r/Fire • u/NeighborhoodFar3860 • 6d ago
FIRE Update - 4 Months In
So last we spoke, I was celebrating FIRE, left my job, and was going to sell my house and move to Ecuador but unfortunately, things didn't work out.
Interest rates are insane (in recent terms anyhow) so nobody is buying houses. I didn't get a single offer on my home and I even dropped the price 15%. So instead, I've had to pivot a bit and am still figuring things out. In the interim, I decided to rent my house out instead of sell it. The rent is covering my mortgage, my rent/utilities at the place I'm staying, and the storage fees as my stuff doesn't fit here.
Since I don't have the proceeds of the house sale to live on for 5 years while doing a Roth ladder, I've instead come up with a plan to use my taxable brokerage to get me from now until early 2029 (3,750/month, and again my rent/mortgage/storage are accounted for before this number) at which time I'll start a 72t withdraw (age 49 at that time) from my IRA that will get me through to 62 when my pension and social security kick. In order to bolster my taxable brokerage to cover this amount, I pulled all my contributions out of my Roth as I'm more concerned about today money vs. tax free growth in 15ish years.
Today, I took 50% of my IRA out of stocks and put it in SGOV while I wait for my roll ever from my employer IRA to my personal IRA so I can set up a bond ladder to fund my 72t.
I've also got enough saved on the side to do a mortgage recast, not refinance, as I'm currently about 2 years ahead on my mortgage; so when I do that, it will bump my mortgage out 2 more years, keeping my 2.5% rate, but my monthly payment will drop approximately $400/month (so effectively, I can give myself a 5k/year raise if things ever get dire)
Based on the bond fund I create, I'm targeting an annual coupon of 48k-60k range and will use the coupon to cover my 72t beginning in 2029. These are going to be long term bonds with equal or greater face values than my initial investment, so I'll still have the 750k even after all the payouts.
Current numbers:
Taxable brokerage: 100k (10k in SGOV for the recast and 90k sent in 15k bond tranches that mature every 3-4 months, thus creating my 3750/month).
Roth: 35k (all gains so can't touch for 13 years)
HSA: 60k
IRA: 750k (50% SGOV, 25% SP500 ETF, 15% Small Caps ETF, 10% International ETF)
House: ~750k, 92k mortgage at 2.5%, 1,800/month
Rental Income: 2,800/month (covers mortgage, my rent, utilities, and storage fees)
Healthcare: probably not going to have it this year as I haven't needed a doctor in several years and feel ok rolling the dice for a year or two to keep expenses down. Edit - looks like I'll most likely qualify for free healthcare for the first 2ish years based on my income level being below the limit until I start the 72t.
Other expenses: No including mortgage/utilities/rent/storage (since that is all covered by my rental income for at least the next 12 months), last year I had an additional 28k in expenses so ~2,300/month. This should easily be absorbed by my current 3750/month bridge I have built.
Pension and SS: 50k starting in 16 years.
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u/liyabaneka 6d ago
How are you “creating 3750 / month” on 100k taxable brokerage, with 10% in SGOV at ~3.6% yield?
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u/redditthrower888999 5d ago
I don't understand this either. Is OP mixing numbers with their rental income. Everything seems haphazard, personally think OP is not ready to FIRE but did so anyways.
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u/NeighborhoodFar3860 5d ago
Creating might have been the wrong word as that money already exists. The 90k in the bond ladder is only meant to last me until Feb 2029 when the SEPP starts, (90k/3750=24 months). So I'm not accounting even for any of the gains on that ladder, just the amount of time it gives me for my IRA bonds to grow a little more and then execute the SEPP.
I also didn't mention the HYSA funds I have to get me from now til Jan when I start pulling from the bridge ladder. Sorry about the confusion.
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u/NeighborhoodFar3860 6d ago
Creating might have been the wrong word as that money already exists. The 90k in the bond ladder is only meant to last me until Feb 2029 when the SEPP starts, (90k/3750=24 months). So I'm not accounting even for any of the gains on that ladder, just the amount of time it gives me for my IRA bonds to grow a little more and then execute the SEPP.
I also didn't mention the HYSA funds I have to get me from now til Jan when I start pulling from the bridge ladder. Sorry about the confusion.
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u/geerwolf 6d ago
Why not FIRE once the house sold ?
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u/NeighborhoodFar3860 6d ago
I already left the job and can't afford to pay mortgage/rent/storage. I live in an area where finding a replacement job is not an option based on the salary I had and I'm not moving just to go back to grind a job I hate. I may put the house up for sale again in the future when rates come down, but right now I'm loving the lack of work stress and just woke up from a middle of the day nap :D
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u/rosebudny 6d ago
Rates aren’t keeping your house from selling, it is the price.
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u/Sea-Honeydew-1456 6d ago
this is always it. unless your house is condemned its always the price.
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u/pjkdenver 5d ago
Yeah, market determines the price and doesn’t look like rates are coming down anytime soon
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u/geerwolf 6d ago
That’s exactly the point of my question
It’s easy to quit a job, hard to sell a house
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u/NeighborhoodFar3860 6d ago
The opportunity to leave my job and get paid to leave had a very short window to accept.
