Today I have two updates for you from a previous millionaire interview.
I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. š
These updates were submitted in August.
As usual, my questions are in bold italics and their responses follow…
OVERVIEW
How old are you?
My spouse and I are both 39.
Weāve been married now for 17 years!
Do you have kids?
No kids.
What area of the country do you live in (and urban or rural)?
We live in a midsize city in the Coastal Southeast.
We were in a large metro area of Texas when I last did my interview.
What was your original Millionaire Interview on ESI Money?
I was Millionaire Interview 35 completed in December of 2017.
Is there anything else we should know about you?
I retired from a high paying career just before my 37th birthday, approximately eighteen months after my original interview.
Now my days are filled with leisure instead of counting down to freedom.
I also run the site Stop Ironing Shirts.
NET WORTH
What is your current net worth and how is that different than your original interview?
Our current net worth hovers at $2,500,000.
Weāre up significantly over the past 3.5 years even though I quit my full time job in April of 2019.
What happened along the way to make these changes?
I grinded through two rounds of bonuses and equity grants and retired with between $1.8 mil and $1.9 mil.
The market was a bit volatile and we had a home sale in progress, so weāll say the number was $1.85 mil.
The market has performed well over the last 26 months, but we did go through the drop of early 2020.
Since we were invested in the value side of the equity markets, a good portion of our rebound didnāt happen until late 2020 and early 2021.
What are you currently doing to maintain/grow your net worth?
Wealth preservation is our top priority.
I remind myself, āWhy risk what you have and need for returns you donāt need?ā
Iāve taken up a little consulting work and I unfortunately spent six months working through my dadās small and messy estate. That will end up being an on and off job that will add a five figure increase in our net worth. Unfortunately this didnāt pay much better than minimum wage, but it was good to have the time and space to work through this.
EARN
What is your job?
Primary: Early Retiree.
Secondary: I provide deal evaluations and due diligence on business transactions. These are either 1) For an accredited investor considering buying into a real estate syndication / fund or 2) Small businesses making an acquisition or trying to sell a company.
Thereās a need for both and I enjoy looking through business deals as a hobby. Itās fun to educate a high income professional on the risk/return profiles of various syndications.
What is your annual income?
My compensation topped out at $330,000 in my prior role.
Today itās variable between dividends, interest, consulting, and IRA conversion.
I target an income of $105,000 per year for tax optimization.
How has this changed since your last interview?
Significantly, it was time to give the career the boot.
Thereās no sense in giving up that level of control of my life for money we no longer need. We only get one chance to be on this planet and I wanted to be able to use the money while we are in good health.
The idea of working my best forty years to maybe enjoy my final fifteen years didnāt have any appeal to me.
Have you added, grown, or lost any additional sources of income besides your career?
I exited the career income and would call any additional income still an experimentation at this point.
SAVE
What is your annual spending and how has it changed since your interview?
Our monthly spending ranges between $5,500 and $6,500/mo.
Weāve always spent around $3,000/mo outside of housing and habits are hard to change!
Eventually weāll push the spending up when we upgrade our housing situation.
What happened along the way to make these changes?
We moved from being a homeowner to a renter, so we no longer have these large variable expenses of home ownership. (Calling the landlord when something breaks has been amazing!)
We do some expensive travel but supplement it with travel rewards.
Everyone talked about the challenges of healthcare as an early retiree, but we have similar coverage from the same insurance company for $250/mo more than I was paying through the employer.
INVEST
What are your current investments and how have they changed over the years?
We are currently invested in 80% equities and 20% cash/bonds.
I am also beginning to dabble in real estate and private investments. There are some lower risk investments in this space that can generate a premium return relative to their risk.
We moved down from a 100% equities portfolio while in accumulation mode. The 80% equities are evenly split between low cost mutual funds and individual stocks. Costco is our largest holding at just over 6% of our net worth.
What happened along the way to make these changes?
I went into retirement with a fairly balanced portfolio, but I used all the cash/bonds attempting to ābuy the dipā in February and early March of 2020 and learned a painful lesson: Being right but early in investing is often as bad as being wrong.
That and no longer having a large W2 job has made me a more conservative investor. We can live the rest of our lives without the stress of a full time job if we just barely beat the rate of inflation.
Just slowing down and not chasing returns has been a bit of a learning process.
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
Switching from a saving mentality to a spending mentality takes time.
Iām 28 months removed from the job and it only recently got comfortable to transfer money out each month.
