The Intersection of FIRE and Disney

[Disneefun]

Here's what I would say about DVC. Don't do it, because you never know how things will change. When we were in our 20's and 30's, we were Disney addicts. AP's four trips per year, etc. Couldn't get enough. For nearly 20 years we vacationed almost exclusively with Disney. We seriously looked into DVC several times, but never pulled the trigger. So glad we didn't because...

Gradually, the magic wore off. Some of it was due to us, but a large part of it happened when magic bands became a thing and you had to start planning everything in advance. And then the service started to decline. And the food went downhill. And the off-season stopped being the off-season. And all the things we loved about the parks gradually got taken away, or changed to the point where we no longer enjoyed it. We haven't been back since 2014, and have no plans to ever return.

My point is, you just never know. We were Disney addicts and never would have believed we wouldn't want to go anymore. In the end we were do glad we didn't have to sell off that contract, or just keep forcing ourselves to go because we had DVC. Whether or not it makes sense financially isn't always the point. Locking yourself into something when your tastes may change further down the road isn't always the best idea. Just my .02. YMMV.

 

[Starport Seven-Five]

I've never been able to get DVC to be a cost save for us but we're on the value/offsite end of the spectrum. The general advice is that if you go every year and stay deluxe it works out to a cost savings but from what I can tell, that savings is not better than investment in an index fund (assuming typical returns).

We're planning to reassess if a recession occurs and prices come down. Otherwise I don't see us ever buying DVC.

 

[RAL710]

Hello,

I've been a long time lurker of this thread and wanted to say thank you for inspiring me to budget better and pay attention to personal finance. I'm not even close to having the savings rates as people here have but one day I hope to get there

My wife and I have started to look into DVC. I wanted to ask the question of those pursuing FIRE, do you think DVC makes sense?

Right now it is me and my wife we are both 28. We have a daughter on the way due in April.

We DO NOT have the money to buy DVC upfront and would have to finance. This point seems to be where most people say don't do it as the financing charges nullify any savings from DVC

Any advice is appreciated !

thanks for the community here

I would wait. Rent points for now and see if you enjoy the experience. We would not have purchased DVC if we did not have the cash on hand. Most importantly....congratulations!!

 

[RamblingMad]

Here's what I would say about DVC. Don't do it, because you never know how things will change. When we were in our 20's and 30's, we were Disney addicts. AP's four trips per year, etc. Couldn't get enough. For nearly 20 years we vacationed almost exclusively with Disney. We seriously looked into DVC several times, but never pulled the trigger. So glad we didn't because...

Gradually, the magic wore off. Some of it was due to us, but a large part of it happened when magic bands became a thing and you had to start planning everything in advance. And then the service started to decline. And the food went downhill. And the off-season stopped being the off-season. And all the things we loved about the parks gradually got taken away, or changed to the point where we no longer enjoyed it. We haven't been back since 2014, and have no plans to ever return.

My point is, you just never know. We were Disney addicts and never would have believed we wouldn't want to go anymore. In the end we were do glad we didn't have to sell off that contract, or just keep forcing ourselves to go because we had DVC. Whether or not it makes sense financially isn't always the point. Locking yourself into something when your tastes may change further down the road isn't always the best idea. Just my .02. YMMV.

Good stuff. I go to Disney when new stuff opens. And I mainly go to DL since it involves less planning. The magic doesn’t wear off for me because I’m going maybe once every three years. However, I do find the price of park tickets to be ridiculous. My default vacation is to go camping or backpacking every year. I try to visit a national park every year.

 

[QueenIsabella]

Another vote for "Don't do DVC at this time". Several reasons:

(1) your lives are about to change in amazing ways. Since it's your first child, you really don't know how things will go. Daycare is expensive; so is having a SAHP.

(2) It sounds like you're getting there, but aren't quite yet on a track where you can afford this. It's okay--DVC will still be there in a year or 2 or 5.

(3) It's tough to know how the long-term family situation will pan out. You guys may be "one and done" on kids, you may decide you want 6. This not only drastically changes your available cash, but if you did buy DVC, your number of points and location might be affected.

(4) On a similar note, you don't know the true impact of a child. Your child could have special needs (sadly, it happens). Your child could be a soccer virtuoso who requires summers spent at soccer camps. I have 4 kids, and juggling their summer schedules can be really tricky. There comes a point where pulling a kid out of school is no longer an option.

