ERE Challenge: Could You Retire on $300k?

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enigmaT120
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Re: ERE Challenge: Could You Retire on $300k?

Postby enigmaT120 » Thu Jun 30, 2016 4:49 pm

Spartan_Warrior wrote:Leaves a five year gap, though, with little to be done about it, since my 401k (TSP) does not appear to allow withdrawals or conversions until I actually leave employment. If I get around to it, maybe I'll crunch some spreadsheet numbers like in the article based on my accounts.


I'm hoping they add more withdrawal options to the TSP before I retire. Why not let us take a payment out once every year? I think they want to push the annuity option, I'm not sure.

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GandK
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Re: ERE Challenge: Could You Retire on $300k?

Postby GandK » Thu Jun 30, 2016 5:20 pm

I've been mulling this over and keep coming back to the same idea. Since you're comfortable with dividend stocks: is it possible to move all of your investments into dividend producing stocks that you're comfortable owning (e.g. dividend aristocrats)? And if so, what would the annual yield be today? Is that enough to live on? I'd walk through that exercise in a spreadsheet. Even if you decide you can't retire today, it may get you closer to a workable estimated retirement date.

To me, the retirement date is about the monthly income amount you'll have, not the nest egg, as @Jacob said.

Edited because I make stupid mistakes when dehydrated after jogging.

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Riggerjack
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Re: ERE Challenge: Could You Retire on $300k?

Postby Riggerjack » Thu Jun 30, 2016 6:47 pm

OK. My post of my number in a different thread aside, I can see this working. Here's the how.

The house has to go, and your numbers are useless. I love Zillow, but their estimates are crap. Call a local agent, get comps, DO NOT LIST with this agent! She should be able to get a reasonable estimate, and a handle on closing costs.

Look at your pension plan. If you are close to vesting, do so.

Sell your house thru mysecretagent.com or similar.

Proceeds from home sale have a big cap gains deductions, figure state taxes on your own. This is your best egg, your all in one cash pile, I will assume your numbers are off, and this is a pile of 50k.

Spread this money on the bed, bring your girlfriend over and recreate whichever scene cones to mind, you are going for the full ERE, you won't see this much cash again for a while, so enjoy it.

Now, take that pile of dirty money, with a straight face, open a taxable account, invest as you please. Relax, man. All money is dirty money, circulation has a whole new meaning, now, doesn't it?

So, now you have the funds for a Roth conversion ladder, and all your money is shortly to be available to you. Soon, it's all liquid.

This site is full of examples of full ERE, choose one. Sailboat, van, tent, homestead, what have you.

My recommendation, if you can keep your mouth shut and learn, would be to move to the poorest county in Mississippi or Alabama, or Arkansas. Rent a shack, shut up and learn. These folks have been getting by on less for generations. Get a rifle, a small boat, and plant a garden.

You want to be an author, use this to learn enough to write about. Do all the things that will make you long for the good old cube, or that will reinforce your belief that you will never go back. You won't know until you do.

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Ego
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Re: ERE Challenge: Could You Retire on $300k?

Postby Ego » Thu Jun 30, 2016 7:05 pm

Film it and you'll retire on the syndication.

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Riggerjack
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Re: ERE Challenge: Could You Retire on $300k?

Postby Riggerjack » Thu Jun 30, 2016 7:09 pm

The places you want to rent are on 3x5 cards on boards at the small town laundymat, and convenience stores. They are cabins and shacks, often without power and phone lines, but solar and cell will get you through the night.

Or rent a room, or vagabond in your van.

The point is that with all your assets liquidated, this should be enough, if it is enough. If not, you are young, and can try again. Plus, it should generate some great stories to tell around the water cooler...

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GandK
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Re: ERE Challenge: Could You Retire on $300k?

Postby GandK » Fri Jul 01, 2016 6:23 am

Riggerjack wrote:... or vagabond in your van.

Yeah, no kidding. Go read C40's latest journal entry, @Spartan. :)

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Re: ERE Challenge: Could You Retire on $300k?

