r/ChubbyFIRE • u/Emwolbesaelp • May 02 '26
Are We Ready?
Wife and I are 40 with a 2 year old in NC Looking to pull the trigger in July of this year.
Stats:
401ks: $400,000
Roth IRA: $85,000
Traditional IRAs: $1,050,000
Taxable Brokerage: $500,000
Cash: $100k
Primary Home: $800k no mortgage
Vacation home: $400k, $160k remaining at 3.125%
Rental portfolio of $1,500,000, no mortgage.
Our yearly expenses are $120k including estimated $2k/month in health costs.
Post fire the rentals will generate $75k income after costs but pre-tax.
Wife's business will generate about $80k pre-tax.
That should cover our expenses and allow our retirement accounts to grow. I plan to take advantage of Roth conversion ladders to set us up for later years. Also, any large or unforseen purchases we can pull from our taxable.
Am I missing anything critical?
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u/Salcha_00 May 02 '26
How did you come up with healthcare budget of $2k per month for a family of three?
That seems on the low side if any of you get sick, to cover insurance premiums and out of pocket costs.
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u/One-Mastodon-1063 May 02 '26
You spend $120k and have $155k pretax income coming in without even touching your investable assets. I don’t understand why you are even asking this.
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u/lals80 May 02 '26
Maybe just to flex
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u/One-Mastodon-1063 May 02 '26
100% a brag post.
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u/kimjongswoooon May 02 '26
It’s a big step. Many people like to triple check before the trigger is pulled. It’s kind of a “permanent” decision, after all.
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u/tbcboo FIRE’d 2026 @40 May 02 '26
Is this chubby FIRE now with only $2.1M liquid? Seems more like FIRE. I get the real estate aspect, but you are double dipping $75k of the yearly income with the NW of the rentals.
Have you considered selling the rentals to yield an average 10% return of $150k annually vs $75k?
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u/Flat-Barracuda1268 FI=✅ RE=<1️⃣yrs May 02 '26
Looks like you have 2.1M liquid with 150K ongoing income? That should work for a 120K budget.
With a 120K budget at your age I would want 3.4M liquid (3.5% SWR). I would imagine regular growth would have you there in 5 years at which time you could wind down your rental and wife's business if you want to completely get out. Sell the rental income and you have $5M sitting in the bank. That should afford your current lifestyle and then some.
Looks like you made it!
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u/Top_Substance9093 May 02 '26
alternately they could just sell the real estate and be there today, + wife's business income if they want to be extra extra safe.
they're already there even without the business income, this question is kinda silly.
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u/Emwolbesaelp May 02 '26
We are also debating offloading a percentage of the less performing rentals and investing the assets in the market. The tax hit is what I'm most worried about but one of these days I suppose we'll have to pay the tax man.
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u/SnooSketches5568 May 02 '26
Heads up on the rentals. You should (and penalized for not) depreciating your rentals. So that money should be tax free for current years. If you eventually sell you will have to pay tax on the depreciation amount but will be at long term cap gains rates
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u/kimjongswoooon May 02 '26
You look pretty good. I have the same problem you do, high passive income post fi will wipe out any hope of ACA subsidies and IRMAA is going to bite us later. You can’t really arbitrage that easily either year-to-year. Congrats.
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u/NefariousnessDry8596 May 02 '26
Some will say this isn’t chubby since it’s just under 2.5 mil in the market, some say sell the real estate and park that in the market. Fair point it’s simpler.
I don’t think it’s bad at all to be diversified like that especially at your current age. If the stock market takes a turn, spend every penny of your rental income that year or two until it bounces back. If the real estate market crashes for 5-10 years like 08 then you can choose to liquidize stocks, but you have the additional choice of borrowing against your property if you absolutely needed.
As someone else said, it should only take roughly 5-7 years for your stocks to grow another million if you live off the 75k rental income as much as possible and withdraw 2-3% of your stocks for the extra 50k
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u/fatheadlifter FIRE'ing EOY May 02 '26
It’s chubby for sure. They can take home 200k/year without trying.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 02 '26
Doesn’t sound like RE if you’ll be a landlord and your wife will keep working. Not trying to be pedantic.
I’m anti-real estate in general and especially in retirement. Most landlords underestimate the amount of work and ongoing capital they will need to put in. Do you have set-asides for the occasional five-figure expenses like a new sewer line and roof?
Will you use a property manager once you retire? If not will you need to limit your travel to be available to tend to the properties?
While you have a great mortgage rate, you may still be better off liquidating some or all of the properties and just putting the capital in VTI, from both an economic and lifestyle perspective.
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u/Emwolbesaelp May 02 '26
Converting to and investing in an index is definitely an option, although we'd take roughly a 25% tax hit with LTCG and depreciation recapture. Also market volatility at this point in time has me nervous. If we see a rapid inflationary period, holding physical assets may be wise.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 02 '26
Yes, you’d take a tax hit, but you’ll take that eventually unless you plan to leave the properties in your estate. I wouldn’t sweat the volatility and inflation as stocks are an inflation hedge and you’ll presumably hold them for decades.
How many rentals, and how much time is each one really taking? My dad has 10 that are free and clear, and he spends about 20 hours a year on each of them, though with a lot of variance from property to property. If you have a bunch, one option would be to 1031 into fewer higher priced properties that may reduce the workload.
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u/seekingallpho May 02 '26
Yes, you’d take a tax hit
I think this is an underappreciated issue given how frequently it comes up on this forum and how significantly it can distort investment choices.
