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Old 07-10-2018, 06:50 AM   #21
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I think you are off to a good start, but here is a way that I looked at it. I do not believe that a 4% WR is sustainable these days for a long retirement so I used 3%. On a $2 million portfolio, 3% is $60K/yr. Only 2% inflation over 20 years erodes buying power by about 1/3. Even with your house paid off and no kids at home, would you want to live on $40K/yr now? That has to include everything - medical, taxes, replacing cars, . . . . .
Thanks for the input DrRoy...not quite sure I follow though. Iím assuming that I will be able to generate 3-5% in interest off of the $2m in 20 years from now. Considering that some CDs now already offer 3%, it doesnít seem like a stretch that the same or more would be available in 20 years. In my calculation I would never have to draw on the principle which is what I think youíre alluding to? Also I believe my calculations are pretty conservative (I should have more than $2m and I would probably invest in a more balanced dividend portfolio that would generate more than 3% annual returns). Lastly my wifes job is pretty flexible and she would be able to pick up one or two days a week (which would generate 20-40k) to make up any shortfalls.
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Old 07-10-2018, 09:15 AM   #22
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Originally Posted by Eastfolk View Post
Thanks for the input DrRoy...not quite sure I follow though. Iím assuming that I will be able to generate 3-5% in interest off of the $2m in 20 years from now. Considering that some CDs now already offer 3%, it doesnít seem like a stretch that the same or more would be available in 20 years. In my calculation I would never have to draw on the principle which is what I think youíre alluding to? Also I believe my calculations are pretty conservative (I should have more than $2m and I would probably invest in a more balanced dividend portfolio that would generate more than 3% annual returns). Lastly my wifes job is pretty flexible and she would be able to pick up one or two days a week (which would generate 20-40k) to make up any shortfalls.
Keep in mind that you will owe full rate income taxes on your fixed income return, and that you also should have some portfolio growth to help you keep up with future inflation too. There is another thread about a WSJ article on the 4% rule that shows 30% failure rates in listed situations. With your current income, I was just thinking that you might get pinched. Good luck.
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Old 04-26-2019, 01:42 PM   #23
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Hasn't quite been a year yet, but wanted to post an update to my July 2018 stats to see how I'm tracking.

* Age: Both myself and DW are 31 now
* Household income: 215k-ish which doesn't include about $15k annual cash bonus and $8k in equity, both of which can be variable
* Total current net worth: 364k (94k increase) broken down as follows:
- 63k cash (13k increase) of which about 40k is in MM fund at 2.0% and the 24k in a FCU at 1.5%
- 193k in 401k (53k increase)
- 41k in vanguard brokerage account (27k increase)
- 34k Roth IRA (8k increase)
- 0k in tIRA (10k decrease, converted tIRA to roth through backdoor)
- 17k in HSA (6k increase)
- 16k between companyís ESPP and equity grants (3k decrease, even though additional shares have vested since July, my company's stock price took a huge hit and was cut in half)

* 15 year mortgage at 3.125%. 367k left (19k increase). House worth about 540k.
* Never did a complete budget of our expenses but would estimate around 80k/year.

Didn't really have any expectations on how much I wanted our net worth to grow, but overall I'm pretty happy with a 94k increase in just 10 months considering the market only increased ~5% in that time.

Pretty bummed about the decrease in value of my company shares, but I guess that's just the way it goes sometimes. Hopefully things turn around.

Lastly, I feel that my cash balance is a bit on the heavier side. I've been waiting for a market correction before I put money in as I believe the market is overvalued at the moment, but I've been saying that for 2 years now. I did put some money in back in December 2018 when the market briefly dipped, but maybe I should have been a bit more aggressive.
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Old 04-26-2019, 02:01 PM   #24
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- 16k between companyís ESPP and equity grants (3k decrease, even though additional shares have vested since July, my company's stock price took a huge hit and was cut in half)
Can you sell your ESPP shares? I was buying under my company's ESPP at a 12% discount, but the equity was too volatile, with unlikely long-term growth that would exceed the market's return. So I sold unqualified shares (held less than a year), paid taxes on the gain, and was done. Just like any single stock, there's a lot of risk.
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Old 04-26-2019, 02:23 PM   #25
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If you don't have kids you may be able to retire in half the time.
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Great Job
Old 04-26-2019, 03:10 PM   #26
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Great Job

You're off to a great start. I would recommend doing an analysis to see if it is worth doing the pre-tax versus Roth contributions. While having a diversified portfolio can be beneficial, it may not be the most tax-efficient approach given the information you have provided as you will likely be in a lower tax bracket in retirement (of course, socialism is beckoning so who knows for sure). So, you have to weigh - is it worth paying more in taxes now versus being able to put those dollars away and allow to grow for decades in a pre-tax account?

