10 Months Later - Trying to Build Bridge

[jt999]

Wife (now 47) and I (now 49) have 2 children. One child recently graduated college and is coming up on 1 year work anniversary. Our other is senior in high school and will be attending Ivy Engineering program in Fall.

401Ks/IRA's (All Pre-Tax)- Previously 1.205M (AA is 60% Stocks/20% Bonds/20% Cash Currently) - Up to 1.279, or +74K (AA is 55% ST Reserves, 30% Stocks, 15% Bonds - for now, expecting correction)

Home - FMV 450K (Paid)- remodeled kitchen last year. Needs about 20K of work. Plan to put on market 2020/2021 and move closer to my spouse's work. Will add new roof this summer and have some other small jobs.

Taxable Account - 56K - Up to 114K (+58K)

Savings - 97K - Up to 106K (+9K) we like to keep more cash on hand than is needed but not planning to add much to this going forward.

529 - 90K - Up to 107K (added 13K)

Small Pension - 10-15K/annually

SS - 17K and 20K annually, estimated

No Retiree Healthcare

Total Net Worth slightly above where we were last time - still right around ~2M

Net Income (after 401K contributions) - 20K Month - spouse doubled salary in last 2 years so this has jumped recently

Expenses - 6K Month - we are holding steady in the 6-7K range.

Last check in, I asked for recommendations for how we can deploy 220K annually to FIRE in ~Years? Our Savings Target is 250K Annually, of which 30K is Targeted for College.

We would estimate we need 9K/month after-tax for travel, healthcare, etc. for the 1st few years and then slightly less after a few years - we are considering moving overseas (dreaming of Italy) where we would pay higher taxes but lower healthcare.

In the Last Year: Wife Bought New Car for 33K in Dec (paid cash), Purchased Used Car for Son 18K (paid cash) - I will drive this while he is at school as my truck is dying

As per suggestions, added to Taxable Account. Also, enrolled in Salary Deferral NQDC program in January - Current Balance 18K

Hopefully Receiving 40K LTIP in June - expecting to put ~25K in Taxable Account, remainder will probably be used to pay for son's 1st semester so we don't have to touch 529 Plan 1st Year

Total Outlays in Last 10 Months - Vehicles +51K, Taxable Account +58K, NQDC ~20K, 401K's +25K, 529 Plan +13K, Savings Account +9 so with LTIP in June (fingers crossed) we should be in our range of around 200K added to savings

As stated last year, we are considering selling house and moving closer to wife's work and renting 1 BR Apt as we will be empty nesters. By investigating the proceeds, we will increase income by $1,200 ($2,000/dividends offset by combination of rent but lower taxes)

I feel like we did not make much progress but when I break out the numbers, it's been a solid year. Any thoughts if we are trying to pull the plug in 3 years? In 3 Years, Goal is 1M in Taxable Accounts (including house proceeds) generating ~50K in Dividend Income, maybe starting pension which will add 10K. Lastly, we could initiate 72T SEPP (using 60% of Tax Deferred Assets, Leaving the Other 40% to grow without withdrawals). The 72T would yield ~35K. The NQDC would be available from 2025-2030 and add about 50K annually. I expect we will reduce % deferred from 2021-2023. Appreciate any feedback/thoughts.

 

[WyomingLife]

Congrats on your children’s progress.

I skimmed some of your prior posts, but likely missed some key historical facts. I think you said your wife makes $400K. That’s wonderful.

It doesn’t look like you currently have much in the market, yet your plan counts on returns (dividends, etc.). I may have misunderstood your post, and I don’t understand some of the acronyms.

I don’t have a grasp of your budget. Your outlays seem high; yet you seem to assume those won’t continue in retirement (new cars, etc.).

I first read your bottom line as optimistic (your NW hasn’t changed,) yet your wife is bringing in $400K. Viewed that way, you are down like many of us.

Your plan seems to be based on some non-trivial ifs — proceeds from future sale of house, future dividends (from investments you don’t yet have), maybe moving to Italy, etc. You also may be underestimating HC costs. Italy may be recovering from the virus for many years, with restrictions on immigration. That said, I suppose there are good deals to be had on real estate there now. In these troubled times, I just wouldn’t feel comfortable basing a retirement plan on anything that involved any international relocation for the foreseeable future.

It just feels like you have a lot of money coming in (and I recognize that is recent), but not much in the market. And the stars would have to align on lots of moving parts to enable your plan.

In these times having any job is a gift, let alone one that pays $400K. Your family is fortunate. If I were your wife, I would hold onto that job with both hands while you both did some more planning and investing.

 

[Golden sunsets]

I'd love to know how a $1M portfolio can throw off $50,000/year in dividends. What equity portfolio do you expect to own that averages $50,000/yr?

