim]

Are you paying for your kids college? How much will you deposit per month into a 529?

Preschool? Private school?

Once you start contributing to kids schooling and upbringing and all of their needs (and there will be many) you’ll likely put less away for retirement or into savings.

Really think about this.

I have twins in college now and one applying this year.

The average 4 year state school will be around $40k per year and that is on the low side .

You’ll likely
Need $600k to fully fund college for your 2 by the time they are ready.

At your income you’ll get no financial aid and maybe kid can get some merit $ if thru test well, get awesome grades or have some crazy talent.

Can grandparents start college fund? Planning for a 3rd?

[Author]

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