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It’s Friday, and you know what means: Reader Case time!
Before we start, a few thoughts on today’s letter. In fiction, one of the hardest things to pull off when writing dialogue is voice. Voice is what gives a character a distinct “sound,” if that makes any sense, and when done well can a) make the character instantly recognizable just by how they talk and b) makes you “hear” what the person sounds like in your head as you read it.
Just from a writing perspective, today’s letter is a fantastic example of something just dripping with voice.
Seriously, read this out loud and it’s impossible not to hear it in a down-South friendly-folksy y’all-come-back-now-ya-hear accent that I just absolutely love. Impossible, I say!
Hey ya’ll!
I’m an 32 year-old Okie from Muskogee…well not really that’s way too country. Mostly city chic living in Norman, OK! I always love saying I’m from Oklahoma but I really don’t want to live here for the rest of my life. Also my dad is from Thailand and spends 6 months there and 6 months in the US so I’m pretty keen on following his footsteps but way sooner than 62! I think I can do this sooner than later as I am a medical professional and make too much money to tell people to eat healthier and maybe they won’t be sick and achy all day.
Income: Gross: $9800/month (but can fluctuate). Net: $6500/month
Spending: ~ $3400
401k: Maxed out every year.
Debt: None
House: $119k with $42k mortgage
Investments:
- 401k #1: $70k
- 401k #2: $22k
- Roth IRA: $12k
- Taxable account: $31k
- CapitalOne 360: $20k
- Chase: $3k
- HSA: $4k
As you can see I (potentially) earn a lot with very little expenses and low cost of living area but I can’t stay here much longer for my sanity. About 4 yrs ago after practice for 3 years I moved to Denver, Colorado and it was fantastic and still close to home (so much so that I would fly the 1.5 hr flight to wrk at my old hospital once a month). It is pricey to live there though cause all those dang Californians coming in with all the monies and buying shit up increasing the cost of everything. I met the love of my life and he was also from Oklahoma so we moved back about 1.5 yr ago as he thought he need to go get another degree he could (won’t) use. Any rate that’s a wash and now we both agree Oklahoma is not for long term. I say we’ll be 4 years but he says 2.
I saw on a previous reader case similar profile with again those dang Californians and high income and they could do it in 7 yrs for a million plus. I don’t need that much to be FI but I want as close as possible to RE and have some cushion and not freak my life partner into quitting his nice paying job.
I have a dilemma however that is keeping me put. A dang HOUSE! Can you believe it?? Well, what happened was my dad got the house in a college town as my brother was attending the same school. When I graduated I took over the mortgage and the house is in my name. Zillow states value is about 119k and mortgage is 42k left. Norman is about 40- 50 mins from OKC where my boyfriend and I work so it’s really silly to keep driving and we want to live in the city where rent is about $800-950/month. That’s as much as the mortgage I pay now. So do I sell and still pay rent?
I feel like this email is long-winded and confusing to what the problem is but that’s what is going on my life. I’ll list details below and probably once I type it out I’ll find my answer, but I like reading your responses to most people boneheaded ideas. It’s always a good chuckle.
Thanks for the entertaining reads weekly. I geek out on this stuff now.
You see what I mean? I just love this lady’s writing for so many reasons.
But anyway, I digress. How are OkeeFromMuskogee’s numbers? Any yes I know she explicitly says she’s NOT from Muskogee, but as a non-American I didn’t realize “OkeeFromMuskogee” was a thing that people say, and now I can’t stop saying it.
So first of all, what should she do about the house? Usually, I’d start whipping out numbers and P/R ratios to try to MATH SHIT UP, but this is one situation where the answer is totally non-mathematical.
The underlying assumption of owning any house ever is that you actually want to live there. By OkeeFromMuskogee’s own admission, the house isn’t near where they work, the drive is a pain, they want to rent in the city, and long term they aren’t even planning on staying in Oklahoma. Plus the rent and the mortgage are the same amount, so by selling they’d save on all the other expenses involved with owning a home, their actual base housing costs won’t go up, plus they’d unlock all their dead home equity and use it to help them retire.
But most importantly, if you don’t even want to live there, why would you own it? Sell that sucka!
