FI - Am I there?

[sxliquin]

Hello folks!
  Glad that Jeremy pointed me to this Forum! The discussion I want to have today is how do I know I'm FI ready -- Am I there?

Personal info:  I am 44 years old, single, no kids. Have one house rented out in Maryland. A paid off car sitting in San Diego now, since I'm on expat assignment ---planning to sell it to my ex BF to avoid paying CA insurance and title fee. Following the 4% withdraw rate after FI and planning to live off flexibly on $30k-40k a year.

My Portfolio:
1. Investment: $756,830 today: (Allocation is about 93% stocks, 6.6% Bond, 1% cash). 
   a. Vanguard: $567,321
           1.) Brokerage: $279,716 (VTSAX 90%, VBTLX 10%)
            2.)Roth IRA: $18,990 (VTI 82%, BND 18%)
            3.) 401K: $268,614 (Inst 500 Index 73.3%, Inst
                                                 Bond7.7%, Mid Cap 19%)
   b. Fidelity: one single stock JEC:- $188,875 value today. This is my employer stock --- discounted purchase over the years. I no longer buy it. But can't unload it while I'm still working, to avoid paying high capital gain tax.

2. Cash in banks: $20,223
3. Rental property market value: $248,885
4. Rental property mortgage: $73,000
5. No other debts beside normal credit card use for daily expenses.

Total net worth by Personal Capital: $951,265 today.

My questions are:
1. My dividends is not that much every year from my investments (2017 Vanguard dividends: $3675, of which $287 non taxable).  Is this something I should be seeking to achieve?  I think it's mainly because half my investment is in retirement accounts?  I also am trying to read how to increase non taxable dividends....

2. Without dividends being the main resource for spending after leaving work, I am still trying to figure out how do I withdraw to fund my expenses ($30-40K a year). I have read the post by JLColin and other blogs. But it just feels unsafe if I am tapping into the investment initial amount (selling some VTSAX) from year 1...

3. Allocation wise, I re-read JLColin's stock series again, I need to re distribute the bond and stocks between taxable accounts and 401K, so I can minimize the tax I am paying now while still working.

4. When evaluating the initial value for the day leaving work, to see if I truly reached the $1M --- the market value could really vary within 6 months,  How did you look at it to say "today it's good".  Do you judge the "average" over a period time or purely look at the market value of that day?

5. I do have an apartment in China, fully paid, with my parents living in it. Market value is about $100k if I ever decide to sell when they are gone --which I don't plan, because I hope they live healthy longer age.  My original plan is to be minimalist normad after leaving work, travelling for a couple of years; then be based backed between US and China and do short travels or some other businesses. But renting only.  Now, being single, I feel the need to have a home base in US. Planning to buy a house or apartment in Orlando/Tampa area, ideally a duplex or quadplex, so I can rent the other units out while having mine airbnb when I am travelling for longer term.  -- what's your thoughts on this?

6. I also have an investment of $50k in a Chinese company(Hoverstar) that is dedicated to design and manufacture flying car (Hovering car). Right now they are designing and manufacturing Water entertainment machines, like AquaJet ....  Hopefully I can make a fortune when they go IPO, but I am not betting my FI on it.  So the main strategy is still totally rely on what I have accumulated in investment.

Really appreciate comments and opinions!

[prognastat]

You should be able to spend about $30,000(adjusted for inflation) annually based on your investments of course not counting any rental income you may receive. That's a 4% Safe Withdrawal Rate(SWR) which has been successful in about 95% of all 30 year periods in the US market. If you are really risk intolerant getting to a 3.5% SWR would mean about a 100% historical success rate in the US market for any 30 year period, but would mean you would either need to spend less than 30k annually or grow your investments some more. Of course if any of the events that you mentioned lead to additional money invested that would speed things up of course.

[gocurrycracker]

But it just feels unsafe if I am tapping into the investment initial amount (selling some VTSAX) from year 1...

There is no difference between spending dividends and selling appreciated stock.

It would be a good investment to understand how that works mathematically, which might help replace emotions with logic

[sxliquin]

prognastat:
  Thank you for replying. Yeah, I have been gauging my number by the 4% rule, and prepare to be flexible in spending once I leave regular work. I thought the base of the 4% is the net worth --- it seemed you used my investment part as the base. Is this typical?

Jeremy:
  Thank you for assuring on the withdraw from dividends or selling stocks.  I will research more into the mathematics.
  My main concern is how to time the FI moment based on the portfolio value ---it varies throughout the year, the value I have now in my portfolio is on high side, especially my JEC stocks portion has basically doubled than the normal low value throughout the year (It typically swings bwtn $35+ and $70 during a year).  Once I leave work, I am planning to unload this stock and invest into VTSAX, of course have to watch out to time it at a higher selling price.

 Appreciate your opinions!
 

[prognastat]

The 4% rule purely applies to funds invested in index funds. Other parts of your net worth don't have a study to determine such a rule for them. You could still only withdraw 4% of your investments and the spend that plus whatever income your other sources generate.

[sxliquin]

Thank you for pointing that out Prognastat. As much as I read and follow these FI experts, there are still a lot details to understand.

[Jim]

There are a lot of pieces in flux here sxliquin and I'm trying to understand how it would all fit together if you were to pull the retiring early trigger today.

You mention a current rental property in your portfolio, but don't mention what kind of income that generates for you.

As for your portfolio, you have enough to spend ~$30k/year as prognastat points out.  The composition of your portfolio which concerns me is the significant portion of the single stock in your portfolio.  The other composition element is how small of a taxable brokerage account you have.  I assume you would be trying to live off of that while you did some Roth conversions from the 401k into your Roth IRA and let them season for 5 years or so.  With your brokerage account (including JEC) ~$469k and withdrawing $30k/year if the market suddenly down turned I'm afraid it would be cutting it close with liquidity outside of dipping into the 401k.

This is just my intial look and concern.  If you sold the rental and JEC and invested it all in VTSAX, while doing the Roth conversions from 401k.  I think you would be fine spending the ~$30k/year especially with the cash buffer you already have.