Keep Doing the Math

HammerDown

Confused about dryer sheets
Joined
Oct 9, 2021
Messages
6
Location
Midwest
Hi :greetings10:
I have been lurking here on the forum for a year or 2 but haven't posted until now. I found the FIRE concept interesting a few years ago after reading a few books and have since listened to hours of podcasts related to finance. I didn't realize I was already living a relatively frugal life and how much my ex and I had saved until our 3 kids were in college and we were no longer supporting them. We started investing 15-20% of income in early 20's and have been relatively consistent.

Recently divorced :trash: 54 years old, with just over $1.1M invested in 95% equities including around $100K in TSLA depending on the day :rolleyes:. I bought early, sold some but plan to keep the remainder for a while longer 🤞. Not quite debt free but savoring the low interest rates on the house that I've lived in for 25 years.
I am ready to pull the retirement card but still paying the ex and I don't feel I have enough cash 💵on hand without concern of market fluctuations. I am also looking to travel for a few years to determine where (internationally, VLCOL area) I may want to live and explore while still young and healthy.

Die with Zero, Alive are some great books!
It's difficult to find others (in person) with similar views on finances, travel, healthy living, etc.

I plan to pull the trigger and stop w*rking in the next 1-2 years. I appreciate everything that is shared on the forum and for all the teaching and education everyone here provides to those of us still trying to find our freedom! Thank you! 🙏
 
Great first post. Good luck and you’re likely closer than you think to FIRE. I liked ‘die with zero’ too.
 
Welcome to the forum!
Hope to hear more from you as you journey towards retirement.
 
Good for you. I started by doing the math and by using the usual retirment programs.

After a number of years the basic math of it all became clear and I could do it on the back of an envelope. There really are not that many variables. The rest is common sense and basic math.

The first thing we did when we retired early was downsize to a storage container, sell our home, and travel for nine months. For the following years, other than covid years, it was 4 months or so of international travel each year. Winter and then either spring or fall trips. We want to do while we have our health and the desire to travel independently.

Neither of us have regretted one moment of it, never looked back. Well...except that our respective bucket lists keep growing, not shrinking!
 
Welcome to the forum. Got divorced myself at 49. All is good now.
 
Hello! I’m also 54 with about that much in Tesla. 😬 You’re looking pretty good if your annual spending is about 50K or less (ballparking), with the unspecified payments to the ex a wild card.
 
Hello! I’m also 54 with about that much in Tesla. 😬 You’re looking pretty good if your annual spending is about 50K or less (ballparking), with the unspecified payments to the ex a wild card.
As a stocks person myself, I'm interested in the idea of large concentrations in one equity. Did you weigh up the risks with such a large bet, or is it that the amount represents are smaller allocation in your overall portfolio than one might assume?
 
As a stocks person myself, I'm interested in the idea of large concentrations in one equity. Did you weigh up the risks with such a large bet, or is it that the amount represents are smaller allocation in your overall portfolio than one might assume?
Well, the easy question first: The Tesla holding is but one of many holdings in our portfolio, but arguably it's still a large single holding at about 5% of the portfolio -- or about 3.5% if you count ESOP funds I hope will still come ultimately.

Now, when I bought the Tesla, the amount invested was *not* a large part of the portfolio. It's just grown that much since. (I suspect it's the same with HammerDown?) Since it is within my taxable funds, that does pose a high-class problem: If I feel it's hit its high mark (especially given volatility from Musk, the politics and the EV market itself) and I should sell, I could have a tax problem or at the least an ACA subsidy problem.

To further answer your first question, on whether I weighed the risks: Well, sure, like anything. I can't remember exactly what was happening at the time, but I think it sank suddenly and then analysts rated it a big buy. I had just had a cash infusion from a condo sale (that I had been renting out), so I had money to invest. Indeed the Tesla was one of many stocks I bought (Netflix soon came later, for example). I quickly lucked out on the Tesla starting when there was a big stock split.

I should say, while I do have us in many individual stocks (investing usually around $10K at a time), I also do have us in pretty standard index or target-date funds, too. I'd have to figure out the ratio, but it's probably 75% of the stock allocation in the mutual funds or ETFs.
 
Most people here have a bit of a concentration in Tesla... it's about 2% of the Total Market Index and 2.5% of the S&P 500. So if you are diversified with either of those plus an additional 5% directly owned then Tesla is actually about 7-7.5% of the portfolio! The amount of concentration is pretty intense in the market value weighted indexes. I realized this a while ago and it keeps any FOMO from missing the "FAANG" stocks away, they are well represented in my portfolio. If I were to invest/speculate, in an individual stock, I would likely pick one not already on top of the indexes unless I really loved that particular company.

