Author Topic: When to FIRE? Need expert advice  (Read 2239 times)

Nomad_McGinnis

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When to FIRE? Need expert advice
« on: March 17, 2018, 09:35:05 PM »
Hello Mustachians,

I figure those with some experience being retired for a few years can help me gauge when to finally pull the trigger.

About me: I'm 32, single, no kids, and living/working as an expat in China. In ten years I've managed to save about 300k in a taxable account, another 72k in tax-free. No desire to have kids (vasectomy at 29). Open to a wife/life partner.... IF she is a Mustachian (at least in mentality!).

My taxable savings are 90% stock (SP 500 etf) and 10% bonds (muni bond ETF). I took that out of the Warren Buffett playbook. I always believe that the best way to invest is to copy successful people. So far it's worked well!

I'm generally happy but I don't want to be working in China forever! The last ten years were good and I think I might have ten more in me, but only if you think it's an absolute necessity. I'm getting to the point where I'm often fantasizing sleeping in and reading books on weekdays. I want to call the quits the second I SAFELY can.

I save about 16k a year on average through work. When I return to America I'd like to buy a "tiny home" (about 50k in value) and possibly a used car if it's absolutely needed (but I might avoid). Still, I see myself spending about 30k/year as a retiree. I like to travel and buy nice "toys", and I occasionally rage in Vegas (can't help it, those pool parties are pretty great!). So it's a little pricier than MMM's retirement, but I can still keep it under 30.

So my basic question is, what's the magic number? How much do you think is needed to truly feel "comfortable" in retirement? I do realize that a lot of this will depend on how those investments appreciate as well. Also I want to take inflation into account.

Thanks for any insight!


Freedomin5

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Re: When to FIRE? Need expert advice
« Reply #1 on: March 18, 2018, 05:11:02 AM »
General rule of thumb is the 4% rule. So if you want to spend 30k per year in retirement, you will need 30k*25 = $750k in your taxable accounts.

Given that you have been in China for 10 years and are now 32, Iím guessing you came over right after graduating...which means that you donít have much of a work history in the US. Iím assuming youíre originally from the US since you say ďwhen I return to AmericaĒ. Iím also guessing you wonít have much of a pension when you return? Or access to government social security? We are Canadian expats in China, and thatís kind of how it is for us ó we canít contribute to tax-exempt retirement accounts due to our lack of work history in Canada, and we wonít qualify for the government pension plan, so we are mostly depending on taxable accounts and real estate investments.

The other thing is, if you left your 300k alone to grow, and didnít touch it at all, by traditional retirement age you should have more than enough to last you comfortably for the rest of your life. That means that from now until 65, you can do whatever you want as long as you make enough to cover your annual living expenses. Play around on cfiresim to determine how different spend/save rates for different numbers of years would affect you. Of course, thatís assuming that you stay healthy and can work all those years. Iím not saying that you should do that...it just helps us to think that way because that means we have basically self-funded the portion that would have been provided by our government pension plan.

Feeling ďcomfortableĒ in retirement is to a very large part up to the individual. We are a family of three and feel pretty comfortable on $2k - 2.5k per month in Canada. But then we are not big travelers or big spenders by nature.

Villanelle

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Re: When to FIRE? Need expert advice
« Reply #2 on: March 18, 2018, 05:33:54 AM »
Yes, by the generally (but not universally) accepted standard, you need $750k for that $30k of living expenses.  Since you've still got a ways to go, by the time you get there, that $30k might have inflated to $35k, but for now that's a decent projection.

If you are currently saving $16k/yr, if you get a 6% annual return, you will be essentially right at $750k in 7 years, so it's doable assuming your $30 doesn't inflate much at all, and nothing else changes. 

