Financial Independence The Engineer's Mind on FIRE |
- The Engineer's Mind on FIRE
- Recommended YouTube channels, videos, podcasts, people, books on financial independence?
- You guys made the news
- Anyone working towards FI to get out of a bad relationship or avoid them in the first place?
- Daily FI discussion thread - January 31, 2018
- Unless I'm missing something, Traditional IRAs are almost always better than Roth IRAs as long as you treat them the same.
- 21 with ~$250k in savings, thinking of Real Estate as a way to FI.. what are your opinions?
- Once you are FI how to you make one-off large purchases?
- Have a big chunk of money to invest. Wife is afraid of looming market correction. How to inject facts/rationality into debate?
- Questions for those who have made investment properties their passive income source.
- Weekly Self-Promotion Thread - January 31, 2018
- Best career paths for FIRE?
- Taxes: anyone able to explain how the "AMT window" works?
- Most people retire when they have enough X, but then are short on Y. [Discussion Question]
- Thoughts on SSO ETF?
- FI number with an Annuity
- What is your favorite real-estate site?
- Fiance offered substantial raise to move to HCOL city. I support it. She does not.
- Starting your own company - is it worth the risk?
- FI but want a job for health coverage. Where to look?
- Where to move...
- Bonds in taxable or tax deferred?
- FI ladies, what do you do/did you do for a living and how did you get there?
- Did anyone here make severe and stressful career sacrifices to gain early financial independence?
| Posted: 31 Jan 2018 06:05 AM PST I get the impression 80-90% of the members of this sub are engineers, computer programers, or similar analytical type professionals- and corporate as well. Is that accurate? One thing that I notice when I read the sub can be illustrated with an example from the Mr. Money Mustache blog. To paraphrase Mr. Money Mustache's experience, he and his wife worked for about 10 years doing some work they weren't crazy about, to save up 600k, then retire to live on 25k per year, in his spare time he does construction and his wife dabbles in real estate.Thats roughly accurate, right? My big issue with line of thinking is, you don't need 600k to live on 25k and do construction and part-time real estate. And I think I understand the FI factor in this which is he doesn't NEED the money from his work, so it's different than my buddy who owns his own pest control business, takes off 4 days a week during hunting season, as much time as he wants around the holidays, and probably earns not too much more than Mr. Money Mustache and his wife live on, because my buddy needs the money to survive and they don't. Can we all agree there could be a disruption in your life that could clean you out? A health concern not properly covered by insurance, a lawsuit, some world event like the great depression. Or, you could die early and no amount of money could save you. I wonder if a lot of you guys are deferring what you REALLY want to do out of what I assume is fear, but its disguised as being prudent and logical? I hope that doesn't sound rude- I just don't understand deferring life in a career you're not crazy about for 10-20 years to be FI. Why wait? Why not just start doing what you want to do now? If it's because what you think you really want to do is sit around and play classic video games and travel, not do construction like MMM, it's the internet age! You could turn that into a business, cover your nut, and start living the life you want to live now. So, why am I on this sub and reading MMM? I think there is a lot of value in the prudent approach to life y'all are taking. Why drive an f150 that costs you 1k/mo to operate when you could be in the 10 year old honda civic? Why not invest optimally? I feel like there is a lot of responsible citizenship attached to FIRE, and there is no denying I'd have more flexibility with a mil in the bank. I know everyone's situation is different and I'm generalizing A LOT here, not trying to be critical but it does seem like some of you would benefit from Warren Buffett's wisdom: "There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don't like because you think it will look good on your resume. Isn't that a little like saving up sex for your old age?" I guess substitute "lead to financial independence" for "look good on your resume." Am I crazy for bringing this up? Thank you and have a good day. [link] [comments]  |
| Recommended YouTube channels, videos, podcasts, people, books on financial independence? Posted: 31 Jan 2018 02:12 AM PST What are recommended sources to learn more about financial independence and entrepreneurship? [link] [comments]  |
| Posted: 31 Jan 2018 11:27 AM PST |