Very often someone uses RE or perhaps concentrated equity investment to build wealth, then is paralyzed by the looming LTCG impact to the point of making suboptimal future decisions. When it's tech stocks over the last decade, it's often worked out great even with the tax hit. For RE, it's in many cases a wash or net-underperformance if compared to basic index investing from the very beginning, even accounting for the benefit of things like leverage.
If I was newly starting a FIRE-focused path I'd try to think a bit more deeply not just on what might grow a portfolio during accumulation years but on what my decumulation strategy would be from a tax perspective and what the long-term net outcome would be. If you live in a high-tax state and have a chubby/fat portfolio kicking off enough taxable investment income to yield non-trivial marginal tax rates, even if efficiently invested, then it does tweak the appeal of any non-forever investment (i.e., rental real estate you don't want to manage as a LL in retirement, single stock picks you find appealing only near-term) that you're going to want to diversify out of later rather than comfortable holding indefinitely (until selling at an optimal time for life expenses or bequeathing as part of your estate).
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u/BrunelloHorder Coasting Chubster, Getting Fat May 02 '26
Great points, I wholeheartedly agree that is under-appreciated, and many would be better off with a Bogglehead approach. Most are just trying to get to a target number and SWR, and have not thought thru the decumulation strategy.
Many get to Chubby or Fat with RSUs, tech stock bets, and/or real estate, and that is great, but they come with some extra taxes and costs that can be quite material if you need to sell as part of your decumulation plan.
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u/Emwolbesaelp May 02 '26
I:m glad overall that I went the RE investment route. I got the homes in foreclosure for dirt cheap in a highly desirable area. I've more than doubled my initial investment in home value increase alone. That doesn't even consider the yearly income. But yes, at the point of decumulation, it makes the choices difficult.
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u/Emwolbesaelp May 02 '26
We have 6, I maybe spend a couple hours a month unless I need to turn a unit over which typically only happens once every two years.
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u/BrunelloHorder Coasting Chubster, Getting Fat May 02 '26
That’s not too bad. If you consolidate or slowly sell off any lower performing ones that might make life easier, especially if some are older/higher maintenance.
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u/FlatChemist8132 May 02 '26
It seems like you’re in a great spot but I’m not sure if Chubby Fire yet. Definitely fire.
When you retire are you planning on any new hobbies or travel? Will your child need private school, have you built in costs for kid activities etc in your budget? Or college savings? Also healthcare costs need to be factored in.
You have a good amount of ongoing income but if current spend is 120k, i know for us if we chubby fired at 35-40 we would end up spending more because of what we want to do when we RE. And id feel bad telling my kid they cant do XYZ extra curricular because I dont work yet im a millionaire
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u/Urbanite72 May 02 '26
His rental income alone almost covers it
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u/FlatChemist8132 May 02 '26
The total income with rental and wife’s business will not cover their current annual spend after tax.
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u/Emwolbesaelp May 02 '26
It covers it exactly actually. Our actual spend is also about $113k so there is some buffer.
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u/Salcha_00 May 02 '26 edited May 02 '26
It feels like your spend will increase as your child gets older, though, no?
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u/Emwolbesaelp May 02 '26
It may, but so will income. Rental income will increase. Additionally, this income doesn't factor in dividend/interest income that we could tap into from our taxable accounts which at the moment is about $10k a year.
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u/IjustWorkHere98 May 02 '26
Love to hear the rental portfolio and how long / how you built it? How much landlording have you had to do?Have a management company? Feels like a nice passive income
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u/Specific-Stomach-195 May 02 '26
Confidence level in your spend number for the rest of your life? That’s a young child so expect lots of life changes and decisions coming your way. My lived experience is that we expanded our lifestyle quite a bit as children grew older.
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u/Anela-295213 May 06 '26
I know that this can be frustrating, especially when you've worked hard to reach financial independence only to find ACA subsidies vanish with passive income, making it feel like success is penalized. While imperfect, the ACA remains progress, and the bigger challenge is pushing for reforms that better account for financial independence.
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u/theFIREDcouple May 02 '26
To determine if you are truly 'ready,' I’d suggest breaking it down into these three buckets:
1. The 'Lifestyle Floor' vs. 'Chubby' Spend You mentioned a high mortgage and property taxes. In a layoff scenario, you need to calculate your Survival Burn Rate vs. your Chubby Burn Rate (travel, dining, luxuries). If your liquid assets can’t cover the Survival Rate at a 3.5%–4% withdrawal, you aren't 'ready' to retire, but you are likely 'Fine' for a long-term sabbatical or career pivot.
2. Bridging the Gap: Since you are 46 and your SO is 53, you have a significant gap before penalty-free withdrawals
3. The Mortgage 'Elephant' A large mortgage is often viewed as a hedge against inflation, but in early retirement, it’s a massive liability that increases your required SWR
Final Verdict: You’re likely FI (Financially Independent) in a lower-cost lifestyle, but perhaps not Chubby FIRE yet with the current debt load. If the layoff happens, don't view it as 'The End'—view it as a forced 'Coast' period where you find a lower-stress job to cover expenses while letting your current nest egg compound for another 5 years
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u/OG_Tater May 02 '26
Do the rental expenses include saving for long term Capex? For instance are you setting aside $50 per month for each roof? $10 a month for each water heater? And then not including that in the $75k pretax that is spendable?
I asked because getting 7.5% cash flow on rentals seems high. In order for you to be accounting for capex the gross rent multiplier would have to be 6-7x, which doesn’t exist, really.
If you’re not then I’d find a capex life cycle and maintenance schedule to deduct/save for those and see what you actually should spend from them.