In the second half of 2023, I significantly impacted our passive income, causing our household to technically lose its financial independence. Prior to this, we had been financially independent since 2012, when I left my banking job.
My goal now is to regain financial independence by December 31, 2027. To achieve this, I need to restore the ~$150,000 in passive income we lost by selling stocks and bonds to buy our new home. This will bring our passive income back to ~$380,000, allowing us to avoid needing to work.
Starting in September 2024, our expenses increased to approximately $280,000 a year after taxes as our daughter now also attends an independent Mandarin immersion school. Consequently, with an assumed 20% effective tax rate, we require at least $350,000 a year in gross passive income for financial independence.
Although the challenge of regaining financial independence while raising two kids in an expensive city is daunting, I'm also excited for the journey. It's similar to the excitement you feel when making plans before going on a great vacation. I haven’t had a financial challenge as large as this one in a while and now I have the time to pursue it.
The Journey Back To Financial Independence: Stage One
The first step towards regaining financial independence is to feel financially secure again. Fundamentally, feeling rich is important given it transcends all levels of wealth. There are people who make millions a year who feel constrained, and people who make $50,000 a year and have more than enough.
I violated my 30/30/3 home-buying rule by not maintaining a 10% liquid cash buffer after purchase. As a result, we felt financially insecure for six months. It was a mentally taxing time with heightened anxiety and stress.
However, partially thanks to a surprise real estate capital distribution in early 2024, we were able to pay our hefty property tax bills and meet a flood of unexpected capital calls. Hooray for consistent investing!
To further boost liquidity, we've cut down our food, transportation, and entertainment budget. For example, I skipped a $500 dad's night out event to save money, and we eliminated all unnecessary subscription expenses.
Having $106,000 from the real estate capital distribution can generate $5,450 in passive income if invested in a one-year Treasury bond. However, I decided to invest $93,000 in the S&P 500, individual tech stocks, and in Fundrise's venture product. When it's a bull market, it's important to press to capture as much upside as possible.
The remaining $10,000 is earning 5% in a Fidelity money market fund, maintaining liquidity for upcoming capital calls and any surprise expenses. All these actions have made us feel more financially secure.
The Journey Back To Financial Independence: Stage Two
The second step toward regaining financial independence was deciding whether to sell or rent out our old home.
Given my bullish outlook on the San Francisco real estate market due to the strength and upside in technology and artificial intelligence, I chose to rent out the property. Despite my reluctance to take on another landlord responsibility, I believe this is the right financial decision. Besides, selling during the winter is the worst time of the year to sell.
I ended up renting out my old home for $9,000 a month starting February 1, 2024. Although I aimed for $10,000 a month, I couldn't find the ideal tenants in time. I might have found a single unit family in April, May, or June, but I wasn't willing to forgo an additional 2-4 months of rent.
Securing tenants brought tremendous financial relief given our hefty mortgage. After mortgage and property taxes, we will net about $43,000 a year. Any unexpected expenses will reduce this net figure.
Just like with owning the S&P 500, the best duration to hold real estate is forever. Unfortunately, many of us run out of patience dealing with tenants and maintenance issues.
In retrospect, if I sold in the spring of 2024, it would have been good timing, because the bidding wars came back with a vengeance. That said, with the Fed expected cut rates and mortgage rates expected to come down, I believe spring 2025 will be equally strong, if not stronger for real estate. The fed started cutting rates in September 2024 and will likely cut rates by 2% by 2026.
My tenants are OK. They broke my kitchen faucet and let a tree outside die, that had been there for four years. Part of the lease require them to take care of the front small yard and water the trees every week, which they did not. Their rent is going up by $700 a month in February 2025.
Latest Estimated Passive Income: $275,000
After completing stage one and stage two of my grind back to financial independence, our passive income has rebounded from $230,000 to ~$275,000. Based on our current passive income, we are still ~$75,000 in gross passive income short of achieving financial independence.
To generate this additional $75,000 in gross passive income, we would need to accumulate:
- $1,500,000 in capital at a 5% rate of return
- $1,875,000 in capital at a 4% rate of return
- $2,500,000 in capital at a 3% rate of return
With interest rates currently high but expected to eventually decrease, targeting $1,875,000 in new capital by the end of 2027 is the goal. However, there's just one big problem: both my wife and I don't have jobs!
The Final Stage Of Getting Back To Financial Independence
The final stage to achieve financial independence is by far the hardest since so much new capital is required. Here’s how I could potentially accumulate $1,875,000 by the end of 2027.
