Roast my investing strategy. (Help me FIRE)

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Thu Nov 14, 2019 2:05 pm

Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:

1. $1,392,000 in personal brokerage account (taxes already paid on gains in this account)
2. $179,000 in 401k
3. Primary home valued at $2,070,000 (average across Trulia, Zillow, SmartZip, and Redfin) and a monthly rental estimate value of $7,300.
4. Wife with about $600k in liquid assets (about $200k retirement, $400k non-retirement).
5. Mortgage: $(805,916) at 3% interest.
6. Various small accounts and random positions (e.g., Robinhood play money so I don't mess with the big accounts): $64,000
7. Roth IRA - $70k
Net worth: ~$3,500,000 (roughly, depending on the true value of our primary residence).

My age: 37. Wife: 42. Child: 1

Current strategy: long term investing horizon due to our age, and our expensive house acts as a hedge, so 100% in VOO (S&P 500 ETF) rather than a 3-fund portfolio that includes bonds. Wife still works, but I quit my job a few months ago. We plan on moving somewhere less expensive (our house is a 3-bedroom single family Edwardian home in San Francisco in a desirable neighborhood).

So... can we do this? Can we retire early? Our long term plan is: move somewhere cheaper and spend $400k to build a house on cheap land, rent out our current house as a "pension", and draw down on our liquid investments at about 2.5%/year while leaving them in VOO.

Am I missing anything? Is VOO + city real estate a decent combo? Should we sell the house and create a 3-fund portfolio instead of collecting rent money? How much can we safely live on?

Thanks!

EDIT: forgot to include wife's assets in net worth, fixed
Last edited by heart_in_san_francisco on Sat Nov 16, 2019 4:33 am, edited 2 times in total.

bloom2708
Posts: 6957
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Roast my investing strategy. (Help me FIRE)

Post by bloom2708 » Thu Nov 14, 2019 2:13 pm

3% of ~$2.5 million is $75k. (not counting the future $400k house).

Can you buy health insurance, pay taxes, do lumpy spending and regular spending on ~$75k? If so, you are set. I would sell and not rent the big house. That would give you much more $ to invest and save.

Here is a blog you might find interesting:

www.rootofgood.com

Both retired in 30s. Have about a $40k budget and undershoot that. Doing it on just over $2.0 million of investments.

Certainly doable. Is it the lifestyle you want to live? 50+ years is a long time to be retired. You could always work here and there, start a blog or video channel on youtube.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Jack FFR1846
Posts: 10460
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Roast my investing strategy. (Help me FIRE)

Post by Jack FFR1846 » Thu Nov 14, 2019 2:19 pm

Assuming you get what you think your house is worth....sure. Your spending will determine if it's actually enough. Moving to a low cost area will give you the ability to spend less and have a fine lifestyle. If that means a new Range Rover every year and sending your child to a $58k private school, maybe not. It's all numbers. Do the math.
Bogle: Smart Beta is stupid

delamer
Posts: 9308
Joined: Tue Feb 08, 2011 6:13 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by delamer » Thu Nov 14, 2019 2:24 pm

No one else can tell you how much you can safely live on. One family’s comfortable budget of $100/week for food might be very skimpy to a family used to spending $200. And if you now drive a Mercedes, you might not be willing to tool around in a Kia Forte.

You need to develop a budget and then determine if your assets will be sufficient to pay your expenses. (Don’t forget to include health insurance premiums and income taxes.) At your ages, you can take 3% of your initial portfolio value (at retirement), adjust it for inflation each year, and not have to worry about running put of money. Do some research on “safe withdrawal rates.”

Most Bogleheads would not want 45% of their net worth in retirement tied up in one asset like a house. Especially one that still carries a large mortgage and is subject to rental vacancies, repairs, tax increases, etc.

Good luck.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Thu Nov 14, 2019 2:25 pm

bloom2708 wrote:
Thu Nov 14, 2019 2:13 pm
You could always work here and there, start a blog or video channel on youtube.
Yes, that's part of the plan, I've been thinking about starting a YouTube channel for a while. I'm not counting on making lots of money that way, but it'll be more than $0. We're also considering remote work (in our field it pays less, but it still pays well), or doing something like becoming a teacher or working for a nonprofit.

