How much $ to retire and how to fund your lifestyle in retirement

[mongo]

Mostly because we are glad we can use the mortgage interest as a deduction against our income and that along with rates being very low (2.4% for us) it isn't something we have worried about personally.

That's not a net win.
You're paying X in interest to get tax*X back. That still costs you (1-tax)*X which is the same net income you would get from X gross. Net income wise & all else being equal, it's better to keep that money.

However, if you're investing the money that would be needed to pay off the house...

We went for Thanksgiving to my brother in law's new house and now my wife has house envy and she want us to upgrade our house . As of right now our house is 8.5% of our net worth and I was just curious how other Tesla investor's compared and what other think about what % of net worth should be allocated to a primary residence. We don't have a mortgage and going into early retirement with a new mortgage kind of concerns me.

Dealing with same calculation. Esp difficult since current house was a distressed foreclosure from the great recession so tax&mortgage is skewed down. Present value is higher, but taxable still trails. May do remodel instead to reduce increase in assessed value.

 

[UltradoomY]

That's not a net win.
You're paying X in interest to get tax*X back. That still costs you (1-tax)*X which is the same net income you would get from X gross. Net income wise & all else being equal, it's better to keep that money.

However, if you're investing the money that would be needed to pay off the house...

Indeed - we have the cash in equities (TSLA) and literal cash to pay the house off if warranted.... however that money is way better served as capital to create additional money.
Just making a note that there is more to having a mortgage than it just being debt. Debt is leverage like anything else.
So we use our leverage to both live comfortably and make more with the capital and deducting part of that is an additional benefit.

I always thought that not having a mortgage and owning my home was a goal I had, that has changed significantly over the past 5 years when it became a reality. That money can generate way better than the low cost of interest and it has a benefit that the mortgage company does the escrow for us!
Weird how things shift, it was always if I have "X" amount I can live forever and only take out 4% to live on, now I don't want to take out anything and only generate income.

 

[juanmedina]

Well if you move you’ll probably have to pay for both added value and a bunch of improvements, so upgrading your current home might be cheaper! Think of it as another tax — for every (disclosed!) x of winnings at the TSLA casino, your wife may expect a percentage.

We actually have been upgrading our house this year to find out that we cannot get it into what we really want to because of the layout and because we leave in a neighborhood with a HOA.

I wouldn't count a house in net worth as you need one (or ongoing rental payments).

Funnily enough, in the UK, most people EQUATE their house value to THEIR worth as a human. Perplexing to me & wife. Of the people we know, most are obsessed with houses and probably have above 100% of their NET worth in their houses ("equity") and seem to count it almost like income when remortgaging.

As for house as % of net worth, I find that an odd question. House envy I find odd too. Once you've secured financial freedom, spend on what you want, but I think of a house as a thing to utilise. Location, necessary space & facilities, neighbourhood, low maintenance, facilities nearby (always within 30 minutes of a hospital - Golden Hour).

We have capped property (council) tax in UK, so buying an expensive house probably isn't daft. Maybe more maintenance costs, but overall a fairly sensible thing to spend out on.

Trouble with houses, yachts etc is that there'll always be a bigger one.

I'd be nomadic with a small base by preference, as would my wife. If our financial future is REALLY secure though, that base would be whatever we thought was sensible.

I would also like to be nomadic but with little kids and their schooling that is not possible right now. As far as house envy it probably comes from our net worth increasing significantly in last few years while us not letting our expenses increase. We have been always frugal and I guess you get to a point financially when you are thinking "why not get a better house". Currently my parents, my wife parents, her brother and my cousins are building or waiting to move into their new houses which gives us an itch. I was reading an article from the "Financial Samurai" talking about how much of your net worth tied up to your house and I was just curious what people here are doing. He said 30% which is way more than I am willing to spend.

Primary Residence Value As A Percentage Of Net Worth Guide

That's not a net win.
You're paying X in interest to get tax*X back. That still costs you (1-tax)*X which is the same net income you would get from X gross. Net income wise & all else being equal, it's better to keep that money.

However, if you're investing the money that would be needed to pay off the house...


Dealing with same calculation. Esp difficult since current house was a distressed foreclosure from the great recession so tax&mortgage is skewed down. Present value is higher, but taxable still trails. May do remodel instead to reduce increase in assessed value.

My house is also a foreclosure that was in really good shape, 6 years old at the time and it was less than a Model S Plaid. It is now an entry $300-250k house in South Carolina.

