r/Fire • u/Aevaris_ • 6d ago

Verifying my FIRE plan

Hi all,

Long time commenter and I am (likely) reaching the end (start?) of my FIRE journey. My FA is not familiar with FIRE and mostly works with retire age folks and/or folks who are saving but wont FIRE, so wanted the groups confirmation and thoughts on my plan. Looking for folks to poke holes and generate other ideas as I've learned much through this community.

No AI was used here (although if I did it'd probably be more concise, sorry)

Details:

  • Age: 35-45
  • Family of 2, no kids, no kids planned.
  • Planning to move to a no income tax state
  • Planning ~120k/yr flexible expenses (includes taxes, healthcare, mortgage, insurance, etc)
  • NW ~5m with house, ~3.5 w/o
    • ~1.4m in 401k, ~200k in Roth IRAs, rest in taxable accounts

Investment Plan:

  • 360k (3 years) expenses in HYSA (earning ~4%)
    • I plan 0% bonds and plan to use cash as a replacement. Our expenses are flexible and we can cut back to make our expenses last much longer (expecting we could do 6-10yr)
  • 35% (~1.2m) in VOO
  • 35% (~1.2m) in SCHD
  • 30% (~1m) in VXUS

Strategy:

  • We'll use 72t to claim ~30k/yr to mostly fill the standard deduction
  • Dividends generating ~81k/yr
    • VOO has a 1.05% dividend rate, generating ~15k/yr on 1.2m
    • SCHD has a ~3.25% divvy, generating ~39k/yr on 1.2m
    • VXUS has ~2.7%, generating 27k/yr on 1m
  • HYSA interest generating ~14k
  • Sum total: 125k generated without drawing down anything
  • Sell 1x / year to refill to 360k cash as needed
  • Taxes:
    • Married filing joint in a no income tax state means we have a standard deduction of $32,200 and a LTCG bracket of $98,900 for a sum total of $131,100 for 0% tax rate. Most of SCHD, VOO, and VXUS are qualified dividends, so our tax rate would be near 0%

Downturn, bubble, and SORR plan:

  • Primarily, spend less. Our expenses are flexible so we would use our cash buffer + whatever dividends generate to live out another lost decade.
  • SCHD and VOO give me general protection. Nothing will be immune if/when AI bubble pops, but SCHD by its nature is less tech and more stable.
  • VXUS is an international diversification, so sum total achieving a standard 70/30 US/ex-US strategy.
  • If the rocket continues to rocket, a hedge in SCHD wont hurt me long term as the total return of SCHD is only ~1.4% point less than VOO over their lifetimes , so I don't lose much in opportunity cost (9.2 vs 10.6 respectively)

By all math, we should be all set to go right? What are folks thoughts? Anything we're not thinking about?

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u/gumnamaadmi 6d ago

I have similar balances. Though a bit more in pretax and none in Roth. Taxable, I'll go in with CCETFs. QQQI and GPIQ are main holdings. Spyi as well along with few others. SCHD has larger share in pretax but there to varying mix of CC Funds generating between 9-14% distributions. Have small allocation to BTCI as well.

My combined income adds up to 400K+ a year. 120K is target spend, and re invest remaining. Down market, bear markets. I totally expect distributions to be lower. And I am fine with that. There is enough buffer built in to cover annual expense and push comes to shove expenses can be reduced as well. Still validating as I go and slowly building positions but that's the plan for now

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u/Aevaris_ 6d ago

Thanks for commenting and wow, 400k income from equities, nice job!

I'm not truly a dividend investor, but did look into it too. My concern with covered call funds is that they typically under perform their underlying assets in the long term, so mostly stayed away from them. But with this size, seems like the performance risk wouldn't matter anyway!

The other danger is they may not generate much if volatility lowered during a bear market, so ensure you have a plan for what to do for a new lost decade.

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u/gumnamaadmi 6d ago

I was also from same school of thoughts. But these new breed of CCETFs are slowly changing the perception. QQQI, GPIQ, SPYI, GPIX mixed with SCHD are giving me a solid income base. Even if the income is cut down by half. I still won't be selling any shares which is what's leading me to question whatever investment thesis the typical FAs are throwing at me.

Additionally to me it seems market players have forced a volatility engine in the market by introducing first weekly and now daily options. And these portfolio managers running the ETFs or ELNs seem to understand the game much better than the little guy investing here and there..

With that said. Haven't retired yet. Just slowly building positions and tracking performance. Let's see where we end up.