When can this newbie FIRE?

[newbie_fire]

Hello folks:

Its been a couple of weeks since I found this wonderful forum and was quite surprised to see so many folks out there looking to retire early


For a while, I was embarrassed to publicly admit that if I had the choice, I would retire/semi retire today. I've been in the IT industry for 10 years now and I feel "burnt out" at this point in my career.....tired of taking sh** from my bosses, tired of waking up at night to answer the pager etc etc.


Of late, I find myself NOT wanting to lead large teams and I try to stay away from "big" projects. Infact, I am a little ashamed to say it - but I would be very happy with a job where I would not have to work too hard and still get paid the same - ha! like thats going to happen!

My dad tells me I'm getting soft at a really young age and gets annoyed when I whine about how I would love to hang it up soon


Well anyways, to put an end to this rambling - earlier this year I started contempating early/semi retirement - and when and if at all it could be possible.

Did not know that there was a forum out there that discussed just that!Awsome!

Dont believe that I have the asset base to retire in the United States, so decided to retire in India (I grew up in India) but have spent the last 15 years here in the US. I understand that it'll take us a while to adjust back to life in India after having been here so long, but we are up for it.


Here are some details:

Age: me - 32, wife - 28, baby on the way


Assets

Emergency fund : 25K in VanGuard MM
Home in India : 170K (paid off)

Retirement and child's college fund : 225K - Have combined into one portfolio

Invested as follows

Stock : 65% - of which 60% is US and 40% international
Bond/Cash : 35%

Mostly spread across Vanguard funds (VTSMX, VGTSX, VFSTX), with the bond allocation held in my 401K.

No other debt.

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From what I have heard (friends and family), living expenses in India (for a "good" life) range from Rupees 30K - Rupees 50K (monthly).

45 Indian rupees make 1 USD.

So that translates to annual expenses of approximately $8K - $13K. I would pick the high end number $13K.

Now, inflation in India is much higher than it is here (5.5% - 6.0%). But, the money market funds/CDs and bond funds returns are also higher - the average clocks in at (6% - 8% with minimal risk). And LTCG from Bond funds are taxed at 10%, not at marginal rates as they are here.

So my question to you experienced folks is - am I getting close to FI/RE? Based on a 4% withdrawal, it looks like I am about a $100K - $150K short at this point, and based on the high inflation in India, it looks like a larger buffer is in order?


Thoughts and suggestions are welcome.......

And once again - its great to be a part of this board.

Thank You.

 

[MasterBlaster]

NF:

well the way I see it is that your $225k will generate around $9k a year income using the 4% SWR rule. So if you could live in India for $8-13k then you are already in that ballpark. So based on the 4% SWR, you could retire now and live modestly in India.

You didn't say how old you are, but based on how long you have been working I will assume you are around 35 years old. At that age your retirement could last up to 60 years or so. For very long retirements like that the SWR drops to around 3-3.5 percent. So based on that scenario you could only safely withdraw ~ $(6.75-7.87)k per year. That's under your income living range.

Perhaps you should keep working for a couple more years or work part time to supplement your income.

You also need to think about healthcare and currency risks. I can't help you on healthcare in India.

About the currency risk, Over the long haul I would expect Indian currency (Rupees) to rise against the US dollar. So if you are considering keeping your investments in the US you need to hedge for currency devaluation. If you take your money out of the US (qualified retirement) accounts then depending on how you do it, US income ( and perhaps early withdrawal) taxes will be levied on you. That could eat up a big portion of your nestegg.

 

[slepyhed]

So my question to you experienced folks is - am I getting close to FI/RE? Based on a 4% withdrawal, it looks like I am about a $100K - $150K short at this point, and based on the high inflation in India, it looks like a larger buffer is in order?


Thoughts and suggestions are welcome.......

First, welcome to this forum! You'll get lots of help and support from like-mided folks here.

Second, I've read your post several times and given it lots of thought... and I come to the same conclusion: you are about $100k-$150k short.

The 3%-3.5% SWR that MB is refering to is based on US data from the 20th century- your situation is much different. If you are planning on staying invested mostly in US stocks and bonds, you could use FIRECALC to figure out possible returns, but how do you handle inflation? As you say, inflation in India is much higher, and I'd expect that to be a long-term trend... On the other hand, you would probably want to invest in India more if you were living there, and you should be able to get a good mix of investments that outpace inflation.

