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Couple 47/51, 5 kids, possible ER after windfall
Old 08-28-2010, 10:45 PM   #1
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Couple 47/51, 5 kids, possible ER after windfall

Hello, everyone. I happened upon this forum a few days ago and am impressed with the quality of discourse and abundance of information here. This seems like an excellent community, and I look forward to participating.

I'm 47 and my wife is 51. Our kids are 21, 19, 17, 15, and 12. The oldest two boys are in college, the next two boys are in high school, and our daughter is still at home. (My wife teaches the kids through eighth grade.) College savings supplied by my parents provide for an in-state education for all the kids. My income provides a comfortable life here in Evansville, IN, but our annual savings have been modest, just 6% for the 401K.

I would describe our financial style as moderate, neither frugal nor profligate. We're not status seekers, drive older vehicles, and live in a rambling older home, but the house has a pool, and we eat very well. Our only debt is our home mortgage. I expect our expenses to diminish steadily as the kids graduate from college and begin supporting themselves.

Prior to the events of this month, our primary retirement plan was to hope for a liquidity event for the substantial stock allocation I received in 1998 as an early executive participant in a privately held company. Our backup plan was to work until my mid-60s and retire at a lower standard of living than the one we enjoy now.

As it happens, our company was sold to another company in our industry earlier this month, and after the expected December closing and after paying off our house we expect to have liquid assets equal to about 26 times our annual income. Only 6% of those assets will be in tax-deferred accounts.

I will know a lot more next week as integration planning begins Tuesday, but currently I think I'm likely to be needed for the next year or so. Continuing to work for the acquirer after that is possible but not the most likely outcome. At least one other professional opportunity is likely to be open to me here in town, and starting a new business is also a possibility.

Of course, all of this also has me thinking about early retirement. I'm pretty sure that 3.8% is a sustainable withdrawal rate, and the fulfillment of our financial obligations to our children over the next 10 years should allow us to reduce that to 3.3% or less. While I can imagine being energized by a new work role, I confess to some ennui and find the prospect of more leisure time enticing.

I do wonder if I'll become bored, shiftless, and self-indulgent in retirement. Will I find enough to do, and what will it be like to be the only age peer I know who doesn't work? My initial focus would be on investing. I'm confident that I could spend six months reading, studying, planning, and managing the portfolio. I don't yet have a feel for how much longer I might want to spend lots of time on that. I wonder how much time the other DIY investors here spend managing money.

Anyway, thanks for reading this far. If you have any comments or suggestions, I'm all ears.
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Old 08-28-2010, 11:51 PM   #2
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Welcome and congrats on becoming FI.
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Old 08-29-2010, 12:18 AM   #3
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I do wonder if I'll become bored, shiftless, and self-indulgent in retirement. Will I find enough to do, and what will it be like to be the only age peer I know who doesn't work? My initial focus would be on investing. I'm confident that I could spend six months reading, studying, planning, and managing the portfolio
Congratulations on the windfall!

If you don't continue with a regular salaried job, either at the current company or some place else, do you have a way to get health insurance for your family?
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Old 08-29-2010, 12:35 AM   #4
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I thought I would price private insurance and compare it to COBRA. I don't yet have a good feel for the difficulties and risks of using private insurance. Our health is pretty good today, but I'm concerned by the stories of people getting sick and having their insurance canceled. Presuming that the new law takes effect in 2014 as scheduled, that concern should go away, right?
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Old 08-29-2010, 12:39 AM   #5
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Welcome! Maybe after the integration obligations are met you could take some time off, like a sabbatical, and decide what to do next. You may like it enough, and find you have enough, to just stay on sabbatical...or FIREd. I'm a year or two older, and our two kids are in college already. I will be working until just before the end of school for the second child. Because I will still be a relatively young 51, and because DWs genes tend toward 100 year longevity, we are targeting a withdrawal rate of <3%, and even then a very cushy budget so we could reduce if the state of the world and the markets go significantly south. You are a little younger than me, but be sure to include your and your DW's longevity in your considerations.

Again, welcome, and congrats on the soon to be realized liquidity!

