Millionaire Interview Update 18

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. 😉

These updates were submitted in September.

As usual, my questions are in bold italics and their responses follow…

OVERVIEW

How old are you?

My husband and I are both 43.

We have been married for 16 years.

Do you have kids?

We do not have kids.

We love our relatively foot loose and fancy free life and the older we get, we are more thankful that we chose this path.

What area of the country do you live in (and urban or rural)?

We have made our home in rural PNW.

We consider ourselves very fortunate to have water and mountains so close by, well worth the higher costs of living here.

What was your original Millionaire Interview on ESI Money?

We were Millionaire Interview 41.

It’s pretty cool that there are over 250 now. I feel like an old timer. 🙂

NET WORTH

What is your current net worth and how is that different than your original interview?

Our net worth is around 2.5M:

• $720K in retirement 401K, IRA, and Roth IRA’s then, $1.4M now
• $3K in HSA then, $25K now
• $25K in stock with my employer then, $36K now
• Our home value was around $575K then, $1.2M now. We built an ADU on our property for parents, plus a nice shop for my husband since he let his MIL move in. 🙂 Also, parents pitched in $150K for the ADU, so I feel weird about counting the home value in our net worth number, because we are locked in to not selling as it has some informal joint ownership. (Would love advice on this, I couldn’t find much of anything and couldn’t get an attorney to call me back. I could find articles on multigenerational joint ownership and co-mortgages, but not our situation.)
• We owed $190K on a mortgage then, and $275K now.
• We now have $55K in crypto.
• Also, $45K in after tax investment accounts (index funds)
• And $22K in cash

What happened along the way to make these changes?

At this point we are mostly just staying the course, other than building the ADU and shop.

It was nice to hear when the house appraisal proved the investment has paid off in increased value of the property.

Automatic investing continues and we spend what is left over.

We are amazed to see our net worth more than double in four years. We focus more now on liquid assets rather than net worth which includes our home.

What are you currently doing to maintain/grow your net worth?

We are more focused on growing after tax investments. I think we can both retire in 7 years, at age 50 easily. We should have around 4-5M in liquid assets — which seems like way too much to me, but my husband wants to work till 50 for social reasons I think and have a larger “safety net” if the markets go terribly wrong.

We have scaled back contributions to 401K (still about 8% to get employer match) and stopped focusing on paying off our mortgage in favor of low payment/rate (30 year) to divert money to after tax investments.

It looks like the power of compounding will result in more money than we will ever spend when we are eligible to access IRA’s without penalty, so I am interested in how we’ll fund life from age 50-60.

EARN

What is your job?

I do environmental, health, and safety in the chemical industry. I have received a promotion to director since my original interview.

My husband is a senior level mechanic.

What is your annual income?

We are at 240K, plus potential bonus of another 40K.

Never thought I would write that.

How has this changed since your last interview?

My promotion boosted my salary w/bonus about 20%.

Have you added, grown, or lost any additional sources of income besides your career?

No.

SAVE

What is your annual spending and how has it changed since your interview?

It’s went up a lot, mostly with building a shop and ADU. I haven’t tracked it very well.

Also, once we hit 1 million, we loosened the reigns and spend what is left after meeting our savings goals.

My spreadsheet calculations say we’ll have way more than we will spend. As they say, you can’t take it with you!

Also, since my husband wants to work till we are 50, I don’t have a reason to save any more than we do naturally.

INVEST

What are your current investments and how have they changed over the years?

The only point not covered earlier is our dabble into crypto. We bought a bitcoin earlier this year at 7K, today (and it varies wildly) it sits at 47K.

We also bought two Ethereum and those have doubled.

I like the concept behind crypto, we’ll likely hold what we have as a diversification.

I am aware it could go to zero tomorrow, I can handle that.

What happened along the way to make these changes?

I am pleased with building the HSA, that brings piece of mind for healthcare costs.

So cool that it’s also invested!

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

I would say all opportunities brought by the adage of it takes money to make money.

I’ve been reading the Millionaire Mentor posts on how compounding works and it still amazes me.

