Brand new Mustachian in need of advice… (Long)

[InNeedOfAdvice]

Hello everyone. It is nice to be here, I've been reading quite a bit and I like what I see very much. As you can tell, I am new here, but I am at a crossroads in my life and wanted to ask advice from the experts here.

Vitals:

I am 43 years old, married, no children but a dog that is effectively a child. :)
Live in southern Florida at the moment, but have only been here a year, having come from New York City before that where we lived for 20 years.
I work from home as a software developer for the company that I was working for in NY. I feel very fortunate that I was able to keep my position when we moved down here, but things have not been going all that smoothly recently.
I currently earn ~$105k in salary. We own the home outright, no mortgage, but property taxes of ~$7k/yr. We own our only car outright as well. We have zero debt currently.
We have approximately $525k in various 401(k)/IRA accounts. We have ~$50k in a brokerage account that we use to play around with stocks. Savings accounts are around $15k.
Now, the big one… We have $720k in a money market account earning almost nothing. This is primarily the proceeds from the sale of our home in New York City. We've been nervous about investing it (silly, I know) so it's just been sitting in the account for almost a year ( I know, I know, I've left quite a bit on the table).

The Setup:

When we lived in NYC, my wife and I both worked and our combined income was around $185k/yr. All of our living expenses were high, but manageable, but the stress of the daily grind in NYC really took its toll on us over the 20 years we were there. We made a decision to move to southern Florida to be close to her parents (great folks) so she could spend time with them and we could ostensibly have a simpler and less stressful life. She resigned her job of 15+ years and I was able to continue working for my company (remotely) from home in Florida.

We do like where we are, and we do feel that the overall lifestyle is less stressful, which is welcome. However, things at my company have not been going so well recently, and if things go badly, we will lose our sole source of income right now. There is really no way for me to do what I do in this location, so I would either have to look for remote work only which can be tricky, or we would have to move to somewhere that sort of meets the criteria of being both a good place to earn a living and a place of peace and stress-free living. I understand that places that fit both of those are very rare indeed.

However recently, we've been trying to figure out if there is in fact a third option, that being getting us on a path to FI/RE. This is where you kind folks come in.  :)

The Question:

Given what I've told you (and if you need to know more, please ask), what do you feel is the best path towards getting us closer to FI? Any and all advice is welcomed. We both understand that we are quite fortunate and privileged to be in this position, and we are thankful for all that we have. At this point, we are simply looking for a quiet, simple life where we can be together and enjoy our time.

I thank all of you in advance for everything.

Best.

[lauren_knows]

Need more information to provide much advice at all.

You earn $105k/yr.  How much do you save each year (in various accounts and investment vehicles) and what is some of your detailed spending?

[hybrid]

With that much money available to you, losing your job tomorrow will surely suck, but so what? You have ample reserves to find something different on your own terms.

Have you thought about a career change or working for a firm for considerably less but a better lifestyle? With so much money available to invest you simply don't need an income of $105K to sustain yourself, you would like an income of 105K. So ask yourself what a local job paying 60 would do for you. There are IT jobs everywhere. Can your wife go back to work in some capacity?

[former player]

$785,000 cash invested in stocks, safe withdrawal rate of 4% = income of $31,400.  $525,000 in 401(k) and IRA, safe withdrawal rate of 4% = income of 21,000.  Downsizing from house which costs $7,000 a year just in taxes =?

Depending on what you want to keep on spending, you could be there already.

[Mrs. PoP]

Some thoughts - your property taxes seem a bit high, though that's tough to say without knowing what your house is valued at or what county you are in.  Ours are a good bit lower, but then again we homesteaded back in 2009.  Have you applied for your FL homestead exemption yet?  That could be a quick win, a little longer if you want to fight your tax assessment with your VAB if the assessed value is too high.  We also did that and it was worth it in the long run to get the lowered assessment for our baseline on our homestead exemption.

"There is really no way for me to do what I do in this location" - without knowing if you are in some super-specialized software space/industry, there are actually tech opportunities in a variety of locations around S FL.  Again, not sure what county you are in, but there are job opportunities around here besides working in the tourism industry or being a bagger at Publix. 

We're targeting around $1.2-1.5mm in investable assets for our FIRE in our current S FL locale, so depending on what your spending is, you may be closer than you think.  What's your spending like? 

[InNeedOfAdvice]

Need more information to provide much advice at all.

You earn $105k/yr.  How much do you save each year (in various accounts and investment vehicles) and what is some of your detailed spending?

Thanks.

