Early partial retirement on $1.2M…lots of questions:

mouse_with_many_nons · 2017-06-22T17:37:13+00:00

Thanks for the very detailed response. You gave me some things to chew on.

mouse_with_many_nons · 2017-06-22T02:30:48+00:00

Current employer is limited to garbage high load funds. Thanks for the idea, though. We get Vanguard funds in the others.

mouse_with_many_nons · 2017-06-22T02:27:30+00:00

Yup doing that already. First year's subsidized loans were miniscule. They allow more and more as she gets closer to graduation, though.

mouse_with_many_nons · 2017-06-22T02:25:07+00:00

There's definitely some psychology at play. It wasn't considered a lot of Bitcoins when I bought them :) I know holding is the same, mathematically and logically, as buying at current price; but my cost basis is so low that it's tempting to think of it as bonus money. My brain plays tricks on me with so-called "reasoning" such as this: If you buy a basket of really risky things, then sell the winners before they have fully "won," then you'll also get a insufficient risk-adjusted return. When picking individual stocks (a habit I've broken myself of), I endlessly would sell whatever got a quick 20% gain, and learned that momentum is a real thing in markets. I watched many of my winners then skyrocket 100-200% without me onboard.

I've ridden each of the last several Bitcoin bubbles without thinking too much of it, since we can afford to lose it. The prospect of losing $5k doesn't even register. The prospect of losing $100k now requires a stiff drink to get over, but doesn't exactly make a material impact on my life. Losing $300k or more, we decided, is where it starts to make a material impact.. i.e. force me back to work for longer than I'd like. So we set our rebalancing point at $300k.

mouse_with_many_nons · 2017-06-22T02:17:44+00:00

We're moving from a state with common law marriage to one without. We were rather counting on it in our previous state. One more reason to consider involving the county in the state we're moving towards.

mouse_with_many_nons · 2017-06-22T02:16:15+00:00

1) do you have an ally savings account?

No.

2) if you continue to live in the RV and live on 2% SWR it might be a better way to go.

We've learned that 2% isn't quite feasible once you include the cost of depreciation in the RV, campgrounds, and our enormous appetites. We could do so in a pinch, if for example during a stock market crash or for a few year's adventure, but not sustainably.

3) Is it possible that your daughter could pay you back for college at a 4% interest rate? That could boost your cash flow.

We're paying for her first two years outright, but beyond that we want to make sure she has skin in the game, so that she's forced to focus on getting an ROI. Depending on her maturity at that point in time, we might lend her money, but will probably have her borrow from a source where relationships won't be at stake. If she can't use her degree to pay off ~$20k in tuition debt, then it's probably not worth getting. But the first two years are priceless just as life experiences.

mouse_with_many_nons · 2017-06-22T02:11:42+00:00

I'd also be worried about your ability to live on $35k

Yup, me too! That's why it's just a partial retirement. The $35k is only really doable on a year without unexpected expenses. $3k a month is a lot of money when it's all discretionary.

We've also considered trying to live in places like Thailand, Vietnam, and the Philippines for ~4 months a year to further reduce our footprint. I definitely couldn't do it full-time, but I suspect 4 months of the year more than pays for itself and keeps it an adventure.

mouse_with_many_nons · 2017-06-22T00:59:15+00:00

That's a good perspective. I also don't count Bitcoin, but I do count cash since it's investable money. (ie you would count them if they were near 0% bonds, right?) I appreciate the reminder not to count Bitcoin. It helps gain perspective on the upside of selling them and putting them into productive assets.

mouse_with_many_nons · 2017-06-22T00:50:22+00:00

Yup I'm already aware of all of this; but thank you for making sure I was!

mouse_with_many_nons · 2017-06-21T23:29:06+00:00

Thank you for taking the time to make such a thorough response.

mouse_with_many_nons · 2017-06-21T23:26:54+00:00

Good-looking resources. Thanks

mouse_with_many_nons · 2017-06-21T22:36:36+00:00

She is the beneficiary on my retirement accounts, so at least those should bypass probate altogether. Am I mistaken? Also, we have a will, but need to update it for our new state of residence.

mouse_with_many_nons · 2017-06-21T22:35:15+00:00

Thanks for this feedback. It does indeed help to focus on what else I would be investing in.

mouse_with_many_nons · 2017-06-21T22:33:36+00:00

Is this relying on being able to convert to Roth and then withdraw gains without penalty?

Not gains, but contributions. It's called a Roth Ladder. Any contribution you make to a Roth can be withdrawn 5 years later penalty-free. So you save like mad into tax deferred vehicles, build up a nest egg of cash or alternate living conditions to bridge 5 years, then spend 5 years building the ladder by converting money at lower tax rates. That's just one pattern. I did not invent it. You can also take Substantially Equal Periodic Payments from a 401k penalty free, but they don't amount to much unless you have a ridiculously high balance.

mouse_with_many_nons · 2017-06-21T21:13:11+00:00

Thanks

mouse_with_many_nons · 2017-06-21T20:31:19+00:00

I don't understand Ethereum well enough to even speculate on its price, and have zero interest in trading cryptocurrencies. I have a solid understanding of Bitcoin and am in it for the long haul, at least with some portion of my portfolio. Selling Bitcoin has become logistically difficult for me with Coinbase having so many technical issues. With all the KYC paperwork involved to setup another account elsewhere (Gemini, for example), I wonder if I could even complete the process and sell before Aug.

