Author Topic: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!  (Read 48012 times)

FOBStash

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #50 on: March 11, 2015, 06:27:06 PM »
You're an inspiration. We hit $1M last year but my hubby loves his job too much. I showed him this post and he started suggesting long vacations and possibly retiring in our 40s. We also live in the Bay and buying our primary residence soon. I think we will seriously consider RE once we pay off our home.
Thanks! We considered buying a home in the Bay Area a few years ago, but we couldn't make the numbers work in our favor. Values keep going up and up every year, so it's hard to say what the future holds. I wish you luck!

Yes if you can move to a lower COL and FIRE sooner, that's a great path to take. In our case, all my family live here in the Bay, so I am happily stuck here

Gone Fishing

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #51 on: March 12, 2015, 07:17:12 AM »
Great strategy for handling the work on Bruno!  Amazing how much of the time and expense of repairs is the removal and replacement of the part.

For those who want to read about it: http://freedomwithbruno.com/financial-independence/

For those that don't:  He had an issue with the differential so he pulled it, took it to the shop, had them fix it and reinstalled it himself.  Didn't sound easy, but I am sure it saved a ton of cash.

dude

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #52 on: March 12, 2015, 09:20:38 AM »
Wow, that is seriously badass!!  Keep us posted on the travels!  I need to live vicariously through folks like you until punch out for the last time in about 5 years!

Exflyboy

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #53 on: March 13, 2015, 11:08:31 AM »
See my note on your blog about changing the timing belt if you need it (or don't know when it was changed).. I looked up on line that a 2000 4 runner with a V6 has a belt.


rocketman48097

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #54 on: March 16, 2015, 09:51:34 AM »
Congrats, I am 38 and still working, sigh.  However, I am well on my way. 

Axecleaver

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #55 on: March 16, 2015, 03:21:32 PM »
Very inspiring, congratulations on your new adventures!

JLR

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #56 on: March 16, 2015, 08:41:18 PM »
Congratuations! Very inspiring.

seamer

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #57 on: March 17, 2015, 07:29:13 AM »
Congrats!

Curious as to your breakdown of 401ks, Roths, non-retirement investments, etc., and what your plan is to access your funds.

I'm a few years out from FIRE (not quite as young as you!) and single, and my biggest concern is figuring out how to juggle the various accounts, managing taxes, setting up the Roth Pipeline, and monitoring realized capital gains.

MooseOutFront

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #58 on: March 17, 2015, 10:44:32 AM »

Curious as to your breakdown of 401ks, Roths, non-retirement investments, etc., and what your plan is to access your funds.
Me too.  Considering how quickly it was accumulated I assume a large percentage is in taxable, but living off that while minimizing overall taxes would be interesting to hear about as well.

spud1987

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #59 on: March 17, 2015, 04:40:15 PM »
Congrats!

You are in a similar situation as us. We are planning on FIRE-ing at 33 with $1.5M. We also live in East Bay, but our expenses are little bit higher (60k, 25k of which is rent). We also plan on moving to a lower COL area when we FIRE, but our budget will be closer to 50k because we plan on having 1-2 kids.

Good luck and I hope you keep us updated regarding your adventure. We were in Costa Rica earlier this year (Guanacaste) and it is amazing.

MsFrugalista

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #60 on: March 17, 2015, 05:23:57 PM »
Congratulations! Super excited for you guys. We are a couple years away from FI. We also live in the Bay area and own a house, so we would ideally like to have a paid off house and possibly move to a lower COL area when we RE.

We love Costa Rica and I've suggested doing this (or even go further down to Panama) to my partner, but he is hesitant about the drive through parts of Mexico. So I will definitely keep apprised of your travels to see how you fare. The other one I'd like to try sometime is driving up north to Alaska :)

arebelspy

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #61 on: March 17, 2015, 09:21:41 PM »
Congrats!

