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Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Sat Oct 26, 2019 5:53 am
by 2Birds1Stone
Yesterday, After a nice late morning run along the beach (6.2 miles) with a business owner friend of mine, and most of the day helping another friend set up his home/backyard for a giant Halloween bash, I came home to eat dinner and hang out with SO. In the mail was a letter from Fidelity, notifying me of my options for the 401k I had with my employer. It's funny how confusing this 14 page letter can be to someone who is not financially literate. They make it sound like you will owe taxes with whatever option you choose for the funds, and there is not much in there to dissuade you from taking a lump sum/payment cash out.

Naturally I called Fidelity and instructed them to roll the 401k into a Rollover IRA I have with them (where both my former employer 401k's currently sit). The funds will have to sit out of the market for 2 days as the transfer is processed. I did learn one interesting bit of information from the letter/tax professional I spoke with on the phone.

When you roll a 401k into an IRA, and then later do a Roth conversion, if you withdraw the Roth funds for living expenses before the age of 59.5, any gains on the Roth are still subject to the 10% penalty for early withdrawals. I was not aware. The onus is on you to track what is principal vs. gains in that account. Which seems a bit daunting to do for the next 27 years -_-

ETA: I also listed my car for sale.

Saturday Funday

Woke up early as SO had work at 6 AM, French pressed some hand ground coffee, snagged some home made oatmeal raisin cookies, and doing a bit of reading before meeting a friend for a training ride in the woods. We are going to attempt 3 x 10 mile loops of the race course that we are racing in 4 weeks. I am hoping for 4-4.5 laps on race day, in the allotted 6 hours. Expect today to take somewhere around 4.

In the afternoon we are going out for AYCE Sushi with SO's family for her brother birthday, followed by a kick ass Halloween party in the evening. Then tomorrow I have to be up at 6 AM to volunteer at a local marathon. Busy weekend!

Happy Saturday, y'all.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Tue Oct 29, 2019 1:24 pm
by 2Birds1Stone
Randomness......

Few tidbits from the weekend, and some fun financial stuff.

The MTB training is going well, and we did nearly 30 miles on Saturday morning. It was incredible out, smelled like fall, and beautiful in the forest. As planned we did AYCE sushi for future BIL's birthday. Crushed a LOT of sushi. I single-handedly ate 7 rolls, 3 appetizers, and 18 pieces of sashimi. Sunday morning was interesting. I volunteered in the cold rain, got completely soaked through, and spent the day recovering. It was a fairly busy weekend, and it felt great to do mostly nothing yesterday.

My 401k -> Rollover IRA conversion completed today. So now I have to figure out what to do with $22k in cash in that account. I'm a bit skeptical buying stocks at these prices......but I also don't want to time the market.

More interestingly, former employer kept their end of the bargain, and I received my final severance payment. This is my last bit of earned income for the foreseeable future. It gives me the benefit of being able to determine my tax liability for 2019 earlier than usual. Right now it looks like I should be expecting ~$2,000 refund, with the caveat being that I don't know how much last years tax refund impacts things -_-

The other curve-ball, is that we may elope before Jan 1. Since we were planning on doing it in 2020 anyway, it might make sense to just move the date up a few months for health insurance and tax purposes. If we end up eloping, that will be an extra ~$2,500 refund, since I grossed about 4x as much as my SO for 2019.

This would bring total tax refund up to the ~$4,500 range, and if dividends/interest stays fairly flat in 2020, I should theoretically "earn" ~$7,500 from that, bringing total "income" up to ~$12,000. This covers ~50% of my projected 2020 expenses.

Since neither of us will be working in 2020, we will have the opportunity to do some serious Roth conversions, as we both have funds sitting in rollover IRA's from previous employers 401k's. Just have to make sure we stay under the ACA limits (just in case our trip is cut short and we need health insurance in the states).