Postby Spartan_Warrior » Fri Jul 01, 2016 8:56 am

@JL13: True. Not sure what I was thinking there. I guess I was thinking I'd avoid drawing down the dividend portion of my portfolio to start with, but yeah, double-counting the dividends as such invalidates the SWR long-term.

@GandK: My dividend-oriented portfolio pays out about 5% in dividends at the moment. Mostly dividend-growth "dividend champions". Seems like it handled Brexit about as admirably as my Permanent Portfolio portion, which amazes me as I've always thought of myself as a sub-par investor. But assuming the total value of my assets converted to "good money" is about $270k, 5% would be about $13.5k a year, or $1125/mo.

I didn't mention my personal expenses because A) I was trying to universalize the problem, B) I've been increasingly lazy about saving and could almost certainly be much more efficient if pressed, and C) I feel the numbers could change drastically depending on the situation. But, FYI, my running average of all non-housing (PITI) expenses for the last two years is about $1050. This includes ~$50/mo in tax deductible side hustle expenses and ~$350 of "frivolity" spending which is basically what it sounds like, including restaurants, booze, video games, new clothes/books, and other luxuries that could be cut pretty drastically (disturbing that the average is so high, actually; probably the PCs I built for me and my GF). It's also worth noting that my electric bill, averaging about $150, would probably be less in a smaller house or one with a damn fireplace. Actually, most bills would probably be lower outside of MD. Ultimately, I think it would be reasonable to assume I could live fairly happily in an environment roughly similar to my present one (e.g. SFH, on the grid, reasonable kitchen and fridge space, etc) on $700-900/mo, PLUS housing costs. If the situation were closer to my ideal (see below: off-grid/solar, smaller house, wood fireplace, large garden, etc) I think I could easily go lower than that.

RE: Zillow estimate; I honestly think it's roughly accurate, maybe high by 5-10k. When I refinanced to 15 year about 3 years ago, the house appraised at $270k, which I take as the high estimate; I got a comp analysis from a realtor maybe a year or two ago that came out at $245k, which I take to be the low estimate.

RE: Capital gains tax; I thought there was an exemption if the capital gains are under something like 2xx,000? :? In MD the transfer taxes, attorney fees and other miscellaneous costs would be something like 2-3% of the sale.

RE: Vagabonding/van-abonding; In attempting to universalize the problem, I did leave out a few obligations unique to my situation, like a girlfriend and a dog. Personally, I always wanted to start early retirement with some vagabond-style adventuring. I haven't had a solid adventure since hitchhiking cross-country in my early twenties which was sadly (ahem) about ten years ago. Appalachian Trail hiking or van/RV camping, etc, sounds pretty good to me, even if only as a temporary solution to add a "buffer" of low draw-down years at the start of retirement. Problem is, my GF is way closer to the "homesteader" side of the spectrum (to the point that I think her ideal situation or at least "dream" situation would be a full working farm). She is the Hobbit to my wandering, inscrutable Wizard. She seems to be reluctant to leave the current situation regardless, but probably increasingly so the less the alternative resembles a safe, ordinary middle class life. She also adamantly hates/fears living in the city, especially Baltimore (honestly, I don't disagree there, which is part of why I overpaid for my house in the semi-rural ex-urbs).

So, taking that into account, when I picture a "lifestyle design" that would work for both of us, I think of homesteading. A plot of forested or at least not too arid land, with not too severe weather/disasters, probably somewhere toward the Rockies or Pacific. As large and private a lot as possible while still having internet and cell phone access for work and pleasure. Would prefer to be off-grid as far as other utilities, with a well and septic for water and solar for electric. The house could be either a tiny home/cabin with wood burning stove and/or an RV parked under a pavilion/garage. The latter would allow for occasional adventuring or seasonal snowbirding.

I've been casually looking across several western states (mostly CO, NV, OR, WA) for at least a year now. Seems like there isn't much that meets those needs in my desired price range of $40-75k. Most places are either too remote or the land too inhospitable for our tastes.

@Riggerjack: "You want to be an author, use this to learn enough to write about."

