Anthonyin2022
Dryer sheet wannabe
I am a long time reader and my wife recently joined as well. I am so grateful to everyone on this site for educating me! You are the reason why I think we can do this.....
We aim to pull the ER trigger in Jan 2022 and respectfully ask for your help to pressure test the hell out of our plan. For background, I’ve listed our facts below, followed by some questions/issues that I am trying to wrap my head around.
The data formatting below may be difficult to read, so if helpful, you can also see this full write-up in this Google Doc:
https://docs.google.com/document/d/1PU8MhM8K2KH4NGSQVwGdeyFVAd2rtcoRnc1kaTAOdcg/edit?usp=sharing
Our Facts
I am 45, my wife is 51. Two kids, 13 and 11. I’ve worked in various mega-corp roles for 20+ years. The last 8 years at one of the FAANG companies. Mind blowing comp and benefits, but big hours and stress. Wife also worked in mega-corps until leaving to become our Chief Family Officer approx five years ago. She has done a great job with ensuring the kids are thriving and she feeds me very well, so I have that going for me, lol!
I’ve been a monster saver since college, but no real understanding on when I could retire until the last year or so when I started learning about ER here. Corp BS and stress has been horrible the last year and I am concerned that it is permanently affecting my health. My family also has a significant history of anxiety and depression issues as well as cancer. Thus, I now feel that I am wasting away my best years in something I hate just for the huge comp package. My wife supports my decision to pull the trigger and is working hard to learn about our finances and FIRE principles, but has historically relied on me to handle everything. I feel this partnership is critical to ensure we both truly enjoy ER and each other forever.
Our Numbers
Total Investable Assets: $4.1M
Taxable Accounts: $2.1M
We’ve tracked our expenses for over two years and estimate we would need about $150k to live well with cushion (I hope!) Estimates are as follows.
That brings us here:
I feel these expenses are reasonable while we get both kids through high school. Maybe some US travel, lots of local stuff, basically living through/for the kids.
I feel by the time they need it, the kids’ 529 plans should fund at least two years of a good college and by then, I hope we will have significant nest egg appreciation to help pay for additional education expenses. We’ll also continue adding to the 529s if we have surplus budget each year. Our POV is that we should help our kids avoid significant debt, but don’t feel obligated to pay for every cent of higher education if it puts our own retirement at risk. They are also very strong students, so perhaps some merit scholarships might be available as well.
After the kids have launched, we plan to move out of our very high tax/cold weather state to someplace warmer with a better cost of living. We’ll travel more, but don’t see anything crazy in terms of massive spend increases. I am perfectly fine spending most days exercising, enjoying nature, hobbies, pets, reading, annoying my wife, etc. Of course, if our plan overperforms, we will find ways to blow that dough!
Our Plan
I plan to give notice in Jan 2022 to get one more year of stock grants and bonus to fill our cash bucket. If I can make it that long, that should easily add $200k+ after tax. We will also use the year to further refine our plan.
Cash Bucket
With a $150k projected budget, we plan to launch with approx $300K in cash equivalents to live off of for the first two years. This hopefully allows for additional growth to our stash to further concrete our assumptions. We would perform an annual review to adjust and/or replenish the bucket as needed.
Employment Glide Path
For at least the first year, one of us (possibly both) would work part time in something low stress that we enjoy. This could provide a small supplementary income stream to further pressure test our plan. If that proves true, we could completely quit work if desired. We are thinking part-time year round (around 20 hrs/week) or full-time for part of the year (temp/contract roles using our professional expertise for 3-6 months). I would target $20k here and this could be considerably higher if we do the contracting/temp role(s).
Nest Egg Utilization
As our primary income source, we would use/replenish the $300k cash bucket by pulling 150k each year from the nest egg, as needed. This is 3.6% of our total investable assets. Both FireCalc and Fi Calc return 100% success rates using $150k withdrawal starting in 2023, $4M in invested assets (I subtracted $300k for the initial cash bucket: $100k in existing cash, plus $200k in 2021 bonus/stock), our current 100% AA, the $68k in SS/pension streams starting later, and a 45 year life span. This does not include any potential part-time income discussed above.
Part of me says, why are you worrying at all? You are at 100% in both tools! But that is just the worrywart in me. As discussed in my questions below, I think a big part of my concern is if/how I should take immediate action to add diversification to my AA.
We would pull from taxable accounts first and then move to the tax-advantaged accounts. We would try to perform roth conversions each year to aid future tax savings. If we had potential for ACA subsidies, we would balance that value with the taxable account drawdowns and Roth conversions. We still need to learn more on how to maximize those strategies.
