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Just go for it ?
Old 11-17-2007, 04:34 PM   #1
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Just go for it ?

Hi all, been lurking around awhile enjoying all the great info and decided to get in on the fun. Been debating for the past year or so wheather the time is right to pull the trigger and FIRE. Here are our stats:

48 yrs. old wife is 47 we have 2 kids 10 and 7 and live in So. Cal.
Retirement Funds- $550,000
Taxable Accounts- $950,000
College 529 Plans- $50,000
Home Equity- $600,000

Assets are primarily in Vanguard Index Funds 60% stocks 30% bonds 10% cash.

The plan is to move out of expensive So. Cal to Oregon. We have done some research and think we could find a comprable home south of Portland in the Willimette Valley for $350- $400,000. We would pay cash for the home and be debt free. That would leave us with $1,700,000. We estimate our living expenses would be about $75,000 in Oregon.

The So. Cal. housing market is tough right now and it may take up to a year to sell. Our cost of living with the mortgage and taxes in So. Cal is $125,000. We have enough cash to cover but this would eat into our principle.

I run a branch office for a large company that I have been with for 16 years. My job pays extermely well but the stress is unbelievable and I seem to have lost my passion for the work.

Do I stick it out at work another year or so and ride out the housing slump and increase our net worth through another year of savings or do we have enough and just go for it ?

The wife will support whatever decision I make, she just wants a decision.

Thanks for everyones input !
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Old 11-17-2007, 04:59 PM   #2
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Me thinks that IF you're posting here...you have already made the decision

Good luck with your new found freedom!!
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I'd say no
Old 11-17-2007, 05:04 PM   #3
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I'd say no

Fire48,

You have to weigh your mental and physical health versus your finances. Some questions: any pension or low cost health insurance?
Have you carefully considered all costs in the $75,000 living expenses (including one-timers like major home repairs, car purchases) and income taxes (even if mostly capital gains).

At 4% withdrawal rate, you could generate $68,000 on $1.7M. I am one of the people here, likely in the minority, who thinks that 4% is too high for early retirees, especially when you and/or DW could be around upwards of 50 years. Look at firecalc, and decide what withdrawal rate you are comfortable with. Keep in mind with 2 kids you could have some heavy years when college costs kick in.

For what it is worth, we are similar in age and family size, and have not given up the day job, but you are living your life and have to decide what you can stomach on a daily basis.

Could you drop expenses below $75k? What are health insurance costs in Oregon?
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Old 11-17-2007, 05:20 PM   #4
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I'd tend towards a No vote also, same reasons. Expenses for kids escalate even during the high school years.

Can you get a somewhat similar job in Oregon with less stress to let you increase your net worth for a couple more years for a safer retirement? Even at less pay you should be able to cover your expenses and keep some benefits, if not also add to your savings while letting them appreciate.
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Old 11-17-2007, 05:56 PM   #5
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I wouldnt try to sell a piece of california real estate right now, or next year, unless I absolutely had to.

I'd plug in another year of earnings, wait another 18 months for the RE market to firm up, and try to trim about 5k off the retirement budget. Then go.
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Old 11-17-2007, 06:07 PM   #6
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Some very good points. I have tracked my expenses with Quicken for years and am using the data to project future expenses. I have also been devouring the Work Less, Live More books.

I have included in my $75K budget the following:

$3,000 for taxes- I plugged the estimated capitol gains and interest into turbo tax and it says I would pay less.

$4,200 for car expenses- assume $1,000 a year towards future purchase. We have always bought used paid cash and keep for about 7-8 years. We could always cut back to one car.

$3,200 for Home maintance and repairs

College Costs- have included $400 month to go into the Kids 529 Plans. According to the Vanguard College fund calculator in addition to what we already saved this will allow us to pay for 4 years of tuition and room and board at the University of Oregon.

The big one Health Care- I checked on eHealthInsurance and you can get an HSA linked family health plan through Blue Cross in Oregon for $521 month with a $3,000 deductable. I have in my budget $600 month for premiums plus $5,000 annual for out of pocket expenses.

Running the basic firecalc I am at a 4.41% withdrawal rate and 69.1% success rate. According to Clyatts latest workbook he is using around a 4.3% withdrawal rate. I would feel better getting down closer to 4%.