However, you may consider some interim steps if the goal is to give yourself some days of sleeping in and/or a return to the US.  Working part time at some generic retail or office gig could net you $10k, for example, meaning you only need to pull $20k from your stache, meaning you would only need $500k in your stache.  If you have some skill that you can translate into a reliable consulting gig or other side hustle, you could make that much or more (working fewer hours than you'd need at the generic job).  If you think something like this would be realistic for you, then I'd say $600k is probably safe, especially if you are willing to commit to cutting expenses in down market years and/or until you are on track to make that $10k/yr minimum.In your shoes, I would absolutely be willing to do that--retire when I got to $600k, seek generic work in the US to bring in at least $10/yr, and know that cutting back in some years might be necessary if the market tanks or my income doesn't reach $10k.  If your skills will allow you to consult or otherwise bring in a higher per hour income, you can probably even safely punch out before $600k. (Again, assuming that $30k in expenses is reasonable and doesn't increase too much due to inflation during the next decade while you continue to save.)

That said, probably the best thing you can do to speed this all along is increase your savings rate.   

LAGuy

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Re: When to FIRE? Need expert advice
« Reply #3 on: March 18, 2018, 11:03:09 AM »
If you get a chance, read through the following post. Some good stuff for you in there.

https://forum.mrmoneymustache.com/post-fire/early-retirement-vs-serial-mini-retirements/

In short, a lot of us single and unlikely to marry folks came to about the same number of $500,000 invested. My expectations of spend are very close to yours, and as others have pointed out that would be $750k invested (and you'll probably need to adjust that upwards for inflation at some point). That said, $500k seems to be about the point where your portfolio moves even on a weekly basis will pale in comparison to what you can contribute in a year. At that point, you start looking at doing something else, cutting back hours, etc...just enough to cover yearly expenses.

One thing I wonder, though. Could you be making more money back here in the US? Are you a teacher? At 32 with some experience under your belt it might be time to come back home and make some real money and super charge that savings rate. That would get you the change you're looking for that will get you through the next couple of years. You've done pretty well to have that much saved at 32 with that low of a savings amount.

Nomad_McGinnis

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Re: When to FIRE? Need expert advice
« Reply #4 on: March 18, 2018, 06:25:10 PM »
Thanks!

Yes, I've been overseas the entire time after college, which means that I rely completely on my taxable for retirement (and some Roth IRA contributions). It's a long time to be away... but I am indeed American. I had the travel bug and took off after getting a diploma. No pension, no SS, etc. All investments.

Villanelle, I like the idea of a "mini retirement" after reaching 600. Thanks for the input! Something like 20 hours a week of part-time teaching, coaching, or even retail would be perfectly fine to coast through the next few decades. I'm just getting to the point where that 40 hour/week grind is wearing me out. But, 5-7 more years feels very doable.

As far as savings in the US go, I might be able to match my savings rate, but it would be difficult to surpass it; I live rent-free and with food stipends in China, which means that 16k/year is a very large portion of my actual income. I did work briefly as a technical writer (my degree was in technical communications), so the best-case scenario is that I could bring the number up to 20-25. It might take a few years to increase the savings rate, though, and I'd rather not go that route (of building up a new career just to retire in seven years). However, my resume is well-established in China now, so employment is easy to always have.

I could potentially live more frugally in China and bring the savings rate up to about 19k a year. 16 has been my "average" so far, I'd say. There were years I was single that I could muster 20, and years that I wasn't where I'd manage maybe 14. Ah, the things we do to impress a significant other (sigh).

Villanelle

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Re: When to FIRE? Need expert advice
« Reply #5 on: March 19, 2018, 02:56:35 AM »
Thanks!

Yes, I've been overseas the entire time after college, which means that I rely completely on my taxable for retirement (and some Roth IRA contributions). It's a long time to be away... but I am indeed American. I had the travel bug and took off after getting a diploma. No pension, no SS, etc. All investments.

Villanelle, I like the idea of a "mini retirement" after reaching 600. Thanks for the input! Something like 20 hours a week of part-time teaching, coaching, or even retail would be perfectly fine to coast through the next few decades. I'm just getting to the point where that 40 hour/week grind is wearing me out. But, 5-7 more years feels very doable.

As far as savings in the US go, I might be able to match my savings rate, but it would be difficult to surpass it; I live rent-free and with food stipends in China, which means that 16k/year is a very large portion of my actual income. I did work briefly as a technical writer (my degree was in technical communications), so the best-case scenario is that I could bring the number up to 20-25. It might take a few years to increase the savings rate, though, and I'd rather not go that route (of building up a new career just to retire in seven years). However, my resume is well-established in China now, so employment is easy to always have.

