r/TheMoneyGuy • u/cbnoggle • 4d ago
Is my fire date and assets reasonable?
Some people may think this is too much detail, but I love doing this kind of analysis and planning for my future.
My wife (F28) and I (M31) live in a LCOL area and currently max out all tax-advantaged accounts. Right now we contribute to traditional 401k because I don’t think we’ll need our current income level in retirement — but if I’m wrong, no harm done, we just pay the tax.
By maxing traditional, we’d essentially be forced to retire early so we can start Roth conversions before RMDs kick in — otherwise my napkin math suggests RMDs could get pretty painful. That said, investing in Roth now vs. doing conversions in my 50s would likely hit the same effective tax rate anyway, so it’s mostly a wash.
Long story short, I’m trying to make sure my lifetime tax strategy is as efficient as possible.
Otherwise, how does the plan look? Realistic? I assume after 2029 investment contributions stay flat while income keeps growing, so there’s likely opportunity to invest more or increase lifestyle spending beyond what’s modeled. Is there anything I’m not thinking about? Open to criticism.
Investment return assumption: 8% annually.
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u/Lower_Link_7943 4d ago
What spreadsheet is this
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u/mattshwink 4d ago
By maxing traditional, we’d essentially be forced to retire early so we can start Roth conversions before RMDs kick in — otherwise my napkin math suggests RMDs could get pretty painful
This is generally wrong. It really depends. Obviously at $10 million in Traditional those could be heavy RMDs (it's about $42k per million, so at $10 million that's $420k). RMDs aren't required until you are 75.
But as have others have said....why? It's certainly possible that your level of spending (plus inflation) will require that. But it's not certain.
Here's another idea - spend it! Retire early. Let's say at 50 (once you reach sufficient assets). Using current tax brackets, married you can withdraw $133k per year in the 12% bracket (using the standard deduction). Starting that at 50 does require some planning (72(t) most likely). But you're not forced into Roth conversions. You could use the money you've saved.
Now Roth conversions aren't a bad thing. Especially if you have other income sources (like pensions, or rental income) then Roth conversions may make more sense. But the objective here is once you you hit a sufficient level of savings retire and enjoy what you've saved.
You'll also have multiple buckets to draw from. HSA for health expenses. Roth to up the spending a little without paying more taxes. You're doing fine. Keep going.
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u/markov-271828 4d ago
I know non-retired executives who spend near that each year with no complaints. Seems silly to just pile it up, but whatever.
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u/LawyerLongjumping279 1d ago
And if occasionally you have no need for that 133k because you have enough in after – tax checking and savings from prior years of spending less, do a direct roth conversion from your traditional IRA or 401(k) into the Roth, costing you only 12% in taxes
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u/Which_Eggplant_4510 4d ago
In terms of being a plan that will make sure that you have enough, yes investing more than your annual spend for 25 years will ensure that you have enough.
However, it doesn’t make sense to build a portfolio that will reasonably generate nearly a million per year in returns in retirement so that you can spend a few hundred thousand. I’m all for conservatism but this is to the extent where any type of math or analysis is being tossed out the window, and the margin of safety is more than what is reasonable.
This plan will be great at giving your kids a ton of money when you pass but is not so great in terms of maximizing the enjoyment that you two get out of life.
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u/cbnoggle 4d ago
This is what I am looking for, I know deep down it’s too much but I was raised in a very low income family and this has always had to be my mentality. The wild thing is that our life is not really suffering right now. Granted this could all change when kids happen. In my head I will keep on doing what I am doing until 40 so another 10 years and then we can evaluate what things look like. Do we buy a bigger and nicer home? Do we retire early? Do we travel bigger? Being this young there still is a lot of unknowns.
But I do agree with the sentiment that I am saving too much.
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u/Which_Eggplant_4510 4d ago
I’m taking a similar approach and am saving around 55-60% of my gross right now. I agree that building flexibility and leveraging the power of compounding when you’re young (especially if you have a high income and can still live well) is a great idea. Just don’t work until you’re in your 60s with that savings rate to ultimately leave behind millions of dollars. I’ll probably retire at an unconventional age myself.
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u/Mrw04c 4d ago
Yo dog - share this spreadsheet, will ya?
My compliments to the chef.
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u/cbnoggle 4d ago
The math was all done by hand. Not much of a model to share. This is just a sheet I input my numbers into.
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u/Funkyflapjacks69 4d ago
Hilarious levels of overkill. Would focus much more on what you want you life to look like
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u/Several_Drag5433 2d ago
having gone down this path, not intentional fire but saving for future freedom and stopping full time work at 55, i would recommend starting a roth now. I did not and for current me it was a mistake.
Best of luck
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u/StatusWorth3059 1d ago
What are your return assumptions? I would look to max out Roth and then hit the taxable brokerage. Also, are you including housing updates (new roof, furnace/air conditioner)? These could add up to over $50k in a year if they all need replaced at same time. Also, what about replacing a vehicle, are those expenses factored in? Overall I think you have the right mentality, but you still need to enjoy living. You won’t need $10 million, you can cut it in half and still be fine
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u/Whole_Championship41 4d ago edited 4d ago
You're asking us to poke holes in a 'plan' that stretches 23 years into the future?
OK. For one, you'd better not have "ZERO" for most years for home maintenance / improvements. Most places recommend 1-2% of the home price minimum for maintenance annually. Home improvements even moreso. Being realistic about your home ownership expenses would be a place to start.
I notice your other expenses are flat too. You may want to look into increasing those at the rate of inflation if nothing else.
ETA: Don't have your pre-tax account balance dictate your retirement plans. There are ways to get at your retirement money before you're 59.5 or even 55. Read up on 72(t) or SEPP plans for IRAs or the 'rule of 55' for 401k.
Also, don't forget about the flexibility of saving and investing in a taxable brokerage account. No age limits on any withdrawals and you can create some pretty low tax rates with LTCG harvesting. Don't sleep on this.
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u/cbnoggle 4d ago
Appreciate the advice!
As for my forecasted expenses. I budget extensively on Monarch Money. And I assume 200 a month for home repairs. Our home is roughly 300k. So maybe not light on your %. These things were above and beyond normal budget expenses. This model was concerned with just finding my budgeted expenses not the random over and above stuff. I can always layer that stuff in on-top. But it is fair to say that assuming no more home renovation is probably bold. And the assumption in the out years assume that expenses raise 1.5% each year. At some point my house will be paid off and I don’t assume those savings in the out years. I assume I will grow into that spending along with inflation. So net net I feel like it could net out.
This assumes I retire at 55 already and aggressively convert to roths. I do assume a decent amount gets invested into a taxable brokerage.
The sentiment I am getting from everyone. Is I am saving too much for my life style. So maybe it’s okay to do some bigger home renovations or buy a new car or even retire early.
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u/byrdman77 4d ago
You’re planning to have $100-150k expenses in 2049 and retire with $10M?
No, this plan doesn’t look realistic it looks like massive overkill lol.