Have $2.5M at 30, career advice needed

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hammond
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Have $2.5M at 30, career advice needed

Post by hammond »

I'm in a unique position financially and there's not a lot of people I feel like I can talk to about the topic. Any advice is appreciated.

I'm 30, live in Bay Area (a very HCOL area), with a net worth of about 2.5M (500k IRA + 401k, 2M in house, $100k cash).
Mortgage on a 2.4M house out of which 2M is already paid off thanks to a largess from an inheritance from my grandfather.
No debt other than mortgage. Married with an infant at home.

I make 350k and my wife makes 200k (both before tax). The challenge for us that our property tax is close to 30k a year and we plan to send our kids to private schools (costing ~20k * 2 a year). We have not much saved for their college education. We plan to start 529 plans soon.

This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).

Sometimes we wonder whether we can achieve FIRE in this area at all due to the high cost of property tax. At times it does feel like we are working very hard just to lead what would seem like normal lives here. For example, we drive modest second hand cars and don't have expensive hobbies. I sometimes think of starting a business but the thought of one of us leaving the job force scares us a bit so I am strongly considering a part time option. And that is also probably not very easy as it means we have to work a few more years to save up enough capital.

I'm really just looking for general advice on how people would approach this problem.
Momus
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Re: Have $2.5M at 30, career advice needed

Post by Momus »

Umm... I don't understand the question. Please stay where you are.

$550k gross, after tax is 330k
-40k tuition
-30k property tax

$270k left.
Max out retirement savings -60k (401k, HSA, ROTH)

Leaving you with $210k remaining with little mortgage (400k left). Let's say you use 60k for living expenses. That's 5k/month spending. That's A LOT of spending.

You are still saving 150k/year net...

Do it for another 10 years, bam $2M after investment gain and new savings added to your networth. Now you are 40 yr with $4.5M networth minimum. DO NOT MOVE...
Last edited by Momus on Sat Jun 02, 2018 2:45 am, edited 3 times in total.
minimalistmarc
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Re: Have $2.5M at 30, career advice needed

Post by minimalistmarc »

Yeah, you’ll be fine
Cunobelinus
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Re: Have $2.5M at 30, career advice needed

Post by Cunobelinus »

hammond wrote: Sat Jun 02, 2018 1:58 am Sometimes we wonder whether we can achieve FIRE in this area at all due to the high cost of property tax.
I would consider reevaluating this statement. Property tax of $30k/year is not the thing that prevents you from retiring early.. while you're living in one of the most expensive areas in the US with plans for an additional $20k*2 (=$40k) / year expense for the next 18+ years. It all adds up.

My advice is to reconsider what your goals are for you and your family and then chart a reasonable course. You can do the math and see at what year you will meet your minimum net worth to retire, but my gut says that's not any time soon (>15 years) when you're choosing to live in the Bay Area with an expensive house and projecting $40k/year for the next 18+ years, outside of your regular living expenses. Perhaps crunching the numbers will give you a realistic expectation, assuming everything is ducky, as to when you can retire. Again, having not actually done the math, I don't think that "RE" part of the "FIRE" that you desire is reasonable with your current life choices.

In this case, my attempt at brutal honesty is more for the honesty part and less for the brutal part.

Were I in your situation, I would strongly consider a lifestyle adjustment to move to a L(ower)COL area, retire, and consider it a win in life. I am a little older, live in a HCOL area like you, with far less income and far less money to my name. I also don't think the Bay Area is the bee's knees -- there are far nicer/better places to live in the world that aren't nearly as expensive (or cold and dreary). Gross $550k/year ought to permit you to get rid of any debt and build a substantial portfolio quickly even if you decide to not sell the house for $2m+. My opinion, again, is that you should take an honest look at your goals and see what's achievable and what needs adjusting. Millionaires can easily feel like they haven't enough when they're living near multi-millionaires and billionaires (I speculate).
Glasgow
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Re: Have $2.5M at 30, career advice needed

Post by Glasgow »

Momus wrote: Sat Jun 02, 2018 2:38 am Umm... I don't understand the question. Please stay where you are.

$550k gross, after tax is 330k
-40k tuition
-30k property tax

$270k left.
Max out retirement savings -48k (401k, HSA, ROTH)

Leaving your with $210k with little mortgage, just pay utilities... You can still live like a king even in SF with that money. Do it for another 10 years, bam $2-3M after investment gain and new savings added to your networth. Now you are 40 yr with 5.5M. DO NOT MOVE...
Tax + Tuition = $70K
Mortgage = $35K (Assuming $400K mortgage with 3.875% 15-year for the sake of argument)
Vacation = $20K
Insurance (Cars, house, etc.) = $5K
Babysitter = $15K
=================
Total Fixed Expenses = $145K

$330K - $145K = $185K left for saving and other daily expenses

Based on this, you can dial up/down different expense knobs to meet your projected goal 10-15 years down the road, either financial independence or early retirement.
My suggestion is starting from your goal and working backward.
If I'd do it, I'd cut private school if your public school is good. A $2.5M million house in Bay Area with no good school is an absurd value.
selters
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Re: Have $2.5M at 30, career advice needed

Post by selters »

You make 550k and you are (nearly) debt free. I don't think property taxes of 30k is what keeps you from retiring early.

