Am I close to FI, impact of housing, plus thoughts on Part Time at work?

[aajack]

Life Situation: 34F, single, long term partner (split all finances 50/50). No kids, no plans for them.

Gross Salary/Wages: 170k (including annual bonus estimate, excluding a 401K match and a different, small bonus because these both vest over many years and I don’t want to count “golden handcuff” stuff that I don’t have yet). It's relatively recent that my salary has been that high.

Accounts:
485k - brokerage post tax
109k - Rollover IRA
54k - Roth
118k - Solo 401k plus regular 401k
7k - HSA
10k - I Bond
185k - Rental Equity*
50k - Real Estate Syndication**
TOTAL: 1,018,000***

*This number is what I expected I’d walk away with if I sold today (so includes mortgage pay-off, estimated sales costs, etc). (ACTUALLY: it doesn’t include taxes… there would be cap gains and also depreciation recapture…… maybe knock off another 30-40k ish? I am also not planning to sell, just trying to get a rough estimate of NW from it).

**I have somewhat mentally discounted this investment. It’s not going awful, but not great either. I wouldn’t redo that decision if I could, but it is what it is now.

***I can’t believe this number. I did a tally exactly 1 year ago and was at 790. A >200k increase in 1 year is blowing my mind…


Rental Income, Actual Expenses, and Depreciation:
Rental breaks even monthly - if not maybe slightly negative after occasional special assessments. However, I am on a 15 yr note and gaining equity like crazy! (something like 600/mo). Rate 3.25%. I have easy tenants so I’m happy to keep it for now and keep gaining equity. I am 7 years into 15 year note. Once paid off, I expect the cash flow to be ~1,000/mo after bills and expenses (this is in today’s dollars, of course). The market value of the rental is ~330k.


Total Annual Spending:
2020: $21,960
2021: $14,100
2022: $23,220
2023*: $33,888

*2023 my partner and I sold our home. We made a chunk of change on it, but it was a slightly complicated property and thus also incurred some out of pocket costs (legal fees, lots of contractors, etc). I also bought a bike for 3,300 :) In general I don’t think my lifestyle has jumped up too much - a lot of these expenses are not recurring.

Expected ER expenses: This is hard for me to know. I am itching to slow travel and I don’t have a good sense of what I’ll spend. Because I tend to be pretty frugal and have read other slow traveler’s blogs, I think my annual spend may not be too much bigger or smaller than it is currently (mid 20k’s to low 30k’s). Also, my partner is not as close to FI as I am, so I realistically won’t have much of a lifestyle change any time soon while he still has to work.

Assets: Partner and I share a paid off newer truck (~20k).

Liabilities: Rental loan @ 3.25%, balance 90k, 8 years remaining.

Specific Questions:

1. Math/numbers question:
I am not sure what to make of a potential withdrawal rate for me. For example, in my highest spend year, I am only at a 3.3% withdrawal (34k/1018k) BUT that’s on total NW, which includes highly illiquid assets and retirement accounts I can’t touch for decades… Not sure how to really evaluate this since my post-tax, liquid investments are only like half my NW. Any thoughts on this specifically, or generally? I feel far away from FI but I’m not sure if I should?

2. Housing and its impact on FI number:
even though my most expensive year would technically only be at 3.3%, I worry about housing. Since we sold our house last summer, we have been renting Furnished Finders (and loving it). But if we ever wanted to own again, I think we would be looking at something in the 500 to mayybeeee 700 range. Part of me feels like I should keep working until I have the “house bucket” much more taken care of. For example if we bought a home today and split it, my NW would be 250-350 lower, and that would feel pretty lean for me. Like I almost feel like my goal should be 1.5, and then if we keep Furnished Findering, great, and if we want to buy, I would be able to buy all cash and still have something a bit north of 1m. Poke holes in my thinking here?