1) Get a Job
One way to accumulate $1,875,000 in new capital is to get a high-paying job in finance or tech. However, finding a $868,000+ a year job and saving 100% after paying a 28% effective tax rate is challenging, especially if you haven't had one since 2012. So, that unicorn job likely won't happen.
If my wife and I do part-time consulting, we might be able to earn $200,000 – $300,000 in active income. This income would at least cover the shortfall between our $275,000 in gross passive income and our $280,000 in upcoming after-tax expenses. But it wouldn’t be enough to accumulate our target capital amount in three years.
I actually took on a part-time consulting role that paid $10,000 a month. However, due to all the meetings and micromanagement, I could only last for four months. It was a good, eye-opening experience that made me appreciate the freedom that I’ve had for so long.
2) Write Another Bestselling Book
Because Buy This Not That became a national bestseller, I was offered a subsequent two-book deal by Portfolio Penguin. Once I finalize my second book for production this summer, I will receive my second installment of the book advance. Once the book is out in Spring 2025, I’ll get my third installment. One year after the book launch, I'll get my fourth and final installment. Then it's off to writing my third book.
After tallying up the hours I've spent writing and editing my second traditional book, I will make less than minimum wage. That said, I write for the joy of writing, not for the money. I will reinvest 100% of my book advance installments in the S&P 500, private real estate funds, and Treasury bonds for passive income.
My second book would probably need to sell around 1 million copies to earn enough royalties to accumulate $1,875,000 in new capital. I assign a 2% probability of this occuring. But that still means there's a chance! For context, BookScan says less than 6.7 percent of all books sell more than 10,000 copies.
I’m launching a new book in May 2025 called, Millionaire Milestones. It’s my modern take on the classic book, The Millionaire Next Door.
3) Do More Business Development Deals on Financial Samurai
I don’t write many product review posts because I’m not focused on making maximum money on Financial Samurai. Instead, I like to share human interest stories that relate to personal finance because they are more fun to write and read.
However, to accumulate $1,875,000 in additional capital, I should be more business-oriented online. Most of my peers write affiliate review posts and create courses to monetize their brand and platform. I will consider doing the same for products I truly believe in, invest in, or use myself.
If I try, I estimate I could make an additional $50,000 – $100,000 / year online. I'll then save and invest 100% of the income into the S&P 500 and private real estate funds as well. I expect runs and property prices to increase as mortgage rates decline.
To this day, I can’t believe everybody can make money online if they want. It’s like funny money. This perspective comes from being a Gen Xer who clearly remembers the days before the internet.
4) Do Nothing And Get Lucky
98.5% of my net worth is tied to risk assets. After reviewing my post on speaking to a financial professional in 2013, I realized my investment risk profile is much riskier than I had thought.
If the bull market continues, an additional $1,875,000 could come out of nowhere. My moonshot is investing in artificial intelligence companies with 10% of my investable capital. My previous moonshot was investing in Tesla in 2016 that helped me buy my latest house.
At the same time, we could easily experience another 2022-like bear market, wiping away $1,875,000 or more of my net worth in just one year. This large absolute dollar swing in net worth, up or down, is actually a disincentive to work.
Let’s say I get a part-time consulting job for $150,000 a year. Not bad, right? I could put in 20 hours a week and take home about $115,000 after taxes. Then let's say the stock market corrects by 10%, bringing a hypothetical $3 million stock portfolio down by $300,000. Dang, what a waste of time working!
I hate working and then losing money in my investments. As a result, during bear markets, I like to work less because my Return On Effort is lower. Times are good right now and taxes are relatively low, which makes work more appealing.
I should probably tone down my investment risk profile. Once you’ve built up a sizable net worth, perhaps $3 million or more, your main goal should be to preserve it.
A larger net worth reduces your motivation to work
On the flip side, when a $3 million stock portfolio is up 10% and returns $300,000, why bother working for $115,000 after taxes unless you love your job? As you get older and wealthier, this is an interesting conundrum you may eventually need to ponder.
I use $3 million as an example because I retired with a net worth of about $3 million back in 2012. After enduring some treacherous years during the global financial crisis, my net worth finally recovered by then.
I distinctly remember feeling incredibly lucky that everything bounced back. At that point, I figured the stress of work wasn't worth it anymore. I was no longer having fun and work politics were also bumming me out.
All the same, it's not in my nature to do nothing and hope for good things to happen. So, I’ll at least work on my book and continue writing on Financial Samurai regularly as I have since 2009. But going back to work full-time is going to be tough in a bear market.