I'll do a full financial monthly recap on Thurs or Friday.......thinking about going back to tracking individual expenses and numbers, now that I am fully into this ERE experiment. I'm not even sure I can call it Semi-ERE at this point, as I have no plans to work, even PT, for the foreseeable future.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Tue Oct 29, 2019 2:18 pm
by ZAFCorrection
@2B1S

Re: withdrawals from Roth conversions

This is definitely an elementary question, but are money and securities distinguishable particles, or do you just make sure the value of the account is >= the amount that was originally put into the 401k in order to avoid the early withdrawal penalty?

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Tue Oct 29, 2019 4:01 pm
by anesde
I hear you on timing market vs sitting out, I face the same conundrum. For now I’m accumulating cash (in ££) as my profession makes investing challenging (financial sector, lots of clearance and notification required). I’m not semi-ERE but I do take solace in the fact that I already have investments and don’t need investment returns. This gets me comfortable accumulating cash and I see it as less of timing the market as being prepared for a good opportunity. I’m also betting that the £/$ exchange rate will continue to improve as (if!!) brexit gets clearer.

You are also invested and don’t need investment returns immediately so there’s nothing wrong with holding some cash for a while, even in a retirement account. I wouldn’t sweat it or look to immediately deploy - I’m sure we will have a pullback or even a semblance of a crash/drop within the next few months. It’s not timing the market as much as identifying what you want and the price you’re looking for. A nuanced difference but a difference nonetheless.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Wed Oct 30, 2019 7:01 am
by 2Birds1Stone
@ZAFCorrection, I'm pretty sure shares get assigned a specific share ID (at least with Vanguard), and that is used to track your cost basis. I haven't played around with Fidelity as much yet. With Vanguard I can look back and see when I purchased each bundle of VTI or VXUS and see the cost basis for those specific shares. This allows you to harvest capital gains/losses more precisely rather than a FIFO system.

@anesde, that makes sense. Does your professional limit/restrict you from broad market ETF's as well? Or just individual securities? While I am invested, my stock allocation is <50% of total assets now, which is quite low for my age. I don't mind holding a ton of cash in brokerage/taxable accounts and CD's but feel a bit silly wasting tax deferred space with cash sitting in there. I'm trying to figure out what else I could invest in, within the IRA that might produce a more guaranteed return than stocks, but higher than cash. Maybe brokered CD's?

Inspired by c_L's journal, I put my starting numbers (since I'm now officially without earned income moving forward), through various FIRE/ER calculators, and get the following results;

Starting Parameters
$545,000 investable assets
50% Equities, 30% Bonds*, 5% PM's, 5% REIT's
$18,000/yr initial spending
60 Year Retirement
50% of current PIA for SS, @ age 70
0.1% Investment fee's
*I include CD's with bonds

FIRECalc
98.9% Success Rate @ $18,000/yr
85.4% Success Rate @ $20,000/yr
65.2% Success Rate @ $22,000/yr
48.3% Success Rate @ $24,000/yr

cFIREsim
$17,920/yr @ 100% historical Success Rate
$19,500/yr @ 90% historical Success Rate
$20,750/yr @ 80% historical Success Rate

Engaging Data - Survival Calc*
100% Success Rate @ $18,000/yr
86% Success Rate @ $20,000/yr
69% Success Rate @ $22,000/yr
51% Success Rate @ $24,000/yr
0% Spending Flexibility Input used

Portfolio Charts

This one is a bit confusing to me, still. Using the maximum retirement length of 40 years,

Perpetual Withdrawal Rate = 3.8% or $20,710/yr to maintain principal in worst case scenario
Safe Withdrawal Rate = 4.5% or $24,525/yr to not run out of money in worst case scenario

Thoughts

What does this all mean? Not too much, at least in terms of anything actionable. While the first three calculators are pretty close in their results, Tylers Portfolio Charts is wildly optimistic, likely due to the fact that the data only goes back to 1970, and we are using a 40 yr retirement vs. 60 with the others.

It is cool to know that historically, I would be quite alright not earning any income in the future, so long as spending stays around what it's been the past two years. Despite being 35-40 years away from SS, I'm confident that even if they raise FRA by 3 years, AND slash the benefit by 50% my estimates are still valid.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Wed Oct 30, 2019 12:29 pm
by Adamski
Hi 2Birds1Stone, interesting thread and life experience. I'll have to read through in detail. I am contemplating full or semi ERE in my late 40s as I am approaching lean FIRE target figure, and it is interesting to get other perspectives.

