While most people retire in their 60s or 70s, Fat FIRE advocates aim to retire sooner without living on a shoestring budget. A Redditor finds himself in a good position with a trust fund that should provide roughly $200,000 per year. He posted about it in the Fat FIRE subreddit.
However, it’s not just the trust fund. He currently earns $500,000 per year, while his wife earns $160,000 per year. They are in their late 30s and have a child on the way. The couple is wondering if they can retire by 50.
In addition to the trust fund, he also has $2.3 million in taxable investments, $250,000 in a 401(k), and $100,000 in cash. He also has $800,000 in home equity and $1.7 million remaining on his mortgage in a VHCOL area.
Can the Redditor retire at the specified age? I will share my thoughts, but it is good to speak with a financial advisor if you can.
The Trusts
The Redditor currently receives a 5% draw each year from a $6 million trust. In the next four years, a $10 million trust becomes available with annual 5% draws. Once the relative passes away, the Redditor receives a $20 million trust.
A retirement already looks feasible when the second trust becomes available within the next four years. Both of these trusts can grow over time and present the Redditor with additional funds. An annual 5% draw on a $10 million trust is $500,000 per year. The Redditor also mentioned $200,000 per year in tax-free withdrawals from the current trust, which would add to $700,000 per year.
The couple spends roughly $300,000 per year in their area, so both trusts can comfortably cover their living expenses. They also have high incomes and $2.3 million in taxable investments that they can access right away. Using a more conservative 3% withdrawal rule for that portfolio, the couple can access $69,000 per year.
Moving to a More Affordable Area
The couple also plans to move to a more affordable area when they get older. They expect to have a net worth that rangesfrom $5 million to $6 million by the time they move to a more affordable area. While lifestyle creep may be a factor, relocating to an MCOL area can still reduce their expenses.
The couple seems prepared to preserve their wealth instead of spending their fortunes at will. They can even make a cash offer on their home if they desire because the home equity in their VHCOL home will continue to increase over time.
Consider This: Dave Ramsey: “You Make $140K. Stay Out of Restaurants, Don’t Go on Vacation, And Get Rid of the Ferrari Bike”
The Motivation for Retiring
The couple seems like they’ll be ready to retire within a few years, and definitely by the time they reach their 50s.However, it’s also good to consider your motivation for retiring. Some people get incredibly bored in retirement and return to the corporate world after 1-2 years.
However, this couple is starting to feel burned out and believe they are working too many hours. The husband said that he enjoys some days and doesn’t enjoy others. The wife also works long hours, and they’re trying to grind it out for another four years before the second trust is available.
Money doesn’t seem to be the problem when the second trust arrives. Yes, the couple will have additional expenses when they have children. However, they are prepared to move to a more affordable area and seem to be savvy with their finances.
The couple may want to consider part-time remote work to keep busy, but it’s completely optional. Their investments will continue to grow, and the couple will eventually receive the final trust of $20 million.
The Redditor is in a great financial position and is approaching his fortunes in an optimal manner.
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