I paid off my mortgage and have $7 million in the bank – would you retire in 5 years if you were me?

Anytime someone starts seriously considering their FIRE (financial independence, retire early) number, there is hope that they are close enough to this number to make it meaningful. The idea of retiring early and living without corporate overloads is undoubtedly appealing to millions. 

One Redditor posting on r/fatFIRE is well ahead of the retire-early game at 35 with a spouse just one year younger. This couple, with a child on the way, has been very fortunate career-wise, which has allowed them to rack up a surprisingly high net worth and seriously consider early retirement. 

There is no question that if someone can walk away from work at 35 with millions of dollars in the bank, I imagine this is a scenario many people would jump at saying yes to. 

So Close, Not So Far? 

What we know about this couple is that the Redditor is 34 years of age with a 35-year-old partner, and their first child is due sometime this year. This couple has undergone major life changes in the last few years, including having a wedding, buying their first home, and moving closer to work. 

The current plan is for the spouse to quit once the baby is born and become a stay-at-home partner, potentially with part-time help until preschool. The Redditor plans to work longer but wants to leave before he is 40, so likely another six years in the workforce. Thankfully, the partner’s job has been relatively relaxing, but the original poster’s job is high pressure, with up to 60 hours per week. However, it has also allowed them to create a budget of around $7.5 million. 

Currently, the Redditor makes between $800,000 and $1.2 million per year, with the spouse taking in another $300,000. They live in a $1.25 million paid-off home and have approximately $7 million in liquid investments between retirement and brokerage funds. 

The Budget

This Redditor wants to know whether their budget is feasible to live the FIRE lifestyle if they retire at 40. The proposed budget allows for a $48,000 annual spend for the home between maintenance, HOA, landscaping, taxes, and insurance. 

Medical costs will likely run around $40,000 per year between premiums and expenses, and transportation will cost another $8,000 annually for insurance, maintenance, and payments. Additional money will be spent on food, entertainment, hobbies, childcare, and travel, bringing the annual spend to around $242,000. With a $7.5 million plus net worth and a $242,000 yearly spend, is retiring at 40 genuinely feasible? 

The Redditor’s Reality

One of the biggest flags Reddit raises about this post is that the original poster should focus more on how much kids are a wildcard in spending. While the original poster does plan to superfund 529 accounts when children are born, this doesn’t account for other expenses, like increased food and travel costs, activities, clothing, and every other expense parents know exists and comes out of nowhere. 

While the Redditor does mention that private schools are likely not on the table, things can change quickly, and this cost isn’t factored in. Where I get concerned is that at a 4% safe withdrawal rate, you’re talking around $300,000 annually. Based on their current expenses, this growing family would be reasonably comfortable at this dollar amount. 

However, as parents of two children, they undersell how much children will increase costs. It’s not unheard of to believe that with two children, the 4% safe withdrawal rate and their current spending wouldn’t be enough, which makes providing a yes or no answer about retirement more of a challenge. 

The Bottom Line

Ultimately, if we had to answer today, the Redditor would likely be in a position where this $7.5 million growth over the next five years is still employed. However, inflation will rise over this time, too, and with the potential of another child, this family needs to look at how to cut back on spending to make things work at such a young retirement age. 

Not only are they trying to fund very busy and active years of their lives, but they also still have enough set aside for the golden years when they are empty nesters, so this also needs to be considered as part of their retirement strategy. It might be a good time to speak with a qualified financial advisor who can help create a plan to ensure long-term wealth so they aren’t worried about the future. 

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