45 yrs old | Married | 2 Kids | Is it Time To Quit?

[rodi]

Quote:

Originally Posted by HawaiiShrimp 1. Yes, I am keeping the rental. No mgmt agency needed. I have reliable tenants (relatives) live there. They are close to us and trouble-free for the last 12 years. 2. I'm considering Bellingham, Blaine. Mainly Bellingham. Is Homelessness an increasing problem there? 3. Yes, my wife is on board with this. Shes likes the idea. Trust me, she's not easily convinced but she's convinced. I'm working from home at the moment and will continue to do so in the next 6 months to a year. It's great to spend time with family. Since the kids have a school schedule, even if I call it a quit now, we can't really go travelling full time. They have school to return to. That's another reason I'm still staying put. I love to hear the pros and cons of living in Bellingham. For example: 1. Is it easy to get used to the weather since you are from SD? 2. Is it easy to get used to the new neighborhood? 3. Are people in general nice there? 4. What kind of hobbies do you have? Any outdoor activities you recommend? 5. Do you drive up to Vancouver? If so, how long it usually takes for you? 6. How's the home buying experience up there? Which real estate agent you recommend? 7. Any tips and tricks in terms of home buying? 8. Any tips and tricks in terms of relocation? Things you'd do differently? 9. Any cultural shock? How long it takes to adapt to the new state/city? 10. Are the cost of goods and services more expensive? Less expensive? 11. How frequent you travel? Is it a pain to travel out from nearby airport? Sorry in advance for so many questions. I am just trying to learn. Thanks!!

1) I had to get used to doing stuff in the rain that I would never have done in the rain when in San Diego: biking, camping, hiking.... Buy some good rain gear. I also had to get over the idea that raining days were for baking cookies. (That was my go to for 'cozy' feeling in San Diego). Too fattening since too many days were raining. I took up making soups on rainy days.
2) Not an issue at all.
3) Folks are very nice. I had no problem making friends - some of whom I'm still good friends with despite having moved away from there over 20 years ago. And I imported my best friend (she ended up moving there after I did - and stayed.)
4) B'ham is great for hiking, biking, kayaking, boating/fishing, skiing, pretty much anything outdoors. I learned to ski at Mt. Baker. The interurban trails are great for biking and hiking. Kayaking on Lake Whatcom or Lake Paddon is great - as well as B'ham bay. We always had a party for our work team that competed in the Ski-to-Sea race every memorial day.
5) Absolutely. I was in my late 20's/early 30's so to see great bands you had to head to Seattle or Vancouver. Went to Vancouver at least twice a month. Had two friends meet Canadians and ended up married and settled in suburban Vancouver.
6) I had an easy time buying. Both my buying and selling agent were Windemere. One is retired, but the other is still active with that office. (Kevin Geraghty)
7) Get a good inspection
8) None I can think of.
9) Culture shock... the only thing I can think of is that it seemed like people got married a lot younger than southern CA.. and since I was single in my late 20's I felt like an old maid. You're married so that won't be an issue for you.
10) I don't specifically remember costs being less or more. Housing is obviously cheaper for what you get. Gas is cheaper.
11) Travel - at the time few airlines flew full size planes out of B'ham international... and it's still not a lot of carriers. I typically flew out of Seattle. (There's a great shuttle bus on a regular schedule.) My BFF does at least 2-3 international trips a year and travels for work frequently. Domestically she mostly flies out of Seattle (mostly work trips). Internationally she flies out of Vancouver. She's able to get some great flight deals for her annual trips to France and Italy out of Vancouver. She invested in a Nexus pass - so border crossing is easy.

[HawaiiShrimp]

Quote:

Originally Posted by HI Bill +1. At your asset level and potential income, you can afford to live in the highest COL areas, including Hawaii, the Caymans, etc. You can afford to live in the geographic area that you most prefer. If that's Honolulu, San Francisco, or an island in the Bahamas. Paying taxes is part of the price of success, so why not move to the place where you'd really love to be? I deferred ER by at least 5 years to be able to continue to live in Hawaii, and factored in the state taxes and higher COL. Except for growing up, I've only lived in great cities (San Diego, Monterey, Honolulu, Kihei), and can't imagine moving somewhere less great, just to avoid taxes.