Yours is a challenging question!

Some other thoughts:

What are your plans to pay for your child's education? Its a long way off and a lot can happen between now and then, so its unrealistic to make firm plans. You can, however, consider your options. Just having some idea of what you may be in for should be helpfull. For example, you could decide to return to some kind of easy low skilled-type job to earn money to pay tuition when the time comes.

You have a $170k paid-for house in India, yet you have been living in the US for 15 years? That bogles my mind! Is that an expensive house there? Could you sell it and move to a less expensive area in India? I have no clue about Indian real estate, but I'd be curious to learn.

I'd suggest teaching your child your native tongue as well as english right from the start - that will help in the future.

Looks like you are almost there. I look forward to hearing more about what you find out for yourself over the next few months/years. Don't be a stranger!

 

[brewer12345]

Heh, have the kid first, then revisit the idea. A lot changes in your life when you become a parent.

 

[Rich_by_the_Bay]

Listen to your father.

I think you're pushing it, unless you are willing to go back to work some day without considering such a move to be a "failure."

Health care, children, high inflation in India, 55 year horizon, too young to fully know what your life plan will look like in 10 or 20 years, political instability which might lead you out of India, special needs, and a million other imponderable variables...

If it were me, I'd look for a more rewarding job. That seems to be where the lesion is. And I'd have a good talk with myself about whether you'd really be happy 5 or 10 years into retirement at your age. I'm sensing restlessness but not a positive, well thought-out plan for when you are not working and not earning. Feels impulsive and frustration-driven, not a good combination.

I'd plan for enough to live simply in the USA, perhaps meaning living luxurously in Inda. That way your options are open, though you will have to have a much bigger nest egg.

Sorry for the negative feedback. Just reading between the lines a bit. Best of luck whatever you decide. You are off to a good financial start for age 32.

 

[macdaddy]

Hi Newbie -
I would 2nd what Rich said. Would you be happier in the US? If so, why not try to find a lower stress job. Lots of non profit charities and community groups need IT people. If you want to work 30-40 hours a week in a low stress environment you will also make less, but it should be enough to survive on. Sometimes it can feel like the only way to get away from a demanding job is to quit and move across the world, but there are other options!

 

[newbie_fire]

Thank you all for your responses - you make very good points.

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Response to MasterBlaster's post

I am 32 years old and my wife is 28

You mentioned currency risks and Heathcare - both very valid concerns

Healthcare in India is not as expensive as it is in the United States, but its not that cheap either. I'll need to research this more and come up with actual numbers and a comparision.

As to the falling dollar - not just with respect to the Indian Rupee, but to other currencies as well, my plan was to

1) Hold my Bond Allocation in local currency (Indian rupees), That way it keeps up with inflation as well

2) For my stock allocation, I will hold 40% in Foregin funds (so if the dollar goes down, this can act as a hedge). Of this 40 %, 20% or so will be invested in Indian Mutual Funds in local currency.

Thats what I have thought of so far to hedge against currency fluctuations and higher inflation in India.

I'll look for more comments on whether this makes sense or not.

You also bring up a great point about withdrawals from my 401K. here is what I plan to do -

1) Roll over to IRA before I leave and then convert to Roth-IRA in small amounts every year, in such a way that I dont have to pay any US tax on the converted amounts (< $20K - standard deduction and child credit). Then hold for 5 years before withdrawing any of the gains. I believe that this way, I could minimize the tax hit and also get away with no penalty. Is this a correct assumption?

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Response to Slepyhed

Thanks for spending so much of your time to respond to my questions - much appreciated.

Dealing with higher Inflation in India is surely a big challenge and I agree that there isnt an easy solution.

As I said in my response to MasterBlaster, the only thing I could think of was to hold my bond allocation in Indian Rupees and also hold a part of my stock allocation (the India portion) in Indian rupees.

As far as our child's education is concerned, good Undergrad education is not as expensive in India as here
in the US. And as you say, its hard to plan that far ahead, so If my child wants to do a post grad MS, MBA, or work in the States, then she'd have to study hard, get a scholarship/job and come here on her own steam - like I did .

