Reader Case: Golden Handcuffs

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I think it’s time for a reader case, so let’s dip into the ol’ mail bag and see what we find, shall we?

Hi Millennial Revolution. 
Let me start by saying that I love your book! I discovered the idea of early retirement (and personal finance) about a year ago and I cant stop thinking about it. I took some days off of work so I have time to organize and plan how to get to early retirement – and got hooked reading your book. The section on taxes was amazing to me and something that I had not even considered. The section on building a portfolio is a lot to think about (especially since I put all my money in company stock only because everybody around me was doing it and then only VTI). 
I would love if you could provide any thoughts into my situation. Here it is: 
Your questions: 

  • Annual gross income: $235K annually from my job + $25K from dividends I own of my company stock (its a privately held finance company)
  • Taxes: ~$65K 🙁 
  • Monthly spending: ~$11,500, which includes below. I am trying to reduce but some of these I can’t / don’t want to reduce and some are only for fixed amount of time. 
    • $1,900 for student loans (details below) 
    • $2,000 for loan payment used to purchase my company stock (details below)
    • $2,000 for rent (I live in Los Angeles, CA)
    • $1,100 for tuition for my child’s preschool. Expect to only pay for 1.5 more years until they start public school. Will also have another $1,100 for 2.5 years (starting in ~1 year) when my other child goes to preschool. 
    • $600 contributions to my parents / family 
  • Debts: 
    • Student loan: $77K balance at 2.55% interest; $1900 per month; scheduled to pay off in January 2025.
    • Stock loan: $110K balance at 5% interest; Loan is interest only for monthly payments and annual paydown of 1/5 balance every March. Minimum payment is ~$450 but I pay $2K per month. 
    • Car loan: $29K loan balance at 0.90% interest; $557 per month
  • Assets: 
    • Car: Last estimate was ~$33K but I owe $29K
  • Investments / Savings: 
    • Cash: $110K  (includes $35K for emergency fund and remainder was saving for house down payment – but I have decided not to buy anymore 🙂 )
    • Traditional IRA: $8,400 
    • 401K: $3,800
    • Stock: $18K ($10K in VTI, remainder invested via Betterment)
    • ESOP: $644K (employee stock option, this was contributed pretax and my company matches 4%, I can rollover to IRA when I leave company)
    • Company stock: $900K (I owe $110K on loan I used to buy this, my company is privately-held finance company, this money isnt very “liquid” – I have to leave company to get or ask board for approval to sell).
      • Note: Current value is $78 per share. I have options that I can execute in December 2021 for 2,500 shares at $30 and in December 2022 for 3,000 shares at $46)

About me: 

  • I am in my 30s and have 2 young kids. I live with my kids and my boyfriend in LA. My boyfriend and I split expenses and have separate finances. 
  • I want to quit my job now for a lot of reasons. I am trying to think of how to do this as soon as possible, responsibly. 
  • I am calculating my 4% rule number at $90K per year, or $2.25M. However, I would plan on continuing to work at a different, more meaningful / enjoyable job – so don’t think I would need full $2.25M to quit. 
  • My ideal situation would be to work part-time / remotely so I can have time / flexibility to spend time with my kids. 
  • I would love to be able to quit in January 2022 after I execute my company stock options (details above). I am thinking if I can become a financial planner (love building spreadsheets and can’t get enough of personal finance this last year) and considering if I should get the CFP certification. 
  • Current savings / investing is ~$34K per year in: 
    • Contributing $16K per year for ESOP, where my company matches 4%
    • Investing $6K per year in IRA 
    • Investing $12K in stock (VTI)
    • Does paying down $3,900 per month in debt count as “savings”? (details below)

My questions: 

  • The real question – is it really irresponsible to quit my job in January 2022? Do you think I should at least wait until after I execute stock options in December 2022 (so quit in January 2023)? Or do you think I should wait until I am closer to 4% number? 
  • For taxes – I think I will have at least $650K in IRA after I quit job. It would take me a very long time to do ROTH conversions and then withdraw. Do I have to accept paying some tax on this and convert more than $12K per year? 
  • For my company stock – I think I will have to sell all my stock when I leave my company and will just get lump-sum payment. I think my basis here is about $450K so a lot of gains. The good news is that I think worst case here is that I pay capital gains tax which is much better than my income tax rate. However, can I do better than this? I think having limited options since its private company and getting lump sum payment takes away the harvesting options for me. Do you have any ideas that I can look into / do here to reduce the tax bill? 
  • For building my early retirement portfolio – I understand how you guys decided on building your portfilio. However, my money is currently already somewhere. Any thoughts on how I can move it to be properly allocated? 