3. Part Time?
Another thing I’d be curious on anyone's thoughts on: I don’t hate my job (well, maybe?), but I do have more days I am extremely frustrated than not. I feel like I’ve stagnated and have recently had some interesting opportunities taken away from me due to political reasons, which is also very frustrating. Additionally, I do feel like it’s taking a toll on my health (I hardly have energy to exercise at the end of the day, get wrapped up in the stressful parts too much, etc.). Some of this I know I can do a better job on by increasing my boundaries (not working overtime/weekends/etc), and really need to start actively working on this. That said, to my question: I do potentially have the option to negotiate down to 32 hrs/week with my employer. My salary, bonus, PTO would all just scale down accordingly. The only thing that doesn’t scale is that we get an extra bonus per year which has a long vesting schedule. I have largely been ignoring it because I don’t want to count these long term vesting things. That said, in about another 2 years, this will be worth another ~20k/yr or so. So if I were to request PT, my total comp would go to ~136 today, and I would forfeit the extra 20k/yr in 2 years… so giving up about 54k/yr in 2 years. That is a BIG dollar amount to give up. And here is the kicker: I know for a fact a few people on my team work around 30-35 hours a week as is (they are full time and have told me this). So then I have to ask myself… why would I negotiate to officially work 32, give up 54k/year, when I know others are already de-facto doing this (Truth is I would have a hard time doing this personally/morally… haha. BUT I think it would also feel pretty bad to give up that income and then know I am still working about as hard as others who are making full salaries). I also worry it would be hard to keep myself at 32 and not slide upwards. I am not looking for any kind of specific answer here, but would be very interested in anyone’s thoughts generally on this topic. I am very torn on what to think about this.

I appreciate in advance anyone’s thoughts on any of this! Thanks for reading :)

[lhamo]

Your large stash in the brokerage account gives you a LOT of flexibility -- you could harvest LTCG to live off of and start a Roth conversion ladder with your taxable retirement investments and have a nice long runway.  Except for the housing piece.  That does complicate things.

I think if I were you I would spend at least the rest of this year focusing on being disciplined about not giving your company more of your time than they are paying you for.  You know that people on your team are doing this already (and even taking more time for themselves than maybe the technically should).  Do you have some flexibility about when/where you give them their 30-40 hours/week?  If working out after a day at work is something you lack energy for, why not do your workouts in the morning or mid-day, starting your work day a bit later or breaking it up with a longer break for lunch?  I know in a meeting-heavy or Slack-focused workplace where people expect you to be available all the time that can sometimes be a challenge, but it seems like many of your colleagues are managing it.  Advantage of making your schedule changes health-focused is also that it is something most people readily understand/sympathize with. 

Another thing that might help mentally as you work through your transition to FIRE is starting to set some of the increased stash aside -- mentally if nothing else -- for that future home purchase or bucket list travel, etc.  You have the basics covered, and really could leave if you want to.  Now you are padding the stash so that you can add on some things that are really meaningful to you/would give you more flexibility down the road. 

You might also want to take a page out of the old classic Your Money or Your Life playbook and calculate what your Real Hourly Wage is when you are working 40+ hours per week (and not getting any additional compensation for it) versus what it would be if you were more in the 30-35 range.  Being disciplined about not checking email evenings and weekends, and getting your gym or road time in even if it means you don't do a full 40 hours at your desk, is a great way to give yourself a substantial raise on a per hour basis.

[jeroly]

You have $783k in financial assets. Looking at FIRE from that would yield $31,320/yr at a 4% WR, and if we add in the bucks you're paying down the rental mortgage by, you're covering your spending.  So I'd say that you're FI for someone who's perhaps 20 years older than you... but given your youth, you need to look at more like a 3.3% WR which would require perhaps another $200k in the accounts.

ETA:

It does look like buying what you're talking about would have a significant impact on your FIRE situation.  You're at around $800K in financial assets and you're probably two years away from the FI part of the journey, regardless when you might choose to RE.  Putting ~$300k into a condo or similar might set you back about four years if you didn't have a plan to sell it as part of a future downsizing.  It's all about choices, though and that choice might work for you, even if it didn't pan out to be the best financial move (although it might, you never know how the real estate market is going to do).

