Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 06-21-2011, 08:39 AM   #21
Recycles dryer sheets
 
Join Date: Mar 2011
Location: Dallas
Posts: 457
Quote:
Originally Posted by FUEGO View Post

These strategies have worked for me well. I am on track for FIRE before age 40.
So Fuego,
Couple questions...what amount of $$ do you plan to have to FIRE before 40? We're doing the same at 41 & 47 with $950k to work with. Also, what was your best decision regarding tax efficiency investing?

Thanks,
S
__________________

__________________
Surewhitey is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-21-2011, 08:51 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by Surewhitey View Post
So Fuego,
Couple questions...what amount of $$ do you plan to have to FIRE before 40? We're doing the same at 41 & 47 with $950k to work with. Also, what was your best decision regarding tax efficiency investing?
We plan on having at least a million, probably more than a million. Just how much depends on how long work remains bearable and what margin of safety we want (4% vs 3.5% vs 3% withdrawal rate) and what luxuries we want ($2000 for travel or $12000 for travel). A moving target I guess you could say. We have enough right now to just about pull off a bare bones ER without any frills and with something like a 4% withdrawal rate, but work isn't bad enough to make us want to quit at this point (age 30 right now).

As for tax efficiency, we max out our 401ks (x2), my 457, and max out the Roth IRAs (earlier it was Traditional IRAs). Some years we are eligible for HSA, and we max it and invest it (instead of reimbursing ourselves). Max out the state tax deduction on 529 plans for our kids' educations. With what is left at the end of each year, we put it in tax efficient mutual funds or ETFs with low costs and low turnover. This way we avoid most capital gains distributions. I manage the taxable account to limit gains and to realize losses so I get a $3000 write off in recent years ("tax loss harvesting").
__________________

__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 06-21-2011, 09:00 AM   #23
Recycles dryer sheets
 
Join Date: Mar 2011
Location: Dallas
Posts: 457
Quote:
Originally Posted by FUEGO View Post
We plan on having at least a million, probably more than a million. Just how much depends on how long work remains bearable and what margin of safety we want (4% vs 3.5% vs 3% withdrawal rate) and what luxuries we want ($2000 for travel or $12000 for travel). A moving target I guess you could say. We have enough right now to just about pull off a bare bones ER without any frills and with something like a 4% withdrawal rate, but work isn't bad enough to make us want to quit at this point (age 30 right now).

As for tax efficiency, we max out our 401ks (x2), my 457, and max out the Roth IRAs (earlier it was Traditional IRAs). Some years we are eligible for HSA, and we max it and invest it (instead of reimbursing ourselves). Max out the state tax deduction on 529 plans for our kids' educations. With what is left at the end of each year, we put it in tax efficient mutual funds or ETFs with low costs and low turnover. This way we avoid most capital gains distributions. I manage the taxable account to limit gains and to realize losses so I get a $3000 write off in recent years ("tax loss harvesting").
Sounds like I'm talking to myself...we're doing everything you mentioned. Glad to hear others think a million is doable, makes me feel more confident. We're planning on giving it a go for couple years and then reassess the situation. Even if we went back to work, we'd only be 43 & 49...
__________________
Surewhitey is offline   Reply With Quote
Old 06-21-2011, 09:18 AM   #24
Recycles dryer sheets
 
Join Date: Feb 2011
Location: anywhere usa
Posts: 246
My wife and I got our bachelor's, have jobs with decent salaries and live well below our means.

I tried the second job thing for awhile, it just didn't make sense for me:

1. I ended up spending almost as much as I earned, trying to make up for the lost time.

2. The money was taxed heavily and increased the complexity of my taxes with quarterly estimated payments

3. A couple hours of free time each working day is important for my happiness. Much more valuable now then later.

4. I found the extra work to distract from success at my day job. If I miss out on a 5k salary increase to earn 20k over the year, it's not worth it. I'd get that extra 5k every year moving forward AND my yearly % based increases will include the 5k, growing it more.

As a salaried professional, it's tough to beat the income increases that come from managing your career well. If you get paid $100k a year, your career (assuming a 3% safe withdrawal rate) is like a 3.3 million dollar asset. Making yourself just 10% more valuable pays large returns over time.