I could potentially live more frugally in China and bring the savings rate up to about 19k a year. 16 has been my "average" so far, I'd say. There were years I was single that I could muster 20, and years that I wasn't where I'd manage maybe 14. Ah, the things we do to impress a significant other (sigh).

You might consider trying to pick up tech writing as a side hustle.  Not only would it increase income, it would also establish a nice income stream for you that you could rely on (or expand upon) when you quite your primary job.  I believe that's something that can be done remotely. 

Freedomin5

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Re: When to FIRE? Need expert advice
« Reply #6 on: March 19, 2018, 03:45:53 AM »
$16k is around 100k RMB per year (sorry, we are in our seventh year in China and sometimes I think better in RMB). So thatís around 9000 RMB per month. Man, you might do better just as an oral English teacher in a local university. Or as an oral English teacher at a private English tutoring center. I think those pay 12k-15k per month and includes housing stipend and flights back per year, for 20-25 hours of work per week.

TL;DR   Thereís no need to be doing 40 hours/week for only $16k-$20k salary per year.

In addition to saving more, you could also tutor on the side. DH charges 500 RMB per hour tutoring small groups of up to four students. He basically has a flat rate and leaves it up to the parents to find students. So then private lesson would be 500/hour, one to two ratio would be 250/hr/student, one to four ratio would be 125/hr/student. Tutor two groups of students and that would be an extra 4000 RMB per month.

LAGuy

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Re: When to FIRE? Need expert advice
« Reply #7 on: March 19, 2018, 09:15:42 PM »
Are you not getting any SS or Medicare credits in? I know some countries have reciprocity, but if that's not the case for you it's REALLY something you should think about. You need 10 years of "credits", and even if you worked some crap job in college you may very well be halfway there already. The progressive nature of SS means that even the minimum time is very worthwhile (the "poor" aka those that have the least amount paid into the system get the best return). And qualifying for Medicare is just a yes or no thing...if you have the credits, you're in. I know everybody likes to believe these programs are going to be gone by the time they're retired, but don't bet on it. If they are gone, something will replace them and whatever it is will likely have similar qualifying requirements.

Nomad_McGinnis

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Re: When to FIRE? Need expert advice
« Reply #8 on: March 19, 2018, 11:41:02 PM »
Thanks again, everyone, for the input.

To my knowledge I'm not getting any SS or Medicare credits in. I've worked my entire professional career overseas. And you are right, it is something to consider. Perhaps after I "semi-retire" in the US, I can accumulate enough credits with a part-time job (over the span of years). I've always been comfortable with part-time work. And like you, LAGuy, I'm an optimist; I like to believe the programs will somehow remain intact.

Freedomin5, yes, my actual salary is about 140k RMB/year, but 100k has been the average amount that I have saved. Some years were more successful than others. To be honest, I just tend to spend more wastefully when I'm in a relationship (trying to change that for the next one and stay truer to myself). I just have this innate need to impress people with shiny objects. I keep telling myself, "the next one will be more Mustachian," but alas, I'm human.

Overall, I feel very lucky. There are indeed plenty of options on where to go from here. I've thought about the university teacher route in China... and really, the only reason I haven't pursued it to this point is that I hit a "comfort zone" early in my 20s and never sought much change. I graduated college in 2008, considered myself lucky to have a job, and simply never changed anything, haha.

Tech writing part-time is also a legitimate option (the money is usually pretty good). I don't particularly like tech writing, but having fewer hours could ease the burden.

As stands I'm going to fish around for some of those high-paying college jobs and see what I can find. I have tutored here and there over the years, and once again, being brutally honest on myself, the desire to be lazy on weekends and weeknights has kept me from making a lot of money that I could have made. Still, if tutoring shortens the time I "have" to work full-time, why not?


Freedomin5

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Re: When to FIRE? Need expert advice
« Reply #9 on: March 20, 2018, 06:34:08 AM »
Donít limit yourself to college jobs. The college jobs tend to pay a lot less than the private English companies (like English First or Disney English or VIPKid).

letsdoit

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Re: When to FIRE? Need expert advice
« Reply #10 on: June 20, 2018, 10:43:47 AM »
more vegas rages