Race from $2M to $4M...and Beyond!

[soccerluvof4]

Well I see a 2017 Toyota Corolla for $13,200 near me so maybe it is possible to get a good deal on a used Japanese car.
You'll definitely want to have an auto mechanic look it over.

I bought a Corolla a year and a half ago 2016 with 7k miles on it for 12k plus change actually from a reputable dealer so there out there. Also bought a Kia Soul for my DS in College around the same time down in NC with around the same mileage, same year and same price.

[soccerluvof4]

Clickbait or not, I enjoy this thread. It's not like I can go around sharing about my situation and asking others how they are handling their millions or retiring at 42.

Speaking of which. I've got a new decision to make. I hesitate to bring it up because I know it's a hot topic on the forum. We are trying to decide if we should pay off our mortgage. I used to be firmly in the "don't pay off your mortgage club" but with the new tax laws and $2.5M in investments I'm not so sure. I think the only thing that we would be missing out on if we paid it back is the impact of inflation. Points of consideration-
-We owe $183k on a $310k house with 26 years on the mortgage at 4%APR.
-Of our $2.5M in investments $160k is in cash.
- DH's Honda Accord has 215k miles (10 years old) on it and probably needs to be replaced. Or we could keep it but potentially have another $1k-$2k fix next year. Some of that cash was to purchase another two year old low mileage Accord for him. The rest of the cash is our cushion for market down turn or to draw down to cover expenses without a tax impact.
-Honda is currently offering 0% on new Accord.
-We should have enough in cash this spring, RIGHT BEFORE I RE, to pay off the mortgage if we don't spend it on a car. But it will use up all cash reserves. Everything else is invested.
So buy a car at 0% (and yes I know I can get the loan, I got a 0% 18 years ago and kept the car for 12 years)? And pay off the mortgage and then not have the $7k of mortgage interest that I can't deduct?
Or keep the mortgage and invest the cash?
What do you smart people think?

How are you going to feel when you "only" have $23k in cash? Also, typically, it's easiest to get a mortgage when you have a j-o-b. I'd hang on to it for a couple more years. Wait until FIRE gets comfortable, then consider a payoff again, but not before. Once you've paid it off, it's damn difficult to get that cheap money back.

As to the car, meh, I'm okay with buying a new one once in a while, then babying it forever. DH's 2002 truck has just under 100k miles on it and still looks great. He bought it brand new, just the way he wanted it, for about $21k. The current version of his vehicle would cost more than double that. He actually needs a truck, and he plans to keep it for at least another decade.

...Another option is to pay off half!

That's possibly the worst option! Feel free to come and chat over on the DPOYM thread if you're not sure why. We don't bite.

I like a paid of mortgage myself but I agree with Dicey in your case and would wait till you save up some more cash in case you have other needs. The car , its nice to have a new car but that lasts about 2 weeks and you can get the same satisfaction buying a 2 year old used one. My suggestion there is just buy one from a reputable dealer with all the warranty etc.. and save the depreciation.

[Car Jack]

There are separate threads for "pay off the mortgage" and "don't pay off the mortgage".  I like to point out that if you have this choice to make, you're in really great shape and so long as that money is working for you, neither answer is wrong.  Heck, you could even pay off half the mortgage and invest the other half.  That's now wrong either.

[BeanCounter]

Thanks guys!! It seems the general consensus is to sit on it for a bit longer. That's kind of how we were leaning. Holding a mortgage was a mathematically easy choice before the tax code changed and we were still in the accumulation phase. Now, the choice is a bit more gray. The only advantage to paying it off now is saving $7k in interest every year.
So we'll sit tight for awhile longer and see how things go when I'm no longer working. DH is going to continue working (his choice) but I think his salary will just barely cover our expenses. So we likely won't accumulate much extra cash, may even start drawing down some to pay for our beloved family vacations.

