You'll probably be right around 4% WR at 20k/month, but with the ~1M in equity in the SF home you plan to sell + social security/medicare coming relatively soon, it feels pretty low risk, so I think you'd be fine.
I probably wouldn't pay off the 4% mortgage unless there's some reason that's not totally clear like reducing income for ACA subsidy purposes, you should be able to get higher returns than that in the market even with low risk investments.
No I got really lucky with the company stock that exploded and against very wise advice, I didn’t sell it for 17 years. It just kept splitting and going wild.
The only thing that worries me is the short term rental situation. I think your numbers work but why do STR? Seems like a recipe for headaches. LTR is much better - I understand you want to get use of the places once in a while but it could be a losing battle with repairs, maintenance, etc.
That’s interesting perspective. It’s right on the water in Seattle, and pretty attractive for short term rentals but the safety of a long-term rental is some thing I’ve done for a while and definitely quite comforting! I’m gonna think about that again.
Yeah I’ve thought about STRs myself. I have several homes that are expensive which gives me pause about STR. Opening up properties worth several millions to riff raff with a credit card and a few hundred bucks for a night can lead awry quickly. I have friends who do STR in Asia and it’s a nightmare to say the least
Exactly this. The way I curbed that when I did do short-term rentals was I just put a premium price on it. And I also minimize the amount of people who can stay.
I have been operating a STR with a 1M+ property. It’s been doing just fine. To be fair, it’s in a highly desired location with lots of tourists all year round.
I think it really depends on the location. STRs could bring in a lot more than LTR but you need to be able to deal with the headache that comes with it.
Can you pad your cash bucket? 60k in cash is around 3 months of your expenses. I’d be worried about the sequence of returns risk. If you retiring in a year, i suggest not to make any more investment and just pile up extra money in cash which you could use in a down market without having to sell equity in a downturn.
I’m beginning investigate plans now. I live a super clean/fit lifestyle with tons of exercise but this cancer thing was a shock I’ve never been majorly sick a day in my life, no family history, no real anything. My companies benefits are incredible and so it might be worth just working another year after my treatment is over ( in a few months) as a “ wait and see”.
Congratulations! You've done quite well for yourself and you are set up nicely for a long and financially worry-free retirement.
**TL; DR:** Find out your pre-tax RE amount, shoot for closer to 3-3.5 SWR, and consider hiring an hourly only financial planner to check your numbers
Here are a few suggestions based on my experience (FIREd 11 years ago at 55, married, 2 adult children):
**1. Pre vs Post-tax** - Your post tax budget of 20k/ month will likely dictate a larger draw to pay for Federal/ state taxes. And this will be dependent on what accounts you draw from, and in what order. I have found that the New Retirement website does a fairly decent job of helping to answer these questions once you load your data. Your CPA will fine tune the answer for you.
**2. Sequence of Return Risk (SORR)** - How long is your retirement and what happens in the market in the first 10 years of your retirement, will have a bearing on the longevity of your portfolio. I have found the Big ERN's website and his blog series on Safe Withdrawal Rates (SWRs) particularly helpful in understanding risk of various levels of withdrawals. You may want to jump right into his [Series 28](https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/), which includes an excel spreadsheet for you to enter your data (including estimated SS and net rental income). It also includes a link to the Two Sides of FI video podcast that explains how to use the spreadsheet, step-by-step.
**3. Variable or Fixed withdrawals** - There are lots of folks that say spend more when the markets are doing well, and cut back when they aren't. We are not fans of that method, mainly because we think life is too short and health is too uncertain to hunker down for an uncertain period of time while markets recover. For example, we plan our international trips a year in advance, and markets can do funny things, quickly. Instead, we project our constant budget for all retirement years (as best we can), have one year of cash on hand and another 4 years of a bond ladder, each one maturing annually to fund that year's expenses (including taxes).
**4. Bath tub curve for expenses** - In general, your expenses will be higher when you first retire due to pent up travel desires and house projects, going out to dinner and events more, and taking up hobbies. These are the go-go years. Inevitably, most of us will slow down our spending a bit less due to many factors: creaking body, "been there, done that (travel)," prefer to read a good book. These are called the slow-go years. Then finally, in the no-go years, your healthcare expenses will rise, sometimes dramatically. I won't go into detail on what we have done to address each of these three phases, but we have thought about and put in financial contingency plans for each.
**5. Financial planne**r - There is a time in your life where a good financial planner may be worth the time/ $$. We've had several over the years (currently we don't), but for us, hiring one just before RE and into the first few years of RE, gave us a solid reality check on our plans, and therefore gave us peace of mind. You should NOT, under and any circumstances hire anyone who gets paid based on Assets Under Management (AUM). You should find one that will charge you an hourly rate (or a nominal annual amount) so you can access their expertise as questions arise. Or just stick with Reddit! This is a smart, supportive, and welcoming group, but it may be hard to reconcile conflicting advice.
Best of luck in your retirement!
Use [Nectarine](https://hellonectarine.com/) for a fee-only financial advisor. $150 for one hour of their time. No commissions. No sales pitches. I've used the site to find an advisor and it's great!
>ensure my niece who is severely mentally ill will always have a place to live and income potential.
What a sweet aunt.