For us the first million took 18 years, the second million took 3.75 years, and the third is looking like it will take less than 2 years. It’s just crazy awesome.

Oh, when I paid off my car I rerouted that to charities, so we are helping others more now and that feels good. We are incredibly fortunate. We also do big tip giving, usually 25%. I really feel for our service industry workers struggling to get by on minimum wage, particularly in our HCOL area.

Overall, what’s better and what’s worse since your last interview?

It’s all better.

I am married to my best friend, it’s great to have more family close by, and enough money to not have any worries there.

We also spent a lot for a once on a lifetime trip to the Galápagos Islands, wow! It’s a must see if you like animals and birds.

What are your plans for the future?

Keep on, keeping on.

Spend more time gardening and taking the dog for hikes!

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

I guess maybe my advice would be to make sure you are measuring your progress.

When we hit the million mark, I really got organized and began tracking net worth by accounts monthly. I wonder if we would have hit it sooner if I was tracking it monthly. It’s motivating to stay the course, see the progress, and forecast results.

Also, any sacrifices you make with a frugal lifestyle on the way to one million are so worth it when you can sit back and watch your money make money for you.

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OVERVIEW

How old are you?

49/49, married 26 years.

Do you have kids?

Child #1 just finished college this year, has received a prestigious scholarship to do research for one year and is considering graduate school after that.

Child #2 is in high school.

What area of the country do you live in (and urban or rural)?

Midwest, suburban.

What was your original Millionaire Interview on ESI Money?

Millionaire Interview 81 (posted August 2018, interview done in June 2018).

Is there anything else we should know about you?

Since doing the interview in 2018, I’ve invested more time in educating myself about personal finance.

The goal is to be better informed to make the right decisions as we move into retirement.

NET WORTH

What is your current net worth and how is that different than your original interview?

$7.1M end of August 2021 (vs. $3.9M in June 2018)

• $4M 8/2018
• $4.2M after the plunge in 3/2020
• $5M 7/2020
• $6M 3/2021
• $7M 8/2021

What happened along the way to make these changes?

Several things have happened:

• We invested more of the cash we had on hand, and are actively investing any “additional” dollars left each month, so not to grow the cash position. I have automated our after-tax monthly investments. For example, in March 2020 – kept investing money in the market as it was going down.
• Increase in income (spending staying stable, and actually way down since the pandemic).
• Pure luck with my employer stock, I was worried 3 years ago that a potential change in leadership in the company would affect the stock price negatively. The exact opposite happened, the stock continues to outperform the market and now it represents ~25% of our total portfolio. This is even as we have fewer shares than 3 years ago (we are donating/gifting them).
• My employer added the mega backdoor Roth option, this gives me an additional $28.5k worth of Roth space each year.
• Starting to turn 50 this year means extra contributions.
• I started contributing to 4 (each of us in the family) 529 accounts up to our annual state deduction amount.
• I learned about the backdoor Roth and have started that for both me and my spouse.
• Learned spouse has access to a 457(b) in addition to a 401(k) – doubling their pre-tax contribution space.

What are you currently doing to maintain/grow your net worth?

Focused on set it and forget it, passive investments via mutual funds.

We save ~$28k/month (~50% of gross); the vast majority in tax advantaged accounts.

EARN

What is your job?

Both are still the same from 3 years ago:

• Me – individual marketing contributor in a tech company. Highest education level MBA.
• Spouse – Researcher. Highest education level Ph.D.

What is your annual income?

This has significantly increased to low $600k annually.

This still feels surreal to me, never imagined we would be making this much.

How has this changed since your last interview?

We were at $438k in the last interview, the increase is mostly due to my spouse who has received 2 significant bumps, from $250k in 2018 to $405k now.

This is a result of increased responsibilities, as a people manager.

Have you added, grown, or lost any additional sources of income besides your career?

We no longer have rental income from our overseas property; now it is for family use only.

SAVE

What is your annual spending and how has it changed since your interview?

Our spending hasn’t changed significantly; college costs are over for the first child. Have another year until it starts for the second one.

Since most of our discretionary income was spent on eating out and travel, we had hardly any activity in these categories for the past 18 months.