The car issue only came up because we would use cash that was saved for a car to pay the mortgage and 0% seemed like a better option than selling stock and incurring more taxes. We usually do buy slightly used cars. Our current Honda's are both lease exchanges (meaning someone brought their two year old leased car back and we came in and bought it for cash). The only time I've ever bought a new car was the 2001 Mazda I bought with the 0% deal. I do think that worked out for me as I was just out of college, I was able to invest what I had saved for the car and I drove the car for 14 years. Anyway, I would like DH to buy another lease exchange, and he said he would consider it. But he wants a very particular model. While I would just be willing to drive whatever was the best deal. He is not. And I don't think at our age and NW it's worth arguing about. As he pointed out when we were discussing this "We are worth $2.5M. It's not like I want a BMW, Lexus or Mercedes. I'm considering a new Honda Accord, which I will likely keep for ten years." He has a point and I let it go after that, since you know, I like being married. :)
After all. I did pay cash for an $80k home renovation last spring and he didn't say boo about it. I'm finishing the extra year of work I agreed to do to pay for it though. I don't regret it at all. I love my house now and will be very happy here for FIRE. When the kids are gone in 12-15 years hopefully we can sell it and get that money back.
It can't be all about numbers all the time. If it was I'd keep working my cushy six figure job because the math says at my age that makes sense. But I don't want to end up dead with $5M and not enough memories with my kids. (I would like to leave some money to my kids to help with their retirement, but that's a topic for another day)
Happy Thanksgiving guys. I'll be cooking a turkey for 12 in my new kitchen. My boys are excited about the pie buffet after the turkey, and football.  Life is good!

[BeanCounter]

There are separate threads for "pay off the mortgage" and "don't pay off the mortgage".  I like to point out that if you have this choice to make, you're in really great shape and so long as that money is working for you, neither answer is wrong.  Heck, you could even pay off half the mortgage and invest the other half.  That's now wrong either.

Oh, for sure. We do feel very fortunate that we have this choice. I think part of what makes the math hard is that we have that $160k sitting in a money market earning about 1.7% (last time I checked). So it's not covering the interest on the mortgage. But it's my hedge against a market downturn and our cash fund that we can raid if we need to without increasing our taxes for the year.

Speaking of taxes, I did switch one of our brokerage accounts (about $600k) to push dividends to cash. I feel like if I'm going to have to pay the taxes on it anyway, I might as well be able to use it. So as that accumulates we can use it to pay down the mortgage.

On the topic of Roth conversion, I haven't thought a lot about it but it's on my list of things to do. It didn't make sense to do anything while I'm still working and our income was >$200k.
Our breakdown is-
24% of the $2.5M is already in Roths (a good portion is an inherited roth which I have to take RMDs on)
35% is in traditional IRAs and 403B & 401A.
41% is in a brokerage and can be used at will.
So it may make sense to investigate moving some of the traditional IRAs over. I will say, an investment advisor convinced my mother to convert $300k to a Roth and I do not think that was a good decision. She paid taxes at around 35% on it (over two years) and ended up paying higher Medicare rates for at least two or three years because of it. All so I could inherit the Roth instead. The taxes on the RMD may never amount to what she paid, because of my life expectancy and RE. So whoever did that math on that sucked, and I'm still pissed that she didn't consult me.

[trashtalk]

For mortgages, we paid ours down to a trivial amount (four figures) but didn't pay it off completely.

This way the homeowner's insurance and property taxes are still withdrawn automatically from the escrow account and we don't have to fuss with tracking that separately.

Our food budget is now larger than our housing spend, including utilities and routine maintenance (lightbulbs and filters and so forth).

[flyingaway]

Well I see a 2017 Toyota Corolla for $13,200 near me so maybe it is possible to get a good deal on a used Japanese car.
You'll definitely want to have an auto mechanic look it over.

I bought a Corolla a year and a half ago 2016 with 7k miles on it for 12k plus change actually from a reputable dealer so there out there. Also bought a Kia Soul for my DS in College around the same time down in NC with around the same mileage, same year and same price.

I don't know how the math works for used cars, I think the dealers also need to make some money, which may add to the total cost of a used car.

[itchyfeet]

We are still carrying a pair of largish mortgages.

I know it’s a risk keeping them, but the leverage has worked in my favour for 20 years, and I don’t feel nervous about it. I like having the extra invested in stocks compared to what we otherwise would have.

Currently our debt is about 22% of our total gross assets.

When house prices dropped 10 or 15% in Sydney last year the paper losses were impressive, but over the long run I’ve done well being in debt.

I am still working though. I suspect once I am not working I will become far more risk averse.