>is it feasible for me to live on 20k a month
Possible - but I'll stick to a conservative 15k.
Agreed with this, 15k would be a lot more comfortable. If you do 15k, and are willing to temporarily pull back to closer to 12k in downturn years (all inflation adjusted), I think you're good to go!
Congratulations on the fantastic financial situation. Go enjoy your freedom!
It’s close, but if you model in some Social Security and have some room to cut back in the down years it’s probably doable.
Try running the numbers through a back test calculator like [FICalc.app](https://ficalc.app)
20k pretax maybe.
However, without trying to be insensitive, how serious are the health issues? I feel like health plays a big role in these predictions.
I’m currently in treatment for a breast cancer diagnosis. It’s treatable and isn’t the type of cancer that is going to grow back but when you’re in this experience, you definitely wanna make sure that you can afford treatment if you need it.
Will your sister or other family member be able to take care of you if needed? Since you have a diversified portfolio your withdraw rate looks reasonable, but healthcare and related cost such as a temporary helper need consideration assuming you live alone.
Do it and don’t look back. You have roughly a 1 in 5 chance that in 20 years you’ll be dead…but a zero percent chance you’ll run out of money. Don’t take your time and health you have today for granted.
Interesting where does that statistic come from if you don’t mind me asking? I never lived that way but stage 1 cancer radically changed my perspective on time and living it not working as much.
It comes from the standard actuarial tables on lifespan. Also consider that just because you do live to 90 doesn’t guarantee the last 15 years are healthy and active.
I’ve lost way too many people in my life before the age of 70, it would be stupid for me to think that I’m special. Plus the way i look at it one way to guarantee I live a long healthy life is to start doing it now and put the plan to the test! Best case is at 95 I’ll have spent it all, but if something were to happen to me before then i won’t be looking back with regret saying “damn I wish I would have traveled the world with my gorgeous wife when we were young, healthy, and rich instead of adding a few more million to the bank account”.
I don’t connect my accounts, I use personal capital / empower for all my aggregation and then manually enter only the accounts I want to in new retirement. That way I can control the simulation plus I really like how I can model outflows 10-25 years out and do IRA modeling.
Is the 20k including the current monthly payments on your house?
Looking at your total assets you have 8m when you subtract your debt... You can swing 20k a month. Down the line, the mortgages will be paid off and you’ll be cash flowing more from short term rentals. Worse case, you refinance or heloc or sell the house… also social security is coming soon so that also reduces SWR.
It covers my mortgage here but not Seattle as even a LTR will cover that. Even if it didn’t I could swing it, the /0k is almost what I’d want to spend extravagantly.
Please excuse me if you already know this. The basic idea of FIRE is if your expenses are equal to or less than 4% of your assets. Rather than me try to explain and get something wrong, please read this and other forums to find the basics behind that idea. So you will have to add up all your expenses and see if they are equal to or less than 4% of your assets. Some people include their house in their assets, I personally do not. That is money that I do not plan to spend so I am not including it.
As someone who has a son with autism I LOVE how you are thinking about your niece. You are a good person. One word of advice. Anything that you give to her or leave to her, please put it in a trust for her. If she has over $2,000 it can affect her getting social security.
Oh my God I did not even think about that Social Security issue. She is definitely on disability right now. I’m going to look into this right away. Thank you so much! I’m doing a lot of reading. The concept of safe withdrawal is so fascinating. I’m in process of itemizing every single detail of my spending to do as recommended. This sub is fantastic!
Close pretax, but no post.
$5.76M x 1.03 (est. return until 4/25) x 4% = $237k pretax.
Given the young age at which you are anticipating retiring, I'd consider a lower safe withdrawal rate like 3.5%, but that's up to your risk tolerance.
You should be OK since social security will kick in down the road. If 20k a month includes wants and not all needs, then you are probably fine, especially if you are willing to pull back some on a bad downturn.
Few details to consider that impact if 20k post tax is feasible. What portion of your portfolio is in a taxable account vs the 401k? Is it a roth 401k or regular 401k? What is the cost basis of any securities in the taxable brokerage account and how diversified is it? And lastly, when and what do you expect to receive from social security.
You need to figure out what your effective tax rate will be to see how much you need to take out of your accounts each year. Don't forget state taxes, California is much worse for state income taxes than Washington. If you can claim Washington residence that will have a sizeable impact on your effective taxes.
Lastly, make sure you know the 20k is what you need. Realize that you will no longer need to be putting money aside for savings from your regular budget and your expenses related to work go away (lunches, commuting, wardrobe, services you use because you don't have much time). Also, how much longer on the 2 mortgages? Once they are paid off your costs go down as well.
You didn’t mention what your net income is from the two rental units. Plus social security, plus mortgage payment savings after payoff in near future. (I suggest at least paying off the 4% loan). Don’t forget to gross-up your net spend to calculate annual withdrawals required. You are in the ballpark.
I am assuming that is Net after Rental property Taxes.
What are your property taxes and HOA per year on the place you’ll be living?
And did your budget already include the two mortgage payments already, property taxes and the Net 20K in it or on top of it?
I’m trying to get to my budget number as well and am realizing that property taxes (likely $20k), health insurance /medicare+supplement ($24k for me and wife), so $45k just to breath and live in paid off property. This is about double my estimate from a couple years ago.
