Author Topic: Super Anxious Case Study (looking for a mentor)  (Read 5981 times)

firelyve

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Super Anxious Case Study (looking for a mentor)
« on: December 23, 2019, 09:12:46 AM »
I'm 46 and looking to FIRE in under 6 months (5-31-20), with wife following at end of 2020.  I didn't think I could really do this quite yet, but after reading this forum I said 'what the heck'!  However, I'm SUPER ANXIOUS about the possibility of checking out near the peak of the stock market which has been so generous to us (me) in the past few years.  I started my investing in earnest in 1999.  So even though through DCA I made a few $$$, I remember the period between 2000 and 2016 where the S&P 500/DJIA basically returned ZERO! 

I'm committed to this, because I can't see myself slugging it out at work any longer, even though there are some great things about my job.  I want the freedom to spend time with as I please and focus on my family. 

Is there someone that would take me under their wing, a mentor if you will, and help me transfer from accumulation mode to the next level?  Here's some details to start with as of 6-1-2020:

I'll have just turned 47 in May 2020, wife about to turn 39.  3 kids (19, 17, 8).  Married 2.5 years ago.  First child in college and paid for.  Second not college bound.  3rd we will contribute $60k to 529 plan. 

$87k mortgage; 12.5 years left of 15 year mortgage @ 3%.  Small 3 bedroom, 1 bath house (1008sf).  P+I = $700.  No other debt.

$530k in retirement accounts
   $114k Roth IRAs
   $416k in 401k

$906k in non-retirement accounts
   $452k in various DRIPs (probably 100 companies-too many; I know, I know...)
   $243k in 4 brokerage accounts (too many; I know, I know...)
   $157k in 2 cash accounts (1.6-1.82% interest; just sold one home)
   $39k in 2 CDs (2 Yr and 4 Yr Ally 'Raise Your Rate'; @ 2.35%)
   $15k in Worthy Bonds (5% I; guaranteed and reinvesting interest-as long as
               company is solvent LOL)

$12k HSA

Budget is about $42,000 per year + $5000 per year for next 10 years for last child's 529 plan.  Got some good pointers on budget from this forum already, and current budget has A LOT of fluff, but we want to live extravagantly compared to others here LOL!

Housing:  $1200/mo
   $700 P+I
   $200 T+I
   $300 yearly repairs
Utilities:  $300 (including internet/streaming services)
Car:  $525
   $150 insurance (for 2 cars; 19 yr old ruined my rates LOL!)
   $75 gas
   $50 repairs
   $250 new car (every 7 years IF NEEDED)
Groceries, Clothes, Personal items:  $500
Health Care:  $275
   Health Insurance on Xchange:  $100??
   Gym: $50
   Life Insurance:  $75
   Vision/Dental:  $50??
Cell Phones:  $100 (x2; wife locked in for 2-3 years, I'm Googlefi for under $35/mo)
Misc/Entertainment:  $600 (BIG CUSHION)

Welcome to hear suggestions about cutting budget, like getting rid of life insurance.  We just got policies a few months ago (each $500k) because it was a goal we had before I decided to read this website and FIRE.  Car number will come way down in a few years after we don't need 2 cars (as no one will be commuting to work) and teen's tickets will evaporate from our policy.  Cutting expenses and saving for me has never been a big issue. 

For the first 7 years after we FIRE starting in 2021, we'll have an additional $19k coming in beyond our investment stash, and then $11k in year 8, and $5.5k in year 9.   

I've also lined up a PT gig that will make $20-$30k with about 2-3 hours of work per day from home IF it works.  It's a sales job, so need to make sure that if I leave my industry FT my contacts still work.  I'd say it's a 50-50 shot it works for at least a few years.  I just started this in November, so I'll know if it works by beginning of 2021 or sooner.

I'd like to keep $150-$200k in cash to start a house flipping business.  Not looking to make much more than interest on the cash, but hoping the son that is not college bound learns some hands on skills and takes an interest.  Will be working with his biological father.  Planning on making 8% per annum on any capital invested, and if they need a pair of hands to help $20 per hour.  Think my wife would like to help with this too, both of us just a few hours per week if needed.  At 8% per annum, I'm assuming 4% return yearly before tax on this money, as I don't think they'll be very aggressive as son is in HS and biological dad has a FT job.

Here's what keeps me up at night:

1. Should I pay off my mortgage?  Lots of moving parts to make this decision. 

2.  Investing questions.  Who is the right (low cost) online broker to use?  Should I jsut invest the majority in index funds or other low cost funds?  How to protect against downside risk?  My two options seem to be some type of glide path where I have less in stocks and more in cash early in retirement and move more into stocks over next 20 years, or something like options. 

