Hi! Some sudden math and I'm back into the FIRE mindset

[livingalmostlarge]

You need to sell the rsu upon vest. You pay the taxes as w2 income. Why would you hang onto the rsu except that you believe it's going to go up? Example work at MSFT, vested in 9/2025 $500/share. get 100 shares get $50k in realized income on your W2. You don't sell to cover. Instead you pay out of your salary. Then now 6/2026 your MSFT stock is $379/share, BOO! You just lost the value of the stock and you paid income taxes on the shares. DOUBLE whammy.

RSU - this is income given to you by the company. They are saying hey we are giving you $50k and you are choosing to buy shares in said company. Think Enron. Anyway you are tying both your salary and your portfolio to one stock. Charles Schwab

Personally i wouldn't do it. We'd be a lot richer if we hadn't sold all of our rsu along the way. But then again hindsight is 20/20.

So your potential gains are during the time before vest. But at the time of vest the stock is taxed. That is the time to sell. If you believe in the company, let's hypothetically say you do you'd turn around and if I handed you 35k out of the $50k put it into the company stock. IF you wouldn't buy the company stock with cash i handed to you then you should sell.

 

[frank05]

You need to sell the rsu upon vest. You pay the taxes as w2 income. Why would you hang onto the rsu except that you believe it's going to go up? Example work at MSFT, vested in 9/2025 $500/share. get 100 shares get $50k in realized income on your W2. You don't sell to cover. Instead you pay out of your salary. Then now 6/2026 your MSFT stock is $379/share, BOO! You just lost the value of the stock and you paid income taxes on the shares. DOUBLE whammy.

RSU - this is income given to you by the company. They are saying hey we are giving you $50k and you are choosing to buy shares in said company. Think Enron. Anyway you are tying both your salary and your portfolio to one stock. Charles Schwab

Personally i wouldn't do it. We'd be a lot richer if we hadn't sold all of our rsu along the way. But then again hindsight is 20/20.

So your potential gains are during the time before vest. But at the time of vest the stock is taxed. That is the time to sell. If you believe in the company, let's hypothetically say you do you'd turn around and if I handed you 35k out of the $50k put it into the company stock. IF you wouldn't buy the company stock with cash i handed to you then you should sell.

Of course you could have been awarded the RSU in 2018 at $100 a share and enjoyed 8 years of dividends. Most high tech companies award stock options twice a year. They vest over time at different prices. If you believe in the company fundamentals, then hold on to a portion. In 10 years, MSFT has gone from 48 to 380. The 500 price was basically a blip.

 

[livingalmostlarge]

Of course you could have been awarded the RSU in 2018 at $100 a share and enjoyed 8 years of dividends. Most high tech companies award stock options twice a year. They vest over time at different prices. If you believe in the company fundamentals, then hold on to a portion. In 10 years, MSFT has gone from 48 to 380. The 500 price was basically a blip.

Did I not say I'd be richer hanging onto rsu? It wasn't msft. You can pick any stock and you'd be richer hanging onto to it from 2018 basically.

Point is it's once incorrect that you need to hold rsu for one year to get long term capital gains. The rsu, rsa is taxed upon vest as income.

Therefore the decision to hold the stock as I properly explained is basically you are choosing to buy the company stock at that price on that day with cash.

It's fine if you want to. But realize what you are doing. Bogelhead the investment strategy of choosing to pick one stock over the market.

I am not that bright and never have been so we've always diversified. We'd be richer if we had hung onto the individual stock

 

[module4330]

This is an excellent point. I had factored in number of stock being reduced from taxation but I was also taxing the income from the sale of the stock in my spreadsheet, which made the short-term sale way worse in my spreadsheet.

My thought process right now is that I'm already highly exposed to my employer from my salary, the RSUs that are locked in until later, and finally through the ESPP (Employee stock purchase plan). Between all those things I don't see a reason to hold all the RSUs year over year given that the tax situation isn't as bad as I thought it would be. I will probably sell at least half, maybe more.

 

[cute fuzzy bunny]

Hi all! I'm Module.

I am a 37 year old father who has been dreaming of FIRE for at least the past 10 years. However, when my child was born, my wife got a series of complicated autoimmune conditions. Between the medical expenses and the increasing cost of parenting, I kind of tried to give up on FIRE in my heart since I didn't think it was all that possible. I've been sitting at what's essentially "CoastFIRE" and working on coping with the medical issues in the family while holding down a job and watching the retirement numbers go up. I figured that it's always hard to predict expenses with complex medical situations.