You are in a similar situation as us. We are planning on FIRE-ing at 33 with $1.5M. We also live in East Bay, but our expenses are little bit higher (60k, 25k of which is rent). We also plan on moving to a lower COL area when we FIRE, but our budget will be closer to 50k because we plan on having 1-2 kids.

Good luck and I hope you keep us updated regarding your adventure. We were in Costa Rica earlier this year (Guanacaste) and it is amazing.

You need to post more about your story.  :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

ponchoape

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #62 on: April 30, 2015, 03:32:28 PM »
Hi everyone!

I wanted to post an update for everyone: we've now been traveling since mid-March and the last 34 days have been spent exploring Mexico. We're now in Guatemala!

Mexico was great to drive through and we had no incident (although I did get E. coli on my last day in the country - I'm currently on antibiotics to sadly remedy that one..)

Over the 34 days of travel in Mexico, here is the breakdown of our expenses:

    Food = $620.37 (mostly cooked our own food)
    Total cost of Camping = $143.73 (10 days out of 34)
    Total cost of Hotel/Airbnb = $996.4 (24 days out of 34)
    Mexican Toll Highways = $152.67
    Gas = $483.07
    Mexico Border/Insurance = $172.35
    Vehicle Parts & Maintenance = $395.74
    Misc. Fun = $217.27

Total costs for Mexico = $3,181.60

Cost per day (34 days) = $93.58

Based on our 4% ($40,000) annual goal (which is a daily budget of $109) - we're keeping within budget so far. Still, we'll aiming to further tighten our belts as we keep traveling. An annual spend of 3% (instead of 4%) would be ideal.

Also, if you're interested I have some additional details posted here: http://freedomwithbruno.com/mexico-stats-summary/

So far so good!! :)

sb_NoVA

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #63 on: April 30, 2015, 08:18:36 PM »
OP - Congrats!

Could you share a bit on how you plan to maintaining a residence in the US?  Are you renting/buying? What place you chose and what drove that decision (property taxes etc.).  Thanks.

arebelspy

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #64 on: April 30, 2015, 10:33:30 PM »
And health insurance.  Are you just paying for an ACA compliant plan?
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

NICE!

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Congrats!

What program or website are you using to make the Savings chart? I like it much better than Mint's Net Worth bar graph.

rubybeth

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Sweet, congratulations!

RunHappy

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Hey OP! I'm curious did you have student loans to pay off?  I love that you are doing this at such a young age, but am curious about life 3+ years ago?

dude

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Daaaaamn!  Way impressive.

arebelspy

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Hey OP! I'm curious did you have student loans to pay off?  I love that you are doing this at such a young age, but am curious about life 3+ years ago?

The wife and I are at similar spots (around 30, graduated in 2007, recently hit 1MM and FIREing in a month), and we paid off about 30k in student loans.  Student loans aren't a show stopper.  :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

ponchoape

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Thanks everyone! Sorry for the delayed response, we're currently in El Salvador and my internet access is inconsistent.

OP - Congrats!

Could you share a bit on how you plan to maintaining a residence in the US?  Are you renting/buying? What place you chose and what drove that decision (property taxes etc.).  Thanks.
Thank you! Our home-base is the state of Nevada. We picked it because it is a no-income tax state, and it was close to where we were living (San Francisco Bay Area). The residency rules are complex, but basically we cannot stay outside of the US for longer than 6 months, and we don't plan to.

And health insurance.  Are you just paying for an ACA compliant plan?

Currently we have no health insurance coverage. If needed, we'll pay cash for any health needs in Costa Rica and then upon our return to the US we'll then sign up for an ACA plan.

Congrats!

What program or website are you using to make the Savings chart? I like it much better than Mint's Net Worth bar graph.
Thanks! The savings chart is done using Google Sheets.

Hey OP! I'm curious did you have student loans to pay off?  I love that you are doing this at such a young age, but am curious about life 3+ years ago?
My wife did not have student loans to pay off (her tuition was heavily subsidized by the province of Quebec), and I had about $30k of student debt upon completing school, which I paid off within the first year of finishing school.