[Bateaux]

Beancounter, we'll have to make the pay-off or don't-payoff mortgage decision in a couple of years.  We owe 175K on the Florida house.   The sale of the free and clear Louisiana property would pay it off.   We live and still work in Louisiana, until we FIRE.  Our liquid net worth is 2.3M and cash reserves are about 65K, our cash was once about 125K and I liked that amount.  The down payment on the Florida house, new roof Florida house, furniture, paint, etc., knocked our cash way down.   The cash is slowly building back, but I need to replace a vehicle before FIRE.   I'm actually considering a big luxury SUV or truck.   The 2017/2018 models coming off lease take a huge hit in price vs new.  I'm replacing a tired old Honda Accord that I only trust as a commuter now.    I also have a 2008 F250 that I  will likely sell when we move.  Paying taxes and registration fees for the old truck in Florida doesn't make sense.   The new car purchase will be registered in Florida.  Anyway, similar decision to be made.   Our kids are out of college.   Oldest sons health isn't great and now my wife has had some issues as well.  Still hopefully early 2021we quit and make the permanent Florida move.  For two additional years, 2023 I'm eligible for lifetime company health benefits for both me and my wife.  That carrot is still out there.  With 7 weeks of paid time off, working isn't the chore it once was.   My wife spent a month home after recent surgery, I  really enjoyed having her home and not working.  She doesn't want to quit till I do however, so I'll support that.

Good luck too you all in the fine tuning stage of early retirement planning.   Those of you that have already FIRE'd, thanks for staying around to guide the rest of us in.

[DavidAnnArbor]

For two additional years, 2023 I'm eligible for lifetime company health benefits for both me and my wife. 

Is this a subsidy for a health insurance premium whereby you only pay a small fraction of the cost ?
It's understandable to want to get that.

[SwordGuy]

For two additional years, 2023 I'm eligible for lifetime company health benefits for both me and my wife. 

Is this a subsidy for a health insurance premium whereby you only pay a small fraction of the cost ?
It's understandable to want to get that.

Yep, 2 years to mitigate that risk for the rest of your life is a very reasonable one.

[pecunia]

It bumped through the old ceiling again!

Record highs!

https://www.thestreet.com/markets/stocks-hit-record-highs-third-day-on-positive-trade-news-from-trump-15183535

Pfizer was one of the big stock leaders so I guess the record high was done with drugs.

So,........another reason for a Happy Thanksgiving!

[EscapeVelocity2020]

It bumped through the old ceiling again!
Record highs!
... Happy Thanksgiving!

[2sk22]

https://www.thestreet.com/markets/stocks-hit-record-highs-third-day-on-positive-trade-news-from-trump-15183535

Pfizer was one of the big stock leaders so I guess the record high was done with drugs.

Ironically, Pfizer has been one of the worst ever stocks in my portfolio. Back in the late 90s, we bought a few individual shares during the height of the bubble and have held on to them now for over 20 years. I just checked and see that the Pfizer shares are now finally worth what I paid for them in 1998 :-)

[soccerluvof4]

https://www.thestreet.com/markets/stocks-hit-record-highs-third-day-on-positive-trade-news-from-trump-15183535

Pfizer was one of the big stock leaders so I guess the record high was done with drugs.

Ironically, Pfizer has been one of the worst ever stocks in my portfolio. Back in the late 90s, we bought a few individual shares during the height of the bubble and have held on to them now for over 20 years. I just checked and see that the Pfizer shares are now finally worth what I paid for them in 1998 :-)

Awesome! yea they were definitely one of those companies that just didn't seem for the longest time to be able to get out of there own way. I owned shares several times back when I thought I was a day trader. Always got frustrated!

[DavidAnnArbor]

https://www.thestreet.com/markets/stocks-hit-record-highs-third-day-on-positive-trade-news-from-trump-15183535

Pfizer was one of the big stock leaders so I guess the record high was done with drugs.

Ironically, Pfizer has been one of the worst ever stocks in my portfolio. Back in the late 90s, we bought a few individual shares during the height of the bubble and have held on to them now for over 20 years. I just checked and see that the Pfizer shares are now finally worth what I paid for them in 1998 :-)

Wow I also bought a few stocks in the late 90's just like you did. But in the mid-2000's I gave that up and sold them and put the money instead in the stock index fund.

[MishMash]

with the new market highs, we've squeezed into your club.  71 is in the house, but we also have a large antique gold coin collection worth the same so I guess that breaks even.

Also not including DHs military pension (2 years until eligible) as 1. it's not written in stone yet and 2. not really sure how one would value it with it being inflation adjusted. 

[AdrianC]

It can't be all about numbers all the time. If it was I'd keep working my cushy six figure job because the math says at my age that makes sense. But I don't want to end up dead with $5M and not enough memories with my kids. (I would like to leave some money to my kids to help with their retirement, but that's a topic for another day)
Happy Thanksgiving guys. I'll be cooking a turkey for 12 in my new kitchen. My boys are excited about the pie buffet after the turkey, and football.  Life is good!

