• Breaking News

    Tuesday, June 29, 2021

    Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - June 28, 2021

    Financial Independence Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - June 28, 2021


    Weekly “Help Me FIRE!” thread. Post your detailed information for highly specific advice - June 28, 2021

    Posted: 28 Jun 2021 02:01 AM PDT

    Need help applying broader FIRE principles to your own situation? We're here for you!

    Post your detailed personal "case study" and ask as many questions as you like, or help others who've done the same. Not sure if your questions pertain? Post them anyway…you might be surprised.

    It'll be helpful to use our suggested format. Simply copy/paste/fill in/etc. But since everybody's situation is different, feel free to tailor your layout to your needs.

    -Introduce yourself

    -Age / Industry / Location

    -General goals

    -Target FIRE Age / Amount / Withdrawal Rate / Location

    -Educational background and plans

    -Career situation and plans

    -Current and future income breakdown, including one-time events

    -Budget breakdown

    -Asset breakdown, including home, cars, etc.

    -Debt breakdown

    -Health concerns

    -Family: current situation / future plans / special needs / elderly parents

    -Other info

    -Questions?

    submitted by /u/AutoModerator
    [link] [comments]

    Daily FI discussion thread - Monday, June 28, 2021

    Posted: 28 Jun 2021 02:00 AM PDT

    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.

    submitted by /u/AutoModerator
    [link] [comments]

    32 Year old immigrant hitting $1 Million NW with index funds, living the American Dream.

    Posted: 28 Jun 2021 09:59 AM PDT

    Hello everyone I'm a 32 year old man and a first generation immigrant from Asia. I'm a dual US/Canadian citizen and my wife is a 30 year old natural born citizen. Recently we just hit the first major milestone of $1 million combined networth. We currently live in a MCOL city in Texas (not Austin) making about $220,000 a year combined. Most of our networth are from 401K/Roth, index funds and equity in our house.

    Here is the quick networth progression over the years. The healthy recovery and increase of the market during the pandemic really skyrocketed our networth since our jobs weren't affected.

    Please note that numbers before 2018 are rough estimates.

    • Year : Me / Wife / Total
    • 2013: $0 / $0 / $0
    • 2014: $15K, -$90K, -$75K (wife's student loans)
    • 2015: $35K, -$65K, -$30K
    • 2016: $50K, -$40K, $10K
    • 2017: $90K, $0K, $90K (loan paid off)
    • 2018: $180K, $30K, $210K
    • 2019: $224K, $90K, $314K
    • 2020: $352K, $187K, $539K
    • 2021: $479K, $301K, $780K
    • Now: $606K, $396K, $1 Mil

    I have a Bachelors in Mechanical Engineering and my wife has a Masters in Biomedical Engineering. I'm currently working as an engineer in a company that provides different components to the Aerospace/Defense, Oil & Gas, Semiconductor and Medical industry. I'm proud to say that our components were used in the production of the Pfizer COVID vaccine (microchip sold separately). My wife works for a company that produces various surgical equipment. Here are salary numbers over the years:

    • Year : Me / Wife
    • 2013: $75K*, $0 (Wife in grad school)
    • 2014: $75K*, $65K
    • 2015: $75K, $65K (Job switch for me)
    • 2016: $75K, $75K (Job switch for wife)
    • 2017: $78K, $82K
    • 2018: $80K, $89K
    • 2019: $100K, $96K (Job switch for me)
    • 2020: $104K, $103K
    • 2021: $110K, $110k

    *My first job out of college got paid $57K with free company furnished housing for 2 years (My W2 was $75K). After 2 years of the program my salary would drop down to $62K so I found a job in Texas. While I got to keep my salary, it didn't increase much due to the performance of the company (all the money went to the CEO/shareholders I'm sure).

    Our total networth breakdown are the following:

    • 401K/Roth/HSA: $472K
    • Brokerage/Index Fund: $391K
    • Cash: $37K
    • House equity: $100K
    • Crypto/Meme stocks: $4K

    Our Index Funds are mainly SP500 equivalent like VTSAX. We have approximately 75/20 split between US and International Market funds with the rest in bonds.

    Like a lot of couples and families in this sub, having a partner that wants to save and FIRE is a huge help to achieve our goals. Since we are pretty frugal we didn't really track our year to year spendings, I estimate we range from $45K to $55K per year. Besides a big vacation each year we don't spend a ton of money on luxuries. We use what we have until it breaks before we get something new. This way we are not cycling through cars, electronics and toys constantly like most consumers. We try to limit eating out to one to two times a week, partly due to cost and partly due to the health benefits of cooking our own meal. We are not gamblers or financial gurus so we stuck to the tried and true index funds. We live by the rule that there's no such thing as "getting rich quick" and stick to what we know the most, our jobs.