Three years ago, we just started to read MMM and looked for opportunities to improve our savings here and there (biggest saver was reducing the amount we eat out). Then we just kept working and saved, and then eventually started planning what traveling we wanted to do (which was a nice distraction towards the finish line)!

arebelspy

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And health insurance.  Are you just paying for an ACA compliant plan?

Currently we have no health insurance coverage. If needed, we'll pay cash for any health needs in Costa Rica and then upon our return to the US we'll then sign up for an ACA plan.

So you're just going to pay the noncompliance tax penalty (2% of your household income above the tax return filing threshold for your filing status or $325 per adult and $162.50 per child (up to $975 for a family), whichever is greater)?
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

SenoritaStache

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Congratulations well done!

NICE!

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Thanks! The savings chart is done using Google Sheets.

Would you mind sharing?

Matthew Olszewski

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Congratulations. I have a lot of missing to a million dollars.

sb_NoVA

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So you just have a PO Box in Nevada?  Doesn't seem like you are buying or renting a place in Nevada.

Sent from my SAMSUNG-SGH-I337 using Tapatalk


Bajadoc

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I wish I was as smart as you at that tender age. With focus the second million comes much faster.

surfhb

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Go to Matapalo or Carate in the Osa Penninsula in Costa Rica and enjoy unspoiled jungle living for a week or so.....its amazing.    congrats!
« Last Edit: May 06, 2015, 05:45:44 PM by surfhb »

ponchoape

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So you're just going to pay the noncompliance tax penalty (2% of your household income above the tax return filing threshold for your filing status or $325 per adult and $162.50 per child (up to $975 for a family), whichever is greater)?
Yup, this is what we're aiming to do for this year.

Thanks! The savings chart is done using Google Sheets.

Would you mind sharing?

Sure, here is a direct link to the spreadsheet: https://docs.google.com/spreadsheets/d/1qs_V9Ds615YFGcXRWtOAvMNOtQ31N68pSFN4d9L2fwo/pubchart?oid=2029215993&format=interactive

So you just have a PO Box in Nevada?  Doesn't seem like you are buying or renting a place in Nevada.
Correct, we're not renting anything in Nevada at the moment. For mail, we're using a mail forwarding service, and we also have a friend living in Vegas who owns his home and is willing to forward us mail if needed. So far so good!

Go to Matapalo or Carate in the Osa Penninsula in Costa Rica and enjoy unspoiled jungle living for a week or so.....its amazing.    congrats!
Sounds awesome - I'll do some research and look into it! Thanks!

brooklynmoney

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The Isa peninsula  is amazing agreed!

My Own Advisor

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Wow.  Congrats!

We're getting close to $1M in net worth excluding our pensions.  We need to work another 10-12 years to pad the pensions and grow the portfolio still.

Costa Rica is great BTW.  Go to Tamarindo and learn to surf!

NICE!

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ponchoape, the link you provided doesn't allow inputs. Can you please share one that allows you to change?

ponchoape

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ponchoape, the link you provided doesn't allow inputs. Can you please share one that allows you to change?
Opps, you're right. It's just a basic spreadsheet with dates and numbers listed in columns, with a chart added. Try this link:
https://docs.google.com/spreadsheets/d/1qs_V9Ds615YFGcXRWtOAvMNOtQ31N68pSFN4d9L2fwo/edit

ponchoape

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Another update on our travels: We're now in Nicaragua, and thoroughly enjoyed El Salvador. We summarized all our costs for El Salvador and it came out to average $43.72 per day for both of us. Pretty low cost of living!

If you're interested, we posted some details on the costs here: http://freedomwithbruno.com/el-salvador-stats-summary/

Also, if you're interested we posted some pictures of El Salvador here: http://freedomwithbruno.com/el-salvador/

This is my favorite, taken at a nice lake called Lago Ilopango, just outside San Salvador:

ponchoape

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Hey all, another update: Nicaragua was great, and my wife and I have now made it to Costa Rica safe and sound!