As far as any housing buy vs rent question goes, there are decent comparison calculators out there (including the NY Times'), just be sure you are comparing apples to apples.  I think the rule of thumb is that it's generally not the best financial move to buy if you're not planning to stay at least seven years, due to high transaction costs and ongoing costs (taxes, maintenance) associated with ownership.

I don't know if your taking a job that's nominally 'only' 32 hours would actually reduce the demands you'd be feeling from it.  I'd say either stay full time (either at your current job or elsewhere), go to a more reduced part time gig of maybe 15 hours/week, or FIRE/take a leave of absence.  You could essentially coastFIRE into FI in a couple of years (assuming you don't buy the condo).

[clarkfan1979]

Life Situation: 34F, single, long term partner (split all finances 50/50). No kids, no plans for them.

Gross Salary/Wages: 170k (including annual bonus estimate, excluding a 401K match and a different, small bonus because these both vest over many years and I don’t want to count “golden handcuff” stuff that I don’t have yet). It's relatively recent that my salary has been that high.

Accounts:
485k - brokerage post tax
109k - Rollover IRA
54k - Roth
118k - Solo 401k plus regular 401k
7k - HSA
10k - I Bond
185k - Rental Equity*
50k - Real Estate Syndication**
TOTAL: 1,018,000***

*This number is what I expected I’d walk away with if I sold today (so includes mortgage pay-off, estimated sales costs, etc). (ACTUALLY: it doesn’t include taxes… there would be cap gains and also depreciation recapture…… maybe knock off another 30-40k ish? I am also not planning to sell, just trying to get a rough estimate of NW from it).

**I have somewhat mentally discounted this investment. It’s not going awful, but not great either. I wouldn’t redo that decision if I could, but it is what it is now.

***I can’t believe this number. I did a tally exactly 1 year ago and was at 790. A >200k increase in 1 year is blowing my mind…


Rental Income, Actual Expenses, and Depreciation:
Rental breaks even monthly - if not maybe slightly negative after occasional special assessments. However, I am on a 15 yr note and gaining equity like crazy! (something like 600/mo). Rate 3.25%. I have easy tenants so I’m happy to keep it for now and keep gaining equity. I am 7 years into 15 year note. Once paid off, I expect the cash flow to be ~1,000/mo after bills and expenses (this is in today’s dollars, of course). The market value of the rental is ~330k.


Total Annual Spending:
2020: $21,960
2021: $14,100
2022: $23,220
2023*: $33,888

*2023 my partner and I sold our home. We made a chunk of change on it, but it was a slightly complicated property and thus also incurred some out of pocket costs (legal fees, lots of contractors, etc). I also bought a bike for 3,300 :) In general I don’t think my lifestyle has jumped up too much - a lot of these expenses are not recurring.

Expected ER expenses: This is hard for me to know. I am itching to slow travel and I don’t have a good sense of what I’ll spend. Because I tend to be pretty frugal and have read other slow traveler’s blogs, I think my annual spend may not be too much bigger or smaller than it is currently (mid 20k’s to low 30k’s). Also, my partner is not as close to FI as I am, so I realistically won’t have much of a lifestyle change any time soon while he still has to work.

Assets: Partner and I share a paid off newer truck (~20k).

Liabilities: Rental loan @ 3.25%, balance 90k, 8 years remaining.

Specific Questions:

1. Math/numbers question:
I am not sure what to make of a potential withdrawal rate for me. For example, in my highest spend year, I am only at a 3.3% withdrawal (34k/1018k) BUT that’s on total NW, which includes highly illiquid assets and retirement accounts I can’t touch for decades… Not sure how to really evaluate this since my post-tax, liquid investments are only like half my NW. Any thoughts on this specifically, or generally? I feel far away from FI but I’m not sure if I should?