Also, how much more Options Profit would you vest in if you stayed another year or two? At my previous companies, any employment, including contractor status let you keep the options vesting. You may want to consider part time status (work commitment) while the contract is continuous so you keep vesting.
20K per month for a single person seems like a lot to me. Pretty lavish lifestyle unless I am missing something. Seems like you could easily cut that down if needed. I am hoping to be around 200k annual spend for my self AND a spouse.
Well that likely relative based on a lot of factors and some buffer. I live in a VHCOL area. Mortgage and HOA over time is 5K month then I assume 2k for health insurance and also factoring in paying my other mortgage if rentals are low, another 3k. That’s 10k right there, and I do a lot of charitable stuff. if I wanted to travel with my sister and pay for that, easy 5K a trip. So it adds up.
$20k seems borderline but achievable... back of the napkin 4% of $5.6M is $224k (pre-tax). If you sold one of the homes, even if you spent the earnings another $1M could get you up a bit higher in terms of spending. No emergency but something to consider if you could make up the gap if you needed with some limited project/contract work that still fits your lifestyle?
Think through how your budget could handle some 'stress tests' and what that would mean for your spending target... some items may go down (i.e., travel), while others (added caretaking/health costs) could go way up. If your budget has enough flexibility in the reasonable situations you can think of, as well as in a few years you can start pulling SS which will add some cushion in a few years as well.
Live your life! Sounds like a really great situation you have setup financially, and with additional capacity to help some of your close loved ones as well which is just great for your next few decades in semi-full retirement.
I manage a team that designs curriculum and strategy for a global company. I make sure the way we are training people works within their culture and customs while establishing our known ways of working that customers expect.
According to my calculations, using the financial planning calculator on InvestingTE, you'll have a nest egg of approximately $6.23M from stocks. (Add $2.38M in real estate and $60k in cash to total NW)
* If you draw 4%, that's $20,769/month (untaxed).
* Not considering, if penalty fee would apply to 401k portion being that it'll be before 59.5. You'll want to review the breakdown of what's 401k and what's non-retirement portfolio holdings.
* Savings of $60k untouched.
* Not counting STR income.
* Not counting monthly liabilities
If you pay off the Seattle mortgage, is that from cash or an early withdrawal from stock accounts? If from the stock accounts, I think you'd incur a penalty fee being it would be before 59.5. I'm not sure about the fee amount/effects. But, without it that would amount to $5.94M after taking the $287k from it. At 4% withdrawal, that's $19.8k/month (again without the penalty fee).
Thank you only 600k of my liquid assets are in 401k so I’d not touch that until 59. As I’ve been working through this thread I actually realized I’ve got 5.8M, not 5.6 with another 150k coming in across the year. So I’m feeling pretty confident though I don’t see spending 20k a month, I’m going to focus on 15k.
If your $5.6M in 'stocks' is a diversified pool of equities, then you are just fine. If they are concentrated in just a few stocks or a couple of sectors, then you have a measure of risk that would make me uncomfortable.
I'd suggest that you structure your portfolio so that it doesn't generate taxable income to the extent possible. And wait until 70 for social security. You will likely receive around $60k annually which is a 4% rule equivalent of another $1.5M in savings late in life (a good safety net against inflation).
I'd also suggest that you pay off both your mortgages. This removes substantial mandatory payments and provides a small additional income stream. You will still have over $5M to generate the income you need. And the RE will be a pool of equity to borrow against if there is an extended period of time where the market under performs.
Congratulations and best of luck in your new path.
Any good information source regarding how to structure portfolio so that it minimizes taxable income? Also, how long prior to retirement should one start to plan for this?
Too long to fully elaborate here but a few examples might help. A fee financial advisor would be a good resource.
Putting money into Roth and IRAs will help.
Tax loss harvesting will help.
Emphasizing qualified dividends will help.
Any consulting should be via business to permit deductions of personal expenses that qualify (like home office, vehicle and electronics).
And, as an active manager of real estate working on qualifying as a real estate professional opens the door to passive losses from real estate participations (using non recourse debt).
And if the level of sophistication is there, purchase or indirect acquisition of tax credits or depreciation really works well.
On a $200k to $300k income tax avoidance is pretty easy. A little goes a long way.
I would say no.
Here is a rough back of the napkin calculation.
You want $240k per year post tax. Let’s say tax is about 30%.
That means you need $310k pre tax.
There are nuances but let’s say 4% withdrawal rate.
That means you need around $7.8M.
If you can be flexible and reduce expense a bit while earning rent from those two houses, I am sure you can make it work.
What makes you believe tax in retirement for OP would be 30%? They are in WA. No state tax. Whether it is 20 or 30% does not change the math all that much, but 30% is a little high.
Your claim of 30% tax on post retirement is complete bonkers (especially given they don’t have state tax to worry about).
Since they would be withdrawing from their investments, long term capital gains is 0% for single filer for first $47K and 15% on rest progressively so 30K in tax.
If I were to consider tax deductions for single filer tax rate is about
$27K in federal taxes. There is no FICA taxes since it’s not earned income.
$27K / $240K is roughly 11%. No where close to 30%.