After the failed assassination attempt of Donald Trump, my chances of doing nothing and succeeding has gone up. There is a increased possibility that a Donald Trump presidency could improve your finances. The stock market generally likes lower taxes and less regulation. Meanwhile, Trump made his fortune in commercial real estate, which means he could introduce policies to help the sector.
Going To Have Fun With My New FI Challenge
Unlike in my early 30s, when I was desperate to escape my dreadful job, I don't feel the same desperation in my 40s. Instead, I feel excited to have a reach financial goal again.
Come December 2024, I will have achieved my goal of being a full-time father to both of my kids for five years. This goal has been my hardest triumph. Now, full-time school for both kids will free up time to focus on earning again.
During this process of regaining financial independence, I'm going to try and have as much fun as possible. This means only doing things I enjoy to make money. This also means constantly taking a step back and appreciating the moment.
In a way, I feel like I'm playing with the house's money. The feeling is similar when I went to Berkeley part-time for my MBA. I already had the job that I wanted, so school became more enjoyable given grades no longer mattered as much.
Here's hoping the bull market will continue! If not, then it’s back to the salt mines because that’s what a parent must do to support his family. Let's see what the future holds.
Diversify Into Private Real Estate
Invest in real estate more passively and check out Fundrise. The firm manages over $3 billion in private real estate funds that predominantly invests in the Sunbelt region where valuations are lower and yields are higher. It focuses on residential and industrial commercial real estate.
My investments in private real estate years ago are paying off today. They are also what helped me get liquid this year. After I had children in 2017, I no longer wanted to manage as many rental properties. With growing pent up demand and mortgage rates, said to decline, I believe real estate is going to do well.
Fundrise is a longtime sponsor of Financial Samurai and Financial Samurai is an investor in Fundrise.
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Sam, I love your blog. Thank you for continuing to share your stories and knowledge with us!
My story is that we’ve accumulated $13M after some steep losses in 2022. I read your other post so I understand that I’m neither allowed to feel happy or sad at this net worth. But since this is somewhat anonymous, I’ll share that I’m about to quit my $600k/yr job because I feel so incredibly burnt out after the pandemic. And because of that, I’m starting to feel a lot of financial insecurity and anxiety.
I really relate to some of the posts you’ve made about reaching your FI number. I guess I’m still trying to figure out what our number is. In a high cost of living place, it’s starting to feel like even $20M isn’t enough.
I’m interested in aggressively growing our savings while the bull market is still on. Do you have any advice for people who live in high cost of living areas like the Bay Area with no real estate investments? Is now a good time to buy real estate? What other investments or opportunities should I be looking at?
And a random fact: I’m also a mom. Like you, I want to maximize my “kid time” since I had kids later in life. So any new efforts that I take on would ideally be constrained to between 10am PST and 2pm PST to avoid any interference with my other duties :)
Congrats on $13 million! What is it that you do?
I have two pieces of advice. The first advice is to try to negotiate a severance package. Have you read my book yet? With a $600,000 a year income, you could conceivably negotiate a $200,000 plus severance package, depending how long you have been there.
The second piece of advice is to ensure that your spouse keeps working! Early retirement is easier when you have your spouse grinding away :)
If you want deeper, Google my personal finance consulting page.
Cheers
Great post! Your insights on the current real estate market trends are spot on. I particularly appreciated your advice on the importance of location and market timing when investing in property. Potential buyers and investors must stay informed, and your tips on leveraging local market knowledge are invaluable.
Looking forward to more of your expert guidance in future articles. Keep up the excellent work!
I think in retrospect, it’s kind of a blessing in disguise that you’re going to refocus and devise a plan to gain back that FI. My parents are recently retired and given they have never retired before lol, they were surprised at the mental part of retirement. Just like you, I think it’s actually good to have something to focus on now so that you won’t feel bored or not a contributor to society, my dad has taken a liking in trading stocks and managing rentals as he treats it as a new job after retiring from his old job so to speak. It’s interesting to see how you and others navigate through these turbulent times and we’re all along for the ride, keep it up Sam! We know you’ll do well as usual!
Hey Sam, long time reader here, but haven’t commented before. I just went through more than 3 years of trying (and failing) to build a profitable full-time, one-person business in my industry (cybersecurity), so I’m headed back to the working world myself. Before I left my last W-2 job back in early 2021, we had gotten close to super-lean financial independence through some well-timed rental property acquisitions. We had some bad luck with eviction moratoriums over here (NY state) coupled with some pretty high CapEx, so we’re just finally getting back to cash-flowing now.