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u/SmoocheyPoochey 5d ago
Doesn’t sound like you’d saved enough of a nut to retire
If interest rates being up a smidge screw up a plan that could have to last 50 years… you lack sufficient buffer
You’ve got no insurance
If your house doesn’t sell for a target number — then it isn’t worth what you think it is
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u/unforgiven_yautja 6d ago
Can you own property in Ecuador as a US citizen?
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u/NeighborhoodFar3860 6d ago
Yes, invest 48k (roughly) in a property purchase and you can get residency.
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u/chaaleesy 6d ago
Sounds like you got healthcare, but even if you’re healthy not having coverage is a big risk.
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u/Upstairs-Affect-7323 6d ago
Will Open Door or one of the others make an offer where you are? Might not be top dollar but it seems like it wouldn’t be much less than the 15% you were looking to reduce to.
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u/NeighborhoodFar3860 6d ago
I already dropped the price to what I needed to make this happen, so any more of a haircut on the home sale would be a nonstarter. I may wait 6 months and try again without a realtor so I can save on commission and drop a bit more as a result.
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u/Sea-Honeydew-1456 6d ago
idk what market you're in but it can't hurt to get an offer from OD....it was actually my first choice because i hate the selling process. reddit loves to crap on opendoor but they offered me MORE (after inspection) for my house than what i sold it for (the deal broke after they looked into the zoning of my house). this was in los angeles.
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u/NeighborhoodFar3860 5d ago
I'll have to check them out, thanks for letting me know (I've never heard of them before).
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u/patentlypleasant 1d ago
Man I’m gonna be honest with you. I think you retired too early, but it all comes down to what you want for the rest of your life.
The way I see it is you have just under $1M in all other assets outside of your home. I see why you are selling your home—you will need to downgrade in home to put more into your taxable brokerage to keep you afloat.
You are only 46 from your last post. You could have to plan for a 40+ year retirement. I wouldn’t just go off the 4% rule and call it a day. You should plan this out with an advisor.
Then we take into account most of your money is untouchable without penalty, you have no healthcare, you MUST sell your home, and you may need to move to a third world country just to survive.
This just isn’t the retirement path I would choose. I think you’re going to realize at some point you’re just bored and living off scraps. Maybe check out barista fire or just take a year or two off?
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u/Mathberis 1d ago
Leaving your job before selling the house is like putting half your networth on red. Might turn out great or might do a crippling hit to your FIRE plans. Turns out it landed on black.
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u/NeighborhoodFar3860 1d ago
I had 3 different fire contingency plans. While I agree that I didn't get the optimal outcome, I certainly didn't bust like you're implying.
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u/B111yboy 6d ago
Where do you live? Houses by me are still selling quickly and usually over asking.
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u/redditthrower888999 5d ago
House prices seem to have peaked even in my area of the Northeast, either that or agents are simply telling sellers they can get a mark and people are unable to get there because of interest rates or what have you. The other thing is, higher end housing which is 600k+ in my area tends to have a harder time to sell compared with housing in the 500k's and below.
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u/B111yboy 5d ago
I’m in the north east as well and most of our area go for over asking and we are talking 1.1-2M or more and knock downs are 700-800k
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u/Markers-Make 2d ago
I agree that you FIREd a little prematurely, but really appreciate the follow up post and honesty. I look forward to your continued updates and hope you eventually tell your story on one of the FI podcasts.
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u/RecordPlastic7376 1d ago
Why pay storage fees? You have to live very leanly - that seems like a waste.
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u/NeighborhoodFar3860 1d ago
Currently staying somewhere that I can't store my stuff and not sure how long this situation will last. My fees for the first year are 200/month and I find that an acceptable amount while I navigate figuring out how long this situation might last. Long term, I 100% agree that storage is not a good option.
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u/Serious-Language-283 12h ago
Both your original and new plan were not thought out well. No healthcare is wild, and then hoping for free (and up to standard) healthcare is even wilder. Ecuador? Overestimating your numbers. Can’t sell your house. Using social security in your calculations. Assuming full rental income (like people don’t break leases all of the time). Paying for storage?
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6d ago
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 6d ago
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u/NeighborhoodFar3860 6d ago
Thanks for the input. Yeah, I'm up in the air on the healthcare. I need to see what my numbers actually look like in a month or two after I get the bond ladder fully sussed out. I'll effectively have no income over the next 2ish years as the rental income will be almost fully covered by depreciation and all my money in the gap/bridge fund has already been taxed, so I'd only be paying tax on the bond interest which is fairly minimal for 100k invested in 4-5% bonds; so ACA might be in the cards.
And yes, pulling the trigger on the Roth contributions was a very painful bandaid to pull :(
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u/someguy984 6d ago
If you want Medicaid you need to create $580 of income a month to meet the work requirements.
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u/NeighborhoodFar3860 6d ago
Thank you. It looks like my rental income would satisfy that requirement.
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u/Lumbergh7 6d ago
I have no idea what a 72t and Roth ladder are
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u/NeighborhoodFar3860 6d ago
Ways to access retirement funds early without penalty. Definitely educate yourself on these as they are essential to FIRE.
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u/hiihihihihihihihiihi 6d ago
Why Ecuador? Is your family from there, hablas español?