42 year old, saved $3M, thinking to retire next year

I have a very good looking son who is single and likes to travel.;)
 
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Ready said:
Correct. 2% for you, 1% for him.
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Unfortunately, this is the bottom line. Advisers will always tell you that their expertise more than makes up for their fee, but while the evidence to support this is scant and generally anecdotal, the fee is constant in up markets and down.
 
dontworry said:
I am close to your age with a hubby and three kids. We could easily retire with what you have, but our spending is pretty low. Congrats on saving so much!
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I have friends at my age with my kind of saving, but have kids and they say they can't retire yet. I guess saving for schools and especially college sets them back a lot - more importantly, adds uncertainty to the future. :(
 
Lcountz said:
Your money may go a LOT farther if you move out of New York State.....and yes I know NY has a lot of very nice areas to live, but they tax your pension ( part of it), property taxes and school taxes are outrageous ( if you were to purchase property)...Winters can be brutal...I just think your dollar can go a lot further in another state.

Being single myself, and childfree and taking care of an elderly parent ( who is, thank goodness, still very independent at 93 in her own home, reads the WSJ every day and is in relatively good shape for her age)....I see what's down the road for me....I do a LOT for my Mom, and I can see I need to plan for my advanced age as I have no kids to rely on....

But, there are plenty of kids that contribute NOTHING to their parents care...

Anyway...congratulations on accumulating so much wealth at such a young age!!!!

You will be set no matter what you choose to do....!!!!!
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Good for you that your mom is 93 and still so smart and independent! That means you will live a long and healthy life too! :dance: I totally agree with you that taking care of our elderly parents makes us realize that we need to prepare early too.

Yes you read my mind! I will be moving out of NY as soon as I retire - been here for more than 20 years and I am DONE with the east coast! I am going to travel a lot, and start doing some research in Southeast Asia for retirement communities and even nursing homes - I (at least for now) plan to eventually stay in Asia (where I was originally from and still have lots of friends and relatives) when I am really old. SE Asia has some of the best retirement and healthcare systems. My parents now spend winters in one of those retirement communities (not nursing home, just condo complex for retirees mostly in their 60s and 70s) and are very, very happy.
 
JPearl said:
I have friends at my age with my kind of saving, but have kids and they say they can't retire yet. I guess saving for schools and especially college sets them back a lot - more importantly, adds uncertainty to the future. :(
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Kids don't make it any easier, but it's not the lack of savings, it's the excess spending that holds people back.

Keeping a lid on spending and not doing something boneheaded with the portfolio is the key to retire early. Moving to a lower cost area and reducing your portfolio management fees are two important potential sources of expense control. Buying a condo and occasionally renting it sound like a plan that could backfire. Going back to work is a viable Plan B only if you are realistic about how little you will earn. More likely you will find early retirement to be rewarding enough to see that as a real " last option".
 
JP, if you can live on $70k a year - you have plenty.

On the FA, while I'm not keen on them if they are able to earn their keep then I'm not opposed to them. Most do not earn their keep. Look at the AA of the money they are managing and then look to the return they generate after the 1% fee for 1, 3, 5 and 10 years, as applicable, and compare it to the relevant Vanguard balanced funds that correlate to the AA of the money they are managing. If their returns exceed the relevant Vanguard fund then they may be a keeper, otherwise DIY. If they are a keeper, continually monitor them and if they start slipping, consider going DIY.
 
papadad111 said:
Well done!
Welcome!

Firecalc holds some of the answers. I think you'll be fine.

With respect to buying property, i suppose it's the old rent vs own ROI analysis.

If it were me, i would avoid the trappings of an expensive home and the incremental costs that go with it - maintenance, property taxes, insurance, etc. While appreciation can far exceed those costs...with the amount of travel you plan to do, I would take a bit of a "keep flexible" attitude. ..either get something less expensive (a single middle aged woman living in a 500K place generally is a decent amount of house, although location dependent could also be something modest)...or rent for a while til you get into retirement routine and see what happens.

Who knows...you could meet Mr. Right who already has a home and decide to marry. Or want to travel for months on end and not want to be tied to having to maintain a house remotely (or the perils of renting it for the short term).

You have a lot of flexibility with no kids .... 2.5M in cash now....a 0.5M 401K that will grow for another 20-25 years. A reliable 30K annual pension+SS "annuity" at age 65 if all else fails and is lost... pretty well prepared but you should also consider that your parents will eventually pass and if you have no heirs....your own older age care could require more than family help... best to plan for that with long term care insurance, etc etc.

Just some thoughts. Keep us posted.
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I was thinking to get a small condo in or near NYC, not a house - minimum amount of work in terms of maintaining it, and can be easily rented out when I travel. Even if it is left empty for months, the carrying costs are not too terrible. My only concern is that I don't intend to come back to the east coast to live or work, perhaps ever. So keeping a place here, although can be a good investment, may be pointless...
 
pb4uski said:
JP, if you can live on $70k a year - you have plenty.