We don’t have a concrete dollar figure in mind, but we do have a couple of vacation properties we’d like to buy (if they make sense as investments) before I’d consider stepping away again from the corporate world.
I think my comfort level will come down to how our current rental investments perform across the next couple of years, as their *expected* cash flow covers about 50% of our monthly costs.
Congrats for at least trying! This way at least you’ll never have any regrets Wondering what if.
I would definitely encourage you not to buy a vacation property. They are a waste of money. Stay flexible and take it from me, a person who has on the vacation property since 2007. I have many articles on vacation property buying and I think after you read them, you will agree that they are not worth it.
Your 20% effective tax rate looks low. Making over $350k and living in high tax CA and you only pay 20%? I must be doing something wrong.
For W2 wage income, 20% effective is probably around 8% too low. But investment income is taxed at a lower rate. And a lot of my income comes from rental properties, which gets shielded by non-cash depreciation expenses.
Are you paying a much higher rate on your six figures in Passive Investment Income?
As a high income earner in CA, your marginal rate is 53.8%. That’s why it irks me when some politician says high income aren’t paying their fair share. It’s the high income W2 guy who gets killed. My average tax rate was around 46%. I recently moved out of CA to avoid that punitive rate. If you aren’t aware, CA max just went from 13.3% to 14.4% when they removed SDI cap. I think a good article could be written on the difference in tax level between W2 earners and business owners. It’s one thing when it’s something you read about in the news and quite another when you are actually paying it. More high earners need to leave CA to teach them a lesson.
I hear you. Such a high marginal income tax rate is a huge disincentive to work. My taxes is one of the reasons why I decided to retire in 2012 from finance. I was already stressed and board at my job. There was no way the government was gonna make more money off my labor than I did.
I wasn’t aware of the maximum state income tax rate increase in California. Thanks for the heads up. I’ll look into it more.
Are you earning income that has to pay the highest marginal income tax rate? If so, what are you doing?
Yes as a high level exec at a F500 company. And just think that assuming the Trump tax cuts expire at the end of next year, the marginal rate goes to an eye popping 56.4% in CA. So you keep just 43.6% of your marginal income. Agree that it is very demotivating to keep working so hard.
Hey, at least you are a high level exec making millions though right? Life can’t be that bad :)
I just chose not to keep climbing and got off the ladder in 2012. So if you’re making millions, enjoy the money as much as possible to make it all worthwhile.
I’ll be 50 in next month or so, my wife is 46 we have no kids. We have approx 3M in net worth. 10% of 3M is in home we live in, the rest is in index funds/retirement vehicles. I’d like to have 10M in next 5 years, we save roughly 400-500K per year. My wife generates 70% of our household income as she has brought her educational online platform from 0$ to just about 1M. it was a business spawn out of Covid times. I’ve been a full time self employed owner as a personal trainer with a boutique studio. I’ve had steady income for 30 years. In the past few years I’ve become stale, needed to learn something new so recently got licensed as a real estate sales person and thinking of learning the ropes as a side hustle/ new challenge. My head is still catching up with money wife’s new business is generating. Interestingly enough this has been challenging for me, as I didn’t come from money. I do believe my wife and I will always work. We enjoy the structure, relationships and the process of building wealth. I’ve had a planner since I was 23 years old, and still with same one today. We’ve developed a nice relationship and really don’t think we would be this far along without his help. I really enjoy your content, and wish you continued success!
Go wife!
With that much money, it’s going to be hard to spend with no kids. Easiest thing is to just buy a nicer primary residence, a nicer vehicle, travel, and give more away while volunteering.
There’s a lot of happiness created by helping others.
I am a single dad will be approaching my 50 this year. I currently have 3 mil in stock (100% index fund ) 2 mil in treasure bill ( 5.25-5.4%) and 1 mil in real estate ( home/ rental/ commercial property) . I am still working making 300-350 k a year. I want to retire completely but my 2 kids college education expenses are keeping me away from doing so. One is already attending college costing 40k a year. Another one will be in college in 2 yrs. I still diligently putting away 80 k a year to max my 401/457 with catch up. I am really hoping and looking forward to a complete retirement at 55. My most setback was a divorce at age 42 which instantly decimated my net worth at that time to only merely 1 mil. I clawed back from that situation 8 yrs ago and will never marry again.
Awesome you have 5Xed your net worth, and just eight years! That is very impressive. Keep up the good work!
I wonder how your ex-wife has done since.