| Anyone working towards FI to get out of a bad relationship or avoid them in the first place? Posted: 31 Jan 2018 11:08 AM PST I'm a 31 year old female software engineer, working in the bay area. I spent most of my 20s in a relationship that turned controlling and unhealthy. After many attempts to leave, I finally got out about a year ago. I've spent the last year researching and understanding how controlling relationships tend to escalate and how people without a support system (financial, emotional, etc) can be particularly vulnerable. Leaving that relationship and re-building my life as a single person was one of the hardest things I've done in my life. When I left, thanks to years of working towards FIRE, I had my own money, my own job, and even my own house (I had bought it as an investment, but could live it if needed). Leaving was still incredibly difficult, I couldn't imagine how hard it would be for people who weren't in such a comfortable place financially. After all this, I see FI as a powerful tool getting out of these types of relationships and reducing my financial dependence on any future relationships. I'm curious if others have similar experiences or any lessons learned to share with the community. [link] [comments]  |
| Daily FI discussion thread - January 31, 2018 Posted: 31 Jan 2018 03:08 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| Posted: 31 Jan 2018 09:00 AM PST Let me explain. I ran two hypothetical scenarios and determined that the benefits of the difference in the expected marginal tax rate paid in a Roth vs. Traditional scenario is largely dependent on a) the amount of time one plans on being retired; and b) what one would do with the initial tax savings if they contributed to a Traditional IRA. The setup I created two saving scenarios based on the same assumptions:
Results At the end of 25 years, both accounts ended with an account balance of $769,469.20. Over the course of that time, the Roth IRA holder paid $30,470 in taxes up front. Over the next 25 years, the Traditional IRA holder both received a net annual payout of 12% less than the Roth holder and paid a total of $68,173.30 in taxes, more than double the amount paid by the Roth IRA holder. All things considered, the Roth IRA holder will net $37,703.30 more money than the Traditional IRA holder. The point in which the amount of taxes paid between the two retirement accounts was approximately equal fell during the 13th year of retirement. Despite the overall financial parity between the two at this point, the Roth holder still netted 12% more in payouts in retirement because they had paid the tax up front. Opportunity Cost Of course, the above scenario is based on the assumption that the initial tax savings in the Traditional IRA were absorbed into that individual's annual expenses. However, if this person were instead able to invest the money they "saved" through the deferred taxes, the results change significantly. Assuming the Traditional IRA holder invested the difference "saved" in a regular taxable account and kept to the 4% withdrawal rate in retirement while paying a 15% capital gains tax on withdrawals, suddenly the Traditional IRA holder's overall nest egg jumps considerably and they will receive a significantly larger combined payout between the Traditional IRA account and the normal taxable account. Over the course of 25 years of retirement, the Taxable investment account will net an additional $106,343.61 in payouts. In other words, this savings scenario will net $68,640.31 more than the maxed Roth IRA scenario, or a 7% higher annual net payout. While my assumptions and assessment of taxes paid on a non-tax advantaged investment account are a little overly simplified, I believe the underlying principle still holds true: Conclusion All else equal, in most cases it is more financially advantageous to contribute to a Traditional IRA over a Roth IRA as long as the difference "saved" in deferred taxes is still invested, even if that investment is in a normal taxable account. In other words, at a (for example) 25% marginal tax rate, contributing $5,500 per year to a Roth IRA or contributing $5,500 to a Traditional IRA and $1,375 to a taxable investment account will result in the exact same end-of-year numbers on your balance sheet. However, saving under the latter scenario will net signficantly more in retirement and thus is the preferred method of saving. Edit: So it looks like potential retirement scenarios can be much more complicated than I thought. Thanks everyone for bearing with me and putting in your two cents! You've given me a lot to chew on. [link] [comments]  |
