Work full time and so does my wife. I love reading FS and allows find extremely useful information in all of your posts but there are 2 issues I see with this analysis and this is coming from a father of an 18 month old living in a DC suburb with one stay at home parent: 1. I always make sure it fits within our own budget as well. Imagine saving so much and making six figures in passive income just to have a $10 bill left. Thats fantastic! Thanks for sharing. You can get a lot more house, but property tax is higher (higher % on less value house). Real estate is the ultimate inflation hedge as rents and property prices go up. Sams budget seems about right. 6M+ in the bank buys a truly amazing life, beyond the hopes and dreams of 99% of others in this world. I take responsibility for that. IRA limits for 2023 have been escalated to $6,500, or your taxable income, for individuals under 50. If this works for J&L, and they are happy, they should keep doing it. But before then, my wife worked for 2.5 years after I left until she was 34, and I had a large severance supplementing our passive income. I am now contributing 15% of my income with an additional 5% employer match. $5M is the number well need to hit to retire early comfortably with 2 kids. If I had $5 million, I would buy QYLD and get 12% dividend . I just believe they might actually be happier in the long run, ironically, if they werent quite so focused. Feel free to reach out! -2000: Landscaping/Maintenance can be drastically reduced by only paying for dangerous activities like tree trimming on a ladder and such. For $1.3M you can get a better looking, although not extravagent home. Ive been looking at retiring with $5M at 2.5% withdrawal rate. Moreover, for married couples, this amount doubles, so a couple can leave up to $23.4 million to their heirs tax-free. Leverage can be dangerous . Had a nanny until my child went to pre-school. gas is up to $18/gallon? Mostly definitely. Likewise, there are certain expenses like life insurance and $200 per month for clothes that they could almost certainly cut given that theyre not working. Keep up the great work and enjoy the time with your son. If thats the logic, then $500 million is barely enough after you factor in the private jet, yacht and household staff. Our financial planner tells me that we are on track to meet our goals of having a retirement income that will allow us to survive. I just dont get why people spoil their kids and call it a mandatory expense. Some deductions from your paycheck are made post-tax. Being stay at home parents 24/7 is no joke. Yes, it is understandable that you think taking care of a child is easy if daycare or your wife does it for you, but throwing a baby into the ocean is not good parenting. Do you really not understand that if you dont have a job you have to pay for it yourself? Another thing worthwhile is getting affordable term-life insurance to protect your loved ones and dependents. Sam, I love your blog as it is one of the few I can relate to. The calculator results provided here are an estimate based on taxable income only. Related: How Much Life Insurance Needs When Having A Baby. 1) agree with poster from Vietnam kids used to just play without much adult attention after age 8-10 or so. I agree. We used to be around $155,000 until both girls entered private school. Thats obviously not the case here. You may think that is ridiculous, but even if you want to pay highest, $16k per year is enough. In CA, prop 13 will help you long term. Home insurance and utility bills are also much higher than SV. 1,500 sq ft with a small balcony or shared rooftop, 2 bdrm, 2 ba, you are definitely looking at $2-3m minimum, on the higher end with a doorman. That being said it certainly is more than necessary if we were trying to cut back! We have a 5 year old car with 32k miles on it and a 3 year old car with 35k miles on it (used for long distance travel). David, you are spot on. This is computed as federal taxes + state taxes. There are still ways to save money for sure but just consider that youre not far off from living at the SAME level as Mr/Mrs 5MM. But, we know that our time spent with him will make him a more loving, kind, and intelligent person going forward. Credible is an online mortgage marketplace where qualified lenders compete for your business. So youre saying 2 kids will add 80k to our annual budget in order to maintain our actual middle class lifestyle? I dont know what a crazy world we have nowadays that both parents Retire to take care of One child, not counting all the extra classes they want the child to take growing up (I read some comments mentioning it as mandatory). Honestly, I will never buy a house where I have to pay more than 1.25% in property tax. $8-10M you are rich. Thank God Singapore only has two seasonshot and hotterso lets just say, to be practical, youll only spend four thousand per look. 2023 Forbes Media LLC. Colleges consider your NET Assets not income when deciding whether your kids will get grants (free money) or not. We purchased our home in 2010 when the market in our area was substantially lower than today. for some numbers. IE we bought a forester and I believe you bought an x5? I am white and value diversity in a living environment. Most people will retire on far less even in these HCOL areas (look at median income in LA or SF), and more power to them! generate enough passive income for retirement, Buy This, Not That: How To Spend Your Way To Wealth And Freedom, Investment Returns surpassing Active Income, Financial Samurai 2018-2019 Passive Income Update, 529 is a good tax minimization investment vehicle, Consumers Stand Up For Your Rights! We plan on moving to one of them, and I am looking forward to it. The childcare cost seems pretty exorbitant considering the parents are both stay at home. On the other days, they go to the local science museum, where they have an annual family membership for $150. I certainly wont be able to afford to pay $1.2 million for their degrees. Our health insurance is approximately $25,000, which by the way doesnt cover dental and orthodontics (braces can cost 3-5 thousand). Notaccording to the Department of Housing and Urban Development, which considers $100,000 a year low income for a family of three living in San Francisco, for example. Weve already spent four hundred and seventy thousand of Simons salary, which leaves just thirty thousand for everything else. They live modestly in 1600 square feet for two adults and a baby: I spent last year up to August living