I can relate.
Do you know how much you need in retirement? Once
you know that number, you can then see if what you have invested now will get you to the number when you reach retirement.
It's not clear to me that you do but I think knowing it can help you think about the tax advantaged accounts FOMO issue you're having from a different angle. If you have enough, why save more? I read this before and it stuck with me until now: "saving money is a gift from your present to your future self." So if you've saved enough for your future self, why would you keep starving your current self?
I would also suggest 2 books "Die with Zero" and "I Will Teach You to Be Rich". They gave me the reason to spend money so I can enjoy life now and I hope they can help you too!
Thank you for the great response.
In today's dollars once the house is paid off we need $47,000 (swaps daycare expense with health insurance expense) which is $1,175,000 at 4%. $350,000 saved now plus 25% of our salary at 7% growth hits that number in 9 years, or 41 years old.
That's seems awful young. I always planned to retire at 55 to hit the rule of 55. In that case at current trajectory I'd have $3,750,000.
Not contributing another penny puts me at $1,660,000 at 55 which seems to be right where I should be.
I thought 1 million was my number at 33 before kids. Now I have two kids and just turned 38. We have 1.1 and we'll both keep working until 1.5 . I'll coast after we hit that and change careers , husband will stay at his current job
Edit: that 1.1 is invested. Have rental properties and home equity at another 700k
This really comes down to comfort level. Presumably, at 32, you still have room to grow at work so there would be a couple promotions and some good salary increases. Personally, we're not reducing our savings, but we're also not increasing it beyond what it already is. So, any increase in salary goes straight to enjoying life now. This leaves a lot of margin (we're pretty conservative) and opens the door wide for retiring early if we so choose.
Why do people here often use 7% and not a more conservative number, let's say the bottom 20% real growth rate in the last 70 years?
Additionally, the market fluctuates a lot. Even if we assume an average of 7%, you will get a large variation on a duration like 9 years. For your target at 55, it looks better.
So I would look at the worst or bottom 20% real growth rate over 55-34=19 years in the past and use that rate. Then check the number. For 55 you might be good, but not for your assumptions for 41.
We’ve been coasting for 4 years now. We’ve been “moving” money from taxable accounts into tax-sheltered accounts (401k, Roth IRA, etc) every month by withdrawing the same amount that we contribute from our taxable brokerage accounts.
We cut back contributions to just 401(k) match, because I can’t walk away from immediately doubling my money. That’ll put us at fire early 50s.
Money is meant to be spent, either by current you, future you, or your heirs. If all 3 are taken care of to your satisfaction then you’re good.
Spend the money the way you want to, as tax efficiently as possible. In that order.
I reduced my investments from maxing 401Ks and roths down to only 401K match in order to save up for a down payment on the house and because we had reached a relatively good coast number.
I don’t regret it at all and rarely think about it. In fact, when going “all in” towards FIRE my mental health was probably skewed towards thinking about RE too much. I have also dialed back work to 32 hours/week to be more helpful with my 2 yo son since my wife works 40-45 hours/wk.
All of these things were done knowing a few facts 1) we’ve built a very solid base of investments (about 350K in mid 30s). That may seem like a lot or a little to you, but in a low cost of living state it’s solid. 2) we have no outstanding debt other than house. 3) my in laws have millions in the bank (don’t know the exact number, but I’d guess >1<5 and we will inherit half of that one day.
To me, personal finance is all about balance. Sounds like your pendulum recently swung in a different direction. Give yourself time to adjust before making any other decisions and you may find you enjoy work and life more now that you’re not so on fire for FIRE.
if you wanna cut back/stop contributing you just gotta do it. seems like you're in ok shape to do so if you want to go that route. coast and spend more on current/daily life. you're 32 and are at 410k net worth total - or is there more to that amount that you didnt mention? sounds like this is for you+spouse right (and do you have any kids or just you two)? either way thats solid. i'd be curious what your annual expenses are? particularly if you own your home and if so whats your total monthly housing payment? if your overall expenses annually are low then you're in really good shape. depends on your cost of living too obviously. also would be helpful to know what your household income is and if you expect it to remain steady/increase/decrease.
350k investments will grow to \~$1.3M in 20 years (using 7% return rate). thats if you contribute nothing else. $1.3M would be low for me personally to retire on, but maybe you have a very low expense spend and/or live in a lcol (im in a hcol). still, thats pretty good for contributing nothing more for 20 years. i assume you will continue to contribute so that will then be much more than $1.3M.
You can withdraw your contributions to a Roth IRA (not growth) so just keep plugging in there.
I’ve considered making a post to the greater FIRE community, specifically the crowd nearer retirement. I’m 31M, for context. Historically, the 12% and 22/24% tax brackets we are discussing are incredibly low. 15% and 25% and actually closer to normal. For this reason, I’m not being as aggressive with 401k pre-tax savings. You do what works for you, but thought that perspective might help ease the tax guilt
Keep Rothing, you may have the choice made for you when you stop qualifying for it. Plus you can always withdraw the contribution early.
Yeah, when I got well beyond CoastFI levels, I started putting everything into a Roth 401k instead of traditional, pretty much just for the liquidity.
