Barista FIRE with kids in Switzerland

[FIREd]

I'd feel comfortable with a "barista FIRE" plan where conservative withdrawals from the portfolio (WR <3%) are sufficient to cover fixed expenses and where income from work/consulting covers discretionary expenses.

 

[eurobogle]

I'd feel comfortable with a "barista FIRE" plan where conservative withdrawals from the portfolio (WR <3%) are sufficient to cover fixed expenses and where income from work/consulting covers discretionary expenses.

If we stay in our HCOL country then we are not in that position, and so you would not be comfortable with our plan as it is today.

If we moved to an LCOL country then we would be in that position, and so then you would be comfortable with our plan.

Question is: How about if we stay in our HCOL country, and cover our costs with a combination of <3% WR and earned income, and are prepared to move to the LCOL country in the future if necessary. Are you comfortable with that?

On the one hand we could FIRE to a lower-cost country today and then everybody would approve of our plans, even most Bogleheads. On the other hand that seems too preemptive to me: it's likely that earned income and market returns will be better than we plan for, and that keeping a move abroad in our pocket as a "Plan B" would allow us to capture that upside - should it materialize - by staying put here and skipping the move. I don't see any additional downside risk provided that we don't deplete our current portfolio and stay open to a move in the future.

 

[tb001]

I guess the biggest question would be what’s the trigger point to moving. And if you need to do it, will it likely be at a time when real estate values are depressed. If so, does that impact your overall portfolio significantly. How might having to pick up and move to a new country impact your children? You need a considerable amount of portfolio growth to get to your planned withdrawal rate—how long will that take if you’re pulling out 50% of your expenses? These are the questions we’re asking ourselves as well.

 

[FIREd]

If we stay in our HCOL country then we are not in that position, and so you would not be comfortable with our plan as it is today.

I am sitting here at my desk with a view over the Jet d'Eau in Geneva, so I have a pretty good idea of the COL in Switzerland and I do indeed think that $1.2M is a bit too close for comfort for this part of the world, especially for a family with two young children.

If we moved to an LCOL country then we would be in that position, and so then you would be comfortable with our plan.

Question is: How about if we stay in our HCOL country, and cover our costs with a combination of <3% WR and earned income, and are prepared to move to the LCOL country in the future if necessary. Are you comfortable with that?

If you are truly willing to move to a lower COL country if your plan falls apart, then it might be acceptable to take the risk.

It does not have to be all or nothing either. You can stay in Switzerland for a while, start to cut your work hours, and see how your financial situation evolves.

I lived "above my means" in downtown San Francisco for a few years after retirement, but I always knew that I would end up in a lower COL area eventually. I was lucky in that those were excellent market years and the SF stint never endangered my FIRE plan.

On the one hand we could FIRE to a lower-cost country today and then everybody would approve of our plans, even most Bogleheads. On the other hand that seems too preemptive to me: it's likely that earned income and market returns will be better than we plan for, and that keeping a move abroad in our pocket as a "Plan B" would allow us to capture that upside - should it materialize - by staying put here and skipping the move. I don't see any additional downside risk provided that we don't deplete our current portfolio and stay open to a move in the future.

There is really no way to tell whether it is likely or not for your earned income and market returns to be better than you plan for. You really have to look at all the angles and prepare for the worst. What if the market if overvalued and returns are smaller than average in the future. What if the consulting gig does not pan out? You do have a plan B, but you have to make sure that, if the time comes, the whole family will be able to leave Switzerland without regret (with more than one person involved in this decision, uprooting the family might be harder than you think).

 

[RetMD21]

I suspect that once the kids start school then "screen time" won't feel like such a scarce resource and I won't be so preoccupied with downshifting. However, since we're looking at a decade of total time having preschoolers at home, I am being conservative by planning as if this is the new normal.

Hard to know what the future holds. Swiss society is engineered around the assumption that families have stay-at-home mothers, and so e.g. children can return home from school to eat lunch with their families, and since we are sharing childcare responsibilities 50/50 in our family this might mean that we'll never be able to both work full-time.

I like your plan. You are staying professionally engaged but having time for the children while living in a nice HCOL location with the option to change when you want. Maybe you should just continue until circumstances change and then adapt. If we imagine that in 15 years you regret the portfolio withdrawals you could switch to working full time for a while or relocate. It wouldn't be the end of the world.

 

[daylatedollarshort]

If it were me, I would not plan on moving countries once the kids are in school and have their social networks and activities set up. Some things are more important than money.

Can you reduce your expenses where you are at? You don't have to go all MMM or make your own rakes extreme, but we cut a lot just by examining every expense, eating more plant based meals, replacing an ink jet with a laser printer, cooking from scratch more, making the house water and energy efficient, price shopping insurance and optimizing deductibles, making our own cleaning supplies, and probably 100+ more small changes along those lines. We kept the same house, location and basic lifestyle, and even upgraded one of the cars but on a much lower budget than we had when working full-time to be able to retire early. What tends to be good for the planet / global warming is usually also good for one's expenses.