So if they were to sell the house, they’d net $119k – 5% (real estate commission) – $42k (mortgage) = $71k
| Summary | Amount (Monthly) | |
|---|---|---|
| Income | $6500 net + $1500 401(k) contributions = $8 | 000 |
| Expenses | $3400 | |
| Debt | $0 | |
| Assets | $70k + $22k + $12k + $31k + $20k + $3k + $4k + $71k = $233k |
OK so with monthly expenses of $3400, OkeeWithMuskogee would need $3400 x 12 x 25 = $1.02M to retire. And given her current investable assets (assuming she eventually sells the house) of $233k, and a savings rate of ($8000 – $3400) x 12 = $55,200, how long would it take her to get to this number?
| Year | Balance | Savings | ROI | Total | |
|---|---|---|---|---|---|
| 1 | $239,000.00 | $55,200.00 | $14,340.00 | $308,540.00 | |
| 2 | $308,540.00 | $55,200.00 | $18,512.40 | $382,252.40 | |
| 3 | $382,252.40 | $55,200.00 | $22,935.14 | $460,387.54 | |
| 4 | $460,387.54 | $55,200.00 | $27,623.25 | $543,210.80 | |
| 5 | $543,210.80 | $55,200.00 | $32,592.65 | $631,003.44 | |
| 6 | $631,003.44 | $55,200.00 | $37,860.21 | $724,063.65 | |
| 7 | $724,063.65 | $55,200.00 | $43,443.82 | $822,707.47 | |
| 8 | $822,707.47 | $55,200.00 | $49,362.45 | $927,269.92 | |
| 9 | $927,269.92 | $55,200.00 | $55,636.20 | $1,038,106.11 |
10 years. So it looks like she’s in a similar situation as those “Dang Californians.” Also, bwahaha! Next time I meet someone from California, I’m going to tell them that OkeeFromMuskogee does not approve of their California-ness.
However, OkeeFromMuskogee has indicated that she may be comfortable with not getting all the way to FI and is thinking of leaving Oklahoma in 4 years. How would the math work out on that idea?
Well, first of all, she’s in the right field for that. Doctors (and other medical professionals like nurses, pharmacists, dentists, etc.) often have a great deal of control over their hours, and can easily scale back by simply booking less patients. Generally, medical professionals want to keep a toe in their field in early retirement anyway, since working a few hours a month keeps their licenses current. Plus, should they later decide to scale their working hours back up, it’s relatively simple to do that as well.
So while medicine isn’t the most location-independent field there is (as licenses are usually country-specific), they do offer a great deal of flexibility when it comes to controlling how much you want to work. For us white-collar cubicle-dwellers, employment is often an all-or-nothing deal. Medical people can slide their hours up and down.
So let’s see. In 4 years, according to that handy table up there, OkeeFromMuskogee will have saved up $460k.
Using a 4% withdrawal rate, this portfolio will be able safely provide $460k x 4% = $18,400 of annual income, forever. That’s $1533 a month.
Knowing that her current monthly expenses are $3400, that means she can drop her working income all the way down to $3400 – $1533 = $1867 a month (net) and still be fine. Given that she’s currently making $6500 net, this would suggest she could drop her working hours all the way down to a third of what she’s currently working now.
Of course, I’m ignoring the impact of taxes here, but that’s because I don’t know where she’s planning on moving. As most states implement a progressive tax system, it’s very possible that working a third as many hours will result in even more than $1867 a month after-tax, since by earning less her average tax rate will go down. And of course, if she moves into a state with no taxes, it’s even better. And of course, if she moves to a state with a really high tax rate (like California) that changes the math even more, but somehow I doubt she’s planning a move to California post-retirement. Just a hunch.
So what do y’all think? Is OkeeFromMuskogee OK to go down to part-time work in 4 years, or should she keep working until she goes full-FIRE?
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If she lives in the home now, is the mortgage included in 3400$ Spending? I assume that renting will cost the same, but only where she lives now. If she moves elsewhere, the cost of living will go up. Important to take that into account!
Why does the balance in year one start with 239k and not 233k?
Just a friendly correction: it’s Okie, not Okee. And it comes from this:
https://youtu.be/n4AgZST_TG8
Enjoy!
Selling the house seems like the right move, but going to part-time in 4 years sounds a little goofy when there’s only 9 years to full time retirement. Just finish it up and be done!
