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

[nash031]

Quote:

Originally Posted by JPearl My financial advisor is more conservative than that. He thinks I can, and should only pull 2% of my net worth, that is, excluding real estate or hard assets (not that I have any) annually. That would give me only $60k a year in spending.

This kinda hacked me off regarding your FP. Yeah, he'll tell you to live off of 2% and tell you that you'll be fine on $60k per year all while he collects $30k per year. Meanwhile, chances are you could ditch him, spend $90k a year yourself and be just fine until age 90 (or until Kingdom come, whichever comes first).

I don't think I'd be able to sleep at night if I were that guy. I'm betting his performance is no better than a cheap index fund anyway, and particularly when you chop off the first 1% for his management fees.

As others have mentioned: 1% is just his fee, the funds he puts you in have fees, so depending on what you're invested in you could actually be paying anywhere from 1.05% up to more than 2% per year to invest your money.

Please seriously reconsider using a planner.

[explanade]

Some rental markets are expensive.

A good 2 BR apt. in the Santa Clara Valley could easily be $2000 a month.

[Elbata]

Quote:

Originally Posted by Ready Correct. 2% for you, 1% for him.

Wow, thinking of it that way means it's all her money but the FP gets half. And no downside. If the account were to drop by half, FP still gets his 1%.

[nash031]

Quote:

Originally Posted by mikefixac Wow, thinking of it that way means it's all her money but the FP gets half. And no downside. If the account were to drop by half, FP still gets his 1%.

That's what torques me off about this industry. They tell you to live on less so you can keep paying them.

[NotJustDreaming]

Hi Pearl,
Welcome!

Based on all I've read on this thread above I don't see any benefit to purchasing any type of residence at this point. If you're committed to traveling extensively, it just doesn't make any sense.

In my view, any cash you tie up on property would be much better spent on your travel accommodations, which is an inevitable expense of traveling.

You could opt for short or longer term rentals in the countries you want to explore and then use those as a home base to travel the more immediate areas. You know, rent an apartment in Mallorca Spain for three months and then explore Spain, Portugal or France etc and hop on a plane to satisfy a whim visit to wherever if you get antsy to travel faster. New location with new rental. Rinse and repeat. Or you may just want to stay in your Mallorca pad longer.

Not being tied by real estate, you'd have complete flexibility. At least until you find out exactly how you feel about it all once you are retired. And maybe you'll find out quickly exactly what kind of lifestyle fits you best. Or maybe it will take years of exploring to figure that out. Not being tied down is a great asset to have for that kind of personal awareness journey.

I know I'm not, but if I were in your shoes....
I'd give my notice today. Pack my bags and see where my fancy takes me. Read all about index investing during your time at the airports if you're not too busy people watching and meeting. Once you're satisfied that ditching your FP was the right move (since you took that free consult with VG and move all your money) you can tramp all over the world footloose and fancy free.

I'm three years behind you. I've read a ton about long term SLOWER travel being less expensive than the cost of living at home. I'm convinced of it. And your 3% WR is a princely sum (especially for one person) if you do it right.

I've also read enough to resolve not to be disappointed in myself, DH or dear kidsX3, if any of us finds the shiny allure of long term world travel gets tarnished much sooner than we would ever have anticipated.

What a great dilemma to have. Financially you are so ready by my measure. It's time to find out what you love most about the next phase in your life.

I dislike change. Any stupid kind of change that causes a permanent unknown X factor. Take a new position at work. Same employer, just a couple of doors down in the same building even. Maybe a few different responsibilities. Mostly similar things though, just different. For weeks I'll dread that damn change, even if I pursued it myself. Then when it finally happens it's almost like I've been always doing it. It's just that it's a change and has some unknowns. But even our everyday stuff has unknowns, we just aren't as aware of it. I think a huge amount of people have change phobia. That's why we're such creatures of habit us humans.

So keep that in mind.

I'm excited for you. Best wishes!

[seraphim]

"As others have mentioned: 1% is just his fee, the funds he puts you in have fees, so depending on what you're invested in you could actually be paying anywhere from 1.05% up to more than 2% per year to invest your money.



Please seriously reconsider using a planner."

Ditto. We have about $20k with an FP out of necessity - a severance pay agreement. Our ER there is just under 2% - the FP gets 1% - and we're not making any money on the 60/40 AA. The FP is. So is the Oppenheimer manager. Our VG account has an average ER of .10 - which is about 1/20th of the Oppenheimer account. The annual fees on the VG account are about $850 a year. Were those funds at Oppenheimer, that fee would be nearer $17000. A year. Now all funds aren't as bad as Oppenheimer, and my numbers here are off-the-cuff.
But you get the idea.

Are you rich enough to throw $16k a year away?

[aida2003]

Very interesting thread with lots of advice. I didn't read every post, only skimmed through so I might have missed necessary information. Below are my observations, suggestions, etc.

