After a year of Lurking- Finally Joined

[Hopeful]

Hello everyone. I have been lurking for over a year now, and finally decided to join and introduce myself.


I just turned 40 and my DW is 46. We have no children, and have been saving for retirement since we got married. Currently I do not like my job/career, and want nothing more than to be FI. My DW makes more than twice what I do, but is not as miserable as I am in her job. DW makes 125K and I make 52K. Ideally our goal would be that in 5 years I could switch to a more enjoyable job regardless of pay, while my DW would be content going to part time. Then in 10 years we could both retire, sooner if we have the means.


The last 2 years I really started to organize our finances, and have been consolidating to index funds at Vanguard. We still have some individual stocks, but as I sell those off, I have been converting to Vanguard index funds. The biggest struggle I have been having is with the concept that money is fungible. I have things allocated in each account, which probably is not the most efficient tax wise. I would like to shoot for an allocation of 60% US Stock, 20% International Stock, and 20% Bond Funds. Though I am toying with the idea of a slight shift towards mid and small caps with an allocation of Total US 50%, Mid 5%, Small 5%, International 20%, and Bond 20%. I am sure I will get deeper into asset allocation later.


Our current situation:


Taxable
Stock Account: 395K
Vanguard Index Funds: 420K
CD @ 3%: 100K
TIPS: 20.5K
Cash 70K

Tax Deferred
403b's: 735K
Roth IRA's: 184K
Lump Sum Pensions: 218K

House value has dropped to somewhere around 465K, and we still owe about 45K which will be paid off in 3 years. No other debt.

That brings our total NW somewhere around 2.5MM, or around 2MM without the house.

We currently max out our 403b's and IRAs. We have been doing yearly back door Roth conversions.

I really need to start tracking expenses, but know we live very comfortably on $7000 per month take home after funding 403b's. That includes several nice trips per year.

Anyway, I just wanted to introduce myself prior to asking a bunch of questions on the forum. I am sure I will be bouncing some ideas off you guys regarding asset allocation. I bang my head against the wall with the separate tax and taxable accounts, especially with the poor choices in our 403b.

 

[pb4uski]

Welcome. You have both done well and seem to be close to FI if you really need $7k a month. Have you sketched out your situation in Quicken Lifetime Planner or Firecalc? I think adding SS into the picture and refining your living costs will likely get you close.

I'm not sure what you mean struggling with the concept of money being fungible other than some people have a hard time understanding that if you use taxable funds that are in equities that throws you out of balance that you can rebalance by selling bonds and buying equities in your tax-deferred accounts.

 

[Ready]

Welcome Hopeful!

At your ages, to have $2M in savings outside of your primary residence, I'd say we could all probably learn quite a bit from you on how you did that. Your salaries are certainly very solid, but I suspect many people on this forum who make more than that have not saved nearly that much.

I would certainly argue that you have achieved FI, and any additional compensation you bring in will just create that much more buffer for you, but you should certainly be doing work that you thoroughly enjoy at this point in your life. Congratulations!

 

[Midpack]

Welcome to the forum, and congrats on your excellent progress towards FI at your (youngish) age. Just wade right in, it's a pretty easy going crowd for the most part...

 

[steelyman]

Welcome to the forum, and congrats on your excellent progress towards FI at your (youngish) age. Just wade right in, it's a pretty easy going crowd for the most part...

It's a great crowd and yes, welcome and great job! These ladies and gentlemen carried me into ER

 

[Hopeful]

Thank you to everyone for the warm welcome!!!

I'm not sure what you mean struggling with the concept of money being fungible other than some people have a hard time understanding that if you use taxable funds that are in equities that throws you out of balance that you can rebalance by selling bonds and buying equities in your tax-deferred accounts.

I understand that concept. The problem I have is that we will need our taxable accounts when we retire early prior to being able to draw on our tax deferred. By having all of the bonds in the tax deferred accounts it opens the money that we would need the soonest (taxable) to the most volatility. That is the concept I am having the most difficult understanding.

The bond funds in our 403b were very poor with 0.7% expenses. I found out today that ING has an option to transfer a portion to TDAmeritrade as a self directed 403b. This would open up no commission Vanguard Bond ETF's. This may be an option I will explore.

 

[meekie]

Welcome Hopeful! Get those expenses tracked!

With the assets you have now, and a DW that makes a great income, why would you want to wait 5 years to switch jobs/careers? Unless your dream job is a Walmart greeter, I'd think that you'd be able to replace a good part of your income with a new job. Why not start figuring out what you want to do and start looking for work, or start some training?

I'm in a similar spot, but I currently make 70k, and any replacement jobs would be in the 30k range. But, my first idea for replacement income is preparing taxes, so I'll be going to tax school this fall, and starting a small side business next year. I'm planning to quit megacorp once we get to $2m unless I get laid off sooner (severance would be nice). We probably need closer to $3m, to really retire, but I'd rather work part time for longer than stay at my current job.

