Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Hi... age 40, $3M, should I retire?
Old 01-11-2009, 09:22 PM   #1
Recycles dryer sheets
 
Join Date: Jan 2009
Posts: 193
Hi... age 40, $3M, should I retire?

I recently sold my business and currently have $2.95M in liquid assets after taxes. I'm still working for the company that acquired mine, at $180K a year, but the stress and BS have me coming home everyday saying I really don't need this, so why am I here? I have a non-compete but not under employment contract.

My questions:

-- The 3-5% rule-of-thumb withdrawal rate, does that assume all taxes will be paid out of that as well? So if I need $60,000 a year I would really need to consider $90K as the withdrawal amount?

-- Is there a conventional wisdom that says professionally managed "wealth" services like Fidelity's Portfolio Advisory Service are known rip-offs, or okay for new investors who probably couldn't do any better? They say they also provide maximum tax benefit so while returns may not be as good as putting it in indexed funds myself, the taxes may end up lower. Sales BS or is there something to it?

Thanks and hello everyone!
Kabekew is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-11-2009, 09:43 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Kabe, welcome to the forum. My advice is to run, don't walk to the nearest exit and get on with your life.

Quote:
Originally Posted by Kabekew View Post
-- The 3-5% rule-of-thumb withdrawal rate, does that assume all taxes will be paid out of that as well? So if I need $60,000 a year I would really need to consider $90K as the withdrawal amount?
Yes, the "4% rule" refers to the initial amount withdrawn from your portfolio in year one, including taxes.


Quote:
Originally Posted by Kabekew View Post
-- Is there a conventional wisdom that says professionally managed "wealth" services like Fidelity's Portfolio Advisory Service are known rip-offs, or okay for new investors who probably couldn't do any better? They say they also provide maximum tax benefit so while returns may not be as good as putting it in indexed funds myself, the taxes may end up lower. Sales BS or is there something to it?
This forum is populated primarily with DIY investors so the most frequent response to your question is likely to be "Sales BS". However, I'd say the answer depends on how complex your tax issues are and how interested you are in managing your own financial affairs. Most of us have figured out managing our own money isn't rocket science and fees paid to advisors is an unnecessary expense.

Others will be along shortly to disagree.
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 01-11-2009, 10:47 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
Quote:
Hi... age 40, $3M, should I retire?
Heck no, send half of it to me. Further instructions will follow.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 01-11-2009, 10:49 PM   #4
Thinks s/he gets paid by the post
Rambler's Avatar
 
Join Date: Jul 2007
Posts: 2,487
If you can live on $90-110 or so pre-tax, you can do it. At that level, you can almost be tax free, if your AA is right, and with maybe 40% or so in tax-free long munis. My situation is very close to yours as a target (3.2m x 3.4%swr, with a 55/40/5 AA, the 40 being in long munis, now yielding around 6% if you can stomach A or AA ratings, and the 55 being in dividend paying equities). Total cash throw-off is targeted at 3.4%, and looking for 7-7.5% total returns. For me, since we pay a religious tithe of 10%, there is no tax on this cash throw-off due to personal exemptions, and being able to deduct the tithe as a charitable contribution, and of course the tax-free-ness of the munis. The 5% is cash, bare bones expenses worth for 3+ years, or emergencies.

Others may have issues with this type of AA and tax strategy, and I don't mind hearing them. Its just what looks like it will work best for us. BTW, we have about 2years until punch-out. May be a little later depending on how long the down economy lasts. Was originally targeting this coming June but do not want to retire into a declining market, prefer one on the upswing.

For you, I think you could do it now if you wanted, but if you can stomach the stress for another 6-18 months give or take, that would probably be a good option, just to see where the market takes you and your funds. I do quite a bit of career counseling and advice, as well as statements in the press, and my advice of late to anyone who will listen is that if you have a job right now, don't quit...wait and see. You have to be able to stomach the stress though, or become like a duck (when water hits their back it does not faze them).

Good luck!

R
__________________
Find Joy in the Journey...
Rambler is offline   Reply With Quote
Old 01-11-2009, 10:53 PM   #5
Thinks s/he gets paid by the post
Rambler's Avatar
 
Join Date: Jul 2007
Posts: 2,487
Forgot to add, with the strategy I outlined, you probably won't every have to touch the principal, except for the occassional update to AA.

R
__________________
Find Joy in the Journey...
Rambler is offline   Reply With Quote
Old 01-11-2009, 10:54 PM   #6
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 312
"Should" you retire? That's a personal choice. "Can" you retire? It looks like you can as long as your needs are not extravagant.