It is. You're doing it right, IMHO. We're probably a few years ahead of you on the life curve. My wife gave up her six-figure career to be a stay at home parent a decade ago, while I continued to work. We have zero regrets. Turns out I really didn't need to keep working but we hadn't discovered the FIRE movement then and the 08/09 market crash hit us hard. We're both FIRE now (OK, I still work part time, but not because we need the money). So far the kids are turning out beautifully. We're doing college visits with kid1, incredibly.

Regarding a mortgage, we don't bother with one - we wrote a check for this house. It's such a small part of our overall net worth that it isn't worth the bother, plus I admit we're both averse to debt. We had a mortgage (and HELOC) during the early accumulation phase, like everybody else, and it worked out well. No need for it now. Each to their own, though.

Regarding cars, I say let him have the Honda he wants. I haven't found many low interest finance deals to beat a cash deal, and we just wrote check for our last two new cars. And we do buy new. We don't care about a few $k depreciation. Friends just keep having horror stories with used cars. Don't need the hassle. We're talking a Honda van and a VW Golf, mind, not Beamers and ridiculous stuff like that. Neighbor bought a Tesla 3 with "only 5 short years till I own it". No, that's not for me. Never was.

[flyingaway]

Regarding cars, I say let him have the Honda he wants. I haven't found many low interest finance deals to beat a cash deal, and we just wrote check for our last two new cars. And we do buy new. We don't care about a few $k depreciation. Friends just keep having horror stories with used cars. Don't need the hassle. We're talking a Honda van and a VW Golf, mind, not Beamers and ridiculous stuff like that. Neighbor bought a Tesla 3 with "only 5 short years till I own it". No, that's not for me. Never was.

We only bought our first car as used and it was a horrible story. Even when we were still in graduate school, we bought our 2nd car as new cars, and never bought any used cars. We drove our cars for about 10+ years, until they got totaled or not ran anymore then were donated.

[SwordGuy]

A year and a half into FIRE and we've crossed the $2.7M threshold.   

[EscapeVelocity2020]

A year and a half into FIRE and we've crossed the $2.7M threshold.   

I'm betting a lot of FIRE bloggers will have some impressive gains to report in their November reports!  Looks like a little over 3% gain (which means you probably saw ~$80k gain last month).  It felt like a pretty strong rally for sure.

I found a good deal on an Alaska cruise so we are spending a bit to help the economy :)

[SwordGuy]

A year and a half into FIRE and we've crossed the $2.7M threshold.   

I'm betting a lot of FIRE bloggers will have some impressive gains to report in their November reports!  Looks like a little over 3% gain (which means you probably saw ~$80k gain last month).  It felt like a pretty strong rally for sure.

I found a good deal on an Alaska cruise so we are spending a bit to help the economy :)

A goodly chunk of our net worth is in real estate so we didn't see such big gains.  But we won't see such big losses in the recession, either. :)   For us, since we're retired, that's the way we like it.

[soccerluvof4]

A year and a half into FIRE and we've crossed the $2.7M threshold.   

I'm betting a lot of FIRE bloggers will have some impressive gains to report in their November reports!  Looks like a little over 3% gain (which means you probably saw ~$80k gain last month).  It felt like a pretty strong rally for sure.

I found a good deal on an Alaska cruise so we are spending a bit to help the economy :)

A goodly chunk of our net worth is in real estate so we didn't see such big gains.  But we won't see such big losses in the recession, either. :)   For us, since we're retired, that's the way we like it.

I didnt see the big gains either but appreciate what we did get out of it because with the market being toppy imo we doubled our real estate ownership part of our networth percentage by buying hopefully what will be our forever home and are sitting on a bit more cash than usual that we will live on the next 3 years or till market adjusts. Plus our portfolio is more conservative now. But we are overall with the paid for house the highest over 3M we have been though still not by much but were not tip toeing back n forth over it like before either.

[flyingaway]

If all my portfolio were S&P500 since 2009, I would have at least one more million dollars.

[pecunia]

You are not alone.  I read Donald Trump would have been a true billionaire and then some if he had taken his inherited money and placed it in Index Funds.

[Much Fishing to Do]

If all my portfolio were S&P500 since 2009, I would have at least one more million dollars.

Yeah, I'm sure my international allocation has cost me half-million over being all in US.  Who knows what's next...

[2sk22]

If all my portfolio were S&P500 since 2009, I would have at least one more million dollars.

Yeah, I'm sure my international allocation has cost me half-million over being all in US.  Who knows what's next...

From what I read, most international stocks are moving more or less in lock step with the US markets nowadays so being invested in international stocks ought not to have a big impact.