People on this forum and Bogleheads are DIY'ers in retirement planning arena and are comfortable with that and will almost always say ditch advisors and do yourself. You, OTOH, have everything under management, so you don't sound you've got experience as a DYI (yet). So, my suggestion or advice to me wouldn't be to toss your 'helper' in a NY minute, but first explore various options and find one or two which would be better for you and feel very comfortable with. Of course, the goal should be minimize that 1% management fee which you're paying on top of expense ratios.
If you haven't yet, if I were you I'd post your holdings on this or Bogleheads forum to hear some opinions.
Others already suggested that you can use VG to get their FREE advice. I've heard that if you choose not one-time plan review but the continuous review, you pay 0.3% annual fee and have access to the advisor. I don't know how good this option is.
If you wish to hear more opinions, I got a solicitation for a FREE plan review from Personal Capital. I was just testing the site and apparently I told the size of our retirement savings and got a call a few months later, but you can call yourself and inquire. I didn't use, so again I don't know how good they are.
I think this guy jlcollinsnh | Money – Life – Business has lots of great and simple advice for newbies. He doesn't like using FP's, but I think he did a review of one or two possibilities to get cheaper help. You might want to check it out.

Re house buying. Just because you're planning to travel so much and the fact that you're not too thrilled with house management/maintenance, I would strongly agree with others to reconsider. And a $500K house?!? This would be insane. People try to downsize such houses in order to add money to their retirement piggy-bank and you're thinking in reverse. I'd definitely not do it (well, I have some experience because we own a house and have two small kids, so I know this stuff a bit, all this cleaning, fixing little things become annoying after some time). Why not live with your parents before you fully establish your future plans and avoid unnecessary bills?

In addition to the above, it would be a good idea to establish your residency in a income tax free state when you plan to travel so much. I don't live in PA but I've signed up on James Lange's site because his advice is applicable nationally too. His free information is great too. If I got it right, PA is income tax free plus it doesn't tax IRA's. If you plan to roll over 401k to IRA, PA is not that far from NY.

Good luck. Your savings are impressive, BTW.

[obgyn65]

Yes.

Quote:

Originally Posted by JPearl So, do I have enough to retire next year?

[seraphim]

Aida

Good observations. As much education as possible.

"Others already suggested that you can use VG to get their FREE advice. I've heard that if you choose not one-time plan review but the continuous review, you pay 0.3% annual fee and have access to the advisor. I don't know how good this option is. "

Depends on how much money you have invested in VG funds. I'll have to double check Flagship Membership ($1M+), but I've not had any additional charges yet. I don't call often, though. Only once after the initial plan setup, which I pretty much ignored as overly complicated, and the advisor failed to take some parts of my situation into account, and later received advice on an alternate setup.

https://investor.vanguard.com/what-w...ts-at-a-glance

They also have a free RMD service to calculate and disburse your RMDs

[EastWest Gal]

I live in PA. State income tax is a flat 3.5%. Not bad. However, PA is one of 5 states with an inheritance tax, which I found out when my dad moved here then passed away.

But PA is one of only a few states that does not tax pension income. Doesn't help me--no pension for me.

Every state gets it's money somehow. F example, I drive regularly to VA, passing through MD and WV. Sales tax in VA is very high but price of gas is low due to low gas tax. WV gas is expensive, so I make sure I don't stop for gas there.

I guess we all have to figure out what's best for our own personal situation.

[JPearl]

Thx everyone! The tips, particularly on the VG funds (hence getting rid of the FA) and tax strategy are extremely helpful! I'm so happy to have found this forum.

Regarding the $500k real estate investment, my plan was to get a small condo in NYC, perhaps a studio or 1b (can be up to $600K). All cash no mortgage. The taxes and common charges are usually <= $1000 in total. I can rent it out for at least $2500/m easily in a good neighborhood. This will give me a pretty good monthly income, very minimum repair/maintenance required, and some appreciation on the property down the road. Plus real estate taxes are deductible from income. I checked --having a property in NY does not make you a NY state resident as long as you don't live here for more than 180 days/yr. therefore you don't necessarily have to pay NY state taxes.

I will be traveling a lot and will probably not live in NY or even the US in the next 2 years, but still would like to have a place to come back to. And if the place can bring some cash flow and appreciation it will be a big plus. Do you think this is a feasible plan and good investment?

[bltkmt]

Quote:

Originally Posted by dscott745 To be honest, our home has been a source of aggravation. If I had to do it again, I would rent.

+1 on this, especially after this hard winter in the Northeast. Our house took a beating and needs some $$ work.

[JPearl]

But a condo in an apt building doesn't need much repair, and the heating bills are included in the maintenance. I won't consider buying a house, but an apt is doable.

[Closet_Gamer]

Quote:

Originally Posted by nash031 This kinda hacked me off regarding your FP. Yeah, he'll tell you to live off of 2% and tell you that you'll be fine on $60k per year all while he collects $30k per year. Meanwhile, chances are you could ditch him, spend $90k a year yourself and be just fine until age 90 (or until Kingdom come, whichever comes first). I don't think I'd be able to sleep at night if I were that guy. I'm betting his performance is no better than a cheap index fund anyway, and particularly when you chop off the first 1% for his management fees. As others have mentioned: 1% is just his fee, the funds he puts you in have fees, so depending on what you're invested in you could actually be paying anywhere from 1.05% up to more than 2% per year to invest your money. Please seriously reconsider using a planner.

+1

Especially because most people don't have terribly unique situations. The vast majority of people have financial plans that can be taken right off one out of a handful of templates. Unless you have some really unique situation, the advisor essentially dispenses the same few sets of advice to everyone who walks thru the door....or worse, they do try to construct some arcane plan that winds up under-performing and driving a bunch of risk/tax consequences.

Ridiculous.