My wife and I have dreams of retiring in 10-15 years – how do you factor in fluctuating income when planning for early retirement?

As is the case with anyone who wants to live the FIRE (financial independence, retire early) lifestyle, there needs to be a plan of action to try to hit a magic number. Whether it’s at 30, 40, 50, or 60 years of age, those in the FIRE community are laser-focused on trying to get out of the workforce early. 

According to their post in r/ChubbyFIRE, this is precisely how one 34-year-old Redditor feels as they are trying to leave the workforce in the next 10-15 years. However, knowing he wants to have more children and allow his wife to quit her job makes the Redditor feel slightly antsy about what is realistic. 

It’s not uncommon for members of this community to feel uneasy about their net worth or lifestyle as they start to focus on when they will be able to say goodbye to corporate life forever. 

The Current Situation 

In this situation, you have a 34-year-old Redditor with a 34-year-old spouse focused on retiring between 45 and 50. Living in the greater Milwaukee area, with no plans to move, they are very much situated in a mid-level cost-of-living environment. 

The couple has a three-year-old daughter with plans to have at least two more, so they know they need to account for this in their overall budget and retirement plans. With this desire to have more children, the couple is also trying to figure out the best financial way to plan for the wife to leave her job so she can stay at home and raise the family. The couple both experienced at least one parent at home growing up, so they want to be able to provide this same lifestyle for their children. 

As far as finances go, the couple has a current net worth of around $2.88 million, which is broken up into $37,000 cash, $620,000 in a pre-tax retirement account, $70,000 in an HSA, $762,000 in a Roth account, and a taxable brokerage holding of around $1.355 million. 

The investments currently focus heavily on the S&P 500, which accounts for 90% of the portfolio. In addition, there is a rental property valued at $405,000, which generates $1,350 a month. The couple still owes around $218,000 on this property and around $560,000 on their current $700,000 primary residence. 

The couple’s income is also about $290,000 annually, of which the original poster accounts for $240,000, though it fluctuates as he is in tech sales. Lastly, the couple wants to pay for college for all of their children, so the $28,000 in a 529 plan will need to grow substantially. 

Planning For The Future

The big question is how the Redditor can plan for the future when his income fluctuates based on his sales position. The good news is that the fluctuating income doesn’t matter in this case, as the family is in good shape. 

With $2.9 million invested, and even if the money is split between different account types, the family can earn a modest 6% on their investments, and bring their total dollar amount to $5 million in the next 10 years. This is true even if they don’t invest one dollar more, so it’s not like they are in bad financial shape. 

As one Redditor points out in the comments, the most considerable risk is the family’s spending and what this looks like in the future. If it explodes with additional children, it changes everything, but if they can keep it in check while still saving toward retirement and putting money into 529 accounts, they should be fine. 

Sell the Rental

Ideally, what should happen is that the couple should sell the rental property, as $1,350 monthly or $16,200 per year isn’t a giant return. Instead, since they already don’t like being behind landlords, sell the property, take any received equity, and invest it. This is far more likely to provide a bigger investment at an 6% annual return than the monthly rental income ever will. 

Alternatively, sell the property, take any earned equity, and drop it right into 529 accounts, and let this be the starting point. This would mean you wouldn’t have to invest in this account for the foreseeable future, whether for one child or three. 

The bottom line is that this Redditor is already in great shape, so fluctuating income won’t impact their preferred retirement date. It might impact overall savings contributions yearly, but a slight fluctuation here and there won’t have any impact. 

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