with four other adults in 1400 square feet fairly comfortably. Would have done well since sept to now. I can appreciate that. Inflation is eating away at the cost of the mortgage. I certainly faced it when I moved my household from Silicon Valley to LA, and again from LA to Atlanta both times within mini-retirements. And definitely something to consider, especially since rates have gone up. Your numbers are very persuasive for a high cost location. Im surprised someone hasnt mentioned this yet, but I feel they have an investing problem, not a spending problem. What amount would you feel comfortable spending? Thats another forty thousand a year. I offer a spreadsheet and Monte Carlo analysis which they promptly decline or ignore. If youre happy putting all your net worth or most of it into cryptocurrency, then more power to you. I dont understand. We raised our children while working and except for paying for preschool or the occasional babysitter for a night out never wanted or needed to pay for daycare? This analysis seems to ignore that cant they take out 4% from the total invested cash rather than just the total of the taxable account? You may ask why not public university. With greater diversity, youre more likely to meet people who have interesting hobbies. Ah, its amazing how everybody arrives at different numbers based on our own experiences! My favorite way to invest in real estate isthrough real estate crowdfunding. Unfortunately, all prizes are also subject to income taxes. I think people underestimate the huge trend towards freelancing. Having spent a few years in other lower cost regions of the US, I can say that there are great places to live that are far cheaper than the great coastal cities. If you havent kept your skills up (I havent), we cant rely on going back to work in the same capacity. 1) To generate a rate of return greater than the risk free right, you dont have most of that money in the bank. And no Florida is not like California. (Most of these links are from 2016 when I did this research but I imagine the rules are still pretty similar). But even if I had stopped working at that point, and hadnt saved all that money from work, I would still have $3.4 million thanks to growth in the market ($3.7 million minus about $92K per year in expenses) . When family and friends are conveniently located in a low cost rural area I think you have an inherent advantage in the early retirement game, but of course that isnt something you get to decide, thats much more a matter of fate. I retired at 45 five years ago and started reading MMM for a while. It is also customary for us to pay for meals when we all go out. the benefits list goes on and on. Additionally I have thought of starting a side business and growing that as a retirement business, having employees run it while I work occasionally. The money also grows tax-free so that you only pay income tax when you withdraw it, at which point it has (hopefully) grown substantially. Maybe he included that with the food budget. Yes no job or employment and enough money to live the high life requires the big numbers you are mentioning.. We are talking tens of thousands of dollars in value each year! How Much Do You Win After Tax? I lived in the midwest most of my childhood. Cell phone 100 Month Ive had zero tutoring myself growing up since only stupid kids needs tutoring from the part of world I came from. Hindsight is always 20/20. When is enough enough? They will spend more on just gym membership and vacations than me and my wife spend on rent at our new apartment. This is what the majority of my parents and grand parents generations did after living in NYC for so long. They still prefer doing their own grocery shopping because they're better at picking out fruit than the delivery guys. Medicare covered most of my costs. Second, learn to objectively evaluate an opposing thought. One recent post I did write was about Investment Returns surpassing Active Income in this bull market. Fundrise smartly created private real estate funds to earn income 100% passively. If they want to take a calculated risk and are committed to reassessing their plan in 3-4 years then Im confident they can afford to make this work. Some of the reasons include: higher pay, more job opportunities, greater diversity, sometimes better weather, amazing food selection, and family to name a few. The FAFSA which most public universities use can be pretty good at concealing assets (for example primary home value, businesses so you could theoretically look poor on the FAFSA but have a high net worth in real life). Income tax calculator 2023 - USA - salary after tax - Talent.com This means that your net income, or salary after tax, will be $55,578 per year, $4,632 per month, or $1,069 per week. I obviously love the work youre doing here and look up to you and what youve done and hope I can do something similar with my life, so again Im sorry for the initial aggressive tone to my first post. The number has always been 6% after tax. I didnt think the reasons would be financial. Retirement age: 60. I prefer to look at it another way, break it down into necessities and luxuries. I think theres this myth that all these things are needed just to be comfortable, and that they are just standard parts of the American middle class lifestyle, but I remember growing up seeing how hard my parents in particular had to work to concurrently provide about half the vacations and luxuries this family enjoys on an annual basis. I sure hope thats not what the going rate when my kids that are both around that age hit college. 4) The total net worth doesnt account for home which presumably could be converted to stock or cash at some point. Im sorry, but anything more than a babysitter for a couple of hours per month for the occasional parent date night is pretty much by definition extravagant. Yes, everyone needs time off, so swap with your spouse. According to the Kaiser Family Foundation, the average annual premium for employer-based family coverage is $19,616 or $1,635 a month. The $600k equity they have will buy them a first-rate single family home in a fine neighborhood with outstanding public schools. The most worrisome wild card besides health insurance would be elderly parents. In my after-tax investment amounts by age for a comfortable retirement, I included a more aggressive after-tax investment chart for those who want to retire in an expensive city like San Francisco, New York, Los Angeles, Washington DC, Boston, San Diego, Seattle, Miami, or now Denver.