My conservative estimate is around $750,000 per person is required to FIRE with a 40+ year time horizon. When someone says a million dollars for two people, I find myself wondering if they have looked into the cost of health insurance. It can reach $1000 per month, per person, before paying deductibles and other related expenses.
__________________
pimpmyretirement is offline   Reply With Quote
Old 06-21-2011, 09:30 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by pimpmyretirement View Post
My conservative estimate is around $750,000 per person is required to FIRE with a 40+ year time horizon. When someone says a million dollars for two people, I find myself wondering if they have looked into the cost of health insurance. It can reach $1000 per month, per person, before paying deductibles and other related expenses.
There are cost savings that come about with having 2 people living under one roof. So if $750,000 is sufficient for 1, then 2x $750,000 is probably more than enough for 2.

But as to health insurance, I don't have a concrete plan in place, because I don't know what the health insurance landscape will look like after Jan 1, 2014. We will qualify for heavily subsidized health insurance if things remain the same under Obamacare. Otherwise we would have to explore other options and have a larger nest egg to pay future health insurance and health care costs.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 06-21-2011, 09:32 AM   #26
Recycles dryer sheets
 
Join Date: Mar 2011
Location: Dallas
Posts: 457
Quote:
Originally Posted by pimpmyretirement View Post
My conservative estimate is around $750,000 per person is required to FIRE with a 40+ year time horizon. When someone says a million dollars for two people, I find myself wondering if they have looked into the cost of health insurance. It can reach $1000 per month, per person, before paying deductibles and other related expenses.
The health insurance was the big unknown for us too...then my wife (in the insurance industry for 20+ years) looked into a high deductible ($10k) / 2 annual exams per year and said for the two of us was $300 / month. I have to tell you she is anal about insurance & won't let me touch our options.

With that said, we also have $20k in our HSA to cover the deductibles for a couple majors. You can only count the cost with assumptions & hope for the best and plan for the worst. If we get into trouble, we both are in industries as a back up plan.
__________________
Surewhitey is offline   Reply With Quote
Old 06-21-2011, 09:41 AM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by Surewhitey View Post
Sounds like I'm talking to myself...we're doing everything you mentioned. Glad to hear others think a million is doable, makes me feel more confident. We're planning on giving it a go for couple years and then reassess the situation. Even if we went back to work, we'd only be 43 & 49...
A million won't buy you a lot of luxuries, but it is a lot more than most folks have at your age. We have spent two summers in Mexico and really enjoyed the slower life down there. It is hard calling it luxury since it was pretty cheap living, but if you enjoy that kind of thing then a million may be enough.

We kind of have the same plan. We can always present our ER externally as "taking a sabbatical" or "taking time off to spend with family". Those seem like valid excuses if you ever want to reenter the work force. Missing a couple years of work in your 30's or 40's isn't the end of the world, although it could be a big hit to your career growth (if that concept means anything to someone who is FI).
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 06-21-2011, 10:06 AM   #28
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by jackontrack View Post
Meaning, how are people achieving the income needed to quit their jobs and fund Early Retirement?
I see that there are several investors on here, so I am assuming that most of you earn decent returns on your money in the market.
Does anyone have a side-gig? 2nd job? Online stream of income? High-Income job? OR, have people just drastically cut their expenses and live frugally?
I am working to free up time on nights and weekends to pursue something else. Not sure exactly what it will be, so I am trying to see what others are doing for some ideas.
It's far easier to reduce your expenses than to raise your income. You also have much more control over the former than the latter.

There's a line between frugality & deprivation, and it depends on your values. If something feels like deprivation then it will eventually stop working for you. The challenge is to figure out what brings you value and then to stop spending on the rest.

Unless you're going to school at night or parenting a family, what else could keep you from tackling the pursuit of ER?
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 06-21-2011, 10:12 AM   #29
Recycles dryer sheets
 
Join Date: Mar 2011
Location: Dallas
Posts: 457
I'm depriving myself from cable tv now for a year. About to turn off Netflix too. Just stream a lot off Hulu now. Deprivation is sometimes liberation in disguise. Taking walks & bike rides now...

Oh, and saving $100 / month is fun too...
__________________
Surewhitey is offline   Reply With Quote
Old 06-21-2011, 10:14 AM   #30
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 16,532
I went a route that is admittedly hard to find now, choosing a career in law enforcement with a defined benefit (DB) pension, 100% COLA's, post-retirement medical and prescription coverage. Through even more dumb luck, I chose one of the local governments that has zero unfunded pension liability.

But there was a price to pay for that too. I worked weekly rotating shift work for 18 years which any doc now knows is bad for one's health. About 20-25% go out on permanent disability, and I went to eight funerals. So at one level I'm happy that I can still walk across the room and get myself a glass of water without a cane or walker. I know a bunch of guys my age who can't.

