Author Topic: need advice: dropping out of the rat race  (Read 1699 times)

FIRE mom

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need advice: dropping out of the rat race
« on: January 08, 2019, 02:43:49 PM »
currently living in affluent area outside of manhattan, 3 kids heading to college in the next 5-8 years.
if we sell primary and secondary residence, would have $2 mil to invest but would be short on college savings. (only $50K per kid in 529s)
current family health insurance is $2300 month. can my husband and i retire/support a family of 5? as that feasible/reasonable? where should we live. (we're outdoorsy and too young (mid 40s) for florida LOL)

TexasRunner

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Re: need advice: dropping out of the rat race
« Reply #1 on: January 08, 2019, 03:44:03 PM »
currently living in affluent area outside of manhattan, 3 kids heading to college in the next 5-8 years.
if we sell primary and secondary residence, would have $2 mil to invest but would be short on college savings. (only $50K per kid in 529s)
current family health insurance is $2300 month. can my husband and i retire/support a family of 5? as that feasible/reasonable? where should we live. (we're outdoorsy and too young (mid 40s) for florida LOL)

My two cents... 

1) Support each kid up to 50k.  Encourage better financial decisions than 4 years at an out of state school with no scholarships...  (IE In-state, or community college first, and make them work their way through school).
2) Sell the secondary residence ASAP.  Invest in market.
3) Once the dust settles on secondary, and you see what amounts you're working with, wait for last kids to leave and sell primary.  Decide FIRE numbers and *possibly* help kids even more.
4) Move to Colorado.  Rock climbing and skiing is now your life.  lol

Really though, you would need to do a full case study to see what your options are and what immediate things need to be corrected.  The link to that is here:  https://forum.mrmoneymustache.com/case-studies/

If you are wanting out of the rat race sooner than the 8-year timeline on kids, then sell it all and move.  The only thing holding you back at this point from a decent LCOL or MCOL FIRE situation is not wanting to pull the trigger.  Also, selling the house in a normal market *right away* may wind up being much better than waiting another six to eight years when such a sale is unknown...

teltic

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Re: need advice: dropping out of the rat race
« Reply #2 on: January 08, 2019, 03:52:09 PM »
I live in Utah.  Rocking climbing and skiing is over here too (Colorado does have full strength beer... Damn you Utah Goverment!)

TexasRunner can correct me if I'm wrong, but I believe UT is cheaper COL than CO (not by much... I'd guess 10-15%).


With $2M, using the 4% rule, you'd have $80k a year to spend. Avg. houses in UT are going for ~$300k...

Id either live in Sugarhouse area, or Park City.  PC is a fancy place to live.  Ski Resorts in your backyard... Although I'm sure the home prices are double in this city..)


TexasRunner

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Re: need advice: dropping out of the rat race
« Reply #3 on: January 08, 2019, 03:59:34 PM »
I live in Utah.  Rocking climbing and skiing is over here too (Colorado does have full strength beer... Damn you Utah Goverment!)
TexasRunner can correct me if I'm wrong, but I believe UT is cheaper COL than CO (not by much... I'd guess 10-15%).
With $2M, using the 4% rule, you'd have $80k a year to spend. Avg. houses in UT are going for ~$300k...
Id either live in Sugarhouse area, or Park City.  PC is a fancy place to live.  Ski Resorts in your backyard... Although I'm sure the home prices are double in this city..)

Not a bad idea either...  Alta is my absolute favorite ski destination.  Skiing whole season there would be great.  And then road trips on the cheap to go mountain biking in Montana...

OP, why are you working again?... lol

Case

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Re: need advice: dropping out of the rat race
« Reply #4 on: January 09, 2019, 09:59:02 AM »
currently living in affluent area outside of manhattan, 3 kids heading to college in the next 5-8 years.
if we sell primary and secondary residence, would have $2 mil to invest but would be short on college savings. (only $50K per kid in 529s)
current family health insurance is $2300 month. can my husband and i retire/support a family of 5? as that feasible/reasonable? where should we live. (we're outdoorsy and too young (mid 40s) for florida LOL)

The answer is definitely 'no'; it sounds from your brief post that you haven't done your research yet.

Get deep into the math and determine way more details.  You need to know your project income based on passive income (investments) vs your cost of living.  WIth this data, you can approximate how quickly your nest egg will diminish (e.g. how long it will last).

BicycleB

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Re: need advice: dropping out of the rat race
« Reply #5 on: January 09, 2019, 11:53:23 AM »
Same comment, different words. You can drop out of the rat race fine - just quit your jobs. Boom, you're out.