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Old 08-29-2010, 12:56 AM   #6
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Thanks for sharing, Rambler. How did you arrive at your below-3% SWR?
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Old 08-29-2010, 01:38 AM   #7
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Thanks for sharing, Rambler. How did you arrive at your below-3% SWR?
Belt, suspenders, and ultra conservative mentality when it comes to having enough. Actually, before I found this site a few years ago, having seen the normal "25x expenses for 30 years of retirement" mantra everywhere, I figured that we would need .833x expenses for every year we expected to survive. At the time I was looking at a 95 year life expectancy for DW, probably less for me. Still, that is 44 years of retirement, not 30. So I did the math like this: .833 x 44 years means 36.65 years of expense saved, or a 2.73% WR.

I know that is not accurate, and I would probably be fine with a higher WR, but I have to work until end of 2012 anyway (succession planning issue), and by then, assuming the market is steady, does not go up, but does not tank, this is probably a doable proposition for me.

At the end of the day, I want DW to be well cared for, and I feel comfortable that she will be comfortable in her waning years if we are able to start with a lower WR (and still be able to do what we want to do). So, frankly, I'm targeting 2.75% but feel we will be fine if we are able to hit <3%.

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Old 08-29-2010, 07:28 AM   #8
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I do wonder if I'll become bored, shiftless, and self-indulgent in retirement.
Fear of the unknown haunts many pre-retirees.

Boredom shouldn't be an issue, at least not if you have a reasonable sense of curiosity. As to becoming shiftless and self-indulgent, what's wrong with that?

Welcome to the forum.
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Old 08-29-2010, 08:17 AM   #9
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I will know a lot more next week as integration planning begins Tuesday, but currently I think I'm likely to be needed for the next year or so. Continuing to work for the acquirer after that is possible but not the most likely outcome. At least one other professional opportunity is likely to be open to me here in town, and starting a new business is also a possibility.
Congrats on the windfall. Nice to have more options going forward. You must feel like a ton of bricks have been lifted from your shoulders.

Looks like you will have another year or so to plan and learn more about investing. That is good and will give you time to get comfortable with the idea of retiring early. Some people do become bored when retiring early although that has not been the case with me. Lot's of things you can think about doing such as getting involved with volunteer work, hobbies, or even part time work.

Keep us up to date on how things go next week.
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Old 08-29-2010, 11:44 AM   #10
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There looks to be a high potential, in a few years, for many grandchildren to keep you from being bored!

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Old 08-29-2010, 11:46 AM   #11
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I'm reading this in Seward Alaska, after two weeks of RV cruising. There is a great big world out there and no one should be bored. That being said I think you have to look at the threads on the needs of children in this environment. They are far more dependent on extended families than before and for a longer time. DD #2 just graduated summa cum laud from Law School and is job hunting in a rough environment.
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Old 08-29-2010, 12:06 PM   #12
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Welcome to the forums and congratulations on having a nice nest egg while raising five kids! And your house will be paid off! Awesome.

I would think affordable health insurance for a big family might be a problem and might be a factor in deciding to continue working (if you enjoy it, and knowing you're financially independent makes working much more palatable imho).

I don't think people really change in retirement so if you weren't already bored, shiftless, and self-indulgent you probably won't become so. If you feel you need more to do, you will find it.

I was worried that this wasn't going to end well:

Quote:
Prior to the events of this month, our primary retirement plan was to hope for a liquidity event for the substantial stock allocation I received in 1998 as an early executive participant in a privately held company. Our backup plan was to work until my mid-60s and retire at a lower standard of living than the one we enjoy now.

As it happens, our company was sold to another company in our industry earlier this month, and after the expected December closing and after paying off our house we expect to have liquid assets equal to about 26 times our annual income. Only 6% of those assets will be in tax-deferred accounts.
I thought the substantial stock allocation might have diminished or evaporated on the sale of the company. Do you already have a plan on how to invest the proceeds? Other people here can give you great advice on resources to decide how to do that, if you need it (of course some of us are good at giving advice even if you don't need or ask for it ).
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Old 08-29-2010, 01:18 PM   #13
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Welcome! Maybe after the integration obligations are met you could take some time off, like a sabbatical, and decide what to do next. You may like it enough, and find you have enough, to just stay on sabbatical...or FIREd.
This idea seems better the more I think about it. Spending, say, 9/1/11 - 12/31/11 on "sabbatical" would give me a good solid taste of everyday life rather than the extended vacation fantasy. During that period we'll have a home schooled eighth grader and a junior in high school, so we won't be doing much traveling. If I'm happy living day to day in that way, I should FIRE. If not, I can explore my employment options locally.
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Old 08-29-2010, 01:23 PM   #14
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There looks to be a high potential, in a few years, for many grandchildren to keep you from being bored!
True! One of my fantasies is to get a Class B motorhome and travel a lot. As the kids spread out, we can establish a regular travel circuit.
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Old 08-29-2010, 01:25 PM   #15
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I think you have a couple of years to sort things out. If you have an interest in investing, that can take a considerable time. It can even approach a fulltime job if you want something more than indexing, at least for a while.