| 21 with ~$250k in savings, thinking of Real Estate as a way to FI.. what are your opinions? Posted: 31 Jan 2018 05:18 AM PST Hi all, As the title says, I have accumulated over the years about 250k in savings and am really interested in real estate through investment properties (single family homes and duplexes). I have started researching a lot into it (Just finished the biggerpockets pdf, bought 2 investment property guidebooks online). Any other IP resources you would recommend? Do you guys think that real estate is a good way to start the path to financial independence in my disposition? Even after considering the market in it's current state? Or are there better options out there... Side note: I also am maintaining my ROTH IRA yearly and am thinking of putting some of my savings into a Mutual Fund/ETF. I'm still a university student and haven't accumulated any student loans. . . . . edit: My parents have also done investment properties on the side (duplexes / multi-family homes) over the past 10-12 years. I'm planning on asking my mother to mentor me this summer break from university. Also I will try to network with her team (contractors, property manager, bank staff, etc.) edit 2: I am from Honolulu. I definitely want to go back home after university and invest in the city. It's my true home and I know it like the back of my hand. What are your opinions on the market in Hawaii? Kind of like San Francisco? [link] [comments]  |
| Once you are FI how to you make one-off large purchases? Posted: 31 Jan 2018 01:02 PM PST I am curious to know how others do this (or plan on doing it). Let's say you have $1m delivering a 3% SWR. That works out to $30k per year or $2,500 per month to cover all expenses. I think that is quite straightforward. However, how do you cover the cost of large expenses? For example, buying a car. I am going to assume a cash-only purchase of course. If you want to buy a $20,000 vehicle do you just have to be aware this is an upcoming expense and save a portion out of the $2,500 for a couple of years to build up the car fund? Or just pull the full cost out of your nest egg and reduce the principle? [link] [comments]  |
| Posted: 31 Jan 2018 07:14 AM PST So my wife and I are about to sell our sole rental property. We have a lot of equity wrapped up in it, which means we'll have big chunk of cash to invest soon. I want to put it all into index funds (80/20 stocks and bonds) and leave it there for the long term. She's worried the market may be due for a big correction and that it could take us 20 years to build back up the value of our investments if the market tanks like it did in 2008 (or worse). I keep sending her articles from FI bloggers about why this is highly unlikely, but she won't budge. Any advice? How do you argue with someone who's afraid of the Apocalypse? Or is she right and I'm the crazy one? [link] [comments]  |
| Questions for those who have made investment properties their passive income source. Posted: 31 Jan 2018 02:45 PM PST So like most people on here my goal is to break away from the 9-5 work week ASAP. Not to quit at the age of 40 then spend the rest of my life watching TV, but to transition into something that makes a little bit of money to supplement what I can start withdrawing from savings. In a lot of ways real estate is the perfect endeavor for this stage: spend a few months every few years buying a new place, fixing it up, and finding tenants, and from there on the effort is limited to maintenance and book-keeping. However I'm struggling to understand how this can actually make money. I crunched the numbers hard before deciding to sell my old place last year. Here's a quick example: If you buy a house for $200k cash and rent it out for $2000/month, if the expenses are 50% of the collected rent as I have read is the norm (and proved to myself before selling my old house) I'd collect $12k/year on a $200k investment for a return of 6% plus any rise in property value. I don't see how that could beat the option of putting the $200k cash in an index fund and enjoying similar growth for a fraction of the effort. I could drive myself crazy again with numbers trying to figure out how leveraging the mortgage would improve this ROI, and/or buying a house for less and fixing it up so I can rent it out for more, but the big question is what ROI can reasonably expected? So for those who are doing this - what do your numbers look like? How much income do you make annually on each property, and how much money do you have invested in them - money that could otherwise be in your portfolio earning 8-10% annually with minimal effort? Is it worth it? [link] [comments]  |
| Weekly Self-Promotion Thread - January 31, 2018 Posted: 31 Jan 2018 03:08 AM PST Self-promotion (ie posting about projects/businesses that you operate and can profit from) is typically a practice that is discouraged in /r/financialindependence, and these posts are removed through moderation. This is a thread where those rules do not apply. However, please do not post referral links in this thread. Use this thread to talk about your blog, talk about your business, ask for feedback, etc. If the self-promotion starts to leak outside of this thread, we will once again return to a time where 100% of self-promotion posts are banned. Please use this space wisely. Link-only posts will be removed. Put some effort into it. [link] [comments]  |