GmanJeff
Posts: 523
Joined: Sun Jun 11, 2017 7:12 am

Re: Roast my investing strategy. (Help me FIRE)

Post by GmanJeff » Thu Nov 14, 2019 2:54 pm

It all depends on your spending and expenses, both planned and unplanned. That is, with a long time horizon, do you have sufficient resources to address changes in expenses which may not be immediately predictable. Two obvious variables which could come into play in the future include changes in taxes and in health care costs. Another risk area is around your child, who is presumably currently young, and whose needs and costs in the future may not be easily predictable.

If you're still planning to work, as you indicate, then you're not retiring at all, you're just changing jobs, and the calculus is different because you'll have income, even if you are presently unsure what that income will look like.

You seem to be counting on rental income from your current house, but that presents a very concentrated risk. The market may change in the future for any number of political, environmental, and/or economic factors, and the equity in your home represents a major asset for you.

Setting aside for the moment the impact of income from potential new jobs, you're aiming to live in perpetuity on what some people would consider a fairly low income, with an associated limited ability to obtain credit if ever needed. Your lifestyle and flexibility to adjust your lifestyle will be constrained accordingly. Whether that's good or bad is obviously entirely personal.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Fri Nov 15, 2019 10:48 am

Note on selling the house versus renting it: we live in California, where our property tax increase is capped, and the house property tax is already about 60% of what a new house property tax would be. The lower property tax is a "hidden asset", right? That makes me disinclined to sell it, even if it keeps our holdings more concentrated and risky. I think that's (kind of) similar to people who have a lot of capital gains locked up in a fund with a high ER, but it still doesn't make sense for them to sell and buy another fund with a lower ER that tracks the same index.

Whether or not we retire early, does that change the calculus for the house?

bloom2708
Posts: 6957
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Roast my investing strategy. (Help me FIRE)

Post by bloom2708 » Fri Nov 15, 2019 11:54 am

heart_in_san_francisco wrote:
Fri Nov 15, 2019 10:48 am
Note on selling the house versus renting it: we live in California, where our property tax increase is capped, and the house property tax is already about 60% of what a new house property tax would be. The lower property tax is a "hidden asset", right? That makes me disinclined to sell it, even if it keeps our holdings more concentrated and risky. I think that's (kind of) similar to people who have a lot of capital gains locked up in a fund with a high ER, but it still doesn't make sense for them to sell and buy another fund with a lower ER that tracks the same index.

Whether or not we retire early, does that change the calculus for the house?
Capped property taxes wouldn't be a factor for me personally. I am not familiar with renting a house for over $7k. I don't know if special rules apply for those that can/might afford that type of rental payment per month. Being a landlord (small business owner) is discussed often. It requires some special attention and skill and diligence. Screening tenants, background checks, holding deposits, dealing with property damage, vacancies, non-payment, repairs when one tenant leaves and another is coming. Maybe people in that price range take better care of things. Maybe they don't. Think of a 3 month vacancy and carrying the mortgage on your FIRE budget. You would lose your cap gains exemption after a few years. You deal with depreciation and clawback and much more complicated taxes. All done by many but hoops to navigate and jump through. Some potential big affects on finances.

I have a friend that has 21 rental units. We lunch often and his stories are terrifying to me. Now, his rentals are $700 per month and not $7,000. He recently had a tenant that paid the deposit and first months rent with a check. She moved in that day. The next day the check bounced. She never paid him a cent. He evicted her but she lived there for 4 months and then left all her stuff. He had to store her stuff for 60 days at his cost. She also wrecked the carpets and put holes in the walls.

One tenant started the siding on fire dropping his cig ashes out the window. Burned and melted a bunch of siding. Those are just the tip of the iceberg.

Would I let the property tax tail wag the dog? No. But, some would. With the numbers, being a remote landlord (potentially) I wouldn't touch that type of rental with a 10 foot pole. Simplicity and tranquility and peace of mind are not found that way. But, I'm often wrong.
Last edited by bloom2708 on Fri Nov 15, 2019 11:58 am, edited 1 time in total.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

MotoTrojan
Posts: 6849
Joined: Wed Feb 01, 2017 8:39 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by MotoTrojan » Fri Nov 15, 2019 11:57 am

Personally I’d want to be rid of the stress of being a landlord.

Why no international exposure? A little bit of long term treasuries could help too.

Dottie57
Posts: 7136
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Roast my investing strategy. (Help me FIRE)

Post by Dottie57 » Fri Nov 15, 2019 12:05 pm

MotoTrojan wrote:
Fri Nov 15, 2019 11:57 am
Personally I’d want to be rid of the stress of being a landlord.