The drop in values in March 2020 was briefly unnerving. My investment style did not include what I considered āunprofitable tech companiesā, causing me to trail the market in the recovery. It was a bit frustrating watching investors in these tech companies gloat about outsized gains.
Overall, what’s better and what’s worse since your last interview?
Life is amazing today when compared to the last interview, itās nice having more money but the freedom and control I have over my time is unbelievable.
We moved next to the beach and enjoy 6+ months of water we can play in plus continuously longer trips to Hawaii in the winter.
Iāve slowly found things that stimulate the brain to fill the small void that was left behind by work, but my old life seems unrecognizable to me.
I briefly have moments of FOMO when it comes to the career, I see people who were a couple of years behind me now advancing to levels/promotions I once desired. I didnāt expect to wrestle with this after leaving, but I occasionally think about it before getting over it.
What are your plans for the future?
Weāve developed a habit of living in places for anywhere from 1-7 years.
I thought this would stop with work but weāre two years in our current location and contemplating moving to Hawaii to see if we want to settle down there.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
I get to talk to a lot of people about early retirement and the fear of leaving their job. The focus is always on everything that can go wrong!
Thereās a lot of things that can go right! So far the market has generated exceptional returns, our expenses are lower than expected, and health insurance hasnāt been bad. I was always afraid if I left the corporate world, I wouldnāt be employable. Iāve received tons of job inquiries and referrals from friends and have zero concern about finding work if I wanted.
I think the programmed saver always thinks about security and can create these boogeymen that arenāt actually that bad. A lot can go right with early retirement too and thereās always a job market for smart people if someone ever wants to return. I find myself encouraging people to test the water earlier and earlier now because of everything that can go right.
————————————
OVERVIEW
How old are you?
I am 55 and my wife is 49. I will be 56 before the year is out.
We will be celebrating our 20th wedding anniversary in early 2022. We are planning on taking a nice anniversary vacation somewhere tropical with lots of sun and fruity drinks. Destination is yet to be determined.
Do you have kids?
We have two daughters. Both are in High School and the oldest is working on getting her driver license.
They both do well in school so Colleges are on our minds.
I have a son from a previous marriage. He is married with 2 young sons.
What area of the country do you live in (and urban or rural)?
Urban Southern California.
What was your original Millionaire Interview on ESI Money?
My original Interview was Millionaire Interview 75.
I think you should read it as a refresher since this interview has the new stuff, and the original interview will give you our background.
Is there anything else we should know about you?
Yes, I have decided to take some time off to figure out what I want to do for my second act. I am not retiring per se however not going back to work is an option to consider. As a matter of fact, my last day at work will be this coming October. I had spoken to my boss about quitting and she offered that maybe I could transition into part-time work. We still have to have another conversation about my last day, and I declining the part-time opportunity.
I have been working in IT for over 30 years, and I have felt the work is becoming more tedious. I have felt Iāve been burning out for the last few years, so Iām taking this opportunity to explore my options.
NET WORTH
What is your current net worth and how is that different than your original interview?
By the latest calculations, we are sitting at about $3.4M dollars in Net Worth.
It has grown $1.4M since the last interview.
I believe ESI retired right around when he reached this milestone.
All of our assets have grown in value so we are rebalancing our portfolio.
What happened along the way to make these changes?
I think the change is due to 3 major changes.
The stock market has done remarkably well these last 3 years.
I also switched my investing philosophy from individual stocks to Index Funds. (ETFs). I do own a few shares of Berkshire Hathaway, but Iām ignoring this fact.
Our real estate holdings have also outperformed our stock market gains.
What are you currently doing to maintain/grow your net worth?
My focus has changed now since I first interviewed with ESI in regards to owning our real estate outright.
We were top heavy in real estate and we have done well. We have started to balance our holdings and balance out our asset categories. We do own several homes outright, however we have started to refinance them in order to get a better return on our money.
The proceeds of the refinancing have gone directly into ETFs.
Our asset mix is about 56% real estate, 43% ETFs, and 1% Miscellaneous.
We are also starting to convert our IRA accounts to ROTH accounts. Starting with my account first, since I will be the first one to qualify to tap into those funds.
EARN
What is your job?
I am a database administrator (DBA).
However, I have held several positions in IT. I started my career as a computer operator, getting a promotion to a programmer / developer, turning into a system administrator and now a database administrator. I donāt have a supervisory role, however I do interact and deal with a lot of department heads.
I have been working in IT my entire career and Iām getting to the point of burning out. Hence, Iām taking some time off to figure out what other things I want to do in my second act.
