The Math

Here be the details of how I think my current money situation allows me to quit my job in one year. Right now I’m thinking this will be a mini-retirement, but I’m super conservative, so I want the ability to stay retired for extreme worst case scenarios. Such scenarios could be me being injured so I can no longer work(though that would likely result in me qualifying for disability-I’m not factoring that in), or me having to become a full time caregiver for a family member.

Here’s where I’m at:

Currently our house is paid off, which is worth about $230K

I have a net worth of investment assets at about $660K, which is broken down to

$265K 457 Deferred comp plan, almost all invested in SP500

$305K Vanguard brokerage, roughly 72/28 Stocks/Bonds

$81K Roth IRA, all bonds

$10K Cash in a savings account for future real estate investment

less than $1K split of BTC/ETH

My net worth does not include $6K in an emergency fund, or another $4k set aside for various savings goals (car maintenance, new mountain bike, gifts, training, etc.)

Projections

I will continue to work for another year, and then will get paid out for about 5 months of leave I have banked up when I resign. Not sure if they pay the leave out in a lump sum or spread it out like a paycheck. Think they do the later.

 I’m currently saving  an average of $4400 a month, which I split between maxing my 457, Roth, and then stockpiling whats left for possible future real estate investment. I’m going to be conservative and say that drops to $3800 a month going forward. That’s the lowest I’ve ever contributed, and would account for no overtime during the 5 months of leave payout and factor in if we change to a completely combined budget.

12 months more work + 5 months of leave balance owed= 17months of savings

17 X 3800= $64K

Again, pretty conservative estimate, as I’m not factoring in any of the return I may get during this time. 

Once I quit I will also have access to all of the contributions I’ve made to my pension. This currently is $63k, and will be about $66K by the time I quit. These are tax deferred, so I can either leave the money in the system, or roll it over into an IRA. If I leave it in the system, I can go back to my current employer with less hassle and work 5 more years to get a pension. I’ll likely leave the money in the system for at least a year before I roll it over into an IRA, because again-super conservative. I like options.

So, I should be around here by the time I quit: 

$660K current net worth 

$64K  projected contributions

$66K pension system/future IRA

Total=$790K

At a 4% SWR that’s $31K a year/$2600 a month

Of course conservative(because stupid hot market), so at a 3.25% SWR it’s $25K a year/$2100 a month

Other Income-VA

I’m currently at 60% disability through the VA, this pays $16k a year/$1300 a month tax free. I’m actively trying to work on my conditions to improve them, but it’s likely they will never completely go away. If I’m able to significantly improve, I’d still likely be getting $6K a year/$500 a month for the rest of my life.

Expenses.

My wife is amazing and uses YNAB to budget and then builds a spreadsheet to track all of our expenses and savings rate. Currently we have a separate but combined finance system. We share expenses for all bills/recurring family expenses like groceries and eating out together, kid related stuff, and goals(vacations, home improvement, etc). We then have separate spending for our hobbies, gifts, and individual medical spending. My average expenses (my half of stuff+individual spending) since we had our first kid is about $24K a year/$2K a month. However, since our youngest started full time daycare in December of 2020, I’m on track for $30K a year/$2500 a month. Once I quit, our oldest will be starting public school kindergarten, and I’ll likely be taking care of our youngest at least twice a week, both of which will significantly reduce our daycare expenses. Probably at least $2500 a year for my half. However, I’m going to use this year’s projected level of expenses because healthcare. The ACA website says we can get a $2600 deductible plan for $30 a month for my wife and I, and we can use our state CHIP for our kids at about $70 a month, totaling up to $1200 a year/$100 a month of which I’d be responsible for half. I’m also not factoring in that currently the VA covers me for healthcare, because that could change someday if I’m able to get my disability rating down. So even though in total our expenses should be lower, I’m just going to assume the worst and expect my half stays a $30K a year.

This leads to why I think I can retire, math wise:

Projected net worth of $790K by the time I quit

3.25% SWR $25K a year/$2100 a month

Low ball of VA pay  $6K a year/$500 a month

=$31K a year/$2600 a month

should cover high estimate of expenses of

$30K a year/$2500 a month

The numbers are close, I know. But I think I have some wiggle room because:

1. I’m using a low SWR, going up to even just a 3.5% SWR would help significantly.

2. It’s likely I’ll continue to get quite a bit more than $6K a year from the VA for at least a few more years.

3. I’m assuming none of my investments make any money in the next year(though honestly, I think this is fair as it’s also possible they lose money in this next year before I quit).

4. My amazing wife is planning on continuing to work part time for at least another five years. Though she doesn’t get healthcare, her income should cover our combined expenses. I will just have to earn my room & board through sexual favors. I’m not above prostitution.

Between her income and my VA payments, our combined expenses should be covered and we still might be able to contribute to our investments.

5. I know me, and me don’t do good with sitting around twiddling my thumbs. There’s only so much mountain biking I can do. I’m planning on decompressing after I quit for up to about six months, and then starting to figure out what I want to do next. I’m pretty sure whatever that is will involve me making money again. I have some ideas, but in reading about other’s FIRE experience, I know a lot can change after I chill a bit and take a step back. I’m giving myself permission to focus on being the best stay at home dad I can be, and not worry about making money until our youngest starts kindergarten which will be about 3 years after I quit. That said, I’m guessing I won’t be able to wait that long. This last point directly relates to the “why” of me quitting, and will probably take up another thousand or so words in a different post. I’m sure anyone who reads this is about done with all the numbers and dubious assumptions, so let’s call it. There it is; the math.