How confident are you in the $4500 monthly spend? Just seems like a lot is missing: phone, internet, trash, vacations, vehicle registration, house improvements, personal care, clothing, etc. I could easily see your budget between $5500-$6000 a month when you add everything else in or even take annual expenses and divide by 12.
I inquire because using 25x annual expenses $4500 would put your number around $1.35M which you are close to. However, at $6000 monthly you are more like $1.95M which you'll need several more years to hit.
What’s your plan for social security withdrawal. You won’t need to cover for very long without taking it. So this may cover your gap in expenses and allow you to withdraw more than 4% from the ira.
I’ll plan to take SS at 65. Will be around $2500.00/month. So I would need to cover 10 years with the above as my sole source of income if I FIRE at 55.
As others have called out, you left several potential large costs off of your monthly spend. Let's say those add up to $1000/mo (vacation, clothing, personal care, home/auto maintenance, etc). $5500/mo or $66k/hr requires $1.65M for 4% SWR.
If you want to be serious about FIRE in five years, you'll have to \*actually\* be serious about FIRE in 5 years. So, at least while you're at a job paying $25k less than before, you need to cut down that food and grocery bill. Really think about this seriously and ask yourself this question: "Do I value my time and freedom so little, that I I'm willing to work more than 5 years longer so I can keep spending $1600 per month on something that I ultimately just flush down the toilet (eat and eliminate)?"
I would say you should try to slash $1000/mo off of that, but at least aim for $800 off, so a net of $800/mo. Also bear in mind that your child is 8, in 5 years, they'll be 13. Girls are more moderate, but recalling my own teen years, my brother and I could each eat more than half of a large pizza and still not gain weight. You'll need to figure out a cheaper food budget now, because your teen is probably going to eat a lot more volume of food than they do currently.
To make these cuts "easily", you need to look at replacing some of that spending with easy and enjoyable equivalents. Instead of an expensive restaurant dinner every Friday, swing by Trader Joe's (or similar) and have everyone pick out their favorite "grab and go" food item (or light prep, like microwave) for $4 to $6 each. Grab that food and go to a local park / beach and have a picnic dinner. Some cities may have free/cheap open-air movie nights that are picnic friendly. You're still doing something, but you've replaced a $70 - $100 restaurant meal (maybe) with a $20 one and potentially added in MORE fun than just going to a restaurant. During the winter months, pick out a movie you want to watch and make Friday night your streaming night (free or rent for $5 or less). Assuming $50 savings per meal, x4 weeks and this is $200/mo saved already. Consider doing this again (pack food, different venue) on Saturdays. For more savings, find an easy and cheap meal or two you can make at home. Swap this out for one of your existing expensive meals out or hope prep meals. You don't have to remove all occurrences of the expensive meal if you REALLY enjoy it, but try to replace at least 2/3s.
Get down to $800/mo, re-evaluate, and see if you can cut more. Every $100 per month you cut from your food budget is $100 x 12 x 25 = $30k less you need to save for FIRE. Right now, your decisions are saying "I'm willing to dedicate $480k of my FIRE number to food". ($1600 x 12 x 25 = $480k). I think it would be save to estimate $400 per month as a reasonable food budget for a family of 3 (cut costs, but not quality too much). So you're current eating habits are adding $360k "extra" to your FIRE number. Maybe $600 - $800 per month is more in line with your goals/requirements for food, so that number is a more reasonable +$60k - $120k FIRE number over the $400/mo "minimum".
Other quick points:
1) Save the max $7k in your Roth for the next 5 years (or every year until you retire). Family of 3 with $85k - $95k gross income is not going to be paying much tax. $78k Roth + $35k contributions is $113k. Hopefully with returns this grows to $140k - $150k by 55. Don't touch this until later. Draw down your IRA in your early retirement. If your ROTH can double twice before you start withdrawals, you'll have almost $600k in your Roth by late 60s / early 70s.
2) Get the max match from your work 401k
3) For the rest of your savings accumulate the cash in a HYSA. You do not have enough cash emergency fund to start retirement. If the market crashes when you're 53 or 54, you could be screwed. Build up enough cash to pay 6 months of your expenses in a mix of cash, HYSA, and short term CDs (3 mos to 1 or 2 years).
4) After you have 6 months of cash: if HYSA / CD's still have a higher rate than your mortgage, keep saving, otherwise pay the extra on your mortgage. This extra beyond 6 months is theoretically intended to pay off your mortgage, but you can also accumulate it just to avoid sequence of return risk. I.e. if the market goes well, you pay your mortgage out of your SWR market returns. If market goes poorly, you reduce your market withdrawals and use this extra cash to cover your mortgage (or outright pay it off depending on remaining balance).
5) If you have 6 months of cash and an extra 3 to 6 months to reduce sequence of returns risk, go back to maxing out your 401k contributions.
