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SE Asia expat looking to ER in 1-3 yrs
Old 12-28-2016, 04:02 AM   #1
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SE Asia expat looking to ER in 1-3 yrs

Long time lurker who is getting close to ER so thought Iíd post a summary to introduce myself and update it from time to time to hold myself accountable. This forum has been very valuable to see how others have prepared for their ER.

Iím currently an expat living in SE Asia. It looks like Iíll stay in my current job for another year and then either go to another expat gig for ~3 years or will be asked to move back to the states (choice is not entirely up to me). Since I donít want to stay long-term in the US area where the j*b is (TX, no offence to texans on the board, itís just too far from the beach for me J) Iíd like to minimize the kidsí school moves and possibly pull the trigger on ER. This means ER at 44 if I go back to the US or ~47 if I stick around on the expat circuit. It does feel early at 44 so my preference is definitely to get another 3 years of expat compensation uplift. Iím doing research on mid-size cities near the water with excellent schools and the current lead is Mt. Pleasant, SC.

Age: me - 43, stay at home DW Ė 40, 3 kids Ė 3-9 yrs old
Target ER: 44-47 for me
Assets: total $4.9M; taxable $2.8M, 401k $1.6M, real estate loans $85k, cash $250k, 529 accts $240k
Asset allocation: taxable is 100% in dividend paying stocks, 401k and 529 are mostly in stock index funds (and company stock in 401k). Cash will be used for down payment on a house when we move back to the US.
Passive income: taxable account is generating $95k per year in dividends (majority qualified) and I continue to add ~$200k in savings per year to it while living overseas. Dividends from existing taxable portfolio are conservatively projected to grow 4-6% per year on average.
Real estate interest ~8k per year, plan to maintain my exposure <$100k in principal so expect $8-10k per year in interest.
I can grab more dividend income from the company stock in 401k if needed (blue chip, conservative). Itís currently reinvested but I can get it distributed to me without penalties (although it would be ordinary income, not qualified).
Expenses: ~$100k per year now (use Mint to track), expect to spend ~$100-120k back in the US as kids get older (read: more expensive) and depending on the mortgage size.

Questions Iím pondering:
- My plan is to preserve principal and live off passive income so it feels like I donít have a sufficient margin of safety to ER in a year? Itís subjective of course but my current thinking is that $150k in passive income that grows with inflation should be enough to sleep like a baby in ER.
- Should I stick around for 1-3 years even if we return to the US just to build up that safety cushion and then move to our desired area? Iím afraid it will be difficult to move again after the family settles down (they are looking forward to getting back to good olde USA and stop moving around every 2-3 years) and Iíll get sucked into OMY.
- I need to gradually allocate some funds to bonds Ė obviously not thrilled with the current interest rates and also donít like the fact the bond interest income is not qualified. It would be good to hear from others who chose to stick with near 100% allocation to dividend paying equities during ER and their lessons learned. I do realize we havenít had a bear market for a while and Iím sure my sensitivity to such an event will be a lot higher in ER vs. now but I also donít expect my dividend income to get hit badly in a bear market.
- Any other critique of my asset allocation?
- If ACA gets gutted we could face a much higher than expected health insurance costs Ė watching what happens in 2017 as it will probably be as bad as it is going to get
- Any other cities I should consider if the only criteria are: warm climate, ~15min from sea/ocean (bonus points for frequent windy days) and excellent school district (with a real estate market I can afford!)?
- Iíve lined up a bunch of things to keep me busy in ER and continuing to add to my Ďlife treeí but there is an element of fear that would only go away once I pull the trigger on ER. Trying to stay rational about those fears of being bored in ER.

Thanks to everyone for any advice on the above! Happy New Year!
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Old 12-28-2016, 07:55 AM   #2
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Welcome to the board! And congratulations on building such a tidy fortune. I agree with your current feelings towards bonds. I'd rather diversify into real estate and making sure my assets are represented in all markets before getting heavily into bonds. Also, I'd try to figure out how to capitalize on a hobby. Having a hobby that generates even a few thousand a year will keep you busy and likely assuage your anxiety over your wealth.

I'm sure the smart and experienced members here will be able to give you more specific advice. But to me, you have all your bases covered as well as one can in life. Try not to fret and enjoy!
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Old 12-28-2016, 08:10 AM   #3
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First, welcome to posting! And good job on getting to this point.

One quick thought on your asset allocation. Is the 1.6M in 401k all in your company's stock? That would be 1/3 of your net worth in one company. True, "blue chip, conservative," but so was GM at one point not too long before 2009 ....

Non-employer Health Insurance was going to be a biggie no matter what happened in November. Me, you, and a whole lot of other people on this forum will continue to watch developments.

Finally, I share your pain on moving into Fixed Income. We were always 100% equity and have been moving briskly to a more diversified portfolio before we retire. Probably not as far along as I should be though...
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Old 12-28-2016, 08:57 AM   #4
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Thanks for your thoughts. Company stock is now ~20% of 401k. I intend to keep it below 20% by directing new contributions to index funds but depending on one-off spending needs in ER can use company stock to generate additional dividend income so reluctant to get rid of it (and have a nice NUA benefit waiting for me after reaching 59.5).
I forgot to mention that I will be eligible for a company pension at 65 although leaving early will obviously reduce it a lot.
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Old 12-28-2016, 10:24 AM   #5
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Quote:
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Since I donít want to stay long-term in the US area where the j*b is (TX, no offence to texans on the board, itís just too far from the beach for me J)
Plenty of awesome beaches in Texas. South Padre Island, Galveston area. Lots of choices. Lots of great lakes in TX also.