Other interests do develop and many of us cannot understand how we found time to work. DW also needs to feel fulfilled. Options such as travel will depend on where the kids end up at school.

Welcome to our club. FI first and then plan for RE.
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Old 08-29-2010, 01:30 PM   #16
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I'm reading this in Seward Alaska, after two weeks of RV cruising. There is a great big world out there and no one should be bored. That being said I think you have to look at the threads on the needs of children in this environment. They are far more dependent on extended families than before and for a longer time. DD #2 just graduated summa cum laud from Law School and is job hunting in a rough environment.
Thanks for the encouragement. I'm getting more and more comfortable with the idea. It helps a lot to read people's stories here.

I'm confident that the three older sons will be fine with electrical engineering and IT degrees. It's a bit too early to tell how son #4 and our daughter will land, so I see your point that our 10 year child rearing horizon might stretch into 12, 14, or more. I'll keep my eyes peeled for the threads you mention.
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Old 08-29-2010, 03:52 PM   #17
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Old 08-30-2010, 12:27 AM   #18
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I would think affordable health insurance for a big family might be a problem and might be a factor in deciding to continue working (if you enjoy it, and knowing you're financially independent makes working much more palatable imho).
I'm guessing that $12K annually should cover us, but I have not looked into it yet and could be way off. If that estimate is close, health insurance is not a deal breaker; on the other hand, it's a substantial cost that would be great to avoid.

Your parenthetical comment resonates. In the past week, as the reality of FI has sunk in, I have become increasingly calm in the face of rampant uncertainty at my workplace. It seems at least possible that I will enjoy work more now that it is more of a choice than a requirement. And, if as seems likely I am not needed for long by my current employer, an ESR approach may be a good fit.
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Do you already have a plan on how to invest the proceeds? Other people here can give you great advice on resources to decide how to do that, if you need it (of course some of us are good at giving advice even if you don't need or ask for it ).
I don't have a plan yet, and I am spending a fair bit of my free time reading about portfolio management. I notice that investing is a major topic here, and I look forward to hearing the advice of others here and learning as much as I can.
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Old 08-30-2010, 10:58 AM   #19
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I do wonder if I'll become bored, shiftless, and self-indulgent in retirement. Will I find enough to do, and what will it be like to be the only age peer I know who doesn't work? My initial focus would be on investing. I'm confident that I could spend six months reading, studying, planning, and managing the portfolio. I don't yet have a feel for how much longer I might want to spend lots of time on that. I wonder how much time the other DIY investors here spend managing money.
Welcome. It's an interesting story. First impression is that you'll certainly have enough to keep you busy with your kids. That might be a really great thing for all of you.

My experience has been that transitioning to ER can take time and you may have to "grow" into the idea over months or years. It took me a long time to realize that the "plan" I had developed all along would actually work (financially). Your plan is just now starting to show itself and may take time to fine-tune, but that's part of the fun.

Being the only one in your peer group who is not working is cool, but also takes time to get used to. There are a number of discussions on that topic on this forum.

Good luck!
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Old 09-03-2010, 08:43 PM   #20
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Keep us up to date on how things go next week.
It was a roller coaster ride, but after some waffling and uncertainty the acquirer made what I think is the right business decision regarding my area. For me personally this means that my position is safe for about a year, and I feel energized by the upcoming challenges I perceive.

Anyway, thanks again for all the advice and encouragement - really helpful. I have a couple of specific financial questions that I'll post later this weekend in the FIRE and Money forum.
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