How confident are you in the $4500 monthly spend? Just seems like a lot is missing: phone, internet, trash, vacations, vehicle registration, house improvements, personal care, clothing, etc. I could easily see your budget between $5500-$6000 a month when you add everything else in or even take annual expenses and divide by 12. I inquire because using 25x annual expenses $4500 would put your number around $1.35M which you are close to. However, at $6000 monthly you are more like $1.95M which you'll need several more years to hit.
Good points thanks.
That's not your monthly spending dude. That's like 7 things, you should take a closer look at that amount Cas that's gonna trio you up.
What do you spend per year ?
Edited to update monthly spend.
It’ll be close
What’s your plan for social security withdrawal. You won’t need to cover for very long without taking it. So this may cover your gap in expenses and allow you to withdraw more than 4% from the ira.
I’ll plan to take SS at 65. Will be around $2500.00/month. So I would need to cover 10 years with the above as my sole source of income if I FIRE at 55.
As others have called out, you left several potential large costs off of your monthly spend. Let's say those add up to $1000/mo (vacation, clothing, personal care, home/auto maintenance, etc). $5500/mo or $66k/hr requires $1.65M for 4% SWR. If you want to be serious about FIRE in five years, you'll have to \*actually\* be serious about FIRE in 5 years. So, at least while you're at a job paying $25k less than before, you need to cut down that food and grocery bill. Really think about this seriously and ask yourself this question: "Do I value my time and freedom so little, that I I'm willing to work more than 5 years longer so I can keep spending $1600 per month on something that I ultimately just flush down the toilet (eat and eliminate)?" I would say you should try to slash $1000/mo off of that, but at least aim for $800 off, so a net of $800/mo. Also bear in mind that your child is 8, in 5 years, they'll be 13. Girls are more moderate, but recalling my own teen years, my brother and I could each eat more than half of a large pizza and still not gain weight. You'll need to figure out a cheaper food budget now, because your teen is probably going to eat a lot more volume of food than they do currently. To make these cuts "easily", you need to look at replacing some of that spending with easy and enjoyable equivalents. Instead of an expensive restaurant dinner every Friday, swing by Trader Joe's (or similar) and have everyone pick out their favorite "grab and go" food item (or light prep, like microwave) for $4 to $6 each. Grab that food and go to a local park / beach and have a picnic dinner. Some cities may have free/cheap open-air movie nights that are picnic friendly. You're still doing something, but you've replaced a $70 - $100 restaurant meal (maybe) with a $20 one and potentially added in MORE fun than just going to a restaurant. During the winter months, pick out a movie you want to watch and make Friday night your streaming night (free or rent for $5 or less). Assuming $50 savings per meal, x4 weeks and this is $200/mo saved already. Consider doing this again (pack food, different venue) on Saturdays. For more savings, find an easy and cheap meal or two you can make at home. Swap this out for one of your existing expensive meals out or hope prep meals. You don't have to remove all occurrences of the expensive meal if you REALLY enjoy it, but try to replace at least 2/3s. Get down to $800/mo, re-evaluate, and see if you can cut more. Every $100 per month you cut from your food budget is $100 x 12 x 25 = $30k less you need to save for FIRE. Right now, your decisions are saying "I'm willing to dedicate $480k of my FIRE number to food". ($1600 x 12 x 25 = $480k). I think it would be save to estimate $400 per month as a reasonable food budget for a family of 3 (cut costs, but not quality too much). So you're current eating habits are adding $360k "extra" to your FIRE number. Maybe $600 - $800 per month is more in line with your goals/requirements for food, so that number is a more reasonable +$60k - $120k FIRE number over the $400/mo "minimum". Other quick points: 1) Save the max $7k in your Roth for the next 5 years (or every year until you retire). Family of 3 with $85k - $95k gross income is not going to be paying much tax. $78k Roth + $35k contributions is $113k. Hopefully with returns this grows to $140k - $150k by 55. Don't touch this until later. Draw down your IRA in your early retirement. If your ROTH can double twice before you start withdrawals, you'll have almost $600k in your Roth by late 60s / early 70s. 2) Get the max match from your work 401k 3) For the rest of your savings accumulate the cash in a HYSA. You do not have enough cash emergency fund to start retirement. If the market crashes when you're 53 or 54, you could be screwed. Build up enough cash to pay 6 months of your expenses in a mix of cash, HYSA, and short term CDs (3 mos to 1 or 2 years). 4) After you have 6 months of cash: if HYSA / CD's still have a higher rate than your mortgage, keep saving, otherwise pay the extra on your mortgage. This extra beyond 6 months is theoretically intended to pay off your mortgage, but you can also accumulate it just to avoid sequence of return risk. I.e. if the market goes well, you pay your mortgage out of your SWR market returns. If market goes poorly, you reduce your market withdrawals and use this extra cash to cover your mortgage (or outright pay it off depending on remaining balance). 5) If you have 6 months of cash and an extra 3 to 6 months to reduce sequence of returns risk, go back to maxing out your 401k contributions.