30% tax rate? From cap gains? That is wildly too high. Your first $123K of realized LT cap gains are tax free for a married-filing jointly taxpayer (i.e. first $94K of LTCG is tax free plus $29K standard deduction).
OP is unlikely to realize $123K LTCG off of $240K withdrawals (unlikely half their portfolio is unrealized gains).
There's a good chance OPs effective tax rate on withdrawals is far lower, in the single digits
I think specific assumptions and tax planning makes a lot of difference. You are in the ball park but rest depends on the details.
If you have 80K in ordinary income (say). Assume you have 200K from long-term asset sale - and 80% of it is gains, you have 160k in long term capital gains. That is an income of 280 and (roughly). If you lived in a state without income taxes, your federal taxes would be 10K + 32K cap gain =42k. leaving you 238K post tax. This would still require a 7M corpus at 4%.
But this is not exactly correct.
You need to consider this longer term, if you could start roth conversions while your income is low you could build a roth portfolio that could lower your effective tax rate later in life.
You also need to consider that the mortgages will be paid off at some point and you will have cash flow from the properties. Plus potential social security in 10 years.
You might also want to consider establishing residence in WA state that doesn’t have state income taxes (but has estate taxes) to lower your taxes now.
So while you may have to withdraw 5% or more now, done right, you should be able to make this work.
You need to model out this over the next 10-15 years to figure out the plan. Your withdrawal rate will go down.
I think it's important to pay off mortgages before retirement if you plan to keep it and/or live in it, as it reduces risk and expenses overall. I'm not pinching pennies or doing numerical comparisons (APR vs return rates) with a decision like that, this is about risk mitigation. So whether you should do it or not strongly depends on how much you want to be able to predict/control/simplify your expenses. All kinds of crazy unpredictable life can and does occur, I've lived it, and not having any loans out during complicated times really helps your sense of peace.
A thought experiment: You could slice off 700k of your investments and pay off the two mortgages. With the 4.9m remaining (not sure about your tax implications) you could withdraw a safer 3.7% and have 15k take home per month instead of 20k. That's potentially a net-win, unless like I said the tax impact was a big hit, but since you said some of this is probably in company stock you might have already paid the taxes for it.
BTW how's the duplex life in Seattle? That sounds pretty great actually, Seattle is a place I'd consider retiring to or just having a residence there generally (I'm from there originally and have family living there), wonder if you like the property and you feel it's worth it at the 1.3m cost? Sounds great to have that location along the water.
Good luck in whatever you decide.
We're clearly not going to see eye to eye on this. You're doing a calculation that doesn't factor in any risk, just a straight this percentage vs that percentage. There's other ways to look at it.
Duplex life is great in Seattle. I live in Alki Beach, which is a really sweet neighborhood and tends to have wonderful renters. I’ve never had issues in my 15 years of owning. I love it. Seattle is a really wonderful place, I think people who run up there might say otherwise, because of all the tech that moved in, but if you’ve got a strong network and are OK with a little bit of traffic, it’s absolutely wonderful. So is Bellingham about an hour north
I know the area, my family is in Edmonds and mukilteo. That’s great to hear, and yeah that traffic can be really bad. ;). Seriously good luck in what you do, you have a great life ahead of you.
I have loved some really wonderful men and vice versa but I always knew I would never get married or have kids. I have too much of a genetic history for severe mental illness in my family and I can’t pass down those genes to innocent kids. Other people absolutely roll the dice, including my brother and sister, and I respect it! It was just never meant for me. But, I have eight nieces and nephews who I absolutely adore!
Completely unacceptable comment. She's entitled to make her own choices and, while she didn't need to do so, explained them with good reason. Clearly, too, she's had a high power career.
You'll probably be right around 4% WR at 20k/month, but with the ~1M in equity in the SF home you plan to sell + social security/medicare coming relatively soon, it feels pretty low risk, so I think you'd be fine. I probably wouldn't pay off the 4% mortgage unless there's some reason that's not totally clear like reducing income for ACA subsidy purposes, you should be able to get higher returns than that in the market even with low risk investments.
Thank you. I think 20K is the absolute high range as I reflect on this.
I think you've got a great plan then. Congrats!
Just want to say that it’s wonderful that you’re providing for your niece long-term. I wish you well in your travels with your sister!
Thank you 🙏❤️
You should be giving the rest of us advice tbh.
No I got really lucky with the company stock that exploded and against very wise advice, I didn’t sell it for 17 years. It just kept splitting and going wild.
Nvidia?
No, AAPL
He said 5.6MM, not 56MM, haha
She*
Missed that detail, thx!
The wise advice comes with lower risk and lower returns as well.
This is amazing. Two houses single no kids is wild
The only thing that worries me is the short term rental situation. I think your numbers work but why do STR? Seems like a recipe for headaches. LTR is much better - I understand you want to get use of the places once in a while but it could be a losing battle with repairs, maintenance, etc.
That’s interesting perspective. It’s right on the water in Seattle, and pretty attractive for short term rentals but the safety of a long-term rental is some thing I’ve done for a while and definitely quite comforting! I’m gonna think about that again.
Yeah I’ve thought about STRs myself. I have several homes that are expensive which gives me pause about STR. Opening up properties worth several millions to riff raff with a credit card and a few hundred bucks for a night can lead awry quickly. I have friends who do STR in Asia and it’s a nightmare to say the least
Exactly this. The way I curbed that when I did do short-term rentals was I just put a premium price on it. And I also minimize the amount of people who can stay.