With your income, you have a lot of room for both spending and saving/investing compared to 99% of the population, even in the richest countries in the world. As long as you save and invest a reasonable amount, don't feel bad for spending the rest. You will accumulate wealth over time anyway.

In your neighborhood, I'm sure peer pressure to spend lavishly on education, leisure activities, travel, cars and other status symbols is very strong. You'll have to find ways to deal with that, because you cannot keep up with everyone in the area, even with your income and net worth.

You may want to read The Millionaire Next Door or listen to the audio book, which is also very good. The main theme of the book is to compare the characteristics of what they call Under Accumulators of Wealth (UAWs) and Prodigious Accumulator of Wealth (PAWs). You definitely do not want to become UAWs, and if you want FIRE, you may want to be more like PAWs. It's written in 1996, but still worth a read.

My comments are secondary advice based on books, blogs and discussions on personal finance. I'm not a millionaire myself, but I'm working on it. ☺
basspond
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Re: Have $2.5M at 30, career advice needed

Post by basspond »

Your assumption about FIRE is correct when almost 80% of your net worth is tied up in housing that has expensive service fees. If you like your “home”, keep saving as much as you can until your house is less then 20% of your NW, then you will feel more comfortable with FIRE. Focus more on retirement savings then school savings.
Compound
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Re: Have $2.5M at 30, career advice needed

Post by Compound »

Momus wrote: Sat Jun 02, 2018 2:38 am Umm... I don't understand the question. Please stay where you are.

$550k gross, after tax is 330k
-40k tuition
-30k property tax

$270k left.
Max out retirement savings -60k (401k, HSA, ROTH)

Leaving you with $210k remaining with little mortgage (400k left). Let's say you use 60k for living expenses. That's 5k/month spending. That's A LOT of spending.

You are still saving 150k/year net...

Do it for another 10 years, bam $2M after investment gain and new savings added to your networth. Now you are 40 yr with $4.5M networth minimum. DO NOT MOVE...
I don’t get it either. What’s the objective here? You are in an amazing financial position with high paying jobs, a paid off house, a high net worth, and are only 30. Why would you mess with that? Stay put. The only thing lacking from a financial perspective is a sizable liquid portfolio. Be patient. Enjoy being a productive member of the workforce and then in a decade or two reconsider the FIRE idea. You will almost certainly have a huge liquid portfolio by then as long as you keep lifestyle creep at least somewhat in check.
bubbadog
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Re: Have $2.5M at 30, career advice needed

Post by bubbadog »

Compound wrote: Sat Jun 02, 2018 6:25 am
Momus wrote: Sat Jun 02, 2018 2:38 am Umm... I don't understand the question. Please stay where you are.

$550k gross, after tax is 330k
-40k tuition
-30k property tax

$270k left.
Max out retirement savings -60k (401k, HSA, ROTH)

Leaving you with $210k remaining with little mortgage (400k left). Let's say you use 60k for living expenses. That's 5k/month spending. That's A LOT of spending.

You are still saving 150k/year net...

Do it for another 10 years, bam $2M after investment gain and new savings added to your networth. Now you are 40 yr with $4.5M networth minimum. DO NOT MOVE...
I don’t get it either. What’s the objective here? You are in an amazing financial position with high paying jobs, a paid off house, a high net worth, and are only 30. Why would you mess with that? Stay put. The only thing lacking from a financial perspective is a sizable liquid portfolio. Be patient. Enjoy being a productive member of the workforce and then in a decade or two reconsider the FIRE idea. You will almost certainly have a huge liquid portfolio by then as long as you keep lifestyle creep at least somewhat in check.
Maybe by living in a HCOL area, you have lost some perspective on your situation. You are in a great position financially with your income/NW. Stay put!
AS7911
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Re: Have $2.5M at 30, career advice needed

Post by AS7911 »

LCOL = Seattle ? Hahaha! Do agree taxes may be less though...
AS7911
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Re: Have $2.5M at 30, career advice needed

Post by AS7911 »

LCOL = Seattle ? Hahaha! Do agree taxes may be less though...
Frisco Kid
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Re: Have $2.5M at 30, career advice needed

Post by Frisco Kid »

OP, imagine your finances WITHOUT your inheritance which saved you hundreds of thousands of dollars in interest beyond the inheritance amount. You are 30 and doing quite well. Stay the course and take some time to smell the roses,step back for a moment to realize that your adult life is just starting.
Pinotage
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Re: Have $2.5M at 30, career advice needed

Post by Pinotage »

bubbadog wrote: Sat Jun 02, 2018 6:41 am Maybe by living in a HCOL area, you have lost some perspective on your situation. You are in a great position financially with your income/NW. Stay put!
Agree with the posters above, there is no problem here.

OP - you have a great situation going. You say you like your jobs and like where you are. Just enjoy your life and maybe work on FI for now. You can still RE, or even just R, later.