There is financial risk, and there is physical risk. Both can, but don't always, pay well.
__________________
I heard the call to do nothing. So I answered it.
Walt34 is online now   Reply With Quote
Old 06-21-2011, 12:35 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 5,459
Quote:
Originally Posted by tryan View Post
Rents.
+1

Also regarding Nords' "easier to not spend than to earn": Someone mentioned that if you make a buck taxes eat, say, 25% of it. If you reduce a buck in spending it's tax free and has 33% greater effect than earning a buck. I'm lazy and endorse that message.
__________________
calmloki is offline   Reply With Quote
Old 06-21-2011, 12:40 PM   #32
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,982
In line with recent topics:

1) get gun
2) rob bank
3) put money in home safe
4) use to bump your swr by 1%
__________________
DFW_M5 is online now   Reply With Quote
Old 06-21-2011, 01:10 PM   #33
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,043
I think these 3 graphs answer the OP's question (all data from Quicken):



First, our income has increased nicely over the years, but our expenses have not. This has allowed us to bank all raises and bonuses.



Second, most of our income has come from wages. Bonuses and stock options helped but were not a deciding factor.



Third, our investments have done quite well over the past 2 years. This has given a nice boost to our portfolio.
__________________
FIREd is online now   Reply With Quote
Old 06-21-2011, 01:31 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,886
For me, to be able to FIRE was mostly to LBYM (pretty much naturally fit my approach) and while working 20+ years for Megacorp I maxed out my contributions to my 401K and IRA. I started at an early age (but not from the very beginning) during the start of my career. Also, my investment approach was to DCA, index and let the magic of compounding do it's magic.

Things still aren't smooth sailing all the way, but it got me to the point that I could say "no mas" to my j*b when the time was right.
__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is offline   Reply With Quote
Old 06-21-2011, 01:42 PM   #35
Dryer sheet aficionado
 
Join Date: Jun 2011
Location: Brooklyn
Posts: 27
@Nords - nothing is stopping me from getting on the path to ER. I am self employed, and traditionally I would reinvest most of my cash into my business, however now I am at a point where I can keep coasting along like this for awhile and my overhead is low, so I am focusing inward on lowering expenses and also raising revenues by increasing prices. You're right, it's much easier to lower expenses. Just changing my behavior with electricity has cut my electric bill by $30/month. I just unplug things when I'm not using them instead of leaving them on standby.

It's a bit of a challenge when you live with your partner, however I have no kids, no property, and very little debt left, and I'm under 30 so the opportunities are there. I just have to get her into this concept a bit more. I've just slashed expenses with my business recently so I am looking to direct that money into something else. Had some ideas I wanted to cultivate to make money on the side, and I even looked into purchasing a laundromat business or something of that nature. I can always choose to make more money (at the expense of my personal life, of course), however I want to learn more ways for my money to work harder for me. Some savings are deducted automatically for my SEP-IRA and some other long-term savings vehicles, however I definitely think I can do more.

@Surewhitey - I'm with u on the cable thing. My cable bill is approaching $180/month and I've been considering dropping much of my service since we don't even watch much TV, but I do enjoy HBO.

It's tough to get rid of all those things that we enjoy. I definitely agree that it's all about a person's perspective. I have a friend who makes a low six-figure income, has a wife, 2 dogs, etc. and lives on less than I do. He told me that because both he and his wife never really experienced a middle class lifestyle until recently, that he was never really "accustomed" to anything, so they don't spend much, don't drive, and don't need much space to live in. I think the only thing they "splurge" on is travel.

With me and my partner on the other hand, we came from what most would consider a middle-class backgrounds. We were never really "keep up with the joneses" people, however we are just accustomed to having certain things. I make about the same as my friend does, however I live in a bigger place, in a more expensive neighborhood, and I have a gas-guzzling SUV, premium cable, and travel a lot. Plus a few other expensive habits.

I really did not think about all of this until recently after I read Early Retirement Extreme, however we both enjoy a good standard of living, but I realize that I have to un-learn many of the bad habits and expectations I picked up as I grew up. One of the things that had a huge impact on me was when the author talked about purchasing real estate. I did not realize until lately that when you get a mortgage, that you wind up paying double the actual value of the loan. That was a shock, and really got me to re-think what I truly valued in life.