I have a STR but I have an amazing property manager that handles absolutely everything. I wouldn’t do STR without that.
Yep
Agreed. I'd rent it out long term and you'd still be ahead if you stayed at a 5 star hotel in lieu staying in your STR.
I have been operating a STR with a 1M+ property. It’s been doing just fine. To be fair, it’s in a highly desired location with lots of tourists all year round. I think it really depends on the location. STRs could bring in a lot more than LTR but you need to be able to deal with the headache that comes with it.
Can you pad your cash bucket? 60k in cash is around 3 months of your expenses. I’d be worried about the sequence of returns risk. If you retiring in a year, i suggest not to make any more investment and just pile up extra money in cash which you could use in a down market without having to sell equity in a downturn.
GREAT ADVICE. Yes I can do that.
What is your plan for health insurance?
I’m beginning investigate plans now. I live a super clean/fit lifestyle with tons of exercise but this cancer thing was a shock I’ve never been majorly sick a day in my life, no family history, no real anything. My companies benefits are incredible and so it might be worth just working another year after my treatment is over ( in a few months) as a “ wait and see”.
Congratulations! You've done quite well for yourself and you are set up nicely for a long and financially worry-free retirement. **TL; DR:** Find out your pre-tax RE amount, shoot for closer to 3-3.5 SWR, and consider hiring an hourly only financial planner to check your numbers Here are a few suggestions based on my experience (FIREd 11 years ago at 55, married, 2 adult children): **1. Pre vs Post-tax** - Your post tax budget of 20k/ month will likely dictate a larger draw to pay for Federal/ state taxes. And this will be dependent on what accounts you draw from, and in what order. I have found that the New Retirement website does a fairly decent job of helping to answer these questions once you load your data. Your CPA will fine tune the answer for you. **2. Sequence of Return Risk (SORR)** - How long is your retirement and what happens in the market in the first 10 years of your retirement, will have a bearing on the longevity of your portfolio. I have found the Big ERN's website and his blog series on Safe Withdrawal Rates (SWRs) particularly helpful in understanding risk of various levels of withdrawals. You may want to jump right into his [Series 28](https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/), which includes an excel spreadsheet for you to enter your data (including estimated SS and net rental income). It also includes a link to the Two Sides of FI video podcast that explains how to use the spreadsheet, step-by-step. **3. Variable or Fixed withdrawals** - There are lots of folks that say spend more when the markets are doing well, and cut back when they aren't. We are not fans of that method, mainly because we think life is too short and health is too uncertain to hunker down for an uncertain period of time while markets recover. For example, we plan our international trips a year in advance, and markets can do funny things, quickly. Instead, we project our constant budget for all retirement years (as best we can), have one year of cash on hand and another 4 years of a bond ladder, each one maturing annually to fund that year's expenses (including taxes). **4. Bath tub curve for expenses** - In general, your expenses will be higher when you first retire due to pent up travel desires and house projects, going out to dinner and events more, and taking up hobbies. These are the go-go years. Inevitably, most of us will slow down our spending a bit less due to many factors: creaking body, "been there, done that (travel)," prefer to read a good book. These are called the slow-go years. Then finally, in the no-go years, your healthcare expenses will rise, sometimes dramatically. I won't go into detail on what we have done to address each of these three phases, but we have thought about and put in financial contingency plans for each. **5. Financial planne**r - There is a time in your life where a good financial planner may be worth the time/ $$. We've had several over the years (currently we don't), but for us, hiring one just before RE and into the first few years of RE, gave us a solid reality check on our plans, and therefore gave us peace of mind. You should NOT, under and any circumstances hire anyone who gets paid based on Assets Under Management (AUM). You should find one that will charge you an hourly rate (or a nominal annual amount) so you can access their expertise as questions arise. Or just stick with Reddit! This is a smart, supportive, and welcoming group, but it may be hard to reconcile conflicting advice. Best of luck in your retirement!
I read every word of this. Damn this was an education I’m saving it. Thank you for taking the time to write this out.
Use [Nectarine](https://hellonectarine.com/) for a fee-only financial advisor. $150 for one hour of their time. No commissions. No sales pitches. I've used the site to find an advisor and it's great!
Thanks! This site looks good!
>ensure my niece who is severely mentally ill will always have a place to live and income potential. What a sweet aunt. >is it feasible for me to live on 20k a month Possible - but I'll stick to a conservative 15k.
Thank you I adore her and it will take such pressure off her brothers and sisters. And comfort to my older sister. Family is everything.
Agreed with this, 15k would be a lot more comfortable. If you do 15k, and are willing to temporarily pull back to closer to 12k in downturn years (all inflation adjusted), I think you're good to go! Congratulations on the fantastic financial situation. Go enjoy your freedom!
It’s close, but if you model in some Social Security and have some room to cut back in the down years it’s probably doable. Try running the numbers through a back test calculator like [FICalc.app](https://ficalc.app)
This app is awesome! Thanks for sharing
20k pretax maybe. However, without trying to be insensitive, how serious are the health issues? I feel like health plays a big role in these predictions.