(5) It's still a timeshare, one with an expiration date. And a pricey one. I know that resale for DVC has been a booming market, but for how long? Make sure you do your homework on maintenance fees as well--I could rent a condo no Myrtle Beach for a week, for just the price of DVC's maintenance fees for a similar-sized accommodation. I know it's not apples to apples, but my kid would have fun in either place.

(6) there's nothing wrong with financing, if you can swing it without actually paying interest, like a PP said about using a credit card with a 0% teaser rate.

 

[MickeyMouseCD524]

Bouncing off of what other posters have said. I would agree that it's not worth it if you use values or go offsite. We would usually stay in deluxes or moderates when we would go down. And we are fortunate enough that we would make it into an event and bring friends and family with us. So buying in where we could have a 2 bedroom villa or even a 3 bedroom so we could make more memories with our loved ones was 1000% worth it and then any points we had left over we might use for a long weekend in a studio or gift to someone. But everyone else is right. You need to figure out what makes the most financial sense for you, and your family. I would also take the advice of waiting until your little one arrives because you don't know if there's certain needs they might have. Which would obviously take priority. Only you can decide what would work best for you and your family. But no matter what don't finance a DVC contract. I know the DVC show has made it sound very easy and painless but you'll pay for an extra two vacations if not more if you finance it.

 

[Rob Huff]

I've never been able to get DVC to be a cost save for us but we're on the value/offsite end of the spectrum. The general advice is that if you go every year and stay deluxe it works out to a cost savings but from what I can tell, that savings is not better than investment in an index fund (assuming typical returns).

We're planning to reassess if a recession occurs and prices come down. Otherwise I don't see us ever buying DVC.

This post probably captures just about every quality piece of advice in three sentences.

When we lived in Florida, we got to try out most Disney resorts, staying at a few in each tier. For us, once we became deluxe folks, it was tough to imagine going back. We had enough saved to buy into DVC in cash and my wife and I both aligned on our plans for future travel. That is, we'd go every year for 10ish days one year and 5ish the next. Adding it all up, we bought a contract that would serve these purposes.

Despite that, I wouldn't have bought DVC if I thought of it as a financial investment. I don't assume that we'll make money or come out ahead of where we would have ended up if we instead invested that money and enabled it to grow.

DVC serves as a useful tool to enable us to travel in a way that we want to travel, and it does come with positive emotional benefits, namely that (1) we genuinely feel at home at the Poly (even when we're not staying there), and (2) the edge is off when we travel, removing the desire/need to do everything because we know we'll be back.

Finally, when I crunched the numbers almost exactly two years ago, I calculated that buying DVC would have the following costs in 2018 dollars per point per year over the lives of the respective contracts: $8.63 at SSR, $9.12 at PVB, $9.14 at BLT, $9.39 at VGF, $9.40 at AKL, and $9.80 at OKW (extended). Every other resort was over $10. I plugged the numbers for current sale prices into my formula now and the only resort under $10 is SSR and even that was at $9.88. Prices have absolutely skyrocketed in a very short period of time. Absent a DVC-specific recession, we likely wouldn't buy at today's prices even though it makes good sense for us.

 

[bernina]

This post probably captures just about every quality piece of advice in three sentences.

When we lived in Florida, we got to try out most Disney resorts, staying at a few in each tier. For us, once we became deluxe folks, it was tough to imagine going back. We had enough saved to buy into DVC in cash and my wife and I both aligned on our plans for future travel. That is, we'd go every year for 10ish days one year and 5ish the next. Adding it all up, we bought a contract that would serve these purposes.

Despite that, I wouldn't have bought DVC if I thought of it as a financial investment. I don't assume that we'll make money or come out ahead of where we would have ended up if we instead invested that money and enabled it to grow.

DVC serves as a useful tool to enable us to travel in a way that we want to travel, and it does come with positive emotional benefits, namely that (1) we genuinely feel at home at the Poly (even when we're not staying there), and (2) the edge is off when we travel, removing the desire/need to do everything because we know we'll be back.

Finally, when I crunched the numbers almost exactly two years ago, I calculated that buying DVC would have the following costs in 2018 dollars per point per year over the lives of the respective contracts: $8.63 at SSR, $9.12 at PVB, $9.14 at BLT, $9.39 at VGF, $9.40 at AKL, and $9.80 at OKW (extended). Every other resort was over $10. I plugged the numbers for current sale prices into my formula now and the only resort under $10 is SSR and even that was at $9.88. Prices have absolutely skyrocketed in a very short period of time. Absent a DVC-specific recession, we likely wouldn't buy at today's prices even though it makes good sense for us.