Again, I am not moving to WA just to avoid tax. I like the weather in Pacific Northwest and the close proximity to Vancouver.

[HawaiiShrimp]

Quote:

Originally Posted by rodi 1) I had to get used to doing stuff in the rain that I would never have done in the rain when in San Diego: biking, camping, hiking.... Buy some good rain gear. I also had to get over the idea that raining days were for baking cookies. (That was my go to for 'cozy' feeling in San Diego). Too fattening since too many days were raining. I took up making soups on rainy days. 2) Not an issue at all. 3) Folks are very nice. I had no problem making friends - some of whom I'm still good friends with despite having moved away from there over 20 years ago. And I imported my best friend (she ended up moving there after I did - and stayed.) 4) B'ham is great for hiking, biking, kayaking, boating/fishing, skiing, pretty much anything outdoors. I learned to ski at Mt. Baker. The interurban trails are great for biking and hiking. Kayaking on Lake Whatcom or Lake Paddon is great - as well as B'ham bay. We always had a party for our work team that competed in the Ski-to-Sea race every memorial day. 5) Absolutely. I was in my late 20's/early 30's so to see great bands you had to head to Seattle or Vancouver. Went to Vancouver at least twice a month. Had two friends meet Canadians and ended up married and settled in suburban Vancouver. 6) I had an easy time buying. Both my buying and selling agent were Windemere. One is retired, but the other is still active with that office. (Kevin Geraghty) 7) Get a good inspection 8) None I can think of. 9) Culture shock... the only thing I can think of is that it seemed like people got married a lot younger than southern CA.. and since I was single in my late 20's I felt like an old maid. You're married so that won't be an issue for you. 10) I don't specifically remember costs being less or more. Housing is obviously cheaper for what you get. Gas is cheaper. 11) Travel - at the time few airlines flew full size planes out of B'ham international... and it's still not a lot of carriers. I typically flew out of Seattle. (There's a great shuttle bus on a regular schedule.) My BFF does at least 2-3 international trips a year and travels for work frequently. Domestically she mostly flies out of Seattle (mostly work trips). Internationally she flies out of Vancouver. She's able to get some great flight deals for her annual trips to France and Italy out of Vancouver. She invested in a Nexus pass - so border crossing is easy.

Thank you for the awesome insight!! I learned a lot from it. Much appreciated.

[Finance Dave]

Something doesn't look right about your current spending. $60k/year seems low.

You're maxing out 401k? That's $23k/year if you are limited to 10% of income.
Kids education at $200/mo is $2.4k/year
Mortgage amount in a HCOL area = $260k...your payment around $1,800/mo? If so, that's another $22k/year.
Food and utilities for a family of four?

Adding those things up makes it hard to see how you can limit spending to $60k/year.

Regardless, your net worth is high enough that you could give half your money to charity and still FIRE lol.

As for when to FIRE, each person has to decide for themselves. Lonely? Join a club? or a church. Do volunteer work. Those things will keep you active and happy. Develop a new hobby. I do woodworking and it fits me well.

[HawaiiShrimp]

Quote:

Originally Posted by Finance Dave Something doesn't look right about your current spending. $60k/year seems low. You're maxing out 401k? That's $23k/year if you are limited to 10% of income.

We, my wife and I, are both max'ing out 401k. That's ~$36k annually

Quote:

Originally Posted by Finance Dave Mortgage amount in a HCOL area = $260k...your payment around $1,800/mo? If so, that's another $22k/year.

I'm paying $2.3k/mo (15 yrs fixed at 2.5%). ~$29k/year.

Quote:

Originally Posted by Finance Dave Food and utilities for a family of four?

We spent quite a lot on foods. Utilities, not too bad, we have solar.

Quote:

Originally Posted by Finance Dave Adding those things up makes it hard to see how you can limit spending to $60k/year.

I just roughly estimate my monthly expense, based on how much I have left after subtracting all my recurring expenses from the paychecks. I don't maintain a budget or checklist of each expenses. It's too tedious for me. Never intend to waste my time on that.