My DRIPs were a blessing as many years ago I started with only a few dollars a month and could invest with zero fees.  If a stock I held dipped I typically just added $50 or $100 and just let the dividends reinvest.  There may be some fees as I get out of these positions, but I do a very similar thing with Folio First and it has worked out nicely.  With many brokers now having $0 trading fees, I could pretty much do this with any company I please.  I'd reduce the number of companies I invest in, but every time I had a few extra $$ I'd look for an opportunity and throw a few more bucks into a position.  Is this better than just doing the same with an index fund? 

Is there a way to not worry so much about this piece, so I don't exchange my FT job for managing my money many hours per week? 

My goal is to live off the returns off my investments and at worse never touch the principal. 

3.  Should I invest in some type of annuity to defer taxes with a guaranteed income on a portion of my non-retirement assets?  10 year annuity from Gainbridge is at 4% no fees.  Could access money with 10% penalty on gain from IRS if life got ugly after a few years.  Thinking about $100-$250k going into this.

4. How to not screw up and make too little money/too much money to qualify for best ACA low cost insurance.  I refuse to go on Medicaid, but I can't afford decent health insurance without a big subsidy since rates have gotten stupid in the past few years and won't have a company to help absorb some of those costs. 

5.  Do I include my son in community college as part of household?  Do I have to include his income from PT job?  He has insurance from biological father.  All tax/ACA subsidy related.

6.  On most of the FIRE calculators, it says I'll be fine no worries.  I read somewhere these calculators including inflation.  Things like health insurance, taxes, home insurance, car insurance, are zooming up crazy over the reported rate of inflation (under 2%) by several fold.  Does this concern anyone? 

7.  Should I even worry about the PT job/side hustle? 

I know that all the information is probably at my fingertips and with others help here on this forum I could find.  My issue is I still have to try to focus on a very stressful (to me at this point in my life) job that requires lots of hours for the next 5 months.  I will not probably sleep until I feel more comfortable that I have a very solid plan to answer the above questions.  Someone that could deep dive with me or just go into my specifics more in depth would feel like a life line right now.  I know it's a big ask, but I'd be so willing to pay it forward and do the same for others in a few years once I made it through the other side in one piece. 

All suggestions welcome, but if there is a Jedi master out there willing to take on a student, I'm here.  Willing to answer anything on this post or private message.

Thanks all so much!!

happy

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #1 on: December 23, 2019, 06:36:53 PM »
If you are anxious, IMO your best safety net is your PT gig. ( or some other PT gig that you and/or your wife undertake.). 50k a year expenses would drop to 20-30k a year expenses if you managed to earn 20-30k from it. Re-do your math using that as your retirement expenses and see what a difference it makes. Even if you only do this for a few years it will get you through a critical period for sequence of returns risk, which I think is one of your concerns.

Cassie

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #2 on: December 23, 2019, 06:42:52 PM »
Do you plan to travel?  You will also have more free time and energy so may want to have more experiences. Have you actually lived on your proposed budget?

freya

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #3 on: December 23, 2019, 08:51:02 PM »
Looks like you are fine to FIRE if your budget is realistic.  Let's say you plan to spend $50K/year going forward, which will give you plenty of travel funds after you're done contributing to the college costs and a bit more cushion than you've planned.  That would require a stash of $1.25 million, and you're at $1.4 m.  And, in a bit over 20 years you get to draw Social Security, which will rescue your portfolio if you get unlucky with the stock market.

The one place I would question in that budget is health insurance and costs.  $100/month seems very unlikely even with Obamacare.  Have you gotten some actual estimates?

As far as investments...I would leave the stocks alone.  They've probably appreciated enough that selling them could trigger serious capital gains taxes.  Use your tax-free space to Roth-convert your tax-deferred accounts instead.  But, I suggest two things:  Set the dividends to go to cash, instead of reinvesting.  If you have any that show losses, you could sell now to tax loss harvest for 2019 (your last full year earning a paycheck), then put the proceeds into an index fund (S&P 500 is fine).

Second the suggestion to go into retirement with a healthy cash cushion.  5 years expenses is a good conservative goal.

Whether you pay off the mortgage is a personal choice.  Given the low rate, letting it ride would be likely profitable for you, on the other hand it's a small amount and you'll probably be very happy to get rid of it.  Just make sure you don't incur taxes for selling assets or leave yourself with too little cash in the process.