Please be careful about the higher end of the "3-5% rule" that you quote. The general consensus is that 4% can easily be survivable for 30 years. Pushing it to 5% gets much more iffy. But you are only 40. At this age, with easily 50 years ahead of you, something more like 3% would be a safer bet, and some would say less than that, even.

As REWahoo says, that 4% (or, better yet, 3%) includes taxes.

Finally, the "pros" will take an excessive cut for their services. Read a few books and do it yourself. It's not that hard. Here's how easy it can be:

* Put say 7 years expenses in a CD ladder and keep the ladder topped off.
* Put the rest in Vanguard's Wellesley (an income-oriented fund) or one of their Target Retirement accounts that suits your preferred stock percentage ("100-age in stocks" - 60% in your case - is a good rule of thumb).

I'm not saying this is optimal, but it's a good start.

Best of luck!
Grep is offline   Reply With Quote
vector vest
Old 01-12-2009, 01:41 AM   #7
Confused about dryer sheets
 
Join Date: Jan 2009
Location: Brinnon, WA
Posts: 2
vector vest

Kakbew: I played at the stock market for20-30 years using a broker, and I got broker. Before I retired 12 years ago I decided my $500k IRA wasn't going to be enough at age 62. I got a lot more serious about the mkt and spent a lot more time learning. During that time I discovered a very useful tool. It is called Vector Vest. I have found it saves me a great amount of time getting info as well as their excelent advice. They will give you software and books and a 5 week trial for $10. The best part for me was they don't bug you to buy more if you don't want to continue.
I use it and cleared 11% last year. I am sure if I worked harder I could have done better.
I believe true inflation, with the govt printing funny money as fast as they can, is about 10-15% and will get worse. You need to add this into the useful value of your available cash. I live aboard and cruise in the summer, I need some way to make money while I am at the dock or cruising. This is the best I can up with.
Good luck.
Note: I have NO finantial interest in V.V.
jchere is offline   Reply With Quote
Old 01-12-2009, 01:59 AM   #8
Recycles dryer sheets
 
Join Date: Sep 2006
Posts: 312
Oh, my goodness! For the sake of your wealth and sanity, please don't day trade. Own entire markets according to your ability, need and willingness to take risk, rebalance on occasion (like once a year), and relax.

(And you might want to have a healthy scepticism of a poster whose very first post is touting a day trading "screening" program.)
Grep is offline   Reply With Quote
Old 01-12-2009, 06:41 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
Quote:
Originally Posted by Kabekew View Post
I recently sold my business and currently have $2.95M in liquid assets after taxes. I'm still working for the company that acquired mine, at $180K a year, but the stress and BS have me coming home everyday saying I really don't need this, so why am I here?
You are financially independent so you should pull the plug on the stressful BS. As to whether you should retire from paid employment or find another job you can figure that out at your leisure. By making this a sabbatical of sorts you can figure out what you really want to do with the rest of your life
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Old 01-12-2009, 07:22 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
Send a message via Skype™ to kcowan
How many hours do you put in for your $180k? Could you cut down to $90k and spend the extra time learning and practicing DIY investing? After that, practice leisure activities.

I am a big believer in evolution when making major life changes.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 01-12-2009, 12:31 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,746
Could you cut the income to 90k, take a demotion, and live happier? A la Bill Gates taking the role of Chief Software Architect at Microsoft instead of CEO?

Seems like you have a sufficient portfolio to fund a sizable withdrawal. 3% of 3 million is 90,000. But if you are paying 1% in average fund expense ratios and 1% to Fidelity for wealth management, you are looking at taking closer to 1%. 1% of 3 million won't get you very far, my friend. Consider managing your own money and you could probably cut your investment fees down considerably. Maybe pay for some professional advice from a fee only planner with investment and tax experience. Help you get a simple portfolio set up, and teach you the basics of tax efficient investing as it pertains to your situation. I don't think the 42 funds in your $800,000 account at fidelity is what you should have.
FUEGO is offline   Reply With Quote
Old 01-12-2009, 01:08 PM   #12
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,223
$2.95M -
how much risk are you willing to take with the money? If you are conservative (as in only want to use CDs and similar cash based investments), then it might not be enough. If you are willing to accept market risks and other risks, you can probably retire now.

Some of us here follow the buckets approach. If you need 60k per year starting now, you have plenty and the buckets approach might work well.

Put 9 years expenses ($540,000) in cash. CDs, TIPs or money markets. For example 60k in your money market for spending in 2009, 60k in a 1 year CD, 60k in a 2 year CD and 60k in a 3 year CD. The 60k in TIPs maturing in 5 years, then buy another 60k in TIPs one year later and 60k one year later and 60k one year later and 60k one year later. Meaning you have a 3 year CD ladder followed by a 5 year TIP ladder. Regardless of the market, you will have 9 years expenses out of the market.