Quote:

Originally Posted by Finance Dave Regardless, your net worth is high enough that you could give half your money to charity and still FIRE lol.

Thanks. Glad to hear. We expect our annual expense to grow significantly to $200k since we intend to travel a lot more after ER.

Quote:

Originally Posted by Finance Dave As for when to FIRE, each person has to decide for themselves. Lonely? Join a club? or a church. Do volunteer work. Those things will keep you active and happy. Develop a new hobby. I do woodworking and it fits me well.

That's the goal, indeed. I'm going to develop more hobbies that keep me occupied.

Thank you for your advice. Cheers!

[rrs26ja]

At 45 you and your wife have done every well. I highly recommend that you take much less risk, your playing with fire. You can live high on the hog on what you have now especially if you leave CA and sell your home and move to a no income tax state.

[stepford]

Quote:

Originally Posted by rrs26ja At 45 you and your wife have done every well. I highly recommend that you take much less risk, your playing with fire. You can live high on the hog on what you have now especially if you leave CA and sell your home and move to a no income tax state.

I often see this recommendation to bail out of California to state avoid income tax. This is a much bigger issue during one's working years than in retirement. Even with a net worth as large as the OP's depending on how the assets are structured the state tax burden may not be all that high.

What a lot of people forget when condemning CA is property taxes. Particularly if one has lived in the state for a long time the property tax can be much lower than if one were to move to a comparable property out of state - even more so if one is contemplating a big expensive place out of state as is the OP. This can easily negate any advantage obtained through the elimination of state income tax.

The OP has certainly done well and should live wherever he wishes, but avoiding state income tax in and of itself may not be a great reason for leaving California.

[HawaiiShrimp]

Quote:

Originally Posted by stepford I often see this recommendation to bail out of California to state avoid income tax. This is a much bigger issue during one's working years than in retirement. Even with a net worth as large as the OP's depending on how the assets are structured the state tax burden may not be all that high. What a lot of people forget when condemning CA is property taxes. Particularly if one has lived in the state for a long time the property tax can be much lower than if one were to move to a comparable property out of state - even more so if one is contemplating a big expensive place out of state as is the OP. This can easily negate any advantage obtained through the elimination of state income tax. The OP has certainly done well and should live wherever he wishes, but avoiding state income tax in and of itself may not be a great reason for leaving California.

I agree. I just like a cooler climate and want to visit Vancouver. I have friends there.

[Ready]

How did you build a retirement portfolio worth $7.2 Million by contributing $36,000 per year at 41 and 45 years old?

[HawaiiShrimp]

Quote:

Originally Posted by ready how did you build a retirement portfolio worth $7.2 million by contributing $36,000 per year at 41 and 45 years old?

By trying to invest in good companies (stocks) for the last 20 years.
Screen Shot 2020-11-17 at 6.28.51 PM.png
Screen Shot 2020-11-17 at 6.29.18 PM.png
Screen Shot 2020-11-17 at 6.29.36 PM.png

[Ready]

Quote:

Originally Posted by HawaiiShrimp By trying to invest in good companies (stocks) for the last 20 years. Attachment 36761 Attachment 36762 Attachment 36763

You have an unusual 401K plan. The plans I’ve participated in all required me to limit my contributions to funds that were preselected by the 401K plan manager. Individual stocks were never an option for me. It’s nice to have that flexibility in your plan.

[HawaiiShrimp]

Quote:

Originally Posted by Ready You have an unusual 401K plan. The plans I’ve participated in all required me to limit my contributions to funds that were preselected by the 401K plan manager. Individual stocks were never an option for me. It’s nice to have that flexibility in your plan.

Yea, agree. My company allow us to buy individual stocks. It makes a difference. I can buy whatever I feel have the highest chance to succeed. I didn't have to stuck with pre-defined funds.

[Ready]

Quote:

Originally Posted by HawaiiShrimp Yea, agree. My company allow us to buy individual stocks. It makes a difference. I can buy whatever I feel has the highest chance to succeed. I don't want to stuck with pre-defined funds.

Your annual spend of $60K is quite low for someone with your net worth. Granted most of your savings is in pre-tax accounts and you are both young so if you wanted to spend that money you would incur penalties to take it out.