| Posted: 31 Jan 2018 04:06 PM PST Close to going to university and I still haven't decided on my major. What's a relatively enjoyable career path that pays good money? I have a 4.0 so something more difficult isn't necessarily off limits. Also my college is free so debt is much less of factor [link] [comments]  |
| Taxes: anyone able to explain how the "AMT window" works? Posted: 31 Jan 2018 04:05 PM PST I am trying to find current year (2018) figures especially. My understanding is that there is a point between roughly 500k in income and 800k that it's optimal to try to increase marginal income if at all possible, because the tax rate is only 28% instead of 35%. Does anyone have the cutoff numbers for 2018 and/or explaining how it works? [link] [comments]  |
| Most people retire when they have enough X, but then are short on Y. [Discussion Question] Posted: 31 Jan 2018 03:29 PM PST As a thought excercise, most of us let X be money, and Y is one or more things. Y might be time if you didn't plan well. Y might be health if you burned yourself out. I hear some people complain that Y might be friends "I'm bored, all my friends are working". Or Y might be a lifr-partner "how to date if I'm already FIRE?". My point is, this sub seems to optimize for time spent not working, and money in the bank. Can we hear from anybody which tried to optimize for another vector? For instance has anybody done a victory lap, in order to fund FIRE for a really good friend? Or done a victory lap to spend money on health (eg personal trainer)? Besides money and time, is there anything else you are optimizing for? [link] [comments]  |
| Posted: 31 Jan 2018 01:09 PM PST I've been a major lurker on this sub for a while and have seen countless praise of sticking money in ETFs/index funds. One of the most popular suggestions has been to stick your money in the S&P 500 (especially if your time horizon is a few decades). Considering this, what do people think about the Ultra S&P 500 ETF? It's supposed to provide 2 times the return of the S&P 500. Wouldn't sticking money into this theoretically shorten your path to FIRE? [link] [comments]  |
| Posted: 31 Jan 2018 06:20 AM PST I've recently begun looking into this whole "Financial Independence" thing and I've got to say that it's inspired me to push for early retirement for me and my fiance. I only recently got a job and have barely begun saving, but our financial situation is looking better by the day.
Our current monthly expenses are about $3500 a month, though I'm hoping to cut that down a bit to around $2500 a month (thanks for all the great ideas u/BlackStash). However, we have a little wrinkle thrown in that makes calculating an FI number more difficult: an annuity from a life insurance payout when my fiance's mother was killed in a car accident. That annuity is set to kick in one week from today, and will payout $2k a month for a minimum of 30 years. There are also some lump-sum payments every 10 years, but I'll ignore those for simplicity. Now my first instinct was to simply subtract $2k from our future monthly expenses and use any/all early retirement calculators as intended, but there's a problem with that train of thought: the $2k doesn't increase with inflation, as far as I can see it's a flat $2k regardless of what the economy does. My next thought was to pretend like it was some amount X as a hypothetical fund that could be treated like it was already part of my investments. If I only spent $1250 of it a month (increasing with inflation) and invested the remainder (assuming 5% real returns), then drawing from that account when the annuity's purchasing power drops below $1250, my spreadsheet suggests that the account would be large enough to support itself forever. If I can draw $15k a year forever, can I treat it like it's just a withdrawl at a 4%SWR from a hypothetical fund of about $378k for the purposes of planning retirement? The math seems sound, but something about it doesn't feel right. Your advice would be much appreciated! EDIT: As far as I'm aware the annuity is non-taxable, but I'm looking into that. We're looking into the details of a lump sum, hopefully I'll update with specifics. Our current plan is to use the $2k for daily expenses and put as much money into 401k/IRAs as we can. [link] [comments]  |
| What is your favorite real-estate site? Posted: 31 Jan 2018 03:54 PM PST |
| Fiance offered substantial raise to move to HCOL city. I support it. She does not. Posted: 31 Jan 2018 03:37 PM PST We are 30 and 35 and probably 90% FI. But are still not ready to RE due to trying to work the numbers on how much money we need per year once we have kids. Fiance is being recruited to work in LA in the medical field. Her pay would go from about $120K to starting at about $250k. We are currently saving about $100k per year and think we could pocket an extra $100K with this move... Even with the HCOL. She does not want to make the move and live in a huge city to maybe cut two or three years off our RE date. Very valid point that I agree with. But it's also difficult for me to turn down opportunities like this. We are still working and DOUBLING our annual savings should be an easy choice. Right?! Am I being crazy? [link] [comments]  |