We're now at our rented house a couple minutes from the beach and our days are pretty relaxing. Eating healthy, staying fit, surfing, practicing spanish, reading/watching downloaded shows, relaxing in the pool! It's nice to actually have a home now.

With my spare time, I just did some calculations on our projected income and future taxes, and wanted to share:

Here are our current Investment Accounts:

    $315,000 - Traditional IRA
    $80,000 - Roth IRA
    $500,000 - Taxable Investments (Vanguard)
    $15,000 - HSA
    $95,000 - RRSP (Canada)
    $20,000 - LIRA (Canada)

We're going to do a tax-free Roth IRA Conversion Ladder of $20,600 every year. We're also aiming to live annually on $30,000-40,000 (3-4% of our portfolio).

For our US health care plan, we're aiming for the ‘Gold Plated Silver Plan‘ (200% of FPL with cost sharing subsidies) which will cost us $1,486 for the year and to qualify for it we require a MAGI of $31,460. So our expected income will be:

    $20,600 – Conversion of Traditional IRA to Roth IRA (this is counted against our MAGI - but we must wait 5 years for this money)
    $10,860 – Capital gains from our Taxable Investment Account
    $19,140 – Distributions from our Roth IRA (don’t count towards MAGI).

Using the Roth IRA to modify our MAGI seems like a loophole. Is anyone else planning on doing this?

patrickza

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Congrats on building a great stache, especially considering your age. Love the adventures you're going on, you're going to have an amazing life. Just curious if you're married or just together and if you plan on having kids at some point.

ponchoape

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Congrats on building a great stache, especially considering your age. Love the adventures you're going on, you're going to have an amazing life. Just curious if you're married or just together and if you plan on having kids at some point.
Thanks a lot!

We've been married for 6 years, and do plan on having a kid at some point in the future. Not sure exactly when, but we'll likely need to cut back on the travel budget when this happens!

Mrs. Crackin' the Whip

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #87 on: August 01, 2015, 12:59:54 PM »
That is amazing.  Congratulations.  Just reading this makes me tear up because it's real.  You did it!  Enjoy your travels.

cheddarpie

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #88 on: August 02, 2015, 01:33:37 PM »
Congratulations!! This is really awesome. It sounds like you worked hard, made some really good decisions, and have a plan for maximizing your future ... well done!

Thanks for providing more inspiration for the rest of us following in your footsteps!


ponchoape

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #89 on: October 21, 2015, 12:11:46 PM »
Hi everyone! It's now been six months since we quit our jobs and started traveling!

When we left the U.S. in March to begin our travels, our portfolio was around $1,030,000. Currently, it’s closer to $960,000, which is a drop of $70,000. Considering we’ve only spent $17,400 in that time, the bulk of the drop has just been the stock markets going up and down. Instead of worrying, we do our best to ignore crazy market behavior and focus on living within our means – keeping our spending low.

Our goal has always been to live on 3-4% of our portfolio, which at $960,000 translates to an annual budget of between $28,800-$38,400. This gives us a monthly budget of $2,400-$3,200.

The good news is that so far during our traveling, we’ve done a decent job of adhering to our budget. Here are our monthly expenses so far:

Code: [Select]
Month       Monthly Spend      Comments
April           $2,044.39 Traveled through Mexico and Guatemala
May             $2,763.59 Traveled El Salvador, Nicaragua, and Costa Rica.
June            $4,215.56 Costa Rica living with purchase of flights to D.C.
July            $2,684.01 Costa Rica living
Aug             $2,800.96 Traveled Costa Rica and Panama
Sept            $2,826.01 Traveled Washington, D.C. and NYC
Overall Average    $2,889.09

This overall monthly average of $2,889 represents an annual spend of 3.6% of our portfolio. Not bad – we’re pretty much on target!