Why no international exposure? A little bit of long term treasuries could help too.
Agree with not being a landlord. A mortgage of over 800k. You need to be able to pay the mortgage each and every month. I would sell the house and invest the proceeds.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Fri Nov 15, 2019 12:45 pm

MotoTrojan wrote:
Fri Nov 15, 2019 11:57 am
Personally I’d want to be rid of the stress of being a landlord.

Why no international exposure? A little bit of long term treasuries could help too.
Doesn’t VOO give you a lot of international exposure without a separate international fund to tilt?

delamer
Posts: 9308
Joined: Tue Feb 08, 2011 6:13 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by delamer » Fri Nov 15, 2019 1:09 pm

heart_in_san_francisco wrote:
Fri Nov 15, 2019 10:48 am
Note on selling the house versus renting it: we live in California, where our property tax increase is capped, and the house property tax is already about 60% of what a new house property tax would be. The lower property tax is a "hidden asset", right? That makes me disinclined to sell it, even if it keeps our holdings more concentrated and risky. I think that's (kind of) similar to people who have a lot of capital gains locked up in a fund with a high ER, but it still doesn't make sense for them to sell and buy another fund with a lower ER that tracks the same index.

Whether or not we retire early, does that change the calculus for the house?
It means that the carrying costs of the house are lower for you than for a new buyer.

But that’s a long way from a “hidden asset.” Assets are things you can sell that have value.

runner540
Posts: 1078
Joined: Sun Feb 26, 2017 5:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by runner540 » Fri Nov 15, 2019 1:26 pm

You asked for a roast: horrible idea to concentrate 2/3 of your net worth in a single asset and expect it to last for the next 50 years.
What if your plan was $2MM in a single stock, that would pay dividends? That's essentially what you're doing, plus being a landlord for high end renters long distance is more work than collecting dividend checks.

retired@50
Posts: 638
Joined: Tue Oct 01, 2019 2:36 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by retired@50 » Fri Nov 15, 2019 1:27 pm

heart_in_san_francisco wrote:
Fri Nov 15, 2019 10:48 am
Note on selling the house versus renting it: we live in California, where our property tax increase is capped, and the house property tax is already about 60% of what a new house property tax would be. The lower property tax is a "hidden asset", right? That makes me disinclined to sell it, even if it keeps our holdings more concentrated and risky. I think that's (kind of) similar to people who have a lot of capital gains locked up in a fund with a high ER, but it still doesn't make sense for them to sell and buy another fund with a lower ER that tracks the same index.

Whether or not we retire early, does that change the calculus for the house?
Holding on to the house would be much more tempting if it were paid off, but since it's not you've got to be prepared to make a mortgage payment without the rent coming in. However, given that it's in San Francisco, the odds are in your favor of finding another tenant quickly. When I lived in the city, anything for rent would disappear in 3 days, not 3 months. If this ceases to be the case, then that would be a risk.

Your "hidden asset" of low(er) property taxes is a slight competitive advantage you have over other landlords, but isn't marketable in any other sense. While it will help your profit margin, it doesn't add to the value of the home when selling, since the new buyer won't inherit your low property tax payment.

If you don't want the hassle of finding, screening, and dealing with tenants, you could hire a property manager. Fees usually run 5-6% of monthly rent but can eliminate a lot of headaches. Interview carefully if you decide to use a property manager. There are plenty of lousy ones out there...

The final thought, in addition to rent you'll receive from the property, the value of the home is still going up over time. In fact, that house price appreciation, may (depending on the market) overwhelm the $84,000 in annual rent. It's not too hard to imagine the house appreciation of $100,000 in a years time.

Regards,

Starfish
Posts: 1460
Joined: Wed Aug 15, 2018 6:33 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by Starfish » Fri Nov 15, 2019 1:40 pm

runner540 wrote:
Fri Nov 15, 2019 1:26 pm
You asked for a roast: horrible idea to concentrate 2/3 of your net worth in a single asset and expect it to last for the next 50 years.
What if your plan was $2MM in a single stock, that would pay dividends? That's essentially what you're doing, plus being a landlord for high end renters long distance is more work than collecting dividend checks.
Except a lot of companies went bankrupt in the last 50 years but real estate in major cities around the world increased by a lot.
Now the question is if SF is a monoindustrial city like Detroit or more of a universally desirable city... I think is the later.
There are also environmental factors not to be discounted (earthquakes).
But still is nothing like a company in it's risk profile.

