What does “rich” mean? There was a huge debate on if having $1M makes you rich in one of my Facebook groups the other week. My argument was — no, $1M does not make you rich. It certainly doesn’t make you poor either, but it’s not what I’d consider wealthy.
Wealth, to me, is having enough in savings that with reasonable diversification and YoY growth, you never have to save another dime to support your future lifestyle. Your income, which can be passive or active if you feel confident you can maintain active employment and want to maintain active employment, should cover all of your bills and expenses until you age into one of your retirement buckets. You may only have one retirement bucket (i.e. age 67) or you may have multiple buckets (I have an early retirement bucket set for age 45, and another bucket at normal retirement age.
Wealth, to me, is being able to buy things like… a minivan… new… and a trip to Hawaii with a stay at a non-budget hotel… without worrying about it impacting my retirement goals. It’s flying my sister and mom to Hawaii and getting them their own room at the hotel for a week. It’s being able to pay to get my mother an in-home aide (or at least contribute to it) when she needs it, maybe even moving her across the country when she’s older, to be closer to us so she isn’t alone (if that’s what she wants.) It’s being able to spend like my father did–always offering to pay for meals for friends and family and tipping generously–but with the actual life savings that can withstand such spending, a life savings that accounts for potential fluctuations of the market and future healthcare and long-term care costs.
While I could do a better job honing these estimates, I feel good about my FAT Fire number. It seems to align with what I’ve seen others say — around $10M — to really reach the kind of wealth where your money continuously works for you. I figure if I ever get to $5M that’s when I can start dabbling in more complex investments like real estate. For now, it’s heads down with (mostly) index funds and a few individual stocks. This year is really the make-or-break year for my plan (though there may be future make-or-break years, but it will be difficult to encounter one in the near future where I have the chance to earn close to $1M in income for the year.)
Below, is a table on my current estimates per savings bucket. I am estimating a 6% YoY growth over time, which may be too high or too low, but as I get closer to retirement I can adjust down for more safety once I see how the years go. The current value column is approximately how much was saved in each bucket at the end of 2020. With 6% YoY until each bucket is accessed, I note the GAP in total amount needed for my final goal (ie retirement goal is $5M, if I didn’t touch my money at all and got 6% YoY now, I’d be $1.6M short. The cool thing is I’d have $3.3M, which doesn’t account for my taxable funds, and also is at age 65-ish, which doesn’t account for additional growth after age 65 since I won’t pull all the money out up front and will hopefully live much longer.
My “pre retirement” FIRE bucket is more or less my “Coast FIRE” bucket, which gets me to career freedom by 45. if I have $3M by 45 I can move into a lower-paid career (and/or take a few years off) and maintain the lifestyle I would like to have. If growth is stronger than 6% year over year we can also invest in building on to our current home, or move to a city that I prefer that we couldn’t currently afford.
| 2020 | Goal | Yrs | Current Value | Growth Rate | “Real Value” | GAP | |
| Retirement | $5,000,000 | 28 | $651,000 | 1.06 | $3,327,708 | $1,672,292 | |
| Pre-Retirement | $3,000,000 | 13 | $833,074 | 1.06 | $1,776,887 | $1,223,113 | |
| College | $600,000 | 17 | $133,607 | 1.06 | $359,773 | $240,227 | |
| Home | $2,000,000 | 28 | $195,483 | 1.03 | $447,251 | $1,552,749 | |
| $1,813,164 | total: | $5,911,619 | $4,688,381 |
2021, which is now THIS YEAR, represents a huge opportunity to get much closer to my goals. Even if I have failed to tap into the actual earnings potential I should have had at this company (my raises and refreshes have not kept up with my market value or initial grant offer), I’m still in a very, very good place if I can just hold out and remain employed until the end of this year. While anything can happen, and my mental health post baby may get the best of me, I’m really focused on surviving this year. (*note, the above doesn’t count total home value, which would be higher in 28 years since the mortgage would mostly be paid off then.)
This is why:
| 2021 | Goal | Yrs | 2021 Value | Growth Rate | “Real Value” | GAP | |
| Retirement | $5,000,000 | 27 | $786,060 | 1.06 | $3,790,653 | $1,209,347 | |
| Pre-Retirement | $3,000,000 | 12 | $1,140,598 | 1.06 | $2,295,108 | $704,892 | |
| College | $600,000 | 16 | $261,623 | 1.06 | $664,615 | -$64,615 | |
| Home | $2,000,000 | 27 | $231,212 | 1.03 | $513,589 | $1,486,411 | |
| $2,419,494 | total: | $7,263,966 | $3,336,034 |
By the end of 2021, if I can keep my job, and the stock markets don’t tank (ie we don’t have a civil war this year), I get much closer to my goals. Not 100%, but close enough that I really am already approaching Fat FIRE territory if I didn’t have such aggressive savings plans.