Can you help with a few questions. I am not familiar with some terms, they may be US centric. (I am in the UK.)

What does 5% RMs mean?
50% of PIA for SS? - is that 50% of the US state pension income at aged 70?
Would you be living on mix of investment principal and investment returns from 30-70, then from SS (state pension) from 70+?
Do you plan part time work or return at some point, or are you taking time out of the workplace to decide?

Is "Unemployed" the right term, should it be "Financial Independent", as unemployed would indicate you are available for work, but you are voluntarily without employment. A concept difficult for the outside to get their heads around!

Thanks, Adamski

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Wed Oct 30, 2019 2:09 pm
by 2Birds1Stone
Howdy! Hope this helps;

5% PMs = Precious Metals, in my case physical Ag/Au bullion
50% of PIA for SS = Principal Insurance Amount. This is how much I would receive in today's dollars if I never worked another day till full retirement age, which under current law is 67. I assume 50% of the amount, and assume they raise FRA by 3 years to 70. Under current law I would get $14,200/yr @ age 67, I assume $7,100 at age 70.
My investments are lumped into buckets. Near term 12-18 months in high yield savings/checking, 7-8 years in CD ladder, and the rest in various retirement accounts. I would keep rolling the CD ladder and using some of the proceeds to live off of, as well as what I have in my taxable brokerage first. Then I would start tapping the tax deferred accounts through a Roth IRA conversion pipeline. Some side hustle income and funemployment is part of the plan too.
Once I get married the household unit is no longer FI based on combined assets/spending. So I guess it's preference on what I should call it. With people in real life, it's just easier to say I'm unemployed, that way they don't ask for money, and can relate more easily. It's definitely voluntary though, no secret there =)

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Wed Oct 30, 2019 2:27 pm
by classical_Liberal
Cfiresim and Portfolio Charts are very interesting in their different results. You are correct that the historical time frames make a huge difference. Equally interesting, is to just look at the data points they have in common (1970+). In Cfiresim this requires you to run shorter timeframes for easier comparison. I assume Cfiresim is using S&P500 returns for it's stock allocation. No clue how it measures it's bond allocation. If I run a 10 or 20 year timeframe, and lump all of my assets together into the correct corresponding classes that cfiresim allows for, there are significantly different results in the 1970+ timeframe. This is because the subclasses of assets really do matter in a true noncorelation strategy. SWR can increase dramatically in the same 1970+ timeframes.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Thu Oct 31, 2019 3:47 am
by Adamski
Thanks, that is making more sense to me now. I think your are correct that would FRA would be raised as people are living longer. I think very conservative to assume 50% of the amount.
You seem to have a lower risk portfolio, which is similar to my portfolio risk profile as well.
Fun employment, side hustle sounds good to keep the income flowing in.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Fri Nov 01, 2019 7:12 am
by 2Birds1Stone
October Financial Update

Combined Assets
$675,000 (+$25,200)

Combined Spending
October - $2,783
Trailing Twelve Months - $34,080

Combined Income
$19,278 Net

Savings Rate
85.5%

Current Withdrawal Rate
5.05% (Portfolio = 19.8X annual expenses)

Activity
34.6 Miles Ran (10 miles last month)
250.1 miles biked (236 MTB (143 last month) 14 Road (95 last month))
76 miles walked (96 miles last month)
11 weigh-lifting sessions (9 last month)
3.2 lbs gained (204.5 on 7 day average)

Musings

Individually @ $17,128 - TTM Spending, 32.6X annual expenses, and a 3.1% WR

It was a 3 paycheck month for SO, and I got my lump sum payout from ex-employer, which made it quite a high income month....that's cool and all, but what's REALLY cool is that our trailing twelve month household spending is the lowest it's ever been, $34k! That's HUGE. We could earn that without much effort even if somehow our portfolio went to $0. In some parts of the country that might not be impressive, but we are in a HCOL area where the median HH income is ~$100k/yr and median HH spend is ~$90k/yr.

