Yankee in NC

[BeachBound2029]

Hi All - my wife and I hit a major milestone a few weeks ago - $1M in retirement funds! Whoohoo! The event has really motivated me to focus on what life might look like in RE - spending, figuring out 'my number' etc... I found this great forum at the same time and, from what I've read so far, I think I will find everything I need right here.

About me/us - I turn 40 this year, and wife 42. We're DINKs, own a home NC and a vacation condo on the beach that we rent out in peak season. My goal is to be FIREd by 2029. I feel it's a stretch, but in the realm of possibilities.

The numbers -
IRAs/401Ks - 800K
Taxable accounts - 200K
AA - 75/25 stocks/bonds split. mostly low-cost index
MegaCorp Stock - 100K (short term holdings as of today)
Home - value 350K with 176K mortgage @ 4.125%; 17 years left
Rental - Value 190K with 130K mortgage @ 3.625%; 28 years left
Target retirement nest egg is 3.5M for about 100-120K a year with a WR of 3-3.5%.

We both max out our 401Ks at 18.5K a year and IRAs at 5.5K. Any extra funds go directly to our taxable investments earmarked for retirement.

I'm just starting to track our spending now and only do so at a very gross level - our credit card bills and utilities. We don't use cash for much. How accurately do others track spending? Every purchase? Item? Right now, it feels like we spend about 80-90K a year, but I have very little sample data.

Our plan is to move into our beach condo when we RE. We'll live there until it's no longer enjoyable or our knees can't handle the 3 flights of stairs. I'll convert our primary residence into a rental, and expect to gross 1800 a month in rental income in today's dollars.

I'm not sure what I should do with the 100K in MegaCorp stock. I will sell it once it turns into long-term caps, but do I invest it directly, or apply it to my primary residence mortgage? The numbers tell me to invest it, but there's a lot to be said about having next to nothing left on a mortgage...

Appreciate your thoughts and feedback on my strategy. Poke holes in it!

thanks!
Dreaming 'bout the beach....

[Whisper66]

Congrats! You look to be in excellent shape. After a few years, I suspect you will be in a position to retire earlier than you are currently thinking.

Expenses - we track ours closely but easily. Vast number of purchases are done on credit card. We automatically download credit card transactions into Moneydance (many use Quicken or some other tool). Spend a few minutes adjusting the categories of each expense. Takes maybe 15-20 minutes each weekend. Has the added benefit of making reconcilliation of monthly credit card bill a 2-5 minute exercise. And can get detailed reports of our expenses out of the program easily.

Paying off home mortages - you'll get varying opinions here. I'm one that likes to pay off mortages unless I have very sure I can get a better return elsewhere. So if you plan to put the money into bonds, I personally would pay off the mortage rather than put it into bonds. If you were going to invest in equities, that's a tougher question. I personally would pay off the mortage (going after the "sure thing") but recognize that I might make more on those funds unless Mr. Market decided to dump on me.

[DrRoy]

I never really tracked expenses closely when I was accumulating NW. I always had a natural resistance to spending and as long as I was saving what I wanted the effort was not needed. You have a very solid plan. I would just take the proceeds from Megacorp and put it in an index ETF.

[euro]

Quote:

Originally Posted by DrRoy I never really tracked expenses closely when I was accumulating NW. I always had a natural resistance to spending and as long as I was saving what I wanted the effort was not needed. You have a very solid plan. I would just take the proceeds from Megacorp and put it in an index ETF.

I never actually tracked expenses very closely either BUT, since ALL my spending (except payroll deductions) ultimately funneled through ONE brokerage account, it was quite easy for me to re-create "total yearly spending for past three years", when I was getting ready to FIRE. In my opinion, this number is at least as important as the "list of available assets" in making the FIRE decision.

[Nightcap]

Congratulations!

I've been tracking expenses for the last 5 years via Mint. Free and dead simple. Personal Capital is another, but I really disliked the incessant offers to use their pay services.

[Katiek]

Welcome and Congrats! I think the decision between investing vs. paying off the mortgage is a personal one. You're doing a good job of investing generally, and both options have their own benefits (and risks). If we knew what the market would do, it's an easy decision. But I think you're ultimately fine doing whichever one you want.

If paying off the mortgage makes you feel better, do that. Or if you enjoy seeing the investment accounts grow more, do that. Either will be fine.

[SheitlQueen]

Looks like you are in good shape!
For six months before I decided to retire, I tracked every single penny I spent. I really had no idea how much I was spending. It was more than I thought, but not enough that I couldn't retire. I still keep track of every cent I spend and generally pay cash for everything that isn't a bill. I feel like it's too easy to spend excess money by using a credit card (so easy to just hand it over, vs taking cash out of my wallet) and by not tracking every expense.

The mortgage is a personal decision. I paid mine off many years ago, so it didn't factor into retiring, but I am very glad I don't have a mortgage, one less thing to worry about.

[bada bing]

You look to be in great shape and on the right track.

One thing that might be worth checking into is the availability of "Mega backdoor Roth conversions" through either of your 401Ks. Since you have money to save beyond the max IRA and deductible 401k limits, if you have the availability of Mega backdoor conversions, it would give the ability to get more of your savings into tax sheltered accounts. Roth money is attractive because the contributions are available 5 years after conversion for any purpose without tax or penalty. Just a minor tweak that might be advantageous.

As an example, *if* both of your 401Ks allowed the components of mega backdoor conversions, you should be able to shuttle an extra ~$25K each into Roths per year. You could move the $100K stock windfall into Roth accounts in 2 years.

[BeachBound2029]

I've heard of mint in the past and created an account yesterday. It was super easy as Nightcap indicated. Linked my CC and bank accounts and now have a good feel for where our money goes. I'll track our spending on monthly basis and see if I need to get into deeper detail. Wisper has a good system - categorize weekly so the month-end time investment is much lower.

bada bing mentions the "Mega backdoor Roth conversion". Never heard of this. And after a quick google search - I'm really interested in this option. I need to look into this more for sure. My employer 401K offers a Roth 401K, but I'm not sure about the non-Roth after tax contributions piece.

Last year and a half, I split my 401K - traditional and Roth. I felt I was getting killed on taxes and stopped after the Roth portion built up to 24K. From what I hear - one should leverage Roth 401K if you feel you're tax bracket will be higher in retirement. I don't get the sense I'll be in higher bracket at this point in my career.

Thanks for the feedback!