free4now
Thinks s/he gets paid by the post
- Joined
- Dec 28, 2005
- Messages
- 1,228
I've been reading the early retirement boards and forums for close to a decade but haven't posted much so this is a bit of an introduction.
I've been working at the same software development job for a large corporation for 13 years now, and have amassed enough assets that I think I'm ready to try not working. Maybe for a lifetime, or maybe I'll find another job in a year or so. I've been getting less and less motivated to work hard at my job and have been falling behind in terms of my job skills and knowledge. My management is really mellow and lets me get away it, so I haven't really felt any need to get my act together at work for a while and I've been sliding down into not really getting much done at work.
I think that FIRE dreaming is a large part of why; I'm not focussed on getting my skills in shape for my next job but rather on just making it through so I can be FIRE. I've just gotten into a little rut working here that has been very financially lucrative and not particularly demanding, so why bother with anything else.
In the dotcom era there was much money to be made and a large portion of my net worth (I estimate between half to 2/3) is from stock options from that era. Since then I've been waiting for all those options to vest and it made absolutely no sense financially for me to go anywhere else to work since the value of my options vesting each year was greater than my salary. But now that they are all vested I am feeling less like I need to stay working here. But I don't really have a desire to work anywhere else, nor strong skills to ease that transition.
Last year I took a 10 month unpaid sabbatical and travelled around the world including across the US. It was a truly great experience and I think cemented for me that I liked being independent financially. My expenses for that period totalled $110 per day. That's everything I spent except the payments on my condo that I left behind. That gave me confidence that I can enjoy life without spending too much money. But it also reinforced for me that I do well with structure in my life; towards the end of the trip I started getting depressed and homesick. In the spectrum between introversion and extroversion I'm definitely on the introverted end, and I do better in places where I see the same people over and over again in structured settings like work or activity groups. So I longed for the structure of my old life and work.
I've been back and working the old job for 8 months now and I've just been getting more depressed... the people I used to go out to lunch with are no longer there and for whatever reason I haven't felt motivated to start many new relationships here. I'm spending most of my work days just avoiding work surfing the internet and not really getting anything done, and it's starting to catch up with me.
So I'm realizing that I'm just done with this job. My original nest egg goal was 2 million dollars which is about what it would take for me to have a bit more than my current income neglecting savings. Right now my post-tax cash out net worth is just a little above 1 million, and I think that's enough for me to live a good life. The one thing that is and has always been a concern is that isn't going to be enough for me to get married and raise a kid on (at least here in California). I'm still unsure whether I need/want to have a wife and kid, but I don't want to shut off that possibility. I suppose I would have to go back to work if I wanted to start a family.
Financially, here's my picture:
Current salary about $100k plus benefits. I'm saving about $25k/year into 401k and stock.
In round numbers I have:
401k $100k
Unexercised stock options and shares: $100k
Brokerage account with mostly BRK and index funds: $700k
2 BR/2BA Condo in California with market value of $550k and mortgage around $270k.
My 5/1 ARM mortage loan costs $1400/month, and taxes HOA and insurance bring my housing payment up to $2100/month. That will go up a few hundred in 2008 if I'm still there when the ARM adjusts.
I have a roomate paying $650 per month in rent.
My after-tax, after-savings take home pay that I live on now while working is about $4200 per month plus the $650 rental income. This pays the $2100 PITI payment and I live well on the rest.
My plan is to live FIRE on 40k per year total, meaning about $3333 per month plus $650 rental income =~ $4000 per month. I'll pay the $2100 PITI out of that and live on the rest. It'll be a reduction in my dicretionary spending by 30-40%, but there are plenty of things I can easily cut out.
I currently have a lot of newish things... 2 year old Prius car, new $4k camera setup (photography is a hobby for me) new $2k car stereo system (learning about audio is another hobby for me). I bought the camera and stereo during my "depressed about work being unsatisfying" period. I really enjoy playing with them but I worry about becoming addicted to expensive consumer electronics that I can't afford on FIRE income. Frankly another reason for stopping work is to stop myself from getting used to buying things as an activity; I spend too much time surfing for bargains. It's not a major issue in that I never spend above my means, in fact live well below my means, and I rarely regret my purchases. But it still seems like I could and should be able to be happy without those purchases. I have in the past been much more into hiking, backpacking, backcountry skiing, and biking, and I look forward to FIRE when I will have time to do long backcountry trips and get back in shape.
The most critical thing for me is I will need some structure in my life so that I don't fall in my own little world of staying at home and working on projects around the house. Some reason for me to take a shower every day
Some of the things I'm considering are: Joining up with Buddhist or Unitarian groups that meet regularly, going to the gym regularly, joining an "artist's way" group, taking classes.