Indeed - we have the cash in equities (TSLA) and literal cash to pay the house off if warranted.... however that money is way better served as capital to create additional money.
Just making a note that there is more to having a mortgage than it just being debt. Debt is leverage like anything else.
So we use our leverage to both live comfortably and make more with the capital and deducting part of that is an additional benefit.

I always thought that not having a mortgage and owning my home was a goal I had, that has changed significantly over the past 5 years when it became a reality. That money can generate way better than the low cost of interest and it has a benefit that the mortgage company does the escrow for us!
Weird how things shift, it was always if I have "X" amount I can live forever and only take out 4% to live on, now I don't want to take out anything and only generate income.

Not having a mortgage feels great but I agree is not financially wise.

 

[generalenthu]

I always thought that not having a mortgage and owning my home was a goal I had, that has changed significantly over the past 5 years when it became a reality. That money can generate way better than the low cost of interest and it has a benefit that the mortgage company does the escrow for us!

This! I briefly looked at paying down our mortgage which is ~3% of our assets, but why mess with a good thing when the servicer takes care of the leg work to pay taxes. Even if I was going to repay, I was going to still hold back a little bit and so that escrow stuff doesn't become a hassle. but to your point, I like the liquidity and the options it opens up, literally..

 

[Double-O]

We actually have been upgrading our house this year to find out that we cannot get it into what we really want to because of the layout and because we leave in a neighborhood with a HOA.



I would also like to be nomadic but with little kids and their schooling that is not possible right now. As far as house envy it probably comes from our net worth increasing significantly in last few years while us not letting our expenses increase. We have been always frugal and I guess you get to a point financially when you are thinking "why not get a better house". Currently my parents, my wife parents, her brother and my cousins are building or waiting to move into their new houses which gives us an itch. I was reading an article from the "Financial Samurai" talking about how much of your net worth tied up to your house and I was just curious what people here are doing. He said 30% which is way more than I am willing to spend.

Primary Residence Value As A Percentage Of Net Worth Guide



My house is also a foreclosure that was in really good shape, 6 years old at the time and it was less than a Model S Plaid. It is now an entry $300-250k house in South Carolina.



Not having a mortgage feels great but I agree is not financially wise.

I wish L.A. County homes were that cheap. That's kinda close to my down payment lol housing is ridiculous in Cali.

% of net worth on a house isn't an important factor, obviously as long as it doesn't put a strain on you financially. What's more important is you find a place that works for you n your family, checks off as many boxes as possible, good neighborhood and school district and if possible, new build. If these things are most important like they were to me, % of net worth is not a deciding factor. Money comes n goes and personally, I'd like to enjoy my money and where I spend it. Having a ton of money in various accounts is highly overrated. Live within your means, buy whatever you can comfortably and enjoy the quality of life you've worked for.

When I die, put my money in the grave!

 

[CHGolferJim]

We actually have been upgrading our house this year to find out that we cannot get it into what we really want to because of the layout and because we leave in a neighborhood with a HOA.



I would also like to be nomadic but with little kids and their schooling that is not possible right now. As far as house envy it probably comes from our net worth increasing significantly in last few years while us not letting our expenses increase. We have been always frugal and I guess you get to a point financially when you are thinking "why not get a better house". Currently my parents, my wife parents, her brother and my cousins are building or waiting to move into their new houses which gives us an itch. I was reading an article from the "Financial Samurai" talking about how much of your net worth tied up to your house and I was just curious what people here are doing. He said 30% which is way more than I am willing to spend.

Primary Residence Value As A Percentage Of Net Worth Guide



My house is also a foreclosure that was in really good shape, 6 years old at the time and it was less than a Model S Plaid. It is now an entry $300-250k house in South Carolina.



Not having a mortgage feels great but I agree is not financially wise.

There are a lot of nice lakes in SC!

 

[UkNorthampton]

In regards to "How much $ to retire and how to fund your lifestyle in retirement" - even though I'm still working, I'm at a high enough confidence level about Tesla/$Tsla future performance that I've decided to sell the odd share to pay down debt slowly, pay yearly taxes, give me some headroom on credit cards that I'd near maxed-out a while back so that I could buy shares.

If $TSLA does as well as I anticipate, my investments will be high enough for my future needs, so nice to reduce the stress a little now and then live a little once travel becomes fun again.