Body Surfer

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #4 on: December 24, 2019, 11:26:03 AM »
Hello. I like that you have approx $200K in cash. I would use that to ride out rough market time frames and as a general safety net. If you are going to buy homes and resell I would use separate cash holdings for that. I personally would not retire until house is paid off- be debt free. The big concern is healthcare and its insane costs. I would research costs more in depth. Your expenses are more likely to be mid $50K's. Retiring now is doable but a bit risky.

six-car-habit

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #5 on: December 24, 2019, 03:41:04 PM »
 I'm just going to chime in and say, because i didn't see it addressed.
 If you paid for 1st kids college already, and you are going to pay for 3rd kids college to the tune of 60K -- you should really consider setting aside $60K for middle child as well. Whether it pays for some technical school, diesel mechanic classes, dental hygenist, bakers apprentice, world sightseeing trip, home downpayment, etc.
 
 Some kids aren't cut out for , or aren't interested in going to college.  Significantly giving 2 kids a boost, and not the 3rd, because they profess no interest in college, will end up in resentment, in the long run.  I saw you mentioned hiring them at $20hr for 'home flipping' - I suppose that is a good start if it works out to $60K in earnings for them.

 Confused about what you wrote about middle son working with/for biological dad in the house flipping scheme, which you will be partially capitalizing ?  { seems like a situation rife with potential issues } { Who is paying the 8% on invested capital , the-Ex ? , who is on the title to properties - everyone ?}

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #6 on: December 24, 2019, 08:20:23 PM »
You probably don't need the life insurance -- both of you should check your SS benefits to see what survivor benefits would be for a surviving parent and minor children.  Probably more than enough to cover any shortfall in your FIRE stash through when the youngest launches.

Your estimate for annual housing repairs seems low -- typical estimate is 1% of house value.

Re: worries about a crash, you should be fine with nearly 1.5 million and 40-50k in expenses, especially considering you likely will keep bringing in some income for the next few years.  If you are really worried you could keep 3-5 years of expenses in lower-risk pots -- cash, bonds, etc.  That should be enough to ride out any recession without having to cash out investments.

Do you have experience flipping houses?  That can be a pretty high-risk activity.  I would only do it if you were willing to hold the properties as rentals if the market tanks before you can sell, and if the rental market in your area is fairly strong.

I'm a bit concerned about your comment that the markets returned effective 0% from 2000-2016.  I don't believe that was the case if you were actually dollar cost averaging during that period....

Thanks for your comments, as with everyone else, thanks! 

I'll look into survivor's benefits for SS as substitute for life insurance.  Was only vaguely aware of and didn't even think about.

House value is under $170,000.  That would put 1% at $1700 per year, and I'm budgeting $3600 ($300/mo) so I should be good here I hope.

Don't have experience flipping houses but do have experience with rental properties, having at one time say 6 or 8 properties.  I would only be doing on flip at a time.  I'd be very cautious of continuing if the housing market started to go south and stop.  I would be able to hold a rental for a few years if I had to.

When I state the market indexes returned nothing from 2000-2016, I don't mean with dividends reinvested for DCA.  I mean the number was about dead even.  I double checked my numbers and found that it was more like from 2000-2013 (instead of 2016, too pessimistic) where the S&P went from about 1500 up and down and up and down back to 1500.  That's not a problem when you are still accumulating, but if you are no longer adding but need to withdraw during this time and live off of the interest it could be a challenge.  Especially from 2000-2009 where the market went from 1500 to under 700 before the rocket run up since the bottom.

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #7 on: December 26, 2019, 08:02:10 AM »
Do you plan to travel?  You will also have more free time and energy so may want to have more experiences. Have you actually lived on your proposed budget?

Right now, with an 8 year old, we aren't looking to do much travel at least for the first 10 years.  After that, if the stash looks good, I think my wife might like that.  We're both pretty much home bodies so there isn't a huge pent up demand for travel yet.  I live on the road for work, so not traveling will actually be good for me for several years lol!  Being as young and healthy as we are, that could easily change as we get into our retirement.

We live pretty close to this budget with some big exceptions.  Car costs are higher now as she is commuting daily to work.  Our healthcare costs now are higher as well as we have jobs and get coverage through work with no subsidies.  Our entertainment budget is higher because we both work FT and for convenience sometimes eat out, but that's only maybe $50-$100 more tops per month eating out.  Internet/cable bill is about $75 higher per month now.  Wife was locked into a plan that ends in January and we won't be having the bundle with TV (retaining streaming services which we use mostly) and phone service (don't even have a house phone). 

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #8 on: December 26, 2019, 08:17:59 AM »
Hello. I like that you have approx $200K in cash. I would use that to ride out rough market time frames and as a general safety net. If you are going to buy homes and resell I would use separate cash holdings for that. I personally would not retire until house is paid off- be debt free. The big concern is healthcare and its insane costs. I would research costs more in depth. Your expenses are more likely to be mid $50K's. Retiring now is doable but a bit risky.