Hell, having written and published half a dozen full-length books now, in my wildest fancies I sometimes believe I AM an author. ;) But yeah, I see what you mean.

Although @Ego may be on to something; maybe best to skip the books and go straight for the documentary! :o

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Re: ERE Challenge: Could You Retire on $300k?

Postby JL13 » Fri Jul 01, 2016 10:03 am

Looking through again:

It seems like the common consensus is that the house has to go, for cash flow reasons. Given that you could sell the house for $245 minus $170k less 6% selling costs, you've got:

$140k tax-deferred
$15k HSA
$35k Roth
$75k liquid (after selling)

$265 total

3% SWR = $7,950 per year

In theory, this is pretty close to the minimum required to safely retire as an individual. Is your girlfriend able to cover her share of the costs regardless of where you go? Will your I'll echo that access the funds could be an issue though. If you want a more typical living situation - your own set of bricks in the USA - then you need to budget at least $100k, i would say about $125 to really have access to a fair number of SFR. If a condo, maybe 75% of this number.

The problem with that is, you've only got at most $110k of liquid funds. The $140k in tax-deferred accounts can be drawn down slowly through Roth Ladder, but not until 5 years from now. So you can't just drop the cash for a house without facing some liquidity issues.

I'm in a similar boat. You've got 68% of your NW locked away in tax-deferred accounts, and I have 62%. If you could split a cheaper house with your girlfriend, then you'd have maybe $50k left over left over in the liquid account. You'd be looking at:

$140k tax-deferred
$15k HSA
$50k liquid/Roth

$205k Total

3% SWR = $6,150 per year

and no rent to contend with. Those numbers work for you to access the liquid accounts first ($6,150 for 8 years in the liquid) while converting the IRA to Roth for access after this.

That's how I see the number's working for a paid off house somewhere. Of course, more unique situations would allow much more flexibility.

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Re: ERE Challenge: Could You Retire on $300k?

Postby Spartan_Warrior » Fri Jul 01, 2016 10:59 am

Honestly, GF brings useful homesteading skills to the table, but not much in the way of assets*, or even enthusiasm for this change. She understandably hates the idea of moving if she'll still have to keep working to pay for part of the bills, as she does now--especially if we're moving far away enough that she'd have to find a whole new job in a new area, OR if we're in her mind "downgrading" our lifestyle at the same time (e.g. moving to RV or apartment). I can see where she's coming from. The best case scenario would definitely be that we combine our budgets fully and I cover both of our costs of living so we can both be free. It's worth noting that my monthly spending in my last post is the full budget for our shared household costs (groceries, electric, etc are currently split, but I budget the whole expense) but does not include her individual costs for cell phone, health insurance, car payment (~6k left on loan), and miscellaneous spending. Some of these expenses, e.g. insurance, could probably be consolidated and lowered further through marriage--might also help her insecurity about the whole deal--but that's a whole other topic!

*Aside from an arbitray $x,000 combined in savings and 401k, she does have a $30-40k Roth in her name, but her parents (who aren't fond of me, btw) rule that account with an iron fist and won't take their names off of it or allow her to actually take it over. GF also doesn't seem keen on tapping into her only savings toward buying a house, although I understand first-time home purchase is (or used to be?) one of the only penalty-free ways to use Roth IRA funds early, and this would be her first purchase.

Bottom line, GF isn't bringing much in terms of assets, her income is geographically tethered to our current location, and she isn't keen on the idea of being uprooted if it means she still needs to work. Definitely adds to the Challenge...

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GandK
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Re: ERE Challenge: Could You Retire on $300k?

Postby GandK » Fri Jul 01, 2016 11:06 am

Spartan_Warrior wrote:Problem is, my GF is way closer to the "homesteader" side of the spectrum (to the point that I think her ideal situation or at least "dream" situation would be a full working farm). She is the Hobbit to my wandering, inscrutable Wizard.

From another Hobbitess: see if you can get her to articulate what it is that "home" means to her. (This may take weeks.) Is it farming? Nature? Deep relationships? Routine? The absence of change? If she can pin that down, the two of you may be able to find a way to go on the road that keeps her happy and feeling grounded.