Either way, I say all that to say that this is a constant learning experience for me, and I thank everyone for their insight.
__________________
jackontrack is offline   Reply With Quote
Old 06-21-2011, 01:46 PM   #36
Moderator
Sarah in SC's Avatar
 
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,456
Jack, if you liked Jacob's ERE book, you might like this fellow. I've enjoyed reading his blog for a bit. Mr. Money Mustache | Putting the Cash in your Stash
__________________
“One day your life will flash before your eyes. Make sure it's worth watching.”
Gerard Arthur Way

Sarah in SC is offline   Reply With Quote
Old 06-21-2011, 02:02 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
We got educations and then good jobs with companies that had good benefits. We saved a big part of ourearnings and invested (conservatively and did not make too many mistakes). We kept our debt low and paid it off early.

Mostly hard work and savings... a little luck along the way also helped.
__________________
chinaco is offline   Reply With Quote
Old 06-21-2011, 02:14 PM   #38
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by jackontrack View Post
With me and my partner on the other hand, we came from what most would consider a middle-class backgrounds. We were never really "keep up with the joneses" people, however we are just accustomed to having certain things. I make about the same as my friend does, however I live in a bigger place, in a more expensive neighborhood, and I have a gas-guzzling SUV, premium cable, and travel a lot. Plus a few other expensive habits.
Either way, I say all that to say that this is a constant learning experience for me, and I thank everyone for their insight.
Yep. It can be very hard to change the values you grew up with.

I had the benefit of living on a submarine with little spare time or sleep, let alone personal space or privacy. A few years of that routine makes it pretty straightforward to figure out what's important to you.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 06-21-2011, 02:27 PM   #39
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,865
Quote:
Originally Posted by jackontrack View Post
Meaning, how are people achieving the income needed to quit their jobs and fund Early Retirement?

I see that there are several investors on here, so I am assuming that most of you earn decent returns on your money in the market.

Does anyone have a side-gig? 2nd job? Online stream of income? High-Income job? OR, have people just drastically cut their expenses and live frugally?

I am working to free up time on nights and weekends to pursue something else. Not sure exactly what it will be, so I am trying to see what others are doing for some ideas.
1) No kids.

2) No debts; I paid off my student loans before I took on a mortgage which I paid off in 9 years. Never had a car loan. Never carried a balance on my credit card, I use it maybe once every 2 months.

3) LBYM.

4) Worked for a company whose company stock grew by 3,000% in the 11 years I was there when its ESOP existed. I cleared 75% of it after taxes when I cashed it out and invested it in a bond mutual fund whose dividends more than cover my monthly expenses.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 06-21-2011, 02:35 PM   #40
Recycles dryer sheets
 
Join Date: Feb 2011
Location: anywhere usa
Posts: 246
The problem with individual health insurance, is it is inexpensive until you need it. Once you have a condition, you will pay big money for insurance. Even with the 2014 health care reform, that money is still coming from somewhere.

I like the ERE book, though Jacob takes things further than I am willing to. Primarily, inexpensive housing has a small % of residents that mess it up for everyone. I do not want to live around them. If you read his blog, it does appear he became financially independent, retired, and then promptly started other projects that cover his expenses anyway... It seems to me if one is going to work anyway, a few luxuries can be enjoyed.

When evaluating a luxury, I consider how much longer I have to work in order to save enough money to afford that luxury forever. If my SWR is 3.3% and a house keeper is $1000 a year, it requires $33k in assets to pay for a house keeper forever. That's an extra 6 months of working, which is totally worth it for me.

On the other hand, cable at $180 a month works out to more than a year of extra work. That is not even close to worth it for me. The library has free movies, and I can stream TV over the internet for free.

$360 a year to keep your appliances plugged in... that works out to an extra 12k in assets, or in my case around 3 months of extra working. I'd rather work 3 more months than unplug my appliances every day for the rest of my life.
__________________

__________________
pimpmyretirement is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Health Care Fund for ERs: Running out of money early samclem Health and Early Retirement 5 04-03-2011 10:21 AM
earning or losing money -- which gives you more anxiety? lazygood4nothinbum FIRE and Money 20 12-26-2008 10:10 AM
Prime Money Market Fund vs. Total Bond Fund two4theroad FIRE and Money 2 04-10-2008 01:46 PM
Bond Fund and Money Market Fund Tax Treatment Question terminator FIRE and Money 4 03-01-2007 07:56 AM

 

 
All times are GMT -6. The time now is 03:23 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.