Long-time listener, first-time caller (38, living abroad)

[FirstTimeCaller]

Hi everyone!

I've been browsing here off-and-on for a little while now, I really appreciate reading the supportive comments and wanted to introduce myself. I'm 38, not married and no kids. I'm trying to will FI and RE as soon as I can!

I'm targeting a $60,000 (today's dollars) in annual spend with having a residence paid off and a SWR of 3.25%. I suppose that final goal number will change based on inflation and when I make the jump. Curious how you all think about that!

Here are my details so far:

* Gross income ~$125,000 (Not stable and can be less)
* Current savings rate: 80% after taxes
* AA [Not including RE]: US Index (45%), International (40%), Bonds (10%), Stocks (5%)

* Taxable: $865,000
* Roth IRA: $113,000
* Trad IRA: $77,000
* Megacorp Stock: $50,000
* Cash (for RE remodel): $80,000
* **Total NW**: ~$1,185,000

I currently live in Mexico and don't qualify for a mortgage - I'd like to buy a house here, which would have to be all-cash. I'm budgeting $200k and am hoping to get a family-loan with 3-5% interest that I'd pay off in 5-6 years. I also have a piece of investment property that I'm doing up (cost $45k) and have budgeted the cash above ($80k) for the remodel. My current income is being saved for a permanent residence and emergency buffer for the remodel and not invested other than with money market.

I am not able to contribute to a Roth IRA / 401K based on my claiming of the Foreign Earned Income Exclusion on taxes living outside the US (I pay self-employment taxes).

What do you think? I don't have a timeline (earlier the better!), and am also thinking at some point (at FI or slightly before then?) to shift to a lower-paying job.

 

[Koolau]

Have you run FIRECalc yet?

FIRECalc: A different kind of retirement calculator

www.firecalc.com

It's a good place to start. Let us know what it shows you.

Welcome to the Forum.

 

[FirstTimeCaller]

Hi there, thanks for the note! I've run firecalc and it seems to look good - but I'm a bit confused with some of the details - if I put in a spend of $60k and that I will not retire for say, 15 years. Does it run the monte carlo for $60k adjusted for inflation for 15 years?

 

[latexman]

Hi there, thanks for the note! I've run firecalc and it seems to look good - but I'm a bit confused with some of the details - if I put in a spend of $60k and that I will not retire for say, 15 years. Does it run the monte carlo for $60k adjusted for inflation for 15 years?

You should really read all tabs on firecalc. Unless you tell it to do Monte Carlo, it doesn’t. Its default runs your input through over 100 years of historical inflation and stock and bond market returns, even the Great Depression! The basis is if your scenario survives the worst that we’ve seen historically, there’s a good chance you’ll survive going forward.

 

[FirstTimeCaller]

You should really read all tabs on firecalc. Unless you tell it to do Monte Carlo, it doesn’t. Its default runs your input through over 100 years of historical inflation and stock and bond market returns, even the Great Depression! The basis is if your scenario survives the worst that we’ve seen historically, there’s a good chance you’ll survive going forward.

Thanks for the clarity re: Monte Carlo! I do go through all the tabs with my current assumptions. Things look good with a 100% success rate and default CPI inflation, but I'm a little bit worried about this number going forward.

 

[Closet_Gamer]

Welcome to the forum. You will get oodles of good advice here.

Looks like you’re off to a great start! If everyone was where you’re at when they are 38 there would be a lot less stress in the world. Congrats.

 

[Time2]

It seems as though you are saving $70k a year, unless I hated my job, I would want to work a few more years to sock away a little more money. You are looking at 40 years being retired, having more money is not harmful and can be good. I'm glad I worked 6 more years after having about the same as you. It was a good time, I got a double in those 6 years.

 

[ut2sua]

OP, your intended SWR of 3.25% looks good (even for younger folks like yourself). It sounds like you may RE in the 40's with a paid off home and ~1.8M. Do you get to collect SS given your tax status? How will health insurance be handled in your case where you are at? Congrats on a great job getting to this point.