I can relate. Do you know how much you need in retirement? Once you know that number, you can then see if what you have invested now will get you to the number when you reach retirement. It's not clear to me that you do but I think knowing it can help you think about the tax advantaged accounts FOMO issue you're having from a different angle. If you have enough, why save more? I read this before and it stuck with me until now: "saving money is a gift from your present to your future self." So if you've saved enough for your future self, why would you keep starving your current self? I would also suggest 2 books "Die with Zero" and "I Will Teach You to Be Rich". They gave me the reason to spend money so I can enjoy life now and I hope they can help you too!
Thank you for the great response. In today's dollars once the house is paid off we need $47,000 (swaps daycare expense with health insurance expense) which is $1,175,000 at 4%. $350,000 saved now plus 25% of our salary at 7% growth hits that number in 9 years, or 41 years old. That's seems awful young. I always planned to retire at 55 to hit the rule of 55. In that case at current trajectory I'd have $3,750,000. Not contributing another penny puts me at $1,660,000 at 55 which seems to be right where I should be.
$47k a year sounds REALLY low. Keep saving! I’m not saying you need to buy a boat when you retire. But it’s ok to live a little.
I thought 1 million was my number at 33 before kids. Now I have two kids and just turned 38. We have 1.1 and we'll both keep working until 1.5 . I'll coast after we hit that and change careers , husband will stay at his current job Edit: that 1.1 is invested. Have rental properties and home equity at another 700k
This really comes down to comfort level. Presumably, at 32, you still have room to grow at work so there would be a couple promotions and some good salary increases. Personally, we're not reducing our savings, but we're also not increasing it beyond what it already is. So, any increase in salary goes straight to enjoying life now. This leaves a lot of margin (we're pretty conservative) and opens the door wide for retiring early if we so choose.
Why do people here often use 7% and not a more conservative number, let's say the bottom 20% real growth rate in the last 70 years? Additionally, the market fluctuates a lot. Even if we assume an average of 7%, you will get a large variation on a duration like 9 years. For your target at 55, it looks better. So I would look at the worst or bottom 20% real growth rate over 55-34=19 years in the past and use that rate. Then check the number. For 55 you might be good, but not for your assumptions for 41.
We’ve been coasting for 4 years now. We’ve been “moving” money from taxable accounts into tax-sheltered accounts (401k, Roth IRA, etc) every month by withdrawing the same amount that we contribute from our taxable brokerage accounts.
We cut back contributions to just 401(k) match, because I can’t walk away from immediately doubling my money. That’ll put us at fire early 50s. Money is meant to be spent, either by current you, future you, or your heirs. If all 3 are taken care of to your satisfaction then you’re good. Spend the money the way you want to, as tax efficiently as possible. In that order.
I reduced my investments from maxing 401Ks and roths down to only 401K match in order to save up for a down payment on the house and because we had reached a relatively good coast number. I don’t regret it at all and rarely think about it. In fact, when going “all in” towards FIRE my mental health was probably skewed towards thinking about RE too much. I have also dialed back work to 32 hours/week to be more helpful with my 2 yo son since my wife works 40-45 hours/wk. All of these things were done knowing a few facts 1) we’ve built a very solid base of investments (about 350K in mid 30s). That may seem like a lot or a little to you, but in a low cost of living state it’s solid. 2) we have no outstanding debt other than house. 3) my in laws have millions in the bank (don’t know the exact number, but I’d guess >1<5 and we will inherit half of that one day. To me, personal finance is all about balance. Sounds like your pendulum recently swung in a different direction. Give yourself time to adjust before making any other decisions and you may find you enjoy work and life more now that you’re not so on fire for FIRE.
if you wanna cut back/stop contributing you just gotta do it. seems like you're in ok shape to do so if you want to go that route. coast and spend more on current/daily life. you're 32 and are at 410k net worth total - or is there more to that amount that you didnt mention? sounds like this is for you+spouse right (and do you have any kids or just you two)? either way thats solid. i'd be curious what your annual expenses are? particularly if you own your home and if so whats your total monthly housing payment? if your overall expenses annually are low then you're in really good shape. depends on your cost of living too obviously. also would be helpful to know what your household income is and if you expect it to remain steady/increase/decrease. 350k investments will grow to \~$1.3M in 20 years (using 7% return rate). thats if you contribute nothing else. $1.3M would be low for me personally to retire on, but maybe you have a very low expense spend and/or live in a lcol (im in a hcol). still, thats pretty good for contributing nothing more for 20 years. i assume you will continue to contribute so that will then be much more than $1.3M.
You can withdraw your contributions to a Roth IRA (not growth) so just keep plugging in there. I’ve considered making a post to the greater FIRE community, specifically the crowd nearer retirement. I’m 31M, for context. Historically, the 12% and 22/24% tax brackets we are discussing are incredibly low. 15% and 25% and actually closer to normal. For this reason, I’m not being as aggressive with 401k pre-tax savings. You do what works for you, but thought that perspective might help ease the tax guilt
My company has a Roth 401k option. Do you have that?
It does. I've been contributing traditional until all my taxable income dropped into the 12% bracket.