FIRE - I am there yet feel I can't quit

VMware / Product lRQQ72
Aug 25, 2018 15 Comments

This is going to be a longer post - mainly because I would like to get an advise and feel I need to share most of the details. I am in early 40s with 2 young kids (1st and 2nd grade) and wife who only works part time (negligible income). We live in one of the expensive coastal cities and I have been saving for the last 15 years - not eating out, not buying luxury items, but fair amount of travel, including international and experiences i.e. sport camps, skiing, scuba etc.

Below are my numbers but I can't find a way to make it work. Ideally I would work hard for 7 - 9 months each year and take it easy, travel learn new stuff in between. But even for the 9 months of work it is not going to be anywhere close to what I am making now. We got no debt (outside of mortgages) and my TC ~ 500k (290 base, 20% bonus, 150k RSUs annual vest).

If I would move to lower cost country, we could probably get by but I am thinking the area where we are right now has some of the best schools, is safe, short commute for me, so for my kids future it is better to stay here until they are done with high school. (do you agree or disagree?)
It seems my problem is both monthly cashflow and the type of investments I made. What should I change? How did you structure your income when you FIRE, did you wait for kids to go to college?

Asset . Value . Liability . Monthly cash flow . Assets if sold . ROI 5 year avrg
Primary house . 1.6M . (660k) . (4400) 900k . 7%
Rental house . 750k . (320k) . 500 . 400k . 7%
Rental oversees . 1.2M . (900k) . 1000 . 300k . 16%
Hedge fund . 550k . N/A Reinvesting 550k . 8%
My investing . 250k . N/A . Reinvesting 250k . 9%
Crowd landing . 150k N/A . Reinvesting 150k 8%
IRA self invest . 250k . N/A . N/A - age restricted 250k . 9%
IRA managed . 200k N/A . N/A - age restricted 200k . 5%
Private shares 150k . N/A . illiquid - Uber, ABNB . 150k N/A

I also bought real estate during after the 2008 crash in Detroit - thinking it was going to be my golden ticket at I got 15x SF for 200k in cash. It was good for the first 3 as we did a rehab but started to be a nightmare after. I could never find reliable management, perhaps some of the houses were too close to troubled areas, but I wrote off 100% of that 200k, so I am trying to be careful...
I have unvested RSUs (4 years, today value about 800k pre-tax). But in the overall I don't think it matters that much.
How should I change the investment strategy so I can FIRE?
Would you stay in the expensive area and keep working or sell and move to a low cost area? (we have been here for 20 years, so have friends, connections etc.)
For those in FIRE - how do you make sure that you have adequate monthly cash to cover expenses?
I know I am in a good spot compare to many others, mainly thank to hard work, saving a lot and having decent returns. I would like to hear from those that found a way to FIRE - HOW?

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TOP 15 Comments
  • Lazard fin/tech
    how are you making $500k at VMware
    Aug 25, 2018 0
  • Amgen Fin4eng
    You aren't ready to FIRE because you aren't even looking at your assets/liabilities from a FIRE perspective.

    There was nothing in your post about your liabilities and yearly expenses. You are also looking at things related to networth and not investable/cashable assets. Also, the focus should switch from ROI to protection and availability.

    It also seems like you are looking at more like part-time downsizing than FIRE and that'd be a different calculation

    1. Do you not have a 401k or is it just the IRA's?
    1a. IRA's aren't age restricted if you are retiring and use the 72t rule to withdraw from them equal values over your life expectancy.
    2. I see $1500/mo in cash flow from real estate and then the rest is from selling investments. From a diversified portfolio of low cost index funds, you can withdraw ~2.8-3%/year and index for inflation and historically that's been a perpetual withdraw rate. At ~4%, that has (almost) always lasted for 30 years and in many scenarios continues to grow.

    3. Simplify this process. You have X in investable assets and Y in yearly expense requirements. Can you look at rental income + 3-3.5% of investments and cover your yearly expenses + tax on the income? Depending on the answer to that and future upcoming expenses, whether you will be helping your kids with them and how well they are funded (new cars, college, grad school, weddings, etc ) then you can answer whether you are FI or just comfortable and on your way.
    4. From the numbers you showed above, even if you cashed out it doesn't look like you are FI unless you missed a large 401k, your expenses are low or something. I see ~1.5Mil in investments and that's only ~$45k/yr of income at 3%. Add the $1500/mo of rental income and that's still a very large drop from current income. But this is why you have to compare it to your expenses.

    side note: there is nothing fundamentally wrong with your investments in hedge funds, private equity, etc but it reduces your flexibility for your assets and at some point you shouldn't keep reinvesting into them.
    Aug 25, 2018 0
  • Intel Ticle
    What is FIRE?
    Aug 25, 2018 1
    • PPD / Ops feu
      Financially independent / retiring early
      Aug 25, 2018
  • Amazon LYFL12
    Fire is easy, put a million in an index fund. 5% growth gives you 50k income. Make sure you payoff all your assets car/house etc. Work part time when you feel like it to keep adding to savings and supplementing income when needed.
    Aug 25, 2018 0
  • Wells Fargo qUyB01
    Would be helpful if you post an image of the excel listing your investments for folks reading on mobile
    Aug 25, 2018 0
  • Apple / Other abcxyz007
    Sorry but ur post is very complicated to understand.

    The basics of FIRE in my opinion.

    1. Understand what is your monthly income from your investments (rental, investments etc)

    2. Can you continue to live in your current location for that amount, If Yes retire.

    If No

    Option 1 : Move to a lower cost location that satisfies ur needs and aligns with ur budget

    Option 2 : continue to do part time/full time work until you get there
    Aug 25, 2018 0
  • Amazon Insomzonia
    Rest and vest
    Aug 25, 2018 0
  • Pure Storage JH67DF
    Show off
    Aug 25, 2018 0
  • Reddit kRFE20
    What are you asking exactly? You have impressive assets but you don’t know what to do with them?
    Aug 25, 2018 1
    • VMware / Product lRQQ72
      OP
      Correct, I feel I got assets but they don't support FIRE. What should I convert them to? When, now or wait? Stay in the expensive area or relocate, are the opportunities especially for kids really better here compared to low cost?
      Aug 25, 2018
  • VMware / Product lRQQ72
    OP
    It's above, base + bonus + RSUs
    Aug 25, 2018 1
    • Oath / Eng [object
      What level at VMware to make 290k base?
      Aug 25, 2018
  • New DuQvV7x
    I FIREd in May, and recently had an AMA on this.

    Your approach seems quite complex. Here’s what is feasible.

    Identify your yearly cash burn. Choose a safe investment that provides that.

    In my case it’s RE. You seem to have enough assets spread through a few classes that may support this (stock and bond mix).

    I’d drop primary house and overseas rental from FIRE calc. Why? You gotta live somewhere and currency fluctuations is too crazy to plan a retirement around.

    Your mortgage seems a bit high to maintain during FIRE for the assets you own. That’s $50k a year just in mortgage debt service.

    Have you considered LCOL area?
    Aug 25, 2018 0
  • HP !HPPLZ
    Move to Broomfield, CO, slim down expenses, keep 1.6M house, buy another one in the area, wait 5 years and invest in a mountain condo or something. 4 assets will be a good source of income.
    Aug 25, 2018 0

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