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Old 02-05-2019, 07:39 PM   #21
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Lots of great feedback here, I agree with the others that you're almost there, but more would be much better. Closer to $3M seems to be the magic number.

It's surprising how much it takes just to get by these days, especially in CA. With 2 kids, I can't imagine... I wouldn't be surprised if you re-evaluate your annual expenses once you have had a chance to experience the high cost of living first-hand. (London is 6% cheaper than SF!) If you lived in another state, I'd say you're there with your home equity; but you need to develop some cash flow. I've read it will take more than $100K of income per year for a middle-class Bay Area family lifestyle.

I wholeheartedly support the sabbatical idea. Your kids will grow up so quickly, now is the time to do it. It was great for me; and taking a year off didn't change my job prospects in any negative way. You're still very young and won't age out of the job market quickly. You can definitely afford it for a year or two if that's what is most important to you. It's also not a bad introduction to FIRE, so you can get a feel for it.

One challenge for you to FIRE is that you will be penalized for any withdrawals from tax-deferred retirement accounts for a couple of decades. That's the last money you'll want to touch. It is also the capital you can take the most risk with, since you have a longer time horizon and you share the risk with Uncle Sam.

As you prepare to RE you may want to re-evaluate your asset allocation with respect to risk and cash flow. When you're not working, it's comforting to have a basket of less-risky financial and physical investments that will produce regular income regardless of the performance of the market. Dividends, annuities, REITS, property, CDs - all of these can generate regular income while protecting your principal over the long-term - each with their own pros and cons. My broker has several Money Market investment accounts that can earn upwards of 3% - much better than leaving cash in a common sweep account. I like using my free cash to balance out the performance of the market. In fact, one of my investor friends sent me a newsletter last week that said that Cash was the top performing asset class in 2018. I won't be surprised if it happens again in '19.

Since you are so young, you might want to focus on developing a diversified investment strategy that leverages your post-tax investments to generate a secure cash-flow [while preserving your capital]; and that uses your tax-deferred investments [IRA's 401's, etc.] for more aggressive asset appreciation and long-term capital gains that will be there to withdraw when you are older.

You sound like a very motivated young person and I'm sure you'll make it work, no matter what you decide. Be careful where and when you invest; and best of luck to you!
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Old 02-05-2019, 11:58 PM   #22
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Originally Posted by Nerdjenni View Post
Hola! Been following this site for years as I've been working towards financial independence. Thinking of hiring a financial advisor to get a professional second opinion, but I thought I'd ask you guys in the ERE forums for some advice first.

I am getting laid off from my employer of 12 years. I have been working towards FI for last decade, with the goal of taking some time off and then transitioning to a (much, much) lower-paying job or self employment.
We live in the Bay Area and what we did was optimize all our expenses and try to spend half of what we used for the same lifestyle. By optimizing expenses and managing our taxable income, our health insurance is only $2 a month.

Would your wife be willing to work part-time once your kids are in school? If you could lower expenses $20K, you made $50K, she made $20K, then you would only need to draw down $30K from your portfolio every year, or 1.25%. If you can lower your overhead by $20K a year for 60 years, there's $1.2M less you need in retirement funding. And at 1.25% your portfolio would still be growing, plus you would both get Social Security later on.
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Old 02-06-2019, 09:22 AM   #23
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I really need to get a better handle on healthcare costs, as I estimated far lower. You spend $25k/yr for how many people/age? And you're right that the kid costs will only increase.
You can use the CoveredCalifornia website to get estimates for current health insurance costs. Enter an income around $100K and you'll get the full quote without subsidies. It's educational to get multiple estimates for different ages so you understand how much premiums rise based on age alone. E.g. the base premium for a couple that is 63 & 64 is almost twice as much as for a couple that is 53 & 54. When the news says "premiums in Northern California will rise an average of 11% next year", that's in addition to the 3.5% that they are going up anyway just because you are a year older.

I'm in Southern California where healthcare is a little cheaper, and it's just me and DH on our policy. Based on my research and some spreadsheet calculations, I estimated that our total unsubsidized premium and OOP costs for 10 years of ER would be around $250K, and it's looking like that was too low; and that's assuming we continue to be healthy and not see medical professionals for anything other than preventive care. A young family of 4 probably has lower premiums than a couple in their 50s, so your initial estimate is probably fine, but you do need to think about how much it'll cost in 15 years when you're a couple in your 50s.
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Old 02-06-2019, 11:27 AM   #24
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I'll bite. I'm curious how you've accumulated over 3MM dollars at only 37 and taking "several long sabbaticals (6mo-1yr) throughout my career"? How many is several? I doubt you started making 400k right out of the gate. The math just doesn't add up?
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Old 02-06-2019, 12:54 PM   #25
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I'll bite. I'm curious how you've accumulated over 3MM dollars at only 37 and taking "several long sabbaticals (6mo-1yr) throughout my career"? How many is several? I doubt you started making 400k right out of the gate. The math just doesn't add up?
Hmmm, Not knowing the specifics I will try to defend him. Let's say 2 six month sabbaticals over 16 years (let's say he graduated college at 21). So 15 years of work at 400K now but we'll say avg 250K. Saved 50% and had a great company match. 125 X 15 years = 1.8 or more even w/out match or compounding. Maybe DW worked until the kids were born. Maybe house cost 400 back in the day and is now worth 1 mil. Plausible.
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Old 02-10-2019, 12:58 PM   #26
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Originally Posted by Starsky View Post