Why even think about FIRE at 30? Just because it's a thing?
Glockenspiel
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Re: Have $2.5M at 30, career advice needed

Post by Glockenspiel »

arf1410 wrote: Sat Jun 02, 2018 6:46 am LCOL = Seattle ? Hahaha! Do agree taxes may be less though...
I laughed out loud reading that. You could retire today if you moved to the Midwest.
wander
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Re: Have $2.5M at 30, career advice needed

Post by wander »

We do enjoy our jobs and very much enjoy working where we work now (both in high tech).
From your post, you don't need my advice because you actually do better than me and sure do a lot better than many folks including Bogleheads. You guys love your jobs and can afford your life with that nice income.
Last edited by wander on Sat Jun 02, 2018 8:19 am, edited 1 time in total.
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knpstr
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Re: Have $2.5M at 30, career advice needed

Post by knpstr »

hammond wrote: Sat Jun 02, 2018 1:58 am I'm really just looking for general advice on how people would approach this problem.
What is the problem? You enjoy your jobs why quit?
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius
hightower
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Re: Have $2.5M at 30, career advice needed

Post by hightower »

hammond wrote: Sat Jun 02, 2018 1:58 am I'm in a unique position financially and there's not a lot of people I feel like I can talk to about the topic. Any advice is appreciated.

I'm 30, live in Bay Area (a very HCOL area), with a net worth of about 2.5M (500k IRA + 401k, 2M in house, $100k cash).
Mortgage on a 2.4M house out of which 2M is already paid off thanks to a largess from an inheritance from my grandfather.
No debt other than mortgage. Married with an infant at home.

I make 350k and my wife makes 200k (both before tax). The challenge for us that our property tax is close to 30k a year and we plan to send our kids to private schools (costing ~20k * 2 a year). We have not much saved for their college education. We plan to start 529 plans soon.

This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).

Sometimes we wonder whether we can achieve FIRE in this area at all due to the high cost of property tax. At times it does feel like we are working very hard just to lead what would seem like normal lives here. For example, we drive modest second hand cars and don't have expensive hobbies. I sometimes think of starting a business but the thought of one of us leaving the job force scares us a bit so I am strongly considering a part time option. And that is also probably not very easy as it means we have to work a few more years to save up enough capital.

I'm really just looking for general advice on how people would approach this problem.
Remember, that even though technically your net worth is 2.5 mil, it is very much dependent on the housing market in your area. Though I doubt SF/Bay area real estate is going to decline drastically anytime soon, keep in mind that it is actually a possibility (no one knows). So, until you sell your house, you don't actually have that 2 million in equity. You are a long ways off from being considered financially independent, especially in your area, unless you sell your house for the $2.5 mil that you say it's worth (congrats by the way). Even then, 2 million in investments is not going to get you very far in California mostly due to the cost of housing and taxes. So, you're not imagining the feeling that "it feels like we are working very hard just to lead what would seem like normal lives here." It's true. You are. And so is pretty much everyone else out there. It's insane the standard of living that must be maintained to live there. And you make over a 1/2 million per year!

I will say that the main thing that prevents me from living in an area like SF is the knowledge that so much of my hard earned cash would be going towards maintaining a somewhat normal lifestyle as you describe even though that lifestyle is quite excessive compared to the rest of the country. You talk about moving to a LCOL but then mention Seattle? Dude, you don't know what LCOL is if you think it's in Seattle, lol. Don't get me wrong, I love the west coast and I absolutely understand that living in the midwest doesn't even come close to living somewhere like that in terms of being close to so many amazing places (the sierra nevadas, the cascades, the pacific ocean, etc). But, in terms of building wealth, you're in one of the worst places in the world, even with your high income. With your salary you could be financially independent now living somewhere with truly LCOL. For example, you could sell your house, invest the equity, and move to Ohio where you'd have 2.5 mil invested, which would equate to 100k/yr with the 4% safe withdraw rate. 100k/yr would afford you a fairly comfortable lifestyle in that area without even needing to work. But, you'd be giving up some pretty amazing surroundings.
It's a good problem to have though and a sign that you're doing quite well..."should I live a "normal" life in SF where I need to work or should I live somewhere LCOL where I could afford to retire now?"

Also, why did you choose to pay off your mortgage rather than invest that 2 million inheritance? You could be earning BIG returns on that kind of investment. If I were you I would actually consider cashing in now by selling the house and investing that 2 million equity. I guess it depends on if you could find work and affordable housing somewhere other than SF. And if you want to leave that area.
MiddleOfTheRoad
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Re: Have $2.5M at 30, career advice needed

Post by MiddleOfTheRoad »

You are fine. You only need time and you will be more than fine. I feel FIRE is overrated and is another form of “keep up with the Joneses” if you really think about it. FIRE sometimes is waved around as a badge of honor, not unlike sending your kids to the best private school or becoming a part of an uber exclusive country club. Just say no, don’t compare. You can afford to march to your own beats and live the way you want.
jibantik
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Re: Have $2.5M at 30, career advice needed

Post by jibantik »

2.5M net worth with 550k a year income at age 30. How will you ever possibly achieve FIRE with such low numbers. You need to make a 1m/year if you want to ever have a chance of FIRE. That is how everyone does it.
mw1739
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Re: Have $2.5M at 30, career advice needed

Post by mw1739 »

It sounds like you feel house poor. The median house price in the Bay Area is something like $1.5 million. Why don’t you sell, buy a new house for cash and invest the difference?
aristotelian
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Re: Have $2.5M at 30, career advice needed

Post by aristotelian »

Yes, you can retire early in a low cost location, or keep working in the Bay Area. You just need to decide what's more important. I would start investing more and paying less on the mortgage if you can. You have very little liquidity relative to your income.
totallystudly
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Re: Have $2.5M at 30, career advice needed