On the FA, while I'm not keen on them if they are able to earn their keep then I'm not opposed to them. Most do not earn their keep. Look at the AA of the money they are managing and then look to the return they generate after the 1% fee for 1, 3, 5 and 10 years, as applicable, and compare it to the relevant Vanguard balanced funds that correlate to the AA of the money they are managing. If their returns exceed the relevant Vanguard fund then they may be a keeper, otherwise DIY. If they are a keeper, continually monitor them and if they start slipping, consider going DIY.
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I think I'm going to have to respectfully disagree with you on this one. Many actively managed funds have outperformed their index counterparts for as many as ten years, only to seriously underperform the index during the next ten years. Magellan fund is a good example. Unless reversion to the mean has become obsolete, a fund that has outperformed over the past decade is statistically likely to underperform in the future. So if the funds have beat their index over the past five to ten years, it's probably statistically likely that they will underperform at some point in the future, which only further strengthens the recommendation to get out of them and move to index funds.

It's very difficult to guess which funds, or which fund managers, might have tremendous skills at beating the odds. But locking in low costs is as simple a move as you can make to increase the odds of not underperforming.
 
JPearl said:
I was thinking to get a small condo in or near NYC, not a house - minimum amount of work in terms of maintaining it, and can be easily rented out when I travel. Even if it is left empty for months, the carrying costs are not too terrible. My only concern is that I don't intend to come back to the east coast to live or work, perhaps ever. So keeping a place here, although can be a good investment, may be pointless...
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Owning a condo in NY State also exposes you to being deemed a resident for tax purposes even if you live overseas.
 
travelover said:
Here is one way to look at it. Pulling 3% a year gives you $90,000 a year, which is twice the average American family income. Can you live on $90,000 a year?
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Or at 4%.....120000. Plus a pension to follow. Well, how much does ONE need.
 
sinbad said:
Hello JPearl,

congratulations for the amount you have saved and for being able to keep your expenses under control (with such income I think it would have been very easy to let your expenses increase out of control).

Since nobody did until now please let me point you to some valuable resources, in what concerns to investment philosophy and practice:

Bogleheads® Blog | Investing advice inspired by Jack Bogle
Bogleheads • Index page

Please don't assume that to be able to manage your own money you need to have special investment skills or dedicate to it a lot of time. Both are myths and such task can be very simple - it is, nevertheless, important to be knowleadgeble about some investment principles (that you can find in the resouces above as well as from specific authors like Bogle, Ferry, Swedroe, Bill Schultheis,...). There is a lot of evidence that the so called investment expertise is basically noise/luck or results from the comparison with the wrong benchmarks.

Since you are young it is very worthwile to invest some time reading such authors and then keep to yourself the 20k/year - it will be probably your best returning investment.

Best Regards,
sinbad
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Great post: well said and 100% true. Not following this advice is the main threat to so many people's financially sound retirement.
 
Ready said:
I think I'm going to have to respectfully disagree with you on this one. Many actively managed funds have outperformed their index counterparts for as many as ten years, only to seriously underperform the index during the next ten years. Magellan fund is a good example. Unless reversion to the mean has become obsolete, a fund that has outperformed over the past decade is statistically likely to underperform in the future. So if the funds have beat their index over the past five to ten years, it's probably statistically likely that they will underperform at some point in the future, which only further strengthens the recommendation to get out of them and move to index funds.

It's very difficult to guess which funds, or which fund managers, might have tremendous skills at beating the odds. But locking in low costs is as simple a move as you can make to increase the odds of not underperforming.
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We can agree to disagree but the reasoning you suggest is exactly why I think continual monitoring is important. If the managed fund or manager starts to lose their touch, you can identify it and consider changes.

BTW, I think the analysis and monitoring is more effort than it is worth, which is why I am mostly in low-cost index funds. At the same time however, I'm not a zealot that FAs are a no-no.
 
+1 on ditching the FP

We have a small managed account as part of a separation package - no choice at this point for a years, as part of the separation agreement. It's set up to the same (60s/40b) AA as my Vanguard account. VG in 2013 had a personal return around 20% (that covers stocks, bonds and cash). The managed account under 7%. After fees, the managed account has about $10 less than what's been deposited on a monthly basis. Figure that one out. (The total ER on that account is closer to 2%). The FP and the fund managers made money, though. As soon as there are no penalties, that money's getting rolled over. Our overall ER, even with this disgusting account, is .12%, thanks to Vanguard.

I suspect your total costs are actually higher than 1% - that's just the FP. What's your actual ER - the total cost you pay every year? How often does your FP argue that you sell one investment and buy another, increasing costs? A fund can 'beat the index', yet still provide lower returns than an index fund. Morningstar put out a recent article concluding that even managed funds which produced higher percentage numbers still paid less of a return - over time - than compatible indexed funds.