I have no individual stocks anymore but think about playing with a piece of my IRA for fun. Most of my choices over the years beat the market BUT were never a significant enough portion of my portfolio to make a difference to my life so it would only be for fun. I enjoy doing the analysis but I'm a value/DCF kind of guy so I tend to "fall in love" with boring companies.
 
Well, the easy question first: The Tesla holding is but one of many holdings in our portfolio, but arguably it's still a large single holding at about 5% of the portfolio -- or about 3.5% if you count ESOP funds I hope will still come ultimately.

Now, when I bought the Tesla, the amount invested was *not* a large part of the portfolio. It's just grown that much since. (I suspect it's the same with HammerDown?) Since it is within my taxable funds, that does pose a high-class problem: If I feel it's hit its high mark (especially given volatility from Musk, the politics and the EV market itself) and I should sell, I could have a tax problem or at the least an ACA subsidy problem.

To further answer your first question, on whether I weighed the risks: Well, sure, like anything. I can't remember exactly what was happening at the time, but I think it sank suddenly and then analysts rated it a big buy. I had just had a cash infusion from a condo sale (that I had been renting out), so I had money to invest. Indeed the Tesla was one of many stocks I bought (Netflix soon came later, for example). I quickly lucked out on the Tesla starting when there was a big stock split.

I should say, while I do have us in many individual stocks (investing usually around $10K at a time), I also do have us in pretty standard index or target-date funds, too. I'd have to figure out the ratio, but it's probably 75% of the stock allocation in the mutual funds or ETFs.
Seems like you've got a good plan going & 5% seems pretty conservative overall. As you say it grew to that over time. Maybe time to trim some profit? Or just hold long term. I see sales disappointed overnight. In AU/NZ where I'm from, resale prices have crashed due to concerns re battery life. Not sure if the same in the US.

The good thing about the indexes for me is that it's set and forget to a large degree & that stops me fiddling aroudn the edges, although in Aussie, we have superannuation, like a Roth IRA, that you can either put into index funds or certain asset categories, OR you can manage it manually and trade a basket of ASX300 stocks & fiddle all you want. I ended up doing a 70/30 split between index options & individual stocks of my choosing. Worked out pretty well... for now anyway.
 
Seems like you've got a good plan going & 5% seems pretty conservative overall. As you say it grew to that over time. Maybe time to trim some profit? Or just hold long term. I see sales disappointed overnight. In AU/NZ where I'm from, resale prices have crashed due to concerns re battery life. Not sure if the same in the US.

The good thing about the indexes for me is that it's set and forget to a large degree & that stops me fiddling aroudn the edges, although in Aussie, we have superannuation, like a Roth IRA, that you can either put into index funds or certain asset categories, OR you can manage it manually and trade a basket of ASX300 stocks & fiddle all you want. I ended up doing a 70/30 split between index options & individual stocks of my choosing. Worked out pretty well... for now anyway.
Of course, Tesla is quite volatile, and it’s hard to tell if it’s a buy-and-holder with a big future. More analysts than not see upside, but it’s a wide range. I’m figuring now that if it hits $500, I might have to make a decision, on profit-taking as you say, in whole or part.
 
Well, the easy question first: The Tesla holding is but one of many holdings in our portfolio, but arguably it's still a large single holding at about 5% of the portfolio -- or about 3.5% if you count ESOP funds I hope will still come ultimately.

Now, when I bought the Tesla, the amount invested was *not* a large part of the portfolio. It's just grown that much since. (I suspect it's the same with HammerDown?) Since it is within my taxable funds, that does pose a high-class problem: If I feel it's hit its high mark (especially given volatility from Musk, the politics and the EV market itself) and I should sell, I could have a tax problem or at the least an ACA subsidy problem.
Don't want to change the thread direction but your post has me thinking of how to get around the big cap gain problem. Just wondering if you or others have insight. Seems that sitting on big gains and potential big tax is similar to big TIRA problem of taxes on the RMDs. To get around the RMD issue many have been doing Roth conversions and paying tax at today's rates. Would the same work if you were to sell say $10K of the $100K each year and use the funds to purchase the same say in a Roth account thus spreading out the tax at lower rates ? Fill up the 0% cap gain bucket with a bit each year ? I'm aware of the wash sale rule, but if you sell in after tax does it apply to a Roth purchase ?
 