    Our future plan is to have a kid in 2-3 years and FIRE in 3-5 years with a total networth of $1.8 million+. We are trying to stick to a more conservative withdrawal rate of 3.5% and flexible spending of $60-75K depending on market conditions. If we decide that we might need a bit more to raise our child then we'll "do one more year" and bump our NW past $2 mil.

    submitted by /u/YW55
    [link] [comments]

    Giving Back After Hitting FIRE

    Posted: 28 Jun 2021 06:45 AM PDT

    Hey all,

    My husband (36m) and I (34f) hit our FIRE number a couple years ago. Since then, we've kept working for "fun money" and actually splurged on a few things. (Mt. Everest! First new car ever!) But after the excitement wore off, we recognized how ridiculously lucky we are to be in this position, and we've started trying to give back however we can. I now teach classes and lead hikes for the Girl Scouts--something I've wanted to do for years. We've turned our yard into a mini farm and donate a lot of the food we produce. We're both really focused on environmental causes, so we're trying to "greenify" our city, helping to maintain trails and push more bike-friendly infrastructure.

    For those of you who have FIRE'd (or are getting close) do you volunteer or give back to your community somehow? Do you find it more rewarding than kicking back and "retiring?" For anyone else who's environmentally-minded, are there any volunteer activities you can suggest? We're always looking for more.

    submitted by /u/Wowbaggerrr
    [link] [comments]

    10 years to $1m

    Posted: 28 Jun 2021 10:47 AM PDT

    I enjoy reading the milestone posts with detailed information so I wanted to share my story about hitting a $1,000,000 net worth in about 10 years.

    Background info:

    • 33 year old couple
    • One in finance and one in medicine
    • 2 kids
    • ~$600k remaining on a mortgage on primary residence in MCOL area ($860k value)

    Net worth over time (year end):

    • 2011: $1,500
    • 2012: $54,000
    • 2013: $68,000
    • 2014: $81,000
    • 2015: $91,999
    • 2016: $191,000
    • 2017: $338,000
    • 2018: $364,000
    • 2019: $455,000
    • 2020: $742,000
    • Current: $1,004,000

    Asset breakdown:

    • Index funds: $659,000 (includes HSA)
    • Crowdsource real estate: $40,000
    • Real estate: $256,000 (big increases in real estate valuations in the last 2 years) (this is the equity only, the value is roughly $860k minus the mortgage of roughly $600k)
    • Other: $49,000 (checking/savings account)

    Careers:

    • I started in Finance in 2011 with a salary of less than $40k and have increased it to just over $100k. I've purposely not gone for promotions over the last few years in order to stay in my role that requires fewer hours so I'm home more with my kids.
    • My SO is in medicine and was in school/residency until the last couple of years.
    • Our average salary for the last 10 years was $130,500 combined.
      • Of course now that my SO is working full-time, our yearly combined income has increased significantly, but we reached $1m NW on the $130k combined average over the last 10 years.

    Budget/spending:

    • 2011-2014: ~$35,000
    • 2015: $92,000
    • 2016: $120,000
    • 2017: $136,000
    • 2018: $116,000
    • 2019: $90,000
    • 2020: $154,000
      • Yes, we spend a lot especially considering this sub.
      • Notable items: currently $28k to daycare, $24k to student loans, $50k to mortgage (includes extra we pay each month to pay if off early), $6k to medicine related career expenses (like disability insurance) - none of these won't be in our FIRE budget.
      • $12k to travel - we could cut this but it's a big part of our happiness.

    Savings:

    • In the beginning we were a single income family and I was only saving 4% of my income with an additional 14% match from my company. I slowly increased my savings and have been maxing out my 401k since 2015. Also currently max out HSA, IRAs, and save in a taxable account.
    • We saved over $50,000 last year and are on track to save $100,000 this year (and this is my annual goal going forward)
    • We owned a home early in our marriage and it increase significantly, leaving us almost $50k in profit after we sold it in 2012.

