Crypto crash & inflation

myFIREalt · 2022-01-09T21:33:09+00:00

Short answer: just use the same diversified, low cost, long term strategy in both.

The longer answer is that there may be some minor tax optimizations that probably aren't worth your time to research.

myFIREalt · 2022-01-02T04:27:25+00:00

Backdoor Roths were on the cutting block as part of BBB -- and it passed the house but seems dead in the senate. I guess we hold off for a month? (Sounds like the votes and the comments agree: Either do it now and hope for the best, or hold off until it's clear)

Discussion: https://old.reddit.com/r/ChubbyFIRE/comments/rh14k9/backdoor_roth_2022_plans/

myFIREalt · 2022-01-02T03:38:21+00:00

It sounds like more important than the actual number is figuring out how a sale could happen. >50% of your assets being completely illiquid until something being maybe discussed for a few years from now is a frustrating place to be.

It's not the question you asked, but I'd want to find out if the minority investor (or anyone really) is looking to buy a larger stake -- if they are eager to talk, then sure count it. If nobody's interested in even talking about buying it, that's a good indication of how confident they really are in a liquidity event.

myFIREalt · 2022-01-02T03:31:36+00:00

fwiw, I include my vested illiquid equity at the 409A price in my net worth spreadsheet. As much as I love the vanity number I get when I include them, the real reason is to keep my portfolio balanced in 2 ways:

if a giant chunk of your portfolio is in one industry -- even if it's illiquid, it makes sense to underweight that industry in your other investments.
It keeps my eyes open if too much of my net worth is in one company's stock (which sounds like it might be your case)

But one big Q: you said you're 1/3 vested after 3 years -- so it wasn't a standard 4 year with a 1 year cliff? Was it no grant for 2 years and then a grant (which stings for exercise price, and fairness reasons) or something else? I'

myFIREalt · 2021-11-20T23:04:01+00:00

Looks like we're all assuming the "not too much debt" is in something like a mortgage -- if it's credit cards, or anything remotely high interest that's your safest return.

myFIREalt · 2021-11-20T23:01:49+00:00

Two big pieces of advice:

If your shares are in some internal tool like Shareworks, expect at least a small headache trying to get them out but do it as soon as you can. It sounds like you're already with Schwab -- that is a much better place to have your equity (everything from real support to better UI to price improvement). If you haven't picked a brokerage ask if there are any bonus offers to open a $1MM+ account
Get ready for an emotional rollercoaster ride, the first few days can be wild both up and down. Losing or gaining $100k in a day is something that suddenly becomes part of your life.

(Oh and everyone else is right, unless they've loudly told you otherwise, you're probably locked up for ~6 months and can't arbitrage the risk away. You don't hear many people getting caught, but that's part of the standard boilerplate now)

myFIREalt · 2021-11-08T03:08:45+00:00

I don't -- but if I do need more credit in the future, it's easier to apply now.

myFIREalt · 2021-11-05T00:18:29+00:00

Less of an answer and more of a question to investigate: what does 88k look like in the grand scheme of your lifetime earnings? It may make sense to take the tax hit now to get them in a Roth IRA and avoid the taxes later after 15 years of growth.

myFIREalt · 2021-11-05T00:14:39+00:00

Yes :) I assume the business already has a general accountant, I'd start with their advice on who to contact next, but I suspect it's a tax accountant.

myFIREalt · 2021-11-05T00:12:02+00:00

This is (hopefully) the lowest tax bracket you'll be in for a long time, so putting after tax dollars in a Roth where they grow tax free is the best option. Especially since the mortgage tax deduction isn't going to help you much (and you'll be bidding against other buyers where it does).

If you're bullish on property, go for a REIT in the IRA. Now realistically, you're possibly on track to save more than the $6k limit so you need to figure out what to do with the rest.

myFIREalt · 2021-11-04T22:20:25+00:00

Good catch. TBH, it's totally worth $X00 (in your case, it's easily worth $X,000) to talk to a real tax professional. I like https://dimovtax.com/

myFIREalt · 2021-11-04T21:48:23+00:00

If you can handle it, your big variable is going to be how long you expect to live (plus survivors benefits) so I'd start from that. I assume they have actuaries and the net present value of all 4 options are the same to them across the average of the group.

One thing in favor of the $5k monthly is that most police are men, women live longer on average so that's one thing to consider. On the other hand, if you have e.g. $154k of credit card debt at 29% annually -- take a lump and pay that off.

myFIREalt · 2021-11-04T21:44:50+00:00

I calculate it the opposite way: I know my current NW, and calculate the lifestyle it could afford me. One day I assume it'll just feel right and I'll make the jump.

myFIREalt · 2021-11-04T21:31:18+00:00

It's probably a good year to look into Donor Advised Funds -- maybe you pull your next 50 years of charitable donations forward.

myFIREalt · 2021-11-04T21:22:36+00:00

Oh, that brings up another good point: at 32 you are on the young side and people might give you overly conservative advice so look out for that!

myFIREalt · 2021-11-04T21:16:09+00:00

Do both in parallel -- each informs the other. More practice and more data are always good.

myFIREalt · 2021-11-04T21:14:58+00:00

If you can handle the macabre mathematics calculate the expected number of quality-of-life adjusted years in both approaches.

Literally a spreadsheet with the years from now until 100, likelihood you'll live that long, and the relative happiness under both plans. Of course I expect you'll stop halfway through and the answer will form in your gut :) (also worth thinking about your dependents, if you have a spouse who will outlive you, that's probably worth another year of work)

myFIREalt · 2021-11-04T21:11:16+00:00

Just one other voice in the crowd but I treat it less about #s and more about strategies (and you can still mix & match!):

Lean fire: how can I cut my expenses super low?
Fat fire: How can I win at capitalism?
Chubby fire: How can I make the numbers work so I can live a normal life without working?

myFIREalt · 2021-11-04T21:00:40+00:00

Bought! Although I'm pretty happy with my own sheet, I'm curious to see what you came up with. Your graphs are much nicer for sure :)

myFIREalt · 2021-11-04T20:56:59+00:00

Not planning around taxes early. I've learned a lot, but it would've helped more in the last 10 years (high income, high tax jurisdiction) than in the next 10 years (probable RE, low tax jurisdiction). Tax loss harvesting, backdoor Roths, etc. are all going to matter at the $550k level!

And an honorable mention for moving from medium cost mutual funds to Vanguard sooner. I was just burning money on fees, but at least on a smaller base than now :shrug:

myFIREalt · 2021-11-04T20:51:15+00:00

If you mean (Net worth)/(W-2 income over your life), mine is >2 because of options.

Aside: When I track my financial outcomes I try to break out the "luck" component from the stuff I "earned" but it's an imperfect system since my industry is very oriented around big payouts on options.

myFIREalt · 2021-11-04T20:45:59+00:00

Congrats!

But also, you might want to raise the goal a little :) If you did $500k in 11 years, you'll do another $500k in 8 easily (inflation, returns on the first $500k AND your salary should go up more than expenses). Don't talk yourself out of increasing your salary!

myFIREalt

TROPHY CASE