Welcome to the forum. It's hard to comment on your 1-2 year FIRE plan as we don't know some important facts. Most importantly your expected total annual spend (including taxes, insurance, ex-wife costs, etc.). Also, the break out of the $1.1M between taxable, tax deferred and tax free would be helpful since if much of this is tax deferred it's really only worth 80% of that total after taxes.

My gut is that retiring around 55 you should limit your annual spend to around 3.0 - 3.5% of your accessible $. This scales back on the widely used 4% rule because you need an extra 10 years of funds since the 4% rules is based on people retiring at 65.

Above someone suggested you'd be OK with spending of $50K per year (4.5%). That spending level would make me very nervous. I'd be more around $35-40K of annual spend with $1.1M at 55 FIRE.
 
Welcome to the forum. It's hard to comment on your 1-2 year FIRE plan as we don't know some important facts. Most importantly your expected total annual spend (including taxes, insurance, ex-wife costs, etc.). Also, the break out of the $1.1M between taxable, tax deferred and tax free would be helpful since if much of this is tax deferred it's really only worth 80% of that total after taxes.

My gut is that retiring around 55 you should limit your annual spend to around 3.0 - 3.5% of your accessible $. This scales back on the widely used 4% rule because you need an extra 10 years of funds since the 4% rules is based on people retiring at 65.

Above someone suggested you'd be OK with spending of $50K per year (4.5%). That spending level would make me very nervous. I'd be more around $35-40K of annual spend with $1.1M at 55 FIRE.
Thank you all for your comments and questions. This past month have brought many changes to my life and plans! Rather than 1-2 years from quitting work, I was told my position was eliminated due to lack of funding and am currently on layoff. Now I must decide what to do moving forward and where my finances might allow my options.

If I decide not to return to work, I would spend the next 2-5 years traveling and spending more than a 'normal' amount of expected annually. My annual spend without travel would be close to $50K. My ex-husband payout (house equity) is 'doable' for me this year but will eliminate my emergency fund which scares me, especially in the current financial rollercoaster we are in!

My assets are 15% after tax ROTH, checking/savings or brokerage account and the rest are pre-tax retirement accounts (worth only 80% as you mention). My house which I do not plan to sell is worth an additional $300K, not mentioned in my first post. I currently have an adult son living with me and paying some rent but I have not really included that in my calculations as he could move out at any time.

My expected annual spend including travel would be around $65K for the next 2-3 years and after that, I would likely want to have part-time income or volunteer type work. The good news is that at 55, I will be able to retire from my position before my layoff terminates which will give me 'penalty free' access to about $400K of pretax (457/403b) funds. Also, medical benefits costing $800/month are an option depending on what will happen with ACA insurance options in the next few years given this administration and the multitude of changes that may take place.

I agree, long term spending of 4.5-6% annual spend is too risky and I would like to stay around the 3-4% annual spend. My current concerns given my new situation focus on sequence of return risk, annual spend the first few years and a lack of emergency fund.

I would appreciate any insight, lessons learned, etc. from others given the details I have shared. Thank you in advance!
 
Is it going to be easy to find another position in your field? If not, after a couple of years of traveling, it will only get harder. Obviously, you can probably find something not in your field, even like being a receptionist at a Medical office - one that I sometimes toy with if I ever have the urge to go back to work.

I would say that with $1.1M, you are not in the position to be fully retired when your annual spending is already $50K before traveling. With traveling you are planning to spend $65K for the next 2-3 years. The question is whether you want to continue to work for a few more years before retiring, or travel first and then go back to work. For me, I would rather to keep working and accumulate enough before I reitre and then never had to worry about money again.

Do you get a pension? How much will your SS benefits be? What sort of severence pay will you be receiving?
 
Is it going to be easy to find another position in your field? If not, after a couple of years of traveling, it will only get harder. Obviously, you can probably find something not in your field, even like being a receptionist at a Medical office - one that I sometimes toy with if I ever have the urge to go back to work.

I would say that with $1.1M, you are not in the position to be fully retired when your annual spending is already $50K before traveling. With traveling you are planning to spend $65K for the next 2-3 years. The question is whether you want to continue to work for a few more years before retiring, or travel first and then go back to work. For me, I would rather to keep working and accumulate enough before I reitre and then never had to worry about money again.

Do you get a pension? How much will your SS benefits be? What sort of severence pay will you be receiving?
Right, there's the option of getting even some part-time job to help you close the gap. Could there even be something you could do on your laptop *while traveling*? Check out this concept: Your Mini Sabbatical -- from a person I know well and who I know has actually and reliably lived this life. But this depends on your line of work or possible line of work that suits your skills -- or that you'd want to learn.
 