    Mistakes/learning opportunities:

    • I didn't learn about FIRE until maybe 2015, so many of these were pre-learning about FIRE, but I still made mistakes recently.
    • We bought 2 homes we shouldn't have and only lived in them for a few years each. We lost a little on the first and lost about $30k on the second one. We are now in what I consider our forever home and am looking to pay it off before FIRE.
    • We bought several luxury cars and lost a lot of money when selling those. I now have a reasonably priced reliable car that I will keep a long time.
    • I mostly stick to index funds but have gotten caught up with individual stocks and am currently only down about $4,000 total on those stocks (on $50k total invested) but if I would have left them in VTI since last year, I would be up a lot more.
    • We've let our spending increase significantly to a point that's higher than where I'd like it to be but as long as we are hitting our savings goal, I don't worry too much about it.

    Goals:

    • FIRE goal: $2.3m in today's dollars ($2.7m future) - not including primary real estate
    • FIRE age: 43-45 (in 10-12 years) using an estimated 6.5% rate of return and 2% inflation (so 4.5% real rate of return)
    • Paid off mortgage at retirement
    • 529s: goal of $100k in each (not included in my savings or my net worth)
    • Spending goal in FIRE: ~$90,000 (just under 4% but will be flexible with market returns to be safer, especially in the early years)
      • Our current spending without daycare, mortgage, or student loans (which will all be paid off before FIRE) is about $50,000.
      • This leaves $40k for healthcare (the big unknown) and travel.
      • I could go part-time to 80% for a few years or my SO could work 1-2 days a week if we wanted.

    Overall, it's been a steady long-term, boring, save and invest in index funds and real estate. Yes, we have a high combined income now which will help meet our FIRE goals by 43-45 but for many years we were a 1 income family.

    Things we did right:

    • Maxed out 401k early and stayed at my company which has a great match
    • Invested mostly in index funds
    • Paid ourself first: even though our spending has increased a lot, we've always saved first and spent what was left over

    Things I wish I knew 10 years ago:

    • Rent if you aren't sure if you will stay long-term in the house (even though our first house netted us a nice gain, house 2 and 3 were not good investments)
    • Buy cheaper cars and fewer of them
    • Don't let lifestyle creep increase so quickly as income increases

    E: added clarity around home equity

    submitted by /u/vgvti
    [link] [comments]

    Finally received a job offer! 70,000 in HCOL. Need advice.

    Posted: 28 Jun 2021 09:18 PM PDT

    I recently received a job offer for a company in SF that would pay me 70k plus benefits.

    They would want me to move in the office by mid July, which seems very soon for me. I recently graduated from college, and by now and mid July, I have to find a place to live in SF and a car to finance.

    I've been getting a lot of interviews lately, and I'm waiting to hear back from a few 2nd rounds. The deadline to accept this job offer is on July 2nd. I won't hear back from the 2nd round interviews by then.

    The other interviews are in my hometown and pay about 55k - 60k, but I can live rent free with my family.

    I don't really know what to do in this situation. It's very hard to find rent in SF for $900 - $1100 (single room). Since this is my only job offer so far, i feel pressure to accept. Any advice?

    submitted by /u/IREGRETITALL123
    [link] [comments]

    Business Insider FUD: FIRE is not accessible unless you are a 27-year old with no debt and a high-paying job

    Posted: 27 Jun 2021 05:23 PM PDT

    I used to think early retirement was the only way to live my ideal life, but I've found a better approach

    TL;DR -

    1. FIRE is not accessible unless you are a 27-year-old with no debt and a high-paying job.

    2. You have to sacrifice to the "point of deprivation" in order to achieve FIRE.

    3. "Slow FIRE" is the better option than just FIRE!

    Wonder what everyone here thinks about this. Personally, I think that so-called slow FIRE has a higher risk of people falling back into their old patterns of earning and spending, so that ultimately slow FIRE is just FIR at the traditional retirement age, without the "early" part.

    submitted by /u/svayamsevak
    [link] [comments]

    Anyone on the path to FIRE quit early for a lower paying, but easier job?

    Posted: 28 Jun 2021 09:06 PM PDT

    The job I work can be pretty stressful at times. It pays $75K/year and involves making our city more sustainable. While the growth potential for this industry is quite high, I really dread my job and that might change under a different employer. While my contract is about to expire and I look for other jobs, I wonder what jobs others have taken up that they found to be quite pleasant, pay well for what it's worth, and perhaps did not require much to get into (i.e., a good odd job).

    In the mean time, I am learning programming to upskill which will supplement my career and perhaps allow me to pivot (I have been thinking about data science).

    So, has anyone had any luck with some good odd jobs? I've heard mentions of ubereats or taking an online IT certificate and working IT remotely. Something WFH would be nice. Please share your research and experience. Thanks!

    submitted by /u/BreathAether
    [link] [comments]

    Weekly FI Monday Milestone thread - June 28, 2021

    Posted: 28 Jun 2021 02:00 AM PDT

    Please use this thread to post your milestones, humblebrags and status updates 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!