I would say that over the last year, we're not saving as much as we'd like for sure. There were some home improvements that were necessary, but we've been able to put aside around 15-20% over the last year. Our spending is pretty frugal, and were something to happen to my position we could certainly cut down on unnecessary items.

[InNeedOfAdvice]

With that much money available to you, losing your job tomorrow will surely suck, but so what? You have ample reserves to find something different on your own terms.

Have you thought about a career change or working for a firm for considerably less but a better lifestyle? With so much money available to invest you simply don't need an income of $105K to sustain yourself, you would like an income of 105K. So ask yourself what a local job paying 60 would do for you. There are IT jobs everywhere. Can your wife go back to work in some capacity?

This is a very good point, thank you for bringing it up. Yes, I've considered a career change many times, but to be perfectly honest with you, I don't think anyone would pay me much for anything else. :)  I am pretty good at what I do, and not very employable for much else I don't believe. In terms of location, it's the one thing that's bad for me, there is literally nothing IT related closer than 60 miles away. That would require a significant commute which would add expenses for gas, maintenance, etc., as well as add to the overall stress level rather than reduce it. Wife is in the same boat unfortunately. We moved here to be close to her parents, so as you can imagine, we are effectively in a retirement community/area where there simply are not many businesses that are looking for our skill sets.

Thank you.

[InNeedOfAdvice]

$785,000 cash invested in stocks, safe withdrawal rate of 4% = income of $31,400.  $525,000 in 401(k) and IRA, safe withdrawal rate of 4% = income of 21,000.  Downsizing from house which costs $7,000 a year just in taxes =?

Depending on what you want to keep on spending, you could be there already.

Thank you for this, it's this kind of thing that I am really interested in learning more about. We could downsize certainly, the house we're in now has quite a bit of property, which is nice for us and our dog, but certainly not something that we *need* to have.

In your opinion, what would be the best investment vehicle for us? Vanguard funds? Any specific ones you can suggest?

Thanks again

[InNeedOfAdvice]

Some thoughts - your property taxes seem a bit high, though that's tough to say without knowing what your house is valued at or what county you are in.  Ours are a good bit lower, but then again we homesteaded back in 2009.  Have you applied for your FL homestead exemption yet?  That could be a quick win, a little longer if you want to fight your tax assessment with your VAB if the assessed value is too high.  We also did that and it was worth it in the long run to get the lowered assessment for our baseline on our homestead exemption.

"There is really no way for me to do what I do in this location" - without knowing if you are in some super-specialized software space/industry, there are actually tech opportunities in a variety of locations around S FL.  Again, not sure what county you are in, but there are job opportunities around here besides working in the tourism industry or being a bagger at Publix. 

We're targeting around $1.2-1.5mm in investable assets for our FIRE in our current S FL locale, so depending on what your spending is, you may be closer than you think.  What's your spending like?

Thank you for this! Yes we did in fact apply for the FL homestead rebate as soon as we got here, but we understand that it can take over a year for it to take effect. Hopefully that can bring the prop taxes down a bit. The property we have has a good amount of land for this area (> .5 acre) so the taxes reflect that. While it's enjoyable to have it, we certainly do not need it and could downsize if that were necessary.

The issue with where we are (St. Lucie County) is that there is not much here in terms of job opportunities. There are quite a few in West Palm, or Boca, Ft. Lauderdale, etc, but those are not inexpensive areas and would require us to move in order to avoid an expensive and stress-inducing commute every day. I am not opposed to trying to work remotely, and I have started investigating this more fervently. Perhaps that may be the best course of action in the short term.

Thanks for your advice!

[former player]

... In your opinion, what would be the best investment vehicle for us? Vanguard funds? Any specific ones you can suggest?...

I haven't been limiting myself much when dishing out advice on this forum, but I do know that investment advice for the USA is beyond me.  You could ask in Investor Alley on this forum or try www.Bogleheads.org.

[Mrs. PoP]

St Lucie, huh?  Can't say I've ever spent much time up that way.  The south eastern counties can definitely be a traffic headache (though picking living locations based on job location is a huge win there - was a great place to be a single renter for that reason), and are a bit pricey, too.  Were it not for your desire to stay near your family, I'd also recommend counties on the gulf coast, though it's a good 2+ hour drive across the state.  Those counties tend to be cheaper and slower paced (more retirees) than east coast counties. 

[InNeedOfAdvice]

St Lucie, huh?  Can't say I've ever spent much time up that way.  The south eastern counties can definitely be a traffic headache (though picking living locations based on job location is a huge win there - was a great place to be a single renter for that reason), and are a bit pricey, too.  Were it not for your desire to stay near your family, I'd also recommend counties on the gulf coast, though it's a good 2+ hour drive across the state.  Those counties tend to be cheaper and slower paced (more retirees) than east coast counties.