Completely agree with this. We crunched the numbers every which way and like you and your wife it made sense for the way we vacation. It did not and does not make sense as an investment. We bought a large contract resale for what we consider a good price and added on the minimum at the time which was 25 points direct. Knowing that we likely will have the option to sell at a decent price if the need ever arises also made us more comfortable. If we no longer enjoy Disney and renting out points becomes a pain, then we sell. Right now we're enjoying the membership and the direct savings on APs for us are a nice plus. It is not and will never be the cheapest way to vacation at Disney but it is the best value for the way we choose to vacation at Disney.

We would not have purchased if we needed to Finance. That's just our personal preference and those original buyers of DVC would have still come out way ahead even with finance charges. That's not really the case these days with the ever increasing cost to buy points.

I often compare DVC to a country club membership with good perks. It's a completely unnecessary expense, but if you can afford it and find value and enjoyment, then that can be enough to justify.

 

[Rob Huff]

This post probably captures just about every quality piece of advice in three sentences.

When we lived in Florida, we got to try out most Disney resorts, staying at a few in each tier. For us, once we became deluxe folks, it was tough to imagine going back. We had enough saved to buy into DVC in cash and my wife and I both aligned on our plans for future travel. That is, we'd go every year for 10ish days one year and 5ish the next. Adding it all up, we bought a contract that would serve these purposes.

Despite that, I wouldn't have bought DVC if I thought of it as a financial investment. I don't assume that we'll make money or come out ahead of where we would have ended up if we instead invested that money and enabled it to grow.

DVC serves as a useful tool to enable us to travel in a way that we want to travel, and it does come with positive emotional benefits, namely that (1) we genuinely feel at home at the Poly (even when we're not staying there), and (2) the edge is off when we travel, removing the desire/need to do everything because we know we'll be back.

Finally, when I crunched the numbers almost exactly two years ago, I calculated that buying DVC would have the following costs in 2018 dollars per point per year over the lives of the respective contracts: $8.63 at SSR, $9.12 at PVB, $9.14 at BLT, $9.39 at VGF, $9.40 at AKL, and $9.80 at OKW (extended). Every other resort was over $10. I plugged the numbers for current sale prices into my formula now and the only resort under $10 is SSR and even that was at $9.88. Prices have absolutely skyrocketed in a very short period of time. Absent a DVC-specific recession, we likely wouldn't buy at today's prices even though it makes good sense for us.

I forgot one other nugget: we're primarily resort and parks people. We'll spend many waking hours each day enjoying wherever we're staying, so we get big value out of staying deluxe. Dining and special events tend not to be major focuses for us. In a 10-day trip, we'd likely have three or fewer table service meals. It's just not how we use our time.

For folks that tour the parks from rope drop to close, I'd be hard-pressed to recommend DVC. You can find another quality bed on property for a much lower cost.

 

[bernina]

I forgot one other nugget: we're primarily resort and parks people. We'll spend many waking hours each day enjoying wherever we're staying, so we get big value out of staying deluxe. Dining and special events tend not to be major focuses for us. In a 10-day trip, we'd likely have three or fewer table service meals. It's just not how we use our time.

For folks that tour the parks from rope drop to close, I'd be hard-pressed to recommend DVC. You can find another quality bed on property for a much lower cost.

We tour very much the same!! Wilderness Lodge is our home (BR) and I could easily spend a day there without even thinking of a park. Although when I do that boat to MK sure hits the spot!

 

[MickeyMouseCD524]

We tour very much the same!! Wilderness Lodge is our home (BR) and I could easily spend a day there without even thinking of a park. Although when I do that boat to MK sure hits the spot!

That's us at BWV so nice to be able to walk to EPCOT or DHS

 

[disfanforlife]

We are DVC members, but given the prices today I am not sure I would buy in. We were lucky buying direct in 2008 and adding on resale right before prices starting climbing in 2013. We love DVC and having the larger accommodations to bring family is really nice. Also we mainly stay at BW and love walking to Epcot and DHS.

 

[Budzooka]

We are DVC members and it has been great for us. We viewed it as a way to prepay lodging on vacations and not as an investment. We go to WDW once every 2-3 years and rent points out or take family with us, and it has been great. We are going to Aulani this summer for the first time and really looking forward to it. It has changed the way we vacation and we love it.

 

[bernina]

I think the proper term is actually in service transfers the more I read. I had rollovers in my head when I was typing

What this means is I'm able to transfer my after tax contributions into my Roth IRA while I'm still working. Most employers only allow this once you terminate employment. I believe this is one of the keys to making the process a lot simpler as well as taking advantage of tax free growth in the Roth IRA while I'm still working.



