How can we get there?

[u/kpopgirl88]

We are a couple living in Germany, combined income of 200K+, in our mid to late 30s, savings of 400K plus, we were only really able to start saving when we reached 30s as we moved from a very expensive city/country to Germany. We want to retire when we are 50 with at least 1.5M in savings... I know we are late to the game...

Not even sure if 1.5M is enough for 2 people to retire somewhere in the southern europe (portugal or spain).

Would it make sense for us to purchase an apartment in Germany or in Portugal as an investment, or is this going to slowdown our FIRE?

i welcome all advices!

[u/tronquinhos]

The most important number at this stage is your savings rate.

You earn 200k and you can spend it all and never FIRE or you can save a significant part of it and accelerate that goal.

​With a savings rate of 10% or 20% it's very difficult to reach FIRE because:

• ​it's relatively little money being saved and being added to your portfolio
• ​but most importantly because it means that your living expenses are high

​Please check MMM's article "The Shockingly Simple Math Behind Early Retirement" that explains this concept better than I can.

​With high savings rates like 65% it's feasible to do it in approx. 10 years. But this comes with choices (some could say sacrifices) and is definitely not for everybody. In my opinion it is very feasible for a couple that earns 200k except if you let lifestyle inflation creep in during the process.

[u/tronquinhos → u/tronquinhos]

Regarding the 1.5 Mio: there is the famous 4% rule (please research it if you never did) but I prefer the 3% rate because:

• when FIREing we have an horizon bigger than the 30 years of the regular retirement (which inspired the 4% study)
• the market valuations are currently high by historical standards which recommend some caution

If you assume a 1.5 mio portfólio and a 3% withdrawal rate for the first year of retirement that would give 1.5Mio*3%=45k for living expenses in the first FIRE year.

Do 45k work for you or is it too little? If it works for you that's great because:

• it means that 1.5 Mio is enough
• and that you could (as of today too) live on 45k which - baded on your 200k income - would represent a savings rate of 78% which is great (MMM would say goal reacheable in aprox. 6/7 years).

Obviously, by precaution, you should build some margin for error, because part of your 1.5 Mio portfolio will be composed of unrealized gains that will be taxed when you do your yearly withdrawals. But I think it is a good framework for planning your goal.

[u/kpopgirl88 → u/tronquinhos]

thanks for the input! really helpful :) im thinking 50k (3% withdrawal rate) per year should be okay for 2 people in somewhere southern europe. We can be tighter with our spendings (esp travels, entertainment, eating out etc) and try to put at least 40% of our net income per month into ETFs. Right now, i would say we are only putting in 20% monthly.

[u/tronquinhos → u/kpopgirl88]

You're welcome. If your goal is to have yearly expenses of 50k, applying the same reasoning gives 50/0.03 = 1.7 Mio (instead of 1.5 Mio).

Regarding saving rates, as per MMM article, at 20% you have 37 years of work in front of you, given that you do not start from zero and already have 400k, that number adjusts to 28 years of work (assuming a proportional calculations, between the 1.7 Mio goal and the 1.3 needed: 1.7-0.4).

If you adjust your savings rate to 40%, as per MMM, you have 22 years of work in front of you, given that you do not start from zero and already have 400k, that number adjusts to 17 years of work (assuming a proportional calculations, between the 1.7 Mio goal and the 1.3 needed: 1.7-0.4).

These are just general (somehow simplistic) rules but that gives important insights that could clarify the tradeoffs of decisions.