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Deckard 32 planning FI from Europe
Old 07-18-2017, 02:37 PM   #1
Confused about dryer sheets
 
Join Date: Jul 2017
Location: Groningen
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Deckard 32 planning FI from Europe

Greetings to everyone in this forum board, I hope to find many like-minded people and useful info to read and share!

First I introduce myself, I am a 32 years old IT engineer who was lucky enough to land a job two years ago in one of the big IT companies out there, though I am based in Europe, more specifically in the Netherlands. Although I'm not originally from here the relocation was a no-brainer for me as I esentially doubled my salary taking into account perks like bonus comp and stock units.

I have always been very careful and conscious about my expenses since the moment I flew away from my parents house, keeping rent, food and transportation costs as low as possible without leaving a miserable life. I had my fair degree of travel and social joy but being mostly introverted and finding pleasure in learning new things and optimizing my finances I was drawn to the world of investments and the stock market.

After winning and losing money trading with some bad european companies, due to misleading online opinions, I found my way to a solid portfolio foundation following the buy & hold strategy focused on dividend income. So far I have found a community of people interested in financial independence through stock market investments for the long term which has been of great help, I also took advantange of every drop (specially in 2016) to construct a winning portfolio.

Going down to numbers, which I have been diligently typing into spreadsheets since my very first paycheck, I take home 52k euros yearly of after tax income + around 3k in dividend income. Currently, I'm living with my girlfriend in a small rented apartment paying 600 euros monthly (internet + utilities included), transportation amounts to aprox. 250 a month for an 11 year old car (gas, insurance and road tax), 250 euros for food and all the rest of expenses are optional. Insurance and pension plan are automatically deducted from my paycheck so I don't add them into the equation and also don't take into the account the nice cushion the stock units provide in the background.

We don't have children and not expect to have them in the near future so we are perfectly fine living for less than 20k a year and saving and investing the 35k left over. My current portfolio is worth around 105k and yielding around 3k after tax, my goal is to grow it to 1 million euros in 12 years or less time if possible, and receive 36k after tax yearly dividend income to be able to retire. This will happen in 2029 according to my calculations and the simulators I've been using. I'm taking inflation into account in the sense that the companies that form my portfolio raise dividends every year over the inflation rate we are having in Europe.

A small amount of my savings are in a well-managed mutual fund with track record proven managers which I trust, though I would like to allocate a portion in index funds whenever the market goes down and gives me a chance.

Summarizing:

110k in defensive dividend yielding stocks + mutual fund
15k non-dividend stock cushion
14k cash

That is:
90% stocks
10% cash

52K net income
3k dividend income

Goal to retire in 2029 with 1 million that yields 36k net dividend income


Not particularly interested in buying a house, more pro-rent anywhere I travel to but of course I may consider buying something cheap and adequate with cash (around 100k price) at some point. Also not interested in bonds as right now the yields are very low, maybe will consider it in the future.

I would like the experts here to find flaws and errors in my FI plan as I'm totally commited to it.

Thank you!
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Old 07-18-2017, 02:47 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Mar 2017
Location: New York City
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Welcome. I dont know your tax situation . Getting 3.6 % after taxes for a long retirement might be a little optimistic. But you have a plan, thats more than some people have.
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Old 07-18-2017, 03:15 PM   #3
Confused about dryer sheets
 
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Quote:
Originally Posted by Blue Collar Guy View Post
Welcome. I dont know your tax situation . Getting 3.6 % after taxes for a long retirement might be a little optimistic. But you have a plan, thats more than some people have.
Hey, thank you for pointing out taxes. Currently, I'm getting a small money back from the tax man for double retention on dividend income although that can change as soon as I relocate to another country. Basically I see the taxes as a game where depending where I establish my permanent residence after retirement I need to pay or get money back.

Before retirement, I don't see any reason why I have to pay extra in my yearly tax return, actually, I've been getting money back for the past few years, even more after changing countries. For next year I expect to break even so 0 euros involved or maybe getting some money back for my non-working girlfriend (this is considered a tax credit in the Netherlands) + the double retention dividend thingy.

As for the 3.6% I thought I was very conservative seeing the historical returns for stocks, I've read in many places that a 7% yearly return is not uncommon but you may be right. For 90% of my dividends I'm being taxed 19% less the small amount I already mention I got back but when I cross the 6k dividend income barrier the excess will be taxed at 21%. All in all the overall gross return will be something closer to 4.5% or 45k.
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Old 07-18-2017, 03:52 PM   #4
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Join Date: Jan 2017
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As it would happen, I am currently sitting very close to where you are heading.

At 58, I have an IRA just a bit north of a million.

It is:

45% Stocks
40% Fixed Income
15% Cash

It is yielding about 33k in div+interest.

As I watch for opportunity to get the cash into equities, I should be able to be around the 36k target you are wanting once deployed.

I am currently FIRE'd living off my non-retirement funds for the next 4-5 years.

Good luck on your journey.
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Old 07-24-2017, 12:08 PM   #5
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Quote:
Originally Posted by Deckard View Post
Basically I see the taxes as a game where depending where I establish my permanent residence after retirement I need to pay or get money back.
Are you in the 30% tax ruling system? If so, you'll get hit in the NL with capital taxes ~1.2% and a higher tax rate after six years.
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Old 08-04-2017, 12:59 PM   #6
Confused about dryer sheets
 
Join Date: Jul 2017
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Originally Posted by Totoro View Post
Are you in the 30% tax ruling system? If so, you'll get hit in the NL with capital taxes ~1.2% and a higher tax rate after six years.
I am, and that also allows me not to declare my whole stock portfolio that is sitting abroad but I'm aware that after six years (the total period is 8 but I have almost consumed 2) my paycheck will go down substantially and I will get hit 1.2% anually due to taxes (minus a 23k minimum threshold).

I see as options changing contries or try to get tax credits by getting a mortgage. For the moment, the taxes are working pretty much on my favor and letting me accumulate more money that I put to good use by investing.

Any tips to avoid getting hit so much?
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Old 09-01-2017, 11:34 AM   #7
Confused about dryer sheets
 
Join Date: Jul 2017
Location: Groningen
Posts: 4
I'm updating the thread because I'm planning to buy a house. I can buy a two story house for less than 150k and low interest rates, what I don't know how to calculate is how much to save for a down payment as opposed to investing that same amount. I was planning to save around 30k but maybe it's not worth to save that much and something like 20k and investing the rest would yield better results.

The bank is financing me 100% of the price so that would not be a problem but of course I want to pay less interest for the loan!

Anyone has done this type of calculations before? I know that if I can get a better rate of return investing than repaying the debt I should do just that. On the other hand, I never had debt before so I don't think I would be too comfortable with it.
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Old 09-01-2017, 12:08 PM   #8
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Originally Posted by Deckard View Post
Any tips to avoid getting hit so much?
Long story short: get a fiscal planner on board. There are some ways to reduce the tax bite if you form an LLC (BV), but it isn't straightforward.
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