I know this is a really long email :/ Any thoughts would be so appreciated.
And I should really say – thank you for your book and your blog and doing so much to educate others on how to follow your example! 

Thank you!


This one’s jumped out at me because of her asset breakdown. Our reader works at some kind of financial company and she actually has quite a bit of money, but it’s almost entirely in a single stock: her employer’s!

It’s not unusual for tech or finance companies to offer stock options as part of their compensation plan, and you should definitely take advantage of it if it’s offered, but our reader really bet hard on her company’s stock. Not only is the majority of her net worth all in one company, she even took out a loan to buy more! That makes me super nervous, because if her company were to go under, it would take her job and all her savings along with it! Yikes.

But because this is a private company, she can’t sell her holdings until she retires or quits. So from a purely diversification perspective, I 100% agree with her that she should leave. Once she quits, she can cash out her company stocks and build a properly diversified portfolio that won’t get destroyed if her CEO does coke and crashes his Ferrari into a police car.

So…when can she quit? Let’s find out by…MATHING THAT SHIT UP!

Can She Retire Now?

So first of all, let’s look at her current situation.

Income$235k (salary) + $25k (dividends) = $260k gross, $195k net
Expenses$11,500 monthly, $138k annual
Assets$110k (cash) + $8,400 (IRA) + $3,800 (401k) + $18k (investments) + $644k (ESOP) + $900k (company stock) = $1,684,200
Debt$77k (student debt) + $110k (investment loan) + $29k (car loan) = $216k

If you’re wondering what an ESOP is, it’s an Employee Stock Ownership Plan. Typically, it allows you to purchase the company’s stock at a discount, and can be structured as a pre-tax vehicle, as our reader seems to have done since she mentioned it can be rolled over into an IRA after she leaves.

She has stock options vesting in December 2021 allowing her to purchase 2500 shares of her company stock at a strike price of $30. Doing so would cost her 2500 x $30 = $75k, but the resulting stocks would be worth 2500 x $78 = $195k, for an instant profit of $195k – $75k = $120k. Yowza. No wonder so much of her money is in her company’s stock. Those stock options are worth nearly 50% of her salary!

So let’s assume she executes her options. How does this change her financial situation? Well, let’s see…

Income$260k gross, $195k net
Expenses$11,500 monthly, $138k annual
Assets$1,684,200 – $75k + $195k = $1,804,200

At her current spending level, she would need $138k x 25 = $3.45M. That’s a LOT of money, and even with her impressive $1.8M total assets, it’s still only halfway there.

That FI target seems WAY too high, even for someone living in L.A., and I think I know why. She’s trying to aggressively pay off her debts, which is great, but those higher debt payments are screwing up her FI target calculation. The FI target calculation is a multiple of your living expenses, but those debt payments will eventually end, so by including her debt payments in the calculation we are assuming that she’s going to be paying that amount forever, which is wrong. So let’s cash out her stocks, use the cash to pay off all her debts and see if that makes the numbers make more sense.

Income$260k gross, $195 net
Expenses$11,500 – $1900 (student loan payment) – $2000 (investment loan payment) – $557 (car loan payment) = $7043 monthly, $84,516 annual
Assets$1,804,200 – $216k = $1,588,200

Her new FI target is $84,516 x 25 = $2,112,900. We still can’t quite make the numbers work for her to retire, but it’s a lot closer, so that means paying off all her debt is definitely the right thing to do.

So unfortunately, from where I stand the answer is no, she can’t retire quite yet on January 2022 on her current trajectory. But all is not lost, because she has options. Specifically, she has 3 paths she could go down to make the numbers work. And here they are:

Reduce Expenses

My natural inclination whenever someone writes in from LA is to yell at their spending. That being said, GoldenHandcuffs isn’t doing too bad. $84,516 in annual spending for a family with 2 kids in LA, the land of $25 burritos, ain’t too bad. But it’s still quite a bit higher than the national average family income of $67k.

To be able to retire on these numbers, our reader would have to bring their expenses down to $1,588,200 x 4% = $63,528, or 24.8% less. Is it doable? Probably, but unfortunately they didn’t break down their spending in enough detail, so I can’t comment on where she could potentially cut her spending, but you know what always works? Moving out of L.A.