What is your annual income?
I make $110k per year.
How has this changed since your last interview?
Not much has changed. I have been working for the company for about 5 years.
We have been getting COLA (Cost of Living Adjustment) increases, and maybe a bit better benefits package.
Have you added, grown, or lost any additional sources of income besides your career?
I have found dividend ETFs as a good alternative to bonds. We are getting around $15K in dividends annually. We will also increase our rental rates next year.
I donāt want to increase the dividend amount because I need to convert my IRA to Roth. Any advice on how to approach this would be appreciated. My plan is to fully convert it over the next 8 to 10 years.
SAVE
What is your annual spending and how has it changed since your interview?
Our spending has actually gone down due to Covid restrictions.
I currently work from home so Iām saving on gas, and lunches, and wear and tear.
We have run the numbers and we could expand our spending, however as most readers here at ESI know, this is easier said than done.
We do anticipate a higher level of spending since kids will be driving soon, and setting their sights on college.
What happened along the way to make these changes?
Well, Covid happened.
We also changed our eating habits to be more health conscious. This has worked out really well for us.
We are planning on renovating a bathroom and the kitchen since now we know we will be spending more time at home.
INVEST
What are your current investments and how have they changed over the years?
As I mentioned before, I have moved from individual stock holdings to investing in Index ETFs.
I have done very little in terms of trading. I put money into the ETFs and let it grow. I have found dividend ETFs are a good substitute for bonds. However, one must be aware of the tax consequences of those dividends.
What happened along the way to make these changes?
Our plan was to have at least three sources of income in retirement. Rental income, our cash account, and our retirement accounts.
However, with restrictions on rent rates, and the cost of properties in California, the ROI on the properties come in at almost 50% cash flow, and 50% appreciation. This breakdown does not provide enough cash flow for us to live on. The obvious choice is to tap into some of our equity, and deploy those funds to the stock market for the time being.
Iām interested in learning more about syndicated Real Estate deals so Iām doing my homework.
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
We are ready for the college expenses. We have earmarked college funds, and are currently sitting in the Fidelity S&P 500 index fund (VOO).
We have a couple of years before we need to start pulling money from this account, so we feel the S&P is a good choice.
Overall, what’s better and what’s worse since your last interview?
I think what is better now is my time at home. Since I have been working from home due to the pandemic, I now have more time for family meals, swim meets, tennis matches, BBQs, steaks on Wednesdays. I have saved 10 hours a week from my commute to work, so I have even gotten more time to exercise.
I figure this may be a preview of what it is like to be retired and I like it.
What are your plans for the future?
Our immediate plans are to take a vacation to celebrate our wedding anniversary and her birthday. We are also planning on spending some time in Napa this fall, doing some wine tastings, and discovering why people love to overspend on the essentials. Northern California also has incredible Craft breweries, so we will be visiting some of those fine establishments as well.
On a longer horizon, I would like to move out of state and take my holdings with me. I see several 1031 exchange transactions in the future. I would like to spend some time of the year in the Caribbean, some time in South America, and some time in Europe.
At some point, I would want to RV the 48 lower states. My wife is more of the idea of staying at different hotels on the way, so weāre not sure yet how this trip will take place but itās one of my goals.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
I think I have been giving this advice to younger generations for the last 2 years:
- Max out your retirement accounts as soon as you can
- I also refer them to Dave Ramsey. (I think he has a lot of good advice)
Another belief that has been losing credibility in my mind is the āOnce in a lifetime opportunityā.
My view now is Opportunities are like the bus / train / or taxi. There is one every 20 minutes. What you must do in order to take advantage of it is to be ready and keep your eyes open for it. Opportunity does not always knock.
$3.0M+ says
Two good updates from opposite sides of the starting line.
From update #2:
“I have been working in IT for over 30 years, and I have felt the work is becoming more tedious. I have felt Iāve been burning out for the last few years, …”
I’m right there with you. I’m older, and Roth conversions won’t be a great advantage for me (unfortunately). I’ve just put a pin in September 2022 for retirement.
Should be fun!
Thanks for the updates.
MI-75 says
Congratulations $3.0M+.
My original plan was to work thru the end of the year, however it made sense to move up the date so I could convert some IRA funds to ROTH this year.
Its a great feeling when you know you’re moving closer to your target.
Best of luck,
Alli says
1st MI Update Author:
Well done. You mentioned that you ā Everyone talked about the challenges of healthcare as an early retiree, but we have similar coverage from the same insurance company for $250/mo more than I was paying through the employer.ā Would you mind sharing more details at how you found this plan? Through your stateās health exchange or through a private health insurance agent? PPO? Dental/Vision? Deductible?
