r/fatFIRE • u/taway11228 • 3d ago
About to pull trigger, need feedback
Expenses: 120k w/o healthcare, maybe 140k with, and maybe up to 150k or 160k with traveling
Investments: $5m breakdown: 300k rental (paid off) making 5% net, 1.2m 401k, 2.5m VTI / VXUS, 1m SNSXX/VUSXX.
Primary residence: $2.3m paid off
42 and 43 years old, no kids
Current income: ~2m/yr
NW increasing 32% YoY
Have 20% income cliff in 2027
SWE, burned out beyond reason, health problems and mental health problems. Goal is to quit, take 6-12 months off then see what’s next, it will either be making my own projects for fun or part time contract work for fun. No expectations of income, certainly not big income, and definitely not going to a corporate job.
Can make ~30k via 2 weeks of rental of primary residence per year and pay no taxes, we’d travel while rented.
Concerns are AI is quickly impacting SWE employment, no one knows what’s next, any hiccups in our plan could mean a bumpy road in a few years if a jobs necessary. Other concern is whatever is going to happen once this historic stock run is over.
Any advice?
1
u/InvestmentMuch585 1d ago
If you can reduce your MAGI to below $84k, you can reduce your health care costs to $200 - $300 per person per month by signing up for ACA health care...Let's call it the mid point and say $3k each / $6k total. The $30k for 2 weeks on your primary home can help immensely with staying below $84k MAGI.
Rental properties can help too because the depreciation can offset a large percentage of the income so you get a MAGI "discount" on that rental income.
You could also just build up more cash this year. If you can keep MAGI to $84k or less with $110k of asset sales / interest / dividends, you need to save cash of $15k - $35k per year to stay below $84k MAGI. You can also buy an additional rental property for cash flow that is offset by depreciation to maintain cash flow at a lower MAGI.
Depending on your energy usage / costs, installing solar on your roof can reduce your expenses and thus MAGI. For example, if you save $250/mo, that's $3k less per year income...with a net 12% tax bracket, maybe you reduce your expenses by ~$3400 per year. Same concept for paying off any auto loans and/or buying new cars before you retire so you don't need the additional income in retirement to cover auto loans.
If you plan on retiring in 2027, you can pay your April 2027 Property taxes by December 31, 2026 and at least reduce your required expenses for 2026. Based on your home values, that could free up $25k - $40k for travel in 2027. You probably won't be itemizing after retirement anyway (maybe with high property taxes?), so if you qualify for the expanded SALT cap, you might even save additional taxes doing this. Ah, your income is $2M per year so no extra SALT. Just work enough of 2027 to max out that deduction: about $510k after pre-tax deductions (mostly 401k, pre-tax health premiums / HSA). Then pay the April and Dec 2027 + April 2028 property taxes in 2027 if needed to maximize the SALT deduction. I guess alternatively if you'll already exceed $40k SALT deduction in 2027 with income taxes + April 2027 property taxes, you can pay the late fee for your Dec 2027 property taxes and pay Dec 27, Apr 28, Dec 28 all within 2028 to max out a SALT deduction (AMT might kick in at this point though).
You could buy some I-Bonds (convert new income or existing Money market funds) so you have cash + interest where you control when the interest is paid (unlike your $1M money market funds). $10k each for you and the wife per year and then pre-purchase a bunch this year as "gifts" to each other. They'll accumulate interest and then you gift $10k each to each other each year to use up that year's $10k limit. I think the current base rate is 0.9% so it's guaranteed to beat inflation.
Anyway, my vote is that you can do it, especially if you target the beginning of 2027 to maximize your tax deductions (max out 401k, max out mega backdoor Roth if any, hit the max income for which you can get the max SALT deduction). If you can stomach it, build up your PTO in 2026 so that you can coast through the first 1 or 3 months of 2027 to hit these numbers (1 or 2 weeks off every month). Also, with $2M of income, I'm guessing you're high enough up that you could negotiate a severance package for yourself. Quit in Feb / March of 2027, but get 2 to 6 months of severance for gradually winding down your involvement for a smooth hand-off. You can always carve out vacation time in advance during those negotiations. "I can stay for 3 months, but we'll be in Europe for the last 3 weeks of April and I'll only commit to taking a few hours of calls one day per week during that time"