I agree with you :) We are here for the wife's family and so I would like to accommodate that as much as I can. I've always been more of a fan of the Gulf coast myself having spent time in Tampa/St. Pete in the past. It's certainly an option as we've done the drive cross the state a couple of times already.

Thanks.

[matchewed]

$785,000 cash invested in stocks, safe withdrawal rate of 4% = income of $31,400.  $525,000 in 401(k) and IRA, safe withdrawal rate of 4% = income of 21,000.  Downsizing from house which costs $7,000 a year just in taxes =?

Depending on what you want to keep on spending, you could be there already.

Thank you for this, it's this kind of thing that I am really interested in learning more about. We could downsize certainly, the house we're in now has quite a bit of property, which is nice for us and our dog, but certainly not something that we *need* to have.

In your opinion, what would be the best investment vehicle for us? Vanguard funds? Any specific ones you can suggest?

Thanks again

Investment vehicles will be whatever you currently have. 401k's, IRA's, standard taxable accounts, and any other sort of investment outside of those vehicles.

What investment you should have would be based on outlining a plan for FIRE. I would start by reading here. Develop a basic investment policy statement. Then get edumacationating. Read some Bernstein, run some numbers, then tweak your plan, then intentionally break your plan with bending your assumptions and see how your plan holds up. When you can do those things you'll know if you'll be ready to FIRE for the most part.

[Frugal Father]

Mr Money Mustache and many others here would recommend using index funds. In particular, Vanguard's "Total Stock Market Index" Fund. Here's an article where he talks about it: http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/

And like former player said, you could take a look over in the Investor Alley section of these forums for other questions and advice that people have had about investing.

I'll echo bo_knows' question (you just answered the first part of his question about saving): What is some of your detailed spending like? If we can get a better picture, then we could better evaluate how close you are to FIRE and perhaps see if there are some easy ways to help you save more.

[Jack]

Here's the bottom line:

If:

• you can keep your expenses below $52k/year (including property tax)
• your money is invested appropriately, including that $720k
• you're okay with a 4% safe withdrawal rate

...then you're done and you can retire today.

[Frugal Father]

In case you're wondering what this 4% safe withdrawal rate is that everyone keeps talking about, take a quick look through  this article.

[InNeedOfAdvice]

Here's the bottom line:

If:

• you can keep your expenses below $52k/year (including property tax)
• your money is invested appropriately, including that $720k
• you're okay with a 4% safe withdrawal rate

...then you're done and you can retire today.

Just so I am certain. The withdrawal from the 401(k) accounts cannot begin until I am 59 1/2 is that correct? The other accounts are taxable accounts, so they could be drawn down on right away, but when you say 52k a year, that includes the drawdown from the 401k yes? And that can't happen for 16 years yet. Just want to make sure I understand. Thank you.

[InNeedOfAdvice]

$785,000 cash invested in stocks, safe withdrawal rate of 4% = income of $31,400.  $525,000 in 401(k) and IRA, safe withdrawal rate of 4% = income of 21,000.  Downsizing from house which costs $7,000 a year just in taxes =?

Depending on what you want to keep on spending, you could be there already.

Thank you for this, it's this kind of thing that I am really interested in learning more about. We could downsize certainly, the house we're in now has quite a bit of property, which is nice for us and our dog, but certainly not something that we *need* to have.

In your opinion, what would be the best investment vehicle for us? Vanguard funds? Any specific ones you can suggest?

Thanks again

Investment vehicles will be whatever you currently have. 401k's, IRA's, standard taxable accounts, and any other sort of investment outside of those vehicles.

What investment you should have would be based on outlining a plan for FIRE. I would start by reading here. Develop a basic investment policy statement. Then get edumacationating. Read some Bernstein, run some numbers, then tweak your plan, then intentionally break your plan with bending your assumptions and see how your plan holds up. When you can do those things you'll know if you'll be ready to FIRE for the most part.

Thank you, I will get started on those right away. I appreciate your help.

[gobius]

Here's the bottom line:

If:

• you can keep your expenses below $52k/year (including property tax)
• your money is invested appropriately, including that $720k
• you're okay with a 4% safe withdrawal rate

...then you're done and you can retire today.

Just so I am certain. The withdrawal from the 401(k) accounts cannot begin until I am 59 1/2 is that correct? The other accounts are taxable accounts, so they could be drawn down on right away, but when you say 52k a year, that includes the drawdown from the 401k yes? And that can't happen for 16 years yet. Just want to make sure I understand. Thank you.