Olemiss540
Posts: 1134
Joined: Fri Aug 18, 2017 8:46 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by Olemiss540 » Fri Nov 15, 2019 1:43 pm

I would not hesitate to FIRE if that was your dream under the one assumption that you sell the house.

At 3% WD rate, that nears around 75k after owning a house free and clear which is WELL above the national household average. You will be easily able to get free (or greatly reduced) healthcare on the ACA (while it is around) as you should be able to have an extremely low AGI.

Go for it! Let us know how it goes and great work becoming multimillionaires at such a young age.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Cycle
Posts: 1501
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: Roast my investing strategy. (Help me FIRE)

Post by Cycle » Fri Nov 15, 2019 1:54 pm

MotoTrojan wrote:
Fri Nov 15, 2019 11:57 am
Personally I’d want to be rid of the stress of being a landlord.

Why no international exposure? A little bit of long term treasuries could help too.
Ditto. Heading to my rental tomorrow morning to dust some radiators a new Tennant complained about who has a dust allergy. If u want real estate income, reit

Tennants are completely unappreciative of the work a landlord does
Never look back unless you are planning to go that way

MotoTrojan
Posts: 6849
Joined: Wed Feb 01, 2017 8:39 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by MotoTrojan » Fri Nov 15, 2019 2:31 pm

heart_in_san_francisco wrote:
Fri Nov 15, 2019 12:45 pm
MotoTrojan wrote:
Fri Nov 15, 2019 11:57 am
Personally I’d want to be rid of the stress of being a landlord.

Why no international exposure? A little bit of long term treasuries could help too.
Doesn’t VOO give you a lot of international exposure without a separate international fund to tilt?
International revenue exposure, maybe, but that is not the same thing. International companies have many other industries than the US. I personally tilt small-value domestically and am beginning to Internationally as well, for even more diversification.

Just look at the returns of VOO compared to VXUS (or use the mutual funds to go further back in time). The US has dominated, but how do you know it'll continue?

aristotelian
Posts: 6464
Joined: Wed Jan 11, 2017 8:05 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by aristotelian » Fri Nov 15, 2019 3:52 pm

heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:25 pm
bloom2708 wrote:
Thu Nov 14, 2019 2:13 pm
You could always work here and there, start a blog or video channel on youtube.
Yes, that's part of the plan, I've been thinking about starting a YouTube channel for a while. I'm not counting on making lots of money that way, but it'll be more than $0. We're also considering remote work (in our field it pays less, but it still pays well), or doing something like becoming a teacher or working for a nonprofit.
If you don't actually have a concrete plan for extra income, I would assume zero. "Working for a nonprofit" or "becoming a teacher" isn't as easy as it sounds. Those are real jobs that require experience and credentials. That said, $2M should be plenty for any normal person. Why don't you have a Roth IRA? I agree with others above that I would prefer to sell the house rather than worry about maintaining it and being a landlord.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sat Nov 16, 2019 4:30 am

So I really screwed up the arithmetic. My household net worth is a bit more than $3.5M. I forgot to add my wife's assets when summing up the total, and forgot about a Roth IRA worth $70k and a couple other five-figure assets. I'll edit the original post. I don't think it materially changes any of the advice in this thread, though, so thank you to everyone who offered advice.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sat Nov 16, 2019 4:43 am

aristotelian wrote:
Fri Nov 15, 2019 3:52 pm
If you don't actually have a concrete plan for extra income, I would assume zero. "Working for a nonprofit" or "becoming a teacher" isn't as easy as it sounds. Those are real jobs that require experience and credentials. That said, $2M should be plenty for any normal person. Why don't you have a Roth IRA? I agree with others above that I would prefer to sell the house rather than worry about maintaining it and being a landlord.
I do have a (small) Roth IRA, fixed my original post. My income outstripped the income limit fairly early in my career. You're right, zero is the correct number to make when running the numbers for FIRE. I shouldn't assume I'll be a big YouTube star, or that California will want to hire me as a teacher, or that my apps/websites will get lots of traction. Whether or not that happens is orthogonal to FIRE principles.

GmanJeff
Posts: 523
Joined: Sun Jun 11, 2017 7:12 am

Re: Roast my investing strategy. (Help me FIRE)

Post by GmanJeff » Sat Nov 16, 2019 8:34 am

heart_in_san_francisco wrote:
Fri Nov 15, 2019 10:48 am
Note on selling the house versus renting it: we live in California, where our property tax increase is capped, and the house property tax is already about 60% of what a new house property tax would be. The lower property tax is a "hidden asset", right? That makes me disinclined to sell it, even if it keeps our holdings more concentrated and risky. I think that's (kind of) similar to people who have a lot of capital gains locked up in a fund with a high ER, but it still doesn't make sense for them to sell and buy another fund with a lower ER that tracks the same index.