I'm interested in any feedback y'all have... some of the questions I'm mulling over are:
I'm thinking it makes sense to convert my $100k 401k to a traditional IRA when I leave in 2006. I'll have about $100k or more ordinary income in 2006 from exercising my employee stock options. Then in 2007 when my tax bracket is much lower I could convert the Trad IRA into a Roth IRA which would allow me to access most of it without penalty in 5 years if needed (e.g. in the unlikely event that a stock market crash took out my brokerage account completely). And I would get the Roth IRA benefits of being able to put more money into the tax-advantaged account.
Most people would say it's crazy to try living in a $550k condo on $40k after tax income, and I would tend to agree. I'm really thinking hard about selling that and moving to cheaper rental housing. But at this point I think I need to wait a year and see where I am then, to decide whether I should keep it or sell it, where I want to live, and if I want to go back to work. The transaction costs of selling are large enough that I think "when in doubt do nothing" is a good approach. After having travelled across the US and the world I do think that the SF Bay area (where I live) may be the best place for quality of my lifestyle in the world. But it is also one of the most expensive and that's a serious problem for living cheaply. As I was driving across the US I was scoping out places I might want to live. I tend to have "California Values" and want to live in a blue state. The most distressing thing I found was that the places that had the most affordable housing were the red states. Austin, Texas was quite appealing because it seems to combine a sort of California attitude with affordibility. Any insights into the sell or stay decision are welcome.
The other issue is how exactly to account for the condo in SWR analysis. I've not seen any SWR studies that incorporate home ownership, so that is uncharted territory. It seems like the most straightforward thing is to just leave it out of the SWR calculations completely and assume zero appreciation. Especially given the current real estate market that is probably not a bad short term prediction. But the whole idea of SWR studies is to analyze things over the long term and I think it's a safe bet that over the 50 or so years of my retirement that housing will appreciate. Anyone come up with a useful model for calculating SWR involving homeownership?
My mother is retiring this year too, and it feels really strange to be considering retiring at the same time as her. My dad will retire a few years later. I recognize that my parents have made enourmous sacrifices to raise me and my sister well; our family started out way below middle class. I would like to somehow share my financial success with them. But obviously that means less for me and $40k per year doesn't leave too much room for generosity. My mom's going to be living on a similar amount in retirement ($2k not including housing) , but I suspect it will be more difficult for her than for me since she tends towards spending at or above her means, which were similar to mine before her retirement. My sister has serious money troubles and I could temporarily make it all go away for her if I wanted to but I don't think that would be good for her in terms of learning to live within her means. It feels a little unfair to be retiring at 35 when my mother and father worked all their lives largely to raise me and my sister. Anyone else navigated through the dilemna of how to deal with that situation?
Looking forward to joining y'all in FIREland soon.
-FireMe
I've been working at the same software development job for a large corporation for 13 years now, and have amassed enough assets that I think I'm ready to try not working. Maybe for a lifetime, or maybe I'll find another job in a year or so. I've been getting less and less motivated to work hard at my job and have been falling behind in terms of my job skills and knowledge. My management is really mellow and lets me get away it, so I haven't really felt any need to get my act together at work for a while and I've been sliding down into not really getting much done at work.
I think that FIRE dreaming is a large part of why; I'm not focussed on getting my skills in shape for my next job but rather on just making it through so I can be FIRE. I've just gotten into a little rut working here that has been very financially lucrative and not particularly demanding, so why bother with anything else.
In the dotcom era there was much money to be made and a large portion of my net worth (I estimate between half to 2/3) is from stock options from that era. Since then I've been waiting for all those options to vest and it made absolutely no sense financially for me to go anywhere else to work since the value of my options vesting each year was greater than my salary. But now that they are all vested I am feeling less like I need to stay working here. But I don't really have a desire to work anywhere else, nor strong skills to ease that transition.
Last year I took a 10 month unpaid sabbatical and travelled around the world including across the US. It was a truly great experience and I think cemented for me that I liked being independent financially. My expenses for that period totalled $110 per day. That's everything I spent except the payments on my condo that I left behind. That gave me confidence that I can enjoy life without spending too much money. But it also reinforced for me that I do well with structure in my life; towards the end of the trip I started getting depressed and homesick. In the spectrum between introversion and extroversion I'm definitely on the introverted end, and I do better in places where I see the same people over and over again in structured settings like work or activity groups. So I longed for the structure of my old life and work.
I've been back and working the old job for 8 months now and I've just been getting more depressed... the people I used to go out to lunch with are no longer there and for whatever reason I haven't felt motivated to start many new relationships here. I'm spending most of my work days just avoiding work surfing the internet and not really getting anything done, and it's starting to catch up with me.
So I'm realizing that I'm just done with this job. My original nest egg goal was 2 million dollars which is about what it would take for me to have a bit more than my current income neglecting savings. Right now my post-tax cash out net worth is just a little above 1 million, and I think that's enough for me to live a good life. The one thing that is and has always been a concern is that isn't going to be enough for me to get married and raise a kid on (at least here in California). I'm still unsure whether I need/want to have a wife and kid, but I don't want to shut off that possibility. I suppose I would have to go back to work if I wanted to start a family.