If you're interested, I posted some additional details on how we're enjoying life in Costa Rica, and some more details on our expenses here: http://freedomwithbruno.com/six-months-of-early-retirement/

Let me know if you have any questions, I'd be delighted to answer!
« Last Edit: October 21, 2015, 12:30:35 PM by ponchoape »

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #90 on: October 21, 2015, 12:22:32 PM »
Congradulations thats awesome.

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #91 on: October 21, 2015, 12:50:08 PM »
Thanks for the update.  Sounds like things are going well!

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #92 on: October 21, 2015, 01:38:49 PM »
This sounds wonderful!  So glad you are on target. I will check out your journal.

One question (which you may have addressed in your journal - if so, ignore) - are you trying to live frugally during your travels, or not worrying too much about it?  I am just being nosy about how your costs compare to a general average cost might be for each locale.

Keep it up (and apply your sunscreen!)

Mntngoat

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #93 on: October 21, 2015, 02:42:12 PM »
at 32 years young will 4% allow enough to carry you 40-50 years  at $1M?

ML

NeverLost

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #94 on: October 21, 2015, 03:21:29 PM »
Following to live vicariously through you :)

ponchoape

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #95 on: October 22, 2015, 08:56:10 AM »
This sounds wonderful!  So glad you are on target. I will check out your journal.

One question (which you may have addressed in your journal - if so, ignore) - are you trying to live frugally during your travels, or not worrying too much about it?  I am just being nosy about how your costs compare to a general average cost might be for each locale.

Keep it up (and apply your sunscreen!)
Thanks! While traveling, we're basically trying to live as comfortably as our budget allows us to. For example, when we're on the road we stay at a lot of Airbnb places (instead of just camping all the time).

at 32 years young will 4% allow enough to carry you 40-50 years  at $1M?

ML
No one really knows, but the Trinity Study seems to indicate it's a reasonable bet. We plan on living on 3-4% of our portfolio, adjusted annually depending upon what the value of the portfolio is. If it drops to 500k, then we'll need to live on 20k per year. If it goes up to $2M, then we can live on 80k per year. Technically, this means our portfolio would last to infinity and should help buffer us when the markets are down (since it forces us to immediately tighten our belts when times our tough).

Axecleaver

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #96 on: October 22, 2015, 09:40:09 AM »
Quote
No one really knows, but the Trinity Study seems to indicate it's a reasonable bet. We plan on living on 3-4% of our portfolio, adjusted annually depending upon what the value of the portfolio is. If it drops to 500k, then we'll need to live on 20k per year. If it goes up to $2M, then we can live on 80k per year. Technically, this means our portfolio would last to infinity and should help buffer us when the markets are down (since it forces us to immediately tighten our belts when times our tough).

Hi poncho, your withdrawal plan will work just fine, but be careful about how you compare it to the findings of the Trinity Study. The Trinity Study assumptions were that the withdrawal amount was fixed at year one, in your case that would be 40k a year (4% of $1m). You adjust it for last year's inflation every year. If your portfolio goes up to $2m, then you should still be taking out just 40k a year. If it goes down to $800k, again you take 40k. This works because the bull runs build up a portfolio that can still drop 50% and survive, by virtue of the gains in bull years and constraining the withdrawals to a predictable amount. The only failures are when retirement happens at the very beginning of a bad year or a sequence of bad years.

In your case, since you recalculate the percentage against the current value (instead of original) you are virtually guaranteed to encounter a "bad year" where you lose a large percentage of your stash. It's like playing Russian roulette over and over, instead of just once. The dreaded sequence of returns risk will get you at some point.

On the other hand, if you plan to use 3-4% of your portfolio's current value, by definition it will last forever.

I tend to like the variations on the Trinity Study that reflect real life, like having a limit on the amount of increase/decrease per year.

Either way, I enjoy keeping up with your adventures.

ponchoape

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #97 on: October 22, 2015, 02:21:48 PM »
Quote
No one really knows, but the Trinity Study seems to indicate it's a reasonable bet. We plan on living on 3-4% of our portfolio, adjusted annually depending upon what the value of the portfolio is. If it drops to 500k, then we'll need to live on 20k per year. If it goes up to $2M, then we can live on 80k per year. Technically, this means our portfolio would last to infinity and should help buffer us when the markets are down (since it forces us to immediately tighten our belts when times our tough).

