Long time lurker, first time poster here.
A little background about me
Male, mid 30s. I grew up in a poor country and a poor family, so I am naturally frugal (e.g. cook at home most of the time, don't have a car, can do without luxuries). I have no family, no children, no plans or desire to have them in the foreseeable future. I live in the US (HCOL area) and have a pretty good professional job which I don't like. I never liked any corporate jobs I had in my life mainly because I value my freedom and hate reporting to other people. I want to retire or at least semi-retire as early as possible, ideally within the next couple of years.
When I semi-retire, my plan is to travel around South East Asia for awhile, maybe also visit other low cost destinations, such as Eastern Europe, then perhaps settle somewhere with nice weather and low cost of living. Based on my own experience (I travel quite a lot) and information I have from other people with similar lifestyles, I can travel/live pretty comfortably on about $1.5K/month in today's dollars. I could even manage on $1K/month, but that would be more like more like surviving than living. Using the 4% draw formula, I need $450K to get 1.5K/month. I already have over $300K for 1K/month to cover bare essentials. After initial few months of "detoxing", I am planning to start a part time freelancing gig or a low investment, bootsrtapped location independent business. The idea is to withdraw a baseline amount of living expenses from my nest egg and use anything else I earn to improve my lifestyle and add to that nest egg or compensate for market dips/portfolio deterioration if need be.
Detailed portfolio information:
Current total net worth – about $320K
No debt. No real estate.
Emergency Funds: $44K in checking accounts. I included them in net worth and asset allocation below.
Tax Filing Status: Single with no children
State of Residence: NJ
Age: 36
Desired Asset allocation: approx 85% stocks/15% bonds (flexible)
Desired International allocation: 20-30% (flexible)
Risk tolerance: relatively high
Assets:
Total net worth – about $320K (100%)
Cash and Cash Equivalents (total $44K, 14% of NW)
-Vanguard Tax-Exempt Money Market Fund (6.7K, 2%)
-US-based checking accounts: (24K, 7.5%)
-International checking account (13K dollar equivalent, 4%)
Taxable Investment Account
Vanguard Brokerage Account (total 118K, 37% of NW)
-VFIAX Vanguard 500 Index Fund Admiral Class, ER 0.05% (95K, 30%)
-VTMGX Vanguard Developed Markets Index Fund Admiral Shares, ER 0.09% (10K, 3%)
-VWO VANGUARD FTSE EMERGING MARKETS ETF, ER 0.15% (1.7K, 0.5%)
-RSX MARKET VECTORS ETF ER 0.61% (4.7K, 1.5%)
Tax Advantaged Investment Accounts
Vanguard ROTH IRA (total 24.4K, 7.7% of NW)
-VYM VANGUARD HIGH DIVIDEND YIELD ETF, ER 0.10% (19K, 6%)
-VNQ VANGUARD REIT INDEX ETF, ER 0.12% (5.4K, 1.7%)
401K (Provider Selected by Employer)
2040 target date retirement fund, ER 0.5% (109K, 34% of NW)
This is a relatively expensive target date fund which doesn’t have a ticker. Approx. asset allocation: 30% intl stocks, 8% bonds, 62% US Stocks (large and mid cap). I am considering replacing it with an S%P500 ETF which is available for 0.15% ER from the same 401K provider. There are other funds as well, but they are relatively expensive, particularly international funds. To avoid paying high fees, I am considering rolling over the 401K to a Vanguard IRA when I quit my current job.
HSA account: almost all of it invested in VIIIX Vanguard Institutional Index (ER 0.41% including HSA provider’s fee). (12.4K, 3.8% of NW).
Foreign Retirement Accounts:
Defined Benefit Pension from a former employer in Europe:
From age 65, I expect to be paid $260/month in today's currency, adjusted for inflation. If I take the pension at 55, I'll be paid approx $150/month in today's currency. I use $13K (4% of NW) as the current value of this pension because this is how much I would get if I transfered it to a different pension scheme, but I’m going to keep it as it seems to be worth considerably more.
Other Foreign Pension:
A state pension fund from an emerging market country, currently valued at $10K (3% of NW), can withdraw early or keep it until retirement age. This amount is invested in emerging market government bonds. I'm not going to cash it anytime soon because it's good for diversification.
Savings/Contributions:
I currently max out my 401K and ROTH IRA and HSA and contribute $3K/month to taxable accounts. Total target contributions are about $60K/year (including taxable, tax-advantaged and company match), currently higher because I’ve been dollar cost averaging extra cash and will reduce after tax contributions when I’m ok with my cash holdings.
Withdrawals plan:
First few years - use taxable accounts and savings from part time gig/business for living expenses. Roll over 401K to IRA immediately, then use the ROTH IRA conversion ladder.
After that, use part time business income + ROTH IRA principal until I can withdraw interest. Wind down the business/part time gigs, timing will depend on financial conditions.
After age 55, use the next egg, including tax advantaged accounts and small foreign pensions, for living expenses. Also add Social Security after age 65 (exact timing depends on financial conditions).
Questions:
1. How realistic is my goal to drop out of the rat race as soon as possible? Please feel free to critique it from the financial/risk as well as lifestyle perspective and point out its weaknesses.
2. How do I optimize my portfolio given my current situation and goals? What can be improved in terms of asset allocation and specific funds I invest in?
3. Regardless of the plan (which I can adjust based on feedback as well as financial situation going forward), are there any obvious mistakes or improvement opportunities in my portfolio?
Thanks a lot for taking a look! All advice is very appreciated!