Whether or not we retire early, does that change the calculus for the house?
Apart from the points made earlier in response to this tax impact question, consider that you are still speaking of a single property in a specific location. That location's popularity may change dramatically over the long time horizon your plan covers (your lifetime and that of your spouse, essentially). While SF properties may now have high values, and while it may seem like that situation will never change, that's an assumption, not a guarantee. A major natural disaster, tax policies which encourage major employers and residents who can pay high rents to leave the area, new pro-tenant/anti-landlord regulations/laws, even further reduced law enforcement and increased crime are all future possibilities. Any one of those could significantly reduce the value of the single asset you're planning around, whether for rental income, to borrow against in case of need, or to sell outright. It's not possible to predict just how likely any of these scenarios really are, but the further out you go on your time horizon, the less certainty you can reasonably have about what the future income stream from the property will look like.

Consequently, I'm with those who suggest selling your residence and using the proceeds to generate income. That exposes you to a different set of risks, but appropriate diversification across asset classes can help mitigate those to greater extent than you can mitigate the risk associated with a dependency on rental income from a single property.
Last edited by GmanJeff on Sat Nov 16, 2019 9:27 am, edited 1 time in total.

User avatar
CyclingDuo
Posts: 2708
Joined: Fri Jan 06, 2017 9:07 am

Re: Roast my investing strategy. (Help me FIRE)

Post by CyclingDuo » Sat Nov 16, 2019 8:38 am

heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:05 pm
Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:


My age: 37. Wife: 42. Child: 1
Skipping all the assets, what makes you - at age 37 - want to retire? What is your career and your wife's career that have led to wanting to pull the plug at such young ages with the potential of 50+ years in front of you?

Just because one becomes financially independent doesn't mean there is a requirement that one also has to do the -RE portion of the word FIRE. I'm sure you've done plenty of discussing this as a couple, but I would be curious to hear the reasoning.

CyclingDuo
"Everywhere is within walking distance if you have the time." ~ Steven Wright

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sun Nov 17, 2019 12:09 am

CyclingDuo wrote:
Sat Nov 16, 2019 8:38 am
heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:05 pm
Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:


My age: 37. Wife: 42. Child: 1
Skipping all the assets, what makes you - at age 37 - want to retire? What is your career and your wife's career that have led to wanting to pull the plug at such young ages with the potential of 50+ years in front of you?

Just because one becomes financially independent doesn't mean there is a requirement that one also has to do the -RE portion of the word FIRE. I'm sure you've done plenty of discussing this as a couple, but I would be curious to hear the reasoning.

CyclingDuo
"Retire" is a loaded word, and it surely means something quite different for someone still young and in good health, than it means for someone who just turned 65. I can't be sure, I'll get back to you when I'm 65.

Anyway, this is kind of personal, but I'll share briefly. I was losing my passion, and it's a big world out there, and my father died this year (at age 59, the year he retired), which reminded me life is short but also lifespan is unpredictable. I also had a beautiful daughter the same year, and this one-two combo-punch of birth/death made me decide to pull the trigger and quit... unfortunately I had been in "work mode" for so long, I didn't even know what my dreams were anymore. So I've been spending the past few months seeing where my interests take me. I've found a passion for machine learning (AI), a passion for poker, and a passion for anime/manga. I expect to unearth more new hobbies/interests and maybe find a new one that I decide to "go pro" at, and possibly re-enter the workforce at a later date, or start my own business.

User avatar
LilyFleur
Posts: 738
Joined: Fri Mar 02, 2018 10:36 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by LilyFleur » Sun Nov 17, 2019 2:06 am

heart_in_san_francisco wrote:
Sun Nov 17, 2019 12:09 am
CyclingDuo wrote:
Sat Nov 16, 2019 8:38 am
heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:05 pm
Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:


My age: 37. Wife: 42. Child: 1
Skipping all the assets, what makes you - at age 37 - want to retire? What is your career and your wife's career that have led to wanting to pull the plug at such young ages with the potential of 50+ years in front of you?

Just because one becomes financially independent doesn't mean there is a requirement that one also has to do the -RE portion of the word FIRE. I'm sure you've done plenty of discussing this as a couple, but I would be curious to hear the reasoning.