I would not focus to much on it in the near-term but longer-term you will really want to think about planning for those bridge years (51-59 1/2).

I am going through this now as I have ~90% of my assets in pre-tax retirement. I am planning to retire in 4 years and want to build enough assets in a brokerage account to provide ~2K/month in dividends (still have a lot of work to do). To provide a floor, I have a very modest pension that I can draw from beginning at retirement age. I am also looking at potentially buying an annuity (but seems to be complex/confusing) to create another income stream.

Lastly, you should review the 72T provision, which allows you to draw from 401K's early w/o penalties but there are rules and I've read that it may depend on your employer/plan administrator (not sure if anybody can confirm this or not). It would be taxed as ordinary income. I plan to utilize this to provide ~50% of my income to achieve early retirement.

Lastly, I agree with others - $2M is a great target but I would probably target higher - of course, it all depends on your expenses.
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Old 04-26-2019, 07:45 PM   #27
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Thanks for the advice guys

Jt999 - great point about the pre- and post-tax allocation. Right now my total net worth is still weighted towards pretax dollars (approx 65%). My plan to get me through the bridge years (50-59.5) is to have a large enough Roth IRA principal balance for me to draw down on. I believe the only requirement there is to have it in the account for at least 5 years.

Also a part of my 401k contributions are also directed into a Roth 401k. I figure now would be a good time to contribute to a Roth given the temporary lower tax rates due to trump tax law.
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Old 08-29-2019, 09:30 AM   #28
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Meant to update this at the one year mark, but a few months late. Posting an update to my July 2018 stats.

* Age: Both myself and DW are 31 now
* Household income: 220k-ish which doesn't include about $15k annual cash bonus and $15k in equity, both of which can be variable (spouse and I were pretty lucky this year and both received generous bonuses. Total comp for the year was $290k)
* Total current net worth: 416k (146k increase) broken down as follows:
- 32k cash (18k decrease) of which about 15k is in MM fund at 2.0% and the 17k in a FCU at 1.5%
- 203k in 401k (63k increase)
- 95k in vanguard brokerage account (81k increase)
- 45k Roth IRA (19k increase)
- 0k in tIRA (10k decrease, converted tIRA to Roth through backdoor)
- 20k in HSA (9k increase)
- 21k between companyís ESPP and equity grants (2k increase, even though additional shares have vested since last year, my company's stock price took a huge hit and was cut in half)

* 15 year mortgage at 3.125%. 359k left (27k increase). House worth about 540k.
* Starting tracking every expense over the last year. Including mortgage, we are spending $100k annually

Didn't really have any expectations on how much I wanted our net worth to grow, but overall I'm pretty happy with a 146k increase in just 14 months considering the market only increased ~6% in that time. I am really starting to see the power of compounding come into play. I still have about $40k in my investment accounts that's sitting on the sidelines (Vanguard MM) that I will need to throw into the market. Slowly starting to bleed it into index funds, but honestly hoping for a recession so I can dump it all in.
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Old 08-29-2019, 10:15 AM   #29
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It's easy to crow about the growth in your net worth during a bull market. Actually, we've been in zig-zag mode for a while, I mean to say that there hasn't been a long sustained downturn that makes you doubt whether you did the right thing.

I was your age in the late 1990's, with about the same net worth which grew by 30+% a year for several years in a row. Then we had 18 months of zig-zag in 2000-2001, kinda like what we're seeing now. Followed by an 18 month downturn until early 2003 where my net worth fell by perhaps a third, and I lost my job for quite a while. What got me through that period? So that now at 55 I have $3M, a paid-off house, and ready to pull the plug on working? One, I stayed the course, I didn't sell anything. I lived off my emergency funds. Two, I knew my spending was way LBYM before my layoff, so there wasn't much more I could cut.