Seriously, L.A. is easily the most expensive city in the U.S. to live, since not only is housing and food super expensive, but everyone needs a damned car. By moving to a cheaper location in the U.S., you’d be able to drop your expenses, simplify your life by getting rid of your car, and retire now. And if she’s willing to move outside the U.S., living on that kind of budget becomes trivially easy.

Work Part time

But not everyone wants to uproot their family. I get that. I mean, we can grab our backpacks and leave the country at any moment, but she has a boyfriend and 2 small children, so that solution will be a little bit more complicated. Another option is something she’s already open to: Working part time.

To calculate how much her new part-time/remote gig will need to pay, we simply take the amount her portfolio will be able to support and subtract it from her projected spending, so $84,516 – $1,588,200 x 4% = $20,988.

Can she find a part-time or remote job paying $21k? Well, that depends. If her post-retirement aspirations are to be a podcaster or artist, that might take a while. But she says her passion is in spreadsheets and personal financial planning. That should be pretty doable, as a quick search of Associate Financial Advisor jobs on showed an average salary of $58k. She wouldn’t even have to get her CFP first either, as she entry-level jobs don’t require it, and it might make more sense to see if she even enjoys the work before committing 1-2 years towards the certification.

Keep Working

And finally, there’s always the option of sticking with her current job for just a little while longer.

If we go back to her original income and spending numbers (before we pretended we paid off her debts), we would have a starting balance of $1,684,200.

She’s saving $34k per year in her own accounts, and has options worth 2500 x ($78 – $30) = $120k at the end of this year, and 3000 x ($78 – $46) = $96k and the end of 2022. And her FI target is $2,112,900 (to cover living expenses) + $216k (to cover her debts) = $2,328,900. Put it all together and this is what we can project…


3 more years. It could be faster or slower depending on whether she gets more stock options in 2023, but I think it’s a pretty good estimate.


She also has some questions that need answering. Specifically…

  1. Should she retire next year?
    • Maybe. You have 2 options that will let you do that: Reduce your expenses by relocating or find a financial planner job that pays at least $21k
  2. ROTH conversion
    • It’s supposed to take a long time, but you can still access the dividends produced by your IRA to fund your retirement in the meantime by using the cash-asset swap technique that we describe in our book.
  3. What about taxes for her stock options?
    • That’s an excellent question for your finance department. How this will be taxed depends on how your compensation package is structured, but I don’t have visibility into that so I can’t answer this for you. When I was working, my stock options were taxed when I made my purchase, resulting in very little capital gains when I sold, but if your plan only reports capital gains when you sell, your tax bill may be in the $65k – $75k range when you leave. Check with your company and update the above calculations accordingly.
  4. How to build her retirement portfolio?
    • I highly, highly, highly recommend moving away from a single-asset investment strategy and diversifying your holdings using index funds in retirement. Check out our Investment Workshop for the specifics.


This reader case turned into a bit of a tome, but it was certainly interesting (if you find stock option plans interesting anyway, which I certainly do).

What would you do? Would you relocate? Work longer? Or just quit and figure things out later? Let’s hear it in the comments below!

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21 thoughts on “Reader Case: Golden Handcuffs”

  1. Super important question for her to answer. To what degree could she get a similar job after she quits if she changes her mind? Could she go back to her current or a similar employer? Some people quit and then can’t come anywhere near the level of income and benefits they had if they change their mind and try to pull a U-Turn. For others, based on their skillset and network, it’s no big deal to go back. I think the answer to that question should heavily influence how quickly she “pulls the chute.”

    Also, could she negotiate a “leave without pay” that lets her test the waters for a year without cutting the cord completely? In this job market, with the right justification, an employer might be more flexible than one assumes. Maybe this isn’t an either/or question…..

  2. With these reader cases, the one thing that always comes to mind is whether you are working off of just the original email or if you have some back and forth with the person who sent you the original email in order to clarify points. Sometimes, it feels like there’s too much guessing and assuming in the reader cases whereas getting some clarification would help to resolve issues and provide a clearer picture of their actual situation and circumstances.

  3. I’d like to add additional clarity to the Roth conversion answer. Yes, it will take a long time. That being said, you’ll also need to convert more than 12K a year and pay some tax. Tax optimization can be complex, but here’s an easy example:

    Take your $650,000 IRA balance you believe you’ll have when you quit. Now calculate 8% of that.