Post by totallystudly »

When you've won the game, stop playing. There are multitude of way cheaper places to live in the usa and world that don't run 70k annually for schooling and property taxes alone.
bgf
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Re: Have $2.5M at 30, career advice needed

Post by bgf »

i would imagine with your high paying jobs that you are both talented and have stellar resumes that would be super competitive anywhere in the country. do you have family anywhere else? anywhere else you would prefer to live? is it possible to work similar jobs in smaller cities? i know some of my friends in finance work jobs that essentially require them to work in manhattan, or thereabouts. is it the same with tech?

i am 32, and if i had a net worth of 2.5 million, then i could upgrade my house to a beautiful 4+ bedroom, 4 bath for less than $500k. id then have $2.0 million in liquid investments from which i could draw 2% annually and meet all of my expense requirements easily, with no mortgage or day care expenses...

you could be 'independently wealthy' right now.

if you continued to work then your net worth would grow rapidly.
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schrute
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Re: Have $2.5M at 30, career advice needed

Post by schrute »

bgf wrote: Sat Jun 02, 2018 11:39 am i would imagine with your high paying jobs that you are both talented and have stellar resumes that would be super competitive anywhere in the country. do you have family anywhere else? anywhere else you would prefer to live? is it possible to work similar jobs in smaller cities? i know some of my friends in finance work jobs that essentially require them to work in manhattan, or thereabouts. is it the same with tech?

i am 32, and if i had a net worth of 2.5 million, then i could upgrade my house to a beautiful 4+ bedroom, 4 bath for less than $500k. id then have $2.0 million in liquid investments from which i could draw 2% annually and meet all of my expense requirements easily, with no mortgage or day care expenses...

you could be 'independently wealthy' right now.

if you continued to work then your net worth would grow rapidly.
I would say that the Bay Area is a bubble for tech area salaries, you can't get similar earnings in say Ohio. There's no way op is going to have combined $500K elsewhere. In the Bay it's adjusted for the cost of living. Tech companies know they have to pay substantially more. Also, $500K sounds like a lot but can actually be stretched thin after taxes, etc. It's crazy expensive out here, there's even an article that says $200-$300K is middle class. But I do think it's a bit of the Joneses as well. Such and such has a house, their kids go to private school, bragging rights to house in Tahoe, etc. As for a resume, I mean a lot of the experience doesn't apply outside of tech. What a lot of people do is commute. So they might live in the North Bay or way way south of the Bay and commute 2 hours to Mountain View or Sunnyvale. If you own a home in San Francisco, it's almost a give-me that it will appreciate.
staythecourse
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Re: Have $2.5M at 30, career advice needed

Post by staythecourse »

Difficult question to answer so won't even try but will bring up some points to consider.

The first thing I would do is be honest about the slope of your networth growth going forward. MOST of your networth comes from the genetic lottery so can't expect you labor income to generate anything close to that slope. So really your networth for all purposes should be more around 0.5m. Still great for 30 years old. Your salaries are great so that is good, but then again you are BOTH in tech (recession prone) AND live in a HCOL area. Your current and future liabilities are significant, i.e. property taxes and private school.

If you move to somewhere else YES you will be in great shape. You locked up equity will be freed and can be invested for a long time horizon. Your COL will be much less. Many of your current and future liabilities will be much less as well. So the question is do you even want to move or just thinking about it as a means to an end to retire early? If it is the former I would consider it. If it is the latter I wouldn't.

The big concern I would have is WHEN (mind you I didn't say if) recession hit both of you get fired, you have these continuous monthly liabilities, and you have no WAY to free up the home equity as most folks aren't buying 2 million dollar homes when the market is plummeting.

Personally, I think I would consider sell the house and move into something less expensive and free up some of that home equity and stay in the jobs you have which you seem to enjoy thus far.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
simas
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Re: Have $2.5M at 30, career advice needed

Post by simas »

hmm.. I do not see anything difficult about this

You have
- very high concentration in real estate (almost all of your NW is in the house). this is risky
- excellent income (8-10X nations average)
- choices to make (public school/private school ,etc).
- enjoy life

You need
- maintain the level of income as long as you can deal with the stress (5 years?)
- be reasonable in your expenses
- unlock the value currently locked in the real estate when you decide to move
- enjoy life even more

The world is not limited to California , and of cause goes far beyond socialistic city states like SF. There is so much more available , so much more affordable. You can pick any weather you like, any place you want to live in. Then sell your house, move, and live.


for comparisons - west suburbs of Chicago, 300-400K would buy you an excellent house, in front of great schools (no need for private schools), all diversity you ever want, 8k-10k property taxes, and completely different costs of living. This would be even cheaper if you go further away from major metro areas..
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22twain
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Re: Have $2.5M at 30, career advice needed

Post by 22twain »

schrute wrote: Sat Jun 02, 2018 11:46 am
bgf wrote: Sat Jun 02, 2018 11:39 am i would imagine with your high paying jobs that you are both talented and have stellar resumes that would be super competitive anywhere in the country. do you have family anywhere else? anywhere else you would prefer to live? is it possible to work similar jobs in smaller cities?
I would say that the Bay Area is a bubble for tech area salaries, you can't get similar earnings in say Ohio.
On the other hand, you don't need anywhere near $500k earnings to live a decent life in Ohio. At least according to my definition of decent, which may be different from the OP's, especially if you take intangible considerations into account: family and cultural ties, etc.
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manandsea
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Re: Have $2.5M at 30, career advice needed