We also beat our gross income from 2018 already, and I won't be working the last two months of the year. Going to be REALLY weird not earning anything next year.

Outside of finances, the activity levels were overall up from last month, and somehow I managed to gain weight. The MTB mileage increased drastically, and running went up as well. I've definitely been eating way more to recover, and it shows on the scale. Still feel good in the 204-205 lb range.

The biggest thing left before the trip is to sell my car, which I listed thanks to [member=11787]neo von retorch[/member]'s nudge.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Fri Nov 01, 2019 1:50 pm
by classical_Liberal
2Birds1Stone wrote:
Fri Nov 01, 2019 7:12 am
Combined Spending
Trailing Twelve Months - $34,080...
Individually @ $17,128
The numbers don't lie, the fiance is beating your lazy ass! :lol: lucky man!

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Tue Nov 05, 2019 7:06 am
by 2Birds1Stone
@c_L, she sure is! She's totally got the spending side of the equation down, it's the income that is prohibiting her from having an insanely high savings rate. All good, I'm still extremely impressed she's at ~7.5X annual expenses individually at the age of 28. This upcoming year of lost income and continued spending will take a chunk out of that, but she's going into it with eyes wide open.

This month is off to a rough start. I took a spill riding my MTB on Saturday. The trails were covered in fallen leaves. I took a sweeping turn rather fast, and both my front and rear tires understeered a bit, forcing me to go wide and hit a tree with my left side at speed. I have a few deep bone bruises and some sore muscles, but nothing broken. The impact to my left handlebar sent my flying over the bike and somehow I managed to land without breaking anything. That's putting a damper on my training to start November, and I will be lucky to maintain my fitness level over the next 2.5 weeks till the big race.

November being my first month without a paycheck, I decided to peruse the web and see if there is any low hanging fruit to make some quick money. I turned to bank bonuses and CC rewards, as that's something I'm quite familiar with. I ended up signing up for a chase checking account, which offers $300 after a direct deposit of any amount hits the account. You can trigger the DD without actually having one, by initiating an ACH trasnfer from an outside bank. Some banks work, while others don't. doctorofcredit.com has data points on which ACH's work for which banks. I have the option of using Santander or Vanguard. Trying V first, and if that doesn't work I need to get $5 into my S account to push into Chase. Easy $300 for 15-20 minutes of work.

The other easy money I found was by signing up for a SoFi Money checking account using a friends referral link. SoFi is giving you $50 for opening a checking account and funding it with $100. Then you have the ability to refer friends and get a $100 bonus per referral. I referred one of my friends and my SO, for a quick $250. If anyone based in the USA would like to help me out and take advantage of this offer, just PM me and I will give you my link. The account itself is pretty kick ass, no fees/minimums, pays 1.6% APY which is the highest I've ever seen for checking, and they reimburse ATM fees charged by other banks, internationally, much like the Schwab account I just opened for the upcoming trip.

Since I'm only planning on using 3% of investable assets as a spending baseline (~$1350), this extra "income" can cover any extras for Nov/Dec, which tend to be a bit higher due to holidays, anniversary, etc.

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Fri Nov 08, 2019 6:22 pm
by classical_Liberal
Well, the good news is that if you keep crashing, you can probably lower your life expectancy in your financial models to make up for the increased medical costs.

In all seriousness, be careful!!

Re: Semi-ERE Experiment - Month 5 - Unemployed, Now What?

