Personal Finance

We're in our 40's and spend $375k annually - are we saving enough to ensure we can retire eventually?

Kristin Hitchcock

Published: November 23, 2024 1:33 pm

24/7 Wall St. Key Takeaways:

• Navigating career, family, and financial goals can be challenging when trying to reach financial independence. 
• Whether you’re eyeing a $10M goal or simply striving for financial independence, the key lies in optimizing your current resources and exploring flexible income opportunities. 
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

Recently, a Redditor shared their situation: a family of five living in a high-cost-of-living area, aiming to reach a $10M “fatFIRE” goal within five years. They left a corporate job for a better work-life balance but are now grappling with a demanding role that doesn’t justify its pay. 

Currently, the poster has around $7.2M in net worth and wants more career flexibility. They’re looking for different options that might work better for their personal and financial goals. 

Let’s take a look at this poster’s journey and see what we might learn from it! 

Their Situation at a Glance:

• Net Worth: $7.3M (including $1.35M in home equity).
• Income: $350K–$400K household income, with the wife earning $250K and the poster earning $100K.
• Expenses: $375K annually, including a $15K monthly mortgage and $8K in childcare.
• FIRE Goal: $10M to safely withdraw $400K per year.

The poster’s main challenge is that their current job is very stressful, and the pay isn’t nearly enough to make up for it. They’re hesitant to return to corporate life, though, unless the job offers flexibility and a larger salary. 

The Redditor is currently open to exploring alternative ways to make money, like vacation property development or opening a small business. 

These dilemmas aren’t uncommon in the professional world. Many people have a hard time managing financial goals with personal ones. Here’s some advice that could benefit both the poster and other readers on similar paths:

1. Reassess the Financial Timeline

The Redditor is currently feeling a lot of pressure to accelerate towards retiring early. With $7.3M and expenses of $375K, they’re close to semi-FIRE territory, especially with ongoing contributions to investments.

However, I think they could reevaluate if the $10M target is really needed to maintain their lifestyle. Adjusting expenses slightly could make their situation less stressful. Furthermore, they could consider part-time work along with a low withdrawal rate, which would help them achieve their financial goals without being stuck in a job they don’t like. 

2. Optimize Career Choices

Their enterprise software background offers lucrative opportunities, but the Redditor hesitates to return to the corporate world unless flexibility is guaranteed.

There are lots of roles that may fit better, though. For instance, they could explore consulting roles in enterprise software or corporate strategy. This path provides the flexibility they’re looking for with a higher hourly rate (and, often, shorter projects).

They could consider contractor roles, too. Many companies hire senior professionals for temporary assignments, especially in strategy or M&A, without requiring long-term commitment.

As I’ve already suggested, part-time roles are also a solid choice. I’ve covered part-time roles and retiring early before, as it’s an often overlooked solution to many common dilemmas. 

3. Explore Entrepreneurship

The poster did mention the possibility of vacation property development and buying a small business. However, there are a lot of risks involved. 

Consider starting with one pilot property to test the market and the amount of work involved. I’d recommend using local market data to determine the demand and operating costs of this business before committing to it as a career path. 

Instead of diving into acquisition entrepreneurship, consider working with a search fund or targeting smaller, profitable businesses that match their expertise (e.g., SaaS-related companies).

There are lots of other ways to get passive income, too. For instance, the poster could explore syndicates or funds in vacation properties to gain exposure without full operational responsibility.