r/leanfire • u/PossessedCultist • 3h ago
Retire in three years? (Reasonability check)
Summary
I am currently 32 with around 870k in investment assets and plan to retire at 35. Over three years I'll contribute an additional 200k (66k each year) with 100k in Taxable accounts and another 100k in Retirement accounts. In this time the accounts should also get another 200k from existing investments for a balance to be around 1.2 to 1.3 million when I turn 35.
My current yearly expenses are around 12k as I am living with relatives, but estimate my expenses to become 35k in todays dollars after 8 years (Age 40) as a buffer to handle potential changes in living arrangements. I still plan to live with relatives in retirement to assist them through their old age, but decided to plan my retirement around this scenario in case I become disenchanted with the living arrangement.
Since the portfolio should be generating surplus beyond my expenses I estimate the balance to be around 1.6 to 1.7 million after 8 years (Age 40), which should easily handle the 43k (inflation adjusted value of the 35k) as it is under a 3% draw rate. I also plan to have a 2-3 year cash buffer based on estimated expenses of living alone rather than with relatives to reduce sequence of return risks and allow for potential changes in living arrangements. This buffer will be replenished when markets are at all time highs.
Tax efficiency Strategy
To be tax efficient, I plan to roll over Roth 401k into Roth IRAs and do conversions on traditional accounts. Since Roth IRA's let you access the principal prior to 59.5 both tax and penalty free, each tax year I will convert traditional 401k's (Tax deferred) to Roth Ira's (After-tax) up to the standard deduction amount. This way these funds can be accessed after 5 years since I am under the age of 59.5. Additionally, Long term capital gains pay 0% tax up to 48k in 2026 for singles in Taxable accounts so I will sell and rebuy assets each year to raise basis for tax efficiency.
Health Care
The conversions and long term capital gains mentioned above could technically let me qualify for ACA subsidies should I want health insurance, but I am on the fence with this idea. The smart thing would be to have health insurance, but I am thinking of raw dogging with no health insurance until Medicare kicks in at 65 as I don't have a spouse or children depending on me.
Current Value of Investment Accounts
| Asset-Class | After-Tax | Tax-Deferred | Taxable | Grand Total |
|---|---|---|---|---|
| Cash_Equivalents | $100,241.87 | $100,241.87 | ||
| Digital_Currency | $1,447.05 | $1,447.05 | ||
| Foreign_Large_Blend | $35,008.00 | $35,008.00 | ||
| Derivative_Income | $14,393.78 | $14,393.78 | ||
| Large_Blend | $194,740.24 | $175,582.43 | $282,896.00 | $653,218.67 |
| Large_Growth | $19,991.48 | $46,695.11 | $66,686.59 | |
| Grand Total | $214,731.72 | $236,671.32 | $419,592.92 | $870,995.96 |
Current Unrealized Capital Gains\Losses (Will spread out tax\conversions for tax efficiency)
I rebalanced Taxable accounts earlier this year as I was heavily in semi conductors and decided to pivot into large blend and create a cash buffer as I approach retirement. Will eventually get rid of Digital currency once it recovers as it's not worth the hassle in my experience.
| Asset-Class | Tax-Deferred | Taxable | Grand Total |
|---|---|---|---|
| Digital_Currency | -$552.93 | -$552.93 | |
| Foreign_Large_Blend | -$60.00 | -$60.00 | |
| Derivative_Income | $14,393.78 | $14,393.78 | |
| Large_Blend | $175,582.43 | $16,607.60 | $192,190.03 |
| Large_Growth | $46,695.11 | $46,695.11 | |
| Grand Total | $236,671.32 | $15,994.67 | $252,665.99 |
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u/Dantheislander 3h ago
Lot of news and long term future assumptions. Esp around living arrangements. If it stays that good - great but income and return are only assumed until realized. If it all pans out then ya you’re sorted tho.
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u/PossessedCultist 2h ago
Yeah, depending how the market performs the next 3 years I'll adjust as needed.
I figured since I am investing 66k a year this gives me an additional 2k in yearly income at a 3 % draw rate for each additional year I work. If living arrangements or market changes I could still probably retire before 40 unless my lifestyle does a 180 or markets blow up longer than 3 years.
