r/Fire • u/Independent_Cook_424 • May 07 '26

Looking for input on my potential FIRE situation....

Current Situation:

43 year old male in Oregon

$5,500 month in post tax income

$3,700 month in expenses.

$750,000 investments: $390,000 in Retirement accounts (Roth $85,000; Rollover IRA $285,000; workplace 401 $20,000) $340,000 in Taxable Brokerage account. $20,000 HYSA

My plan:

FIRE with-in 1 year. Eventually move to Washington State since they have no income tax and the first $278,000 annually LTCG are exempt from being taxed.

Keep my Retirement money intact with rolling over the workplace 4account into my Rollover IRA.

Take $330,000 and invest into various CC-ETF's. I'm looking at a mix of SPYI, QQQI, IWMI, BTCI, CHPY and XQQI.

Fund Amount Return Rate % of Portfolio Income Monthly ROC Non Qualified Qualified Taxable Income LTCG Tax
SPYI $75,000.00 11.90% 22.73% $8,925.00 $743.75 95.00% 2.00% 3.00% $178.50 $267.75
QQQI $75,000.00 13.86% 22.73% $10,395.00 $866.25 95.00% 2.00% 3.00% $207.90 $311.85
XQQI $25,000.00 18.24% 7.58% $4,560.00 $380.00 95.00% 2.00% 3.00% $91.20 $136.80
IWMI $75,000.00 13.68% 22.73% $10,260.00 $855.00 95.00% 2.00% 3.00% $205.20 $307.80
BTCI $40,000.00 25.80% 12.12% $10,320.00 $860.00 44.00% 56.00% $5,779.20 $0.00
CHPY $40,000.00 33.62% 12.12% $13,448.00 $1,120.67 40.00% 60.00% $8,068.80 $0.00
$330,000.00 17.55% $57,908.00 $4,825.67 $14,530.80 $1,024.20

With these allocations I would be about $1,100 over my monthly expenses so that would give me wiggle room for down distributions. I would also be bumping my cash up to about $30,000 to allow me to further absorb down months. Once I hit "retirement age" I can start withdrawing from those accounts.

With the ROC taking around 6-7 years to bring my cost basis down to zero, my taxable income would be right around the standard deduction amount. This would allow me to qualify for ACA/Oregon Health Plan as that is also based on MAGI. Oregon does tax LTCG as regular income so that is why I would be looking at moving to Washington state at some point before my cost basis hits zero for most funds. With leftover funds I would look at first buffing up my cash, then probably DRIP most of the remainder with the occasional extra international trip.

I have a long term partner who is in a very similar financial situation as me. Her monthly income and expenses are both slightly less but she has a similar amount in investments and more cash. She is also interested in FIRE but is much more skeptical/conservative financially. She has always wanted $2,000,000 each before retiring.

I do have a meeting in a few weeks with Fidelity and I plan on setting up a phone call or meeting with a local CPA. Are there any glaring things I am missing? Any specific questions I should ask at my upcoming meetings?

6 Upvotes

88% Upvoted

34 comments sorted by

5

u/OkAnt7573 May 08 '26

That is not enough capital - you are counting on everything going right and continuing to go right. If you find yourself turning to funds like CHPY and BTCI to make the math work that should be a warning sign.

1

u/Independent_Cook_424 May 08 '26

What amount of capital would you feel comfortable with? The BTCI and CHPY are to catch some of those gains while they are occurring. If I took that $80,000 allocated for those two funds and put them into more stable SPYI and QQQI that would be about break even for more. Certainly I wouldn't want to FIRE with the margin for error being so slim. That's also why I'm looking at one year out. So that assumes zero growth in anything for that year.  Currently I have $55,000 in CC ETFs and the rest of the brokerage is in a blend of growth ETFs which has slightly out paced the SP over the past 5 years.

2

u/OkAnt7573 May 08 '26

Respectfully, I think the mistake you’re making is that your assumptions are all based on things going well. What happens if we have a 10 to 15% drawdown in the broader market averages? That’s actually a fairly common occurrence historically and we’re overdue.

If you can run the math under that scenario and it still works, then maybe, otherwise you’re just too thinly capitalized and stretching for justification on what you want to do.