[nancyfrank232]

You are not alone.  I read Donald Trump would have been a true billionaire and then some if he had taken his inherited money and placed it in Index Funds.

This is a popular anti-Trump narrative pushed by those who dislike him

Bloomberg discusses why this narrative is flawed

https://www.bloomberg.com/opinion/articles/2015-09-03/should-donald-trump-have-indexed-?utm_source=url_link

[jdfergason]

From what I read, most international stocks are moving more or less in lock step with the US markets nowadays so being invested in international stocks ought not to have a big impact.

There's a lot mis-information out there about international and I feel the financial industry is selling a pig with lipstick. International markets do not move in lockstep with US markets.
Over the last 5 years the market correlations with the SP500 for various countries has been:

Australia .69
UK .77
India .36
China .69
Brazil .28

Definitely not moving in lock-step. And definitely has had a huge downward weight on portfolios with significant exposure.

All the financial wizard advice about having 40% of assets in international ignores how businesses actually make money. It doesn't take into account where profits are made. If you invest in the SP500 about 43% of revenue is already derived from overseas sources. In effect by purchasing international funds you are overweighting the impact of those markets.

[bluebelle]

just popped in to say happy Monday, and welcome to December.   Plows just went down my street.

I really like this thread, it feels like a more moderate thread than some of the others.  Folks have their opinions but are open to other points of view or at least agreeing to disagree.  Pay off the mortgage, don't pay it off, buy a new car, never buy a new car.   It's a thread for people who can 'afford it', but are choosing where and how to spend their money.

Because I put a dollar value to DH defined benefit pension, I've been a member of this thread for a while, but with market gains the last week, we officially have more than $2 million of investable assets and I can finally call myself a millionaire (DH and I agreed years ago that we need 2 million of liquid assests as a couple for us to call ourselves millionaires).  $2 million is our number, although, now that I'm here, OMY has kicked in.   I like my job, he hates his, he's retiring at the beginning of next summer (2020), I think I'll hang in until spring of 2021, assuming the job stays fun.  I like what I do, who I work for and with, if that changes, FU money kicks in.   I may even try going down to 3 days a week, although I fear that would just mean working 5 days and getting paid for 3 (I have some boundary issues, and the nature of my job - there is almost always a crisis to work on, and I tend to getting really involved - I love a good puzzle, and I'm very very good at it)

Part of the reason for my OMY syndrome - we're in the process of building our 'dream' home in a vacation area, I know there will be lots of extra costs once the house is finished and we've moved in next summer.....dock, boat, replacement cars (mine is 16 years old, his 13), landscaping, some new furniture.

I've designed our retirement budget with three buckets -
1) bare bones, not fun, but we have food and heat
2) live like we live now - a pretty good life
3) Fat FIRE - take the trips we want, buy the things we want get a new car every 7-8 years etc

My plan is if the economy has an off year, we drop down to option 2 until things recover....if the apocalypse happens, we drop down to option 1, we get better at gardening, and huntin' and fishin'. 

[EscapeVelocity2020]

https://www.bloomberg.com/opinion/articles/2015-09-03/should-donald-trump-have-indexed-?utm_source=url_link

That was a pretty interesting read, although the repeated point that Trump would starve to death while having billions in Index funds was kinda ridiculous.

So it seems like Trump has outperformed the S&P 500 over his career. But the main line of criticism is that he has underperformed the S&P over some other, shorter period. Matthews says, "If you compare Trump's performance since 1982, when the stock market started to take off after the early-'80s recession, it looks pretty abysmal." If Trump had taken his 1982 net worth of $200 million, cashed it out, and put it all in an index fund with reinvested dividends, he (would again be dead of not eating, but his heirs) would have $6.3 billion today. Similarly, the Associated Press math has Trump cashing out his $1 billion net worth in 1988 -- shortly after the 1987 stock market crash -- and putting it in index funds worth $13 billion today.

Ignoring the questionable assumptions, I think the message was that Trump's brand name value has outpaced S&P return but, more importantly, he's been able to have more fun and lead a better life more suited to his persona by investing in himself.  Can't really disagree with that, although I kinda wish he'd just sat on billions in index funds and not become President.  Also, for Trump, the top is probably in :)

[nancyfrank232]

^ the point is, when an investor indexes, the funds are fully deployed with minimal to no withdrawals for decades

Trump has enjoyed index-like returns and massive consumption for himself and his family and friends. If I had the ability, this would be preferable to indexing - which is just storing money to use just before death

[flyingaway]

just popped in to say happy Monday, and welcome to December.   Plows just went down my street.