Post by manandsea »

I feel like the author failed to mention the feeling of trapped and the constant high stress with tech jobs. We are in the similar situation, but feels like burned out even without kids. Stay in the workforce for another 20 years just to become too old to enjoy life? that feels absurd.
limeyx
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Re: Have $2.5M at 30, career advice needed

Post by limeyx »

hammond wrote: Sat Jun 02, 2018 1:58 am I'm in a unique position financially and there's not a lot of people I feel like I can talk to about the topic. Any advice is appreciated.

I'm 30, live in Bay Area (a very HCOL area), with a net worth of about 2.5M (500k IRA + 401k, 2M in house, $100k cash).
Mortgage on a 2.4M house out of which 2M is already paid off thanks to a largess from an inheritance from my grandfather.
No debt other than mortgage. Married with an infant at home.

I make 350k and my wife makes 200k (both before tax). The challenge for us that our property tax is close to 30k a year and we plan to send our kids to private schools (costing ~20k * 2 a year). We have not much saved for their college education. We plan to start 529 plans soon.

This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).

Sometimes we wonder whether we can achieve FIRE in this area at all due to the high cost of property tax. At times it does feel like we are working very hard just to lead what would seem like normal lives here. For example, we drive modest second hand cars and don't have expensive hobbies. I sometimes think of starting a business but the thought of one of us leaving the job force scares us a bit so I am strongly considering a part time option. And that is also probably not very easy as it means we have to work a few more years to save up enough capital.

I'm really just looking for general advice on how people would approach this problem.
Just FYI, Seattle while a bit lower is definitely not a LCOL anymore ...and it's getting worse
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tfb
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Re: Have $2.5M at 30, career advice needed

Post by tfb »

hammond wrote: Sat Jun 02, 2018 1:58 am This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).
Bay Area resident here. Other than not being able to brag "I retired at 30" I don't see any problem. Live the life the way you enjoy and don't feel like you must win the contest in at what age you retire. You can definitely achieve FIRE in this area. The Bay Area is actually one of the best place to become financially independent. I couldn't have made it this far if I didn't live here.
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DavidW
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Re: Have $2.5M at 30, career advice needed

Post by DavidW »

bubbadog wrote: Sat Jun 02, 2018 6:41 am
Compound wrote: Sat Jun 02, 2018 6:25 am
Momus wrote: Sat Jun 02, 2018 2:38 am Umm... I don't understand the question. Please stay where you are.

$550k gross, after tax is 330k
-40k tuition
-30k property tax

$270k left.
Max out retirement savings -60k (401k, HSA, ROTH)

Leaving you with $210k remaining with little mortgage (400k left). Let's say you use 60k for living expenses. That's 5k/month spending. That's A LOT of spending.

You are still saving 150k/year net...

Do it for another 10 years, bam $2M after investment gain and new savings added to your networth. Now you are 40 yr with $4.5M networth minimum. DO NOT MOVE...
I don’t get it either. What’s the objective here? You are in an amazing financial position with high paying jobs, a paid off house, a high net worth, and are only 30. Why would you mess with that? Stay put. The only thing lacking from a financial perspective is a sizable liquid portfolio. Be patient. Enjoy being a productive member of the workforce and then in a decade or two reconsider the FIRE idea. You will almost certainly have a huge liquid portfolio by then as long as you keep lifestyle creep at least somewhat in check.
Maybe by living in a HCOL area, you have lost some perspective on your situation. You are in a great position financially with your income/NW. Stay put!
+1

Sometimes, I think the journey is more important than the destination.
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randomizer
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Re: Have $2.5M at 30, career advice needed

Post by randomizer »

FIRE in the Bay Area doesn’t seem realistic with all your net work tied up in a house. I’d keep working, or move.
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aristotelian
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Re: Have $2.5M at 30, career advice needed

Post by aristotelian »

Also, you are FI already. If you keep working, it is because you are choosing to work in order to sustain a high cost of living lifestyle.
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patrick013
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Re: Have $2.5M at 30, career advice needed

Post by patrick013 »

Have you ever tested the market to see what your house
would sell for ? Real Estate can be very unpredictable.
No offers for years then 3 offers the same day type of thing.

If I rec'd an offer of over 2M it would be very hard not to take
it, even after taxes, if any. Rent, or buy a smaller house, take
the extra million(s) and invest, you may find yourself in a more
solid place considering how uncertain the Real Estate market
can be. Several options are available, keep saving, or buy another
house with a larger down payment/smaller mortgage. Not
every house needs to be in the millions, there are excellent houses
for less than a million I'm sure. Appreciation is not always cer-
tain.
age in bonds, buy-and-hold, 10 year business cycle
TRC
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Re: Have $2.5M at 30, career advice needed

Post by TRC »

Guessing you're in tech? Do you have the ability to both work remote full time? Why new move to a suburb outside the city and find a much lower cost of living area?
majiaknight
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Re: Have $2.5M at 30, career advice needed

Post by majiaknight »

My family also live in the Bay area, mid-30s and both in high-tech. Just look at your financials in another simplified way: $400K mortgage, $30K property tax and plus $20K*2 for 2 kids' private school. Shouldn't the lower single income of you (i.e. your wife's $200K/Y income) be able to cover everything? Why bother about retiring at early 30s?