Thank you for the article and word of warning. This is exactly the kind of dialogue I was hoping for as I don't really have many folks outside these forums to bounce ideas off of.

In doing more research it appears that by allowing in service transfers and due to the fact that my plan tracks pre tax and after tax contributions and growth separately, this may lead to the ability to more easily do a mega backdoor Roth IRA contribution.

In theory each year (or more frequently if the plan allows) I would transfer the after tax contributions plus any gains (which the plan tracks) to a Roth IRA. By allowing in service transfers instead of only at retirement/termination, the amount of growth is minimized (since it has at best 1 year to grow).

Now I just need to sit with my co worker who is currently doing this as well as continue reading through our plan literature to ensure what I want to do is actually possible.

I'm open to any and all feedback and would love to hear if there are others doing something similar.

On the subject of mega backdoor Roth IRA, I stumbled across this article which perfectly describes how my co worker has been utilizing this and how I plan to once my contributions begin with my Feb paycheck. I plan to put 10-20k in this year (basically instead of taking our liquid savings and dumping into our Vanguard brokerage, I'll be using that money to offset the much lower take home paycheck I'll be receiving).

https://www.exchangecapital.com/blog/a-mega-roth-savings-opportunity-hiding-within-your-401k

 

[Hokie2005]

My wife and I have started to look into DVC. I wanted to ask the question of those pursuing FIRE, do you think DVC makes sense?

If you are an individual pursuing FIRE, then DVC makes zero sense. True FIRE lifestyle is all about delayed gratification. The purchase price of that DVC contract plus annual dues year after year is a lot of compound interest missed out on. That same line of thinking is why I see there is zero intersection between Disney and FIRE. Taking that DIsney trip comes down the road after FI. Again this is only if someone is truly living that FIRE lifestyle.

Now I'm not advocating that you, or anyone, pursue FIRE in its entirety. FIRE is an extreme and very few people truly FIRE. Sure people take bits and pieces from the movement and apply them to their lives but overall most people don't want to make all the sacrifices necessary. As a whole I think the FIRE movement is great because it has opened many people's eyes to the world of finance that wouldn't have given it a thought before. When you hear of someone retiring in their 30s, you definitely want to know how they did it.

I certainly fall into the camp of a more balanced approach to FIRE. Used to track household spending only a few months of the year but for a little over a year now have obsessively tracked everything. I have excel sheets to slice and dice the data in many ways and try to optimize our finances as best we can. I calculate NW once or twice a year. 401k maxed, IRAs maxed, pumping plenty more into Vanguard funds, and a couple of P2P loans I have done. My savings rate is sufficiently high that I could probably be FI within 10 years by my mid-40s although currently plan to work till 58 at which point all my contributions to social security will be maxed out. Only debt is our mortgage which I was aggressively paying down but have since shifted the extra payments to Vanguard to build a fund that is more liquid than the equity in the house (plus it is the wiser choice anyways considering our mortgage interest rate vs average returns in the market). Yet I am also able to do all of this and not sacrifice the family vacations or relationships with others. Back in 2009 when I was 26, well before ever heard the FIRE acronym and before we even had kids, my wife and I did buy into DVC at a final price of $100/pt at BLT. It fit our lifestyle and was a good point financially for us to do it.

My suggestion to you would be to at least be sure you were maxing out any and all tax advantaged accounts. It admittedly took me till I was about 30 to max my 401k out and then only more recently the IRAs which I am getting close to not even being able to contribute to due to the income limits. I will fully admit that I was subject to lifestyle creep as my salary continued increasing and I didn't want to make the necessary sacrifices at that time to max things out. Yet annually when I got a raise, I would then increase my contributions so as not to feel any loss of income. So if you just go ahead and max those accounts now, you will prevent allowing yourself to use those funds to contribute to lifestyle creep. If you still have discretionary spending after that, evaluate what is important for you and whether DVC makes sense for you and your family. It is all about how you vacation and if you want to routinely stay on property at a DVC resort.

 

[first*toright]

Completely agree with this. We crunched the numbers every which way and like you and your wife it made sense for the way we vacation. It did not and does not make sense as an investment. We bought a large contract resale for what we consider a good price and added on the minimum at the time which was 25 points direct. Knowing that we likely will have the option to sell at a decent price if the need ever arises also made us more comfortable. If we no longer enjoy Disney and renting out points becomes a pain, then we sell. Right now we're enjoying the membership and the direct savings on APs for us are a nice plus. It is not and will never be the cheapest way to vacation at Disney but it is the best value for the way we choose to vacation at Disney.

