Can You FIRE by 55 While Funding Kids Education?

This is an interesting use case where a FIRE enthusiast was wondering if he could still FIRE by 55 while hoping to fund his kids’ education expenses of about $500,000. Here is the reddit post

46M in HCOL with two kids and spouse. NW ~1.8M. Household income is 450K, and expenses are 150K, including mortgage payments. 1M invested equally in a few growth stocks and growth ETFs (VGT, VOO). 750K in retirement accounts (30% Roth). 80K in cash reserves. (800K in home equity with 15 more years of payment left). Plan to fund kids’ undergrad, so expecting 500K expenses in 6~10 years.

Please refer to the Reddit post for clarification on the situation to better model it in the Baniya App. So, the data modeling is relatively simple and can be done with the above data, and would look like below:

Screenshot of a financial portfolio showing income of $316,173.79, expenses of $150,416.67, assets totaling $2,105,731.00, and liabilities of $300,000.00.

Overview of assets including real estate, funds, stocks, retirement accounts, and cash reserves detailing their financial values.

This data is sufficient to get future projections using just passive income or by considering asset liquidation. However, the tricky part comes up on how to understand if it is possible to FIRE even after spending a one-time half a million for funding kids’ education in a future year. Please note that a few assumptions have been made to explain this powerful feature. Two such assumptions are: only one kid is assumed for the entire $500,000, and it is averaged out to 8 years rather than 6-10 years (So the user will have this expense at the age of 54 years).

The “Plan FIRE” option from the home screen allows two options:

Be able to opt out of which assets should not be considered for liquidation. In this case, the user never wanted to liquidate their home.
Be able to add one-time future expenses. In this case, a $500,000 expense is considered at the age of 54.

Below is how “assets” selection appears in the “Plan FIRE” area. You will notice that real estate is excluded from this list to prevent consideration for liquidation.

A mobile app interface titled 'Plan FIRE' that allows users to adjust asset liquidation and future expenses for financial planning. The screen displays categories for assets including retirement accounts, cash, funds, and stocks, along with their respective values.

Below is what expenses look like after adding a one-time future expense of $500,000 at the age of 54.

Screenshot of the Plan FIRE feature showing asset liquidation and future expenses projection, including current and future costs for miscellaneous expenses and kids' college funding.

That’s all it requires to finish the data modeling and this one-time expense adjustment. Going to the home screen shows the magic numbers and indicates the possibility of FIRE by age 56. Of course, the user would like to understand how this worked out and its impact. So, tapping on the blue box at the closest number, which is 57 in this case, shows additional details:

A financial planning app screenshot showing a user's F.I.R.E. (Financial Independence, Retire Early) analysis, with graphs depicting expenses, passive income, and projections for funding education and reaching financial independence by age 56.

A financial app screenshot displaying projected income and tax details for a 57-year-old, including total income, liquidated assets, and monthly passive income from various sources.

Looking into the details screenshot, you will notice that the “Cash” value shows $0, and you will also see the “stocks” asset. The little blue icon next to these shows a complete explanation of how these numbers are calculated, accommodating adjustments made by the user.

A mobile app screen displaying an explanation of liquidating assets for covering future educational expenses, highlighting an $80,000 cash liquidation for a child's college fund.

Explanation modal detailing asset growth and expense coverage for kids' education in financial planning app.

Tapping the cash asset, as shown in the first screen, explains why it is zero, as it was used to pay part of the kids’ education at 54. Tapping the second screen shows that the remaining balance was paid by liquidating a portion of stocks. This did affect the growth of the stock portfolio, but it still managed to grow with the remaining stocks. If you are curious about why stocks were chosen for liquidation over funds, the reason is that stocks have a lower return rate based on the provided data compared to funds.

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