 

[FirstTimeCaller]

It seems as though you are saving $70k a year, unless I hated my job, I would want to work a few more years to sock away a little more money. You are looking at 40 years being retired, having more money is not harmful and can be good. I'm glad I worked 6 more years after having about the same as you. It was a good time, I got a double in those 6 years.

Thank you for your advice! I think I'm too quick to try to exit quickly and given all the uncertainties that could come up, I'll take this to heart.

 

[FirstTimeCaller]

OP, your intended SWR of 3.25% looks good (even for younger folks like yourself). It sounds like you may RE in the 40's with a paid off home and ~1.8M. Do you get to collect SS given your tax status? How will health insurance be handled in your case where you are at? Congrats on a great job getting to this point.

Ooh man, I hope I get there - cash everything for RE feels very slow going. I will get to collect SS - I reached the minimum 40 credits right before I moved out of the US and my current self-employment taxes continue to contribute to that. I don't think I'll get very much though given that I've not contributed for many years (with a low income during the first half of my credits).

Thanks so much for your encouragement and positivity.

 

[Time2]

Thank you for your advice! I think I'm too quick to try to exit quickly and given all the uncertainties that could come up, I'll take this to heart.

Thanks for the response! Just want to add, with an average 10% stock market return, that is a double in 7.2 years, with your savings rate, it could be less for you. Even if you extend half of that time, you could have an additional $500k or $20k a year.

 

[Surewhitey]

Are you planning to stay in Mexico? $60k sounds like living in the states. We lived well in Mexico on half that... The longer you stay there, the more saved, unless you come back & boost your income greatly.

Either way, your #s look great considering how much you have in taxable accounts.

 

[pjigar]

I would throw out one more curve ball. At some point, I was planning to geo-arbitrage RE by moving to another country. Turn of events outside my control meant that I can't move to any other country. So all my planning had to restart and goals had to be reset. Fortunately, I wasn't RE when this happened. I would be in a very tough spot if I had to move back to United State while I was in RE. All I am saying that, plan for contingencies in case you ever have to move back to United States e.g. for kids, for health, etc.

 

[FirstTimeCaller]

Are you planning to stay in Mexico? $60k sounds like living in the states. We lived well in Mexico on half that... The longer you stay there, the more saved, unless you come back & boost your income greatly.

Either way, your #s look great considering how much you have in taxable accounts.

I'm uncertain! I'm in a bit of a nomadic phase trying to find a place to call home. My current partner is from here, so it's easier to stay for now and be on the same timezone as the US. I'm budgeting $60k just in case I need to be in a more expensive location and yes! Hoping to save as much as I can now that I'm here.

Since you lived here, what do you think of the real estate plan? I'm starting to hesitate on whether an additional $80k on a Real Estate reno ($45k for the lot) is too much and if I should just put some lipstick on a VERY crumbly place and put the rest in investments. Also considerations for buying a home here - the current market is appreciating really fast and I like the idea of finally having a home base. It takes forever to sell here if needed, plus the currency risk and I'm unsure about this place beyond the medium-term.

 

[FirstTimeCaller]

I would throw out one more curve ball. At some point, I was planning to geo-arbitrage RE by moving to another country. Turn of events outside my control meant that I can't move to any other country. So all my planning had to restart and goals had to be reset. Fortunately, I wasn't RE when this happened. I would be in a very tough spot if I had to move back to United State while I was in RE. All I am saying that, plan for contingencies in case you ever have to move back to United States e.g. for kids, for health, etc.

Completely! I appreciate you mentioning this. I could not afford a home where my parents live and extended family live in a potential-war-in-next-few-years country. It does feel difficult and alarming to plan for where / what / how you'll be in the next X decades. Thanks for sharing your story!

 

[Lorenzo]

It takes forever to sell here if needed, plus the currency risk and I'm unsure about this place beyond the medium-term.

