Approaching a Milestone.....

[scrabbler1]

I did not want to hijack the "How far are you from your all-time high?" thread, but I did mention that I was getting close to the $1M mark for investment assets (retirement and non-retirement), an amount I was close to in 2008 before I retired.

Back then, I was at about $975k when I cashed out my company stock worth about $300k. I paid most of the state taxes that December and most of the federal taxes last April, maximizing my ability to deduct state taxes while meeting minimum estimated tax amounts. That, along with the falling stock market, dropped me down to under $800k for a little while in 2009. But the stock and bond markets have rebounded nicely so I am not only at an all-time high but am very, very close to the $1M mark ($997k). I am counting my small checking account balance (assuming all my checks have cleared) but am not including the $2k balance of an outstanding (and unsecured) loan to a close friend.

Remaining bills this month will set me back a little bit but continued growth in my portfolio along with a quarterly dividend in one stock fund will keep me moving toward the $1M mark, so I could easily hit it any day now.

My 47th birthday is in a few weeks so that would be a great b-day present!

Life is good.....

 

[jwkde]

Good to hear - Enjoy

 

[kaudrey]

Congrats! I'll have to look to see your "backstory", as I will likely hit $1M around 45 or so (in 4 years), but that won't be enough for me to retire on!

 

[FIREd]

Congratulations Scrabbler!

 

[simple girl]

Congrats! Very exciting, hope to be there someday, too. Hopefully sooner than we think, LOL!

 

[Alan]

Congratulations Scrabbler - well done

 

[ESRwannabe]

That's awesome scrabbler1.

Portfolio growth can really be amazing once it gets large enough for the investment return to outpace contributions. I am getting closer to that point and it is very exciting.

I am 33. I put around $24k a year in and my portfolio is around $175k now. Theoretically I could get close to a $17.5k per year investment return as I am usually around 80/20 stocks/bonds.

 

[Milkman]

I understand the feeling. In October 2007 I was within $75,000 of making that goal before the bottom fell out. By March of 2009 I was under $600,000. A year ago in March, I never thought that it would come back so fast. During the last 2 1/2 years I never stopped putting everything I could afford into my investments. Now I am less than $20,000 away. I know that 7 figures is just a number, but it still gives you something to get excited about. Somehow in the back of my mind, I am waiting for the shoe to drop.

 

[Leonardo]

Congratulations! I'm sure being childfree had a significant positive impact in your net worth.

 

[lightspeed]

Congratulations, and great work. It is a great feeling hitting the $1m milestone. What's even better is that your 2nd million will come much faster!

 

[Westernskies]

Congrats!

...on a related note, we experienced a new personal financial milestone this year, too- paid over 100K in income taxes...

 

[scrabbler1]

Thank you, everyone, for your kind words.

@ESRwannabe - When my portfolio was about $175k, I was 33 years old, too. This was in the mid-1990s when the stock market was booming. I was working full-time and was increasing the stock portion of my overall holdings. Between that and my company's ESOP taking off, I was averaging about $50k increase per year in those great years.

@Milkman - I hope you can reach the $1M mark soon. I, too, got a little worried not only because my investments had dropped in value but the "big" bond fund's monthly dividends had taken a tumble. Everything has increased and returned to what I hope is "normal," especially the monthly dividends.

@Leonardo - My being childfree is the biggest reason for my financial success and being able to retire in 2008 at age 45.

@Lightspeed - I have not been adding much to my portfolio from the outside because I stopped working (i.e. retired) in 2008. All my IRA's increase is from the growth in the stocks and bonds in it, not any new contributions. My non-retirement funds have increased mostly from growth but some from excess dividends reinvested (from muni bonds to the "big" bond fund and to stock mutual funds). Therefore, getting from $1M to $2M is not likely to happen as long as I remain retired.

 

[knucklehead 61]

congrats scrabbler!
i envy you & am trying to bail out at 45 as well, but it looks like a may have to push it back a couple years. can i ask how do you support your self with 1m total? is all that in taxable accounts? i have 1.1m in my portfolio, but only 300 to 325k of it is outside of ira & 401k accounts that i cant get to until 59.5 years old. so i am wondering how to support myself between 45 & 59.5?

 

[floatingdoc]

Congrats Scrabbler, I am 44 and just passed the 1M mark 1 month ago, currently 1.02M. I have to say that I know it is just a number but...its a large number. I moved to 100% cash and my target is 1.75M with 72K per year annual contributions. I hope to be there in 2017. Congrats. I ran the numbers and figured that with my savings rate, why take the risk?