2. Housing and its impact on FI number:
even though my most expensive year would technically only be at 3.3%, I worry about housing. Since we sold our house last summer, we have been renting Furnished Finders (and loving it). But if we ever wanted to own again, I think we would be looking at something in the 500 to mayybeeee 700 range. Part of me feels like I should keep working until I have the “house bucket” much more taken care of. For example if we bought a home today and split it, my NW would be 250-350 lower, and that would feel pretty lean for me. Like I almost feel like my goal should be 1.5, and then if we keep Furnished Findering, great, and if we want to buy, I would be able to buy all cash and still have something a bit north of 1m. Poke holes in my thinking here?

3. Part Time?
Another thing I’d be curious on anyone's thoughts on: I don’t hate my job (well, maybe?), but I do have more days I am extremely frustrated than not. I feel like I’ve stagnated and have recently had some interesting opportunities taken away from me due to political reasons, which is also very frustrating. Additionally, I do feel like it’s taking a toll on my health (I hardly have energy to exercise at the end of the day, get wrapped up in the stressful parts too much, etc.). Some of this I know I can do a better job on by increasing my boundaries (not working overtime/weekends/etc), and really need to start actively working on this. That said, to my question: I do potentially have the option to negotiate down to 32 hrs/week with my employer. My salary, bonus, PTO would all just scale down accordingly. The only thing that doesn’t scale is that we get an extra bonus per year which has a long vesting schedule. I have largely been ignoring it because I don’t want to count these long term vesting things. That said, in about another 2 years, this will be worth another ~20k/yr or so. So if I were to request PT, my total comp would go to ~136 today, and I would forfeit the extra 20k/yr in 2 years… so giving up about 54k/yr in 2 years. That is a BIG dollar amount to give up. And here is the kicker: I know for a fact a few people on my team work around 30-35 hours a week as is (they are full time and have told me this). So then I have to ask myself… why would I negotiate to officially work 32, give up 54k/year, when I know others are already de-facto doing this (Truth is I would have a hard time doing this personally/morally… haha. BUT I think it would also feel pretty bad to give up that income and then know I am still working about as hard as others who are making full salaries). I also worry it would be hard to keep myself at 32 and not slide upwards. I am not looking for any kind of specific answer here, but would be very interested in anyone’s thoughts generally on this topic. I am very torn on what to think about this.

I appreciate in advance anyone’s thoughts on any of this! Thanks for reading :)

Similar to what others have said, you have "F-U" money, but I don't think you are "FIRE", mostly because of the housing piece. You have more than enough money to start negotiating different responsibilities at work. If they don't give it to you, get another job that will. If I was making 170K/year and didn't like my job/employer working 40-50 hours/week, I would try to downshift to 3-4 days/week and make 75K/year.

[aajack]

Thank you Ihamo for your thoughts! I really appreciate them. I have been thinking about your points all day.

Your large stash in the brokerage account gives you a LOT of flexibility -- you could harvest LTCG to live off of and start a Roth conversion ladder with your taxable retirement investments and have a nice long runway.  Except for the housing piece.  That does complicate things.

Yes... I think housing is the main part that complicates things, as you mentioned. We could absolutely get something closer to the 500 mark in some of the towns we're looking at, but I still think I need to save a bit more even at that price point.

I think if I were you I would spend at least the rest of this year focusing on being disciplined about not giving your company more of your time than they are paying you for.  You know that people on your team are doing this already (and even taking more time for themselves than maybe the technically should).  Do you have some flexibility about when/where you give them their 30-40 hours/week?  If working out after a day at work is something you lack energy for, why not do your workouts in the morning or mid-day, starting your work day a bit later or breaking it up with a longer break for lunch?  I know in a meeting-heavy or Slack-focused workplace where people expect you to be available all the time that can sometimes be a challenge, but it seems like many of your colleagues are managing it.  Advantage of making your schedule changes health-focused is also that it is something most people readily understand/sympathize with. 

I really love your comments about spending the rest of the year focusing on not giving more time than I am being paid for. I have been looking up screen time tracker apps and plan to install one tomorrow. I really do like your suggestion of trying to fit a workout in morning or midday… I have historically not done it because our work environment is as you described: meeting-heavy, spur of the moment calls from managers for fires, lots of chats you are expected to respond to quickly, etc. Because of this, I don’t really feel a lot of flexibility in when I am available during the day. But you raise an interesting point that bringing up health related schedule changes might be something I could find support in… I have thought about bringing this up with my manager in the past, but I think I should revisit it.