I really like this thread, it feels like a more moderate thread than some of the others.  Folks have their opinions but are open to other points of view or at least agreeing to disagree.  Pay off the mortgage, don't pay it off, buy a new car, never buy a new car.   It's a thread for people who can 'afford it', but are choosing where and how to spend their money.

Because I put a dollar value to DH defined benefit pension, I've been a member of this thread for a while, but with market gains the last week, we officially have more than $2 million of investable assets and I can finally call myself a millionaire (DH and I agreed years ago that we need 2 million of liquid assests as a couple for us to call ourselves millionaires).  $2 million is our number, although, now that I'm here, OMY has kicked in.   I like my job, he hates his, he's retiring at the beginning of next summer (2020), I think I'll hang in until spring of 2021, assuming the job stays fun.  I like what I do, who I work for and with, if that changes, FU money kicks in.   I may even try going down to 3 days a week, although I fear that would just mean working 5 days and getting paid for 3 (I have some boundary issues, and the nature of my job - there is almost always a crisis to work on, and I tend to getting really involved - I love a good puzzle, and I'm very very good at it)

Part of the reason for my OMY syndrome - we're in the process of building our 'dream' home in a vacation area, I know there will be lots of extra costs once the house is finished and we've moved in next summer.....dock, boat, replacement cars (mine is 16 years old, his 13), landscaping, some new furniture.

I've designed our retirement budget with three buckets -
1) bare bones, not fun, but we have food and heat
2) live like we live now - a pretty good life
3) Fat FIRE - take the trips we want, buy the things we want get a new car every 7-8 years etc

My plan is if the economy has an off year, we drop down to option 2 until things recover....if the apocalypse happens, we drop down to option 1, we get better at gardening, and huntin' and fishin'.

Welcome.

I'd like to hear more about the fatFIRE part of the story.

[jdfergason]

I've designed our retirement budget with three buckets -
1) bare bones, not fun, but we have food and heat
2) live like we live now - a pretty good life
3) Fat FIRE - take the trips we want, buy the things we want get a new car every 7-8 years etc

I’m quite a number of years away from my target retirement but i’ve considered a similar retirement strategy to yours. Personally I’m most interested in a fat retirement but i’m not sure how to budget for things like healthcare. Obamacare coverages in my area seem lousy compared to my current health plan. How are you approaching healthcare costs? Also how are you budgeting for travel?

Thanks!

[flyingaway]

From what I read, most international stocks are moving more or less in lock step with the US markets nowadays so being invested in international stocks ought not to have a big impact.

There's a lot mis-information out there about international and I feel the financial industry is selling a pig with lipstick. International markets do not move in lockstep with US markets.
Over the last 5 years the market correlations with the SP500 for various countries has been:

Australia .69
UK .77
India .36
China .69
Brazil .28

Definitely not moving in lock-step. And definitely has had a huge downward weight on portfolios with significant exposure.

All the financial wizard advice about having 40% of assets in international ignores how businesses actually make money. It doesn't take into account where profits are made. If you invest in the SP500 about 43% of revenue is already derived from overseas sources. In effect by purchasing international funds you are overweighting the impact of those markets.

I think the SP500 has been performing well because people "think" it will do well (and it did well), regardless of the value. This is like a bubble which will grow until it pops.

[jdfergason]

I think the SP500 has been performing well because people "think" it will do well (and it did well), regardless of the value. This is like a bubble which will grow until it pops.

I agree that there is an emotional component to investment returns but we often discount the effects of monetary policy on stock prices too. If interest rates stay in the 0-3% range, us stocks look fairly priced to me. If interest rates expand much beyond that then stocks will start looking expensive. The 2017 tax policy changes also have a positive impact on balance sheets which has translated to higher valuations.

Point is: its really hard to time the markets. On these forums people have been declaring a top since at least 2014; but 2019 is nearly over and we are significantly higher than we were in 2014. I dont know that we wont plunge in to recession tomorrow but I am still optimistic for the US long-term. We have significant advantages compared to other economies and if we dont throw those away with poor economic policy like a wealth tax, UBI, etc. I’m putting my money where my mouth is and investing in US stocks.

[Exflyboy]

@carstenjames You're right we do have advantages here that other economies do not.

We are are a much more "purely capitalistic" than others. For example NO other country refers to the "Healthcare sector", which in the US is worth about 17% of the entire economy.