You can withdraw from a 401k but it's a 10% penalty plus you pay the income tax.  There are ways around it from what I've heard, such as a Roth conversion, but someone else will have to talk about that.  Income tax may not be much on the 401k part anyway.  You could just withdraw from your taxable accounts until you are 59-1/2; the taxable accounts will drain down some but your 401k should have grown enough to make up for it.

[bluelion]

Given that you live near a large retirement community, you can probably set up shop as being the IT guy for the non-techie retirees who are in need of malware removal, AV setup, etc... Given your in-law's strong ties to this community, they should be able to make some introductions. Maybe start this side business now while you still have a job...

[InNeedOfAdvice]

Given that you live near a large retirement community, you can probably set up shop as being the IT guy for the non-techie retirees who are in need of malware removal, AV setup, etc... Given your in-law's strong ties to this community, they should be able to make some introductions. Maybe start this side business now while you still have a job...

This is a very clever idea, thank you!

[InNeedOfAdvice]

Thanks for all of your advice so far, I am going to put together a more detailed spending tracker to share with you all. I will post it when I have it done.

[Jack]

Here's the bottom line:

If:

• you can keep your expenses below $52k/year (including property tax)
• your money is invested appropriately, including that $720k
• you're okay with a 4% safe withdrawal rate

...then you're done and you can retire today.

Just so I am certain. The withdrawal from the 401(k) accounts cannot begin until I am 59 1/2 is that correct? The other accounts are taxable accounts, so they could be drawn down on right away, but when you say 52k a year, that includes the drawdown from the 401k yes? And that can't happen for 16 years yet. Just want to make sure I understand. Thank you.

• Read http://www.madfientist.com/retire-even-earlier/ and http://www.mrmoneymustache.com/2011/11/11/how-much-is-too-much-in-your-401k/ to learn about Roth pipelines, 72t distributions, etc.
• Even without the above strategies, your $720K in taxable should be more than enough to last 16 years, on average.

Let me give you an example. Assume a constant 7% annual return (it won't be, but that's a reasonable average -- read about "sequence of returns" for deeper understanding). In that case, here's what would happen to that $720k:

Year	Beginning Balance	Annual Spending	Annual Growth
1	$720,000.00	$52,000.00	$46,760.00
2	$714,760.00	$52,000.00	$46,393.20
3	$709,153.20	$52,000.00	$46,000.72
4	$703,153.92	$52,000.00	$45,580.77
5	$696,734.70	$52,000.00	$45,131.43
6	$689,866.13	$52,000.00	$44,650.63
7	$682,516.76	$52,000.00	$44,136.17
8	$674,652.93	$52,000.00	$43,585.71
9	$666,238.63	$52,000.00	$42,996.70
10	$657,235.34	$52,000.00	$42,366.47
11	$647,601.81	$52,000.00	$41,692.13
12	$637,293.94	$52,000.00	$40,970.58
13	$626,264.52	$52,000.00	$40,198.52
14	$614,463.03	$52,000.00	$39,372.41
15	$601,835.44	$52,000.00	$38,488.48
16	$588,323.92	$52,000.00	$37,542.67

As you can see, in the first year you may spend $52k, but your (taxable only!) portfolio accrues almost $47K, so your balance only decreases by $5k.

Oh, by the way: by year 16, your 401k balance has grown to almost $1.5M using the same assumptions.

Don't get me wrong, sequence of returns is very important, and reality could be much worse (or much better) than this. For example, if your year 1 return was -30% (i.e., you retired in a year similar to 2008), but the market only returned the same 7% in subsequent years, then you'd run out of (taxable account) money in year 15.

In fact, http://www.firecalc.com/ predicts that a $720k portfolio/$52k spending/16 year time horizon has "only" a 76.6% success rate. That wouldn't be very good, if that were your only money -- but it isn't your only money, because you could implement the strategies I listed in point 1 (or you could reduce spending, of course). Also, I just realized I did all this calculation without considering the $50k in your brokerage account or the $15k emergency fund. Starting from $785K instead of $720K, your Firecalc success rate goes up to 82%.

[InNeedOfAdvice]

Jack,

Thank you so very much. This is extremely helpful and I appreciate the time you took to lay this out.

[chasesfish]

InNeed - is it a specific type of software that you support?  One nice option is to suggest switching to contract work and provide remote support.  I knew someone who did this and it comfortably wound them out of a job over five years.

Jack is also dead on, you don't need to work if you keep your expenses at or below $52k/yr


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