It's surprising how much it takes just to get by these days, especially in CA. With 2 kids, I can't imagine... I wouldn't be surprised if you re-evaluate your annual expenses once you have had a chance to experience the high cost of living first-hand. (London is 6% cheaper than SF!) If you lived in another state, I'd say you're there with your home equity; but you need to develop some cash flow. I've read it will take more than $100K of income per year for a middle-class Bay Area family lifestyle.
So true. I just checked out the EPI Family Budget calculator (link here: https://www.epi.org/resources/budget/) and it says that for family of 4 in the SF metro area to live a "modest yet adequate standard of living" requires $148K/year. Taking out taxes (assuming minimal taxes if I'm retired), I still need close to $120K. It's really crazy and explains why when I went back home over the holidays to visit friends in the bay area, everyone seemed to be struggling despite earning good incomes. Also just read this article on "Why Households Need to Earn $300K to live a middle class lifestyle" (https://www.financialsamurai.com/liv...xpensive-city/). Really puts a damper on any dream of real early retirement.

That said, I know myself well enough to know that complete retirement isn't my ideal life. I just want to be able to downshift and have greater freedom and flexibility.
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Old 02-10-2019, 01:15 PM   #27
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Originally Posted by Bigdawg View Post
Hmmm, Not knowing the specifics I will try to defend him. Let's say 2 six month sabbaticals over 16 years (let's say he graduated college at 21). So 15 years of work at 400K now but we'll say avg 250K. Saved 50% and had a great company match. 125 X 15 years = 1.8 or more even w/out match or compounding. Maybe DW worked until the kids were born. Maybe house cost 400 back in the day and is now worth 1 mil. Plausible.
So the answer is: I took 3 sabbaticals over the last 16 years of my working life, ranging from 6-12months. I was lucky enough to stay employed through two of them, which meant I didn't lose vesting. Company stock hasn't been stellar, but it's been solid. Spouse didn't bring much savings in but did bring the house (inherited), so I can't take credit for that. By the way, why do you think I'm a "he"?
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Old 02-10-2019, 02:34 PM   #28
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Originally Posted by Nerdjenni View Post
So true. I just checked out the EPI Family Budget calculator (link here: https://www.epi.org/resources/budget/) and it says that for family of 4 in the SF metro area to live a "modest yet adequate standard of living" requires $148K/year. Taking out taxes (assuming minimal taxes if I'm retired), I still need close to $120K. It's really crazy and explains why when I went back home over the holidays to visit friends in the bay area, everyone seemed to be struggling despite earning good incomes. Also just read this article on "Why Households Need to Earn $300K to live a middle class lifestyle" (https://www.financialsamurai.com/liv...xpensive-city/). Really puts a damper on any dream of real early retirement.

That said, I know myself well enough to know that complete retirement isn't my ideal life. I just want to be able to downshift and have greater freedom and flexibility.

Most of the high part of high cost of living areas is usually housing. We bought our Bay Area house a long time ago so it was not too expensive, have Prop 13 for low property taxes, a $2 a month Bronze ACA plan, we eat low on the food chain and shop at places like ethnic markets and outlet stores so our grocery bills are pretty low, we made the house more energy and water efficient making our utility bills low, kids went to good public schools for K - 12, they went to community college and in state public schools for college, etc. Overall our expenses are pretty reasonable, certainly no where near $300K for a middle class lifestyle.
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Old 02-10-2019, 02:52 PM   #29
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So I just want to be able to downshift and have greater freedom and flexibility.
Normally at 37 I'd say keep working full stop. But in your case, I would instead:

- Take the severance, minimum should be 6months salary + accrued vacation/bonus, negotiate for serial pay with healthcare included if you can (then you can cobra after if needed, but have time to shop around). Yes the quotes upthread about $25k for a family of 4, are real if un-subsidized.

- Take a short break to move back, get settled, kids, etc. 90-180 days ish.

- Contact recruiters that you are ready for a new role at another company, while simultaneously exploring what you'd do for a new lower-income role in a few years.

If you were 47 I'd say stay put and stick it out 2-3 years, but at 37 you have enough time to course correct as long as you don't take too long a break. A 38 year old explaining a <1 year gap on a resume "we relocated back from another continent with a 6 month old so I took some time for the move+family" is totally reasonable.

Pro-tip, if you get serial severance vs. lump sum, at most companies that means you are still officially employed until the end of the payouts, helping cover the "gap" in your employment.
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Old 02-16-2019, 07:35 AM   #30
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In my case I make your desired spend rate working just one day a week. I also spend about 100k per year and because it is possible to charge a lot as a contractor and consultant it is not hard to earn $250 an hour, or $2,000 a day. So I can work one week then take the rest of the month off. That gives me a zero withdrawal rate over the three years I've been retired even though I pay about $23,000 on health insurance and our HSA.
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Old 02-17-2019, 06:22 AM   #31
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Other things to consider: A $1+M home will have a great deal of upkeep and maintenance. My experience as a home owner is that you need 1 - 2% of the value of the home per year (on average) for upkeep. This includes saving for a roof, taking down trees, window replacement, heat/ac/water heater/appliance/etc. I'd err on the high side.
We’ve spent about 1.5% of value per year over 18 years in our current house. That has been doing most routine things myself. I hadn’t spent anything near that in two previous houses, but large expenses that were avoidable over less than 10 years of ownership simply weren’t over the long run-and included everything on your list. One of our retirement goals is buying less house this time.
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