To a European, healthcare is not something the country makes a profit on, rather the Government uses its purchasing power to screw down prices as low as possible.. In the US it is illegal for Uncle Sam to negotiate drug prices.. One could argue this is corrupt too.. I certainly do.

Simple math also says that if the stock market grows on average by 10% per year than healthcare should represent about 1.7%.. (10% X 17%).

So if you have a $1M index fund portfolio, HC makes you about $17,000 per year.

Quite an uplift if you have a multimillion $ stash!

[Much Fishing to Do]

If all my portfolio were S&P500 since 2009, I would have at least one more million dollars.

Yeah, I'm sure my international allocation has cost me half-million over being all in US.  Who knows what's next...

From what I read, most international stocks are moving more or less in lock step with the US markets nowadays so being invested in international stocks ought not to have a big impact.

Well, more specifically the 5 year/10 year returns of VTSMX is 10%/13% and VGTSX is more like 4%/5%.  Thats a pretty huge difference and in general what I have been seeing as the difference between the two the the past decade.  Again, could obviously all change for the next 10 years.

[AdrianC]

All the financial wizard advice about having 40% of assets in international ignores how businesses actually make money. It doesn't take into account where profits are made. If you invest in the SP500 about 43% of revenue is already derived from overseas sources. In effect by purchasing international funds you are overweighting the impact of those markets.

And companies based overseas make money in the US. If you don't invest internationally you're missing out on some pretty big, successful, money-making companies, who are currently quite cheap compared to the US market.

[bluebelle]

just popped in to say happy Monday, and welcome to December.   Plows just went down my street.

I really like this thread, it feels like a more moderate thread than some of the others.  Folks have their opinions but are open to other points of view or at least agreeing to disagree.  Pay off the mortgage, don't pay it off, buy a new car, never buy a new car.   It's a thread for people who can 'afford it', but are choosing where and how to spend their money.

Because I put a dollar value to DH defined benefit pension, I've been a member of this thread for a while, but with market gains the last week, we officially have more than $2 million of investable assets and I can finally call myself a millionaire (DH and I agreed years ago that we need 2 million of liquid assests as a couple for us to call ourselves millionaires).  $2 million is our number, although, now that I'm here, OMY has kicked in.   I like my job, he hates his, he's retiring at the beginning of next summer (2020), I think I'll hang in until spring of 2021, assuming the job stays fun.  I like what I do, who I work for and with, if that changes, FU money kicks in.   I may even try going down to 3 days a week, although I fear that would just mean working 5 days and getting paid for 3 (I have some boundary issues, and the nature of my job - there is almost always a crisis to work on, and I tend to getting really involved - I love a good puzzle, and I'm very very good at it)

Part of the reason for my OMY syndrome - we're in the process of building our 'dream' home in a vacation area, I know there will be lots of extra costs once the house is finished and we've moved in next summer.....dock, boat, replacement cars (mine is 16 years old, his 13), landscaping, some new furniture.

I've designed our retirement budget with three buckets -
1) bare bones, not fun, but we have food and heat
2) live like we live now - a pretty good life
3) Fat FIRE - take the trips we want, buy the things we want get a new car every 7-8 years etc

My plan is if the economy has an off year, we drop down to option 2 until things recover....if the apocalypse happens, we drop down to option 1, we get better at gardening, and huntin' and fishin'.

Welcome.

I'd like to hear more about the fatFIRE part of the story.

My FAT FIRE may sound like someone else's Tuesday, we all ride our own ride.....but our retirement 'plan' includes some motorcycle trips, and many of those will include trailering the bikes somewhere.   The plan also includes a few big trips, maybe every other year, to Europe, Hawaii, UK.   And we will be living Ontario's cottage country, so there will be lots of opportunity to boat/fish, hike, snowshoe, maybe get a couple of sleds.   I'm thinking of taking up golf again.

[2sk22]

Well, more specifically the 5 year/10 year returns of VTSMX is 10%/13% and VGTSX is more like 4%/5%.  Thats a pretty huge difference and in general what I have been seeing as the difference between the two the the past decade.  Again, could obviously all change for the next 10 years.

Inspired by your comment, I dug into this and found that you are right. It occurs to me that there is also currency exchange risk in international investing. For example, the Indian Rupee has gone from 62 to 72 (per US Dollar) in the last five years while the SENSEX (their main index) has gone up. I see identical trends in Turkey and Brazil as well.