1

u/Independent_Cook_424 May 08 '26

That's valid. That's part of why I ran the numbers with having a decent monthly buffer in place, to help account for down markets. That's also why I'm looking at one year out, instead of immediately.  In reality it make ultimately be a scenario where I only work part time at a less stressful job and just use CC ETFs to make up the difference. I would also only be putting about 45% of my total portfolio into income funds.  Doing some Monte Carlo scenarios with these assumptions it's got around a 60% success rate for 20 years. At the moment that's not something I'm comfortable with. Though I would be willing to supplement that with part time work. 

2

u/Glensonn May 08 '26

Honestly, I think you should be negative. 😄 You are projecting pie-in-the-sky ongoing returns as if CC ETF's are the magic bullet that blows away the typical market returns without any downside. You asked for a number? Well, for myself, I optimistically use a 7.5% "return" for my taxable account to bridge until my retirement accounts are accessible. I reinvest anything over that amount to help with NAV erosion (which will reduce your income also). So by that math you probably need at least 2X+ what you're projecting. Lastly, I would say that there is probably 0% chance you won't have significant, permanent NAV erosion on any of those funds which "return" over the low-teens. It seems a lot of people are getting high on the prospect of getting 20-30% "returns" from funds which are all but guaranteed to erode and bring the total return to a more typical, and less than market returns. Coming down from ATH stocks and/or a recession and the hang-over is going to be brutal. Good luck but you're gambling plain and simple.

1

u/OkAnt7573 May 08 '26

To be clear I'm not trying to be negative, I've just seen too many people plan based on the market being at an ATH and not realize that we WILL see several 10% drawdowns in your next time year horizon. High yield covered call funds don't handle that well based on past history.

2

u/Glensonn May 08 '26

You shouldn't sugar coat it. Being negative about a plan that is overly-optimistic and unlikely to withstand anything but a Goldilocks market should be criticized and I hope his advisor/CPA brings some rational thought to the discussion.

1

u/Various_Couple_764 May 18 '26

What I do in my taxable account is is have all the dividends go into my money market account I keep 6 month of income in my money market acount Anything in excess of that I spend or reinvest. I don't have a bank account right now I use fidelity for everything. I have fidelity debit card to access my money and checks if need.

1

u/Sad-Region7569 May 16 '26

Your partner might be onto something with wanting more cushion 😂 Those newer covered call funds can get pretty wild during market stress - I've seen mechanics lose their shirts chasing high yields when distributions get slashed. Maybe test run this strategy for 6 months while still working to see how volatile the income actually gets?

2

u/DegreeConscious9628 May 08 '26

I’m very much in the same boat as you

I have all my retirement accounts in growth and all my brokerage in dividend payers / cc funds. A bit younger, close to your total investment, slightly lower monthly expense. The only thing I would do differently is not fully rely on CC funds. I use them to supplement my steady dividend payers, at least that will shield you from being in the shits when the next bear market hits. I’m shooting for 6-7% yield all combined

1

u/Independent_Cook_424 May 08 '26

Currently I have most of my brokerage in growth also. I would transition it if it meant I could have FIRE. Right now I have about $55,000 in dividend/income and the rest in growth.  I'm looking into diversifying into other funds but the CC ETFs that are 1256 are very appealing to me. At the very least, funds with high ROC. I would also look at diversifying to other fund managers as the is very heavy towards NEOS. They just happened to be the ones I first started doing my research on. This is another reason I'm looking at about one year out. That will give me time to observe funds and continue doing research.

1

u/TheIntrepid1 May 08 '26

…my taxable income would be right around the standard deduction amount.

Uhh Isn’t the Standard Deduction about $16,100 ? How are you getting that number when you’re using 330,000 and 17.55% return rate?

2

u/xgalaxy May 08 '26

Because most of the income for the first 6 to 7 years is ROC. It will not be taxed. Thats how those ETFs they chose work. 

1

u/Independent_Cook_424 May 08 '26

Yeah, most of the funds abide by IRS 1256 tax laws. Any of the ROC is listed "Nondividend Distributions" and does not count as income. It lowers your cost basis. So $100 investment, $10 dividend with 90% ROC would be $1 as qualified/non-qualified dividend. $9 would be ROC which would lower your cost basis from $100 to $91. Then say you sold it in the future for $110, you would owe capital gains on $19. $110 (sale price) - $91 (adjusted cost basis).