| Starting your own company - is it worth the risk? Posted: 31 Jan 2018 03:30 PM PST Anyone have any experience or words of wisdom towards the risk/reward of starting your own company in relation to the fire principles? I am a plumber in Canada and got myself into this with the intention of going it on my own the second I have the ability to do so. As I get older and closer to that goal I wonder if the risk of bankruptcy is worth the possible reward of exponentially increasing my earning potential. I have a long way to go on my road to fire and dont know what I would do if I watched all my hard work go down the drain.. [link] [comments]  |
| FI but want a job for health coverage. Where to look? Posted: 30 Jan 2018 05:33 PM PST 29M, FI, Southeast USA, 6 months married, no kids (in 2 years we will) Recently lost job due to failed startup. While I don't need a job, I want health coverage, among other things. While I can afford my own coverage now, the rising and future unknown costs concern me. Being that I do not want a high stress job, what are some industries or jobs that I could look to with great health benefits and coverage? Edit: Thank you for your comments. I want to mention that I am looking for salaried work, and not necessarily work as a barista, grocery worker, or Costco/Walmart employee. While I respect each and every one of these, it's not something that fits me personally. If it helps, I have a degree in finance and 6 years experience in software sales and account management, which I consider stressful. [link] [comments]  |
| Posted: 31 Jan 2018 12:54 PM PST Hello All, My wife and I are trying to decide where to move. We currently live in Phoenix. I work for a company in Phoenix while my wife works from home. We both are engineers and bring in around 120K. We own a house in Phoenix (~400K with 250K mortgage). We are tired of the weather in Phoenix, being away from family, and lack of greenery. Our extended family is spread out all over on the east coast (between NY and NC). So I talked to my manager and he was okay with me working from our other location (in Charlotte, NC) or even remotely. Now that we have an option to choose where to work from, we are having a hard time deciding on the location. Should we make the decision based on current employment (i.e. choose a comparatively low cost of living area and save money), or move to an area where we will always find future employment. We are considering suburbs of Washington, DC (on Maryland side with home prices around 700-800K) and suburbs or Charlotts, NC (with home prices around 500-600K). This may sound vague, but what should be our primary factor in deciding the location? More about us: Wife, 35 - Program Manager in Aviation/Aerospace Husband, 35 - Software Engineer Two Kids 2 and 4 yrs [link] [comments]  |
| Bonds in taxable or tax deferred? Posted: 31 Jan 2018 10:16 AM PST It seems theres lots of conflicting articles out there. Bogleheads Wiki recommends tax differed while WhiteCoatInvestor and many others recommend just normal taxable account. In the current economic situation (with interest rates what they are) where is the best place to hold bonds for the long term? If the only bond fund I'll buy is Total Bond Market Index Fund, does it matter where it goes? [link] [comments]  |
| FI ladies, what do you do/did you do for a living and how did you get there? Posted: 30 Jan 2018 05:20 PM PST |
| Did anyone here make severe and stressful career sacrifices to gain early financial independence? Posted: 31 Jan 2018 08:17 AM PST I managed to retire early with a lot of money and gain total financial independence. But had to experience a living hell in my career to do so. Let me tell you my story, so I can hear yours! When I was young I always wanted to turn the world on fire and be a Vice President making a lot of money by the time I was 35 years old. To get to that point I had to work 12-16 hours a day and compete with some of the biggest SOBs and Alpha Men on this planet. I battled many people who wanted power, influence and money and thought I was in their way. The Office Politics was incredible. I picked up lots of enemies in the office. I felt like I was a Democrat in Congress in an office of Republicans. I lost a few jobs when the office politics became overwhelming. But I got right back on my horse and kept riding. I saved 30% of my income so I could retire from the rat race before I went insane. Was it all worth it? I still don't know. [link] [comments]  |
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