Then set up a second bucket to generate 60k in income each year. Probably from dividends and interest.
A fund like wellesly probably can yield you 4%
muni bonds like others have mentioned can probably yield you 2.5%
Dividend stocks can probably yield you another 3%.
$750k in wellesley gets you 30k
$500k in muni bonds gets you 12.5k
$250k in dividend paying stocks gets you 7.5k
the total income is 50k- plus the dividend paying stocks and wellesley have the opportunity to appreciate. $1.5M sending out 60k in income is the 4% withdraw rate. Tweak the numbers if the 3X-2X-1X in wellesley-munis-dividend payers is not in line with your own risk tolerance or if you want to add REITs (higher yield) for example.

You still have about 800k left to invest. This is bucket 3. Invest this in a diversified portfolio of cash and equities. If bucket 2 ever falls below $1.5 M, move money from bucket 3 to bucket 2. When bucket 3 increases in value, sell some of the gains. When bucket 3 loses value, wait for gains to replenish bucket 2.

Each bucket is essentially taking on another layer of risk.
Bucket 1 is the money you need this decade
Bucket 2 primarily generates income, but should increase slightly in value over time
Bucket 3 is to make sure you always have enough money.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 01-12-2009, 01:08 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Quote:
Originally Posted by haha View Post
Heck no, send half of it to me. Further instructions will follow.

Ha
Sounds almost right. Send me the other half and keep working ;-)
Sam is offline   Reply With Quote
Old 01-12-2009, 01:16 PM   #14
Moderator Emeritus
CuppaJoe's Avatar
 
Join Date: Jun 2007
Location: At The Cafe
Posts: 6,873
Quote:
Originally Posted by Sam View Post
Sounds almost right. Send me the other half and keep working ;-)
and you and Ha send me the yield on both halves.
CuppaJoe is offline   Reply With Quote
Old 01-12-2009, 02:16 PM   #15
Thinks s/he gets paid by the post
Rustic23's Avatar
 
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 4,203
Must be in a high income tax state. That is a 33% tax rate on $90,000. I'd move to Fl, or Tx. Of course if you pick TX. you have the scorpion and fire ant tax. Might stick with FL.
Rustic23 is offline   Reply With Quote
Old 01-12-2009, 02:50 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 1,074
Quote:
Originally Posted by haha View Post
Heck no, send half of it to me. Further instructions will follow.

Ha
Now, send the other half to me, per Ha's instructions.

Seriously, do you have children or others who are counting on your assets or income for enjoyment such that the $2.9 million in liquid assets and $180K in yearly income aren't such big numbers after all? I mean if you have kids and you're currently sending them to Sidwell Friends or St. Stephen's & St. Agnes, in the DC area, that's a sizeable chunk of money going out the door for a long time! And that's just elementary and secondary school education.
__________________
Someday this war's gonna end . . .
ChrisC is offline   Reply With Quote
Old 01-12-2009, 03:10 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
Quote:
Originally Posted by Sam View Post
Sounds almost right. Send me the other half and keep working ;-)
Sam, welcome back. We'd been wondering about where you'd gone.
samclem is offline   Reply With Quote
Old 01-12-2009, 03:14 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Thanks, samclem. I'm still around, just didn't have anything "interesting" to say. How are you guys doing?


Quote:
Originally Posted by samclem View Post
Sam, welcome back. We'd been wondering about where you'd gone.
Sam is offline   Reply With Quote
Old 01-12-2009, 03:24 PM   #19
Recycles dryer sheets
 
Join Date: Jan 2009
Posts: 193
ChrisC, no I don't have kids and am single.

Thanks for the suggestions everyone! I'll look into that bucket approach.
Kabekew is offline   Reply With Quote
Old 01-12-2009, 03:28 PM   #20
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 17,773
Quote:
Originally Posted by Kabekew View Post
ChrisC, no I don't have kids and am single.
Would you like to sign up for our top-of-the-line matchmaking service, in that case?
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
female age 57; 401k, would like to retire early Linuial Hi, I am... 9 07-21-2008 04:40 PM
What age did you retire? wog777 Life after FIRE 60 02-11-2007 09:40 AM
Re: Retire before age 50? malakito Young Dreamers 1 03-06-2005 04:54 PM
The Optimum Age to Retire? RockMiner Other topics 19 12-11-2004 01:13 PM
Poor Bill & Julie, @ age 60 w/$1M can't retire Telly Other topics 13 11-16-2003 04:31 AM

» Quick Links

 
All times are GMT -6. The time now is 05:27 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.