Don't want to change the thread direction but your post has me thinking of how to get around the big cap gain problem. Just wondering if you or others have insight. Seems that sitting on big gains and potential big tax is similar to big TIRA problem of taxes on the RMDs. To get around the RMD issue many have been doing Roth conversions and paying tax at today's rates. Would the same work if you were to sell say $10K of the $100K each year and use the funds to purchase the same say in a Roth account thus spreading out the tax at lower rates ? Fill up the 0% cap gain bucket with a bit each year ? I'm aware of the wash sale rule, but if you sell in after tax does it apply to a Roth purchase ?
If you'll pardon again this aside in the thread: This is an interesting thought. For me, I'll effectively be doing this -- selling a bit each year until age 59.5 -- because I need to generate the living money each year. I can easily fall under the 0% cap gain limit, but so far I have to worry about the ACA credit limits (or determine whether it'd be worth paying the extra ACA premiums anyway).

I actually have an even hairier problem (again in a high-class way) in that I have a big Apple holding, too! Let's hope some giant scandal or something doesn't befall that company.

On the wash sale question: My understanding is that if you sell something for a loss, you can't rebuy it in *any* account you have. But, that's true for only 31 days (not 30, right?).
 
I went back and re-read the last post from OP, is the $400K over and above the $1.1M? If so, we are looking at $1.5M and the numbers now look much better. Is it considered either a lump sum payout or can you take it as a pension benefit which is paid monthly at X age?
 
I'm aware of the wash sale rule, but if you sell in after tax does it apply to a Roth purchase ?

There is no wash sale rule for a capital gain. You could buy it again the same afternoon after recognizing a gain by selling in the morning.

(And, yes, in the case of losses, the wash sale rule applies if you buy the same stock in a different account, no matter the type.)
 
I went back and re-read the last post from OP, is the $400K over and above the $1.1M? If so, we are looking at $1.5M and the numbers now look much better. Is it considered either a lump sum payout or can you take it as a pension benefit which is paid monthly at X age?
The $400k is not over and above. It is part of the $1.1M total invested. Not a lump sum either. It is money that is accessible from pre-tax retirement savings as I retire from the university or leave the position (457 and 403b accounts). I don't have to wait until age 59.5 to access or have to pay the 10% penalty to access but it will be subject to income tax. The nice thing is, I can control how much I take out each year (control taxes and income level). I can roll it over to ROTH while controlling income too.
 
Is it going to be easy to find another position in your field? If not, after a couple of years of traveling, it will only get harder. Obviously, you can probably find something not in your field, even like being a receptionist at a Medical office - one that I sometimes toy with if I ever have the urge to go back to work.

I would say that with $1.1M, you are not in the position to be fully retired when your annual spending is already $50K before traveling. With traveling you are planning to spend $65K for the next 2-3 years. The question is whether you want to continue to work for a few more years before retiring, or travel first and then go back to work. For me, I would rather to keep working and accumulate enough before I reitre and then never had to worry about money again.

Do you get a pension? How much will your SS benefits be? What sort of severence pay will you be receiving?
I am an RN but have not worked in hospitals and have no desire to do so. I do have some part-time work from computer that I currently do but it is not enough to make a significant impact on finances at this point. Also, this position does not offer medical insurance. Medical care is my biggest cost concern at the moment as I could either pay to continue coverage from my employer $$$ or ACA (if it remains a viable, affordable option after this year and all the administrative changes taking place). So the medical receptionist is an option but I need a position with insurance if I plan to take on part-time work.
 
The $400k is not over and above. It is part of the $1.1M total invested. Not a lump sum either. It is money that is accessible from pre-tax retirement savings as I retire from the university or leave the position (457 and 403b accounts). I don't have to wait until age 59.5 to access or have to pay the 10% penalty to access but it will be subject to income tax. The nice thing is, I can control how much I take out each year (control taxes and income level). I can roll it over to ROTH while controlling income too.
Do you get a pension, if so how much? What is the SS amount at 62, FRA and 70?
 
I am an RN but have not worked in hospitals and have no desire to do so. I do have some part-time work from computer that I currently do but it is not enough to make a significant impact on finances at this point. Also, this position does not offer medical insurance. Medical care is my biggest cost concern at the moment as I could either pay to continue coverage from my employer $$$ or ACA (if it remains a viable, affordable option after this year and all the administrative changes taking place). So the medical receptionist is an option but I need a position with insurance if I plan to take on part-time work.
I won't worry about ACA going away, it just won't.
 
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