Author Topic: Thoughts and advice appreciated  (Read 1052 times)

BreakBad

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Thoughts and advice appreciated
« on: March 18, 2017, 01:32:06 PM »
Hello all - once upon a time I thought I'd just work forever, and wouldn't ever have to think about my spending or retirement planning as my income would take care of it all. I'm 4 years into a very stressful but lucrative job and am now planning on hanging it up within the next 12 months or so. I'll be 44 years old. I'm a Canadian living in California, and plan to move back to Canada once I quit. Have a wife (who is enjoying EER herself), no kids, but some expensive pets.

The basics - all amounts are what I expect to have by this fall:

Assets:
House equity: $1.25M USD
Vested company stock: $50K USD
401K: $45K USD
Cash: $50K USD; $80K CAD
RRSP: $340K CAD
Total: Somewhere in the range of $2.1-$2.25M CAD. Also have 2 paid-for cars (one aging, one fairly new but both in good shape).

Liabilities: None. As a short-term US resident, I honestly haven't known what to do with my money other than pump it into my mortgage on my very expensive (but modest by local standards) house. I've netted the current remaining mortgage (~$300K) against my stock assets above as I plan to sell what I need to be mortgage free this year.

Plan is to sell the house and buy in Canada for somewhere in the $450K-550K CAD range. That should leave us with something in the range of $1.6-1.7M CAD. I had a goal of $2M but don't think I can last that long in this job, and don't really want to start something new.

At a 3.5% WR rate, this in theory should give us ~$56K-59K/year.

Current/expected annual expenses:
Groceries: $7200
Dining Out: $6000
Vacations: $10000
Internet/Cable: $1440
Utilities: $2400
Home/Car Insurance: $3000
Pets: $11000 (still a little cheaper than college for kids!)
Total: $41K... but probably more like $45K+. The reality is that we've spent $60K the last two years before taxes per Mint, but there is a lot of discretionary stuff in there.

Taxes: I'm definitely a little out of my comfort zone on taxes, and living in the US has made things more vague. But my expectation in Canada is that we would eventually pay about $11K on ~$60K of "income". This calc is rough and would appreciate input... of the $60K, assuming 80% comes from "taxable" accounts at 16% tax, and 20% comes from RRSPs at 29% tax. I honestly haven't done the math on a real-per-year basis (ie, won't touch the RRSPs for a long time), but figure this is worst case. Or am I completely off base? Would be living in either BC or Ontario.

Add to this ~$6K of property taxes (?).

Ok some commentary: I am by no means "mustachian" as you can tell, and make no claims to be. But I've managed to luck myself into a very lucrative career and had some additional luck with start-ups etc early on in my career. I would describe myself as "cheap" but I am not frugal when it comes to eating in restaurants, buying wine, going on vacation, etc. But I don't really like buying *anything*. I'm a "practicing but not accomplished" DIY'er.

My chosen handle of BreakBad is inspired by the notion that I've been channeling Walter White recently - trying to make as much money in a short period of time before something kills me. Not a good way to live. The stress and the hours are not good, but I have stock that vests every six months that is worth some "fat stacks".

Ok: Anything huge that I'm missing? I'm deliberately not including any government money (which I'm sure will be a pain as I need to reconcile Canadian contributions with US contributions), and my wife has a small pension that might be worth $1K/month. There will also be expense/inconvenience with moving the 401K money to Canada, but in theory it should balance out ok.

Some other assumptions: our spending in USD is roughly equal to spending in CAD - ie, groceries cost about the same regardless of currency, etc. I think this is generally true. Also not factoring in any optional Canadian healthcare, but would need some sort of plan I suspect.

BB.
« Last Edit: March 18, 2017, 01:36:16 PM by BreakBad »

Cannot Wait!

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Re: Thoughts and advice appreciated
« Reply #1 on: March 18, 2017, 03:04:37 PM »
Anything huge that I'm missing?

What do you plan to DO in retirement?   Sounds like you'll have a lot of hours to fill?
You list your expected expenses to be the same as your current expenses.  You might find it easy to cut expenses like eating out, a second car, vacations, etc because you don't need them when you have more time/less stress.  Or you might find that you spend more money because you have more time...
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BreakBad

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Re: Thoughts and advice appreciaciated
« Reply #2 on: March 18, 2017, 03:32:09 PM »
Hi CW. I've got a long list of hobbies - music, reading, projects around the house etc. depending on whether we end up near an ocean we would also fill the time with kayaking and whale watching. If we end up inland I'll have to take up curling again. I'm not too concerned about filling the time. If get too bored or restless I'm not adverse to working part time in a low key retail setting or volunteering. There is always the hiking and camping we've neglected for the past 10 years.

Hargrove

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Re: Thoughts and advice appreciated
« Reply #3 on: March 18, 2017, 04:44:53 PM »
More on pets than any other expense, and over a quarter of the budget. Wow. I hope you really, really, really, really...

/makesandwich
/birdwatch
/paintthebarn
/nap
/backtocomputer

... really enjoy your pets.

Healthcare is covered in Canada, so it sounds like you did pretty well for yourself on target/total saved. I'm afraid your Mustache rating is "Baby's Bottom," however.

You may want to check your expense totals for things like gas, home upkeep, new stuff you may buy...
« Last Edit: March 18, 2017, 04:49:00 PM by Hargrove »

Laura33

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Re: Thoughts and advice appreciated
« Reply #4 on: March 18, 2017, 06:37:07 PM »
Wait -- so you plan to sell $300k in investments to pay off the home you live in, and then just a few months later sell the home to move back to Canada?  How does this make sense?

I can see paying off the mortgage if you are going to live there forever and want to reduce your post-retirement monthly income needs.  But (a) you are not retired yet -- you are continuing to earn a big fat paycheck for as long as you stay in that home, and (b) you'll be gone in less than a year anyway. So at most you are freeing up extra cash flow (that you don't need) for a few months.

OTOH, when you sell $300K in stocks, you will very likely owe capital gains (unless you are selling losers, which is unlikely in the current market).  And worse, CG tax rates are correlated with income, ranging from 0% to 20%.  See http://www.schwab.com/public/schwab/nn/articles/Taxes-Whats-New.    So selling out this year, while you are still making the big bucks, means you are handing over 15-20% of your gains to Uncle Sam.  OTOH, if you wait until the next tax year after you quit to cash out (e.g., quit at the end of 2017, sell in early 2018), you might be able to keep 100% of those gains to yourself as long as your total income is low enough.

Unless you are not paying US income taxes and Canadian taxes are different??
Laugh while you can, monkey-boy

BreakBad

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Re: Thoughts and advice appreciated
« Reply #5 on: March 19, 2017, 09:09:31 AM »
Re pets. Yep. Was an expensive year with lots of illnesses etc. don't expect that to repeat but wanted to be conservative.

Re Laura - whether I sell the stock for the mortgage or pay off the mortgage when I sell the house - these details I haven't fully worked through with the tax implications. I'm paying US tax on everything down here for clarity.

I'm planning on selling all US assets as soon as possible so I dont have to keep filing tax in the US. But will likely hold onto some stock for a year until I get past short term capital gains window.

Two questions: excuse my ignorance, but does cap gains tax rate change with income? Will need to find the data for that to include it. Correction: you already said they were, I will look up the details.

Secondly, outside of likely having to file taxes in the US, are there other implications for a Canadian to continue to hold US assets once I'm no longer here and no longer have a visa?

Thanks all for the thoughts and input. Really appreciate it. There aren't very many people/places we can have these types of conversations. Totally understand that I'm going to be viewed as beautiful no outside of my element, but I aspire to be a better human being.