Steve says
Hi Millionaire 75,
Thanks for your update. Specifically, what dividend ETFs do you invest in? I appreciate your time in answering this. Best wishes to your family!
MI-75 says
Hi Steve,
Thank you for your wishes.
I currently hold 5 ETF’s that pay monthly divs. They are : NUSI, JEPI, XYLD, QYLD, and RYLD.
Other ETFs with “high” quarterly dividends I own are : VNQ, and VYM.
Best of luck to you,
Phillip says
MI-75
May I ask how much you’ve saved up for your kid’s college funds? I’m sitting at $180k for my kid (a junior) which may be a bit much but am curious where you want to be at and why.
MI-75 says
Hi Phillip,
Congratulations! I think you’re there already!
We are allocating $100K to each child. If they get any scholarships, or grants, or grandparents want to pitch in, we’re all for it.
Our daughters know they may need to subsidize their schooling, and spending with part-time work, or summer jobs. I’m counting on this so they have a bit of skin in the game.
Also, The kids don’t know this yet, but whatever is left over from the $100K fund, will become their money at graduation. I got this idea from ESI (https://esimoney.com/managing-college-costs-by-offering-an-incentive/). Thank you J!
I will have to communicate this incentive to them soon before going away to college. They are already taking AP classes and preparing to shave off time from school.
Hope that helps,
MI-75
MI 175 says
(Note ā This reply is from MI175, not MI75, the updater)
We are probably outliers, but we spend about $250 k over 4 years for our daughters college (more than we had in the 529 account). This was because she went to one of the most expensive schools in the country and, due to our high net worth she did not get financial aid (we didnāt take out the available high interest loans). Other schools she got into offered merit aid (and were less expensive as well) but in retrospect she is happy where she went and so are we.
Phillip says
This is exactly the situation I’m contemplating. My kid has a shot at getting admitted to one of these “elite” expensive private universities. I’m budgeting $300k in case he gets in one of these targeted schools. Running some quick calculations based on FASA rules, I don’t expect any aid. But I don’t want to save $300k in the 529 and UGTM on the chance that my kid goes to State U and/or gets a scholarship. And with the number of AP courses my kid is taking, he will likely place in as a sophomore at State U if he goes that route. I’m fine giving him the balance of what he doesn’t use of the $180k for grad school, a car or even a post-graduate vacation but not the balance of $300k (the extra $120k will come from our regular taxable accounts). Hence, I’ve positioned the extra money as an incentive to work extra hard to get that bonus, which is full tuition and board at specific parent approved private universities (and approved major).
It’s interesting to note that my kid now has little interest in being a soccer referee which pays around $45/hr (per game) and you can typically stack multiple games back-to-back to 3 or even 4 games. Great pay for a high-schooler. But I tell my kid that there’s even more money to be made after college graduation so it’s smarter to study now instead of taking the fast money now. Hopefully the teachings of delayed gratification will stick.
Paper Tiger says
Our daughter just graduated in May from a solid, out-of-state public school. We paid the full ride. We started with $315K in her 529 4 years ago and ended with a balance of $175K. Her plans call for her to go to grad school in a couple of years so there is money in the account to cover it. Anything left over will continue to be invested for the education of future grandchildren.
MI192 says
MI-35, Iād be interested in learning more about your due diligence services for Real Estate syndication deals. If you are interested ESI can connect us via email. Thx
ESI says
If you’re in the MMM forums, there’s a ton of information on this subject there.
DC says
MI-75,
Congratulations on a job well done! And good luck on one of your next projects — a ROTH conversion ladder. I’ve been checking back to this post for any feedback given to your request for guidance on this. I plan to start the same (after I move to Florida for a bit, oh-so-coincidentally), but so far it seems we are both hanging FIRE (ahem). I recognize the guiding principle of trying to reach-but-not-exceed the ceiling of one’s current marginal tax bracket (which for me, I can’t do if I want to ladder in a reasonable time period), but not much else. I’m thinking of finding a flat-fee CPA. The Horror! The Horror! š³š
MI-75 says
Hi DC,
Thank you for your kind words. There is a lot of info on this topic (ROTH conversions) and I think it will come down to getting the conversion amounts in the ball park. I think if I go over the next tax bracket it won’t be by much.
Finding a CPA is a good idea and also get a second opinion.
Good luck,