 

[Bamaman]

Let me get this right. You've lived a middle class lifestyle in the past and your son is going into an Ivy League engineering program in the fall?

I certainly hope he is going to be a scholarship program. Private schools, especially Ivy League schools, are priced out of sight of most middle class families. They often require rich men to have to work another few years past normal retirement to fund such programs.

Even those with college scholarships will most likely have substantial cash outlays required.

And being an empty nester is difficult enough, much more so when you go from the security of owning a home to a one bedroom apartment. I'm more into maintaining the status quo at home when going into another stage of life.

 

[jt999]

Equity Portfolio

I'd love to know how a $1M portfolio can throw off $50,000/year in dividends. What equity portfolio do you expect to own that averages $50,000/yr?

Below are stocks in current portfolio along with some on the watch list. Majority of these are yielding close to 5% except Disney.

Company Symbol Yield
Blackstone BX 5.3%
Home Depot HD 3%
Disney DIS 1.7%
Ratheon Technologies RTX 4.7%
Brookfield Infrastructure Partners BIP 5.7%
Broadcom AVGO 5.0%
Abbvie ABBV 5.7%
Outfront OUT 12.1% (Elevated - Historical is between 6-7%)
WATCH LIST - Valero Energy VLO 8.7%
WATCH LIST - Emerson Electric EMR 4.2%

 

[Toocold]

We are similar ages and have similar expenses, and I just pulled the trigger.

I agree that it is cutting it too close to pull the trigger now. For the 3 year scenario, can you lay out what you think your net worth and composition be?

 

[Franklin]

You are in great shape and have done well. I would take full advantage of the NQDC plan assuming they give you at least a dozen ways to invest it. Take the 10 year equal payout upon termination. (that lets you move to a lower taxed state versus paying your home state taxes). Make sure the NQDC is secured with a strong company or Rabbi trust. PM me is u have detailed questions on this. Ive placed the next 1o years of income into the plan allowing me to bridge out to SS and 401K distributions.

 

[jt999]

College Costs

Let me get this right. You've lived a middle class lifestyle in the past and your son is going into an Ivy League engineering program in the fall?

I certainly hope he is going to be a scholarship program. Private schools, especially Ivy League schools, are priced out of sight of most middle class families. They often require rich men to have to work another few years past normal retirement to fund such programs.

Even those with college scholarships will most likely have substantial cash outlays required.

And being an empty nester is difficult enough, much more so when you go from the security of owning a home to a one bedroom apartment. I'm more into maintaining the status quo at home when going into another stage of life.

We plan to have 2 full years of funding in the 529 Plan before he starts this fall and use monthly payment plan (pay as you go) to cover the first year w/o touching 529 Plan (current balance 107K). He is attending the college with the understanding that he will take out a loan for the cost of 1 year. He has applied to a dozen scholarships but we have not heard anything yet. Many application deadlines have been extended and decisions delayed.

I certainly agree with the sentiment around the security of owning your own home. I would like to eliminate the property tax bill (13K/annually) and spouse is driving 50 minutes 1 hour each way. Then, you have the lawn maintenance, insurance and other carrying costs. I will be paying more to "own" the home than I will lay out on rent when you factor in investment returns. Additionally, we are tired of the same old, same old. We feel like we're ready to change some things up and explore a new area.

 

[WyomingLife]

Below are stocks in current portfolio along with some on the watch list. Majority of these are yielding close to 5% except Disney.

Company Symbol Yield
Blackstone BX 5.3%
Home Depot HD 3%
Disney DIS 1.7%
Ratheon Technologies RTX 4.7%
Brookfield Infrastructure Partners BIP 5.7%
Broadcom AVGO 5.0%
Abbvie ABBV 5.7%
Outfront OUT 12.1% (Elevated - Historical is between 6-7%)
WATCH LIST - Valero Energy VLO 8.7%
WATCH LIST - Emerson Electric EMR 4.2%

I'm trying to understand your equity investments (which are apparently 30% of your AA now, down from 60%).

You have about $380K disbursed among those stocks above? What does that get you in annual dividends?

It looks like during the Great Pandemic of 2020 you largely liquidated to cash, such that your AA is now 30% equities. Completely understandable (but I would never have done so). Yet your retirement plan is dependent upon, at least in part, a dividend strategy. A dividend strategy, I would imagine, requires one to remain invested. Maybe I am wrong.

My only observation is that if you retire at, say, age 53, you may anticipate living through two more depressions and six more pandemics before the string runs out. If your tendency is to go to cash during such events, that may impact your dividend-based strategy. You are living through an experiment of your strategy.

I'm an index guy, so I can't imagine ever holding an individual stock no matter the strategy. Companies go out of business.