Funding A Work Optional Plain-Jane DIY Investor

How I Invested

I am just a plain-Jane DIY investor. I’ve invested earnings from W2s or 1099s consistently since I began my professional working career out of college, mostly in equities – no crypto, no bitcoin, no rental income. How much and what I invest in has shifted over time, initially starting out with small dollars in blindly selected high-cost mutual funds of a 401K, to larger dollars in more strategically selected low-cost index funds, spread across taxable and tax-advantaged accounts.

Becoming work optional so early was never a goal for me, but the habit of setting aside time to learn and invest a little bit more each year, was. However, I was very much a set it and forget it type, would decide quickly, act, automate, and move on. There wasn’t much contemplation or analysis paralysis. Although I made tweaks little by little over time, I did not initially devote more than a weekend of hours a year in educating myself about personal finance until the last decade, and much more in depth over the last five years. The biggest driving force around learning more was the birth of my child. I was suddenly responsible for more than just myself. Prior to her birth, the ratio of savings I set aside per paycheck was significantly less.

Current Portfolio Snapshot

Today, my investable assets are primarily split between a taxable brokerage and tax-advantaged accounts (401K, Roth, IRA, 529, HSA). Most of the investments are in low-cost index funds (mainly US growth funds tracking the S&P 500). I do hold a few single company stocks and other ETFs: bonds, gold, and other. My cash position covers several months of expenses.

Funding My Work Optional Time Horizon

My taxable brokerage will bridge the earlier years. I plan to harvest capital losses and long-term capital gains first. During my lower income years, I plan to do Roth conversions from my IRA to lessen the tax burden of RMDs (required minimum distributions) from my IRA down the road, and to also draw down on tax and penalty-free Roth principal contributions, if needed. For now, I’ve kept my 401K active as I was fine with the investment choices there, the admin fees were negligible, it offered more legal protection, and I expect a final true-up on the employer match next year. I may consider rolling it into an IRA down the road for more investment options. The 529 would cover some or all of my child’s qualified education costs, if needed, and the HSA would cover our incurred medical expenses, should I want to be reimbursed for them.

From Accumulation to Decumulation

Given my corporate exit was a decision I made rather quickly, I still have a rather aggressive accumulation portfolio with a good chunk in a mixed bag of highly volatile single stock investments, which is not generally advised for most who are planning to drawdown soon. So for decumulation in the short and long term, I will be updating my investment, withdrawal, and tax strategies. I do have a higher risk tolerance, and in turn, expect a higher portfolio volatility. The swings may not be bearable for some but is enough for me to sleep at night. Since I’m in my early 40s, I have a longer work optional time horizon, am flexible to adjusting spend, can opt to bring in more income as needed, and therefore able to afford some risk.

How did you or do you plan on funding your work optional time? How did you accumulate your nest egg? I’d love to hear your thoughts.