 

[samclem]

If you are truly willing to move to a lower COL country if your plan falls apart, then it might be acceptable to take the risk.

. . . .You do have a plan B, but you have to make sure that, if the time comes, the whole family will be able to leave Switzerland without regret (with more than one person involved in this decision, uprooting the family might be harder than you think).

I do think the move would prove much more difficult once the kids are in school and have their close friends, etc. In addition, a move costs money--to move the household, to search for the new home, closing costs/selling costs/even deposit on a new rental. And the costs can be a >lot< higher if the present home is owned and must be sold in a down market (which might be consistent with a downturn in both investment returns and employment income).

If the OP and spouse are truly open to a move to a LCOL country, doing it now might be preferable rather than betting that all the planets stay in alignment for a decade. Then, the risk is removed--the kids wil stay with their friends no matter what, there will be no need to search for a new abode when household money is already tight. The OP would presumably be able to spend even more time with the kids and less time at work (due to lower expenses). If there's no market downturn, then the portfolio continues to grow and they can buy back into Switzerland.

There are different levels of cutting back. To me, it would be entirely acceptable to ask our family to cut back by foregoing a spendy vacation, by driving the family car for 5 additional years, by eating out less often, cutting back on cable, etc. But if our backup plan is to sell the house and move to a different state/country when the kids are in school, I'd probably look for a different plan.

 

[HI Bill]

We have $1.2M in a balanced portfolio of index funds and our annual expenses are currently $100K/year but should decrease to $70-80K once the children start school. We we have a $200K mortgage on our home.

On the other hand we could be "Bogleheads" by working hard, focus on accumulation, and retiring rich here in Switzerland at 50-55. However neither alternative quite suits us and we are looking for a middle path that is reasonably responsible and allows us to enjoy working on our own terms, pursuing our own interests, taking professional risks with our time and energy.

What we have have decided to do is "Barista FIRE" here in Switzerland. We will start immediately withdrawing ~$50K/year from our portfolio (VPW method) to cover around half of our living costs. We will then work enough to cover the remainder of our expenses...

With a net worth of just $1M, at your age, with your kids at young ages, I would consider it vastly irresponsible to try any form ore RE. What if one of you gets sick? What if the markets lose 30-40% of their value? What if....too many unknowns, over too long of a horizon. I would recommend the Bogleheads plan. VPW is very risky for someone your age, especially with your modest assets, and your inability to cut spending much more than the planned 20-30% reduction (which I don't see as realistic, as the kids start needing more lessons, sports gear, stuff, clothes, etc.). I also would not want to have my travel and toy budgets constrained this much. All the time in the world, but no money to spend on pursuits that would give your lives meaning (other than raising the kids).

 

[eurobogle]

Thank you everybody for the replies so far. There is a lot of food for thought here.

I have come upon one really striking way to frame the issue: that we are spending approximately $50K/year on the luxury of living in Switzerland. This would amount to an extra one million dollars of spending over the 20 year period that we raise our children here. The alternative would be to raise our kids in Sweden, another country we love and are citizens of and would be happy to live in, and save the money.

The question then becomes: is raising our kids in Switzerland instead of Sweden really worth a million dollars to us? Or: would we be willing to move to Sweden for a million dollars?

Is this a legitimate way to frame the question? Note that our income and taxes would be approximately the same in either country, for complicated reasons, and so I believe there really is a $50K/year impact on our bottom line (except that we may choose to work less when our expenses are lower and besides the sunk cost of years already spent here.)

This is striking to me because I have often read Bogleheads threads about people spending hundreds of thousands of dollars to put their kids into private schools or exclusive colleges. I have always thought, wow, what a crazy system that is in the USA, thank goodness we don't have to work and save for such expenses here. Maybe all the while we have been doing that, and then some?

 

[HI Bill]

The question then becomes: is raising our kids in Switzerland instead of Sweden really worth a million dollars to us? Or: would we be willing to move to Sweden for a million dollars?

Is this a legitimate way to frame the question? Note that our income and taxes would be approximately the same in either country, for complicated reasons, and so I believe there really is a $50K/year impact on our bottom line (except that we may choose to work less when our expenses are lower and besides the sunk cost of years already spent here.)

If Sweden = Swizterland in terms of your standard of living/quality of life/education, etc., then why don't you move there? At only $1M in NW, I would work to double that, as the SORR is vastly unknown over the next 60 years. Tax rates, health insurance costs, inflation, unanticipated emergencies, potential divorce, and even desired changes in lifestyle are all variables that are difficult, if not impossible to know, much less model all together. While I understand you desire to FIRE, most of us on this board would not do so without a large safety margin, especially at your young ages.

 

[daylatedollarshort]

Thank you everybody for the replies so far. There is a lot of food for thought here.