Our Questions:
1. Lack of Diversification in our Taxable Accounts
We have approx 50% of our value in GOOG, APPL, and AMZN. We’ve profited tremendously from them over the last eight years and I feel they are extremely well positioned companies with excellent balance sheets/business models/leaders. I feel there are few companies that can compete with them in that perspective. However, I know this is a massive diversification risk and the little guy on my shoulder keeps telling me to move most/all into index funds. But I still struggle with doing this immediately due to high taxes because of my large employment income - I’d be in the top capital gains bracket and get hit hard with AMT and Investment tax. My idea is to immediately sell off shares that have low appreciation and then sell additional chunks of the highly appreciated shares each year until the diversification is more reasonable. Since my income would be significantly lower, so would our tax rates. I need help here to either (1) give me confidence that this is reasonable, (2) convince me that I am an idiot and need to bite the bullet on the taxes now, or (3) provide other suggestions.
2. Asset Allocation
I think this flows hand in hand with question 1. Excluding that stock diversification issue, we only use Vanguard Index funds, and are essentially 100% stocks. I’ve been fine with that for pretty much my whole career, but that is with thinking that I would be working for a very long time. I’m not sure that is still smart as retirees with hopefully 40+ years ahead of us. A part of me says to move to at least 80/20 immediately. Once again, I struggle with moving large chunks to bond funds now as I feel with interest rates so low, it will immediately hurt us in the short/mid-term and I need help understanding if most folks think this is really the right thing to do. Maybe I just don’t understand bond funds correctly? Should we really just move a huge chunk immediately to get to the 20%?
3. Health Insurance is our #1 expense wildcard
We factored in $2,500 per month for premiums, plus $300 a month in copays, etc. This would cover either COBRA from my employer or a gold ACA plan with no subsidies. We are generally very healthy. I have had multiple orthopedic repairs from sports and still have manageable aches/pains that will probably require joint replacements later on, but that seems a long way off. I’m not sure if that would count as pre-existing conditions forcing us into the ACA. We do foresee being able to manage MAGI to get some subsidy, so premium costs might be lower. We also have the additional 25% per month cushion for surprises. I know I can never be 100% sure, but do you think our health insurance budget here is reasonable?
4. Reasonableness of Expenses
We’ve scrubbed two years of spend data and will continue to track for 2021, so we feel those estimates are solid. We also have that 25% cushion for anything else that may come up. But I always worry that I am missing something, so any call outs here are appreciated!
5. Cash Bucket Options
We plan to hold two years of cash in a safe and liquid vehicle. Our thought was to find an internet savings account with a good reputation and high yield (still basically nothing these days). Wondering if there are other safe/liquid options that might return more but not require a ton of management?
6. “On Point” Resources
Finally, we want to learn more about Roth conversion and ACA subsidy strategies, as I think they would be great tools for us to add to our plan in great detail. Are there any on point websites, podcasts, or threads that folks would recommend to help us educate ourselves there?
Anything else that we are forgetting or missing? Thanks so much for all the help here! I am sooo ready to join the club!!
We aim to pull the ER trigger in Jan 2022 and respectfully ask for your help to pressure test the hell out of our plan. For background, I’ve listed our facts below, followed by some questions/issues that I am trying to wrap my head around.
The data formatting below may be difficult to read, so if helpful, you can also see this full write-up in this Google Doc:
https://docs.google.com/document/d/1PU8MhM8K2KH4NGSQVwGdeyFVAd2rtcoRnc1kaTAOdcg/edit?usp=sharing
Our Facts
I am 45, my wife is 51. Two kids, 13 and 11. I’ve worked in various mega-corp roles for 20+ years. The last 8 years at one of the FAANG companies. Mind blowing comp and benefits, but big hours and stress. Wife also worked in mega-corps until leaving to become our Chief Family Officer approx five years ago. She has done a great job with ensuring the kids are thriving and she feeds me very well, so I have that going for me, lol!
I’ve been a monster saver since college, but no real understanding on when I could retire until the last year or so when I started learning about ER here. Corp BS and stress has been horrible the last year and I am concerned that it is permanently affecting my health. My family also has a significant history of anxiety and depression issues as well as cancer. Thus, I now feel that I am wasting away my best years in something I hate just for the huge comp package. My wife supports my decision to pull the trigger and is working hard to learn about our finances and FIRE principles, but has historically relied on me to handle everything. I feel this partnership is critical to ensure we both truly enjoy ER and each other forever.
