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43 year old soon to be first time father!
Old 04-10-2012, 03:08 PM   #1
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43 year old soon to be first time father!

My wife and I both currently work in well-paying corporate jobs and my wife plans on leaving her work when our baby is due (May). We have always maxed out our retirement savings and have saved on top of that. As a result, I been kicking around the idea of leaving work too. We have about 600k in 401k funds and an additional 300k in a self directed IRA. In addition, I own several rental properties and they bring in about 50-60k/year. I donít have any debt (other than mortgages on my primary home and rental properties). Our monthly expenses are around 6k and I know that if we could significantly reduce these that I could leave.
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Old 04-10-2012, 03:16 PM   #2
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Congratulations on the great achievement so far. How about any taxable investment? I would at least wait till paying off the mortgage before leaving work myself.
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Old 04-10-2012, 03:23 PM   #3
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I had a decent amount of money (around 500k) in the stock market. Three years ago I got my real estate license and started buying foreclosed properties. So basically all my "taxable" investments are in real estate (all rentals). I have about 50k in stocks but I will probably use this to purchase another property. Some people have told me that I'm putting too many eggs in one basket but I'm able to rent for substantially more than all expenses (even if I were to assume they were 100% financed). I've run into some bumps in the road but I feel I have the process down fairly well. I now own 17 properties. I figure if I can purchase 5-10 more then I would feel more comfortable leaving my corporate job.
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Old 04-11-2012, 09:17 AM   #4
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I donít have any debt (other than mortgages on my primary home and rental properties).
This always makes me laugh. I don't have any debt, except for this $300,000 loan over here.
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Old 04-11-2012, 09:20 AM   #5
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salmp01,
If you really dislike your Corporate job (like many do) then I would leave and be willing to live a slightly less expensive lifestyle. Of course, it is vital that your spouse be in total agreement with this plan.
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Old 04-11-2012, 09:32 AM   #6
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Health insurance would be an issue,.
managing that many properties is a full time job, so it isn't like you would not have anything to do. I would run worst case sceniorios on the value of your rentals , factor in health insurance, the cost of raising the child (children) college expenses etc... and how employable are you should you change your mind down the road.
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Old 04-11-2012, 10:06 AM   #7
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Your age and your asset allocation seem to be at odds. Most of your savings ($900k) is in tax deferred accounts that you can't really get to for many years. What do you propose for an income stream for the period before you can withdraw the IRA/401k $$s.

I totally understand not enjoying the corporate world. (I've been with the same megacorp for 17 years and we're in the process of being gobbled by an even larger megacorp.)

Have you considered easing into retirement... reducing yours and your wife's hours to less than full time? I found this worked for us during the early years of kid raising - so much that we never went back to full time. This really made the work/life balance much easier. But then again - I had my first child during the dot-com boom and engineers could call their own shots... Not sure I could negotiate my part-time status in today's job market. (I'm still working 80% 11 years later.)

The part time adjustment also helped us refine the LBYMs lifestyle. Then the downtown in the economy kicked my spouses work into even more part time status. His willingness to work fewer hours kept him employed when the collapse of the building industry destroyed the architecture job market. Now that things have recovered somewhat we've gotten used to the LBYM lifestyle and bank even more $ towards retirement.
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Old 04-11-2012, 10:11 AM   #8
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This always makes me laugh. I don't have any debt, except for this $300,000 loan over here.
Not to be harsh, but +1 ...
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Old 04-11-2012, 10:23 AM   #9
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I think you would be best to wait. Staying home with a baby might not be what you want. You could see and your expenses might change.

I always told myself through my 40's that i was going to retire in 4 to 5 years. I ended up working to 59 maybe a year or two to much but close. Anyway from your numbers you are short on how to live from now until 59. You need 22k more per year plus a buffer...maybe as much as a million. I would not assume that my expenses will go down after having a baby and quiting a job...to many unknowns.
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Old 04-11-2012, 10:36 AM   #10
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If you were 100% debt free and had the health insurance situation under control, I'd say the numbers might work (even with the uncertainty of keeping your rental properties rented out). But with the mortgage debt still there and a dysfunctional health insurance system tied largely to being employed, I think there's too much risk.

Another thing that might be a factor is the type of work you do, as that may determine how "employable" you will be after a significant gap in your work history. If you work in a fast-moving, ever changing field like technology, if you need to go back to work (or even just *want* to) in a few years, you may be obsolete and unemployable. If you work in a much more stable, less changing field it might be less of a concern to get a job years down the road.
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Old 04-11-2012, 10:45 AM   #11
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+1 on figuring out health insurance first. Also, there are definite expenses to adding a 3rd person to your household. It is also very important to get your child into social situations early and often with others their own age.

Although DH and I both worked full-time while raising our 2 kids, looking back it would have been wonderful for us both to have worked less than full-time.

I totally understand the Megacorp frustration (been there, done that) but that doesn't necessarily mean giving up on the workforce altogether. I think I was a better parent overall for being a w*orking mom.

Good luck with whatever you decide!
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Thanks for all the words of wisdom!
Old 04-11-2012, 10:47 AM   #12
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Thanks for all the words of wisdom!

Below are some of my responses/comments.

I have 5 mortgages for 17 properties so my overall LTV is quite low. I could sell a few properties and pay off all my debt but Iím locked into low interest rates (from 4% Ė 4.75) and Iím making a much higher return on the properties. I really hate debt but I feel that if I can make a significantly better return than the cost to borrow the money that it makes perfect sense.

Regarding Health insurance.. There will be some added cost but it really isnít that much. I priced out insurance (for a family of 3) at ehealthinsurnace.com and it look like the premium would be less than $400/month for a 6k deductible plan. So worse case would be around 1k/month. I currently have a 8k deductible HSA plan through work and I have never come close to using my deductible. My monthly cost for my work plan is $120/month so the difference isnít all that great.

My idea of retirement does not involve sitting around my house. I plan to make money but not in an 8-5 type job. The problem is I donít know how much money I will make and being as financially conservative as I am that scares me! What also scares me is letting significant more time pass by while I work in my corporate job not being 100% happy. Iím struggling with this balance.

Regarding getting at my retirement fundsÖ There are a few ways I could get at these. Ĺ of my self-directed IRA is a ROTH IRA so I could withdraw the principal penalty free. Also, if my income is low I could convert a portion of my traditional IRA to a ROTH, wait 5 years and withdraw the principal. I would rather not do this but if I needed to I could.

Regarding my ďemployabilityĒ after leaving workÖ This is a good point. I work in technology and after a couple years it would be very hard to return.
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Old 04-11-2012, 11:07 AM   #13
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Your ratio may be low, but a half million or even more of mortgage debt is not a small amount. I understand what you're saying, but.....you know.
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Old 04-11-2012, 11:36 AM   #14
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Quote:
Our monthly expenses are around 6k and I know that if we could significantly reduce these that I could leave.
You're about to have a baby and you think you can reduce your cost of living? LOL

You ARE a first time father *grin*

Congratulations.
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Old 04-12-2012, 04:26 AM   #15
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Congratulations, salmp01.
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Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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