But whether you can live happily forever on the proceeds from selling your houses depends entirely on how you live afterwards - in other words, how much you spend and whether you learn to live happily in a new location. This is unknown because it depends on your future actions. Other people could do so easily, but other people are used to living on amount such as $60k/year for a family (1.5M x 4%... I left a bit of wiggle room for college costs and transition costs). Our forum is full of people who spent more than this, learned to spend less, and liked it, but got there by specific measurable actions. Whether you WILL take such actions yourself is a dice roll. The fact you have two separate homes doesn't make it obvious that you have active thrifty genes.

Have you done such things in the past? What are your expenses? Is tracking expenses something new for you, or do you know your current expenses in detail? If you know details, you can research costs in other areas and somewhat accurately project cost of living in Utah or Colorado or wherever your youthful dream spot is. If you don't, you probably need to exercise your growth skills in the direction of cost tracking, personal budgeting, and generally sorting out priorities. This includes getting greater insight about what makes you happy.

It sounds like you have a strong base in terms of income, and the kind of asset base that gives you options. What happens next is up to you. Self exploration and honest assessments are in order. It's time to take charge of your life and make it reflect your most important values.

One thing you could do for a start is read examples in the "Case Studies" section. That would give you a sense of how people track costs and what decisions made a financial difference. Look for case studies where people started in high cost areas, especially. See if their initial costs are similar to yours, or whether even getting to other Mustachians' starting point is a move that would take effort on your part. Then make the needed effort!
« Last Edit: January 09, 2019, 12:05:57 PM by BicycleB »

partdopy

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Re: need advice: dropping out of the rat race
« Reply #6 on: January 09, 2019, 12:08:07 PM »
currently living in affluent area outside of manhattan, 3 kids heading to college in the next 5-8 years.
if we sell primary and secondary residence, would have $2 mil to invest but would be short on college savings. (only $50K per kid in 529s)
current family health insurance is $2300 month. can my husband and i retire/support a family of 5? as that feasible/reasonable? where should we live. (we're outdoorsy and too young (mid 40s) for florida LOL)

I'd reconsider Florida, and take a look at Gainesville, due in part to the University of Florida in the city.  While it wasn't traditionally a top academic institution, it is actually rated 8th best public university in the US (tied with Georgia Tech), and has a goal of reaching the top 5.

Tuition and fees for in state students are $6,381.  So you could easily send your kids to a top 10 public university for what you currently have in your 529s.

In addition, Gainesville is very liberal for Florida and has very cheap COL.

shingy

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Re: need advice: dropping out of the rat race
« Reply #7 on: January 10, 2019, 07:55:34 AM »
Having gone to the University of Florida myself, this is spot on. Gainesville is a great city - the COL is low and it's becoming less and less dependent on the University. Though, if you're adverse to heat, this is not the place for you!

historienne

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Re: need advice: dropping out of the rat race
« Reply #8 on: January 10, 2019, 08:15:32 AM »
I agree with the basic principle of moving to a state that has a good state university system with reasonable tuition an admissions rate that makes it plausible that your kids will be admitted there.

NC or PA might fit the bill if you don't want to go to the west coast. 

FIRE mom

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Re: need advice: dropping out of the rat race
« Reply #9 on: January 10, 2019, 12:22:48 PM »
All good advice and suggestions! I definitely need to fill in the case study spreadsheet. It would be a challenge to retire right now, for our family to live off 80K when that includes paying mortgage/rent and health insurance. But we are not far off if we make some immediate and drastic changes. (Like keep working, sell both houses and invest the proceeds, rent a smaller house, save like crazy...explore UT and CO in the meantime...love the idea of road trips to Idaho and Montana.) I am inspired by this website/forum. (If I'd discovered all this 5 years ago we WOULD be FIRE by now -- so -- kind of disgusted with myself.)

BicycleB

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Re: need advice: dropping out of the rat race
« Reply #10 on: January 10, 2019, 03:13:16 PM »
Get after it and keep going. You will find a world of multiplying benefits when you start reducing your expenses, because some of the feedback loops work in your favor.

Most people with $1M to $2M equity don't realize how close they could be to a partial federal subsidy on their healthcare costs, for example. Perhaps your healthcare through work is considered affordable, for example, disqualifying you from ACA coverage. But if your total expenses drop to 80k including 2300/mo health care premiums, your non-premium expenses are less than 53k.

