Today I have an update for you from a previous millionaire interview.
I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉
This update was submitted in September. It’s actually the second update from this millionaire!
As usual, my questions are in bold italics and their responses follow…
OVERVIEW
How old are you?
We are 57. We have been married for 26 years.
When it comes to earning, spending, and investing, we are almost always aligned. So, it has been easy to follow the ESI path.
Do you have kids?
Our twins graduated college with STEM degrees from the two elite universities a couple of years ago. One of them got a job in the energy sector right out of college.
The other got admission to an MD/PhD program on a full scholarship. We paid over $250k per kid for their private college education.
One will likely have a career in energy, and the other will be a physician/scientist. We pretty much drained their 529 accounts for four years of college, but didn’t have to tap into our other savings to pay for college, and both graduated debt-free.
I know that paying private college tuition is not quite looked favorably in the FIRE community, but, given their fields and career trajectory, we think it was fully worth it. The beauty of the elite colleges is that their alumni network can get you internships that one can parlay into future opportunities.
What area of the country do you live in (and urban or rural)?
We live in an urban area. We used to live in a low-cost-of-living midwestern city.
I took a severance from my job five years ago, moved to the suburbs of a relatively expensive East Coast city to take a job at a startup. We bought a house in a relatively affluent neighborhood in an area where we would like to retire.
The area has a lot of activities that we like to do in retirement, and great healthcare. The state also has a great ACA marketplace, and that was important to us as we need to bridge the health insurance gap between retirement and Medicare.
What was your original Millionaire Interview on ESI Money?
I was Millionaire #12 in 2017 and then did an update in 2020.
Is there anything else we should know about you?
I’m an immigrant, and I came to the US with $500, a suitcase, and a full scholarship to a top 25 college. I went to graduate school in the sciences, worked my butt off, and graduated with a PhD with exceptional credentials that led to a job in a Fortune 500 company.
Over a 20-year career, I got regular promotions, and at the time I took the severance, I was a Senior Director-level manager leading a relatively large group.
NET WORTH
What is your current net worth and how is that different than your original interview?
Here’s where we are now compared to our previous two updates:
The increase in each account and in our net worth is mostly due to continuous contributions twice a month to each account. We inherited an IRA and a small amount of cash when my in-law passed away.
Our house in the original city was sold for about 350K, and we used that and my severance as a down payment to buy a house that was more expensive in the new city. We paid the house off within a year, and the value of the house has gone up by about 30%, at least on Zillow.
I also have a pension from my first employer that I’ll tap into when I turn 65.
What happened along the way to make these changes?
Other than taking a new job that gave me a jump in pay and high-risk/high-reward stock awards, we have not changed anything. Just stayed the course.
Contribute to 401k, HSA, IRA, ESPP (Employee Stock Purchase Program) every paycheck so they are maxed annually, and then invest about 40% of the take-home pay in the Vanguard funds twice a month.
What are you currently doing to maintain/grow your net worth?
Essentially, stay the course until I retire. I don’t foresee myself working longer than three more years.
I may be forced to retire or get laid off before that because of the fickle nature of my industry. If that happens, my current portfolio can pretty much help us maintain our current lifestyle with about a 3% annual withdrawal rate.
EARN
What is your job?
I am an executive in a small (under 100 people) tech company. I have been there for over five years, and the successes of the company helped our financial situation.
My wife is a part-time educator and has always worked part-time outside the house. Her willingness to work part-time helped us have a great work-life balance when the kids were growing up.
What is your annual income?
My base salary is about 300K, and I have a 30% cash bonus. I also have a very generous Employee Stock Purchase Program that I have been maxing out.
I also get about 50k shares as options annually and Restricted Stock Awards. As you can see from the table above, I haven’t really cashed much of it.
So, my plan is to sell them monthly to generate income after I retire.
I didn’t make this much always. I started at 70K and a 10% bonus and no stock awards in my first job.
I didn’t hit a six-figure base salary until about six or seven years into my career. Over my 25-year career, I have more than quadrupled my salary.
Not too bad for the E of ESI. ☺
My wife is a part-time educator and brings in about 10K per year.
How has this changed since your last interview?
After working for a Fortune 500 company for about 20 years, I was given the opportunity to take a severance package. I took a chance and took the severance, and started as an executive in a startup company.
The transition was challenging because we had to move halfway across the country during the middle of the pandemic. However, the change increased my base salary by about 25% initially.