We could also look at a less expensive house, after 10 years as a stay at home mom the wife is willing to work part time and could bring in $10- 15K.

We also have my 86 year old mother in law living with us who kicks in $1,000 a month. We recently sold her home and used the money to set up laddered CD's that will cover 5-7 years of long term care if required.
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Old 11-17-2007, 06:20 PM   #7
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Getting close to 4% may be crucial. A 3-4 year bear market right off the bat could put you in the tank.

As Bob's book notes, a small income stream does wonders for ER survival, so part time jobs are good things. *Really* good things if they get you access to a group medical plan thats reasonably priced.
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Old 11-17-2007, 07:07 PM   #8
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As Bob's book notes, a small income stream does wonders for ER survival, so part time jobs are good things. *Really* good things if they get you access to a group medical plan thats reasonably priced.
GO for it!

Take your life back ~ make your life YOUR life! Enjoy your wife and your kids BEFORE they move on (not your wife, your kids ).....

As long as you keep an open mind about the possibilities of returning to wo*k - either part time or full time at a much less stressful position AND/OR that you may have to tighten your belt in response to poor market conditions ~ you WILL BE FINE!
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Old 11-17-2007, 07:56 PM   #9
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I'd want to find a different less stressful job, with Health Insurance, the success rate is too low for my personal tolerance
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Old 11-17-2007, 10:45 PM   #10
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Fire48,

I advise sticking it out for another year - the additional savings and (hopefully) improvement in the real estate market will get you closer to a 4% SWR.

The other alternative is part-time w*rk - either you and/or your wife - could you consult, do seasonal work (such as UPS dock hand during the holidays), or take a part-time job in an area you enjoy (hobby, other interest)? That could get you where you need to be immediately (I'm assuming here that your $75k estimate is accurate).

Or, stick it out while researching future part-time opportunities. The knowledge that 'hey, I can walk away if it gets too bad' can make the j*ob seem not so bad; plus, if you sincerely hand in your badge and you're a valuable employee, you might negotiate whatever adjustments that you require to stay on for a while.

Looks to me like you have many options and are in a good place!
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Old 11-18-2007, 12:31 AM   #11
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Just a comment on the OC real estate market. There are currently 12 months of inventory on the market. Inventory is currently growing at 30%/year. Sales are declining at 30%/year.

In other words, there isn't a snowball's chance in hell that the market will recover in anywhere near a year. My guess would be closer to 5 years. If I were you, I would try hard to sell now.
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Old 11-18-2007, 04:51 AM   #12
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The So. Cal. housing market is tough right now and it may take up to a year to sell.
I vote to keep working while trying to sell...when the house sells, FIRE!

Looks like you have done your homework and are ready.

Keep part time work at the new location as an option.
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Old 11-18-2007, 05:07 AM   #13
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I'd say sell the house now, move to Oregon, and find some work that won't kill you. I don't know about the rest of the folks here, but a 69% success rate on firecalc does not comfort to me bring. I'm two years younger looking to FIRE in 18-24 mos, and my FC SWR is more like 3.38%...but I would prefer it 3% or less due to relative youth...BTW, count on healthcare costs going up...
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Old 11-18-2007, 07:56 AM   #14
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That success rate is too low for my peace of mind. If you could stick until the house sells and your dw could work while the kids are in school, you would buy yourself more savings and avoid pulling from your accounts until after the move. For me, I just don't think I could leave the job until the house sells. Call your realtor asap!
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Old 11-18-2007, 09:45 AM   #15
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Just a comment on the OC real estate market. There are currently 12 months of inventory on the market. Inventory is currently growing at 30%/year. Sales are declining at 30%/year.

In other words, there isn't a snowball's chance in hell that the market will recover in anywhere near a year. My guess would be closer to 5 years. If I were you, I would try hard to sell now.
Depends on what you mean by "recover". I doubt we'll see 2004 prices come back for a long time, but saleability is the major issue right now and you hit all the buttons as to why.

Right now with a dearth of buyers and a huge inventory, any home with a visibly obvious shortcoming or defect wont sell unless its marked down substantially from the market price. In a normal market its plausible to get an oddball buyer to make an offer on your oddball house, or someone willing to do a little fixing or remodeling.