Also, I think it’s worth saving more when you’re younger. That way there’s more time for the money to compound.
So, Okee from Muskogee is a song. I remember it when I was a kid.
Check it out on Youtube (assuming links are o.k. to post here).
Okie From Muskogee by Merle Haggard:
https://www.youtube.com/watch?v=D5K5l89mpV8
commuting that far is soul crushing. i used to drive 75 miles each way in louisiana with no a/c in the car…and if you don’t like the house or town make that change. i would try and change jobs now and get to a place where you want to live.
i can testify that when you live where you like living work feels less like work.
tough to open my account in this market, ugh.
dont think a globally balanced portfolio makes 4% this year….reversion to the mean?
The FI calculation is based on a spending of $3400 in a low cost of living.
But she clearly indicated that they wanted to move somewhere else, sooner rather than later.
So, not sure if the FI calculation with $3400 * 12 * 25 makes complete sense here.
For me it is a bit risky.
Suze Orman would go crazy here lol.
Personally I would go with a higher spending amount and multiply it by 28 or 30 to be on the safe(r) side.
Just love those Daang Cowgirls!
This is by far one of my favorite case studies so far. I say they sell the house and move to Denver NOW – sure it might slow down reaching FI, but it doesn’t sound like that’s a huge deal to her and that she’d be so much happier in a city she loves!
Assuming she bought a 3 bedroom house and she and her boyfriend were living alone in it, selling and moving to a smaller dwelling rental would decrease their rent and expenses. Assuming they split the bills equally between them, her share of expenses may end up being even less. Living closer to work means less transportation costs as well. Plus she wants to live 6 months in Thailand so her yearly expenses decrease even further and her FI amount could be less and 2-4years may just end being just right.
Add to that her life partner’s income and expenses and assuming they both want to FI together, this is a calculation only she can do.
+1 transportation costs will plummet once they sell the house and move.
But 2 job relocations (I’m assuming the other is not in the medical field) is more complicated and may take some time to arrange.
So, sell the house ASAP and move close to work. Consider renting between the two workplaces and using public transportation most days, or moving walking distance to one workplace and public transportation available for the other person. You get my drift, reduce the commute time and expense of transportation to increase enjoyable city amenities.
Then, spend time picking the next US location and launching job search for the harder to place person, with the easy to place person following once a job is landed. This might take awhile. The US is way bigger than OK and CO, with plenty of tradeoffs to be made. 2-4 years isn’t too long to get all that done.
Once relocated, redo the numbers. COL and income will be different and may change the FIRE date, but once you are in a happy place, it won’t matter as much.
If life’s a drain now don’t keep doing the same thing. Why wait. Go somewhere you want, rent there, enjoy life. Drs have a lot of options with how much and where to work.
I would love to see how the case study works to transition from semi retirement to full retirement. If she cuts back to working fewer hours to earn just $1867 in 4 years what does that do to her time to full FI? Is it too long for that to be a viable option? Is it just a few extra years making it a more enjoyable option than grinding it out for 5 more years? Inquiring minds want to know!
You guys are a couple of my favorite bloggers, but I’m not sure I agree with your statement that “Doctors (and other medical professionals like nurses, pharmacists, dentists, etc.) often have a great deal of control over their hours, and can easily scale back by simply booking less patients.”
Most doctors have a really hard time with controlling their hours. Employed doctors are constantly pushed to go faster, do more and see more patients. Even self employed doctors can have a really hard time adjusting their hours unless they cover no call and have their own clinic. One of my partners is cutting back to 75% time and it’s taken him over six years to get the group to approve the change.
As far as the reader case, I had a brutal commute like that in medical school. If you’re trying to get to FI so you can be free and “buy” time to pursue your passions, one of the first things I would do is sell that house and buy yourself freedom from that commute.
Also, I think that part of this FI journey is really sitting down and defining your priorities in life. Given that most people will still make money even when they RE, I wouldn’t stress about the exact FI number too much. If you really want to leave Oklahoma early and this would slow down your race to FI, sometimes it’s better to enjoy the journey a little and not try to cross the finish line as early as humanly possible.
BTW Bryce, when I first typed that you were a couple of my favorite bloggers, my phone autocorrected it to a couple of my favorite boogers! Hmm… Maybe not that far from the truth! ?