We would not have purchased if we needed to Finance. That's just our personal preference and those original buyers of DVC would have still come out way ahead even with finance charges. That's not really the case these days with the ever increasing cost to buy points.

I often compare DVC to a country club membership with good perks. It's a completely unnecessary expense, but if you can afford it and find value and enjoyment, then that can be enough to justify.

Was just at Disney with some friends - one has been a DVC member for a few years, the other is in the process of buying a contract on the resale market. They were joking about me being next. The one who is buying said pretty much the same thing as @bernina and @Rob Huff and @Budzooka - he could not get it to make sense as a purely financial transaction (and he was paying cash), but his wife loves Disney, and they want to lock in future vacations. So, he's doing it to make his wife happy. He has the money, it could go to investments, or he could prepay some vacations. But one of his kids is already halfway through college and they have college funds for the other in the bank, so he's at a much more flexible point in his life financially.

I am unlikely to buy DVC anytime soon. I don't want to tie up that much of my vacation budget in one place because we enjoy going other places as well. I would not be comfortable financing it - the only debt we have is our mortgage and paying interest would negate even the perception of any savings from having a DVC contract. I max out our tax advantaged savings vehicles, and sock away any extra cash towards college (coming up soon for my kids). Maybe once I have enough sitting around to pay for both kids in cash without touching investments, MAYBE I will feel I have enough leeway in my macro budget to do DVC, but I would need to have both the whole contract paid for and a fund sitting around to pay the dues for at least the first several years before I would make that jump, personally. If I were on the same schedule as my friends who have DVC, I wouldn't be buying in for another 10 years or so - they both bought in their mid 50s!

 

[nkmorgan87]

not sure if this is the best place to post this question, but you are my financial experts.. Looking for advice on the next step

I have an emergency fund saved with about 3-4 months expenses

I participate in employer sponsored 401k where I have 6% taken out (they match half of my contribution up to 3%)

Is it wiser to up my contribution here? OR should I open a roth IRA? OR is there another better option

Just looking for advice, this thread has been very helpful to me !

 

[MickeyMouseCD524]

not sure if this is the best place to post this question, but you are my financial experts.. Looking for advice on the next step

I have an emergency fund saved with about 3-4 months expenses

I participate in employer sponsored 401k where I have 6% taken out (they match half of my contribution up to 3%)

Is it wiser to up my contribution here? OR should I open a roth IRA? OR is there another better option

Just looking for advice, this thread has been very helpful to me !

Why not both? What I do is max out my IRA every year, and then up my 401k by at least 1% every year. Sometimes more depending on raises and such, and my goal is to hopefully start maxing that out.

 

[Starport Seven-Five]

Depends on current tax bracket and where your effective rate will be in retirement. For above median income earners pre-tax is generally better than post tax but there are exceptions to that rule.

Post tax investments reduce taxable income at your top tax bracket. If you are in the 22% tax bracket for a substantial portion of your income, that's 22 cents on every dollar in tax savings. When you withdraw the taxes will be paid on the effective rate which is substantially lower than your top tax bracket. For example, a family with 120k in taxable income filing as married filing jointly will be in the 22% tax bracket for their last 41k in income but the effective rate is 15.1%... and that's assuming you took 120k as taxable income.

There are arguments regarding the risk of future tax rates being higher but I don't buy it for those of us with non 1% lifestyles. A substantial increase in tax rates on the middle class would destroy the economy as so few are living below their means.

 

[ski_mom]

Depends on current tax bracket and where your effective rate will be in retirement. For above median income earners pre-tax is generally better than post tax but there are exceptions to that rule.

Post tax investments reduce taxable income at your top tax bracket. If you are in the 22% tax bracket for a substantial portion of your income, that's 22 cents on every dollar in tax savings. When you withdraw the taxes will be paid on the effective rate which is substantially lower than your top tax bracket. For example, a family with 120k in taxable income filing as married filing jointly will be in the 22% tax bracket for their last 41k in income but the effective rate is 10.62%... and that's assuming you took 120k as taxable income.

There are arguments regarding the risk of future tax rates being higher but I don't buy it for those of us with non 1% lifestyles. A substantial increase in tax rates on the middle class would destroy the economy as so few are living below their means.

I follow most of what you are saying, but can you explain the part I bolded? How are you getting that the effective rate is 10.62%? This past year, I changed our 401k deduction to all pre-tax instead of post tax trying to still be able to take some of the American Opportunities Credit for our DD in college. I am trying to decide whether to switch it back or leave it all pretax this year.