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

    submitted by /u/AutoModerator
    [link] [comments]

    Thoughts on CRUT for highly appreciated capital gains

    Posted: 28 Jun 2021 07:23 AM PDT

    Hey everyone,

    I've recently been putting some thought into using a CRUT as part of my FI strategy. I haven't found much information on this subreddit around CRUTs, so I thought it might be interesting to provide some info and start some discussion around this topic. I'm hoping to get some additional perspective around the usage, and see if anyone has additional insights into using this from a FI perspective.

    What is a CRUT?

    Charitable Remainder Unitrust

    It is useful if you have a lot of highly appreciated assets and you're looking to avoid paying capital gains, while also provide a steady stream of income. Perhaps you've got a lot of stock options that have appreciated and your company just went public. You might want to reallocate your position, but you might be taking a big tax hit by doing so. You're also donating to your favorite charity, instead of paying a large tax bill.

    The CRUT lets you donate your shares to a charity, receive an annualized payment (this can be for a set number of years, or for the rest of your life), and the remainder goes to the charity. When the CRUT receives the donation, they will sell the assets, and reallocate into a more standard portfolio (you are usually paying for this service, there are requirements around who can manage these assets).

    What benefits are there?

    One benefit is that your contribution gets you a tax deduction which can be applied to the next 5 years of taxes. The amount you receive is variable (depending on the annuity value and term of the CRUT). Most likely it'll be around 20%-30% of the total contribution.

    You will also avoid any capital gains on the funds, because you're not the one selling, the CRUT is.

    What about the annuity?

    The annuity payment is variable, and you get to decide. There seems to be standard amounts that are acceptable, and the company who is helping you set this up will have options for you to choose from. You might take 5% to 6% of the value in the CRUT for life. Or you might take 18%-20% for 10 years. 10% of the initial contribution is guaranteed to the charity if performance is poor and you're drawing down too much.

    Taxes on the annuity

    You will be paying taxes on your annuity payments, so this is something to consider. I need to dive a bit deeper into the potential scenarios to understand if there's a withdrawal amount that would make this strategy beneficial or not. Obviously the lower your annuity is (and it's your only source of income), then the more tax advantaged it is.

    Personal Considerations

    I'll be needing to reallocate some highly appreciated capital gains soon (combination of a couple of assets, including stock options from a company that's going public). I've been sweating the tax bill, but recently came across this as a possible solution.

    For example, say I've got 2 million in assets I need to sell. I'm currently thinking I could create a CRUT and transfer 1 million to it and start taking an annuity from that. Then, I'll use the immediate 30% tax deduction to cover selling some/all of the rest of the asset directly and move to a more standard allocation.

    Would I be better off taking the tax hit and managing my funds myself? What seems to make this interesting is the possibility of taking a larger annuity than you would normally get from using the 4% rule. Instead of the 4% rule, you could lock in 5% or 6% for life, and potentially get a larger payout immediately. Or you could lock in 20% over 10 years and draw down as much as you can (leaving 10% of the CRUT to the charity).

    If I needed to sell all 2 million in assets and not use a CRUT (left with 1.5 mil after taxes), then I would be looking at 60k (4% rule) a year. However, using a CRUT, I could potentially start receiving 60k a year from the annuity, and use the tax deduction to get the other 1 million out of the appreciated assets, and have 60k (annuity) + 40k (4%rule).

    submitted by /u/crutfi
    [link] [comments]

    FIRE, Freedom, and Meaning

    Posted: 27 Jun 2021 06:24 AM PDT

    A useful framing I have seen in this community is that money doesn't buy happiness—it buys freedom. Building on this, I think it's helpful to note the distinction between "negative freedoms" and "positive freedoms."

    "Negative liberty is the absence of obstacles, barriers or constraints. One has negative liberty to the extent that actions are available to one in this negative sense. Positive liberty is the possibility of acting — or the fact of acting — in such a way as to take control of one's life and realize one's fundamental purposes. "

    FIRE allows liberation from external constraints (negative liberty). This is quite incredible. Yet there's more to life than removing chains. The work of self-actualization, of building a meaningful life, can only come from within each of us and requires its own type of effort.

    I find this language helpful in articulating what FIRE can do for me, as well as its limits. I hope it's helpful for you, too!

    submitted by /u/dreamingofdegaliah
    [link] [comments]

    No comments:

    Post a Comment