Posted: Tue Nov 12, 2019 7:45 am
by 2Birds1Stone
=D

It's continued to be a crazy month since my last post. On Friday I showed my car to another potential buyer, they seemed like they liked the vehicle despite pointing out some cosmetic flaws, we have an appointment on Thursday night for a pre-purchase inspection at a mechanic they trust. Hopefully they guy doesn't find any show stoppers and we can agree on a sale price, which would be glorious.....except our other car is shitting the bed. On Saturday SO and I are on the way to the gym, and a few blocks from the house her car sputters and dies at a stop sign. Despite cranking it just won't start. We pop it into neutral, and I pushed the 3,600 machine home. We pull the code and it turns out to be a crankshaft position sensor/circuit issue. After some research it looks like the part is cheap, but the location and difficulty of removing it is rather annoying. I end up using some social capital (which later turns out to be a lot of social capital) in order to enlist the help of a friend who works as a fleet mechanic for a large truck delivery service. I buy the part, the tool needed for the job, and yesterday after over 2 hours of cursing and fiddling with the thing, we get it replaced and the car started. *knock on wood* that it runs for another 18 weeks, as it will be our only vehicle, and where we live, you really do need a car in the winter, especially for SO who works a bikable distance from work, but very unsafe roads both due to traffic and the seedy neighborhood you pass through to get to her job. He hours ranging from 4 AM to midnight also add to the difficulty.

I healed up from my crash and did an easy 3 hour ride on Wednesday, and another more difficult one on Sunday morning. I feel ready for the race, though could stand to lose a few lbs which will make a big difference over a 6 hour course.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Wed Nov 13, 2019 12:31 pm
by 2Birds1Stone
I bit the bullet and sold the car today. My initial buyer backed out, and lost his small deposit, but I found someone else last night, who offered cash on the spot this morning. It was definitely less than I could have potentially gotten if I was more patient, but I could have ended up having a harder time selling a RWD manual transmission car in the winter here in the northeast. This will certainly botch my financials and pretty FI graphs for November, because I have been tracking depreciation on the car as an expense, and it sold for $2k below the value I had tracked for this month, so my spending will reflect an extra -$2k. I guess I should curse or thank my past (2016) self for using this accounting method.

So now we are down to two bicycles and one unreliable beater....with just a hair under 4 months till we leave on our epic trip.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Wed Nov 13, 2019 2:07 pm
by ajcoleman22
Congrats! I remember when you bought the car. Time flies.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Wed Nov 13, 2019 3:00 pm
by classical_Liberal
If you're tracking multiple years of spending (I know you are!), then just go back amortize the 2k over the period you owned the car. It will remain consistent in your accounting that way, and probably barely move the needle. Well, that's what I would do anyway.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Wed Nov 13, 2019 3:36 pm
by 2Birds1Stone
aj! Thank you. Time does fly. I bought the thing ~44 months ago! No regrets though, still better than buying a new car back then (in the league I was looking in).

@c_L, that's not a bad idea. The total depreciation ($7,400!) spread across 3.5 years, albeit lumpy as cars don't tend to depreciate in a linear fashion. Do you suggest I go back and spread that $7,400 evenly across the 44 months of ownership? I kind of like it, but kind of feel dirty doing it =D

ETA - I did what you suggested, and just amortized the cost as a $164 expense every month from March 2016 when I bought the car, through Nov 2019. It smooths the graphs out and is a more realistic way to track since I was updating monthly going off an average of KBB, NADA, Edmunds, and CarGurus.

It makes my individual TTM spending higher over the past year, but still reasonably FI.....for end of October I'm now at a 3.3% WR vs. previously calculated 3.1%....this is more accurate moving forward anyway, because now I will have more regular transportation costs.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Thu Nov 14, 2019 4:44 pm
by classical_Liberal
@2B1S
The answer to your question is yes. Because you already depreciated it over that period of time for $5500, right? So it seems you should simply adjust your depreciation estimation errors.

Personally, I do it like @bigato suggests. Because I tend to only pay 4-5k, and depreciate them to $1000 or junk value. Then whatever I get from the previous one comes of the price of the new one on the year of purchase. If I were buying more expensive vehicles that I thought I could sell later for significant value after depreciation, it would impact my annual numbers much, much more to lump sum like this. In that case I'd do it your way, simply to smooth things out. However, not only do I have zero need for expensive vehicles, having one actually causes anxiety. I have to take better care of it, make sure I park it where it won't get damaged, ect.

Re: Semi-ERE Experiment - Month 6 - Downsizing From 400 sqft to 50L Backpack

Posted: Thu Nov 14, 2019 5:05 pm
by 7Wannabe5
Or you can track mileage used for business, "business" (not deductible, but necessity for money-generating activity such as W2 employment not located within safe bike ride housing circle etc.), and personal usage.