Author Topic: FIRE Options  (Read 3413 times)

FIRE Saver

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FIRE Options
« on: July 30, 2018, 04:09:51 AM »
Hi,

Just looking for some opinions, but also hoping that writing this out will help to clear up my thinking.

I'm mid-thirties and married with two kids (enough!), but living in Ireland. Our tax laws aren't favourable to relying on stock market returns. 33% capital gains tax when selling/harvesting and approx. 50% income tax on dividends (depending on a few variables). At my age, I can only put 20% of earned income (investment/passive income not counted) in a retirement, tax sheltered account. Even that is somewhat risky, as our government has/is applying levies to private retirement accounts when money runs short. This is likely to be a recurring theme, as we have a massive pensions time bomb on the horizon and private pension funds are a soft target. The joys of democracy, where everyone thinks only in election cycles.

As a result, I've favoured property investment, and use a few strategies to help minimise tax. My take on property is that:

1)   Over the longer term, and in strong locations, it generally keeps pace with inflation. I bought in close to market bottom following one of the worst recessions in modern history, so that will help.

2)   The rental returns are growing much faster than inflation, however I'm ignoring that, as it isn't sustainable without wage growth.

After accounting for all expenses, sinking fund (for once off large repairs) and having most properties independently managed, my net property income is $35,000/year. I could push this up to $41k by taking on more of the management myself (which I enjoy).

There is another investment property that will add approx. $12,000/year in 15 years, when the mortgage is paid off. I'm currently ignoring it, as it is self-funding. My income figures are before tax. I very conservatively need $35k to cover my half of the expenses, including a large sum for child care. My wife covers the other half. There would be some shortfall due to taxes due on my income. A sizeable chunk of my expenses is spent servicing my half of our home mortgage ($75k)

My wife has a good job, has her own small business and some investment properties (hers bring in $18k net). She loves her job and intends only on reducing her hours rather than retiring (still has some property loans). She hopes to move to a 3 day week next year. Despite my best efforts, she hasn't fully bought into the FIRE concept (although is sensible). She likes her work, which I think has a big bearing on motivation. Based on my calculations, she will be very close to FIRE at age 47, without any major change and based on working reduced hours.

I really don't want to continue working at what I do. The industry in which I work has changed massively since I started, to the point where I am living in fear of the next e-mail or project. I could write a book about all that is wrong and one line about what is good about it. My options are:

1)   Stop in 12 months, knowing I may have a $7k/year shortfall ($2k/year shortfall if I take over full property management). I have lots of options for consulting at what I currently do, albeit for a lower rate per hour. As I will be consulting, I can control the types of projects/people I work with, which would have a big impact. Consult say 3 days per week and use that income to pay down all remaining loans for the next 7 - 10 years. This will have both of us working 3 days per week, so we can spend 4 days together.

2)   Work full time for another 5 years and pay down all loans/invest. That would leave me with no loans and an income well above my expenses. As my kids would still be very young and my wife would be working, I'm not sure how much extra freedom I would have. Perhaps I could look at various business opportunities that might be of interest whilst I?m waiting on my wife to join me.

I know there is no universally right answer. My main concern is the loss of identity and loss of consistently strong/regular savings if I call stop in 12 months. As my work has always been very intense, I haven?t developed a wide circle of friends or hobbies.


« Last Edit: July 30, 2018, 04:14:11 AM by FIRE Saver »

prognastat

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Re: FIRE Options
« Reply #1 on: July 30, 2018, 07:30:33 AM »
With these kinds of things it's always hard to give any good advice, because when it comes down to it it really is about how you feel about the options and which would be more sustainable for you.

I'd be pretty hesitant about quitting myself with the 2k shortfall, but I can be pretty conservative with financial risk. A few things that might be worthwhile is cutting back a little in your job if at all possible while expanding your management work for your properties before switching to get more of a taste of it so you'll know for sure you enjoy the tasks you are taking over.

Is there any room left for cutting in your budget? If thee is some room to cut I'd feel more comfortable taking the chance as I could always cut my expenses some if income doesn't turn out the way I hoped it would. If there is no room to cut the budget though that again would make me more hesitant as risk is larger.

FIRE Saver

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Re: FIRE Options
« Reply #2 on: July 30, 2018, 07:50:48 AM »
Thanks for the feedback. The budget could be cut back. For example, there is no way I would be paying for child care if I wasn't consulting on a part time basis. It also includes plenty of discretionary spending. I don't spend that budget now, so I calculated it based on a worst case scenario.

My wife isn't committed to FIRE, so I'm conscious of not forcing my ideas on her. She likes to dine out and go on weekends away, whereas I could happily do a lot less.

Dakrew94

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Re: FIRE Options
« Reply #3 on: November 05, 2018, 01:57:52 AM »
Truly good info. I too had similar questions in my head and have finally got all answers in this thread. Thanks for this invaluable forum and for helping us out. I am not an expert in planning finances and savings but recently seeking some good income tax saving investment options. Can anyone list out some options here?