Random question: can Americans tell non-americans (like me and Kristy and Bryce) what’s wrong with Norman, OK or OK as a state? like why would someone want to leave it ASAP? ^^
ps: I will google what “okie from muskogee” means, when I get a chance.
Norman and any Metro area (OKC & Tulsa) in Oklahoma aren’t that bad but its like living in a time warp. While you’ll find a lot of smart folks and pockets of progress thought (especially in Norman where the University of Oklahoma is [thus a lot of transplants]), the state is seems about 15 years behind the rest of the country on social issues. Politically, extreme conservatism has also allowed the tea party (a fringe Republican political movement [see Scott Pruitt]) to gain hold of elected positions and their extreme view on gov’t and gov’t spending are making a very conservative state a very risky place to economically. That’s just my 2 cents. I don’t dislike Oklahoma but it’s an acquired taste; once you’ve moved somewhere else, it’s hard to move back there and settle down for anything other than family reasons.
Thanks for the answer Dave.
No sweat. Sorry for the typos – the dog gone page didn’t give me an option to go back and edit the post (as usual) after I typed it so I didn’t event think my response was posted until I got an email with your reply.
https://www.youtube.com/watch?v=68cbjlLFl4U
I just made the decision to cut back to a little more than half time working 84 days a year (12 hour shifts) instead of working full time with 159 days a year. This decision delayed achieving complete FIRE for a few years but has some benefits. A few things that factored in my decision was was the ability to continue to contribute to social security for a some additional years while extending my working career which will increase my social security benefits in the future and for my wife if I die before she does. By extending my working career it would also allow me to maximize my retirement accounts and utilize their tax benefits for a few more years rather than saving in a taxable account in a higher tax bracket while working full time.
Okay, since I’m from Oklahoma (an Okie not Okee) and ya’ll known I’m no FI/FIRE hater, I’m going to pooh on this parade and do so in the parlance of my home state…
Put simply, this dog don’t hunt worth a damn. OM and her man are making good dough especially in the Sooner state. For those who don’t know, the OKC Metro is one least expensive housing markets in the country for a City that size. The drive from Norman to OKC is a quick hop on I-35 where there is hardly ANY traffic. All this is being said for these reasons.
1. Given that you want to significantly cut your living expenses, renting isn’t going to save you a whole lot of money in OKC, if any. If you want to live somewhere nice, your rent is likely going to be the same or more than your current mortgage payment in Norman (this is an assumption due to the lack of a monthly mortgage amount). Other housing costs (maintenance) may make it advantageous to sell but I’m doubting that purely rent vs mortgage is going to make a difference.
2. Lets get real – ya’ll aren’t getting rid of your cars or nothin when you move to the City (yes, that’s how people in Oklahoma talk). You’ll save on gas but you know that unless you live super close to where you work, you’ll be driving there everyday. What you will do is save on gas and wear and tear on your cars. However, your man is still going to have to commute to Norman for class, I’m not sure how much time ya’ll will be saving.
3. Something else to ponder = Will you make a bunch if you sell that house? If your house is near campus, my guess is it hasn’t increased in value much and how much would you need to give back to your dad of any gross profit from the sale?
Now, that that’s out of the way I just want to say the FC is right, don’t own stuff where ya’ll don’t want to stay. Commit to selling that house ASAP once your partner is done at OU and head back West or just sell it now and move to OKC. You’re never getting that hour a day you waist commuting back; it may be worth selling the house on a push (no money made or lost) for that reason alone right now. Know when you get to Colorado (where a bunch of my friends have recently relocated) it’s going to be WAY more expensive for house. However, you will likely make more $ as well.
Hope this helps or a least provides some food for thought.
Selling the house sounds like the right move to me. I’d wait until they move to another state to evaluate the situation again. There are just too many variables here.
I think going to part-time is a good option if it means enjoying work again. It’s better to enjoy the journey than to try to rush through.
I just want to point out that “Okee from Muskogee” really isn’t an “American” thing so much as a local thing. I’m American and I’ve never heard the phrase before. But I live in the Northeast.
Honestly, I thought you were pulling out some Canadian slang term.
Sincerely,
ARB–Angry Retail Banker