I recall I had similar anxiety before. You may want to consider some near/long term plans and define several milestones to gradually achieve FIRE. Write down your annual family investment policy statement w/ your wife and then stick to it. Spend more time outdoors w/ your kids during weekends or take a vacation to relax. :beer
TravelGeek
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Re: Have $2.5M at 30, career advice needed

Post by TravelGeek »

tfb wrote: Sat Jun 02, 2018 2:58 pm
hammond wrote: Sat Jun 02, 2018 1:58 am This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).
Bay Area resident here. Other than not being able to brag "I retired at 30" I don't see any problem. Live the life the way you enjoy and don't feel like you must win the contest in at what age you retire. You can definitely achieve FIRE in this area. The Bay Area is actually one of the best place to become financially independent. I couldn't have made it this far if I didn't live here.
Former Bay Area resident here. So much truth in this. :sharebeer
HornedToad
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Re: Have $2.5M at 30, career advice needed

Post by HornedToad »

Honestly your post is either a joke or you are severely out of touch with how well you are doing.

Yes, you can't FIRE *today* in the Bay area. You certainly could in the next ~15-25 years depending on how much you want to focus on it. If you want to go sooner then yes, you can always move somewhere of lower cost of living and retire today or in next 5-10 years depending on what sacrifices you want to make and priorities between lifestyle and FIRE.

You make $550k, and only need to pay another 400k more for your mortgage and have $500k in retirement accounts already.

The problem isn't a $30k property tax, and even private schooling is fine at your income although that costs you much more than property taxes. What are you doing with the ~$300k you are netting? Spend ~5 years and pay off your house and have an effective mortgage payment of just your property taxes. Or invest the ~75-100k you can easily have remaining each year and that will naturally improve your cash assets.

If you are seriously worried about cash flow for some reason, then get a new $400k mortgage and your monthly payment will be very low compared to if you took it out with a $1-2mil loan.
AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

IMO, you are not thinking clearly.

Of your $2.5M net worth, $2.0M is from inheritance. I would mentally separate that amount: you did not earn it, you should not count that (yet).

You have:
- $0.5MM net worth (most of which is in 401K),
- $550K a year income. That's nice,
- a $2.4MM house. Ouch on $550K a year income. 30K property tax is not a lot (after you have paid $2.4M on a house).

I sincerely doubt that moving to Seattle, you can practically retire.
Seattle is not cheap.
Would your Silicon Valley jobs pay you around $550K in Seattle? Then perhaps move.

Your biggest uncertainties to retirement are:
- young age. You are still 30, and you might both live to 90. 60 years is a lot of years to plan,
- 2 kids. Count around $1MM per kid until they are off your payroll. God help them find a high paying job (after a good university career). Otherwise, you will be supporting them throughout your life,
- uncertainty in terms of health care. If you move to Canada or another single-payer country, health care issue might be resolved.

I would optimize as follows:
- make a BIG decision: to move or stay,
- if staying, trying to move to a school district which has the trifecta: excellent elementary, middle, and high schools. Don't get used to shelling out $40K a year in tax non-deductible expense is wasteful, when you are living in a $2.4M house.


Need more info to help you more.
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AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

Cunobelinus wrote: Sat Jun 02, 2018 2:49 am
hammond wrote: Sat Jun 02, 2018 1:58 am Sometimes we wonder whether we can achieve FIRE in this area at all due to the high cost of property tax.
I would consider reevaluating this statement. Property tax of $30k/year is not the thing that prevents you from retiring early.. while
Agreed. Also, blaming the 30K real estate tax when purchasing a $2.5M house is like complaining about the 7% tax in a restaurant after order $300 worth of stakes.
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AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

Cunobelinus wrote: Sat Jun 02, 2018 2:49 am Were I in your situation, I would strongly consider a lifestyle adjustment to move to a L(ower)COL area, retire, and consider it a win in life. I am a little older, live in a HCOL area like you, with far less income and far less money to my name. I also don't think the Bay Area is the bee's knees -- there are far nicer/better places to live in the world that aren't nearly as expensive (or cold and dreary). Gross $550k/year ought to permit you to get rid of any debt and build a substantial portfolio quickly even if you decide to not sell the house for $2m+. My opinion, again, is that you should take an honest look at your goals and see what's achievable and what needs adjusting. Millionaires can easily feel like they haven't enough when they're living near multi-millionaires and billionaires (I speculate).
This is good advice, with only one caveat.

$550K a year in income in SFO might not translate to the same in Dallas, Houston, or Memphis.

Firstly, these jobs don't exist there.
Second, similar-ish jobs will pay a lot less.
Thirdly, while they can move from their jobs from SFO to lesser jobs now, the reverse move will not be possible in 5 years. Skill decay, etc.

The correct way is to optimize the local situation a bit to move to a cheaper area, or to keep the higher cost but eliminate the wasteful private school tuition.