However, two things have changed since then:
1. I've got a second child on the way, due in about a month's time. My feelings about needing to get away from work to help and do more parenting alongside my sick wife have loomed larger.
2. I logged into my company's stock portal. I realized that I'm getting what I'd consider an astonishing amount of value in RSUs and stock in the next year. Long story short, I work for a tech company and the AI bubble is currently working in my favor.

The amount of stock coming my way is, before taxes, about 60% of my retirement account value over the next 4 years. Needless to say this kicked my mind into gear and made me realize that maybe retirement is possible in the short-term. Before this, my spreadsheet calculations have usually had me sitting 6-10 years from retirement depending on what my calculations are on SWR, market returns, how I calculate my retirement expenses, etc.

Depending on how the stock prices go and if I do short-term or long-term sales, and what my expenses end up being, I could potentially retire in 2032 or 2031. It bums me out on that one is that is pretty much the exact time both my kids will start elementary school and the maximum benefit of being retired early starts to fade.

Fund type	Amount
401K	~$555,000
Roth IRAs	~$345,000
Post-tax index funds	~$500,000
Kids' funds, both 529 plan and post-tax index funds	~$42,000
HSA	~$24,000
Possible stock windfall across the next four years, untaxed	~$920,000

I'm expecting to need/want about $130k (including planning for about a 10% tax rate) after retirement. This includes a fairly aggressive budget for medical, home repairs and travel and it might be too high for most folks. I'm planning on doing a fairly traditional Glidepath with a planned SWR of 3.75%.

Some of the looming questions and anecdotes that inspired me to come here and start reading are:
1. When you have school-aged kids, how hard is it to travel? We were planning on increasing our travel budget dramatically when I'm not working but it both seems hard to travel with young kids and school-aged kids.
2. Does anyone have anecdotes of early retirement with serious medical problems or autoimmune conditions? My wife's condition really does control more of our life decisions than we'd like.
3. I'm currently calculating that our cost of living will be higher in retirement. The short of why is that I will be paying for state college for two kids, aspiring to travel a lot more, and catching up on home repairs. It's just so hard to know what I'll need. My retirement spending spreadsheet currently has a weird bump above my SWR during the children's college years.
4. I am trying to figure out how to sell my stock in the best way for me. I've never felt comfortable holding tons of stock in my employer. As the prices are skyrocketing, I have to weigh the benefits of waiting to sell for long term capital gains vs. selling quickly to lock in the price.
5. I think that I will have to figure out a backdoor Roth IRA since I'll be exceeding the limit in the short-term because of these massive stock sell-offs. Of course, I already contributed half a year of Roth IRA before I realized this. I'm currently feeling intimidated by this and feeling the need to talk with an accountant.

Any thoughts from you folks on this? This has been a mental challenge for me because I had been mentally filing FIRE as a pipe dream and not a possible reality.

Thanks, all! I'll probably mostly be lurking but I'd love to chat, too.

About 20 years ago I did a long-term budget on life in retirement. Stuff that a lot of people don't figure in like tires on a car new cars heating and air conditioning replacements and so forth came to about $10,000 per year thinking it all the way through. I bet that amount is about 20,000 a year given the past 20 years of inflation.

There was also a cpi-e calculated for elderly. The thought was to use that in social security c o l a. But the number was so freaking high they completely scrapped that idea if I remember right it was 8 or 9% per year. Unaffordable for the government as it was googling that and tapping AI mode gives a lot of information.

 

[module4330]

I didn't factor tires into my sheet. I will add it. Thanks!

I'm lucky (for now) that I have a fairly new furnace, heat pump which will protect me for a handful of years but I still need to make sure the emergency fund handles it.

 

[cute fuzzy bunny]

I didn't factor tires into my sheet. I will add it. Thanks!

I'm lucky (for now) that I have a fairly new furnace, heat pump which will protect me for a handful of years but I still need to make sure the emergency fund handles it.

People are pretty good factoring and things like food clothing and shelter but the big maintenance items especially things like a furnace or air conditioning system I listed out everything that I'd spent in the last 20 years for Capital items and yeah tires are a big thing especially when they cost five or six hundred dollars every five or six years. Although once I get settled in the place I'm at now growth all around me has picked up and I can go get almost anything I need within a mile or two of where I live. I ride one of those rascal type scooters only mine is a big giant honking one. At 8 miles an hour and with most things a mile or so away from me it's actually quicker than driving a car in most cases. The little one is more maneuverable but not as fast and has a shorter range and has a tough time with hills but I got it for free so I can't complain.