I have come upon one really striking way to frame the issue: that we are spending approximately $50K/year on the luxury of living in Switzerland. This would amount to an extra one million dollars of spending over the 20 year period that we raise our children here. The alternative would be to raise our kids in Sweden, another country we love and are citizens of and would be happy to live in, and save the money.

The question then becomes: is raising our kids in Switzerland instead of Sweden really worth a million dollars to us? Or: would we be willing to move to Sweden for a million dollars?

Is this a legitimate way to frame the question? Note that our income and taxes would be approximately the same in either country, for complicated reasons, and so I believe there really is a $50K/year impact on our bottom line (except that we may choose to work less when our expenses are lower and besides the sunk cost of years already spent here.)

This is striking to me because I have often read Bogleheads threads about people spending hundreds of thousands of dollars to put their kids into private schools or exclusive colleges. I have always thought, wow, what a crazy system that is in the USA, thank goodness we don't have to work and save for such expenses here. Maybe all the while we have been doing that, and then some?

We found it helpful to house hunt. In our case we decided it was worth staying in a HCOL area (Bay Area), but we didn't know that until we looked around and did up different budgets. We found that for us, other than the cost of housing, it was not that much cheaper to live elsewhere and some expenses here are actually cheaper.



It is not really a crazy system in the U.S. as a whole. Our kids went the community college / public 4 year school route with paid internships, summer jobs, tutor jobs, and financial aid making our out of pocket college costs very modest.

 

[eurobogle]

We found it helpful to house hunt. In our case we decided it was worth staying in a HCOL area (Bay Area), but we didn't know that until we looked around and did up different budgets. We found that for us, other than the cost of housing, it was not that much cheaper to live elsewhere and some expenses here are actually cheaper.

We have done some window shopping. I think it is fair to say that all of our costs would be halved, including food/transport/housing/etc, except for healthcare which be free instead of costing ~$10K/year for the family. The equity in our current house should be sufficient to buy a new one without a mortgage.

This difference is mostly due to the CHF:SEK foreign exchange rate. The Swiss Franc has almost doubled in value relative to the Swedish Kronor over the past decade. This is currently a negative thing for us, since our income is mostly sourced from abroad, but it would be positive to "lock in" those gains by replacing the real-estate (home) and bonds in our portfolio.

 

[daylatedollarshort]

We have done some window shopping. I think it is fair to say that all of our costs would be halved, including food/transport/housing/etc, except for healthcare which be free instead of costing ~$10K/year for the family. The equity in our current house should be sufficient to buy a new one without a mortgage.

This difference is mostly due to the CHF:SEK foreign exchange rate. The Swiss Franc has almost doubled in value relative to the Swedish Kronor over the past decade. This is currently a negative thing for us, since our income is mostly sourced from abroad, but it would be positive to "lock in" those gains by replacing the real-estate (home) and bonds in our portfolio.

We used to look around and ask ourselves, "Would I rather move and live here or stay where we are at and keep working full-time?" In the final analysis we cut our non-housing expenses to stay but if we hadn't found a way to do that our second next best option would have been to move and not have to work full-time.

 

[eurobogle]

If Sweden = Swizterland in terms of your standard of living/quality of life/education, etc., then why don't you move there?

This is the million dollar question. If the net additional cost of raising children in Switzerland compared with Sweden is approximately $1M, and we have to earn this money by spending a lot of additional time working over the next couple of decades, and the standard of life is equivalent in our eyes, then why not moved to Sweden right now? That way we could save that million dollars, or spend our time doing something other than working to earn it at all.

Sweden does seem to provide equivalent quality of life, more financial peace of mind, less downside risk to the portfolio during a recession due to lower base costs, and more upside potential due to more capacity to take professional risks.

Sounds like we have found a solution

 

[eurobogle]

We did it!

We moved from Switzerland to Sweden and now we are FI thanks to a massive reduction in living costs and freeing up a chunk of home equity to add into our portfolio.

Life is great so far. Our quality of life has improved and we like our new country much better despite (?) it being much cheaper. We are working full-time but completely on our own terms, choosing our own work/life balance, feeling free to focus on work that feels important to us even if the pay is less (or less certain.)

Thank you everybody on this forum for the feedback. You helped us to better understand our true values and risk-tolerance. We were not comfortable with spending from our portfolio in HCOL Switzerland, nor were we comfortable with guiding our careers based on what pays the most bills, and so ultimately it made complete sense to move abroad.

 

[RetMD21]

Lower cost of living and you are happily employed! A win win. I have never been to Sweden but from my week in Switzerland it seemed really nice. Gland it worked out for you

 

[Finance Dave]

Congrats!

Our neighbor has kids in Sweden and keeps suggesting we go. We almost went to Switzerland for 4 days while we were in Germany but the cost was very high so we just spent more time in Germany...glad we did because Germany is wonderful.

Enjoy the FIRE life!