Author Topic: Investment Advice Before Leaving my Job. What would you do? How to invest?  (Read 1491 times)

dcel22

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Hi Everyone!  I'm a 34 year old software engineer that has done an alright job at being a Mustachian over the years but admittedly have made some decisions that do NOT align with Mustachian principles (boat and loan on a new car).  I'm looking to improve in those areas though :)  I'm looking to leave my job in the spring and am looking for advice on how to invest wisely before doing so.

- Current Assets
$375k  House without mortgage.  I believe $375k should be a conservative number on what I expect to receive after the house is sold
$30k Savings
$90k in my 401k (Open to leveraging or cashing out if it makes sense)
$50k expected sale price of boat

- Expected Assets in Spring
$22k additional

Liabilities
$20k car loan



My dream is to live a simple life where I can do work that is more enjoyable (Yoga instruction, kiteboard instruction, marine mechanic, etc) and in a warmer climate.  I'd also like to have reduced housing costs (tiny house or sailboat).



So....My question is.  What would you do?  I wonder about taking a loan against or cashing my 401k.  Buying investment properties that can cash flow.  I know I had a condo before that cost $180k and rented for $1600 a month.  I am sure there are better investments out there so that's why I am looking for help.  Also, maybe I could leverage myself and take on real estate investment loans while I still have low to no debt and a good paying salary.  Basically I want to set myself up to have as good of a positive cash flow possible and not need to worry about income that much.  All while being relatively safe with my investments.  All ideas welcome!  What would you do!???  Thank you in advance! :)

dcel22

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #1 on: December 08, 2017, 11:06:16 AM »
Anyone?  Really curious to see what ideas people may have.

frugaliknowit

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #2 on: December 08, 2017, 11:25:52 AM »
Because I am on the conservative side in this forum, I would take your expected increase in savings between now and then and kill the car loan.

Question:  Are you leaving your job for another, or are you "FIRING", in which case you will need an income from your money?

dcel22

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #3 on: February 08, 2018, 11:12:20 AM »
Thanks. I plan to leave my job but for one that pays for just my minimal expenses. That way I don't touch my savings. After doing more calculations it looks like I will have 600k. I am thinking if I put that in the s and p 500 once the next recession comes that I could have roughly 1 million after 5 years. Any thoughts/advice?

Lady SA

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #4 on: February 08, 2018, 12:12:02 PM »
whoa I think you're getting a little ahead of yourself. Please read ALL of the posts in here: http://jlcollinsnh.com/stock-series/
Don't wait to invest until the next recession. No one knows when that will be. Statistically, you are better off putting your bulk sum into the market now. Read this: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

It really sounds like you don't really have a firm grasp of your situation (what is your annual spending? Where is this $600k sum coming from, do you have other assets you didn't include above? You ask about investing during the next recession, with what cash? Do you know what funds you are currently invested in?) or how to handle creating income streams yourself. Slow down, read more information, and is there a reason you are quitting in the spring? Can you wait until you have things properly set up before pulling the plug?
I worry because you only have $90k in the stock market. The bulk of your net worth is tied up in cash and a house, which doesn't rise in value like the market does, so your retirement math is significantly different than most here.
Also, I'm not really following your math -- your INVESTED assets would double in 10 years, not 5. https://www.investopedia.com/ask/answers/what-is-the-rule-72/ using the generally accepted 7% stock market return. This is only for assets invested in the stock market, not cash or real estate.
Do you understand how taxes will have an impact on your FIRE number? do you know how to utilize tax-advantaged accounts to streamline your tax burden?
you say you maybe want to dabble in real estate, do you know how to find a property and evaluate it's cash-flow potential?

DO NOT EVER cash out your 401k. Terrible idea because if you cash out, you'll have to pay full income taxes on the full sum that way. IF you are leaving your job, and IF you are unhappy with the 401k fees and want lower fees, you roll it over into an IRA at the institution of your choice. Around these parts that is Vanguard or Fidelity. Don't touch any of your 401k funds for the foreseeable future.Taking a loan against your 401k for living expenses is similarly a terrible idea.

fwiw, my DH and I are planning a similar path: build up our invested assets to half of our FIRE number, then drop down to part time work to sustain our living expenses until we hit our FIRE number. What you are planning is not unheard of, or outlandish, but you really need to make sure your preparation is correct before doing it. You sound really excited, but not really prepared. Please take some time to make a more solid plan for the future (currently you have plans all over the place) and set up your accounts/holdings to properly support that vision - are you going to sell your house? Will you buy another house in a new location (that will tie up assets that you can't live off of)? What are your projected living expenses in the new location? What kind of job would you get? When do you need to get a new job? Do you have a family (wife, kids) planned for the future, because you need to take that into account also?