Thank you for sharing.
Do you have regrets looking back over the past 12 years of not monetizing this site more?
This is the only personal financial site I read anymore. We aren’t bombarded with affiliate crap, credit card stuff, etc. Advertisements are minimal. you have been truly authentic and share very detailed information. I specifically love reading your articles on landlord, renting, house stuff, economics. My wife and I bought another home in December and are renting out our old house. Your articles have been tremendously helpful. We are still feeling the cash crunch from all that but we pulled it off and don’t have regrets. We “screened our tenants like the CIA” and has so far paid out. However, the thought of selling old house and receiving the windfall is very enticing. We have about $250,000 in equity. We have 2 young kids, and have debt. So I am not sure of the best course. The money could go very far for us, but the house rents well and gives us a little extra monthly income. We are very thankful and fortunate for our situation.
Thank you for sharing your knowledge and expertise.
Thanks for reading and sharing.
I feel weird writing affiliate posts and credit card review posts bc they are completely uninteresting, even though they are key ways to make money.
I just want to write what I’ll enjoy reading. I left with enough money in 2012 to not have to do things I don’t want to do. As a result, I’m happier this way with more meaning and sustainability.
Yes, earning more money online would be nice. But it’s enough to make me satisfied.
GL with your housing decision. I have the same one right now actually that I’ll write about next.
It seems like you’re really struggling financially, but perhaps more so emotionally. Therapy can be really helpful as we navigate difficult situations. Happy to recommend some headshrinkers in the San Fran market!
Indeed. It’s been a long hard grind to try and keep our heads above water with kids. But it’s also been a rewarding challenge.
What are some of the emotional challenges you think I’m facing? I always appreciate the feedback as it helps highlight my blind spots.
Happy to get some recommendations from great therapists! What type of doctor are you?
Blogging income is not passive. But you must be earning a significant amount from that activity.
Do you mind disclosing how much this blog is contributing to your total income?
Yes, writing is definitely not passive income as these posts don’t write themselves. But maybe one day with AI, the technology can capture my writing style and write everything for me long after I’m gone. That would actually be pretty cool, especially when I’m on vacation and I can just tell the technology to write several topics for me.
I make enough to cover my monthly site expenses, which is about $800. That includes a dedicated server, a system administrator, extra security protection, site updates, e-mail subscription service, and other random stuff.
You may enjoy this post: Reflections on making money online since 2009
How much do you make? And where are you on your passive income and financial independence journey?
To be honest, it’s a bit of a turn off to read things like “we felt financially insecure for six months. It was a mentally taxing time with heightened anxiety and stress.” and hearing about this on your podcast. It’s not as if you were on the brink of going homeless. You chose to buy another multi-million dollar home in one of the most expensive cities in America. Lately, when I listen to your podcast and hear these kinds of sentiments, I always wonder if it may help if you did some volunteer work with the homeless or others who have fallen on hard times. I appreciate your content but these recent comments about being stressed out over your finances as if you’re in such a tough position in life makes me not want to follow your blog/podcast as much as I did before.
Thank you for your honesty Mari. I’m sorry for offending you with this post and my podcasts about my journey.
It just goes to show that fear, anxiety, stress and other difficult emotions don’t just go away the more money you have. They may even amplify, especially if you have a family to raise? Do you have kids too?
Choices have consequences. As a result, we must not complain but come up with a plan and take action.
Let me know how I can help you with any of your financial concerns. And if you have suggestions on other content topics to help you, let me know. These articles take a long time to write, but I will endeavor to keep writing to help others achieve FI sooner.
In the meantime, you might enjoy these posts,
Spoiled Or Clueless? Try working a min wage job
Giving Is Personal, Keep It Private
Keep being honest and critical when my writing is bothersome. It helps me get better and tailor the content to be more suitable. Thanks!
It’s all good! I wanted to share my feedback in case it helps as you continue to grow your blog and podcast and expand your audience to people who are looking to grow their personal finances but are still at the beginning stages. I learn a lot from your blog and download your podcast weekly and I hope that more and more people will discover your content in the future.
Thanks, I would appreciate a review. Even a bad one if you don’t mind.
I’d love to hear more about you and where you are on your financial independence journey.
It’s tiresome when someone opines that rich people aren’t allowed to have negative emotions (didn’t you write about this, Sam?) or admit to enduring any suffering, because they’re rich (don’cha know?). Suffering is ultimately personal and can’t be compared individually.
In my own direct observations, I’ve seen rich kids who were miserable drug addicts and poor kids who had it all together emotionally, so assuming and generalizing isn’t helpful.