Thanks for the helpful comments. 

I could payoff the mortgage, but the question is at fixed 3%, does it make sense to invest the under $90,000 somewhere else for a better return?  If I pay off mortgage, my stash drops from like $1.4MM to $1.3MM and my monthly budget requirement drops between $8000 and $9000 per month (the principal and interest portion of mortgage). 

Here is the calculator that I used to determine my health care costs and the inputs:

https://www.kff.org/interactive/subsidy-calculator/#state=va&zip=23831&income-type=dollars&income=36000&employer-coverage=0&people=4&alternate-plan-family=&adult-count=2&adults%5B0%5D%5Bage%5D=21&adults%5B0%5D%5Btobacco%5D=0&adults%5B1%5D%5Bage%5D=21&adults%5B1%5D%5Btobacco%5D=0&child-count=1&children%5B0%5D%5Bage%5D=0&children%5B0%5D%5Btobacco%5D=0

I think the trick is to get the income to be right about $36,000 per year.  Interest, PT work, capital gains and dividends.  If I make too much, the subsidy starts to fall off and the benefits also fade.  If I make too little, then the subsidy also goes down.  I can always do the back door Roth to regular IRA conversion to show more income and stay in this $36,000 area.  If I make too much money, however, that's a little different.  Making up the gap of interest, dividends, and PT work would be easy by selling some investments or using cash.  Using cash no tax implication, selling investments would be taxable event unless I had some assets that had little or no gains, or even a loss if needed. 

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #9 on: December 26, 2019, 08:48:01 AM »
I'm just going to chime in and say, because i didn't see it addressed.
 If you paid for 1st kids college already, and you are going to pay for 3rd kids college to the tune of 60K -- you should really consider setting aside $60K for middle child as well. Whether it pays for some technical school, diesel mechanic classes, dental hygenist, bakers apprentice, world sightseeing trip, home downpayment, etc.
 
 Some kids aren't cut out for , or aren't interested in going to college.  Significantly giving 2 kids a boost, and not the 3rd, because they profess no interest in college, will end up in resentment, in the long run.  I saw you mentioned hiring them at $20hr for 'home flipping' - I suppose that is a good start if it works out to $60K in earnings for them.

 Confused about what you wrote about middle son working with/for biological dad in the house flipping scheme, which you will be partially capitalizing ?  { seems like a situation rife with potential issues } { Who is paying the 8% on invested capital , the-Ex ? , who is on the title to properties - everyone ?}

Thanks for your suggestions.  The more eyes and view points, the better.

As far as I see it, my middle (step) son is just not wired for class room education.  So my thought is that if his biological dad and I do something hands on with him (repairing/flipping houses) this might be an avenue for him.  A lot has to do with what he wants to do.  If he takes to it, fantastic, if not, then that is his choice.   

I can't figure out a way to make an 'equal' contribution to each child.  I came in way late in the game for the kids as the step parent (16, 13 and 5), so some paths were already pre-determined.  Oldest child has GI bill from biological father for 3 years of school.  I've shown him how to make that actually pay for 4 years (2 years community college, 2 years 4 year university).  Middle son lives with biological dad.  Youngest daughter (now 8) we've worked hard with to get on track to do well in school (all 3 kids struggle with school) and is now on A/B honor role. 

Some of what I have tried to do is a combination of need and earn for each child.  First son doesn't need any help, so I don't think I should just give him $60,000 because I might give to another child for education.  Second son, if he wanted to, I'd drop $60,000 for school.  I wouldn't give any of my kids just a hunk of cash at this point and say it's for whatever you want.  My compromise with him is the house repair/flipping as kind of an educational program.  The youngest is on a path for college, so she'll have the $60,000 in a 529 waiting.  If she doesn't use, then I'm not just going to give to her.  My hope is that what ever my wife and I have left my kids will get in a trust/transfer of some type.  We're not sure how to do that, but I don't want it to be that they slack because they think they are covered.  I want them to learn to be responsible with their lives and finances.  That's a whole other conversation which I'm willing to get into but not quite yet. 