 

[scrabbler1]

congrats scrabbler!
i envy you & am trying to bail out at 45 as well, but it looks like a may have to push it back a couple years. can i ask how do you support your self with 1m total? is all that in taxable accounts? i have 1.1m in my portfolio, but only 300 to 325k of it is outside of ira & 401k accounts that i cant get to until 59.5 years old. so i am wondering how to support myself between 45 & 59.5?

I had the same problem you had in the years leading up to my retirement in 2008. My retirement investments (RI) were growing more quickly than my non-retirement ones (NRI). In 2004 the value of my RI exceeded the value of my NRI. By 2008, my RI became 60% of the total. In 2007, I stopped contributing to my 401(k), mainly because I had become ineligible for any company match due to working only 12 hours a week. In the years before that, I should have kept my 401(k) contributions down to the level at which I would be able to take advantage of the company match but no more. Not doing that boosted my 401(k) a little but kept my NRI down a little, too.

But I had an ace in the hole to boost my NRI to get me through the age 45-59.5 years. I knew when I left my company I would have a one-time chance to liquidate all or part of my RI. My company's ESOP gave me a chance to sell my company stock holdings at a lower tax rate (LTCG) when I left it while I rolled my 401(k) portion into an IRA.

I did not want to take a beating on taxes and penalties by liquidating my 401(k), the same kind of beating you would face if you did that now or in the near future. I ended up paying about 25% of the ESOP in taxes (state and federal) and penalties, far less than the 35%-40% I would pay if I liquidated the 401(k). If you have any company stock in your 401(k), you may be able to cash it out at the LTCG rate by using NUA (Net Unrealized Appreciation), paying the 10% early withdrawal penalty on only the original cost (par value).

Another thing I was able to do when I left my company and cashed out my ESOP was to withdraw without penalty the after-tax contributions I had made to my 401(k) back in the 1990s. The earnings from these after-tax contributions I rolled into the IRA. This was my only chance to totally separate this blob of money from the rest of the 401(k) prior to turning 59.5.

The income from that big bond fund came from about $300k I invested in it initially (it pays almost 7%). I get about $2k a month from it, enough to cover my expenses with some room to spare. I was able to keep most of the rest of my ~$300k in NRI intact. Perhaps you can liquidate at most half of your RI and combine that with your NRI to cover your expenses (don't know how much they are)?

Speaking of expenses, I needed to be debt-free to keep them low. I also needed to find an affordable individual HI policy which could fit into my budget.

 

[smjsl]

Congratulations scrabbler! Nice round milestone!

...on a related note, we experienced a new personal financial milestone this year, too- paid over 100K in income taxes...

Hmmm, Westernskies, I think I envy you more than scrabbler!

 

[scrabbler1]

Wow, Westernskies, I thought I paid a lot in income taxes in 2008 when I paid about $74k, mostly as a result of selling my company stock. I thought I was going to have to pay a greater tax penalty (about $28k more) for doing that until I learned otherwise.

And with the big increase in the stock market and S&P 500 this week, I figured out that I am now only about $435 away from the $1M mark. It is likely that I will go over $1M and under $1M a lot in the next few weeks as I pay some big bills in the next few weeks. Makes for pleasant but bumpy ride LOL!

 

[scrabbler1]

With today's small gains in the stock market and S&P500, I am now over the $1M mark ($1.0008M) in total investments - my taxable accounts, my IRA, and my small checking account!

I do not know if I will stay over the $1M mark for the rest of the month, as I have two large bills (total=$2k) due in the next few weeks before I receive my next monthly dividends. I'd say the odds are pretty good I can stay above $1M.

 

[ejman]

Congrats!

...on a related note, we experienced a new personal financial milestone this year, too- paid over 100K in income taxes...

.

Congratulations! I guess? On a personal note, this is the first year that we paid zero in Federal and State taxes. I can only hope the second one of the usual duo remains equally distant.

 

[knucklehead 61]

i don't own stock in the co i work for (but likely will inherit at least half of it unless i bail out soon). my spread sheet shows expenses of $80k after taxes to survive the way i want to. (lets just say that that will be a substantial pay cut from what i earn today ) i think i have income streams set up to bring in about 75% of that amount now, but want a solid safety factor in place before i pull the plug.

I had the same problem you had in the years leading up to my retirement in 2008. My retirement investments (RI) were growing more quickly than my non-retirement ones (NRI). In 2004 the value of my RI exceeded the value of my NRI. By 2008, my RI became 60% of the total. In 2007, I stopped contributing to my 401(k), mainly because I had become ineligible for any company match due to working only 12 hours a week. In the years before that, I should have kept my 401(k) contributions down to the level at which I would be able to take advantage of the company match but no more. Not doing that boosted my 401(k) a little but kept my NRI down a little, too.