During the past 2 years, we significantly increased our charitable giving though (using appreciated company stock) – employer had a temporary, generous 1:1 match with no cap & we took full advantage of that!

INVEST

What are your current investments and how have they changed over the years?

• $2.55M (vs. $1.37M in June 2018)– Retirement accounts (Roth IRA/Roth 401k + Pre-tax 401k)
• $1M (vs. $185k in June 2018)– Brokerage, comprised of individual stocks and index funds.
• $1.7M (vs. $700k in June 2018)– Company Stock, Obtained through RSU’s, stock options, ESPP. Has seen phenomenal growth in the past 3 years. This is the source for our charitable giving. Net number of shares is actually less than 3 years ago.
• $122k (vs. $38k in June 2018)– College account, we cash flowed college for child #1 will use it for child #2 & child #1 graduate school down the road.
• $660K (vs. $453k in June 2018)– Cash balance Pension
• $336K (vs. $260k in June 2018)– Home equity, we only count the actual equity we have in our house vs. market value
• $152K (vs. $122k in June 2018) Home equity overseas
• $485K (vs. $781k in June 2018) – Cash, $100k in HYSA, rest earning 3% in 5-year CD’s that I opened in 2019.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

Thankfully, only “tax” related challenges:

• We are stuck in the situation of letting the tax tail wag the dog with nearly 25% of our net worth in one stock with HUGE appreciation. We donate to charity and transfer to children from this bucket, but the overall value keeps growing. We will divest in larger chunks post-retirement.
• Our pre-tax retirement accounts have significant growth, there will be a large tax implication down the road to plan for.

But several opportunities:

• Found out child #1 was able to contribute to a Roth 401k through their on-campus job, plus contribute to a Roth IRA – teaching them about investing and having them see both the ups and downs (March 2020) has been a good learning experience. They understand investing and more importantly the power of compounding and staying in the market. Child #2 is also contributing to a Roth IRA with part-time job.
• Transfer/gift our children shares of company stock (starting with the older one, who is no longer a dependent) $30k/year. Child #1 is fiscally very responsible; we have told them to ear mark these gifts for their graduate school years to pay for tuition/living expenses. Having them be able to sell at their very low tax bracket (especially this year) will result in $0 in LTCG.

Overall, what’s better and what’s worse since your last interview?

Better: I don’t have any financial angst for our future, now it has become an exercise in optimization and joyfully giving/spending.

Worse: My spouse’s job, now as a people manager is resulting in more stress, spouse is not enjoying this. This is why “early-retirement” at age 55 is a real possibility.

What are your plans for the future?

• In 4 years, decide on retirement (earliest at 55 for my spouse to be eligible for the monthly pension & health insurance benefit)
• I stop working at 55 or if I get laid off, whichever comes first
• Figure out how to psychologically transition from working to not-working and from accumulation to decumulation
• Spend more money (travel, focus on experiences with our children vs. buying “things”)
• Be in a position to be able to help our aging parents, as needed (more with time than money)
• Plan to continue giving generously to charities via QCD’s at age 72
• There is a real possibility with decades ahead of us (God willing) that our portfolio will continue to have significant growth, we need to decide if we gift some % of our estate to our children before the estate tax law changes in 2026.
• Model out how much in Roth conversions we should do from retirement until age 72

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

• A saving mind set is so helpful, especially if one is considering early retirement.
• The magic of compounding is really magic! Contribute the most you can in your early years and automate it. Low-cost mutual funds are your friend!
• A lot of it is just pure luck. Even though we have lived through 3 significant market downturns during our working lives so far (Early 2000 recession, Great recession of 2008/2009, COVID-19 drop of March 2020), we have thankfully always been fully employed when we wanted to be with continuous YOY salary growth, had good health and haven’t had any personal crises. We realize luck is a huge part of our success, we are grateful and humbled by this.
• Legislation changes, depending on which political party is in power will continue to cause a see saw of challenges for long term planning. I write this as news is released today, Sept. 13th 2021 with proposals to eliminate the backdoor Roth, mega backdoor Roth, increase in Capital Gains Tax, etc.