You have enough to retire, depending on your lifestyle. Hopefully you're running your time horizon out about 50 years in FireCalc, since it seems your family is longer lived.

Good luck, whatever you decide.
 
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No doubt there are pros and cons of a FA. A few thoughts:

1-our advisor takes a decreasing % the greater the assets...ie I pay about 0.75% overall. Keep in mind the % may be negotiable. I would think at 2.5 mil you should be paying less than 1%.

2-while you may be manage your own, some folks just can't and this is something you really don't want to mess up. . .you will count on that money.

3-my FA focuses very much on after-tax returns. Currently I am at a very high income and perhaps this will be less important after retirement but I consider this of great value right now.

4-our FA assists with ALL financial factors in our lives: life insurance, disability, any real estate transactions, estate planning, asset protection, etc.

I used to manage my own but I do find value in the advisor we found. But, it took years to find her. Most I felt were worthless.

Just my 2 cents. I'm also 42 and will FIRE in 2 years, 3 months. Good luck!
 
I guess you could also go the Jack Reacher route and just buy a new set of clothes every few days and keep moving.
 
seraphim said:
+1 on ditching the FP

We have a small managed account as part of a separation package - no choice at this point for a years, as part of the separation agreement. It's set up to the same (60s/40b) AA as my Vanguard account. VG in 2013 had a personal return around 20% (that covers stocks, bonds and cash). The managed account under 7%. After fees, the managed account has about $10 less than what's been deposited on a monthly basis. Figure that one out. (The total ER on that account is closer to 2%). The FP and the fund managers made money, though. As soon as there are no penalties, that money's getting rolled over. Our overall ER, even with this disgusting account, is .12%, thanks to Vanguard.

I suspect your total costs are actually higher than 1% - that's just the FP. What's your actual ER - the total cost you pay every year? How often does your FP argue that you sell one investment and buy another, increasing costs? A fund can 'beat the index', yet still provide lower returns than an index fund. Morningstar put out a recent article concluding that even managed funds which produced higher percentage numbers still paid less of a return - over time - than compatible indexed funds.

You have enough to retire, depending on your lifestyle. Hopefully you're running your time horizon out about 50 years in FireCalc, since it seems your family is longer lived.

Good luck, whatever you decide.
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Thank you! Those are great insights. I'll surely be looking into it!
Yes I did a 50 yr horizon in FireCalc, although none of my family members ever lived beyond 90, yet. :(
 
I've now seen many posts like this. Clearly, OP has enough to retire financially. In this case and many other similar posts, OP seems to need some kind of assurance to push him/her over the edge. The real question behind the OP is not financial. It's mental assurance he/she seeks.
 
JPearl said:
Thank you! Those are great insights. I'll surely be looking into it!
Yes I did a 50 yr horizon in FireCalc, although none of my family members ever lived beyond 90, yet. :(
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Careful. When you go beyond ~ 45 years, a calculator like FIRECalc has to drop off the recent 45+ year scenarios, as it won't have a complete data set.

So do 30, 35, 40, and then start going year by year. When you see success rates increasing rather than decreasing as expected, you know you are dropping off some data. You can kind of plot an expected curve, it will start to flatten out.

-ERD50
 
Welcome! I'm also a 42-year-old single woman with no kids, looking to retire next year. Your finances look very good. My expenses are a bit lower than yours, but I live in a lower-cost area and have my house paid off. I'm also planning to travel a lot after I retire.

I would hold off on any condo purchase until you've spent some time living overseas. You may find you never want to come back. Sounds like that's what you're planning to do in any case.

I feel some anxiety about retiring too even though I've analyzed all the finances to death and they look good. I'm guessing the anxiety will get more intense as the date approaches. My parents retired with a very solid financial outlook and my dad had stress-induced hives for a year after giving up his income, believe it or not. So I guess all I can do is prepare mentally for some anxiety to inoculate myself against One More Year syndrome. :)
 
Jpearl, i'm in about the same position you're in (single, 42, healthy savings), except I've already quit my day job about 10 years ago. I'm still working on where to live and how much to travel. Anyway, good luck. You've found the right board for advice!
 
Not sure if this has been mentioned, but I believe the OP can get a free consultation with a Vanguard CFP due to the amount of assets (over 500K). I think at that level you get a free annual meeting as well. Hey, its free so it is at least worth a call!
 
ERD50 said:
Careful. When you go beyond ~ 45 years, a calculator like FIRECalc has to drop off the recent 45+ year scenarios, as it won't have a complete data set.

So do 30, 35, 40, and then start going year by year. When you see success rates increasing rather than decreasing as expected, you know you are dropping off some data. You can kind of plot an expected curve, it will start to flatten out.

-ERD50
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Good to know! Thanks a lot.:flowers:
 
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