I'm not planning on keeping aside a huge amount of money for this purpose. I hope that didnt come across
as being "inconsiderate".

About the home in India - yep boggles my mind too . Unfortunately, I could never really settle in one place - such is the nature of my job and therefore could never have the courage to buy a home here in the US - always rented, packed and moved every couple of years.
Anyhow, we bought this house in India only earlier this year. Its a high end home in a tier 2 city. Indian real estate has been booming for the last 10 years or so - prices in Tier 1 cities like Bangalore, Bombay, Madras, Delhi or Hydrebad are sky high and so is the cost of living. So i picked a Tier 2 city where the prices have not appreciated as much and it is also the city in which my parents have retired.

Yes, its a given that we will teach our child both languages - infact, a high degree of proficiency in English and Hindi (national language) are "must haves" in any of the good schools in India.

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Brewer12345, can't argue with what you said about waiting till after the child. At this point I'm just contemplating WHEN and if at all FIRE is possible. Things may most certainly change.

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Rich and Macdaddy,

Thanks for keeping me "honest". Your points about inflation, a 60 year retirement timeline, healthcare and "what ifs" in life are completely valid.

I was "venting" a little when I wrote my original post, mainly due to being frustrated with long hours at work, but I dont really plan on bring my income down to a COMPLETE halt anytime soon. Just looking for options and taking stock of where I am financially and how I can go about TRYING to semi-retire/retire.

Yes, a lower stress job would certainly help and I'll be on the lookout in the next couple of years.

Another reason (and a very important one) why we want to go back to India is - our parents arent getting any younger, and we would like to spend time with them, having been out of the country for so long. Ofcourse we've been going back on trips and they have come here many times to visit, but the 30 hour travel time isnt pleasant. Moreover, we are very attached to our folks and would like to be around them to help them through their old age. Cannot expect them to come live with us here in the US at that age - too much of a change - and again medicare is not cheap. So, India it is

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Once agan, thanks for your responses and hope to hear more.....

 

[ylm23]

If a major issue in your FIRE plan is to spend more time with your parents, why not move to India and keep working but at a more relaxed pace? Tech is booming in India, I am sure with your USA experience you'll find work (of course it will depend on where you are geographically, but I'd assume a Tier 2 city is large enough for some tech). You don't sound as though you are ready for complete retirement yet.

 

[newbie_fire]

YLM23

Im leaning towards that as well - return to India in a couple years and continue to work in a low stress environment for a few years.

Tier 2 cities do have a lot of opportunity when it comes to IT. But working in IT comes with a price in India - good money but lots of stress and odd hours due to global clients.

So I'll be looking out for something in other sectors - not sure which one yet.

Yes, I agree I'm not ready (financially and mentally) for complete retirement yet. If I had a couple million stashed away - sure

Thanks for your post

 

[Milton]

My dad tells me I'm getting soft at a really young age and gets annoyed when I whine about how I would love to hang it up soon

No surprise there, surely? No one likes a whiner or complainer. Especially at your age and with a grandchild on the way, he doesn't want to hear anything that suggests you are irresponsible or lazy.

However, that doesn't mean that your problems at work are unimportant, or that your future plans are crazy. I simply suggest that you make those plans without consulting other people (except your wife, natch), or at least without going into why you want to move back to India. I'm sure that there are positives to that step (closer to family; better food or climate; etc.), and you should be able to 'sell' it on that basis when the time comes.

If you take a low-stress job (perhaps part-time?) when you return to India, that should help address any concerns that you are not an idle layabout.

From what I have heard (friends and family), living expenses in India (for a "good" life) range from Rupees 30K - Rupees 50K (monthly). 45 Indian rupees make 1 USD. So that translates to annual expenses of approximately $8K - $13K. I would pick the high end number $13K.

Inflation and currency fluctuations are things to consider, but I think the weakest point of your plan is that you're unable to accurately predict your expenses. How reliable is the anecdotal information you're casually received? What if it turns out that US$25,000 is a much more realistic annual amount? I'd suggest some serious research before pulling the plug on your current situation.

 

[haha]

To bad you can't sell your green card on your way home.

Ha