You only pay for private school tuition when you live in a crappy school district. Crappy school district normally means cheaper housing costs, relatively speaking.
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AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

HornedToad wrote: Sun Jun 03, 2018 2:49 pm Honestly your post is either a joke or you are severely out of touch with how well you are doing.
I sincerely disagree. He might have co-workers, friends, neighbors who are sitting on $10MM +, $20MM+ net worths, and he is feeling poorer.

Also, I have a distinct feel that he wants to retire early.
People WAY overestimate the value of retiring early.

Most people that I know who have retired early (and were successful), are missing that part of being something that puts them on a regular regimen, and keeps their skills / minds sharp.

Certainly, freedom of time is nice, but after a while, it gets old.
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AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

TravelGeek wrote: Sun Jun 03, 2018 1:36 pm
tfb wrote: Sat Jun 02, 2018 2:58 pm
hammond wrote: Sat Jun 02, 2018 1:58 am This math and expense make retiring not very possible at this stage. We do realize that if we were to move a LCOL with less taxes (like Seattle), we could practically retire. We do enjoy our jobs and very much enjoy working where we work now (both in high tech).
Bay Area resident here. Other than not being able to brag "I retired at 30" I don't see any problem. Live the life the way you enjoy and don't feel like you must win the contest in at what age you retire. You can definitely achieve FIRE in this area. The Bay Area is actually one of the best place to become financially independent. I couldn't have made it this far if I didn't live here.
Former Bay Area resident here. So much truth in this. :sharebeer
Excellent!

People underestimate the employment / income value of living in a HCOL.
SFO, New York city are places where you have the potential to pull $10MM+ in pre-tax earnings in 10 years or less.
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AlphaLess
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Re: Have $2.5M at 30, career advice needed

Post by AlphaLess »

hammond wrote: Sat Jun 02, 2018 1:58 am I sometimes think of starting a business but the thought of one of us leaving the job force scares us a bit so I am strongly considering a part time option.
Statistics on start-ups state, especially those around software start-ups, that:
- someone with no experience with start-ups has around 10% of a successful exit,
- someone with a successful exit makes that chance go to 50% second time around,
- having a solid partner greatly increases that chance.

You start a startup when:
- you don't yet have a spouse or a kid, or you can manage the time well,
- you have a somewhat secure position.

In your case, when you have 10-20x annual living expenses in liquid cash that you don't mind dipping into, you can start a startup.
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schrute
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Re: Have $2.5M at 30, career advice needed

Post by schrute »

HornedToad wrote: Sun Jun 03, 2018 2:49 pm Honestly your post is either a joke or you are severely out of touch with how well you are doing.

Yes, you can't FIRE *today* in the Bay area. You certainly could in the next ~15-25 years depending on how much you want to focus on it. If you want to go sooner then yes, you can always move somewhere of lower cost of living and retire today or in next 5-10 years depending on what sacrifices you want to make and priorities between lifestyle and FIRE.

You make $550k, and only need to pay another 400k more for your mortgage and have $500k in retirement accounts already.

The problem isn't a $30k property tax, and even private schooling is fine at your income although that costs you much more than property taxes. What are you doing with the ~$300k you are netting? Spend ~5 years and pay off your house and have an effective mortgage payment of just your property taxes. Or invest the ~75-100k you can easily have remaining each year and that will naturally improve your cash assets.

If you are seriously worried about cash flow for some reason, then get a new $400k mortgage and your monthly payment will be very low compared to if you took it out with a $1-2mil loan.
Why would you need to wait 15-25 years @ income of $500K annually? Honestly, I think 8 years at most for op. He could have $2 million saved up, their $400K retirement accounts will also grow. They will effectively have to pay $50K annually (property tax + schooling) + $40K (my estimated guess in spend) in food, mortgage, fun stuff, etc. for a total of $90K annually. 4.5% withdrawal rate for $2M is $90K. Beyond that it seems it would be satisfying a nice lifestyle or just enjoy the work to keep working. At 16 years work, you'd have at least $4M (not assuming appreciation) so $180K annual withdrawal.
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Re: Have $2.5M at 30, career advice needed

Post by HornedToad »

schrute wrote: Sun Jun 03, 2018 3:39 pm
HornedToad wrote: Sun Jun 03, 2018 2:49 pm Honestly your post is either a joke or you are severely out of touch with how well you are doing.

Yes, you can't FIRE *today* in the Bay area. You certainly could in the next ~15-25 years depending on how much you want to focus on it. If you want to go sooner then yes, you can always move somewhere of lower cost of living and retire today or in next 5-10 years depending on what sacrifices you want to make and priorities between lifestyle and FIRE.

You make $550k, and only need to pay another 400k more for your mortgage and have $500k in retirement accounts already.

The problem isn't a $30k property tax, and even private schooling is fine at your income although that costs you much more than property taxes. What are you doing with the ~$300k you are netting? Spend ~5 years and pay off your house and have an effective mortgage payment of just your property taxes. Or invest the ~75-100k you can easily have remaining each year and that will naturally improve your cash assets.