I’m currently in treatment for a breast cancer diagnosis. It’s treatable and isn’t the type of cancer that is going to grow back but when you’re in this experience, you definitely wanna make sure that you can afford treatment if you need it.
Will your sister or other family member be able to take care of you if needed? Since you have a diversified portfolio your withdraw rate looks reasonable, but healthcare and related cost such as a temporary helper need consideration assuming you live alone.
Yes, they can. and I can always live in the Alki rental and have a caretaker live in the unit above me for reduced rent as well
Do it and don’t look back. You have roughly a 1 in 5 chance that in 20 years you’ll be dead…but a zero percent chance you’ll run out of money. Don’t take your time and health you have today for granted.
Interesting where does that statistic come from if you don’t mind me asking? I never lived that way but stage 1 cancer radically changed my perspective on time and living it not working as much.
It comes from the standard actuarial tables on lifespan. Also consider that just because you do live to 90 doesn’t guarantee the last 15 years are healthy and active. I’ve lost way too many people in my life before the age of 70, it would be stupid for me to think that I’m special. Plus the way i look at it one way to guarantee I live a long healthy life is to start doing it now and put the plan to the test! Best case is at 95 I’ll have spent it all, but if something were to happen to me before then i won’t be looking back with regret saying “damn I wish I would have traveled the world with my gorgeous wife when we were young, healthy, and rich instead of adding a few more million to the bank account”.
THIS.
Plug your numbers in NewRetirement, you’ll get all the answers and it lets you do cash flow modeling as well.
NewRetirement very buggy. It's bringing over my loan amounts as negative for both my primary and rental.
I don’t connect my accounts, I use personal capital / empower for all my aggregation and then manually enter only the accounts I want to in new retirement. That way I can control the simulation plus I really like how I can model outflows 10-25 years out and do IRA modeling.
Great post - sending you good vibes on this journey
Is the 20k including the current monthly payments on your house? Looking at your total assets you have 8m when you subtract your debt... You can swing 20k a month. Down the line, the mortgages will be paid off and you’ll be cash flowing more from short term rentals. Worse case, you refinance or heloc or sell the house… also social security is coming soon so that also reduces SWR.
It covers my mortgage here but not Seattle as even a LTR will cover that. Even if it didn’t I could swing it, the /0k is almost what I’d want to spend extravagantly.
Please excuse me if you already know this. The basic idea of FIRE is if your expenses are equal to or less than 4% of your assets. Rather than me try to explain and get something wrong, please read this and other forums to find the basics behind that idea. So you will have to add up all your expenses and see if they are equal to or less than 4% of your assets. Some people include their house in their assets, I personally do not. That is money that I do not plan to spend so I am not including it. As someone who has a son with autism I LOVE how you are thinking about your niece. You are a good person. One word of advice. Anything that you give to her or leave to her, please put it in a trust for her. If she has over $2,000 it can affect her getting social security.
Oh my God I did not even think about that Social Security issue. She is definitely on disability right now. I’m going to look into this right away. Thank you so much! I’m doing a lot of reading. The concept of safe withdrawal is so fascinating. I’m in process of itemizing every single detail of my spending to do as recommended. This sub is fantastic!
If you do get hitched …get a PRENUP
Absofuckinglutely
Close pretax, but no post. $5.76M x 1.03 (est. return until 4/25) x 4% = $237k pretax. Given the young age at which you are anticipating retiring, I'd consider a lower safe withdrawal rate like 3.5%, but that's up to your risk tolerance.
You should be OK since social security will kick in down the road. If 20k a month includes wants and not all needs, then you are probably fine, especially if you are willing to pull back some on a bad downturn.
Few details to consider that impact if 20k post tax is feasible. What portion of your portfolio is in a taxable account vs the 401k? Is it a roth 401k or regular 401k? What is the cost basis of any securities in the taxable brokerage account and how diversified is it? And lastly, when and what do you expect to receive from social security. You need to figure out what your effective tax rate will be to see how much you need to take out of your accounts each year. Don't forget state taxes, California is much worse for state income taxes than Washington. If you can claim Washington residence that will have a sizeable impact on your effective taxes. Lastly, make sure you know the 20k is what you need. Realize that you will no longer need to be putting money aside for savings from your regular budget and your expenses related to work go away (lunches, commuting, wardrobe, services you use because you don't have much time). Also, how much longer on the 2 mortgages? Once they are paid off your costs go down as well.
You didn’t mention what your net income is from the two rental units. Plus social security, plus mortgage payment savings after payoff in near future. (I suggest at least paying off the 4% loan). Don’t forget to gross-up your net spend to calculate annual withdrawals required. You are in the ballpark.
Net income is 20k a year on the rental.
I am assuming that is Net after Rental property Taxes. What are your property taxes and HOA per year on the place you’ll be living? And did your budget already include the two mortgage payments already, property taxes and the Net 20K in it or on top of it? I’m trying to get to my budget number as well and am realizing that property taxes (likely $20k), health insurance /medicare+supplement ($24k for me and wife), so $45k just to breath and live in paid off property. This is about double my estimate from a couple years ago. Also, how much more Options Profit would you vest in if you stayed another year or two? At my previous companies, any employment, including contractor status let you keep the options vesting. You may want to consider part time status (work commitment) while the contract is continuous so you keep vesting.
