Greyweld,
I love your case study write-up SO much. I can totally hear it in I Will Teach You to Be Rich style. It is just perfection, *chef’s kiss!
I hope you don’t mind that I’m going to dump a lot of thoughts out, I am trying to channel Liz from the Frugalwoods in my response. You really captured Ramit’s format but mine is probably just going to be slightly Liz-flavored like one of those bubbly waters that tastes like just a shadow of the fruit.
You have $800k in assets at age 31, you are doing SO great! Seriously, that is amazing. You and Frank did a lot of hard work to get where you are. I think you recognize how badass that is-- I know I do! You are in WAY better shape than I was at that age.
But your level of money stress is sky high. You’ve spent more money on comforts than you planned and you will get no criticism for that from me. You’ve had a lot going on in your life, and if you find value in spending money in this way, then that is something you can continue to prioritize.
But don’t forget, we are also in a rare period of high inflation. So the fact that your money isn’t going as far as you expected is not just a result of your actions. It’s also the result of this cluster of a worldwide economy we have right now.
But I do have some tough love for you. These thoughts are not intended as face punches, but as honest opinions from another member of the FIRE community, who may be more conservative than you when it comes to financial stuff. I know there are a lot of opinions in the FIRE community, so if you don’t agree with these thoughts, I am not offended in the least.
First, the bulk of your net worth is in your paid off house. (Wow, you have a paid off house worth a half mil?!?! I really am amazed at you!) Unless you can find a way to generate income from that house by having renters live with you (ugh, that would not appeal to most of us and I completely get it), I wouldn’t personally include this asset in the stash I use to calculate my withdrawal rate. That money is not available for you to live off of unless you sell the house. And if you sell the house, you would still need to pay for housing somehow. So in my mind that’s pretty much a wash.
So that leaves you with about $300K in a stash to live off of. Your case study mentioned you had calculated a 5% withdrawal rate. Perhaps that was a typo? The vast majority of the FIRE community uses 4% as the safe withdrawal rate, as that is the one that came from the Trinity Study. There are a few outliers out there who use 5% or higher withdrawal rates, but really in my experience they are very rare. It is much more common to find people who use more conservative withdrawal rates, especially for those who would have much longer than typical retirements (i.e., those who quit their jobs in their 30s). Personally, I aimed for a 3.5% withdrawal rate and I know a lot of others have done the same. So with a $300K stash and a 4% withdrawal rate, you could expect to withdraw $12K a year.
Another issue is where your money is located. It sounds like the bulk of your money is in retirement accounts that you can’t access right now without penalty. Is any of that in Traditional IRAs? If so, you could start Roth conversion ladders so that you have money available to you starting 5 years out. I get the sense that maybe you only have 401(k)s? Unfortunately, I haven’t heard of anything similar when it comes to those. I’m not an expert in this area, so I’m not certain if I am correct about that.
I completely agree with your reluctance to withdraw money from your 401(k)s to fund living expenses right now. In my mind, that would be an absolute last resort to keep from becoming homeless or starving. Much better to sell photos of your feet, but hopefully it won’t come to that, either!
It sounds like when you quit your jobs, you weren’t planning to support your in-laws? But now they have expressed wanting to move closer and you want to help them do so. I love that you want to do this. It shows how generous and kind you are. It shows a lot of love, and how much you value family! However, under current conditions, I really question whether you can afford to help them.
And here’s the really big thing. It sounds to me like you really want to get a job. It sounds like there are some people close to you who don’t think you should get a job because you’ve had a toxic one in the past. But you want to get a job. I think you should listen to your desires. You have a huge stash of FU money. If you get a job and you hate it, you can quit at any time.
If you get a job, then you will be in a much better position to support Frank as he launches fully into self-employment. That transition can be really rough, and having a steady income for that will help so much. Have you had to pay self-employment taxes yet? I was unpleasantly surprised at how high those are.
If you get a job, you will also be in a much better position to support your in-laws if you decide that is what you want to do. And you will be better able to spend money to try to grow your family.
Wanting a job instead of being self-employed is not a personal failing. Just like it is not a personal failing that I don’t like apple pie or cheesecake.
Do you actually want to retire early? If you do, a job will help save money for the years between when you retire and when you can access the money you have tied up in retirement accounts.
I think you and Frank are doing a great job. But I think you will have a lot less stress if one of you has a steady W-2 income. And I don’t mind saying that because I am fully convinced you actually want a job. So I say, go for it. If it isn’t a good fit you can quit and find something else.
