Author Topic: Case Study - Am I on the right track?  (Read 1483 times)

MrFire22

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Case Study - Am I on the right track?
« on: October 10, 2019, 02:50:53 PM »
All:

I'd like advice on my Fire Journey. Here's my info:


1. Life Situation: 35 year old lawyer in NYC. Single Debt free (paid off $150K in student loans 2 years ago). Graduated law school in 2008.
2. Income: $158K + $20-$40K bonus
3. Assets: $125K stocks (VTI, VYM, Facebook and Apple)
4. 401K: $25K from previous employer. My current job does NOT have a 401K, but they may set one up next year.
5. Rent: $1,200
6. Spending: Approx $1000 to $1,200 per month on food, groceries, entertainment, utilities, personal travel. I know I could probably cut this down.

After tax, I get about $8K per month. $5K of that goes to an ETF like VTI. I know I could probably get better on eating out less and cutting down my expenses. I make too much for a ROTH IRA, but my job may begin offering a 401k going forward. Its a small law firm that just started out and growing rapidly. I'm tracking my spending with Nerdwallet.

Anything else that I should be doing? I hear after the first $100K saving becomes easier due to compounding / dividends reinvesting themselves. My goal is to become FI by age 40 maybe age 42. I expect salary to increase and cost of living to maintain the same / slightly more due to inflation over the next few years.

When I do become FI, I plan on living abroad. Top contenders: (Brazil, Mexico, and Philippines). Living abroad for most of the year and maybe coming back to NYC in the summers. I know NYC is expensive, but I was born and raised here. Family and friends here.

Thoughts?

Bernard

  • Stubble
  • **
  • Posts: 153
  • Age: 61
  • Location: Ojai Valley, Calif.
Re: Case Study - Am I on the right track?
« Reply #1 on: October 10, 2019, 10:40:23 PM »
I'd say you are doing VERY well!
Your savings rate is over 60%, and that on a very high income in a HCOL area.

In regard to retirement destinations, look into Portugal (no income tax for 10 years on foreign sourced income) and Thailand . . . instead.

ericrugiero

  • Stubble
  • **
  • Posts: 159
Re: Case Study - Am I on the right track?
« Reply #2 on: October 11, 2019, 06:45:30 AM »
You should be able to do a backdoor Roth IRA. 

oldmannickels

  • Stubble
  • **
  • Posts: 201
Re: Case Study - Am I on the right track?
« Reply #3 on: October 11, 2019, 07:05:32 AM »
Just some quick math. (1200+1200) x 12 months = 28,800 Annual Expenses

28,800 / .04 = 720,000 Total Stash Needed

720,000 - 308,000 = 412,000

So you need to save/earn $412 over the next 5 years so lets say save about $75,000 per year.

The $8k you take home is that after 401k because the $5k you are saving monthly after tax won't get you there by 40.

Something I don't see in your spending is healthcare.

Like someone else said if you old 401k is still in the 401k you could do a backdoor Roth IRA.

MrFire22

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Case Study - Am I on the right track?
« Reply #4 on: October 11, 2019, 07:55:03 AM »
That's true, that's why I said 40-42 years old! Haha. The 8K is after healthcare, HSA, and Flexible spending accounts. Also, I get a bonus each year of $20-40K (after taxes that is about $13K to $26K). Also, I assume that I will see some growth in salary throughout the years. Plus natural growth of the stash throughout the years sitting in the stock market. My expenses / rent should come down once I leave NYC too.


Any one have some good material on the pros and cons of a backdoor IRA? I googled it, but if anyone has a trusted resource, I'd appreciate it!

oldmannickels

  • Stubble
  • **
  • Posts: 201
Re: Case Study - Am I on the right track?
« Reply #5 on: October 11, 2019, 01:14:27 PM »

Any one have some good material on the pros and cons of a backdoor IRA? I googled it, but if anyone has a trusted resource, I'd appreciate it!

The backdoor Roth IRA is just a Roth IRA so its advantages are the same as any Roth account. Here's a good article. https://www.physicianonfire.com/backdoor/


Laura33

  • Handlebar Stache
  • *****
  • Posts: 2384
  • Location: Mid-Atlantic
Re: Case Study - Am I on the right track?
« Reply #6 on: October 11, 2019, 05:20:59 PM »
Do a traditional IRA until they start a 401(k).  At your income level and with no deductions, any tax deferred growth you can get will pay off in the end.

MrFire22

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: Case Study - Am I on the right track?
« Reply #7 on: October 14, 2019, 12:17:11 PM »
Good idea Laura. I just read up on the tax benefits. I have a traditional IRA setup from a rollover from my prior employer. I'll start there!