I’m an American Therapist living in Mexico. Is it too late for me to FIRE? – Millennial Revolution

Hope you’re all having a good summer and not drowning in sweat like we are. When we’re not out at community pools or chasing our toddler around at playgrounds, we managed to find the time to look through our readers cases and this one jumped out at me. It’s about an American living in Merida, one of our favourite places in Mexico. If you’ve never been there, I highly recommend it as the people are so chill and laid back. Plus, it’s been rated not just the safest city in Mexico, but the second safest city in all of North America. Our reader is able to take advantage of the low prices there and as a result, bring her expenses to a fraction of what they are in the U.S. So even though she self describes as being “late” to the FIRE game, this expat life might just be the cheat sheet she needs to catch up. Can she do it? Let’s find out:

---

“Hi. I’m 46 years old and currently living in Mérida, Mexico. I left the U.S. in 2014 to travel full-time and now work as a licensed therapist, seeing clients three days a week.

Income

My monthly income ranges from about $7,600 to $13,000/month, depending on client volume and other business factors. I’m considering raising my rates or expanding my offerings further.

Expenses

My monthly expenses are relatively modest: rent is $750, food averages $800, utilities around $150, with other recurring costs like WiFi ($33), phone ($9), medical ($150), transportation ($50) and professional expenses ($300)

Debts and Fixed Assets

I have no debt and no fixed assets like a house or car.

Savings/Investments:

My current savings and investments include $33,000 in a high-interest savings account 3.85%, $2,300 in checking, $66,000 in a 2035 Fidelity account, and $50,000 split between Vanguard VTI and VTSAX (averaging around an 8.5% return over 5 years). I also have $281,000 in a SURS state retirement account, which earns around a 7.5% return. I’m technically not fully vested in SURS until 2040 (age 61.5 ALTHOUGH i could early withdraw at 52), but I’d love to retire by 56—or sooner, if possible. At full vesting, I’d be eligible for a monthly annuity of $4,970 or a lump sum of approximately $865,000. I’m looking for guidance on how to realistically achieve FIRE as someone in middle age: how to best allocate my current income, how aggressively to save and invest, and how to evaluate whether taking the lump sum versus the monthly pension will give me the most long-term flexibility. I really don’t have a plan and could use your help.

LateFIRE

---

Summary:

Income:	$7600 – $13,000/month or $91,200- $156,000/year
Expenses:	$750 (rent) + $150 (utilities)+ $800 (food) + $33 (wifi) + $9 (phone) + $150 (medical) + $50 (transportation) + $300 (professional expenses) = $2242/month or $26,904/year
Debt:	0
Investible Assets:	$33,000 (HISA) + $2300 (chequing) + $66,000 (investments) + $50,000 (VTI, VTSAX) = $151,300
State pension:	$281,000 (SURS), will be worth $4,970/month or a lump sum of approximately $865,000 in 2040 at age 61.5

With yearly expenses of only $26,904/year (gotta love expat living!) she only needs a portfolio size of $672,000 to reach financial independence. With a current net worth of $151,3000 and a savings rate of at least $64,296/year or 71%, using a conservative 6% average rate of return, she’ll reach FI in:

Year	Balance	Contributions	ROI (6%)	Total
1	151,300	64,296	$9,078.00	$224,674.00
2	$224,674.00	64,296	$13,480.44	$302,450.44
3	$302,450.44	64,296	$18,147.03	$384,893.47
4	$384,893.47	64,296	$23,093.61	$472,283.07
5	$472,283.07	64,296	$28,336.98	$564,916.06
6	$564,916.06	64,296	$33,894.96	$663,107.02
7	$663,107.02	64,296	$39,786.42	$767,189.44

Slightly over 6 years!

She’s 46 now, so if she can keep her current financial trajectory going, by the time these 6 years are over, she’s be just 53. She said she wants to retire by age 56, so she’s already on track to hit FIRE 3 years earlier than she was expecting. Nice!

What About Her Pension?

What’s even more interesting is that she has a state pension worth a whopping $4970/month when it vests at age 61.5. That’s nearly 60K/year and more than double what’s she’s spending! She can also choose to take it as a lump sum of $865,000, but this would only give her a passive income of $34,600/year. So she should definitely take the pension as a monthly annuity. It’s almost double what you’re getting as a lump sum.

So, if we enter this injection of money into FIRECalc at age 61.5, we can see that there’s an even safer and more efficient way for her to reach FIRE. We can view her retirement in 2 stages. The first stage is for her to live off of a portfolio generating enough passive income to cover her expenses until age 61.5. After that, stage 2 kicks in and the pension annuity covers all her expenses.

By playing around with FIRECalc, I discovered that a portfolio size of $515,000 gives her a 100% chance of not running out of money in 15 years when her pension kicks in.

With her current savings rate, this is how long it should take her to reach $515,000 in net worth:

Year	Balance	Contributions	ROI (6%)	Total
1	151,300	64,296	$9,078.00	$224,674.00
2	$224,674.00	64,296	$13,480.44	$302,450.44
3	$302,450.44	64,296	$18,147.03	$384,893.47
4	$384,893.47	64,296	$23,093.61	$472,283.07
5	$472,283.07	64,296	$28,336.98	$564,916.06

In just under 5 years!

So, she could retire in less than 5 years, by age 50, live off the portfolio by withdrawing 4% a year for 15 years, then take the monthly annuity of the SURS pension, and have a 100% success rate!

That’s the power of geo-arbitrage. By significantly reducing her expenses, she’s able to get to FI in half the time it would’ve taken if she were in the US.

My other advice, looking at her situation is to consolidate her portfolio she she’s either invested in VTI or VTSAX. They are basically the same thing, so there’s no need to have both. VTSAX is just the mutual fund version of the ETF.

What do you think? Will LateFIRE be able to retire before her ideal age of 56?

Related