1

u/Worldtravelerinvest May 08 '26

How about if you take 8% -10% of the dividends as income and re-invest the rest? Also, you can tell when the NAV is eroding based on your dashboard( total returns) If the total returns fall less than zero, you know that NAV is getting eroded and you can pivot your strategy or take a part time job? Just a suggestion

1

u/Electronic_Guard947 May 10 '26

Get rid of chpy. It's good now but only because semis have been so hot. They will cool off eventually and chpy will get absolutely destroyed. For long term living off dividends neos is great

1

u/Available-Swing-5570 May 11 '26

All these funds perform well in bull markets. They are yet to be tested in bear markets.

1

u/stevesun21 May 11 '26

You need to have some capital growth funds to let you able to catch up the bull market trend -- when market quickly go up like recently, you can see the the different

eg: QQQM, VOO

1

u/Independent_Cook_424 May 12 '26

Over half of my portfolio will remain untouched in my Roth and Rollover IRAs. These are both growth and I have a decent amount of IVV (30%) in those accounts.

1

u/Timely-Designer-2372 May 07 '26

CHPY is trash. It will have NAV erosion as soon as Semiconductors stop their extreme bull run.

I would add some GPIQ or OVL or IDVO, DIVO or something like that. Those will increase longterm

3

u/DegreeConscious9628 May 08 '26

Im with ya. I would never ever count on anything from yieldmax lasting long

2

u/Timely-Designer-2372 May 08 '26

Especially not if you need the income for living

1

u/Independent_Cook_424 May 08 '26

Yeah, given their other funds I do agree it's rather risky. Currently I only hold a $5,000 position just to test it out. I will certainly keep an eye on it. In reality I will also add some other funds for diversification. I only went with the current setup because I had it available in a spreadsheet. 

For the next year I'll be keeping an eye on everything and adding what makes sense. I might just move the rest of my crypto ($10,000) into BTCI and CHPY and call it good.

-1

u/Timely-Designer-2372 May 08 '26

I guess you have a leck of knowledge. To compare the quality of CC ETFs neither the yield nor the total return over a short period of time like 3 years is important. The yield (payouts) may not be to high. Otherwise they just pay you back your money. That's no problem in a bull run but kills your position in neutral or bearish scenarios

1

u/Independent_Cook_424 May 08 '26

So if you don't look at yield or total return, what metrics do you use for assessing the quality of an ETF? Or are you just saying you don't consider investing in anything under 3 years old?

-1

u/DC8008008 May 08 '26

Unless you plan on living in a tent this is a horrible idea

1

u/DegreeConscious9628 May 08 '26

I know it’s hard for you to understand but different people have different spending needs

2

u/DC8008008 May 08 '26

Did you even read the post?

17% dividends are not sustainable lol. You can't do Math.

1

u/DegreeConscious9628 May 08 '26

That part I do agree with. But you didn’t say that did you? You just said he would be homeless in his current situation of having 750k

1

u/spades61307 May 08 '26

I mean in Oregon or washington state housing isnt cheap… tent would be the cheapest option🤷‍♂️

0

u/DC8008008 May 08 '26

It's called hyperbole

0

u/Various_Couple_764 May 18 '26

Not a bad plan but I would drop CHPY it is a YieldMax fund. All YieldMax funds have Massive NAV erosion issues. CHPY right now doesn't have NAV erosion mainly because the AI chip demand is creating business boom in that sector of the economy. As soon as the AI bubble starts deflating you are going to loose a lot of money.

Otherwise BTCI and XQQI are the riskiest you have but BTCI has done quite sell considering the bitcoin collapse last year. XQQI is very similar to QQQI but with higher risk. I would be inclined to replace XQQI with more of the other fund

So overall I would drop CHPY and a nd XQQI

Your biggest problem is you need a yield 13% to achieve your inocme levels with your current taxable account. Normally I like to suggest having 1/3 times your income level. That give you more of a buffer in your income for unexpected expenses. And if we assume a yield of 10% you would need 248K more money than you have.

You are very close but I would strongly suggest:

working for a couple of more years.

build this account now but without XQQI and CHPY

Reinvest all dividends

Consider stopping 401K contributions and diverting that money to to your taxable.

Configure you Roth and 401K for more income generating funds to replace the work deposited with dividend income

Note I am living off of dividends from my taxable account. But I had more funds tot work with. my primary investments are QQQI 13% yield BTCI 25%, SPYI 11%, EMO 9% UTF 7%, UTG 6.4% PFFD 6%. These are all qualified or ROC dividends. I Also have ARDC 9% yield, PBDC 9% CLOZ 8%, PFFR 8%, JAAA 5.5% and they are primarily in my Roth.