But I had an ace in the hole to boost my NRI to get me through the age 45-59.5 years. I knew when I left my company I would have a one-time chance to liquidate all or part of my RI. My company's ESOP gave me a chance to sell my company stock holdings at a lower tax rate (LTCG) when I left it while I rolled my 401(k) portion into an IRA.

I did not want to take a beating on taxes and penalties by liquidating my 401(k), the same kind of beating you would face if you did that now or in the near future. I ended up paying about 25% of the ESOP in taxes (state and federal) and penalties, far less than the 35%-40% I would pay if I liquidated the 401(k). If you have any company stock in your 401(k), you may be able to cash it out at the LTCG rate by using NUA (Net Unrealized Appreciation), paying the 10% early withdrawal penalty on only the original cost (par value).

Another thing I was able to do when I left my company and cashed out my ESOP was to withdraw without penalty the after-tax contributions I had made to my 401(k) back in the 1990s. The earnings from these after-tax contributions I rolled into the IRA. This was my only chance to totally separate this blob of money from the rest of the 401(k) prior to turning 59.5.

The income from that big bond fund came from about $300k I invested in it initially (it pays almost 7%). I get about $2k a month from it, enough to cover my expenses with some room to spare. I was able to keep most of the rest of my ~$300k in NRI intact. Perhaps you can liquidate at most half of your RI and combine that with your NRI to cover your expenses (don't know how much they are)?

Speaking of expenses, I needed to be debt-free to keep them low. I also needed to find an affordable individual HI policy which could fit into my budget.

 

[scrabbler1]

i don't own stock in the co i work for (but likely will inherit at least half of it unless i bail out soon). my spread sheet shows expenses of $80k after taxes to survive the way i want to. (lets just say that that will be a substantial pay cut from what i earn today ) i think i have income streams set up to bring in about 75% of that amount now, but want a solid safety factor in place before i pull the plug.

As part of your safety factor, you need to know that your expenses will rise more quickly (especially HI) than your income will (especially before SS and a pension kick in). In my spreadsheet, I needed to have a considerable surplus in my early years of ER because they will likely become deficits later (at least 10 years later). I do factor in a small income increase prior to SS and pension because I can reinvest those surpluses but that only slows the slide towards deficits. These deficits do not include IRA withdrawals, only from taxable (NRI) accounts.

Just some more food for thought.

 

[Westernskies]

Wow, Westernskies, I thought I paid a lot in income taxes in 2008 when I paid about $74k, mostly as a result of selling my company stock. I thought I was going to have to pay a greater tax penalty (about $28k more) for doing that until I learned otherwise.

And with the big increase in the stock market and S&P 500 this week, I figured out that I am now only about $435 away from the $1M mark. It is likely that I will go over $1M and under $1M a lot in the next few weeks as I pay some big bills in the next few weeks. Makes for pleasant but bumpy ride LOL!

Scrabbler, congrats on your financial milestone- didn't intend to hijack your thread. Our big tax bill was the result of DW and I both having good years at w*rk (usually seems like one is up when the other is down) and selling a piece of property on contract- capital gains on the the sale pushed us over 100K...the perfect financial storm.

 

[av8er]

Congratulations on accomplishing a very significant milestone.

@ESRwannabe - When my portfolio was about $175k, I was 33 years old, too. This was in the mid-1990s when the stock market was booming. I was working full-time and was increasing the stock portion of my overall holdings. Between that and my company's ESOP taking off, I was averaging about $50k increase per year in those great years.

If you don't mind me asking, how much did you invest in your retirement accounts each year (on average) to get from 175k at 33 to almost 1 mil by your retirement at 45? Again, great job!

 

[scrabbler1]

Congratulations on accomplishing a very significant milestone.



If you don't mind me asking, how much did you invest in your retirement accounts each year (on average) to get from 175k at 33 to almost 1 mil by your retirement at 45? Again, great job!

Thank you.

It is kinda tough to answer your question because the money came from several sources.

(1) My own pre-tax contributions into my 401(k).

(2) Company match dollars into my 401(k).

(3) After-tax contributions into my 401(k).

(4) Earnings on (1), (2), and (3).

(5) ESOP distributions (company stock).

(6) ESOP gains in value (Net Unrealized Appreciation, or NUA).

(7) Non-retirement (taxable) account contributions.

(8) Non-retirement (taxable) account earnings.


It is tough to quantify some of these items (mainly because there is intermingling and internal transfers), but I can tell you that Item (6) was the largest at $279k.

 

[ikubak]

Not trying to hijack, just piggyback on your theme. DW and I updated Quicken this morning and hit the 1M mark. I know it's just a number and I don't really feel any different, but it's a nice finally see a 7 figure number on my net worth.