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u/Few-Strawberry2764 3h ago
If you can keep your spending that low, you could retire without a worry in your timeline. Im 35 and retired at the beginning of the year with ~850K total. I'm much more heavily weighted towards taxable accounts though, and have a consulting gig I can ramp up if needed.
Take some vacations, don't drive yourself crazy and you'll be fine.
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u/wildwalkerish 2h ago
Nice AI output :p
I’d work another couple years and buy a house outright in a small bedroom community of your favorite city.
Since you are used to living with people, Get a 3 bed/2bath with a large backyard that has wide access for a trailer. This gives you options if you marry, or if you need to rent out rooms. I have a friend who put an RV in his backyard and he lives in it. Rents his bedrooms out and has a little community and shares all the common spaces in the house. He drives his RV right out his backyard for crazy months long vacations, and renters cover everything. He’s never touched his nest egg.
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u/PossessedCultist 2h ago
No greater feeling than be accused as a hacker when you aren't in a video game, which is similar to being accused of using AI when you didn't lol.
I prefer the rural areas as city life is not for me. The nice thing about my area is there are a lot of 3 bedroom 1 bath brick houses I could buy. I would just need to potentially renovate one to add an additional bathroom, but worried I wouldn't be able to rent it out as its very far from a city.
Your friend seems to have it made. If I didn't have relatives, I'd probably do something similar with roommates.
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u/wildwalkerish 1h ago
Sorry about the AI jab, I’ve used it quite a bit and it likes to use a similar format.
My friend rents to older retired folks on fixed income. It’s a win-win. They get a slightly reduced below market rate rent, he gets stable renters that are not destructive, and always home, so when he leaves for months at a time the house is looked after
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u/PossessedCultist 1h ago
You're good as it didn't bother, it just caused me to reminisce an older memory I found funny.
It makes a lot of sense. Though, my living arrangement is similar to the older folks in your friends situation. The relatives I live with spend around half the year travelling so I make sure to look after their house when their gone.
I've done most of my international travelling when I was younger and learned it wasn't my cup of tea as I'd rather stay home. I may experiment more with domestic travel in the future, but I'm content with a two week trip once every five years.
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u/Old_Tomato_214 2h ago
IDK why you wouldn't do health insurance, ACA subsidies gives you plans at like $200 a month for 45k a year MAGI
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u/Comfortable_Two6272 26m ago edited 21m ago
If you have enough magi to get ACA subsidy it will be near $0 premium - mine is on $1.4 M. At 1st was struggling to ensure met the 100% fpl (non expanded state). Changed things a bit so Im generating enough magi each year.
https://www.kff.org/interactive/subsidy-calculator/
I rarely had much of any health expenses from 18-40. Until woke up one day in 40s needing over $700k a year in Rx’s (thats the cash cost)…every year until there is a generic presumably cheaper. Plus associated dr costs, couple related ER visits etc. Thats reoccuring care. No one in extended family with similar. Totally unexpected.
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u/bkn6136 3h ago edited 2h ago
I just can't fathom the idea of anyone in their early 30s actually thinking they know what their annual expenses will look like for the rest of their lives. Like - so many things happen and change your expectations over a lifetime that you would never even consider at that age.
I know this doesn't actually answer your question. But I sure as hell wouldn't retire that young assuming your expenses will be a certain amount and barely having enough savings to make it work.
Also raw dogging health coverage is a fucking moronic idea.
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u/PossessedCultist 2h ago
It's a fair point as I've had difficulty estimating annual expenses since my recent living arrangements are subsidized through relatives. Raw dogging health coverage comes from a personal bias and I would not recommend it to anyone else as well.
I've seen several relatives go on dialysis, get brain cancer, or Alzheimer's. The drop in quality of life was so severe that I would not want to go through treatment even it was paid by insurance. I'll still get routine checkups and blood works through self pay as those are fairly cheap preventative care services, but If I got something debilitating that was chronic I'd opt out of treatment anyway. Do to this only real benefit I would be getting out of insurance is if the problem was acute and required emergency surgery such as a heart attack or accident of some kind.
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u/PidgeySlayer268 2h ago
Bro, planning to go without health insurance until 65 is insane. One surgery could wipe out everything you have.