#760: Q&A: $1 Million Invested, $100K a Year to Live On. Do We Ever Need to Save Again?

Beth asks: My husband and I are in our late 30s and early 40s. He’s in tech and I’m an accountant. We have two kids—one in preschool and one in elementary school—and our day-to-day support is limited. We’re both working full-time, but we’d love more time to rest, recharge, and spend quality time with our kids while they’re little.

My husband is burned out, and work stress has been affecting his sleep and health. He has a chronic health condition, so health insurance is a huge factor in our plan. My job isn’t super stressful, but I want to keep it low-stress. I don’t want a higher-level role than I have now, and I want more flexibility. In a perfect world, one of us would stay full-time, or close to it, in a low-stress role to carry benefits for the family, and the other would work part-time to manage the home and kids, freeing up more time for both of us.

The challenge is that good part-time options are hard to find in both of our fields. We’re open to retraining, but we don’t know what to retrain into. AI is also on our minds, especially in tech, because it’s changing the work and making us question career security. We also frequently fantasize about completely changing our jobs to do something totally different from our desk-bound office lifestyles.

Here is where we are financially: Our house and cars are paid off, and we don’t plan to take on any debt going forward if we can avoid it. Together, we earn roughly $290,000 a year. We have around $100,000 in a high-yield savings account for emergencies, about $330,000 in taxable brokerage accounts, and a bit over $700,000 in retirement accounts. We save about 40% of our income on average. For the kids, we have modest 529 plans and a separate brokerage account, totaling about $40,000 saved.

We conservatively assume we will need about $100,000 a year to live on once daycare ends, which is in four years when we target our downshift. Coast FIRE appeals to us because stopping work entirely feels scary at our ages, and we want to keep a foot in the working world. The idea is to earn enough to cover our living expenses without drawing down our investments.

Are we at Coast FI now? What about in four years when we plan to downshift? If we are, what should we be thinking about as we pivot, and what careers could realistically provide benefits while allowing part-time work?

Daniel asks: I am a recent retiree from the Phoenix area, and I am now planning college for my sophomore daughter. She is a 4.0 student looking to go to a high-echelon school, maybe an Ivy League institution. I’m trying to get information regarding the college financial aid system, specifically ways to lower my 1099 income for FAFSA, since that interest is what I live off of. I’m also looking to gather information on admissions advisors and SAT tutoring.

Anonymous (let’s call them “Ezra”) asks: I am a younger millennial in my early 30s, and I’ve recently started thinking about my finances a little more seriously in a way I didn’t in my 20s. In the back of my head, I’ve always assumed I would be a homeowner by my mid-to-late 30s, which is when my parents moved into the house where I grew up. But as is the case with so many in my generation, that has started to feel like an impossible dream. Making matters worse is the fact that I live in New York City, and I love it here—it’s the greatest city in the world, and I don’t want to leave.

Do you think homeownership is still a good or even viable financial goal for folks in my generation? Is being a lifelong renter just a financial death sentence that I should avoid, or are there other ways to think of building wealth that might look a little different from how my parents did it, but fundamentally get me to the same place of financial security?

• Coast FIRE means you can stop retirement saving: My definition of coast FIRE: you have enough in retirement accounts that you no longer need to contribute to them. With $1 million invested by their early 40s, Beth and her husband could see that money double roughly every nine years at 8% returns.
• Hitting coast FIRE frees up your savings rate: Once retirement is covered, the gap between income and expenses doesn’t have to go into retirement accounts anymore. That delta can fund short-term reserves, or simply let one of you cut back hours now, while the kids are young.
• The best part-time jobs hide in tiny businesses: Below roughly 25 employees, bureaucracy fades and you get a direct line to the decision-maker. Look for W-2 roles with reduced hours, contract work with a small business, or a handful of contract clients cobbled together.
• For Ivy League aid, the CSS Profile matters most: Lowering your 1099 income won’t move the needle much. The Ivies lean on the CSS Profile, which looks at assets as well as income. Many cover some or all of tuition for families earning under roughly $200,000 to $250,000, if your assets match that income.
• Put SAT and ACT prep ahead of admissions counselors: With rampant grade inflation, standardized test scores are a better signal of preparedness than GPA, which is why testing is back in vogue at top schools. Prep resources are cheap, and a strong score matters more than polished extracurriculars.
• Let the price-to-rent ratio decide rent or buy: Divide a home’s purchase price by its annual rent. Under 15 is a slam-dunk buy; over 25 is a slam-dunk rent; 15 to 25 is a gray zone. In Manhattan, it’s over 25, so I’d rent there and own somewhere it pencils out.

Reached coast FIRE? Map where your next dollar should go
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Joe’s conversation with Lynda Gratton
On taking breaks and changing careers over a longer life (Stacking Benjamins SB1898).
Listen to the episode

Read This Before Planning for College
Stacking Benjamins x The College Investor.
Read the guide

The College Investor
Robert Farrington’s site.
thecollegeinvestor.com

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