What would you do?

[My1stThrowAway]

hi all,

I am struggling to find motivation lately and wanted to run my scenario by the braintrust on here. I wasn't 100% sure where to put this thread so feel free to relocate as needed.

Me: 38
SO: 61

Job and income:
Me: work in big tech earning base of $134k gross with typically a 15% annual performance bonus
SO: Retired from a government position earning ~$57k COLA pension.

Current stash:
Me: ~$250k between my accounts allocated for retirement
Us: ~$7k VTSAX and ~$250k home equity
SO: ~$57k cost of living adjusted pension, retirement fund is one of the best funded out there; minimal risk of ruin.

Our back story:
SO and I met after the retirement, SO was traveling quite a lot and we actually met on the plane after getting re-routed so clearly it was meant to be. In 2010 my partner had a bout with skin cancer and later also had a stroke but overall is more health conscious than me. SO works out 3-5 days a week and hikes/bikes/snowshoes etc. Due to the fact that we met after retirement I am not a beneficiary on the pension, this is important for our fire plan.

Our current setup:
SO has a very strong desire to travel and is currently gone about 100 days a year between trips to see family (grown kids and several grandkids), tours through Asia and Europe with other retired friends etc. We have mutually agreed to allocate a set amount of money to a travel fund for SO on a monthly basis and that is funding these trips for the most part. My time off is limited so we do take 1 big trip each year and some smaller ones where I often end up working remotely. We have been married for 8.5 years and have a healthy marriage. I don't dislike my job but it's a pretty high stress environment. My career has gone super well in the 3.5 years on this job. I am on track for directorship if I choose to pursue that, but have told my leader and GM that a career of that nature isn't in my future. My GM also has a significant age difference with her SO (17 years i believe) so she can relate to wanting to spend time together sooner rather than later.

The big dilemma:
My partner is ready to go, right now. We have agreed to live the first 8-10 number of years off of the retirement as we plan to move to a LCOL country in Southern Europe. We live quite lavishly now but I have been able to convince my partner that without a car budget and more affordable cost of living it is doable. Our post-retirement budget is generous for that part of Europe and still leaves us a nice buffer for mostly Schengen area travel. During this time we would leave my current investments sit and let them grow with the market (assuming 7% real returns for future calcs). The home equity would go into a buffer account (mostly VTSAX) that can be accessed for exceptional opportunities or circumstances at a rate of no more than 6% in any year. We expect to be well below that 6% mark in most years. I am currently contributing roughly $80k per year to my investments through 401k, ESPP, HSA, Roth IRA and taxable investment. It's a huge fire hose of money that I am reluctant to give up. There is also $50k in unvested stock that will free up over the course of the next 5 years. Time is starting to become more valuable every day, my SO is starting to have some minor issues with lymphedema from the cancer surgery in recent months. It's easy to get overly pessimistic and extrapolate these things when you're on a path to FIRE. What to do and when to do it??

Options we are currently considering:
We have a few options in mind, all of which are appealing to a certain degree but some more than others. The trust in/dependency on the market increases with every option:
1. Work for 3 more years in the US, preserving the existing firehose and ending my working career with ~$500k invested. Leave the money in there for 8-10 years so I end up with about $1M in today's dollars come 50-52 and add that to our monthly budget at that time.
2. Work through next summer in the US, move to Western Europe through work and leverage a much smaller fire hose (expecting a pay cut of in excess of 50%) in those 2 years. End my current career with about $350k-$400k invested and roughly $700-800k by age 50-52 assuming normal market returns. This would enable us to transition slowly into a more balanced life with opportunity for Schengen area travel sooner. SO's dream of living in Europe will be met within less than 12 months. This would also mean I will have sub 40 SS credits in the US but I do have some credits that could carry over from another country to make 40 total.
3. Pull the plug as of next summer ensuring my 2020 401k is maxed out, HSA is maxed out and stay long enough to benefit from bonus payout. This would mean I end up with $300k invested. Leave money sitting for about 12 years and end up with about $650k or so at age 50-52. SO and I can both start traveling basically immediately (no sense in trying to sell a house now as I live in an area with seasons). This would also mean I will have sub 40 SS credits in the US but I do have some credits that could carry over from another country to make 40 total.

Our plan also assumes a probable move back to the US later in life, I am currently not opposed to going back to work at that time but it's not the optimal scenario of course. My preference would be to spend more time with SO's extended family during the final years of our life together.