The biological dad for the middle son, who lives with him, is a good guy.  I have experience with rental properties, which is much different than flipping I know.  The other dad has lots of physical skills but no capital.  Yes, I'm looking to capitalize on the cash used to finance the business adventure, but that is part of me teaching my (step) son that nothing is free.  All profits after the cost of capital will be given as wages to son and profit for other dad.  It will all be in my name.  I take the risk.  Yes, it could be fraught with perils, but my plan is to make things well documented from the start.  Other dad does not want to be involved at this point with the financial concerns. My eventual hope is that our son likes working with his hands, learns some business principles and earns an income, that would be amazing.  Yes, it could all backfire, but I think I can manage that risk. 

frugal_c

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #10 on: December 28, 2019, 10:33:14 AM »
How much social security would you get at 66?  I guess that between that cushion and your pt gig and this mystery money you get for the next while, that you will be ok.

I wouldn't get involved with the home flipping if you are coinvesting, just too many risks between the market and a business partner.  That's just a pure business perspective, if you have other motivations then so be it.  You should have a contract at least.

Quote
2.  Investing questions.  Who is the right (low cost) online broker to use?  Should I jsut invest the majority in index funds or other low cost funds?  How to protect against downside risk?  My two options seem to be some type of glide path where I have less in stocks and more in cash early in retirement and move more into stocks over next 20 years, or something like options. 

You should probably move some of your interest bearing investments to your retirement accounts.  The taxable account should be focused on equities and yes specifically on ETF's.  If you want to protect your portfolio with options, do it in the taxable account so you can at least use it as a capital loss.  In the event the put's payoff you should have losses in the taxable anyways so it shouldn't trigger too many taxes if there is a crash.  Unfortunately everyone is looking for downside protection so put's aren't cheap right now.   I personally have a tiny amount in deep out of the money puts (in case we get hit by the "big one" :)  and otherwise keep a reasonable chunk in shorter duration bonds.

I would slowly sell down your 100+ investments, you can start now with anything that doesn't have a capital gain but otherwise wait until the tax year after you retire to start.  It is just too much to keep track of, it will be like a second job to take care of that.  With that many investments, unless you have some god like skills, you are just going to more or less track equity indexes so you might as well just buy an index.

You are heavily weighted towards the taxable accounts, have you really maxed out all of your retirement account options?
« Last Edit: December 28, 2019, 11:17:27 AM by frugal_c »

six-car-habit

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #11 on: December 28, 2019, 10:41:41 PM »
Thanks for the answer to my query and suggestion, explaination of your involvment/marriage vs kids ages, -makes more sense now - the house flipping, biological father connection also.

 I bring up the potential resentment because i saw it in my family, younger sisters got minmal help for college. Younger brother had much $$ spent on his sports, tournaments, travel, equiptment, which did parlay into a partial scholarship, and then parents helped with uncovered costs while in college. Sisters resent the amount of time and $$ given, getting the brother an advantage, while they ended up with student loans to pay off.

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #12 on: January 01, 2020, 07:53:05 PM »
How much social security would you get at 66?  I guess that between that cushion and your pt gig and this mystery money you get for the next while, that you will be ok.

I wouldn't get involved with the home flipping if you are coinvesting, just too many risks between the market and a business partner.  That's just a pure business perspective, if you have other motivations then so be it.  You should have a contract at least.

Quote
2.  Investing questions.  Who is the right (low cost) online broker to use?  Should I jsut invest the majority in index funds or other low cost funds?  How to protect against downside risk?  My two options seem to be some type of glide path where I have less in stocks and more in cash early in retirement and move more into stocks over next 20 years, or something like options. 

You should probably move some of your interest bearing investments to your retirement accounts.  The taxable account should be focused on equities and yes specifically on ETF's.  If you want to protect your portfolio with options, do it in the taxable account so you can at least use it as a capital loss.  In the event the put's payoff you should have losses in the taxable anyways so it shouldn't trigger too many taxes if there is a crash.  Unfortunately everyone is looking for downside protection so put's aren't cheap right now.   I personally have a tiny amount in deep out of the money puts (in case we get hit by the "big one" :)  and otherwise keep a reasonable chunk in shorter duration bonds.

I would slowly sell down your 100+ investments, you can start now with anything that doesn't have a capital gain but otherwise wait until the tax year after you retire to start.  It is just too much to keep track of, it will be like a second job to take care of that.  With that many investments, unless you have some god like skills, you are just going to more or less track equity indexes so you might as well just buy an index.

You are heavily weighted towards the taxable accounts, have you really maxed out all of your retirement account options?

I fall into the full social security bracket at age 67.  My calculations if I don't work at all past the next 5 months is that I collect $2500 per month at 67.  The PT gig is something that may or may not work.  I'm hoping to figure out a way maintain my capital even if that falls through. 

I know there are huge risks with flipping and taking on a partner.  The multiple comments/reactions from the responses will give me cause for pause.  I can say that I'll only be taking on one project to start, and not looking to make very much on it.  If it turned out I would continue flipping.  If not, I would hold as an investment property until I could sell. 