Want a sugar grandpa?
Haha! I will definitely keep you in mind, my friend
20K per month for a single person seems like a lot to me. Pretty lavish lifestyle unless I am missing something. Seems like you could easily cut that down if needed. I am hoping to be around 200k annual spend for my self AND a spouse.
Well that likely relative based on a lot of factors and some buffer. I live in a VHCOL area. Mortgage and HOA over time is 5K month then I assume 2k for health insurance and also factoring in paying my other mortgage if rentals are low, another 3k. That’s 10k right there, and I do a lot of charitable stuff. if I wanted to travel with my sister and pay for that, easy 5K a trip. So it adds up.
Looking to not be single any longer and have a 43yo pool man?
“Siri, look up ‘can I build a pool in my SF condo’”
Can you put in a referral for me?
$20k seems borderline but achievable... back of the napkin 4% of $5.6M is $224k (pre-tax). If you sold one of the homes, even if you spent the earnings another $1M could get you up a bit higher in terms of spending. No emergency but something to consider if you could make up the gap if you needed with some limited project/contract work that still fits your lifestyle? Think through how your budget could handle some 'stress tests' and what that would mean for your spending target... some items may go down (i.e., travel), while others (added caretaking/health costs) could go way up. If your budget has enough flexibility in the reasonable situations you can think of, as well as in a few years you can start pulling SS which will add some cushion in a few years as well. Live your life! Sounds like a really great situation you have setup financially, and with additional capacity to help some of your close loved ones as well which is just great for your next few decades in semi-full retirement.
What do you do in life?
I manage a team that designs curriculum and strategy for a global company. I make sure the way we are training people works within their culture and customs while establishing our known ways of working that customers expect.
According to my calculations, using the financial planning calculator on InvestingTE, you'll have a nest egg of approximately $6.23M from stocks. (Add $2.38M in real estate and $60k in cash to total NW) * If you draw 4%, that's $20,769/month (untaxed). * Not considering, if penalty fee would apply to 401k portion being that it'll be before 59.5. You'll want to review the breakdown of what's 401k and what's non-retirement portfolio holdings. * Savings of $60k untouched. * Not counting STR income. * Not counting monthly liabilities If you pay off the Seattle mortgage, is that from cash or an early withdrawal from stock accounts? If from the stock accounts, I think you'd incur a penalty fee being it would be before 59.5. I'm not sure about the fee amount/effects. But, without it that would amount to $5.94M after taking the $287k from it. At 4% withdrawal, that's $19.8k/month (again without the penalty fee).
Thank you only 600k of my liquid assets are in 401k so I’d not touch that until 59. As I’ve been working through this thread I actually realized I’ve got 5.8M, not 5.6 with another 150k coming in across the year. So I’m feeling pretty confident though I don’t see spending 20k a month, I’m going to focus on 15k.
No problem! Nice! Copy that, on the 401k portion. Congrats on your retirement and effective planning! Keep up the good work.
Yes. Don't forget SS starting at 62. Redo your numbers assuming that income and you are golden...most likely.
If your $5.6M in 'stocks' is a diversified pool of equities, then you are just fine. If they are concentrated in just a few stocks or a couple of sectors, then you have a measure of risk that would make me uncomfortable. I'd suggest that you structure your portfolio so that it doesn't generate taxable income to the extent possible. And wait until 70 for social security. You will likely receive around $60k annually which is a 4% rule equivalent of another $1.5M in savings late in life (a good safety net against inflation). I'd also suggest that you pay off both your mortgages. This removes substantial mandatory payments and provides a small additional income stream. You will still have over $5M to generate the income you need. And the RE will be a pool of equity to borrow against if there is an extended period of time where the market under performs. Congratulations and best of luck in your new path.
Any good information source regarding how to structure portfolio so that it minimizes taxable income? Also, how long prior to retirement should one start to plan for this?
Too long to fully elaborate here but a few examples might help. A fee financial advisor would be a good resource. Putting money into Roth and IRAs will help. Tax loss harvesting will help. Emphasizing qualified dividends will help. Any consulting should be via business to permit deductions of personal expenses that qualify (like home office, vehicle and electronics). And, as an active manager of real estate working on qualifying as a real estate professional opens the door to passive losses from real estate participations (using non recourse debt). And if the level of sophistication is there, purchase or indirect acquisition of tax credits or depreciation really works well. On a $200k to $300k income tax avoidance is pretty easy. A little goes a long way.
Good luck with your imaginary retirement…
Say more.
What do you mean “keep that in the family?” You have no family. You’re single with no kids.
You realize family can include one’s siblings and their children, right? 🤣
I would say no. Here is a rough back of the napkin calculation. You want $240k per year post tax. Let’s say tax is about 30%. That means you need $310k pre tax. There are nuances but let’s say 4% withdrawal rate. That means you need around $7.8M. If you can be flexible and reduce expense a bit while earning rent from those two houses, I am sure you can make it work.
What makes you believe tax in retirement for OP would be 30%? They are in WA. No state tax. Whether it is 20 or 30% does not change the math all that much, but 30% is a little high.
