Oh...and one other thing...in about one more year of FTE employment, I'll be eligible for a one-year (unpaid) sabbatical. The timing just might work out where I could go on sabbatical, and take this plan for a test-drive, and if there's too many bumps I would have the option to return to the juicy office politics with a comfortable chair and a nice salary...but by then I would've given up a very lovely home, which my children and I do enjoy living in!
This seems like an excellent opportunity; I was going to suggest trying an FMLA leave for just such a test drive, without shutting you out of your current job. But the sabbatical would be so much better. Will you have health insurance available during this time? That would also be a good benefit, and give you time to look through options.
You talk about this being centered around spending time with your young kids. How long are you really thinking? If you are looking to see them off to school, then you have a maximum of 5 years, and your taxable account could handle your reduced expenses all by itself--no worries, do it!
But if you are thinking that this will be the bridge condition to an early retirement, you are right to dig deeper. One thing I would say is that you don't necessarily need to pay for the new house with cash; you could find a mortgage level that keeps you around your tax limit, but that would allow you either a multi-year cash cushion or additional taxable investments you could make to take a shot at moving to retirement rather than returning to full-time work. Certainly, a paid-for house is a good thing, but the optionality may be valuable, too. (as in, you need an emergency fund that could pay for a roof leak / broken AC / whatnot without inducing you to make a taxable withdrawal)
I looked more into the sabbatical option today, and if I'm understanding the policy, I can continue getting health insurance while on sabbatical. But I remember a colleague mentioning that while on sabbatical, the health insurance is via cobra...which I know is very expensive.
An ideal state for me, would be to stay in my profession, but work part-time, set my own hours, and work from my home office. I would also like to feel like working is optional, not a requirement. I don't want my lifestyle to be dependent on finding consulting work, or staying glued to a home office during times when I would rather travel, or immerse myself in a hobby/project.
As for my kiddos, I have about 9 years before they're grown-ups, so I'm thinking this needs to be a pretty solid plan.
My reasoning for paying cash for a home instead of having a "small mortgage", was to be able to limit my yearly expenses, which in turn, should decrease my income, and taxes owed.
If I am understanding the Federal LTCG tax bracket, I don't pay any cap gains tax until I reach $52,750 in CG. It seems to me that if I must liquidate equities to cover a mortgage, I might go over the $52,750 LTCG limit. Please set me straight on that if I'm misunderstanding. I guess it wouldn't be the end of the world to pay 15% in CG tax, but why do that if I don't need to?
As for emergency fund, I may consider a HELOC just in case SHTF.
Well, you certainly have the assets for FIRE now. And your read GCC. Have you considered the option of selling the home and renting in your area for the next 10 years? Then you could move somewhere cheaper. What’s the value in owning? If you have a million dollar home now, will it be 2mil in 10 years? If you invested that money is should double in 10 years. You’d also eliminate your property tax. You’ll never get that time with your kids back.
I couldn't agree with you more! I feel that every day is a day lost when I'm at the office and they're elsewhere.
I'm definitely considering selling my current home...that's actually the major change I'm willing to make to quit my FTE job. I'm not sure which home you're referring to, but the home I live in now, it's reasonable to expect WILL be "worth $2M" in 10 years. My $1.6M current estimate is very conservative, and I suspect would probably fetch a higher price, but I don't want to plan on that.
In my area, home prices over the last 20 years have steadily risen 3.5% on average, per year. I live in one of those HCOL areas where lots of news reports discuss the insane housing situation. I feel that having a solid housing plan is very key to surviving in my area (especially for someone like me, who hates to move!).
Would I earn more than that in the stock market? Probably...but I want to stay where I am to be close to the important people and activities in my life. Homes in the >$900K range have HOA fees, which I don't want to pay...
Renting in my area is something I have considered, but the rental housing market is even more insane than home ownership. I prefer the certainty of home ownership...not depending on a landlord to continue owning the property, etc.
Essentially, moving to a smaller home I would get rid of all debt, and be able to keep my living expenses low enough to stay within the 0% LTCG tax bracket for single, HOH.
It may be worth mentioning, that my children do not want to move because of their friendships with neighbors...my home is the hub of activity for the neighborhood. My agent feels strongly that I should wait 2 years, and see how those friendships mature or if they become less important to my children. My agent also thinks this is a bad time to sell my home...she believes that the home prices "will soften a bit", and it's better to sell low and buy low because of the recurring property tax. I'm ok with waiting two years, and frankly, it almost seems like perfect timing if I want to take advantage of a work sabbatical.
Thank you
@MrThatsDifferent and
@reeshau for the thoughtful feedback...I welcome further discussion.