A house that needs updating or major work wont sell without the work being done. Thats a major investment for a seller just to get out of the house. There are just too many homes that people HAVE fixed up for someone to pay a little less to get your fixer. Buyers can be super picky right now. If you can get one at all.

You're probably going to have to go to 3.5-4% to the buyers agent, maybe even as high as 5% to drive eyeballs to the property. Because the new home builders are pitching 4-5% on a lot of CA properties and thats where the agents are taking the buyers.

End of 2008, maybe the inventory dries up a little, buyers come off the sidelines, I doubt prices are going to drop much from here except for the really speculative, stupidly overpriced areas that still have a bit of adjustment to do...mostly the sacramento and surrounding areas in CA.

You might get away with a reasonable price without socking 30k into the house and paying an extra 15-20k in agent fees.

Plus you dont have people tromping through your house 5 times a week for a year.

Bear in mind...I just sold a house in this market two months ago. Fresh from the front lines... :
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Old 11-18-2007, 10:16 AM   #16
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I vote to keep working while trying to sell...when the house sells, FIRE!

Looks like you have done your homework and are ready.

Keep part time work at the new location as an option.
I agree with this advice. Even it it takes 2 years to sell at a reasonable price, you will only be 50 and will have a fatter portfolio.

Congrats on being in such a good situation!
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Old 11-18-2007, 11:11 AM   #17
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Depends on what you mean by "recover". I doubt we'll see 2004 prices come back for a long time, but saleability is the major issue right now and you hit all the buttons as to why.
The traditional way to fix "saleability" problems due to an out of whack supply/demand curve is to reduce prices. IMHO, there are very few buyers who can or will buy at current prices. If you can find a buyer, take the deal. Otherwise, you'll be chasing the market down as sellers play a game of price discovery.

Unless underwriting standards miraculously go back to 2005 standards, or everybody miraculously gets a major pay raise, the only logical outcome is that prices will come down significantly to clear the ever-building inventory.
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Old 11-18-2007, 11:36 AM   #18
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Theres where we differ. I dont think theres a high inventory because buyers cant afford the properties or they cant get mortgages. I think theres a high inventory because buyers dont want to buy until they feel like prices have bottomed, and because sellers are still being unrealistic about the price they can get...and while they're dropping the ASP is dropping along with them so they're still overpriced. But theres a bottom to that where sellers wont sell unless they're being forced to move.

Reduced prices to get a sale done now seems to be a bit painful. I completely remodeled my house and offered 3.5% to the BA and got a sale in 7 weeks at a reasonable discount to my asking price. Still made a nice profit and lived there for free for four years.

Except for one other property that sold at a huge discount...nothing else sold in my zip code for the last 8 weeks except for new homes sold at a huge discount, with favorable financing, and 5% to the BA. About 40 new homes. That'd be 42 buyers who wanted or needed to buy right now, and a standing inventory of almost 400 homes.

Two neighbors with similar homes that need work and updating are now 50k below my sale price and still not selling. That marks those down to approximately 2002 prices.

But then again, several areas in this region were on the top 5 more overheated/overinflated markets in the country just 2 years ago.

I cant see the more desirable areas of CA getting driven a lot lower. The less desirable resale properties seem to be getting close to reconstruction cost and a little extra for the land.
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Old 11-18-2007, 11:57 AM   #19
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Obviously, there's a psychological factor in play. When buyers expect prices to drop, they'll wait until prices drop.

But affordability is still near an all-time low, and that means a small pool of potential buyers. And the buyers who could have bought a couple years ago even if they couldn't afford it are gone for good due to new underwriting standards. That latter category made up a HUGE fraction of the buyers at the peak.

In any case, we both have our guesses out there. Your guess is that the market recovers in 18 months. My guess is 5 years (simply based on previous, much smaller bubbles). I actually think I'm way optimistic on that guess, but let's revisit this thread after the recovery to compare predictions.
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Old 11-18-2007, 12:05 PM   #20
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Still depends on what you mean by 'recover'. I'm suggesting it'll be easier to sell with less out of pocket cost in a 12-18 months. I doubt prices will be higher then. Just that the cost of sales will be lower. And a lot less inconvenience due to lookyloo buyers that arent going to buy.
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