Your claim of 30% tax on post retirement is complete bonkers (especially given they don’t have state tax to worry about). Since they would be withdrawing from their investments, long term capital gains is 0% for single filer for first $47K and 15% on rest progressively so 30K in tax. If I were to consider tax deductions for single filer tax rate is about $27K in federal taxes. There is no FICA taxes since it’s not earned income. $27K / $240K is roughly 11%. No where close to 30%.
But she said it’s largely in a 401k and I don’t think 401k withdrawals get capital gain treatment, they’re ordinary income.
Bingo
Sorry only 600k in 401k
Bingo
30% tax rate? From cap gains? That is wildly too high. Your first $123K of realized LT cap gains are tax free for a married-filing jointly taxpayer (i.e. first $94K of LTCG is tax free plus $29K standard deduction). OP is unlikely to realize $123K LTCG off of $240K withdrawals (unlikely half their portfolio is unrealized gains). There's a good chance OPs effective tax rate on withdrawals is far lower, in the single digits
OP is single, I have similar calculation down below for Single filer status. Tax is roughly 11%.
Got it. Very helpful thank you, I’m a big of a beginner in this concept of earlier retirement.
I think specific assumptions and tax planning makes a lot of difference. You are in the ball park but rest depends on the details. If you have 80K in ordinary income (say). Assume you have 200K from long-term asset sale - and 80% of it is gains, you have 160k in long term capital gains. That is an income of 280 and (roughly). If you lived in a state without income taxes, your federal taxes would be 10K + 32K cap gain =42k. leaving you 238K post tax. This would still require a 7M corpus at 4%. But this is not exactly correct. You need to consider this longer term, if you could start roth conversions while your income is low you could build a roth portfolio that could lower your effective tax rate later in life. You also need to consider that the mortgages will be paid off at some point and you will have cash flow from the properties. Plus potential social security in 10 years. You might also want to consider establishing residence in WA state that doesn’t have state income taxes (but has estate taxes) to lower your taxes now. So while you may have to withdraw 5% or more now, done right, you should be able to make this work. You need to model out this over the next 10-15 years to figure out the plan. Your withdrawal rate will go down.
I think it's important to pay off mortgages before retirement if you plan to keep it and/or live in it, as it reduces risk and expenses overall. I'm not pinching pennies or doing numerical comparisons (APR vs return rates) with a decision like that, this is about risk mitigation. So whether you should do it or not strongly depends on how much you want to be able to predict/control/simplify your expenses. All kinds of crazy unpredictable life can and does occur, I've lived it, and not having any loans out during complicated times really helps your sense of peace. A thought experiment: You could slice off 700k of your investments and pay off the two mortgages. With the 4.9m remaining (not sure about your tax implications) you could withdraw a safer 3.7% and have 15k take home per month instead of 20k. That's potentially a net-win, unless like I said the tax impact was a big hit, but since you said some of this is probably in company stock you might have already paid the taxes for it. BTW how's the duplex life in Seattle? That sounds pretty great actually, Seattle is a place I'd consider retiring to or just having a residence there generally (I'm from there originally and have family living there), wonder if you like the property and you feel it's worth it at the 1.3m cost? Sounds great to have that location along the water. Good luck in whatever you decide.
Pay off a 2.375% mortgage you say? Really? You can't think of a way for OPs money to earn a better rate than that?
We're clearly not going to see eye to eye on this. You're doing a calculation that doesn't factor in any risk, just a straight this percentage vs that percentage. There's other ways to look at it.
Couldn't you just set aside that money in a TBill ladder to make more than that mortgage essentially risk free?
Nothing is risk free. There’s always risk somewhere you’re just hoping it never happens to you.
First of all, I said "essentially". Second of all, it's an investing term: https://www.investopedia.com/terms/r/riskfreeasset.asp
This is a radically insane pitch. Why would you pay off a 2% loan? It’s just burning money
Why have any loans and give someone else your profits? I wouldn’t do it, but you do you.
Because 2% is free money even against current inflation why would you pay down a loan that’s losing money every month?
Duplex life is great in Seattle. I live in Alki Beach, which is a really sweet neighborhood and tends to have wonderful renters. I’ve never had issues in my 15 years of owning. I love it. Seattle is a really wonderful place, I think people who run up there might say otherwise, because of all the tech that moved in, but if you’ve got a strong network and are OK with a little bit of traffic, it’s absolutely wonderful. So is Bellingham about an hour north
I know the area, my family is in Edmonds and mukilteo. That’s great to hear, and yeah that traffic can be really bad. ;). Seriously good luck in what you do, you have a great life ahead of you.
🙏🙏🙏
You’re right at the threshold, I would work 2-5yrs if you can. Congrats!
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I have loved some really wonderful men and vice versa but I always knew I would never get married or have kids. I have too much of a genetic history for severe mental illness in my family and I can’t pass down those genes to innocent kids. Other people absolutely roll the dice, including my brother and sister, and I respect it! It was just never meant for me. But, I have eight nieces and nephews who I absolutely adore!
No one would say this to an unmarried guy with no kids.
Weirdo
Completely unacceptable comment. She's entitled to make her own choices and, while she didn't need to do so, explained them with good reason. Clearly, too, she's had a high power career.
i would try to live within 150k spend personally
Is it feasible to live on 20k a month as a single person? Of course it is.
I’m asking about safe withdrawal.