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Re: ERE Challenge: Could You Retire on $300k?

Postby Spartan_Warrior » Fri Jul 01, 2016 11:09 am

@GandK: Good idea! I've asked questions more along the lines of "Where/how do you want to live in the future?" to try to get at some common ground like that, but approaching it from what "home" means could be easier for her.

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Re: ERE Challenge: Could You Retire on $300k?

Postby JL13 » Fri Jul 01, 2016 2:00 pm

Yeah that's tough. FWIW You can take all your contributions out of a Roth tax-and-penalty-free and if you have any gains, then you can take up to $10,000 of those out without penalty to buy a first-time house (they will be subject to income tax, though).

How does your mortgage expense compare to renting apartments in the area? If it's similar.....I would just keep working and dumping free money into the mortgage for at least another year. tax-deferred accounts are amazing, but for buying property they really suck.

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Re: ERE Challenge: Could You Retire on $300k?

Postby JL13 » Fri Jul 01, 2016 2:02 pm

Again, I'm in a similar situation with taxable/tax-free funds as you, but I don't have the significant other to restrict things quite as much. I'm planning to do the nomad thing for awhile and hopefully the accounts will grow enough that maybe I can pull out ~ $100,000 to buy a property someplace. I'm not in a hurry though.

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Riggerjack
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Re: ERE Challenge: Could You Retire on $300k?

Postby Riggerjack » Fri Jul 01, 2016 9:20 pm

S_w, I don't usually read the journals, so I just remembered that you wanted to write, and hated your govcube. I didn't realize that you were published. Where is that income on your breakdown? Is that the side hustle?

Any way, when you try breaking out those numbers for two, and add in a homestead, things get much more grim.

I saw several people worried about the retirement accounts, but if you sell your house, and Roth conversion, I don't see a problem there. I just don't see a homestead working on that scale.

Living on one jacob can be done, but homesteading is not a cheap buy in. I've known many people who thought they could be self reliant, and live off the land. They all gave up, and got jobs.

The closest examples I can think of, my best friend's uncle built a log cabin on inherited logging land with a chainsaw, a winch and his Jeep. Then rowed out in the Sound, caught his supper, and gardened. But he still had to work on occasion. 1 year out of 4-5. But that was back in the 70's and 80's, before property taxes did what they do. And the fishing was better.

Now we have an import retiree industry, so the small homestead comes with a retail price tag. For example, the 7acres next to me is up for sale, they want 91k, and it is so wet, it will be hard to build on. I have a spare 5 acres, untouched, currently appraised at 110k, even with the small wetland.

If you are aiming for Western Washington, aim South and/or West of Olympia.

Whatever you do, good luck!

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Re: ERE Challenge: Could You Retire on $300k?

Postby Spartan_Warrior » Sat Jul 02, 2016 9:33 am

@JL13: The current 15-year mortgage payment is similar to or better than rent on a comparable SFH in the area, but there are way cheaper apartments available for rent. On the other hand, if I refinanced to a 30 year mortgage, it would be far cheaper than rent on a comparable house and competitive with local apartment rentals, especially considering location.

I've been reluctant to refinance because I don't know if I want to stay--correction, I KNOW that I DON'T want to stay--and it would grate me to eat the closing costs if I left before it paid off. Depending on the closing costs, I think I calculated it as about a year before I break even in saving more than I spent. Perhaps I should just bite the bullet and commit to at least another year...

@Riggerjack: No harm done, I'm just messing with you. It is a pet peeve when people IRL who know better pull the "still trying to be/want to be a writer?" thing, so I couldn't help giving my accustomed response, but it's all good. :D Yes, the side hustle figure in this thread is my meager book royalties. In months I publish or advertise heavily, they go up. I've been ignoring it for a few months now and last month I made about $100.

I'm not sure if we could pull off the homesteading thing either, but it sounds fun, and seems to hit the sweet spot for both of us: I get "adventure" of its own sort, she gets "home". If we opted to move across country, I think our plan would be to find a place to rent in roughly the area we wanted to end up and spend the year acclimating while having access to look at local properties. It's definitely hard to find or even recognize a bargain online.