We're thinking of moving to Mexico in the next few years, and we have read of these concerns. We love Mexico, but we're not entirely persuaded that owning property is better than renting. As for the market appreciating fast, wherever we have gone and picked the brains of expat retirees we have heard the same thing: You should have bought here 10 years ago. If we had asked the same thing 10 years ago, we would have heard the same thing: You should have bought here 10 years ago. I suppose the same is often heard here in the US. Well, we are going to buy (or rent) when we're ready, and that's all anyone can do. The more interesting question is will we be able to SELL when we're ready, or will it sit on the market for years--time is increasingly valuable to us in our older years.

Oh and BTW, it looks like you're in a great position, with impressive savings at your age and a great income. If I were you, living in Mexico and earning a US-sized income, I'd continue working and socking it away (that 60k spend sounds luxurious for Mexico) until I genuinely could not stand it anymore.

 

[Diogenes]

I'm uncertain! I'm in a bit of a nomadic phase trying to find a place to call home. My current partner is from here...

That's an important consideration. For those of us lacking sturdy roots of our own, we seek roots vicariously, via our partners. That won't necessarily last, of course... but it's a topic for a different thread.

I congratulate the OP on his intense thrift and ability to sock away money! The only qualm is about ex-US equity (fund) allocation... again, that's a topic for another thread, but a more aggressive tilt towards US stocks seems more appropriate, and for the past 17 years, would have been substantially more lucrative. One sees little reason for that to change any time soon; if anything, it the pro-US trend might accelerate.

And as goes without saying, OMY (one more year) applies. At the OP's age and rate of savings, even if FIRE in n-years is amply sustainable according to calculations, delaying to n+1 offers notable benefits, not merely financially, but in peace of mind.

OP - say that we're 7 or 8 years into the future, and you've just retired. What happens next? Will you relocate? Buy real estate? Establish residency somewhere? Pick up a hobby?

 

[Surewhitey]

Since you lived here, what do you think of the real estate plan? I'm starting to hesitate on whether an additional $80k on a Real Estate reno ($45k for the lot) is too much and if I should just put some lipstick on a VERY crumbly place and put the rest in investments. Also considerations for buying a home here - the current market is appreciating really fast and I like the idea of finally having a home base. It takes forever to sell here if needed, plus the currency risk and I'm unsure about this place beyond the medium-term.

Real estate is not what I would do. We (and most of our friends) rented. We had a place that we'd go back to. 2br/1ba converted home to apartments & paid $550 including electricity and water. I'm still on Google Street view 10 years later...I'm the guy taking out the garbage.

20°37'41.5"N 87°05'15.8"W

goo.gl

We're thinking of moving to Mexico in the next few years, and we have read of these concerns. We love Mexico, but we're not entirely persuaded that owning property is better than renting. As for the market appreciating fast, wherever we have gone and picked the brains of expat retirees we have heard the same thing: You should have bought here 10 years ago. If we had asked the same thing 10 years ago, we would have heard the same thing: You should have bought here 10 years ago. I suppose the same is often heard here in the US. Well, we are going to buy (or rent) when we're ready, and that's all anyone can do. The more interesting question is will we be able to SELL when we're ready, or will it sit on the market for years--time is increasingly valuable to us in our older years.

Oh and BTW, it looks like you're in a great position, with impressive savings at your age and a great income. If I were you, living in Mexico and earning a US-sized income, I'd continue working and socking it away (that 60k spend sounds luxurious for Mexico) until I genuinely could not stand it anymore.

Our Canadian friends just sold their place there and it took ~2 years. Same for our Cozumel buds. If you are not a resident, you can expect to pay a sales tax as I recall. Always seemed complicated to us & we loved our place in town.

If you buy a locals kind of place, you can live even more affordably but you may be ~1 mile from the beaches. Most locals do word of mouth and signs on the property kind of advertising rentals so drive around and look for the signs. If you use a service of some sort, they may receive a monthly commission.

 

[Koolau]

I'm targeting a $60,000 (today's dollars) in annual spend with having a residence paid off and a SWR of 3.25%. I suppose that final goal number will change based on inflation and when I make the jump. Curious how you all think about that!

Keep in mind that with a 3.25% SWR, you can probably cut back for a year or two if need be to help you weather any of life's financial storms. You have a long time to live (hopefully) and flexibility and back-ups are probably the watch-words for your plan at this point. Best luck.