CyclingDuo
"Retire" is a loaded word, and it surely means something quite different for someone still young and in good health, than it means for someone who just turned 65. I can't be sure, I'll get back to you when I'm 65.

Anyway, this is kind of personal, but I'll share briefly. I was losing my passion, and it's a big world out there, and my father died this year (at age 59, the year he retired), which reminded me life is short but also lifespan is unpredictable. I also had a beautiful daughter the same year, and this one-two combo-punch of birth/death made me decide to pull the trigger and quit... unfortunately I had been in "work mode" for so long, I didn't even know what my dreams were anymore. So I've been spending the past few months seeing where my interests take me. I've found a passion for machine learning (AI), a passion for poker, and a passion for anime/manga. I expect to unearth more new hobbies/interests and maybe find a new one that I decide to "go pro" at, and possibly re-enter the workforce at a later date, or start my own business.
I am so sorry for the loss of your father.

It seems that you have a great deal of money in taxable accounts...are the earnings in those accounts tax-efficient? It seems to me, whether you rent out your house or invest the equity from selling your house, that your taxable earnings could push you off the ACA cliff, which might make it harder to live on your planned budget. I didn't do the math, I am just bringing this up as a consideration.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sun Nov 17, 2019 11:21 am

LilyFleur wrote:
Sun Nov 17, 2019 2:06 am
heart_in_san_francisco wrote:
Sun Nov 17, 2019 12:09 am
CyclingDuo wrote:
Sat Nov 16, 2019 8:38 am
heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:05 pm
Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:


My age: 37. Wife: 42. Child: 1
Skipping all the assets, what makes you - at age 37 - want to retire? What is your career and your wife's career that have led to wanting to pull the plug at such young ages with the potential of 50+ years in front of you?

Just because one becomes financially independent doesn't mean there is a requirement that one also has to do the -RE portion of the word FIRE. I'm sure you've done plenty of discussing this as a couple, but I would be curious to hear the reasoning.

CyclingDuo
"Retire" is a loaded word, and it surely means something quite different for someone still young and in good health, than it means for someone who just turned 65. I can't be sure, I'll get back to you when I'm 65.

Anyway, this is kind of personal, but I'll share briefly. I was losing my passion, and it's a big world out there, and my father died this year (at age 59, the year he retired), which reminded me life is short but also lifespan is unpredictable. I also had a beautiful daughter the same year, and this one-two combo-punch of birth/death made me decide to pull the trigger and quit... unfortunately I had been in "work mode" for so long, I didn't even know what my dreams were anymore. So I've been spending the past few months seeing where my interests take me. I've found a passion for machine learning (AI), a passion for poker, and a passion for anime/manga. I expect to unearth more new hobbies/interests and maybe find a new one that I decide to "go pro" at, and possibly re-enter the workforce at a later date, or start my own business.
I am so sorry for the loss of your father.

It seems that you have a great deal of money in taxable accounts...are the earnings in those accounts tax-efficient? It seems to me, whether you rent out your house or invest the equity from selling your house, that your taxable earnings could push you off the ACA cliff, which might make it harder to live on your planned budget. I didn't do the math, I am just bringing this up as a consideration.
I understand that VOO is fairly tax efficient with low turnover, is it not? Do you have another suggestion that’s similar but focused on tax efficiency? I don’t have much unrealized capital gains yet so switching is an option right now (only about $50k).

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sun Nov 17, 2019 11:29 am

Also, thank you for your condolences. The loss of my father hit me harder than I ever expected it to. He had brain cancer, was given 2-5 years, and survived for 1 year, although in some ways he died when he had his initial brain cancer surgery. Towards the end he died unexpectedly quick, I didn’t make time to visit with my daughter before he passed, which is my biggest regret. Don’t put off things like that, when death comes it is without any concern for the survivors’ wishes or expectations.

He was the only person in my life I could talk to about certain things and the loss of him is immense for me, especially as his oldest son, with early memories of him throwing me in the air as a baby and me giggling like a baby does. I wish I called him more... I call my widowed mother twice every day now.

runner540
Posts: 1078
Joined: Sun Feb 26, 2017 5:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by runner540 » Sun Nov 17, 2019 11:55 am

heart_in_san_francisco wrote:
Sun Nov 17, 2019 11:29 am
Also, thank you for your condolences. The loss of my father hit me harder than I ever expected it to. He had brain cancer, was given 2-5 years, and survived for 1 year, although in some ways he died when he had his initial brain cancer surgery. Towards the end he died unexpectedly quick, I didn’t make time to visit with my daughter before he passed, which is my biggest regret. Don’t put off things like that, when death comes it is without any concern for the survivors’ wishes or expectations.