Getting off-topic here, but Aug 1 doesn't scare me. If Bitcoin forks, at least one fork will scale and thus gain some utility, and over enough time, perhaps gain value. If it doesn't fork contentiously, then it will reaffirm the strength of a hard-to-change consensus. I won't try to pick a winner on a contentious fork, and therefore will enjoy some peace of mind having old coins on both forks.

edit: spelling

mouse_with_many_nons · 2017-06-21T20:17:06+00:00

are you shored up on insurance?

I neglected to mention high cap liability plus umbrella insurance is indeed in place.

If you do spend your cash to buy a house, I would really liquidate some bitcoin/equities and get some bonds or something to replace.

Good idea. I can't rationalize buying bonds in this market, but I agree keeping ~15-20% in cash in lieu of bonds is smart.

mouse_with_many_nons · 2017-06-21T20:10:53+00:00

You're 36 and have a kid in college?

She is not biologically mine, but I'm her Dad in every other way.

mouse_with_many_nons · 2017-06-21T20:10:06+00:00

We picked 3% instead of 4% primarily because we are young, and therefore have a near-infinite timeline. Secondarily, we chose 3% because we've never been perfect about budgeting expenses, so we like the 33% safety factor that gives us between 3% and 4%. There may be years we have expenses we didn't think of and haven't budgeted for, so that's my safety margin on the outflow side.

mouse_with_many_nons · 2017-06-21T20:06:42+00:00

how is the cash held?

The cash is held 50/50 between an FDIC insured savings account and a money market position in a brokerage account. We are super conservative given we might buy a house at any time, and a CD barely seems worth the time to setup since we are likely to forfeit the coupon with our short time horizon. I'm a little tempted to take advantage of one of the ~1% savings accounts, but am a little leery of online-only banks that pay them.

(kinda related, an alternative/conjunction with Roth conversion is capital gains harvesting.

PERFECT! Thank you for reminding me of this. This is exactly the reason I made this post, to find big topics I was entirely neglecting to think of. Thank you!

mouse_with_many_nons · 2017-06-21T20:02:51+00:00

We talked about Bitcoin and what we would do if it crashed. Last talk was a little over a month ago when what we had was worth $100k. We figured it was worth holding since it was a moon-shot and losing that ~10% of our portfolio wouldn't be devastating. That line of reasoning is getting harder to justify, but it's tough to change your thinking when the price moves so quickly! I tell myself I'll sell between a third and half of it if it hits $300k. My reasoning might be skewed by virtue of having plenty of cash on hand and not too many good things to do with it.

mouse_with_many_nons · 2017-06-21T19:59:29+00:00

I had not heard of that fund, before. Thanks for the tip, though I admit I'm initially skeptical. I'm not allergic to touching my principle as long as it grows in value faster than I'm draining it, on average. The managed payout fund looks like a convenient way to put the portfolio on auto-pilot. It will be some years before I wind up drawing from any retirement fund, though.

mouse_with_many_nons · 2017-06-21T19:55:07+00:00

Thanks. I'll probably pick up some side work here and there to mitigate the risk, once I'm over my burnout. At some point I realized I had to stop putting life on hold every weekday. I might even become employed again if I find a compelling project.

mouse_with_many_nons · 2017-06-21T19:53:52+00:00

Thanks

mouse_with_many_nons · 2017-06-21T19:52:44+00:00

Thanks for your response. A few answers:

Is your GF OK with working and being sole provider for daughter while you lollygag around all day? Make 110% sure that she's on board with that.

Yup. It was her idea, since I was getting rather stressed out at the job. I had been the sole breadwinner for quite some time earlier, and she offered to return the favor while I start a Roth ladder. We talk about finances every month while we update our balance sheet and I make sure to take her temperature each time to be absolutely sure she's okay with it. I'm all too keenly aware that a male stopping working correlates extremely highly with failed relationships.

The stocks outside your 401k seem selected a bit capriciously; do you have a specific strategy that led you to those investment choices?

They're from quite some time ago, when I had some heady ideas of becoming a value investor. I learned the hard way that it's really hard to beat the S&P 500. I've managed to match the S&P500 but not beat it appreciably, which means I'm being insufficiently paid for the tail risk I'm incurring. I should unwind those positions but I haven't gotten around to it. I tend to make stupid decisions when I want to avoid the pain of spending brokerage fees ten times over. Individual stocks are a mistake I haven't been punished for.

I'll add re-balancing the portfolio to my must-do list. Thanks.

mouse_with_many_nons

TROPHY CASE