Our Numbers
Total Investable Assets: $4.1M
Taxable Accounts: $2.1M
- Individual Stock: $1.6M
All in three of the FAANGs. We’ve had huge returns on all three over the past 8 years, but realize that the lack of diversification is a big risk, especially in retirement. - Vanguard Index Mutual Funds: $400k
(all Vanguard admiral stock funds (VTIAX, VFIAX, VTSAX) - Savings/Checking: $100k
- Virtually 100% stock funds
- My 401k: $1.2M all in Vanguard institutional stock funds
(approx. 50% S&P 500, 30% Emerging Markets, 20% Small Cap) - My Roth IRA: $150k in VTSAX
- My HSA: $50k in an S&P index fund
- Wife's IRA: $500k all in VTSAX
- Wife’s Roth IRA: $100k all in VFIFX
- $30k My Social Security at 67
- $28k Wife’s Social Security at 67
- $10k Wife’s corporate pension at 65 (no COL increase)
- $200k Home equity ($320 FMV, approx $120k left on 10 year fixed 2.75% note) House is in great shape and all major items have been replaced in the last six years.
- $10k for two 2014 Mazdas - both are paid off with extremely low mileage. Will likely keep them for another 5+ years.
- $120k in 529 Plans ($60k for each child in Vanguard index funds)
- No other debt
We’ve tracked our expenses for over two years and estimate we would need about $150k to live well with cushion (I hope!) Estimates are as follows.
| Expense |
| Monthly |
| Annual |
| Mortgage |
| $1,200 |
| $14,400 |
| Property Taxes |
| $1,000 |
| $12,000 |
| Kids Expenses |
| $700 |
| $8,400 |
| Grocery |
| $600 |
| $7,200 |
| Utilities |
| $600 |
| $7,200 |
| Miscellaneous |
| $800 |
| $9,600 |
| Pet |
| $500 |
| $6,000 |
| Medical (not premiums) |
| $300 |
| $3,600 |
| Dining |
| $210 |
| $2,520 |
| Home/Car Insurance |
| $200 |
| $2,400 |
| House Expenses |
| $150 |
| $1,800 |
| Entertainment |
| $100 |
| $1,200 |
| My Hobbies |
| $100 |
| $1,200 |
| Wife’s Hobbies |
| $100 |
| $1,200 |
| Gym |
| $70 |
| $840 |
| Clothing |
| $50 |
| $600 |
| Gas |
| $40 |
| $480 |
| Car Maintenance/Misc |
| $40 |
| $480 |
| Govt fees |
| $30 |
| $360 |
| $6,790 |
| $81,480 |
That brings us here:
| Annual Spend Estimate |
| $81,480 |
| Add: Additional 25% Cushion |
| $20,370 |
| Add: $2500/month Health Insurance |
| $30,000 |
| Subtotal |
| $131,850 |
| Add: 15% Income Taxes |
| $20,000 |
| Total |
| $151,850 |
I feel these expenses are reasonable while we get both kids through high school. Maybe some US travel, lots of local stuff, basically living through/for the kids.
I feel by the time they need it, the kids’ 529 plans should fund at least two years of a good college and by then, I hope we will have significant nest egg appreciation to help pay for additional education expenses. We’ll also continue adding to the 529s if we have surplus budget each year. Our POV is that we should help our kids avoid significant debt, but don’t feel obligated to pay for every cent of higher education if it puts our own retirement at risk. They are also very strong students, so perhaps some merit scholarships might be available as well.
After the kids have launched, we plan to move out of our very high tax/cold weather state to someplace warmer with a better cost of living. We’ll travel more, but don’t see anything crazy in terms of massive spend increases. I am perfectly fine spending most days exercising, enjoying nature, hobbies, pets, reading, annoying my wife, etc. Of course, if our plan overperforms, we will find ways to blow that dough!
Our Plan
I plan to give notice in Jan 2022 to get one more year of stock grants and bonus to fill our cash bucket. If I can make it that long, that should easily add $200k+ after tax. We will also use the year to further refine our plan.
Cash Bucket
With a $150k projected budget, we plan to launch with approx $300K in cash equivalents to live off of for the first two years. This hopefully allows for additional growth to our stash to further concrete our assumptions. We would perform an annual review to adjust and/or replenish the bucket as needed.