I'd be curious to know your spending excluding the mortgage. $100K seems high, not knowing anything else about you, not knowing where you live, not knowing how much of that is to your mortgage (where, BTW, I always accounted for the principal part of my payments, including any additional principal paid, as adding to my equity and therefore staying part of my net worth).

I'd suggest you simplify your tracking to just Taxable investments, equity in your home (value minus mortgage balance), and IRA/401K/Roth combined. Makes for a simpler picture.

I took a quick look at the prior comments. You are doing well but you can do better. If you plan to have kids, your spending will go up and your income will go down. You may need to get better control of your spending.
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Old 08-29-2019, 11:52 AM   #30
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It's easy to crow about the growth in your net worth during a bull market. Actually, we've been in zig-zag mode for a while, I mean to say that there hasn't been a long sustained downturn that makes you doubt whether you did the right thing.

I was your age in the late 1990's, with about the same net worth which grew by 30+% a year for several years in a row. Then we had 18 months of zig-zag in 2000-2001, kinda like what we're seeing now. Followed by an 18 month downturn until early 2003 where my net worth fell by perhaps a third, and I lost my job for quite a while. What got me through that period? So that now at 55 I have $3M, a paid-off house, and ready to pull the plug on working? One, I stayed the course, I didn't sell anything. I lived off my emergency funds. Two, I knew my spending was way LBYM before my layoff, so there wasn't much more I could cut.

I'd be curious to know your spending excluding the mortgage. $100K seems high, not knowing anything else about you, not knowing where you live, not knowing how much of that is to your mortgage (where, BTW, I always accounted for the principal part of my payments, including any additional principal paid, as adding to my equity and therefore staying part of my net worth).

I'd suggest you simplify your tracking to just Taxable investments, equity in your home (value minus mortgage balance), and IRA/401K/Roth combined. Makes for a simpler picture.

I took a quick look at the prior comments. You are doing well but you can do better. If you plan to have kids, your spending will go up and your income will go down. You may need to get better control of your spending.
Thanks for the reply Larry. You're right. I started working in 2011 so I've been fortunate to only have experienced an extended bull market. I keep telling myself that if and when a recession comes, that I'll hold steady and continue investing as I am now, but I guess I'll see when that actually happens.

My $100k of annual spend includes $48k a year for mortgage and property taxes. I'm paying exactly $4k/month of which about $2k is for principal, $1k for interest and $1k for taxes. 12.5 years left on the mortgage. I have about $180k of equity in my house but excluding that from my net worth as I don't plan on selling it. And even if we do, we would just end up paying the same for another one.
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Old 08-29-2019, 12:05 PM   #31
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Hello everyone


* Household income: 210k - 230k, the 20k difference is because DW is working 6 days a week but will likely scale it down to 5 over the next few years when we have kids. This also doesnít include variable comp (cash bonus and equity) which can vary significantly year over year but generally around 10k conservatively.
* Total current net worth: 270k broken down as follows:
- 50k cash of which about half is in CapitalOne360 MM fund at 1.5% and the other half in a FCU at 1%
- 140k in 401k
- 14k in vanguard brokerage account
- 26k Roth IRA
- 10k in tIRA
- 11k in HSA
- 19k between companyís ESPP and equity grants
* Bought a house last year. 15 year mortgage at 3.125%. 386k left. House worth about 540k.
* Never did a complete budget of our expenses but would estimate around 80k/year.



Not sure if Iím missing anything but wanted to see if anyone had any advice/comments. Appreciate all comments.
At first glance, you've got a big hole that is sucking money somewhere...

220k income minus 80k expenses equals 140k available to save.

140k * 20 years =2.8M

So if your expenses really are 80k, you're way ahead. But I don't see where you're saving anywhere near what you can.

I was very skeptical the first time I did a budget class, as my income was close to yours. The insight I got was not to regulate my spending, but to see where my money was going. It is a good exercise to do for insight to your own spending.
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Old 08-29-2019, 12:08 PM   #32
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- 21k between company’s ESPP and equity grants (2k increase, even though additional shares have vested since last year, my company's stock price took a huge hit and was cut in half)
Good job, so far! As far as the ESPP, once the shares are qualified, can you roll them over to your 401(k)? Shares I purchased in my company's ESPP at a 12% discount went way up when the current president was president-elect. I sold them (even non-qualified shares) at a profit and haven't looked back. I also stopped contributing to my company's ESPP, as the shares were too volatile, Wells Fargo held a couple of months of contributions before making the buys, and due to the waiting period for qualification. A 12% discount, along with lack of diversification (Job and ESPP tied to the same company) made this a no-go for me, as I didn't want to watch the stock and try to time the sale point.
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Old 08-29-2019, 01:15 PM   #33
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At first glance, you've got a big hole that is sucking money somewhere...