Another thing that might help mentally as you work through your transition to FIRE is starting to set some of the increased stash aside -- mentally if nothing else -- for that future home purchase or bucket list travel, etc.  You have the basics covered, and really could leave if you want to.  Now you are padding the stash so that you can add on some things that are really meaningful to you/would give you more flexibility down the road. 

This is a great idea, and I also like the idea/excuse for some more time in Excel modeling different scenarios :) Having a “bucket”, even if mental, for housing would definitely reduce some stress around the future possible purchase.

You might also want to take a page out of the old classic Your Money or Your Life playbook and calculate what your Real Hourly Wage is when you are working 40+ hours per week (and not getting any additional compensation for it) versus what it would be if you were more in the 30-35 range.  Being disciplined about not checking email evenings and weekends, and getting your gym or road time in even if it means you don't do a full 40 hours at your desk, is a great way to give yourself a substantial raise on a per hour basis.

I read that way back in the day, but forgot some of the ideas from it. I like the Real hourly wage calculation. I just did some back of the envelope math and if you drop from 50 to 40 hours a week, that’s a +20% increase hourly (45 to 40 is %11)... These are good reminders that I really need to work on some personal boundaries first and foremost.

Thank you again for all your thoughts!

[aajack]

You have $783k in financial assets. Looking at FIRE from that would yield $31,320/yr at a 4% WR, and if we add in the bucks you're paying down the rental mortgage by, you're covering your spending.  So I'd say that you're FI for someone who's perhaps 20 years older than you... but given your youth, you need to look at more like a 3.3% WR which would require perhaps another $200k in the accounts.

ETA:

It does look like buying what you're talking about would have a significant impact on your FIRE situation.  You're at around $800K in financial assets and you're probably two years away from the FI part of the journey, regardless when you might choose to RE.  Putting ~$300k into a condo or similar might set you back about four years if you didn't have a plan to sell it as part of a future downsizing.  It's all about choices, though and that choice might work for you, even if it didn't pan out to be the best financial move (although it might, you never know how the real estate market is going to do).

As far as any housing buy vs rent question goes, there are decent comparison calculators out there (including the NY Times'), just be sure you are comparing apples to apples.  I think the rule of thumb is that it's generally not the best financial move to buy if you're not planning to stay at least seven years, due to high transaction costs and ongoing costs (taxes, maintenance) associated with ownership.

I don't know if your taking a job that's nominally 'only' 32 hours would actually reduce the demands you'd be feeling from it.  I'd say either stay full time (either at your current job or elsewhere), go to a more reduced part time gig of maybe 15 hours/week, or FIRE/take a leave of absence.  You could essentially coastFIRE into FI in a couple of years (assuming you don't buy the condo).

Thank you jeroly for taking the time to share your thoughts! I really appreciate it!

I know there’s a lot of debate on SWR, but I also think I would be nervous on a 4% plan. Although it’s likely I would end up making some money here and there, I would still realistically sleep better at night knowing the plan is < 4%.

Can I ask you about how you came to the $783k in financial assets part? It looks like that’s everything listed above minus the rental and the syndication. We can ignore the syndication, but I am curious how you would consider/model the rental? Perhaps it doesn’t count towards NW, but in around 8 years it’ll be fully paid off and cash flow conservatively around 1k/mo, providing a 12k/year reduction in what I need to withdraw from the other accounts. Just genuinely curious on how others would model this, if not try to lump it into a generic NW to apply a 4% (or 3.x%) rule on (how I tried to look at it).

And - regarding your comment on taking something that’s “only” 32 hours perhaps not actually reducing the demands I feel… that is an excellent point and I suspect you might be really on to something there. I need to think about that part more.

[Freedomin5]

You’ve got some great advice from very wise folks.

One other consideration re: housing is whether you want a mortgage if you do buy again. If you want to leverage using a mortgage, then you should buy before you FIRE, while you still have a job. It’s a lot harder to qualify for a mortgage without a job.