But even still you are setting yourself up to leave a very large inheritance to your heirs if you don’t increase your spending at some point. You are both still young so you have plenty of years to go. But my recommendation would be to either loosen up and spend some more, or accept the fact that you are now working to save money that you will likely never spend yourselves.

[ILikeStarTrek]

[Edit: I see other people have just asked the same questions I'm asking here - I didn't see the past few posts until after I posted. It seems you have been investing in individual stocks, which partially answers the question. But I'm still curious - did you really average a 15% return for the past 22 yrs in your 401k?]

Quote:

Originally Posted by HawaiiShrimp Age: 45 Wife: 41 Salaries: $180k (me), $50k (wife) Portfolio (Pre-tax): $7.2M (Stocks)

Quote:

Originally Posted by HawaiiShrimp We, my wife and I, are both max'ing out 401k. That's ~$36k annually Thank you for your advice. Cheers!

I don't have a lot to add beyond what others have already said. You have done beautifully - AMAZING amount of savings. You should easily be able to retire, financially. Your main challenge will be deciding how you want to spend your time in retirement!

But I have a curiosity question.

You have so much savings, particularly in pre-tax money, that I'm struggling to understand how you accumulated so much money. If you don't mind sharing, can you help me understand this?

You're age 45, so assuming you started investing for retirement right after college, that's an investment time frame of about 22 years.

You also said you have been contributing $36k/yr pre-tax. However, you cannot have been contributing that much the whole time, because the 401k contribution limit was a lot lower in earlier years. E.g. in 2000 (20 yrs ago), the contribution limit was $10,500 instead of $18,000, so your max contribution as a couple was only $21k at that time.

Even if you had been contributing $36k for the past 22 yrs, and assuming a $4k company match taking the total contributions to $40k/yr. - using a compound interest calculator:
Assuming weekly compounding - contributing $40k/yr for 22 yrs, to get to the $7.2M in your pre-tax account means you were getting a 15.2% annual return. That seems impossible. Even with your portfolio of 100% stocks, the past 22 yrs includes the recessions of 2001 and 2008-9.

Using an S&P CAGR calculator online (at moneychimp.com) for the period Jan 1998 to Dec 2019 (22 yrs), it comes up with an average CAGR of 7.6%. Plugging the 7.6% return into the compound interest calculator for 22 yrs, you must have contributed $127k/yr to end up with $7.2M for this time period. That's far more than the $36k annual amount you said you were contributing.

What am I missing? The $7.2M must be something more than a simple 401k account you have been contributing to for the past 22 yrs. Maybe you inherited an IRA?

[HawaiiShrimp]

Quote:

Originally Posted by ILikeStarTrek [Edit: I see other people have just asked the same questions I'm asking here - I didn't see the past few posts until after I posted. It seems you have been investing in individual stocks, which partially answers the question. But I'm still curious - did you really average a 15% return for the past 22 yrs in your 401k?]

No problem. I am happy to answer your questions. I don't average 15% annually. Over the years, depend on each stocks, some of them are significantly higher.

Quote:

Originally Posted by ILikeStarTrek You have so much savings, particularly in pre-tax money, that I'm struggling to understand how you accumulated so much money. If you don't mind sharing, can you help me understand this?

Over the years, I invested in different asset classes: Big Oil, Natural gas, mining companies, casino stocks, tech stocks. I got lucky and investment grows. Snowball effects, dividend reinvest, compounding over time etc.

Quote:

Originally Posted by ILikeStarTrek You're age 45, so assuming you started investing for retirement right after college, that's an investment time frame of about 22 years.

I started around year 2000. 20 years or so.

Quote:

Originally Posted by ILikeStarTrek You also said you have been contributing $36k/yr pre-tax. However, you cannot have been contributing that much the whole time, because the 401k contribution limit was a lot lower in earlier years. E.g. in 2000 (20 yrs ago), the contribution limit was $10,500 instead of $18,000, so your max contribution as a couple was only $21k at that time.

I tried to max out my 401k and Roth if I can. I did not max out every year because I need some money to buy my 1st house and rental property along the away.