 

[tivoboy]

We went for Thanksgiving to my brother in law's new house and now my wife has house envy and she want us to upgrade our house . As of right now our house is 8.5% of our net worth and I was just curious how other Tesla investor's compared and what other think about what % of net worth should be allocated to a primary residence. We don't have a mortgage and going into early retirement with a new mortgage kind of concerns me.

There is no world where home ownership net worth to a single stock like Tesla net worth would be of an informative value at all. I have some friends who bought back in 2016, they live a VERY LARGE house in Pennsylvania that probably has a 500K value, and their Tesla stock is probably valued at about 3.5M. My neighbor has about 3.5M in Tesla stock and his house is worth 4.8M (and the other neighbors hours is worth apparently 7.2M and he is happy to have about 750K now in Tesla stock. I’m sure there are some people in Texas and Nevada who have 1-5M in Tesla stock who live in nice and even large 250K-500K houses..so any comparison isn‘t going to be worth much overall I think.

 

[UCF3]

We went for Thanksgiving to my brother in law's new house and now my wife has house envy and she want us to upgrade our house . As of right now our house is 8.5% of our net worth and I was just curious how other Tesla investor's compared and what other think about what % of net worth should be allocated to a primary residence. We don't have a mortgage and going into early retirement with a new mortgage kind of concerns me.

Going into early retirement and starting up a new mortgage don’t seem to mesh to me. I would tell my wife to pick one or the other

 

[adiggs]

Going into early retirement and starting up a new mortgage don’t seem to mesh to me. I would tell my wife to pick one or the other

Sort of depends on your income level.

One thing that being around Tesla owners since roughly 2012 - there's always somebody better off and somebody that is less well off.

And there is somebody for whom a performance Model S falls into the category of rounding error. Or as I think of it - acquisition is a function of See / Want / Get. There isn't any financial planning necessary - just See / Want / Get.


For some of us a $5M house will be similar - it'll be everything that they want, and the financial end of things, whether with or without a margin, doesn't need all that much financial planning. They'll probably put more energy into the color of the tile in their bathroom

 

[UCF3]

Sort of depends on your income level.

One thing that being around Tesla owners since roughly 2012 - there's always somebody better off and somebody that is less well off.

And there is somebody for whom a performance Model S falls into the category of rounding error. Or as I think of it - acquisition is a function of See / Want / Get. There isn't any financial planning necessary - just See / Want / Get.


For some of us a $5M house will be similar - it'll be everything that they want, and the financial end of things, whether with or without a margin, doesn't need all that much financial planning. They'll probably put more energy into the color of the tile in their bathroom

Agreed, but I’ve seen enough of his posts that I can calculate how much he has for net worth.

My thing with retiring early (not an option for me personally) is that if my wife wants a new house and mortgage right when we stop working, where does it end? Is she going to want an even bigger house and larger mortgage in 5 years? I’d be trying to set expectations from the beginning about what it means to retire early.

 

[adiggs]

Agreed, but I’ve seen enough of his posts that I can calculate how much he has for net worth.

My thing with retiring early (not an option for me personally) is that if my wife wants a new house and mortgage right when we stop working, where does it end? Is she going to want an even bigger house and larger mortgage in 5 years? I’d be trying to set expectations from the beginning about what it means to retire early.

That certainly makes a lot of sense and I agree with that. I'd just add that maybe that's something to get squared away regardless of early retirement or not.

 

[scubastevo80]

Agreed, but I’ve seen enough of his posts that I can calculate how much he has for net worth.

My thing with retiring early (not an option for me personally) is that if my wife wants a new house and mortgage right when we stop working, where does it end? Is she going to want an even bigger house and larger mortgage in 5 years? I’d be trying to set expectations from the beginning about what it means to retire early.

For me, I can't even calculate retirement at this point in time at just over age 40. After going through the last 4 years (with a 7 and 5 yr old), fighting a crazy expensive legal battle against a school district for my autistic daughter (and winning), but then having to sell our house and move towns, putting the other kid in private school and now starting to fund my wife's baking/cafe business... all with dreams to eventually settle in OZ where my wife is from, it seems like an impossibility. Unfortunately for me, instead of being able to invest in TSLA pre-2019, I was waiting for the district to reimburse us legal fees so I missed quite a bit of the exponential gains. Most of my TSLA profits are from investing our rolled 401k from my prior firm into TSLA shares early this year.