 

[cute fuzzy bunny]

I didn't factor tires into my sheet. I will add it. Thanks!

I'm lucky (for now) that I have a fairly new furnace, heat pump which will protect me for a handful of years but I still need to make sure the emergency fund handles it.

A roof on your house is another good example. Just look out for things that are more than a month expenditure or years expenditure things that take 20-30 years or more I ended up not having to replace my cars cuz I drove both for 30 I'm sorry 20 and 17 years respectively. I remember the millionaire next door book talked about how the average millionaire drove a pickup truck and lived in the middle income subdivision and that's me. And a t-shirt and shorts driving a Honda my insurance agent said you don't look like someone you can sue or somebody that can pay a fine and that's perfect.

 

[Slim11]

2 kids and collage, state school? Is that like a usa state collage. Cost is around 50k a year 8 so 200k just for collage. Dont count on any finacial aid at what you have saved. So merit scholarships maybe. Thats a big added expense, especially if you need to pay for both kids at once.

 

[module4330]

2 kids and collage, state school? Is that like a usa state collage. Cost is around 50k a year 8 so 200k just for collage. Dont count on any finacial aid at what you have saved. So merit scholarships maybe. Thats a big added expense, especially if you need to pay for both kids at once.

It'll be one right after the other. So in the middle years of retirement I'll have 8 years in the row of dramatically increased expenses, which is a bit odd. I'm suspecting I'll be able to safely go above 3.75% or 4% for those years if needed.

 

[Slim11]

Just an idea, not sure if its doable, but load up some of that stock or bonus or some more of your salary into the kids collage fund. It would have time to grow tax free. May help in the long term, probably will not help now.

 

[cute fuzzy bunny]

It'll be one right after the other. So in the middle years of retirement I'll have 8 years in the row of dramatically increased expenses, which is a bit odd. I'm suspecting I'll be able to safely go above 3.75% or 4% for those years if needed.

I always said that's a good rule as we all know from our fire count runs but it's not terribly must do


I've been known to spend a little more when the returns are good and tighten up the wallet when times were bad we got did a lot of staycations and didn't spend a lot of money during the Great recession but boy I wish I had bought up four or five of the homes in my neighborhood back the they were selling desperately at 350 to 375 and they're all up in the 800 something range now. I do love my s&p 500 index and a few other funds and ETFs that I'm fond of but California real estate has made me a ton of money. It is a double edged sword though if you don't have fluid money in a lot of people don't I watched a lot of people take a real bath having to sell their houses at a huge loss. But I'm not in position where I'd have to desperately do that.

 

[module4330]

I've thought about the idea that I could load up the college plans this year and just let them grow in order to simplify the budget in the future. For this, however, my big concern is that I might overshoot amount and have money kind of stuck in a 529 plan. I know you can use them for trades and change the beneficiary, but it seems ideal not to get money caught in there if I don't have to.

I think what I may do it still some of these RSUs and fund just enough in the 529s that with ideal growth (12%? 15%?) they should hit the right amount and I can otherwise do some yearly donations to course correct as I get closer.

This is also one of those days where my RSU theoretical price has been very volatile. It's a good reminder to not count all my chickens. I really should check the stock price less often for my own mental health.

 

[NgineER]

Are you fortunate enough to be able to choose what you do with the RSUs? I do not have a choice of what to do. Mega corp automatically sold all RSUs on exercise day and took 36% of them for taxes and the rest were sold and the cash deposited into my ESPP account.

I know that theoretically you should be able to pay the taxes from cash and keep all RSUs, but I did not have any option to do that.

 

[module4330]

Are you fortunate enough to be able to choose what you do with the RSUs? I do not have a choice of what to do. Mega corp automatically sold all RSUs on exercise day and took 36% of them for taxes and the rest were sold and the cash deposited into my ESPP account.

I know that theoretically you should be able to pay the taxes from cash and keep all RSUs, but I did not have any option to do that.

They sell enough for taxes and give me the rest as stock to do with as I please. But I don't get to choose the tax situation

 

[livingalmostlarge]

I overloaded the 529 and it's a nice problem to have. A lot of our college savings came from early investing. We split the difference and not all is in 529. About $325k 529 and $75k in ugma per kid x 2. And we are 2 and 4 years out from college.

I don't worry about college much. And if we have more then first world problem they can save it for their kids or they can use it for going on or. I was hoping the ugma account would fund first house, car, and wedding. Also they can just pay taxes on the 529 or Roth conversion.

 

[NgineER]

They sell enough for taxes and give me the rest as stock to do with as I please. But I don't get to choose the tax situation

Would you buy your stock at current price without any discounts (like you get in your ESPP) today? If not, you should sell your share of the stock right away and diversify into something else.