The more important distinction is whether stress/pain leads to taking action to change the outcome or whether it leads to passive perpetual victimhood. And that’s not about being rich, it’s about who you are personally.
Thanks for the reminder. I did! It’s called “Net worth serenity: the level of wealth where are you are no longer allowed to feel sad”
It’s funny how I forget the things that I’ve written before.
Yes, if we’re in a funk, especially of our own doing, let’s take action!
Sounds like you have some personal and financial challenges you’re dealing with.
To not only not feel happy for someone’s progress, but feel disdain and unhappiness is a big negative characteristic. Until you fix that characteristic of yours, you will probably always be in a funk.
It will also lead to loneliness and dissatisfaction.
Happy 4th!
No financial or personal challenges here! It’s interesting that you came up with all of that based on a simple blog comment. Just giving some honest feedback to Financial Samurai because I think his content is helpful and I think it would be helpful if more and more people learned from his content.
Mari, Feel free to share your own life and emotions publicly and experience what it’s like to have someone dismiss your feelings or criticize you. Everyone’s circumstances are different. Does that mean we should ignore or not take others perspectives into account? No. But I challenge you to reread your comment and think of how you could have reworded it. Would you have said your same words to Sam’s face? Doubtful. Not only that, think about the frustrations and pains in your life that you’re going through right now and how you may be projecting your own unhappiness on others.
Yes I would have said it to his face because it’s good to provide honest feedback to people that you want to see succeed. It’s interesting that you came up with all of that analysis of my life based on a simple blog comment. I was just giving some honest feedback to Financial Samurai because I think his content is helpful and I think it would be helpful if more and more people learned from his content.
Are you up for writing a guest post? Always good to take action when you see a problem or a suboptimal situation.
Give it a go! I’ll help edit and will be supportive, not critical.
Mari,
Perhaps we need more data points? Classically, almsgiving changes our relationship with others, prayer changes our relationship with God and fasting changes our relationship with ourself.
Volunteering at a homeless shelter is almsgiving, an additional data point such as how much Sam already gives to charity would be helpful. Sam is also giving of his time through this site which offers free content, seems his relationship with others is headed in the right direction
Thanks for the support. I feel bad writing about any giving of time or money because I find giving should be a personal decision.
My hope is that those who are telling others to give their time and money are actually giving their time and money as well. Otherwise, what’s the point?
That’s really exciting news on your upcoming book. I had many dreams of being an author when I was growing up. I used to make my own picture books when I was a kid. Then as an adult I went through a phase of wanting to become a children’s novelist and wrote out a plot for a book and everything. I wrote out a few pages of the storyline I came up with and quickly realized it’s a lot harder than it seems to write a catchy story that doesn’t sound overly cheesy or boring, ha. That fizzled shortly thereafter.
I love reading nonfiction now as an adult so I can’t wait to check out your new book when it hits the market. I can’t imagine how much work it takes to write so many chapters and polish it through to publication. Very impressive! I have no doubts you’ll do great on your remaining FI journey.
High Income: 500K
Moderate/Low Net Worth: 2.1M (1M in equity in primary residence and 1.1M in retirement accounts)
Projected Portfolio at Retirement (according to Empower): 2.6M
Years to Retirement: 11
Pension Projections: 200K+
Current 403b Contributions: 61K
Trying to decide between allocating more towards tax deferred accounts (457b/SEP/individual 401K) or adding to (or upgrading) real estate. Figure no need for after tax investing with a relatively short timeline until tax deferred funds are accessible (52) and pensions.
Congrats on your progress and thank you for sharing!
Curious what your cash-on-cash % return on your “SF rental 3” house would be if there were not be a mortgage? (Numerator = rental income less all cash expenses like taxes, insurance, and denominator = the price of the house if you’d paid all-cash)?
Also, as your kids get a little bit older, do you consider your expenses might go up in the short term (for example, more vacations, and higher per-day expenses when you travel, or more expensive after school, summer activities)?
The cash on cash return is pretty low. I think about San Francisco real estate, more like growth stocks with low yields, but higher potential capital appreciation. With big tech and artificial intelligence booming, I think the chances are higher than San Francisco Bay Area, real estate will outperform the nation over the next 20 years.
Expenses will definitely creep up overtime, which is why if I get back to $380,000 in gross passive income, I will have a $30,000 a year gross buffer.
How about you? Where are you on your financial independence journey?
Related: The Real Estate Investment Strategy To Follow: BURL