BW_'s Journal

[bw_]

A few things about myself-

I am 52 years old, and enjoy reading about the journeys to ERE of others in this forum, especially those who were also born in 1964.

I don’t know anyone else who is or has retired early. My family thinks ERE is crazy, irresponsible or impossible. My grandparents could not have imagined such a thing.

I hope to gain some insight here on living without the need to work, and on continuing to grow my investments. My current job consists of crunching numbers and will leave it between 2 and 12 months for now, to set out into my retirement.

I am corporate accountant by training, and so creating a long term financial plan is second nature.

I live in the wet part of the Pacific Northwest.

My health is excellent, and I am frequently active. For example, I will often walk 4.2 miles RT to the public library, if time allows.

I always have been frugal. Saving for the future, and delaying gratification, have always seemed like a kind of wisdom, rather than a sacrifice.

The only car I’ve owned is a new Toyota, bought with cash in 2002. It may have several years left in it.

The home mortgage is my only consumer debt. I use several credit cards, and never carry a balance.

When I was an entrepreneur in my 20’s, I planned, with a minimalist budget, to retire by age 50. Circumstances changed drastically, so I set aside that goal. I worked minimally for much of my 30’s, travelled around North America and Europe, got an accounting degree, and then cast about for a full time job that paid well.

Except for getting up early on week days, the job has become quite easy. Ever since getting my first accounting job, which is, in essence, little more than adding things up and knowing what to do with the sums, I have been delighted to get paid relatively well to do this. Now that it is especially easy, I feel doubly blessed.

The annual wages are about $50k and annual savings is about $25k.

I have owned whichever house I lived in since 1994 and have done quite well with appreciation. I bought my first rental in 2008. The real estate market rose more.

I bought a third property in 2014, and a rising market put me over the top, to FI, with 2 rentals and a home.

$130k is the approximate value of my cash, stocks, ETFs, 401k, IRA.

$534k is the equity in 2 rentals and home, though I realize that home equity is not the same as liquid assets, or investment real estate that can be converted to cash.

Net worth 664,000 * 4% = 26,560 SWR.

If I sold the rentals, the cost of doing so would lower my SWR to $23,700.
My expenses in 2015 were $18,600.

My projections do not include future appreciation of the real estate, nor cash flows from the rentals.

Cash flow from rentals might be as high as $12k in 2016.

Please let me know how I can help you on your ERE path.

[Farm_or]

What is your strategy for managing capital gains?

[bw_]

My capital gains from dividend paying stocks and ETF's in taxable accounts will be offset for many future quarters by previous capital losses from stocks.

If an exit from real estate investments becomes necessary, much of the capital gains could be offset by those previous capital losses instead. My anticipated selling costs for the investment properties includes the capital gain tax effects.

If I choose to sell, it will be to move to another type of investment, rather than real estate of equal or greater value, and so, a 1031 Exchange would not be applicable.

I might avoid capital gains on real estate by selling my current home, moving to one of the rentals, selling it after 2 years, moving to the last, and selling it after 2 years.

However, cashflow from the rentals could cover a large part of my annual expenses, so it may be prudent to hang onto them.

Are there other ways to manage capital gains?

[bw_]

I am able to retire now, but for a variety of reasons, have not decided to do so yet.

1) $23k per year is what I could safely spend from my net worth every year, at 4% of the total net worth. That's almost $5k more than I spent in 2015. Cash flow from the rental houses will add another $12k.
2) If I stay at the job through Dec 31, 2016, my employer will award a 401k match for my 2016 contributions. That date is coming up very quickly!
3) No one knows what the future will bring. Perhaps I need to continue at the current job to accumulate more cushion/insurance against unanticipated losses of any kind. Perhaps I suffer from a condition described in the Diagnostic and Statistical Manual of Mental Disorders (DSM)
4) None of my family has ever retired early, and other than in the ERE community via the internet, I don't of anyone who has done so. I can read what others have done on their journals and blogs, but that's not the same as having an IRL example.
5) My employer has just announced to the general public that it has entered the process of being acquired, and that it will certainly reduce headcount. Waiting for a lay off, if that happens, will be rewarded with a small severance.
6) Winter is not most favorable time for a person who likes to spend a lot of time outdoors to take a huge infusion of free time.
7) The job began with 40 hours per week, frequent overtime, and a large serving of stress. Over time, because the needs of the company changed, the stress disappeared, the responsibilities diminished considerably, and I still get paid for 40 hours of work per week. The only negative things about the job now are having to get up early to commute there at a particular time, and having to be available for 8 hours, instead of choosing to spend that time in another way. I practiced for retirement over the Thanksgiving week with three days of PTO (paid time off) and 2 paid holidays.
8) I neither like nor dislike the job. It's a source of income. I don't participate in team building or extra-curricular activities with my co-workers, rarely say more than hello to anyone outside of my team, and encourage others to talk about themselves, when they initiate a conversation, because my personality is kind of different from everyone else's in many ways.

[bw_]

My employer got around to laying me off in early June, and awarded severance and accumulated PTO.

I traveled to Santa Fe for a few days, and might move there some day, shortly before the termination notice came.

I visited family in Massachusetts in July.

Otherwise, I am allowing myself to do little of anything, but monitor diet and slowly return to my ideal weight.

I have no desire, yet, to "do something" with my time, except meditate frequently upon my good fortune.

$180k is the approximate value of my cash, stocks, ETFs, 401k, IRA.

$540k is the real estate equity.

Net worth 720,000 * 4% = 28,800 SWR.

[wolf]

Net worth 720,000 * 4% = 28,800 SWR.

Sorry to hear about your layoff.

If you spend less than your SWR, you could FIRE? Do you think about it?

[Eureka]

I would rather say congratulations to your layoff!

Wonderful news that you don't have to think about when to quit any longer. Wish it was me. I am about same age as you, have had long stretches of very little work in younger years, but had a decent job for the last 6 years and should have enough savings to quit for good. But then one month and another good reason takes the next ...

I wish you super good luck with all the crazy, beautiful, exciting and/or calm adventures you have ahead of you!

[bw_]

MDFIRE ---
I should have begun the entry this way: "I have now FIRE'd. My employer got around to laying me off in early June, and awarded severance and accumulated PTO. That was what I was waiting and hoping for. I am enjoying my freedom immensely."

I spend much less than SWR, and also have rental income coming in.

Eureka ---
My employment situation was similar to yours, and discovery of MMM and ERE set me on a path to freedom: frugality, a steady, good paying job for the last 4.5 years, and another investment in real estate increased my SWR to a comfortable level.

Thank you for the good thoughts.

[singvestor]

Congratulations! The layoff came at just the right time and you could start retirement with the "severance bonus" to boost the SWR

[wolf]

Congrats! Wow another one FIRE'd! Great.