I say the above out of concern for you, I don't want you to get yourself into a difficult situation because of lack of preparation.

dcel22

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #5 on: February 08, 2018, 05:01:42 PM »
Because I am on the conservative side in this forum, I would take your expected increase in savings between now and then and kill the car loan.

Question:  Are you leaving your job for another, or are you "FIRING", in which case you will need an income from your money?

My plan is to leave my corporate job and pick up some sort of work that I enjoy more. Not particularly money driven.  As for the car, the interest is only like 3 percent. Would it make sense to not pay that off with the intent to make more than 3 percent in the market?

dcel22

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Re: Investment Advice Before Leaving my Job. What would you do? How to invest?
« Reply #6 on: February 08, 2018, 05:27:16 PM »
whoa I think you're getting a little ahead of yourself. Please read ALL of the posts in here: http://jlcollinsnh.com/stock-series/
Don't wait to invest until the next recession. No one knows when that will be. Statistically, you are better off putting your bulk sum into the market now. Read this: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

It really sounds like you don't really have a firm grasp of your situation (what is your annual spending? Where is this $600k sum coming from, do you have other assets you didn't include above? You ask about investing during the next recession, with what cash? Do you know what funds you are currently invested in?) or how to handle creating income streams yourself. Slow down, read more information, and is there a reason you are quitting in the spring? Can you wait until you have things properly set up before pulling the plug?
I worry because you only have $90k in the stock market. The bulk of your net worth is tied up in cash and a house, which doesn't rise in value like the market does, so your retirement math is significantly different than most here.
Also, I'm not really following your math -- your INVESTED assets would double in 10 years, not 5. https://www.investopedia.com/ask/answers/what-is-the-rule-72/ using the generally accepted 7% stock market return. This is only for assets invested in the stock market, not cash or real estate.
Do you understand how taxes will have an impact on your FIRE number? do you know how to utilize tax-advantaged accounts to streamline your tax burden?
you say you maybe want to dabble in real estate, do you know how to find a property and evaluate it's cash-flow potential?

DO NOT EVER cash out your 401k. Terrible idea because if you cash out, you'll have to pay full income taxes on the full sum that way. IF you are leaving your job, and IF you are unhappy with the 401k fees and want lower fees, you roll it over into an IRA at the institution of your choice. Around these parts that is Vanguard or Fidelity. Don't touch any of your 401k funds for the foreseeable future.Taking a loan against your 401k for living expenses is similarly a terrible idea.

fwiw, my DH and I are planning a similar path: build up our invested assets to half of our FIRE number, then drop down to part time work to sustain our living expenses until we hit our FIRE number. What you are planning is not unheard of, or outlandish, but you really need to make sure your preparation is correct before doing it. You sound really excited, but not really prepared. Please take some time to make a more solid plan for the future (currently you have plans all over the place) and set up your accounts/holdings to properly support that vision - are you going to sell your house? Will you buy another house in a new location (that will tie up assets that you can't live off of)? What are your projected living expenses in the new location? What kind of job would you get? When do you need to get a new job? Do you have a family (wife, kids) planned for the future, because you need to take that into account also?

I say the above out of concern for you, I don't want you to get yourself into a difficult situation because of lack of preparation.

Sorry I am not able to answer all your questions in detail. Currently browsing this post on my phone as I am at the airport. Thank you for the links. Definitely will check out and will make for good travel reading. I am planning to move this spring. Pretty burnt out with my job but the main thing is I will be 35 this May and I am not fulfilled with my career path. I make 130k in the Midwest which is a comfortable wage but it isn't what I want to do with my life. Some things have changed, especially the house estimate as it is going on the market soon. It is looking like the total will most likely be 600 to 615 once the house sells. I'm selling in the spring because the house is a lake house and that is the ideal season to sell for lakefront properties in my area. As for future living expenses they should be very low. I could run through numbers and plan to but it should be very simple. I have offers from friends on the west coast to live at their place rent free or on their boat. Another thing that has my interest is living in a van or rv which would be very simple and affordable. I realize that my plans may and well, actually are all over the place but hey.....that's life :)  its an adventure! my thought is to live extremely simple. Get loads of kiteboarding and surfing in. Invest all the money into something like the s&p500 and try to not touch it. As for living, given that situation and no dependents I won't need much to live. People who work in the restaurant industry are most likely not wealthy but still manage to live. I'm very confident in my abilities to make such a wage.  I don't know a ton about rental properties. I've only owned two and admittedly there are things to learn there but I have a decent idea. I don't think I want to get into renting again though. Too much hassle. The market seems so much simpler.  You do bring up a great point with learning more on taxes. I know some but I am certain there is much more I can learn there.