[aajack]

Similar to what others have said, you have "F-U" money, but I don't think you are "FIRE", mostly because of the housing piece. You have more than enough money to start negotiating different responsibilities at work. If they don't give it to you, get another job that will. If I was making 170K/year and didn't like my job/employer working 40-50 hours/week, I would try to downshift to 3-4 days/week and make 75K/year.

Clarkfan - thank you for your thoughts!

This is great - a reality check is what I was looking for, and “FU Money” but not “FIRE” makes complete sense.

Using the financial cushion as an excuse to start guiding my work towards something more interesting (or at least less stressful) is something I have been thinking about a LOT lately. I think that will be easier said than done in a lot of ways, but I am definitely exploring ideas more and more lately.

Thank you for your input!

[Laura33]

First, don't consider the equity in the rental in your FIRE projections.  If you don't plan to sell, the equity is irrelevant, other than as a safety net.  For a rental, cash flow is what counts for FIRE.  Which basically means you're very borderline FIRE now, because the rental isn't generating any free cash, and in fact is sometimes an extra cost.  OTOH, you will be FIRE in another 7-8 years when he mortgage is paid off and adding another $12K+/- to your budget.  So you can either FIRE now, with the plan to cut your costs until the rental is paid off, and knowing you'll have more cash when that happens to buy a home/travel, or drop to part-time/find another job that isn't as draining in the interim.  Or, you know, sell the rental and invest the proceeds in the market.

On the work front:  if you want to focus in on being more like your coworkers and not letting work take over your life, do not start that process by talking to your manager.  You know the phrase "it's better to ask forgieness than permission"?  It's very very very true.  If you want to go to the gym in the middle of the day, just put all your messaging systems on "away" for an hour and go.  If you work with multiple different people, everyone will assume that you're tied up with someone else.  And as long as you get the work done, and no one is left in the lurch, no one will even notice.  (And then practice the noncommital responses if someone comments that you weren't there -- "yeah, I had to step out for a minute," "I was wrapped up in something else," etc.).

At one time, I found myself in a position where I was officially 80%, and the other folks in my class were officially 100%, but they had the same hours as me.  Yet they didn't get a pay cut, and I didn't get bumped up to where they were.  I was pissed.  But then I said, well, why wait until someone else recognizes the unfairness and tries to make it even?  I need to put the status quo in my favor.  So the next day I told them I was going full-time.  They were not happy -- it really is a flexible place, and I was one of their success stories, and they were unhappy that I felt like I had to go full-time to be paid fairly.  The managing partner called me to persuade me I could stay part-time.  And I repeated one of his favorite lines back to him:  "show me the money."  I asked him directly if they would have cut my pay that year if I had been at 100%, given my hours, and he said no.  So I said "then I'm 100%."

Now, I love this place -- still here after more than 2 decades, and it really is one of the fairest places I've known (and consciously tries to be so).  But think about that:  even the places that try to be fair and treat folks equally don't have the time/energy/systems to delve into each individual employee's circumstances.  If you are surrounded by coworkers who are routinely doing less than you and yet are still receiving the same compensation/bonuses/promotions,* then you are working much more than you're actually getting paid for -- you are giving them many more hours of your life than your coworkers are, for no additional pay whatsoever.  It's like you're volunteering for them an hour a day.  Why?  Why do that? 

Unwritten rules always mean more than written rules, so figure out what those are and how they can help you move closer to your goal.


*This is an important "if."  Someone may be very vocal about how he gets away with 30 hrs/week, but won't be so vocal about the fact that he's been put on a PIP and has one foot out the door.  Similarly, someone may look like they're only working 7 hrs/day because they leave at 5 to go home for dinner with the kids, but may then log back on and work for another couple of hours every night (my former boss/mentor did this -- he was open and adamant about leaving early enough to have dinner with the family, but then I noticed I'd get emails from him at like 1 AM).  Point is to do your best to figure out what people actually do, vs. hearing only what they say.