2022 I plan to switch jobs, so my income will go down quite a bit. At the moment I’m thinking I will try my best to stay until I get get the full $58k into my retirement for the year as well as max out the first ESPP period for the year, which ends in March. I’ll have to leave some money on the table at some point (unless I leave in March/April which is probably the ideal time to move to a new role), but I’m now looking at a transition around June. This assumes I make $200k total in 2022, including expected bonus that comes in February before I leave my current job. I’m kind of considering this part of 2021 plan, but since the actual receipt of income falls in 2022 it hits my 2022 goal plan:
| 2022 | Goal | Yrs | 2022 Value | Growth Rate | Value | GAP | |
| Retirement | $5,000,000 | 26 | $929,224 | 1.06 | $4,227,394 | $772,606 | |
| Pre-Retirement | $3,000,000 | 11 | $1,314,116 | 1.06 | $2,494,584 | $505,416 | |
| College | $600,000 | 15 | $277,321 | 1.06 | $664,615 | -$64,615 | |
| Home | $2,000,000 | 26 | $269,085 | 1.03 | $580,306 | $1,419,694 | |
| $2,789,745 | $7,966,899 | $2,633,101 |
As you can see from the numbers above, with 6% YoY return expected, by the end of 2022 I’m SO CLOSE to my FIRE goals. I’m close enough that if I needed to I could stop working and probably be fine.
If I adjust to 10% YoY returns (unlikely but an easy switch in my spreadsheet), things start looking pretty crazy good. Fun to dream, right? If 10% YoY is in the cards, by 2022 I’m set.
| 2022 | Goal | Yrs | 2022 Value | Growth Rate | Value | GAP | |
| Retirement | $5,000,000 | 26 | $989,310 | 1.10 | $11,790,771 | -$6,790,771 | |
| Pre-Retirement | $3,000,000 | 11 | $1,396,395 | 1.10 | $3,984,077 | -$984,077 | |
| College | $600,000 | 15 | $293,664 | 1.10 | $1,226,709 | -$626,709 | |
| Home | $2,000,000 | 26 | $286,934 | 1.03 | $618,800 | $1,381,200 | |
| $2,966,304 | $17,620,358 | -$7,020,358 |
Actually, things look really good already… with 10% YoY the total value of my current assets is $13.3M at time of use. Not bad.
| 2020 | Goal | Yrs | Current Value | Growth Rate | Value | GAP | |
| Retirement | $5,000,000 | 28 | $651,000 | 1.10 | $9,388,067 | -$4,388,067 | |
| Pre-Retirement | $3,000,000 | 13 | $833,074 | 1.10 | $2,875,997 | $124,003 | |
| College | $600,000 | 17 | $133,607 | 1.10 | $675,313 | -$75,313 | |
| Home | $2,000,000 | 28 | $195,483 | 1.03 | $447,251 | $1,552,749 | |
| $1,813,164 | $13,386,628 | -$2,786,628 |
Of course I’m not going to bank on seeing 10% YoY. I probably should stick to 4-5% to be conservative and leave room for unexpected growth, versus the other way around. Either way, I’m really getting excited about these next 14 months. The next 14 months to a whole different level of living. I’m not going to change my spending immediately, and I don’t plan to ever actually stop working, but I can stop forcing myself into roles that aren’t a fit and that make me miserable. I can maybe start my own company or work for a non-profit or just do work that matters.
Even with 4% YoY growth the numbers don’t look horrible in 2022 if I hold fort. Sure, I don’t have $5M in retirement or $3M in pre-retirement at 45, but I’m at $1.9M in pre-retirement and $2.5M in retirement and nearly $500k in college for my kids. So this is all great news, if I can just survive a year with two kids, including a newborn and given lack of sleep, and a company that seems to want to set me up to fail and to get rid of me.
| 2022 | Goal | Yrs | 2022 Value | Growth Rate | Value | GAP | |
| Retirement | $5,000,000 | 26 | $899,962 | 1.04 | $2,495,116 | $2,504,884 | |
| Pre-Retirement | $3,000,000 | 11 | $1,273,976 | 1.04 | $1,961,227 | $1,038,773 | |
| College | $600,000 | 15 | $269,309 | 1.04 | $485,011 | $114,989 | |
| Home | $2,000,000 | 26 | $260,394 | 1.03 | $561,564 | $1,438,436 | |
| $2,703,641 | $5,502,919 | $5,097,081 |
This year is everything.