Quote:

Originally Posted by ILikeStarTrek Even if you had been contributing $36k for the past 22 yrs, and assuming a $4k company match taking the total contributions to $40k/yr. - using a compound interest calculator: Assuming weekly compounding - contributing $40k/yr for 22 yrs, to get to the $7.2M in your pre-tax account means you were getting a 15.2% annual return. That seems impossible. Even with your portfolio of 100% stocks, the past 22 yrs includes the recessions of 2001 and 2008-9. What am I missing? The $7.2M must be something more than a simple 401k account you have been contributing to for the past 22 yrs. Maybe you inherited an IRA?

I didn't inherit anything. My parents gave me $2000 for college and ask me to make it works. "It's time to take care yourself" talk.

During my investment journey, I hit several 5 baggers, 6 baggers, even 30 baggers over the years. For example, Facebook, Apple, Nvidia, Tesla, NextEra, Netflix, Google, different oil companies before oil crashes, different gold stocks before it cooled down. Those stocks have significant higher returns than normal index funds. I did not buy options or margin call. I don't believe in day trading, so I just buy and hold.

I was taking significantly higher risk with a fairly concentrated portfolio of a few companies I researched and believed in. I'm not so much into diversification by then. I chased for higher returns when I was young & reckless. Overall, I took some semi-educated risks and it paid off by luck. Fact is, I got lucky an no one gets lucky forever. "Better take some off the table when I'm ahead" mentality kicked in at some point in my investment journey. In the last 5-7 years, I scaled back to index funds and only hold a few individual stocks.

I hope this information helps. Thanks.

[HawaiiShrimp]

Quote:

Originally Posted by Ready But my recommendation would be to either loosen up and spend some more, or accept the fact that you are now working to save money that you will likely never spend yourselves.

I totally agree with you on this. We have been frugal all our life. It's almost like we need to train ourselves to feel okay to spend a little. Nowadays, we are more flexible in dining out, order more expensive dishes, etc. For example, I just got my kid an Ipad Air. He will love it when it arrives.

With $2.2M in Taxable account, I intend to use half of that (+ the equity of the CA house) to buy a house in WA. That's my 5 year plan. So, after that, there won't be a lot of buffer left after this major spending. Something I keep in mind constantly.

[ocean view]

If you buy your dream house in cash, will you have enough left in taxable to live on until you reach 59.5 and can start pulling from your pre-tax savings?

[ckelly78z]

Quote:

Originally Posted by HawaiiShrimp As a family, we stay home and do family things (cooking, baking, in-door exercises, reading a lot), so we want to get a dream house. Sounds cheesy, I know. The area we are interested in WA, house prices are in that range. Yes, I think so. We are currently living in a modest house in South Cal standard. Typical 2000-2500 sqfts, 2 story, tract home. No Inheritance here. I like to invest and started in my low 20's. I've been invested in individual stocks and index funds for a while.

It's good to hear how successful you, and your family have been, I also wondered about an inheritance when I saw those figures...good for you !

It's also reassuring to see how well someone with discipline from an early age can accumulate at a still relatively young age.

[HawaiiShrimp]

Quote:

Originally Posted by ocean view If you buy your dream house in cash, will you have enough left in taxable to live on until you reach 59.5 and can start pulling from your pre-tax savings?

This is my #1 concern about buying a $2M house. It will leave me about $1.2-$1.4 to spend until I reach 55. 10 years. That's about $100k per year. It's tight, but do'able. I certainly hope the Taxable account to increase in the next 3-4 years to "give it more room."


Note:
The Rule of 55 is an IRS provision that allows you to withdraw funds from your 401(k) or 403(b) without a penalty at age 55 or older. E.g. If you leave your job at age 55 or older and want to access your 401(k) funds, the Rule of 55 allows you to do so without penalty.

[HawaiiShrimp]

Quote:

Originally Posted by ckelly78z It's good to hear how successful you, and your family have been, I also wondered about an inheritance when I saw those figures...good for you ! It's also reassuring to see how well someone with discipline from an early age can accumulate at a still relatively young age.

Thank you for your kind words. We worked hard and stayed focus on building wealth. It's all about having financial security for the family. I think it is doable to do it, just need to focus, invest wisely, live below your means, and be patient. Thanks again.