Well, all the income you pour into 401k (or solo 401k) and similar plans is deducted when determining income for this purpose. So if your income is 150k but you can put 37k (18,500 apiece) into 401k plans and 12k into IRA plans, your income drops to 101k. Incredibly, that's low enough to qualify for premium subsidy under the Affordable Care Act. 

If you have other plans available, bigger amounts can be deducted. If one of you has a solo 401k on 100k of income, for example, your deductible amount jumps another 20k. If one of you is a teacher or government employee with access to 457 plan, another 18,500 can be deducted. Both of those items together (one self employed spouse, one public employee spouse) could get a 150k income down to under 62k. At which point, most of your health care premiums might be subsidized while more than 85,000 per year pours tax free into retirement accounts.

Retiring has compensating advantages. For example, if you sell property and end up with 1.5M in stock investments outside of 401k accounts, the 1.5M would likely generate its income in the form of qualified dividends and capital gains. The income might be just that 60,000 per year...but because capital gains and qualified dividends have a tax rate of zero under the amount of $75,000 for married couples filing jointly, your retired selves might pay ZERO INCOME TAX! Yet your income would be in the right range - low enough, not too low - to qualify for substantial health care subsidy. The cutoff isn't poverty level, it's 4x the poverty level, so in a family of 5, subsidy begins at income of $117,000 per year:

https://www.nerdwallet.com/blog/health/finding-health-insurance/maximum-income-obamcare-premium-assistance/
https://help.ihealthagents.com/hc/en-us/articles/223450248-How-Do-Pre-Tax-and-After-Tax-Contributions-Affect-My-Subsidy-
https://www.verywellhealth.com/federal-poverty-level-health-insurance-1738406
https://familiesusa.org/product/federal-poverty-guidelines

Poundwise

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Re: need advice: dropping out of the rat race
« Reply #11 on: January 11, 2019, 03:38:58 PM »
Posting to follow, I'm also tired of the cost and competition of the NYC metro area. You may be one of my neighbors! 

flyingaway

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Re: need advice: dropping out of the rat race
« Reply #12 on: January 11, 2019, 04:04:04 PM »
currently living in affluent area outside of manhattan, 3 kids heading to college in the next 5-8 years.
if we sell primary and secondary residence, would have $2 mil to invest but would be short on college savings. (only $50K per kid in 529s)
current family health insurance is $2300 month. can my husband and i retire/support a family of 5? as that feasible/reasonable? where should we live. (we're outdoorsy and too young (mid 40s) for florida LOL)

If you have not saved any money yet, you may burn your $2M very soon.

Acastus

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Re: need advice: dropping out of the rat race
« Reply #13 on: January 15, 2019, 12:12:55 PM »
One big question is, can you easily adjust to a lower COL, lower cultural options lifestyle? I moved fro ex-urban Boston area to proper upstate NY - the I90 corridor. Rochester was pretty good. I went to school there, and I had friends there, so I was more tuned in to what there is to do. It also has a lot of activities for a city its size. Syracuse has been a real disappointment. If you like sports, all of them are here. If you want museums, theater, and nightlife, well it is pretty grim. Even the geocaching is noticeably sub par. Can you say pill bottles?

Now that I have FIRE'd and my son is headed to college in the fall, it is time to look for a hipper scene. Ithaca and Rochester areas appeal, and the wilds of New England would be fun if we can find housing for the right price. That is my back burner FIRE project for the next couple years. Vacation for a month in potential locations and see if it is all we think it is.

Poundwise

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Re: need advice: dropping out of the rat race
« Reply #14 on: January 15, 2019, 09:10:48 PM »
Orange County is beautiful... I'd retire to Warwick in a heartbeat!  It's not cheap but it is notably less expensive than areas within an hour of NYC. 

Also areas north of Albany, south of Lake Placid, have great winter sports and cheap real estate for sure. I've always wanted to buy a glove millionaire's  decrepit mansion there for $50K and fix it up for a ski house.   

Hula Hoop

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Re: need advice: dropping out of the rat race
« Reply #15 on: January 16, 2019, 02:29:51 AM »
Various SUNY campuses are good and there is also CUNY if you stay in NYC.  Isn't tuition at SUNY meant to be free for families with an income under $110,000 with the new Excelsior Scholarship?  Not sure if you would qualify. But staying in New York State could be fine if your kids go to SUNY. https://www.suny.edu/suny-news/press-releases/10-2017/10-1-17/tuition-free-suny-cuny-numbers.html