Knowing everything outlined here what would you suggest I/we do?

[Ego]

2 or 3.

I guess it comes down to what future-you will regret most.

I tend to believe it is healthy to assume that life is short and we damn well better live it while we can. But that's what I believe. What's important here is what you believe.

Looks like you've got some exciting years ahead no matter how you look at it. Congratulations!

[jacob]

If you adjust historical market returns for valuation, the expected returns for the US total market over the next ten years is more like -2%. Your 7% return assumption presumes that market capitalization / GDP will remain at a permanently high (or higher) plateau. That's not to say that this is what's going to happen. It's just the most likely outcome (based on history).

This would change your options so that under (1), you'd have about 400k come 50-52; under (2), you're have 320k and no/tenuous SS; and under (3) you'd have 240k and no/tenuous SS.

Whether that's enough all comes down to how much you're spending and how flexible that number is. With 57k coming in as long as SO remains around, you could still maintain a high savings rates with an average ERE budget. If not, I'd at the minimum get the 40 SS points first. I do not know how this works for American expats.

[My1stThrowAway]

I doubt i will regret not making more money honestly, while my SO has had health issues there is very little residual impact beyond some issues from the cancer surgery. The future does seem very exciting for sure, we have some ideas of things that could make us money while we are traveling but understand that most of the successful folks that document their life and make worthwhile money are outliers.

thank you for chiming in.

[My1stThrowAway]

You make some very good points about the valuation of current markets and the likelihood of a 'correction' of sorts. There are no certainties in life so some risk taking is absolutely necessary and that is what I am trying to weigh here. I can't help but feel that my upside is way more attractive than the downside. The numbers you quote are exclusive of our home equity stash, i do expect that the equity piece will see marginal use in the first few years and could be added insurance for a downward stock market trend. at least based on how I feel now I wouldn't mind taking a low pay/low stress job to enable my stash to grow in a rising market if the next 10 years are severely underperforming. Lastly, I do expect that there will be some sort of inheritance (maybe 3-5 years worth of spending) later on in life that I am not counting on but has a 95% chance of happening.

[My1stThrowAway]

Thanks @Augustus for your response.

I work in operations so my skills aren't technical in nature as most of the IT workforce but it's still an absolutely valid point. There are VERY few 50+ year olds in my organization and those that remain are either SLT or struggling in their roles.

We could certainly rent out our property but I'm skeptical it's a profitable proposition. Our mortgage payment is only about $600/25% below the expected rent. The house is 10 years old so some of the bigger expenses (water heater for example) may start popping up soon. We also had a less than optimal experience with a previous rental. Additionally, my SO wants access to the equity as well; not leave that just for me later in life. I agree that we could leverage that $250k more optimally so having most of it in VTSAX and agreeing on spending no more than 5 or 6% of the balance each year might be a good compromise.

The intent would be to hit 100% savings rate in Europe, yeah. At that point the savings are almost at the level they are here with the exception of access to 401k etc.

I could certainly contract in Europe; it does seem like most of that is on the technical side and being in ops is not as well suited for contract work with my current employer. That said, I could most definitely sharpen my skills through training (think 6sigma black belt, lean or change management) and become a freelance consultant in that space.

One important piece I left out is that I was born in Europe and have dual citizenship. My entire family is still in my home town and being closer to them is another driver for our desire to move there. We have some existing network in certain areas but not like here, obviously.

[My1stThrowAway]

I have thought about this and wonder how much of a factor this really.

Would you accept a guaranteed 4% real return over the next 10 years vs relying on the market? How about 3%?

[jacob]

Personally, I'd take a guaranteed 0% real return at this point of the US market. However, our circumstances are different. For something like coastFIRE, I'd use very conservative assumptions given current market valuations. Expecting 7% APY (total nominal return) in "the long run" would require a very very long run indeed (about 80 years!) to renormalize valuations from their present level. Again, this is assuming that stocks have not reached what looks like a permanently high plateau.

PS: The quote function is not meant to be used as a reply button. See forum rule 2.

[Bankai]

I guess >100 years of expenses saved allow for some... extravagance

[Peanut]

Well, if I were you I’d try living on a significantly smaller budget now (25%-30% less) before moving abroad and just assuming a smaller post-FIRE budget will be doable. I may have the math wrong but the income to nw ratio is not the best in my eyes, which means the spending level has probably been very high. Frankly I would also demand that the 250k home equity indeed be saved exclusively for your use. You are 23 years younger than your partner. He should recognize the added financial assurance you will need in the future. Sorry if I seem harsh, just my honest opinion.