If you are seriously worried about cash flow for some reason, then get a new $400k mortgage and your monthly payment will be very low compared to if you took it out with a $1-2mil loan.
Why would you need to wait 15-25 years @ income of $500K annually? Honestly, I think 8 years at most for op. He could have $2 million saved up, their $400K retirement accounts will also grow. They will effectively have to pay $50K annually (property tax + schooling) + $40K (my estimated guess in spend) in food, mortgage, fun stuff, etc. for a total of $90K annually. 4.5% withdrawal rate for $2M is $90K. Beyond that it seems it would be satisfying a nice lifestyle or just enjoy the work to keep working. At 16 years work, you'd have at least $4M (not assuming appreciation) so $180K annual withdrawal.
The 15-25 years was staying in Bay area with 2.5Mil house and 2 kids. Based on current income and savings, I would guess their expenses in the $200-250k year range + saving for kids college and the fact that this topic was posted shows that they can't currently envision lower tier expenses. So the longer timeframe was to keep a similar quality of life since they were very blessed with a large inheritance and have almost paid off house.
schrute
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Re: Have $2.5M at 30, career advice needed

Post by schrute »

HornedToad wrote: Sun Jun 03, 2018 4:01 pm
schrute wrote: Sun Jun 03, 2018 3:39 pm
HornedToad wrote: Sun Jun 03, 2018 2:49 pm Honestly your post is either a joke or you are severely out of touch with how well you are doing.

Yes, you can't FIRE *today* in the Bay area. You certainly could in the next ~15-25 years depending on how much you want to focus on it. If you want to go sooner then yes, you can always move somewhere of lower cost of living and retire today or in next 5-10 years depending on what sacrifices you want to make and priorities between lifestyle and FIRE.

You make $550k, and only need to pay another 400k more for your mortgage and have $500k in retirement accounts already.

The problem isn't a $30k property tax, and even private schooling is fine at your income although that costs you much more than property taxes. What are you doing with the ~$300k you are netting? Spend ~5 years and pay off your house and have an effective mortgage payment of just your property taxes. Or invest the ~75-100k you can easily have remaining each year and that will naturally improve your cash assets.

If you are seriously worried about cash flow for some reason, then get a new $400k mortgage and your monthly payment will be very low compared to if you took it out with a $1-2mil loan.
Why would you need to wait 15-25 years @ income of $500K annually? Honestly, I think 8 years at most for op. He could have $2 million saved up, their $400K retirement accounts will also grow. They will effectively have to pay $50K annually (property tax + schooling) + $40K (my estimated guess in spend) in food, mortgage, fun stuff, etc. for a total of $90K annually. 4.5% withdrawal rate for $2M is $90K. Beyond that it seems it would be satisfying a nice lifestyle or just enjoy the work to keep working. At 16 years work, you'd have at least $4M (not assuming appreciation) so $180K annual withdrawal.
The 15-25 years was staying in Bay area with 2.5Mil house and 2 kids. Based on current income and savings, I would guess their expenses in the $200-250k year range + saving for kids college and the fact that this topic was posted shows that they can't currently envision lower tier expenses. So the longer timeframe was to keep a similar quality of life since they were very blessed with a large inheritance and have almost paid off house.
Boy, what could you be spending $200K a year on? After writing that, I know bunch of people who do spend that in the Bay Area... outside of mortgage, childcare, etc. what kind of baller lifestyle has you spending that much?
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Re: Have $2.5M at 30, career advice needed

Post by EddyB »

AlphaLess wrote: Sun Jun 03, 2018 3:19 pm IMO, you are not thinking clearly.

Of your $2.5M net worth, $2.0M is from inheritance. I would mentally separate that amount: you did not earn it, you should not count that (yet).
I thought he’d already received he inheritance? Why would he not “count it”? Receiving a multi-million dollar inheritance should be a pretty clear indicator that he should consider himself very lucky, but I don’t see the point in pretending he doesn’t have it.
Afty
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Re: Have $2.5M at 30, career advice needed

Post by Afty »

I wonder whether OP's mortgage was originally for much more, and they paid off most of it using the inheritance, or if they received the inheritance first and used it for a downpayment. If it's the former, they may be feeling squeezed by large mortgage payments that will disappear pretty soon. They might consider recasting the mortgage to reduce their payments and free up cash flow.
PhilosophyAndrew
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Re: Have $2.5M at 30, career advice needed

Post by PhilosophyAndrew »

OP, can you say more about want your exact concerns and desires?

You say that you and your wife both enjoy your jobs, but you also seem interested in retiring now. If you enjoy your jobs, why are you concerned about retiring now? Do you expect that you will lose your jobs, or that you will stop enjouyong them?

Your discussion of expenses suggests that you are locking well below your means, but you also express concern about your ability to ever save enough to retire at your current t location. Have you tracked your exact expenses? What are they, and how much are you able to save each year? How much will you be able to save once you start paying tuition for school? If your concern is that your expenses may get out of hand due to lifestyle inflation, you have the power to prevent tenor reverse that through disciplined spending.

As long as you don’t succumb to significant lifestyle inflation, your relatively high family income and relatively low housing costs should allow you to save enough for FIRE. No, you can’t retire immediately, but why should you expect to be able to do so with 500k of invested assets?

If remaining in your house is your biggest priority, you should be able to do that — but will need to work longer because 2M of your net worth is devoted to your house. If retiring as soon as possible is your biggest priority, you should consider what your biggest-paying job prospects are in an area with significantly lower cost of living.

It looks to me like you have all the resources you need to achieve financial independence, so I’m unclear about exactly where your concern about this lies. Can you say more about this?

Andy.
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