UCF3 - lifestyle creep is a real challenge. I admire people who can be set and happy at 30 with what they have and start saving. For me, it will be 40 and I'll make due. Hopefully the wife's business takes off and we can save quite a bit of profits from her success.

 

[TSLA Pilot]

I think is time for an update with SP mooning retirement is calling me bad. I am really considering quitting my job because I am not really enjoying it right now and I even got promoted the other day lol. My investments are now 3.5M and I have been selling my stock slowly. I have around 900k in cash and most of my shares are underwater with covered calls at $1100 in my after-tax account. I feel like I can easily make my current net income by selling premium in my after-tax account with puts and BPS. I actually enjoy trading options from time to time even after losing 6 figures the other day when the stock gapped up 20%. I think I should be able to trade options maybe one week or two weeks out of the month to match my current paycheck. What I am finding really hard to do is quitting my job; it is really scary to take the plunge. I actually think it would be better for me to get laid-off because I think I would receive about $150k on a severance package and stock which would be really nice. I think my main worry is that my current job is really high paying for my qualifications, location and is easy and I am afraid I would not be able to find another like it if I ever need to work again. Any thoughts? suggestions?

Yes.

Keep working.

I don't see how $3.5m is anywhere near enough, personally, and your recent six-figure loss in options, in just one day, suggests you do not have the skills needed to make money in options. (And even if you do or did, options are great until they aren't . . . . )

Just because you own a lot of a stock, remember that TSLA does not, and likely will not, be paying any dividend, perhaps forever.

Cash flow is king, and leaving your job will drop that to about ZERO.

 

[Oil4AsphaultOnly]

Yes.

Keep working.

I don't see how $3.5m is anywhere near enough, personally, and your recent six-figure loss in options, in just one day, suggests you do not have the skills needed to make money in options. (And even if you do or did, options are great until they aren't . . . . )

Just because you own a lot of a stock, remember that TSLA does not, and likely will not, be paying any dividend, perhaps forever.

Cash flow is king, and leaving your job will drop that to about ZERO.

I decided to retire earlier this year on less than juanmedina. And I also took a 6-figure bath at that time, but that's because I was selling call-spreads. Simply selling covered calls and cash-covered spreads is NOT going to have the same results.

But the decision to retire early is a risk that one has to decide for themselves, and I would whole-heartedly recommend it to anyone who is ready to take the plunge.

 

[TSLA Pilot]

In regards to "How much $ to retire and how to fund your lifestyle in retirement" - even though I'm still working, I'm at a high enough confidence level about Tesla/$Tsla future performance that I've decided to sell the odd share to pay down debt slowly, pay yearly taxes, give me some headroom on credit cards that I'd near maxed-out a while back so that I could buy shares.

If $TSLA does as well as I anticipate, my investments will be high enough for my future needs, so nice to reduce the stress a little now and then live a little once travel becomes fun again.

Credit card debt for investing?

Ah, no.

AFAIK, it's not tax deductible debt, and the interest rate is likely far, far higher than what a margin loan would be.

Why not just get a margin loan to buy more shares?

Margin loans, used with care, would seem to be far, far more prudent, tax deductible, far less expensive, and less risky . . . .

 

[juanmedina]

Yes.

Keep working.

I don't see how $3.5m is anywhere near enough, personally, and your recent six-figure loss in options, in just one day, suggests you do not have the skills needed to make money in options. (And even if you do or did, options are great until they aren't . . . . )

Just because you own a lot of a stock, remember that TSLA does not, and likely will not, be paying any dividend, perhaps forever.

Cash flow is king, and leaving your job will drop that to about ZERO.

Just curious, what figure do you think is appropriate for someone to retire? Every one's goal is different and it obviously depend on life style and location. I live in a really low cost area so money goes a long way.

As far as my trading yes that loss sucked but that doesn't mean I am down for the year. I have recovered 2/3 of that loss so far and I up multiple times my current salary which is my highest salary. Even with zero extra income from selling options I would fine because I could withdraw 3% from my portfolio and that would be plenty for us. Mathematically I am ready to early retired, it is just a scary decision but I think next year I will follow @Oil4AsphaultOnly path.

 

[UkNorthampton]

Credit card debt for investing?

Ah, no.

AFAIK, it's not tax deductible debt, and the interest rate is likely far, far higher than what a margin loan would be.

Why not just get a margin loan to buy more shares?

Margin loans, used with care, would seem to be far, far more prudent, tax deductible, far less expensive, and less risky . . . .