    $650,000 *.08 = $52,000.

    That’s an average return you could expect to receive each year on the balance in your IRA invested in the broader market. If you’re only converting $12,000/year after retirement, and paying all of your expenses in cash… you’ll never catch up.

    Madfientist did some nice studies on these topics. Here’s a link to the Roth Ladder:

  4. It’s important to remember that you don’t need to be FI to quit a job you don’t like!

    If I had a friend in this situation, I would humbly suggest:
    – quit your job as soon as your 2021 options are vested
    – cash out your stock in 2022 tax year so you can diversify ASAP
    – if you end up not working much in 2022, you may benefit from the 0% tax bracket on long-term cap gains (ask a tax professional)
    – take some time off to enjoy life… you have plenty of money!
    – when you get bored in 6-12 months, get a new job that you’ll enjoy more

  5. I think it is too early to think about retirement in that case.

    Stocks and stock options may make someone feel rich, but that’s only on paper.

    First, some options are not vested yet. Second, stocks can easily go down -30% or -50% before they are sold. This happen all the time, even for the “safest” companies. If this is a start-up or other type of speculative investments, the drawdowns can be even more severe.

    Usually, I don’t like to be concentrated in a single stock (my personal maximum is 10% for any single investment). But here, this can be a little tricky / political – to sell the stock while still working, particularly if this is a small company (in number of employees) and that anyone in the company knows that you sold your shares. This essentially mean you don’t believe in the company’s future…

    Leaving the company may be the easiest way out of the shares. But it’s impossible to know how much they will sell for until the shares are redeemed by the company.

    Since it doesn’t seem like a place this person like to work, the decision to leave seem obvious. The harder decision is “what’s next” ?

    If she can do something similar in a different company, that would be the ideal solution, allowing to earn a high income while cashing out of the former company stock. I’m not sure the CFP Certification is a good idea. Most of the jobs in that field are essentially “sales” jobs.

    We never know… the shares could sell for even more than they are worth today. In that case, maybe the path to FIRE would be even closer. But let’s not make any plan before that happen. That would be too discouraging if things don’t turn out the way they are planned …

    One final note : I personally don’t like consumer debt. I think they are pretty bad for anyone trying to build wealth over the long run. But in that case, I wouldn’t worry too much if the stock can be liquidated in a short period of time. As long as the the proceeds is used to pay off the debt.

    The rest would be better transferred into a diversified / less risky portfolio, like a ETF.

  6. With the $77k loan at 2.55% interest + the $29k car loan at 0.90% interest and inflation running at 5%+ and rising, she would do well to stretch out the term for as long as possible while making the minimum payments, to inflate away the real purchasing power of that debt, rather than trying to pay it off as soon as possible, while reinvesting that cash into assets that can outrun inflation.

  7. I’m in an ESOP, and they don’t have to pay you out for up to 7 years if you quit before your full retirement age. And the stock will continue to fluctuate during those years. Something to think about.

  8. As long as she works at her current employer (say 3 years from Dec 2021), she can pay off her debt immediately and save $4557 per month (that she’s spending on her debt). Saving $4557 for 36 months will result in approx $164K, which could be invested elsewhere instead of just the company stock. Of course, paying off the massive debt using ESOP sale comes with cap gain tax consequences.

  9. Normally your reader cases are very well done, but on this one I feel like there’s something missing!

    “$84,516 in annual spending for a family with 2 kids in LA, the land of $25 burritos, ain’t too bad”… But she mentioned “My boyfriend and I split expenses and have separate finances” Shouldn’t the family annual spending be closer to 160K in that case? Or maybe less if her boyfriend’s debt payement is not as high.

    Her company stocks are not very “liquid” : if it’s not liquid for her, it’s not liquid for other shareholders. So I wouldn’t be scared of the CEO doing coke and crashing his Ferrari into a police car… As long as the VP is not the passenger!

    The cost of letting go the December 2022’s options is very high! My question would be : does she need to stay at her exact current job to keep them or could she moves to a part-time and more enjoyable position that would pay at least 21K/year?

  10. I’m confused why the 401K contributions are so low. To optimize tax advantages it would be best to max that out every year, especially to offset the cap gains from the company stock. I would also max out the IRA and do a backdoor Roth now and not wait to cash out just to get the ball rolling on her tax advantaged accounts.

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