Author Topic: Returning to the nomad life - check my numbers please?  (Read 2424 times)

Travel and Cents

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Returning to the nomad life - check my numbers please?
« on: October 03, 2019, 03:03:59 PM »
Long time lurker!

My husband (38) and I (45) plan on hitting the road October 2020 to slow travel the world.  I'd love some insights.

Background -
Traveled for 2 years for a total of 25K per year.  This included both hcol & lcol destinations with an average of $65 per day for the both of us.  We never felt deprived and it was the best time of our lives.

We returned to the US to shore up our finances and currently live on one income while saving the other.  I'm starting an online hustle that should net us about $1500 per month and DH will start something as well.  We are both in the service industry so it's possible we may find some short term work on our travels but not banking on it.

So here are our numbers (they are based on our saving rate - so estimated Oct 2020 numbers)

Savings in cash : 75K
401 tIRA  - 320K
Roth IRA - 5K
Simple IRA - 8K
PayPal stock - 2K
After Tax brokerage acct (travel fund) 140K

total : 550K

No debt

The plan is to live in LCOL destinations where we know we can live a comfortable life at a 1K per month basis for the first 3-5 years.  Basically food, housing and utilities.  We'll contribute anything extra we make over the estimated 1.5K earnings to our 401 tIRA and use the cash in savings as an oh shit fund.

I know it's a lot of cash to have on hand but I want to know that if we want to come back home this will give us a soft landing.  Also I have bag lady worries and this makes me feel better psychologically.

I think my main worry is the 140K in the brokerage account.  The hope is to let it grow in the next 6 years then draw it down for the following 10 years then tap into the 401K.  After the 5 years is done what should I do with the account?  I don't want to incur a massive tax burden by cashing it out.  Letting it sit, there's the worry of a market drop & we'll be out of luck.

What do you all think?

thanks!




« Last Edit: October 03, 2019, 03:52:04 PM by Travel and Cents »

dandarc

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Re: Returning to the nomad life - check my numbers please?
« Reply #1 on: October 03, 2019, 05:17:14 PM »
If you can keep it to $25K per year, you're probably OK to do this indefinitely. If you really do wind up with 1.5K of stable income and only 1K of expenses each month, then obviously you're solvent until that changes.

2Birds1Stone

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Re: Returning to the nomad life - check my numbers please?
« Reply #2 on: October 03, 2019, 08:06:05 PM »
Looks good to me, I just quit my job this week and we are embarking on a year long trip with similar budget in mind starting March of next spring.

$650k combined assets, and no side hustle income to speak of. Though we are younger (33/29 when we leave) so going back to work for a few years is more likely than not in our future.

Travel and Cents

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Re: Returning to the nomad life - check my numbers please?
« Reply #3 on: October 04, 2019, 10:14:21 AM »
Thanks 2Birds!

I’m not too nervous about the money as we’ve done this before and there are a bunch of ways to keep costs down.  My favorites are house sitting and Workaway - we have a standing invitation to return to Italy.  I worry about leaving it in its current allocations.  I’m sure we’ll figure it out before we go.

Where are you headed in March?  You must be so excited!  How will you execute your drawdown?  Pulling out a year at a time, quarterly or monthly?

2Birds1Stone

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Re: Returning to the nomad life - check my numbers please?
« Reply #4 on: October 05, 2019, 01:10:39 PM »
Super excited! We are flying into Lisbon or Porto, and spending ~90 days working our way across Europe to the Ukraine. From there we will cross into Poland where we plan on spending an additional 90 days. Back to the USA for 1 month in the fall for a wedding and some time with friends/family, then off to SE Asia for an additional 6 months (2 months in Thailand, 1 month Bali, and the remaining three traveling around Malaysia, Taiwan, Laos, Cambodia, and Vietnam).

We have the funds sitting in a high interest account already earning ~2% right now. Planning on ~$30k for the whole trip for two people.