He was the only person in my life I could talk to about certain things and the loss of him is immense for me, especially as his oldest son, with early memories of him throwing me in the air as a baby and me giggling like a baby does. I wish I called him more... I call my widowed mother twice every day now.
OP, my condolences. With this context, I'm going to amend my recommendation. You should take some time with your wife and child to grieve and adjust before making BIG decisions that are expensive to undo, such as purchasing a new home or selling the existing one. I would set a deadline for yoursel (next year?) to decide on selling the SF house. If you want to move to LCOL, do it, but rent first.

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sun Nov 17, 2019 3:00 pm

runner540 wrote:
Sun Nov 17, 2019 11:55 am
heart_in_san_francisco wrote:
Sun Nov 17, 2019 11:29 am
Also, thank you for your condolences. The loss of my father hit me harder than I ever expected it to. He had brain cancer, was given 2-5 years, and survived for 1 year, although in some ways he died when he had his initial brain cancer surgery. Towards the end he died unexpectedly quick, I didn’t make time to visit with my daughter before he passed, which is my biggest regret. Don’t put off things like that, when death comes it is without any concern for the survivors’ wishes or expectations.

He was the only person in my life I could talk to about certain things and the loss of him is immense for me, especially as his oldest son, with early memories of him throwing me in the air as a baby and me giggling like a baby does. I wish I called him more... I call my widowed mother twice every day now.
OP, my condolences. With this context, I'm going to amend my recommendation. You should take some time with your wife and child to grieve and adjust before making BIG decisions that are expensive to undo, such as purchasing a new home or selling the existing one. I would set a deadline for yoursel (next year?) to decide on selling the SF house. If you want to move to LCOL, do it, but rent first.
I agree I shouldn't make any big decisions now, and I won't (to the extent I can avoid them), but I think it's good to start thinking of these decisions as far in advance as possible.

Another question I have (for anyone reading)... what is a good resource to look up quality LCOL areas? How do you make a decision here? Move close to family, or some other metric?

delamer
Posts: 9308
Joined: Tue Feb 08, 2011 6:13 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by delamer » Sun Nov 17, 2019 5:29 pm

heart_in_san_francisco wrote:
Sun Nov 17, 2019 3:00 pm
runner540 wrote:
Sun Nov 17, 2019 11:55 am
heart_in_san_francisco wrote:
Sun Nov 17, 2019 11:29 am
Also, thank you for your condolences. The loss of my father hit me harder than I ever expected it to. He had brain cancer, was given 2-5 years, and survived for 1 year, although in some ways he died when he had his initial brain cancer surgery. Towards the end he died unexpectedly quick, I didn’t make time to visit with my daughter before he passed, which is my biggest regret. Don’t put off things like that, when death comes it is without any concern for the survivors’ wishes or expectations.

He was the only person in my life I could talk to about certain things and the loss of him is immense for me, especially as his oldest son, with early memories of him throwing me in the air as a baby and me giggling like a baby does. I wish I called him more... I call my widowed mother twice every day now.
OP, my condolences. With this context, I'm going to amend my recommendation. You should take some time with your wife and child to grieve and adjust before making BIG decisions that are expensive to undo, such as purchasing a new home or selling the existing one. I would set a deadline for yoursel (next year?) to decide on selling the SF house. If you want to move to LCOL, do it, but rent first.
I agree I shouldn't make any big decisions now, and I won't (to the extent I can avoid them), but I think it's good to start thinking of these decisions as far in advance as possible.

Another question I have (for anyone reading)... what is a good resource to look up quality LCOL areas? How do you make a decision here? Move close to family, or some other metric?
Your family needs to figure out what “quality” means to you.

Warm weather, good schools, cultural and/sports activities, political climate, etc.

A conservative who likes to ski and go to the theatre has different criteria than a liberal who likes to scuba dive and go to college basketball games.

User avatar
LilyFleur
Posts: 738
Joined: Fri Mar 02, 2018 10:36 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by LilyFleur » Sun Nov 17, 2019 9:01 pm

heart_in_san_francisco wrote:
Sun Nov 17, 2019 11:21 am
LilyFleur wrote:
Sun Nov 17, 2019 2:06 am
heart_in_san_francisco wrote:
Sun Nov 17, 2019 12:09 am
CyclingDuo wrote:
Sat Nov 16, 2019 8:38 am
heart_in_san_francisco wrote:
Thu Nov 14, 2019 2:05 pm
Hi! Long-time lurker.