Employment Glide Path
For at least the first year, one of us (possibly both) would work part time in something low stress that we enjoy. This could provide a small supplementary income stream to further pressure test our plan. If that proves true, we could completely quit work if desired. We are thinking part-time year round (around 20 hrs/week) or full-time for part of the year (temp/contract roles using our professional expertise for 3-6 months). I would target $20k here and this could be considerably higher if we do the contracting/temp role(s).
Nest Egg Utilization
As our primary income source, we would use/replenish the $300k cash bucket by pulling 150k each year from the nest egg, as needed. This is 3.6% of our total investable assets. Both FireCalc and Fi Calc return 100% success rates using $150k withdrawal starting in 2023, $4M in invested assets (I subtracted $300k for the initial cash bucket: $100k in existing cash, plus $200k in 2021 bonus/stock), our current 100% AA, the $68k in SS/pension streams starting later, and a 45 year life span. This does not include any potential part-time income discussed above.
Part of me says, why are you worrying at all? You are at 100% in both tools! But that is just the worrywart in me. As discussed in my questions below, I think a big part of my concern is if/how I should take immediate action to add diversification to my AA.
We would pull from taxable accounts first and then move to the tax-advantaged accounts. We would try to perform roth conversions each year to aid future tax savings. If we had potential for ACA subsidies, we would balance that value with the taxable account drawdowns and Roth conversions. We still need to learn more on how to maximize those strategies.
Our Questions:
1. Lack of Diversification in our Taxable Accounts
We have approx 50% of our value in GOOG, APPL, and AMZN. We’ve profited tremendously from them over the last eight years and I feel they are extremely well positioned companies with excellent balance sheets/business models/leaders. I feel there are few companies that can compete with them in that perspective. However, I know this is a massive diversification risk and the little guy on my shoulder keeps telling me to move most/all into index funds. But I still struggle with doing this immediately due to high taxes because of my large employment income - I’d be in the top capital gains bracket and get hit hard with AMT and Investment tax. My idea is to immediately sell off shares that have low appreciation and then sell additional chunks of the highly appreciated shares each year until the diversification is more reasonable. Since my income would be significantly lower, so would our tax rates. I need help here to either (1) give me confidence that this is reasonable, (2) convince me that I am an idiot and need to bite the bullet on the taxes now, or (3) provide other suggestions.
2. Asset Allocation
I think this flows hand in hand with question 1. Excluding that stock diversification issue, we only use Vanguard Index funds, and are essentially 100% stocks. I’ve been fine with that for pretty much my whole career, but that is with thinking that I would be working for a very long time. I’m not sure that is still smart as retirees with hopefully 40+ years ahead of us. A part of me says to move to at least 80/20 immediately. Once again, I struggle with moving large chunks to bond funds now as I feel with interest rates so low, it will immediately hurt us in the short/mid-term and I need help understanding if most folks think this is really the right thing to do. Maybe I just don’t understand bond funds correctly? Should we really just move a huge chunk immediately to get to the 20%?
3. Health Insurance is our #1 expense wildcard
We factored in $2,500 per month for premiums, plus $300 a month in copays, etc. This would cover either COBRA from my employer or a gold ACA plan with no subsidies. We are generally very healthy. I have had multiple orthopedic repairs from sports and still have manageable aches/pains that will probably require joint replacements later on, but that seems a long way off. I’m not sure if that would count as pre-existing conditions forcing us into the ACA. We do foresee being able to manage MAGI to get some subsidy, so premium costs might be lower. We also have the additional 25% per month cushion for surprises. I know I can never be 100% sure, but do you think our health insurance budget here is reasonable?
4. Reasonableness of Expenses
We’ve scrubbed two years of spend data and will continue to track for 2021, so we feel those estimates are solid. We also have that 25% cushion for anything else that may come up. But I always worry that I am missing something, so any call outs here are appreciated!
5. Cash Bucket Options
We plan to hold two years of cash in a safe and liquid vehicle. Our thought was to find an internet savings account with a good reputation and high yield (still basically nothing these days). Wondering if there are other safe/liquid options that might return more but not require a ton of management?
6. “On Point” Resources
Finally, we want to learn more about Roth conversion and ACA subsidy strategies, as I think they would be great tools for us to add to our plan in great detail. Are there any on point websites, podcasts, or threads that folks would recommend to help us educate ourselves there?
Anything else that we are forgetting or missing? Thanks so much for all the help here! I am sooo ready to join the club!!
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and that creates/increases risk factors in your plan ...otherwise why would insurance premiums jump when parents add a teen onto their auto policy? Once one of mine starts taking Drive Ed, I'll most likely increase our Umbrella Insurance from $1M to $2M at least.