220k income minus 80k expenses equals 140k available to save.

140k * 20 years =2.8M

So if your expenses really are 80k, you're way ahead. But I don't see where you're saving anywhere near what you can.

I was very skeptical the first time I did a budget class, as my income was close to yours. The insight I got was not to regulate my spending, but to see where my money was going. It is a good exercise to do for insight to your own spending.
Hi Snowball

Not sure if you saw my latest post, but I provided a few updates to my original post. I have been keeping track of my expenses for the last 14 months. My total annual expense is $100k which includes about $48k for mortgage and property taxes. $230k of gross income after taxes (23% effective rate) leaves me with $177k less $100k of expenses is about $77k saved annually.
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Old 08-29-2019, 01:19 PM   #34
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Good job, so far! As far as the ESPP, once the shares are qualified, can you roll them over to your 401(k)? Shares I purchased in my company's ESPP at a 12% discount went way up when the current president was president-elect. I sold them (even non-qualified shares) at a profit and haven't looked back. I also stopped contributing to my company's ESPP, as the shares were too volatile, Wells Fargo held a couple of months of contributions before making the buys, and due to the waiting period for qualification. A 12% discount, along with lack of diversification (Job and ESPP tied to the same company) made this a no-go for me, as I didn't want to watch the stock and try to time the sale point.
Unfortunately, I don't have the ability to roll my ESPP shares into my 401k. I stopped participating in it 2 years ago for the same reason you did (too volatile and I have enough exposure through equity grants). Even though I bought at a 15% discount, I'm still down big time. At this point I only have about 7 thousand in ESPP shares so I'll just let it ride out. It has bounced back a bit in the last 9 months or so.
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Old 08-29-2019, 02:14 PM   #35
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Hi Snowball

Not sure if you saw my latest post, but I provided a few updates to my original post. I have been keeping track of my expenses for the last 14 months. My total annual expense is $100k which includes about $48k for mortgage and property taxes. $230k of gross income after taxes (23% effective rate) leaves me with $177k less $100k of expenses is about $77k saved annually.
Then you're still in really good shape. Yes, diversify the tax treatment of your investments. Check out https://www.firecalc.com and https://www.i-orp.com/ They are really good tools, but take some time to interpret (depending on your quantitive skills). I summarized my take on how to RE in this post http://www.early-retirement.org/foru...rly-99570.html and there are some good comments, especially with respect to Insurance and managing life's risks (which I didn't cover very well).

Volatility can be your friend (as long as you can handle the lows, and the volatility you're riding is sufficiently diversified). But if you can't handle the lows, then it's too much and you should use another security.
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Old 07-25-2020, 08:39 AM   #36
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My 2 year update. Changes are compared to July 2019 stats.

* Age: Both myself and DW are 32 now
* Household income: 260k which doesn't include about $20-30k annual cash bonus and $10-15k in equity, both of which can be variable
* Total current net worth: 563k (147k increase) broken down as follows:
- 10k cash (22k decrease)
- 274k in 401k (71k increase)
- 166k in vanguard brokerage account (71k increase)
- 62k Roth IRA (17k increase)
- 29k in HSA (9k increase)
- 22k between companyís ESPP and equity grants (1k increase, even though additional shares have vested since last year, my company's stock price continued to do poorly)

* 15 year mortgage at 3.125%. 336k left (23k increase). House worth about 560k.
* Starting tracking every expense over the last year. Including mortgage, we are spending $100k annually; quite a bit less this year though due to everything that's happening in the world (less travel, less eating out, etc.)

The overall NW increase was consistent with the increase from Year 1 - 2, which I guess is good considering the market is only up slightly during the same period. Was hoping for compounding to play a bigger factor though, but given the markets have recovered so quickly after Covid, i guess i really can't complain. I aggressively added to the Vanguard brokerage account this past year especially during the dip in March/April, which helped a bit. Still have about $30k of un-invested funds. Wish i would have been more aggressive.
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