Hi poncho, your withdrawal plan will work just fine, but be careful about how you compare it to the findings of the Trinity Study. The Trinity Study assumptions were that the withdrawal amount was fixed at year one, in your case that would be 40k a year (4% of $1m). You adjust it for last year's inflation every year. If your portfolio goes up to $2m, then you should still be taking out just 40k a year. If it goes down to $800k, again you take 40k. This works because the bull runs build up a portfolio that can still drop 50% and survive, by virtue of the gains in bull years and constraining the withdrawals to a predictable amount. The only failures are when retirement happens at the very beginning of a bad year or a sequence of bad years.

In your case, since you recalculate the percentage against the current value (instead of original) you are virtually guaranteed to encounter a "bad year" where you lose a large percentage of your stash. It's like playing Russian roulette over and over, instead of just once. The dreaded sequence of returns risk will get you at some point.

On the other hand, if you plan to use 3-4% of your portfolio's current value, by definition it will last forever.

I tend to like the variations on the Trinity Study that reflect real life, like having a limit on the amount of increase/decrease per year.

Either way, I enjoy keeping up with your adventures.
You're completely right, thanks. I was more focused on the benefits of immediately tightening out belts during bad years (and not spending more than we need to during bad market years). On the flip side, I hadn't thought much about necessarily spending more money during the good years, something I think we'll shy away from doing (we'll probably limit our maximum spending to the Trinity Study recommendation: 4% of original portfolio + inflation).

Thanks!

Cookie78

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #98 on: October 22, 2015, 03:39:50 PM »
Quote
No one really knows, but the Trinity Study seems to indicate it's a reasonable bet. We plan on living on 3-4% of our portfolio, adjusted annually depending upon what the value of the portfolio is. If it drops to 500k, then we'll need to live on 20k per year. If it goes up to $2M, then we can live on 80k per year. Technically, this means our portfolio would last to infinity and should help buffer us when the markets are down (since it forces us to immediately tighten our belts when times our tough).

Hi poncho, your withdrawal plan will work just fine, but be careful about how you compare it to the findings of the Trinity Study. The Trinity Study assumptions were that the withdrawal amount was fixed at year one, in your case that would be 40k a year (4% of $1m). You adjust it for last year's inflation every year. If your portfolio goes up to $2m, then you should still be taking out just 40k a year. If it goes down to $800k, again you take 40k. This works because the bull runs build up a portfolio that can still drop 50% and survive, by virtue of the gains in bull years and constraining the withdrawals to a predictable amount. The only failures are when retirement happens at the very beginning of a bad year or a sequence of bad years.

In your case, since you recalculate the percentage against the current value (instead of original) you are virtually guaranteed to encounter a "bad year" where you lose a large percentage of your stash. It's like playing Russian roulette over and over, instead of just once. The dreaded sequence of returns risk will get you at some point.

On the other hand, if you plan to use 3-4% of your portfolio's current value, by definition it will last forever.

I tend to like the variations on the Trinity Study that reflect real life, like having a limit on the amount of increase/decrease per year.

Either way, I enjoy keeping up with your adventures.
You're completely right, thanks. I was more focused on the benefits of immediately tightening out belts during bad years (and not spending more than we need to during bad market years). On the flip side, I hadn't thought much about necessarily spending more money during the good years, something I think we'll shy away from doing (we'll probably limit our maximum spending to the Trinity Study recommendation: 4% of original portfolio + inflation).

Thanks!

I feel like that's a great plan (for me too). 4% based on original portfolio OR 4% based on current portfolio, whichever is less.

ajonesin

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Re: Mission Accomplished: My wife (32) and I (30) just hit our goal of $1M!
« Reply #99 on: October 22, 2015, 04:46:48 PM »
So happy for you!!