I'm questioning if I'm financially ready to FIRE. Quick rundown on my finances:


My age: 37. Wife: 42. Child: 1
Skipping all the assets, what makes you - at age 37 - want to retire? What is your career and your wife's career that have led to wanting to pull the plug at such young ages with the potential of 50+ years in front of you?

Just because one becomes financially independent doesn't mean there is a requirement that one also has to do the -RE portion of the word FIRE. I'm sure you've done plenty of discussing this as a couple, but I would be curious to hear the reasoning.

CyclingDuo
"Retire" is a loaded word, and it surely means something quite different for someone still young and in good health, than it means for someone who just turned 65. I can't be sure, I'll get back to you when I'm 65.

Anyway, this is kind of personal, but I'll share briefly. I was losing my passion, and it's a big world out there, and my father died this year (at age 59, the year he retired), which reminded me life is short but also lifespan is unpredictable. I also had a beautiful daughter the same year, and this one-two combo-punch of birth/death made me decide to pull the trigger and quit... unfortunately I had been in "work mode" for so long, I didn't even know what my dreams were anymore. So I've been spending the past few months seeing where my interests take me. I've found a passion for machine learning (AI), a passion for poker, and a passion for anime/manga. I expect to unearth more new hobbies/interests and maybe find a new one that I decide to "go pro" at, and possibly re-enter the workforce at a later date, or start my own business.
I am so sorry for the loss of your father.

It seems that you have a great deal of money in taxable accounts...are the earnings in those accounts tax-efficient? It seems to me, whether you rent out your house or invest the equity from selling your house, that your taxable earnings could push you off the ACA cliff, which might make it harder to live on your planned budget. I didn't do the math, I am just bringing this up as a consideration.
I understand that VOO is fairly tax efficient with low turnover, is it not? Do you have another suggestion that’s similar but focused on tax efficiency? I don’t have much unrealized capital gains yet so switching is an option right now (only about $50k).

User avatar
Topic Author
heart_in_san_francisco
Posts: 86
Joined: Sun Oct 09, 2011 3:43 pm

Re: Roast my investing strategy. (Help me FIRE)

Post by heart_in_san_francisco » Sun Nov 17, 2019 11:01 pm

delamer wrote:
Sun Nov 17, 2019 5:29 pm
heart_in_san_francisco wrote:
Sun Nov 17, 2019 3:00 pm
runner540 wrote:
Sun Nov 17, 2019 11:55 am
heart_in_san_francisco wrote:
Sun Nov 17, 2019 11:29 am
Also, thank you for your condolences. The loss of my father hit me harder than I ever expected it to. He had brain cancer, was given 2-5 years, and survived for 1 year, although in some ways he died when he had his initial brain cancer surgery. Towards the end he died unexpectedly quick, I didn’t make time to visit with my daughter before he passed, which is my biggest regret. Don’t put off things like that, when death comes it is without any concern for the survivors’ wishes or expectations.

He was the only person in my life I could talk to about certain things and the loss of him is immense for me, especially as his oldest son, with early memories of him throwing me in the air as a baby and me giggling like a baby does. I wish I called him more... I call my widowed mother twice every day now.
OP, my condolences. With this context, I'm going to amend my recommendation. You should take some time with your wife and child to grieve and adjust before making BIG decisions that are expensive to undo, such as purchasing a new home or selling the existing one. I would set a deadline for yoursel (next year?) to decide on selling the SF house. If you want to move to LCOL, do it, but rent first.
I agree I shouldn't make any big decisions now, and I won't (to the extent I can avoid them), but I think it's good to start thinking of these decisions as far in advance as possible.

Another question I have (for anyone reading)... what is a good resource to look up quality LCOL areas? How do you make a decision here? Move close to family, or some other metric?
Your family needs to figure out what “quality” means to you.

Warm weather, good schools, cultural and/sports activities, political climate, etc.

A conservative who likes to ski and go to the theatre has different criteria than a liberal who likes to scuba dive and go to college basketball games.
Oh, I meant any good websites/apps for comparing areas, like https://www.areavibes.com/, etc. Not a specific place that someone thinks is "good", because as you said, it's different for everyone.

Post Reply