Author Topic: Cutting 4-5 Years Off Time to FI?  (Read 1764 times)

nexus

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Cutting 4-5 Years Off Time to FI?
« on: July 26, 2017, 12:15:37 PM »
The question is inspired by MMM's post back in August 2011. I've been re-reading the blog from the start and this one spiked my curiosity. I've taken no action, just curious to see what folks think based on my hypothetical example.
http://www.mrmoneymustache.com/2011/08/15/become-a-lazy-landlord-with-reits/

What is wrong with this idea?
Does it come down to risk tolerance?

As it stands, networthify says I can retire in 12.1 years with my current portfolio & savings rate.

In summary MMM mentions $350k in SNH would yield about $24k in dividends each year. My target/goal FI number is about $625k in VTSAX. Switching focus from SNH to VTSAX would cut my time down from 12.1 years to 7-8 years to FI.

Currently able to dump $5k in 401k annually. Next year will get employer match so $10K into a 401k each year plus ~$24k into a taxable account annually.

My thoughts are to keep my current holdings ($50k in VTSAX right now), but moving forward start purchasing 75% to 100% SNH (or similar REIT) and 0-25% VTSAX each month. Once I hit about $20k in dividends from SNH, or ~$250k in SNH shares I'd have a few options... (250,000/19.35)=12,920 shares... @ 1.56 dividend =$20,155.039. Obviously the share price will go up/down, but these are rough figures.

At that time I'd have a NW around $475k and could...
a. Throttle back to PT work & semi-retirement
b. Continue to work FT and go back to:
   $24k into VTSAX annually
   $20k dividends from SNH into VTSAX
   Plus 10k/year in 401k
Until I hit $625k in 2-3 more years anyway, although this 625k will generate more passive income than 100% in VTSAX...right?

My math says... (using today's share price of $19.35)
> It would take 7-8 years to get $250k in SNH starting at $0 (11k this year, then dividends plus 24k for subsequent years).
> Current holdings of VTSAX would grow via automatic dividend reinvestments to just under $70k by 2026. 50k*1.02 for rest of this year, then 1.04 for following years(too conservative?).
> I will have added $70-$80k into my 401k, plus appreciation.
Net worth would be around $450k-475k instead of $625k
Is the big issue here IF SNH continues to exist and pay dividends forever?

Many thanks. My face awaits punches.

Heroes821

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Re: Cutting 4-5 Years Off Time to FI?
« Reply #1 on: July 26, 2017, 02:38:55 PM »
I don't have an argument either way, I like Jlcollinsh thoughts on portfolio.  But I did find this https://www.streetinsider.com/dividend_history.php?q=SNH

Last quarter had higher dividends than when MMM wrote that article, but there were some quarters in the 5 and 6% area instead of 7.8% of 2011.

Honestly those numbers are pretty cool to me, but I'm too junior of an investor to go deeper in this right now.