Travel and Cents

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Re: Returning to the nomad life - check my numbers please?
« Reply #5 on: October 05, 2019, 08:02:47 PM »
You’re going to love it!!!

A few random tips.  While trains are great buses are cheaper.  Always have some loose change - they always charge to use the bathrooms at rest stops.
In Cambodia if you go to Ankor Wat ask your tuk tuk driver to do his usual route backwards.  This way you’ll have at least a few temples to yourselves especially at sunrise.
In Vietnam crossing the street takes nerves of steel.  Just walk with purpose and DO NOT HESITATE.  Traffic will just flow around you.
Know that you can negotiate rates with your Airbnb host if you’d like to stay longer.  Cash is king and they usually discount at least 25%
Oh and be sure when booking to use military time.  We missed at least two buses because we booked them for 3 am 🤦🏻‍♀️
If you island hop in Thailand- skip the big islands.  Visit at least one island with no dock - it keeps the big ferries away.  Our favorite was Koh Kradan.  Koh Mot was awesome as well.  And eat fried chicken off a cart in Bangkok...so, so good!
If you can visit Albania, do it.  It was one of the highlights of our trip- liked it so much we stayed 2 months!

Have fun!!

Travel and Cents

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Re: Returning to the nomad life - check my numbers please?
« Reply #6 on: October 05, 2019, 08:24:02 PM »
Just remembered a few more practical things!

Use a paper clip on your passport to stop custom agents from stamping Willy nilly.  This way they open to the page you want and you won’t have ten pages with one stamp on each.  Space is precious!

Get a Schwab account and have them issue a bank card for each of you.  Do the same with a secondary account.  You will not regret this once an ATM in Vietnam eats your card.  Move money into the Schwab account once a month so you don’t have a ton of money if the card gets stolen or phished. 

Get all the usual shots but skip malaria.  The pills are so much cheaper in the country you’ll need them in.  Oh and bring a natural bug repellent.  Amazon sells an essential oil that great and can be diluted into a small spray bottle.  Otherwise you’ll be mainlining Deet and other suspect chemicals in foreign made repellents.

And when you feel a little homesick they sell Oreos ABSOLUTELY EVERYWHERE!!

BicycleB

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Re: Returning to the nomad life - check my numbers please?
« Reply #7 on: October 07, 2019, 01:28:01 PM »

The plan is to live in LCOL destinations where we know we can live a comfortable life at a 1K per month basis for the first 3-5 years.  Basically food, housing and utilities.  We'll contribute anything extra we make over the estimated 1.5K earnings to our 401 tIRA and use the cash in savings as an oh shit fund.

I know it's a lot of cash to have on hand but I want to know that if we want to come back home this will give us a soft landing.  Also I have bag lady worries and this makes me feel better psychologically.

I think my main worry is the 140K in the brokerage account.  The hope is to let it grow in the next 6 years then draw it down for the following 10 years then tap into the 401K.  After the 5 years is done what should I do with the account?  I don't want to incur a massive tax burden by cashing it out.  Letting it sit, there's the worry of a market drop & we'll be out of luck.

What do you all think?

thanks!

I think you're going to have a great time!

Since portofolio allocation is your big question, some details (mostly from reading...FIREd, not FT traveler):

1) Like 2Birds implied, keep most of your cash somewhere where it earns interest. Currently, there are accounts that give 2% or so and allow instant no-penalty withdrawal, hence most users would classify them as cash. At least do those.

2) I don't have any problem whatever having that "high" cash amount, as long as at least 50% to 70% of overall portfolio is stock. Meaning, it's your portfolio, but I agree you'll get enough appreciation from the "low" 50% to 70% stock allocation. I personally like 70% stock as a default "forever" allocation. You don't specify what type of assets are in your non-cash accounts (or if you did I missed it), but you should.