Someone tipped me off to mining claims as a potential way to essentially live on and work land at subsidized rates (AND get to pan for gold!), but I haven't looked into it much yet.

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Re: ERE Challenge: Could You Retire on $300k?

Postby ffj » Sat Jul 02, 2016 9:38 am

I still think you are ignoring the tax implications. The Root of Good author is still paying the tax penalty for conversion, but since he is married with three children his tax credits are off-setting this penalty. He also is being subsidized through Obamacare, as he is purposely altering his income to maintain his qualification in that program. As far as I understand, you won't have those off-sets. When you are planning on living on less than $10,000/year, than a $3,200 tax hit is huge, assuming you would withdraw $30,000/year as the author has.

If you do choose to go down this path, then ultimately the profit from the sale of your home would have to sustain your lifestyle for five years until the first installment of converted funds were to become available. I could see it working if you were to work enough to cover your $7,000/year lifestyle and using the profit from the sale of the home as a reserve. That way you could work maybe 4 months out the year while maintaining your reserve from the sale of the home. I think it would be wise to consider options a few years down the road when you may tire of living in a van or a shack in Mississippi. Or you get married, or a kid becomes part of the picture. Or not, but who knows what will happen. My caution would be not to create a system that crashes and burns when hiccups are encountered.

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Re: ERE Challenge: Could You Retire on $300k?

Postby FrugalFred » Tue Jan 10, 2017 9:56 am

I've thought about semi-retiring with $300K. Should have that much saved by my early-mid 30's. Maybe move to a small town with just enough to cover my basic living expenses. Make a little money online somehow to add to my stash and take romance vacations to SEA.

My original number was $500k, but full-time work is really starting to take a mental (and physical) toll and I don't know if I can hold out that long. I'm stressed out 24/7, my skin is breaking out, my once Adonis-like body is now pale and flabby, and I generally feel like ass. I'm also having night terrors - often waking up in a cold sweat, temporarily paralyzed, and hallucinating being attacked by evil spirits. Yeah, work's taking its toll alright.

My plan relies on several assumptions though: that I can find a place for under $500/month, I can make about $500/month online with minimal time invested, and the 3% rule is legit. I'm not so sure it can be pulled off.

James_0011
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Re: ERE Challenge: Could You Retire on $300k?

Postby James_0011 » Tue Jan 10, 2017 1:21 pm

Easily, just move to a cheaper country.

No idea why people here discount this method much.

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Seppia
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Re: ERE Challenge: Could You Retire on $300k?

Postby Seppia » Tue Jan 10, 2017 6:06 pm

No I would not do it.

You may have a $300k net worth, but most of it as Jacob said is "not the good stuff"
One thing is having $300,000 in a brokerage account, invested in well diversified stocks, and another is having the same amount split 1/4 into a house you still owe money on, a big chunk in retirement accounts and just a little bit of readily available, post tax assets.

BRUTE wrote:
Zalo wrote:Geographic arbitrage is also excellent to make your US DOLLARS go farther. Take advantage of the US's hegemony over the rest of the world. $1 US dollar is worth quite a bit in nice places, such as Norway (as the recent millionaire post noted).


moving to Norway for geographical arbitrage? brute found Norway to be very expensive.


Norway is literally one of the most expensive countries in the world.
https://www.ubs.com/microsites/prices-e ... -2015.html

Here the full study of UBS prices and earnings, which I have been using since the mid 2000s when I started being an expat.

https://www.static-ubs.com/microsites/p ... 015-en.pdf

It's an amazing tool for geographical arbitrage.
Based on personal experience, they tend to overestimate the costs, which is predictable.

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Re: ERE Challenge: Could You Retire on $300k?

Postby steveo73 » Wed Jan 11, 2017 11:04 pm

I don't consider my house that I own outright as part of my FIRE assets. If you move assuming you buy somewhere cheaper than your house can be part of your FIRE assets. If not then you shouldn't consider it.


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