 

[module4330]

Would you buy your stock at current price without any discounts (like you get in your ESPP) today? If not, you should sell your share of the stock right away and diversify into something else.

I'm relatively confident that the price is more or less long-term stable. My previous math on keeping vs. saving was erroneously based on saving to sell for capital gains because I had thought that the entire amount was still taxable. But now that I've looked into it a bit more I've realized that I get shared deducted to pay for tax. That situation means that I'm very likely to just sell right away.

 

[module4330]

I overloaded the 529 and it's a nice problem to have. A lot of our college savings came from early investing. We split the difference and not all is in 529. About $325k 529 and $75k in ugma per kid x 2. And we are 2 and 4 years out from college.

I don't worry about college much. And if we have more then first world problem they can save it for their kids or they can use it for going on or. I was hoping the ugma account would fund first house, car, and wedding. Also they can just pay taxes on the 529 or Roth conversion.

Well, now I know UGMA accounts are a thing. That's something I'm going to have to look into. I've been saving some money in a generic post-tax vanguard account and then doing a 529 so far

 

[pb4uski]

I've done a bit of FIRECalc. I found it a bit easier to map out a budget that changes year to year with a spreadsheet. I've got inflation and a variable budget (to account for college and the like) but my spreadsheet doesn't have monte carlo simulations which is an obvious downside.

I will see if I can better model my situation in the advanced tabs of FIRECalc.

Do it for yourself but FIRECalc suggests that you probably could do it. Here is what I used for inputs:

• Start Here:
  • Spending: $130,000
  • Portfoio: $1,424,000
  • Years: 63 (100-37)
• Other Income/Spending
  • SS: $0 (you'll need to input)
• Not Retired?
  • Retirement year: 2032
  • Annual additions :$80,000
• Portfolio
  • 100% stocks
• Portfolio changes
  • Add $300,000 in 2026
  • Add $300,000 in 2027
  • Add $300,000 in 2028
• Investigate:
  • Spending level for 95% success

Then Submit and result is $135,843 annual spending @ 95.7% success.

The results are obviously heavily dependent on RSU benefits and I suspect need to be reduced to reflect tax bite on RSU benefits which will likely make a big difference. For example, if I reduce the $300,000 to $200,000 to reflect taxes then the 95% success safe spending level is $121,005 @ 95.7%.

YMMV so do your own due diligence. I suggest that you look into Quicken Lifetime Planner which is a pretty robust retirement planner that covers a lot of bases and is included in Quicken Deluxe and higher.

 

[pb4uski]

I've done a bit of FIRECalc. I found it a bit easier to map out a budget that changes year to year with a spreadsheet. I've got inflation and a variable budget (to account for college and the like) but my spreadsheet doesn't have monte carlo simulations which is an obvious downside.

I will see if I can better model my situation in the advanced tabs of FIRECalc.

You could use off-chart spending under the Income/Other Spending tab for college costs but only 3 entries are allowed so you'll have to fudge the 8 years of college into 3 years of off-chart spending withdrawals.

Quicken Lifetime Planner may work better for your complexities and long time horizon. Until a short time ago QLP was only deterministic but they recently added monte carlo capabiities.

If you become a supporter of FIRECalc and login to FIRECalc, it will add a manual entry of spending changes to the botton of the Spending tab that gives you year-by-year control over spending.

 

[module4330]

You could use off-chart spending under the Income/Other Spending tab for college costs but only 3 entries are allowed so you'll have to fudge the 8 years of college into 3 years of off-chart spending withdrawals.

Quicken Lifetime Planner may work better for your complexities and long time horizon. Until a short time ago QLP was only deterministic but they recently added monte carlo capabiities.

If you become a supporter of FIRECalc and login to FIRECalc, it will add a manual entry of spending changes to the botton of the Spending tab that gives you year-by-year control over spending.

View attachment 64486

It also looks like the fidelity planner I get through my employer retirement plan is not bad, but I haven't yet found a way to model my stock cash infusion over the next few years. I'll keep messing with all these tools.

 

[module4330]

The bullet point in my original post has come to pass. I'm now a parent of two. I've got some college fund accounts to fill up!

 

[module4330]

I've also realized that my originally planned spending is close enough to the ACA cliff that i probably would benefit from optimizing spending for it

 

[pb4uski]

The bullet point in my original post has come to pass. I'm now a parent of two. I've got some college fund accounts to fill up!

Congratulations! Double the fun!