It was a gamble, but within reasonable limits. Worst case was survivable.

Credit card was for living while income went on shares, just running up to relatively small limit (by most people's standards). I did also borrow money, but far lower interest rates. Still relatively small amounts compared to others we know and their money has been spent - with no assets remaining.

In UK, we have investment allowances which are use or lose within a tax year. So buying (funding account) in March vs April (tax year starts on 6th April) means you can get 2 lots of allowances. So time shifting can be important.

Credit card interest is not tax deductible in UK

My UK brokers don't offer margin loans. You can't use them for tax wrappers in UK anyway. Interest on margin loans would not be tax deductible in UK AFAIK.

I now have a USA broker too, but unused and they don't offer UK tax wrappers, so very tax inefficient. Only useful once all UK tax wrappers used up. I have them in case I ever want to do LEAPS/options.

UK tax wrappers are pretty good, between 0-8% USA withholding tax on dividends, no capital gains taxes, income tax on pension income in future. However, there are limits for each person in each tax year.

Credit card 13% APR
Annualised returns on TSLA much higher!

 

[UkNorthampton]

Just curious, what figure do you think is appropriate for someone to retire? Every one's goal is different and it obviously depend on life style and location. I live in a really low cost area so money goes a long way.

As far as my trading yes that loss sucked but that doesn't mean I am down for the year. I have recovered 2/3 of that loss so far and I up multiple times my current salary which is my highest salary. Even with zero extra income from selling options I would fine because I could withdraw 3% from my portfolio and that would be plenty for us. Mathematically I am ready to early retired, it is just a scary decision but I think next year I will follow @Oil4AsphaultOnly path.

Chipping in...

Two Sides of FI (Financial Independence)
(links below)

From memory and reading between the lines, these two are around $2.5 million each (link below suggests their band is $2-5m, so might be higher). The retired one (was senior in Biotech) also deliberately has a mortgage, not sure whether counted. He expects to live/provide into his 90s.

USA healthcare & property really seems to be big determinants on how much is needed. UK guides to what is required for "luxurious retirement" seem much smaller. These UK amounts are probably laughably small to many of you. I certainly wouldn't consider myself Financially Independent at the levels suggested in the UK articles (in the spoiler)

Chubby Fire

Two Sides of FI

twosidesoffi.com

- 8 minutes - 2-5m for Chubby fire. Some descriptions/graphics of different Financial Independence bands just before this.

/

- lifestyle including $700 for a meal (before retirement)

What I'm thinking is that whatever my annual budget is - that should be no more than 3% of useable assets (so not house etc).

Spoiler: UK Pension Examples

£50,000 a year is $66,000

The secret to a happy retirement? £26,000 per year, Which? research reveals - Which? News

We help you to identify your retirement income targets

www.which.co.uk

For a couple (probably retired 65-68, so more would be needed by a younger couple)

How much do you need in your retirement pot?

A survey of 7,000 retirees by consumer organisation Which? estimates those looking for a comfortable retirement need a pension pot of between £192,000 and £305,000 depending on whether they use pension drawdown or an annuity. In terms of income this equates to £19,000 per year to live...

moneyfacts.co.uk

A comfortable retirement now costs £2.2k more a year - for a couple

London living would be more

 

[adiggs]

Just curious, what figure do you think is appropriate for someone to retire? Every one's goal is different and it obviously depend on life style and location. I live in a really low cost area so money goes a long way.

As far as my trading yes that loss sucked but that doesn't mean I am down for the year. I have recovered 2/3 of that loss so far and I up multiple times my current salary which is my highest salary. Even with zero extra income from selling options I would fine because I could withdraw 3% from my portfolio and that would be plenty for us. Mathematically I am ready to early retired, it is just a scary decision but I think next year I will follow @Oil4AsphaultOnly path.

The way I figured it out was using the 4% withdrawal rule. As I see it, its really a guide post where the idea is that whatever pile one has, they can withdraw 4% each year for living expenses and that pool will last roughly forever. I did NOT use this as actual retirement planning, but rather as a yardstick and quickie approximation of the income I'd see in retirement given the pile I had accumulated at that point.

So $1M in assets would provide a $40k annual income, whether via dividends, selling stuff off, whatever.

For a $120k annual income or roughly $10k/month living expenses, that'll be $3M in assets.


So very, very many additional considerations that actually go into early retirement. This is only a thumb to the wind estimate for where one is at. The FIRE folks have a lot more detailed information.