My income has gone up significantly over the five years that I have been with the company.
Have you added, grown, or lost any additional sources of income besides your career?
My income has always been my salary and investment income. I work hard and focused on my job, and really don’t try to generate any additional income streams.
That helps me maintain our quality of life. I don’t want to be bothered with rental property or other businesses.
Really don’t want that 10 PM call from a tenant that the toilet is leaking.
SAVE
What is your annual spending and how has it changed since your interview?
We usually try to live off half of our take-home salary, but I think it is about 60% in reality. We max all the pre-tax accounts like 401ks, HSAs, and then automatically invest about 40% the take-home pay.
We use half of the cash bonus to do fun stuff like travel. I’ve not touched the stock awards, and my employer’s stock values have gone up over the years, and we have benefited from that.
Right now, my take-home pay is about 12k a month. We spend about 7k a month.
Since our house is paid off and the kids are independent, that is more than enough. As my income increased, there was lifestyle creep, but, was always pegged to our income.
What happened along the way to make these changes?
We made a plan and stuck to it. The investing plan that we made was based on a book that we got from a mentor in the late 90s called Get Rich Slowly by William T Spitz.
This was before the internet FIRE and investing blogs, and it essentially described the low-cost index investing strategy. Unfortunately, that book hasn’t been updated and is out of print.
We’ve been maintaining a rather aggressive stock-heavy investment portfolio (US/International/Small/REIT/GNMA/Bond 50/20/10/10/5/5) based on it. Rather than rebalancing annually, we’ve resorted to adding new money to the funds that are low.
That had helped us reduce some of the capital gains taxes that we would have to pay when rebalancing.
INVEST
What are your current investments and how have they changed over the years?
Really haven’t changed over the years, other than the accumulation of employer stock. All our non-employer stock assets are in one way or another in the stock market invested in low-cost index funds.
Pretty simple – Vanguard S&P500 (50%), Total International Index (20%), Small Cap Index (10%), REIT Index (10%), GNMA(5%), and Intermediate Bond Indexes (5%). Our house, which we bought in 2020, is worth over $1M on Zillow and is paid off. We have zero debt.
What happened along the way to make these changes?
As our income increased, we splurged a bit more, but always within that 60% of the take-home pay. We saved close to 40% of our take-home pay after maxing out tax-deferred accounts.
So, nothing really changed.
We have helped our kids to contribute to Roth IRAs. We got this idea of a “daddy match” from The White Coat Investor and it had worked out well to set them up for the future.
Since we matched their earnings into a Roth IRA, they were very motivated to work and earn during their college years, even though they didn’t have to. Each of them now has over 30k in their Roth IRAs and we continue to do the match.
We also taught them the value of investing in low-cost index funds. They are now investing in Fidelity Zero funds in their own pre-tax and taxable accounts.
We have also started to think about wealth transfer to our kids. Kids need money in their 20s and not when we die.
So, we’ve been helping them build funds for down payment towards their first houses, etc., within gifting limits.
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
Leaving a relatively stable Fortune 500 company job to a startup was stressful. However, we had accumulated enough in our investments that we could afford to take the risk of taking the offer from the startup.
If things had fallen apart at the startup, we still would have been OK.
Overall, what’s better and what’s worse since your last interview?
We are financially able to retire and enjoy the rest of our lives soon. After being focused and putting long hours at work for 25 years, I need to figure out what I would do to fill my time when I retire.
There is only so much traveling and exercising one can do in retirement. One regret I may have is that I haven’t picked up any hobbies that I can spend a lot of time during my retirement.
The worst part since the last interview was relocating to a new area. We had friendships that we had over 20 years, and it was hard to make new friends in a new city, especially because of the pandemic.
Things have gotten significantly better slowly, and now we have a very active social life and a group of new friends.
What are your plans for the future?
Hopefully, we will retire in about two to three years and travel and visit our children regularly in their new cities. We hope our health remains good to enable all that.
Over the last three years, we have been giving about 25-30K per year to our favorite charities. We hope that the market conditions remain positive so that we can continue or expand our charitable work.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
If you look at my career and life over a 25-year period, you can see that consistent earnings, consistent saving, and consistent investing really work. Index investing regularly really works.
Trying to save a high percentage of your income and living debt-free within your means really works. Keeping lifestyle creep in check works.
ESI strategy works.