I worked for about 8 years for a company with no 401k.  As soon as I joined the workforce, I always put something in my 401k, and as soon as feasible put in 100% the yearly max.   Some years I couldn't put very much into my 401k because of the draconian 'highly compensated' rules.  I didn't make a ton, but the companies I worked for were in the hospitality industry where 90% of the employees were servers/tipped employees. Since they didn't make much and weren't contributing, I got hosed.  I normally put the yearly max in my Roth IRA since 2000, but I think I missed a couple of years.  Back then you could only put in $2000 per year.  Some years I couldn't put anything in a Roth because I made too much income.  I have a low deductible health insurance plan, so I put max in my HSA for the past few years since i found out these plans were available. So I did what I could with after tax investment.

I want to pare down my individual stock holdings as quickly as possible but as you said it will probably take several years so I don't get smacked with taxes. My question is who to go to-Fidelity, Schwab, or Vanguard?  The first two have no trading fees.  Vanguard as no ETF and Vanguard fund fees with a generous payment on cash in account (sweep) not invested, but if I have other stocks sales and/or purchases may cost.  The DRIP accounts worked well 20 years ago for accumulating, but are now very unweildy.  Options seem a bit complex, as I've been a buy and hold guy for so long, but it sounds like I'll have to educate myself on them for downside protection.

The thought was to keep quite a bit of cash/interest bearing investments in my taxable accounts in order to have income to qualify for ACA subsidies as well as have cash in case the crap hits and fan and I don't want to sell my investments with short term losses so they can grow when the market returns.  If I don't show between $30,000-$36,000 of income in my taxable accounts then my subsidies and coverage can take a hit. 

I'm also not very worried about paying taxes.  If I make $30,000, I'll probably pay close to $0 in taxes.  With over $24,000 (married) in standard deduction and a $2000 tax credit for a dependent under 16, I'd have to make over $40,000 in income that is ordinary (non-qualified dividends, interest or earned income) to pay any taxes.  LT gains and dividends under like $80,000 total in income would have no taxes required.

Thanks again for the helpful comments/suggestions.


firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #13 on: January 01, 2020, 08:02:43 PM »
Thanks for the answer to my query and suggestion, explaination of your involvment/marriage vs kids ages, -makes more sense now - the house flipping, biological father connection also.

 I bring up the potential resentment because i saw it in my family, younger sisters got minmal help for college. Younger brother had much $$ spent on his sports, tournaments, travel, equiptment, which did parlay into a partial scholarship, and then parents helped with uncovered costs while in college. Sisters resent the amount of time and $$ given, getting the brother an advantage, while they ended up with student loans to pay off.

Trying to have equality of anything with kids is tough.  In a blended family situation with multiple parents, it's a mess!  I don't want to give my middle kid a hunk of money that he isn't going to use for educational purposes.  Having an 8 year gap (nearly 6 and 14) when I came into the picture makes it even tougher.  The 529 will be put aside for the 8 year old for education only.  If they don't use for that purpose, I'll take the tax hit and reclaim.  If the middle son in a few years finds his way and needs some type of training, I'll do anything I can.  I offered all the kids the opportunity to get involved in any extra-curricular activities they wanted (music, sports, etc.) and I would pay.  Only the one child (8 year old) took me up on it.  I wish they all did, but they didn't.  My parents didn't pay for my activities once I left HS, and I wouldn't expect to do that for my kids either. 

In any event, I appreciate the advice to be cautious of how the kids may see unequal treatment.  Thanks!

Villanelle

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #14 on: January 01, 2020, 08:23:56 PM »
I'm just going to chime in and say, because i didn't see it addressed.
 If you paid for 1st kids college already, and you are going to pay for 3rd kids college to the tune of 60K -- you should really consider setting aside $60K for middle child as well. Whether it pays for some technical school, diesel mechanic classes, dental hygenist, bakers apprentice, world sightseeing trip, home downpayment, etc.
 
 Some kids aren't cut out for , or aren't interested in going to college.  Significantly giving 2 kids a boost, and not the 3rd, because they profess no interest in college, will end up in resentment, in the long run.  I saw you mentioned hiring them at $20hr for 'home flipping' - I suppose that is a good start if it works out to $60K in earnings for them.

 Confused about what you wrote about middle son working with/for biological dad in the house flipping scheme, which you will be partially capitalizing ?  { seems like a situation rife with potential issues } { Who is paying the 8% on invested capital , the-Ex ? , who is on the title to properties - everyone ?}

Thanks for your suggestions.  The more eyes and view points, the better.