[My1stThrowAway]

Not harsh at all, Peanut. That is why I am posting this.

We will certainly need to have another budget conversation, it's something we have been putting off for a while. Option 2 would enable us to test the budget out with a buffer through my income. I definitely agree that there is a lot of trust involved in banking on such a reduced budget post-fire though.

The spending has been high for sure, but there are large budget items that will be going away (housing and vehicles alone will be huge). I don't pretend to live according to ERE spending standards but getting closer to those standards is an ambition of mine. I've only been in this country for about 9 years and while I have worked ever since my 1st job post-green card I haven't made 6 figure money until the last 3 years (before that I was at 40-45k). That is in part a reason why the savings to income ratio is so low.

Demanding that the full equity portion is added to my own, untouchable stach is not realistic or worth it to me. I'd rather work longer now or go back to work later than go down that path.

[ertyu]

(1)Seconding Jacob's point on expected US stock market returns over the next some time. I would not rely on the stock market returning 7%. I assign very high probability to Jacob's estimates being correct. So I would not take what he says in a lighthearted, "well, yea, of course there's a possibility of an adverse market outcome [but that is unlikely]" sort of way.

(2)Finances aside, you sound like you would rather quit and follow the s.o.

So quit, but make a serious plan of how you will weather (1). Assuming a life expectancy of 88 years, you have 50 years to provide for. Let's say while your so is alive, the two of you would live on his pension, but then what? In your shoes, I would seriously look into how you can continue to consult/freelance/otherwise keep a reliable stream of cash, albeit small, flowing your way. It is possible your so will enjoy a long and healthy retirement, and i wish both of you that with all my heart. It is also possible he will pass in the next, say, 5 years, and you will need to find a way to rejoin the labor market or start relying on your savings sooner. Make sure your skills and employment prospects stay current.

Also, what is the situation with your citizenship? Do you have a US citizenship now, or are you still a green card holder? You don't mention whether you are a citizen now. If you are not, I would sort out the citizenship asap, and definitely before leaving, to make sure you have more options.

[My1stThrowAway]

Thanks @ertyu, you make some good points and are helping me ask the right questions.

Given that you picked up on it through how I am responding/wording things I have to acknowledge that I must be dismissing Jacob's point about the market situation more than I should. I will take that feedback and see what it means for my projections.

I would definitely rather quit and follow my SO today but I am somewhat risk averse and mathematical so I understand that building up more of a financial buffer greatly reduces the downside risk with minimal 'sacrifice' (I feel super fortunate to be in my role and make the money that I do so can hardly call it sacrifice). Your suggestion about staying relevant in the job market is an excellent one, I will certainly take that mindset with me in the next 6 months pre-move (leaning towards option 2 currently) and then target my networking at our destination (and online) towards that goal of finding a web-based way of earning some cash.

I had been considering my SOs life expectancy to be the biggest risk but am now adding projected market return risk to the list.

Most recently I became a US citizen which we considered a blocker before making any moves abroad. This offers me the opportunity to come back even should the SO pass away in the near term. As I indicated I am originally from Western Europe so I would have to make a decision at that point on where to settle (or continue on my nomadic ways).

[ertyu]

Many other eminent financiers have made the same point about returns going forward: Dalio, Buffet, Gundlach, and also the philosophicaleconomics.com guy who works with the one up on wall street guy, does research, and publishes papers. Anything is possible, but I'd be cautious. For instance here is a recent interview by Gundlach that'll give you the gist of the mood: https://www.fuw.ch/article/gundlach-us- ... -the-most/

You sound like you'll be ok and find a way to work it out - I am glad your citizenship is all set, too. Good luck whichever option you choose going forward.

[George the original one]

I had been considering my SOs life expectancy to be the biggest risk but am now adding projected market return risk to the list.

Have you checked on what you need to do if SO dies unexpectedly in a foreign land, with or without your presence?

Only other consideration I have to offer is to wait until after the US election is over unless you don't mind having to potentially meet new requirements (immigration/residence, banking, taxes, healthcare, etc.) while overseas.

[My1stThrowAway]

I will take a look at the market projections for sure. Interested to learn more.

My citizenship is not tied to my SO at all, there is no need to stay past the election from an immigration perspective. Any laws that get passed wouldn't be retroactively effective imo.