Financially, here's my picture:
Current salary about $100k plus benefits. I'm saving about $25k/year into 401k and stock.
In round numbers I have:
401k $100k
Unexercised stock options and shares: $100k
Brokerage account with mostly BRK and index funds: $700k
2 BR/2BA Condo in California with market value of $550k and mortgage around $270k.
My 5/1 ARM mortage loan costs $1400/month, and taxes HOA and insurance bring my housing payment up to $2100/month. That will go up a few hundred in 2008 if I'm still there when the ARM adjusts.
I have a roomate paying $650 per month in rent.
My after-tax, after-savings take home pay that I live on now while working is about $4200 per month plus the $650 rental income. This pays the $2100 PITI payment and I live well on the rest.
My plan is to live FIRE on 40k per year total, meaning about $3333 per month plus $650 rental income =~ $4000 per month. I'll pay the $2100 PITI out of that and live on the rest. It'll be a reduction in my dicretionary spending by 30-40%, but there are plenty of things I can easily cut out.
I currently have a lot of newish things... 2 year old Prius car, new $4k camera setup (photography is a hobby for me) new $2k car stereo system (learning about audio is another hobby for me). I bought the camera and stereo during my "depressed about work being unsatisfying" period. I really enjoy playing with them but I worry about becoming addicted to expensive consumer electronics that I can't afford on FIRE income. Frankly another reason for stopping work is to stop myself from getting used to buying things as an activity; I spend too much time surfing for bargains. It's not a major issue in that I never spend above my means, in fact live well below my means, and I rarely regret my purchases. But it still seems like I could and should be able to be happy without those purchases. I have in the past been much more into hiking, backpacking, backcountry skiing, and biking, and I look forward to FIRE when I will have time to do long backcountry trips and get back in shape.
The most critical thing for me is I will need some structure in my life so that I don't fall in my own little world of staying at home and working on projects around the house. Some reason for me to take a shower every day
Some of the things I'm considering are: Joining up with Buddhist or Unitarian groups that meet regularly, going to the gym regularly, joining an "artist's way" group, taking classes. I'm interested in any feedback y'all have... some of the questions I'm mulling over are:
I'm thinking it makes sense to convert my $100k 401k to a traditional IRA when I leave in 2006. I'll have about $100k or more ordinary income in 2006 from exercising my employee stock options. Then in 2007 when my tax bracket is much lower I could convert the Trad IRA into a Roth IRA which would allow me to access most of it without penalty in 5 years if needed (e.g. in the unlikely event that a stock market crash took out my brokerage account completely). And I would get the Roth IRA benefits of being able to put more money into the tax-advantaged account.
Most people would say it's crazy to try living in a $550k condo on $40k after tax income, and I would tend to agree. I'm really thinking hard about selling that and moving to cheaper rental housing. But at this point I think I need to wait a year and see where I am then, to decide whether I should keep it or sell it, where I want to live, and if I want to go back to work. The transaction costs of selling are large enough that I think "when in doubt do nothing" is a good approach. After having travelled across the US and the world I do think that the SF Bay area (where I live) may be the best place for quality of my lifestyle in the world. But it is also one of the most expensive and that's a serious problem for living cheaply. As I was driving across the US I was scoping out places I might want to live. I tend to have "California Values" and want to live in a blue state. The most distressing thing I found was that the places that had the most affordable housing were the red states. Austin, Texas was quite appealing because it seems to combine a sort of California attitude with affordibility. Any insights into the sell or stay decision are welcome.
The other issue is how exactly to account for the condo in SWR analysis. I've not seen any SWR studies that incorporate home ownership, so that is uncharted territory. It seems like the most straightforward thing is to just leave it out of the SWR calculations completely and assume zero appreciation. Especially given the current real estate market that is probably not a bad short term prediction. But the whole idea of SWR studies is to analyze things over the long term and I think it's a safe bet that over the 50 or so years of my retirement that housing will appreciate. Anyone come up with a useful model for calculating SWR involving homeownership?
My mother is retiring this year too, and it feels really strange to be considering retiring at the same time as her. My dad will retire a few years later. I recognize that my parents have made enourmous sacrifices to raise me and my sister well; our family started out way below middle class. I would like to somehow share my financial success with them. But obviously that means less for me and $40k per year doesn't leave too much room for generosity. My mom's going to be living on a similar amount in retirement ($2k not including housing) , but I suspect it will be more difficult for her than for me since she tends towards spending at or above her means, which were similar to mine before her retirement. My sister has serious money troubles and I could temporarily make it all go away for her if I wanted to but I don't think that would be good for her in terms of learning to live within her means. It feels a little unfair to be retiring at 35 when my mother and father worked all their lives largely to raise me and my sister. Anyone else navigated through the dilemna of how to deal with that situation?
Looking forward to joining y'all in FIREland soon.
-FireMe