As far as I see it, my middle (step) son is just not wired for class room education.  So my thought is that if his biological dad and I do something hands on with him (repairing/flipping houses) this might be an avenue for him.  A lot has to do with what he wants to do.  If he takes to it, fantastic, if not, then that is his choice.   

I can't figure out a way to make an 'equal' contribution to each child.  I came in way late in the game for the kids as the step parent (16, 13 and 5), so some paths were already pre-determined.  Oldest child has GI bill from biological father for 3 years of school.  I've shown him how to make that actually pay for 4 years (2 years community college, 2 years 4 year university). Middle son lives with biological dad.  Youngest daughter (now 8) we've worked hard with to get on track to do well in school (all 3 kids struggle with school) and is now on A/B honor role. 

Some of what I have tried to do is a combination of need and earn for each child.  First son doesn't need any help, so I don't think I should just give him $60,000 because I might give to another child for education.  Second son, if he wanted to, I'd drop $60,000 for school.  I wouldn't give any of my kids just a hunk of cash at this point and say it's for whatever you want.  My compromise with him is the house repair/flipping as kind of an educational program.  The youngest is on a path for college, so she'll have the $60,000 in a 529 waiting.  If she doesn't use, then I'm not just going to give to her.  My hope is that what ever my wife and I have left my kids will get in a trust/transfer of some type.  We're not sure how to do that, but I don't want it to be that they slack because they think they are covered.  I want them to learn to be responsible with their lives and finances.  That's a whole other conversation which I'm willing to get into but not quite yet. 

The biological dad for the middle son, who lives with him, is a good guy.  I have experience with rental properties, which is much different than flipping I know.  The other dad has lots of physical skills but no capital.  Yes, I'm looking to capitalize on the cash used to finance the business adventure, but that is part of me teaching my (step) son that nothing is free.  All profits after the cost of capital will be given as wages to son and profit for other dad.  It will all be in my name.  I take the risk.  Yes, it could be fraught with perils, but my plan is to make things well documented from the start.  Other dad does not want to be involved at this point with the financial concerns. My eventual hope is that our son likes working with his hands, learns some business principles and earns an income, that would be amazing.  Yes, it could all backfire, but I think I can manage that risk.

The post 9/11 GI Bill is time-based, not money based, so going to a cheaper community college doesn't save or extend anything.  That said, while it looks like it is only 3 years, time not in school doesn't count (summer, winter break, even a short spring break) so it is basically intended to cover 4 years of college. 

If he doesn't think he will be able to finish everything in 4 years/8 semesters, then it would make sense to do one year at a community college and pay for that with cash and scholarships, then use the time on the GI Bill for the more expensive university tuition. 

Lkxe

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Super Anxious Case Study (looking for a mentor)
« Reply #15 on: January 01, 2020, 09:23:05 PM »
I'm just going to chime in and say, because i didn't see it addressed.
 If you paid for 1st kids college already, and you are going to pay for 3rd kids college to the tune of 60K -- you should really consider setting aside $60K for middle child as well. Whether it pays for some technical school, diesel mechanic classes, dental hygenist, bakers apprentice, world sightseeing trip, home downpayment, etc.
 
 Some kids aren't cut out for , or aren't interested in going to college.  Significantly giving 2 kids a boost, and not the 3rd, because they profess no interest in college, will end up in resentment, in the long run.  I saw you mentioned hiring them at $20hr for 'home flipping' - I suppose that is a good start if it works out to $60K in earnings for them.

 Confused about what you wrote about middle son working with/for biological dad in the house flipping scheme, which you will be partially capitalizing ?  { seems like a situation rife with potential issues } { Who is paying the 8% on invested capital , the-Ex ? , who is on the title to properties - everyone ?}

Thanks for your suggestions.  The more eyes and view points, the better.

As far as I see it, my middle (step) son is just not wired for class room education.  So my thought is that if his biological dad and I do something hands on with him (repairing/flipping houses) this might be an avenue for him.  A lot has to do with what he wants to do.  If he takes to it, fantastic, if not, then that is his choice.   

I can't figure out a way to make an 'equal' contribution to each child.  I came in way late in the game for the kids as the step parent (16, 13 and 5), so some paths were already pre-determined.  Oldest child has GI bill from biological father for 3 years of school.  I've shown him how to make that actually pay for 4 years (2 years community college, 2 years 4 year university). Middle son lives with biological dad.  Youngest daughter (now 8) we've worked hard with to get on track to do well in school (all 3 kids struggle with school) and is now on A/B honor role. 