 

[pb4uski]

....I understand that concept. The problem I have is that we will need our taxable accounts when we retire early prior to being able to draw on our tax deferred. By having all of the bonds in the tax deferred accounts it opens the money that we would need the soonest (taxable) to the most volatility. That is the concept I am having the most difficult understanding....

That is true, but it also opens it to the most growth as well - a double edged sword. I guess if one projected that your taxable funds would be gone before you can access tax-deferred funds penalty free then it might help you sleep better at night to have your less volatile investments in your taxable account as long as you realize that it is tax inefficient to do so.

 

[5971]

Welcome Hopeful! Get those expenses tracked!

With the assets you have now, and a DW that makes a great income, why would you want to wait 5 years to switch jobs/careers? Unless your dream job is a Walmart greeter, I'd think that you'd be able to replace a good part of your income with a new job. Why not start figuring out what you want to do and start looking for work, or start some training?

I'm in a similar spot, but I currently make 70k, and any replacement jobs would be in the 30k range. But, my first idea for replacement income is preparing taxes, so I'll be going to tax school this fall, and starting a small side business next year. I'm planning to quit megacorp once we get to $2m unless I get laid off sooner (severance would be nice). We probably need closer to $3m, to really retire, but I'd rather work part time for longer than stay at my current job.

+1

In your current situation I would be looking for that more enjoyable job now.

Congratulations on your impressive savings.

 

[scrabbler1]

Thank you to everyone for the warm welcome!!!

I understand that concept. The problem I have is that we will need our taxable accounts when we retire early prior to being able to draw on our tax deferred. By having all of the bonds in the tax deferred accounts it opens the money that we would need the soonest (taxable) to the most volatility. That is the concept I am having the most difficult understanding.

The bond funds in our 403b were very poor with 0.7% expenses. I found out today that ING has an option to transfer a portion to TDAmeritrade as a self directed 403b. This would open up no commission Vanguard Bond ETF's. This may be an option I will explore.

As someone who has retired at 45 (4.5 years ago), I can offer you advice based on my experience and planning before I ERed.

I split my ER plan into two parts. The first part is getting from my ER age (45) to around 59.5 using only my taxable accounts. I have about 63% of that in bond funds so it is income oriented. The rest is stock funds whose dividends are reinvested so I don't touch it but could if I needed to. I have a good buffer or cushion here so I don't have to worry about small, unforeseen expenses busting my budget.

The second part of my ER plan, the easier part, begins at age 59.5 when the first of my reinforcements kicks in. Those include my frozen company pension, Social Security, and unfettered access to my IRA. The IRA right now is about 50/50 in stocks/bonds and is growing nicely.

While not a requirement, I would adivse you not to ER until you have paid off the house. This will lower your monthly expenses, something you should start tracking more as others have adivsed, including running FIRECALC or another retirement planning program. I paid off my mortgage 9 years, making me totally debt-free before I ERed and saw my savings rate increase a lot in that time.

Do you have health insurance planned for? This was a big piece of my ER plan back in 2008. With the ACA and the exchanges starting soon, it will become more affordable and available. It does not appear you will be eligible for subsidies but it would e helpful to figure that out before you ER and get it into your budget.

It looks like you are childfree which will be a big help to being able to ER as it was for me.

Keep up the good wok and I hope you can ER soon.

 

[Hopeful]

Maybe I should add a little background on why I plan to stick it out for 5 more years.

1. A number of years ago I was offered the chance to work every weekend (12hr shifts on Sat & Sun). For this I am paid a premium. The premium works out to only a few thousand dollars a year less than I would make FT. Doing this has been a good compromise, and I am used to my weekdays free now. I guess it has given me a taste of retirement. LOL
2. I would have to great of feelings of guilt if my wife could not at least also go part time at the same time I took a pay cut.

While working every weekend has gotten old, it affords me more free time so I guess I will stick with it. I am going to start getting serious about tracking expenses. I am thinking about getting quicken to help with that. I currently use Quicken 2005 for checkbook only. LOL

 

[Badger]

It sounds like you are almost there already. At one point I made a switch to a much more enjoyable job even though it was quite a bit less rewarding financially. It was my dream that took another 20 years to pull myself away from. It was the best decision I ever made (other than taking the chance to get married again). It was that good and life was that much better. You can probably tell what my suggestion would be.

Cheers!

 

[obgyn65]

Welcome to the forum. I agree with others, you have some well.

 

[steelyman]

I hope nobody falls into that well.

 

[obgyn65]

Sorry for the typo, due to the iPad auto correct. I meant "you have done well".

Welcome to the forum. I agree with others, you have some well.