[bluebelle]

I've designed our retirement budget with three buckets -
1) bare bones, not fun, but we have food and heat
2) live like we live now - a pretty good life
3) Fat FIRE - take the trips we want, buy the things we want get a new car every 7-8 years etc

I’m quite a number of years away from my target retirement but i’ve considered a similar retirement strategy to yours. Personally I’m most interested in a fat retirement but i’m not sure how to budget for things like healthcare. Obamacare coverages in my area seem lousy compared to my current health plan. How are you approaching healthcare costs? Also how are you budgeting for travel?

Thanks!

I'm in Canada, so our healthcare costs are different.   I've budgeted $500 a month for our "free" healthcare premium.  (our free health care does not include dental, vision care, prescriptions, hearing aides or any parmamedical {massage, orthodics, physio})  Prescription costs should drop down dramatically once we're 65, as currently seniors pay a lower dispensing fee and $100/year co-pay for prescriptions, but as our population ages, I don't see how that is sustainable, but it is not currently means tested.   I looked at what a
I have budgeted $15K a year for travel.   Neither of us are big 'resort' type travelers, and are happy in places with a kitchenette

[MaybeBabyMustache]

We've officially crossed over into the $4M bucket. Barely (under $10k over). Without our primary residence equity, we're at $2.4M.

Because our primary residence is so $$$$, our current big goal is to get the loan value under $1M. I know that's a crazy big number, and while we're in good shape with equity, we both still feel very uncomfortable with the giant loan looming over us.

[SwordGuy]

We've officially crossed over into the $4M bucket. Barely (under $10k over). Without our primary residence equity, we're at $2.4M.

Because our primary residence is so $$$$, our current big goal is to get the loan value under $1M. I know that's a crazy big number, and while we're in good shape with equity, we both still feel very uncomfortable with the giant loan looming over us.

Golly.   I can understand that!    I can't imagine having anywhere near that much debt!   The most we've ever had was $114K house and $55k business loan and 2 x $16k cars, or $201K, and that bugged me.   We paid it all off within 11 years.   

But at least you have a whopping big stash!   Congrats on that!   Well done!

[MaybeBabyMustache]

@SwordGuy - we would like to have our house paid off in seven years (total loan time), which I think is realistic. We've already paid off more than a million as well, so we're churning through it quickly, but anything can happen & we want it paid off as quickly as possible while still making smart tradeoffs. Bay area real estate... definitely comes with major tradeoffs.

[SwordGuy]

@SwordGuy - we would like to have our house paid off in seven years (total loan time),

If you're going to get a 7-year itch, that's about the best one to get! :)

[jdfergason]

We've officially crossed over into the $4M bucket. Barely (under $10k over). Without our primary residence equity, we're at $2.4M.

Because our primary residence is so $$$$, our current big goal is to get the loan value under $1M. I know that's a crazy big number, and while we're in good shape with equity, we both still feel very uncomfortable with the giant loan looming over us.

My goodness, congrats on the healthy NW but I totally understand your uncomfortability with such a large loan. When I have visited the Bay Area it has a lot to offer that I really enjoy. I'd be so fat if the bakery Tartine was in my city!!! But real estate costs are just out of this world. Good luck paying down the loan.

[flyingaway]

We've officially crossed over into the $4M bucket. Barely (under $10k over). Without our primary residence equity, we're at $2.4M.

Because our primary residence is so $$$$, our current big goal is to get the loan value under $1M. I know that's a crazy big number, and while we're in good shape with equity, we both still feel very uncomfortable with the giant loan looming over us.

So your house is worth at least $2.6M? Hope it is also enjoyable.

[flyingaway]

My FAT FIRE may sound like someone else's Tuesday, we all ride our own ride.....but our retirement 'plan' includes some motorcycle trips, and many of those will include trailering the bikes somewhere.   The plan also includes a few big trips, maybe every other year, to Europe, Hawaii, UK.   And we will be living Ontario's cottage country, so there will be lots of opportunity to boat/fish, hike, snowshoe, maybe get a couple of sleds.   I'm thinking of taking up golf again.

Looks like travels of various kinds are always on the list of fatFIRE people.

[MaybeBabyMustache]

We've officially crossed over into the $4M bucket. Barely (under $10k over). Without our primary residence equity, we're at $2.4M.

Because our primary residence is so $$$$, our current big goal is to get the loan value under $1M. I know that's a crazy big number, and while we're in good shape with equity, we both still feel very uncomfortable with the giant loan looming over us.

So your house is worth at least $2.6M? Hope it is also enjoyable.

Yes, it's worth more than that. I wouldn't describe it as super enjoyable - it's a fixer upper that we are slowly working on.