Good luck.
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Old 12-28-2016, 05:51 PM   #6
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I love South Padre and Corpus Christi beaches but don't think their schools are that great, unless I'm missing something. That seems to be a common problem with towns close to the water in FL as well.

Galveston is a fun island but the water is too brown!
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Old 12-30-2016, 06:24 PM   #7
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Are you willing to go back to work for years after you ER? I ask because a 100% equities position gives you a substantial amount of risk, such that it isn't inconceivable that you could see a 40%+ loss during a significant market drop. If that happened early in your ER years, you'd likely be returning to work to recover. I'd shoot for a less aggressive portfolio and try to have enough to sustain a 3-4% withdrawal rate instead if it were me, but I don't want to be forced to go back to work after I ER.
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Old 12-30-2016, 07:23 PM   #8
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Typically more tax efficient to hold dividend stocks, (and bonds, good call to increase allocation), in tax deferred. Those index funds in 401k are typically the most tax efficient investments for taxable accounts.
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Old 12-31-2016, 10:30 PM   #9
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Originally Posted by exnavynuke View Post
Are you willing to go back to work for years after you ER? I ask because a 100% equities position gives you a substantial amount of risk, such that it isn't inconceivable that you could see a 40%+ loss during a significant market drop. If that happened early in your ER years, you'd likely be returning to work to recover. I'd shoot for a less aggressive portfolio and try to have enough to sustain a 3-4% withdrawal rate instead if it were me, but I don't want to be forced to go back to work after I ER.


I agree it's too risky to maintain 100% equity allocation in ER and plan to reduce to 70-80%. But I also don't expect my dividend income to take a 40% hit if the market drops 40% and since I don't plan to sell stock to fund my expenses the market drop is not that relevant to me. Would love to hear opposing views on this approach.
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Old 12-31-2016, 10:43 PM   #10
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Typically more tax efficient to hold dividend stocks, (and bonds, good call to increase allocation), in tax deferred. Those index funds in 401k are typically the most tax efficient investments for taxable accounts.


Agree and I'm all for tax efficiency but in my case I need dividend income to live on way before 59 1/2 so I have to generate it in a taxable account. Any other ways to minimize the tax bite given this constraint?

I may wait to get into bonds until ER just to avoid generating ordinary income on top of earned.
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Old 03-30-2018, 01:28 PM   #11
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Thought I'd post an update - it's been ~15 months since my original post and a lot has happened!

We got back to the US in Dec'17 and I was given a crappy j*b/no promotion so my BS bucket reached the tipping point pretty quickly. I took one more look at the numbers and it became clear I don't have to stick around and it's time to FIRE! I've previously read about 'FU money' in FI blogs but only now did I fully appreciate the meaning

Here is our current plan:
1. Location - buy a house and move to Mt. Pleasant (Charleston SC area) this summer. We are renting currently. We chose Mt. Pleasant primarily for schools and lifestyle/weather/beach.
2. Health insurance - plan to get coverage through Liberty Healthshare.
3. Portfolio - I've been investing in real estate syndications in the last 12 months as I considered stock market overpriced. Real estate has the added benefit of higher cash distributions compared to stock dividends (and they tend to be tax-sheltered initially). My taxable portfolio is now ~85% equities, 10% real estate and 5% cash. Cash distributions more than cover our projected living expenses. I plan to slowly go into bonds starting next year when I don't have W-2 income.

While it's scary to not have a paycheck it's such a relief to know I'm going to be in control of my time in ~4 months or so. Class of 2018 - here I come!!!
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Old 03-30-2018, 05:59 PM   #12
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Great to hear ShahtER. Sounds like you are on the path to a happy retirement.
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Old 03-31-2018, 06:51 AM   #13
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Charleston = good eats (great bars, historic district, etc) and lots of vitamin sea. We love visiting that area.

Oh, congrats!
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Old 03-31-2018, 05:04 PM   #14
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Quote:
Originally Posted by skibum View Post
Typically more tax efficient to hold dividend stocks, (and bonds, good call to increase allocation), in tax deferred. Those index funds in 401k are typically the most tax efficient investments for taxable accounts.
Quote:
Originally Posted by ShahtER View Post
Agree and I'm all for tax efficiency but in my case I need dividend income to live on way before 59 1/2 so I have to generate it in a taxable account. Any other ways to minimize the tax bite given this constraint?

I may wait to get into bonds until ER just to avoid generating ordinary income on top of earned.
You're confusing income with cash flow... even if your taxable account equities paid no dividends at all then you just sell some shares occasionally... if you use the specific id method you can make the gains all LTCG and therefore tax preferenced.

Many of us have our taxable accounts as all equities for tax efficiency.... when I need cash I just sell equities as needed and then rebalance in tax-deferred accounts.
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