3) There is a real question re cash vs bonds though. Cash can drop to zero percent interest at the drop of a hat. Bonds maintain their interest throughout the term of the bond. In fact, if general interest rates drop during your travels, it could easily happen that existing bonds go up in value, yielding positive income if you sell them, at the exact moment that cash loses its earning capacity (or, considering inflation, suddenly becomes a money loser in real terms). For that reason, my suggestion would be at least 2 units of bonds per 1 unit of "cash".

4) An example of 3, taking a very low-short-term-risk approach, would be a total portfolio allocation of 55% stock, 30% intermediate term bonds, 15% cash. The $75,000 cash is obviously a little less than 15%, so I'm not opposing cash, just trying to ensure that if you have more than 3% to 5% in this vulnerable category, you have some countervailing bonds to balance it out.

5) Me personally, in your shoes I'd go with 70% stock, 20% bonds and 10% cash. (Actually I'd go 70-25-5, but that's me. You want cash; if 70-20-10 is comfortable, go with that). Remember, you don't have to buy bonds directly. Vanguard has perfectly fine bond funds. I hear about VBTLX a lot, but there are others.

6) Re capital gains, my suggestion is to calibrate your taxes year by year. I don't think that having 140k in brokerage accounts is a problem. I think it's great. As economic circumstances change, having substantial money in diverse investment types and accounts allows you to use different fund sources at will to maximize your tax situation as well as efficiently balancing your portfolio allocation. I think you're going to be very much in the driver's seat here.

7) Along the lines of 6, consider reading the "Never Pay Taxes Again" series on Go Curry Cracker, and also his article on the Foreign Earned Income Exclusion. FEIE is perfect for your earning-while-traveling situation, I think.

https://www.gocurrycracker.com/never-pay-taxes-again/
https://www.gocurrycracker.com/never-pay-taxes-by-moving-abroad/
https://www.gocurrycracker.com/to-feie-or-not-to-feie/
https://www.gocurrycracker.com/passing-physical-presence-test/
https://www.gocurrycracker.com/feie-and-capital-gain-harvesting/
https://www.gocurrycracker.com/6-years-of-nearly-income-tax-free-living/
https://www.gocurrycracker.com/never-pay-taxes-again-overseas-corp/
« Last Edit: October 07, 2019, 01:30:54 PM by BicycleB »

Travel and Cents

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Re: Returning to the nomad life - check my numbers please?
« Reply #8 on: October 08, 2019, 08:07:10 AM »
@BicycleB Thanks so much to the input! 

1. The cash is currently in an online account earning ~2%
2. The 401k is 80/20 both Roth and Simple are in life funds 2040/2050 respectively and the brokerage is 100% stock split 80/20 USA /International.  In the next near I'll be adding bonds so the split will be 70/15/15 - keeping all other buckets the same
5. If the market drops I'll use some of the cash to buy more stocks/bonds recalibrating the percentages accordingly.
6. Thank goodness!  I've spent the last three years thinking, implementing and rethinking the plan and the validation is wonderful!  Most of the people in my life think I'm nuts.  Most believe I should add the yoke of a mortgage because it's a safe and reliable investment.  Despite explaining how the math doesn't work for us 100 different ways...sigh.
7. I've been reading Jeremy's blog since 2014.  He's one of the reasons we had the cojones to travel the first time around!!  It took the actual traveling to convince DH to FI.  He was the grasshopper in our story and now he's fully in.

Since the online work will be 1099 I plan on sketching out my plans with my accountant before we leave.  He was a great help last time but I had smaller ideas/dreams.  This time I'd like to add a Roth ladder conversion to the 401k and keep everything low enough that I never pay taxes.  I plan on enrolling in H&R Block's Income Tax course so I can temp during the season next year.  It's free in my state so it's a win even if I'm only doing my own taxes!

Again, I'd like to thank you for your insights.  MMM has been such a treasure trove of information and I hope it keeps inspiring people to push for freedom!