Some of what I have tried to do is a combination of need and earn for each child.  First son doesn't need any help, so I don't think I should just give him $60,000 because I might give to another child for education.  Second son, if he wanted to, I'd drop $60,000 for school.  I wouldn't give any of my kids just a hunk of cash at this point and say it's for whatever you want.  My compromise with him is the house repair/flipping as kind of an educational program.  The youngest is on a path for college, so she'll have the $60,000 in a 529 waiting.  If she doesn't use, then I'm not just going to give to her.  My hope is that what ever my wife and I have left my kids will get in a trust/transfer of some type.  We're not sure how to do that, but I don't want it to be that they slack because they think they are covered.  I want them to learn to be responsible with their lives and finances.  That's a whole other conversation which I'm willing to get into but not quite yet. 

The biological dad for the middle son, who lives with him, is a good guy.  I have experience with rental properties, which is much different than flipping I know.  The other dad has lots of physical skills but no capital.  Yes, I'm looking to capitalize on the cash used to finance the business adventure, but that is part of me teaching my (step) son that nothing is free.  All profits after the cost of capital will be given as wages to son and profit for other dad.  It will all be in my name.  I take the risk.  Yes, it could be fraught with perils, but my plan is to make things well documented from the start.  Other dad does not want to be involved at this point with the financial concerns. My eventual hope is that our son likes working with his hands, learns some business principles and earns an income, that would be amazing.  Yes, it could all backfire, but I think I can manage that risk.

The post 9/11 GI Bill is time-based, not money based, so going to a cheaper community college doesn't save or extend anything.  That said, while it looks like it is only 3 years, time not in school doesn't count (summer, winter break, even a short spring break) so it is basically intended to cover 4 years of college. 

If he doesn't think he will be able to finish everything in 4 years/8 semesters, then it would make sense to do one year at a community college and pay for that with cash and scholarships, then use the time on the GI Bill for the more expensive university tuition.

It is true that the GI Bill is time based, the young person in this scenario could and probably did live at home while attending jr college. The second year could be paid for with the housing allowance. That would leave the remaining months available for university. If that was also local the housing allowance could be used to pay for the remaining tuition needed. Been there, done that.


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« Last Edit: January 01, 2020, 09:29:41 PM by Lkxe »

firelyve

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #16 on: January 03, 2020, 10:21:16 AM »
Exactly the way we've guided him.  Pay for one year of CC with GI Bill, pay for 2nd year of CC with the GI Bill stipend and out of pocket the rest (should be $0), and pay for last 2 years at university with the remaining GI Bill.  He should get a 4 year degree with no cost to him.  Now, it's up to him to budget the living stipend and save it for tuition instead of blowing it on stuff.  We're keeping our fingers crossed he makes the right decision here!

Reddleman

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #17 on: January 06, 2020, 05:01:41 PM »
Just wanted to add about the house flipping idea.

This is a really difficult space to be in if you don't have experience.  I would set that far aside from your regular finances- like making a separate LLC to shelter the rest of your future from it.  Seriously.  It could be a winner or loser, but if the market goes down it is pretty sure to have a substantial impact on credit markets and house prices too.  Not the time to be facing a downturn with leverage. 

Also, 1% of house value for maintenance is a general rule, but that's assuming a more expensive house.  There have been many discussions on biggerpockets (real estate/rental discussion site) about realistic long-term costs.  Even with a well constructed, new-ish house, it is unlikely to run under $300 a month long-term.  Between personal properties and rentals, I would agree. 

tamuaggie2011

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Re: Super Anxious Case Study (looking for a mentor)
« Reply #18 on: January 07, 2020, 08:52:57 AM »
Overall there is a lot here to look at and the most specific answers would require more specific details to 100% tackle the nitty gritty but as a CPA my advice for you would be the following:

1. As others have said you are definitely in great shape to pursue retirement.
2. I think the biggest stress that you have really is that you are keeping track of so many different buckets and concerns
3. Tackle the concerns one at a time e.g. for example do your research into health insurance and then lock that expense down
4. From there once you have a truly comfortable yearly expense amount then focus on simplifying your holdings
5. How you go about it depends on the gain/loss of each DRIP and the amount you have in each company but having 100 is way too many. I would start by seriously looking at them and finding your top 10-15 companies. Once you have done that then based on tax position and income need (the exact process of course would require exact details but just to paint you a picture) begin to sell off the others until you only have those remaining
6. This will make things way easier for you to keep track of, give you some exposure to individual stocks which allows for slighly higher returns (though of course with higher variance), and also allows you the personal opportunity to still put a spare $50 or so into a company which seems to be a great personal habit for you.

Hope this helps and congrats on doing such a great job!