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Hi from Va. Can I retire early?
Old 03-16-2010, 11:56 AM   #1
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Hi from Va. Can I retire early?

I'm 54 years old and will basically retire at 59 1/2. What that means is I have a defered comp package from family busines ownership that runs out when I am 59 and 1/2.
I have $1,025,000 in liquid investable assets and a net worth of around 2million. After the years of acquiring a home and raising three children including college educations and master degrees....I suddenly looked around and retirement was on the horizon. Have been saving diligently towards that goal for 7 years now...on top of what I had done previously. I am married to a CPA who owns his own small CPA practice but the assets mentioned are just my assets. My husband doesn't have the assets I have but is working on it.
I am with any luck able to save approximately another 75k-100K a year or the next 4 years. My original goal was to have 1.5 million but it is likely it will be more like 1.3 ro 1.4. I am not including investment gains in my projections because who knows what they will be.
I cashed out of the stock market well before the crash but lost probably 10 % from the October 2007 high before doing so. Currently have about 70% in CD's paying 5% and 15% in the market and 15% in same brokerage house waiting to invest. I have to sleep at night.
I have worked at reducing debt. The only debt I have is about $50k left on my house and I plan to have that paid off by the time I retire. My "bare bones" projected budget in retirement looks like I need $3600 a month. Knowing "barebones" might not be possible...I run calculations based on $5,000 a month (net).
SSN is projected to be $1500 a month at age 62. Almost $2000 at age 661/2.
Other income in retirement includes $18,000 a year in board fees. $75,000 a year or more in K1 income from family business ownership. I consider this sort of like a pension. These buckets have run true to form for the last 20 years but hey...there is no guarentee.
I have projected that if the board fees and K1 income remain in tact, I shouldn't have to touch my projected 1.4 million investments and hope to be able to let that grow for several more years before invading it. Trying to get to 2 million.
My husband plans to help with household expenses after my deferred comp runs the tune of maybe another $1,000 a month ($12,000 a year).
As you can tell...I have been the one responsible for most of the "families core bills). We have been married 18 years - it is a blended family and things work differently for blended families.
If I ever sell my portion of the family business I could probably net an additional 1m to 1.5m (but again there are no guarantees and it could just as easily go in a zero direction). And...stock may or may not be worth that in closely held family business. However...IF things remain fairly stock ownership in family business is worth about $4.5 million to me over the next 25 years. My planning has been to protect myself in case the family business doesn't afford us what we expect.
I don't expect to live to 95. I take after my moms side and all of them died relatively early with my mom living the longest...passing away at age 76.
Health care: I have a private individual policy for my daughter and myself and see this as a big risk for me during retirement. Currently paying over $7,000 a year in premiums and deductible (2,500 a year to get premiums down). I have a subclinical thryoid condition. Am currently NOT on any medication for it. Other than that fairly healthy.
Children: eldest stepson is 27 and can't find a job - doesn't have a great work ethic. Has taken him a year to get 1 part time job. Lives at home with his mom. My daughter is 22 and will graduate in May with a teaching degree - hope she can find a job- has a great work ethic- working summers thru college. Youngest stepson has 1 more year of college...and has a great work ethic- worked part time all thru college.

I'd appreciate any thoughts on how you think I am preparing for early retirement. Ive run Firecalc...and it looks fairly good but there are some unknowns...such as income from family business.

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Old 03-16-2010, 04:51 PM   #2
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Plug the numbers into Firecalc (see link at bottom of the page), and see for yourself. It will allow you to try some "what ifs" too.
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Old 03-16-2010, 06:32 PM   #3
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Your income numbers sound great. I am sure there is some risk with the family business, but you will probably be in the best position to figure out that risk.

You don't mention what your expected retirement expenses are, at all. That is pretty important to figure out. A large part of your uncertainty may be coming from not pegging this number down.

I think you should strongly consider reducing your retirement date, if that is possible. 70-75 is a pretty low life expectancy, you should make sure you enjoy life while you are healthy. You seem to be in a position to privately insure yourself. Money is important, but your health is your greatest asset, spend it wisely.
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Old 03-16-2010, 09:29 PM   #4
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Thanks walkinwood and plex. Ive run firecalc both with and without the income from the family business. Need to run more scenarios. I suppose that even though there should be income from the business my preparation has been to not look at case it evaporates. I'm a second generation owner and own 20%. While we have been moderately successful for 60 years...Family businesses aren't a given. And we didn't go Sub S until about 12 years ago so until then there was no so called profit sharing for all shareholders. By the way I did work in the business for 15 years and worked in other industries prior to that.
Knowing the risk of family businesses has driven my savings and fanatical desire to get to the 1.5 million in investable assets in the next 4 years (or as close as humanly possible).
Plex....I have a retirement budget which closely resembles how I live today...which is frugally. In todays dollars, I will need a barebones minumum of $3,600 to pay the core monthly and yearly bills, eat, drive, buy a few clothes and keep up my YMCA membership and about $200-$300 in spending money. Pretty bare bones. That is without major house expenses or vehicles. However, I use a net $5,000 a month projection when I run retirement monte carlo simulations. So I think I have a pretty good idea of what I will need. It's just that I would like to live better in retirement than I have allowed myself to live the last 7 years. ( and even before that with all the expenses of the children!!!) That said...I don't know if I can allow myself to ever spend without thinking !
I mean...1.5m is a good nest egg...and yes hopefully there are the other income sources but I don't feel it is....without risk.
Thanks for the thoughts. I have found some great information on this forum so far !
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Old 03-16-2010, 10:15 PM   #5
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Any of the other family member/owners interested in buying your stake? Would that be better than taking the def comp and board fees etc? just wondering. Oh, and I think I would expect hubby to contribute quite a bit more than 1000 per month to the communal retirement kitty if I were you. You did not mention whether you live in a high or low cost of living area, nor whether you live in a modest home or a McMansion. Is moving to a more favorable location a possibility that would allow for more investable (cash-flow producing) assets?

Just wondering. In our own case, I will say that we do not use the house in the calculation of our retirement kitty. However we know that at some point (assuming a small amount of recovery in the real estate market) sell for about a million or so (down from peak valuation of 1.6m in 2006 or so, shortly after we built it). Therefore, we do feel that in the worst case scenario we could sell it and downsize to something in the range of 300k or so and still be very comfortable. We'll probvably want to sell it anyway when I get to the point I can't care for the 2 acres anymore (or don't care to pay someone to do it anylonger).

Just some food for thought.

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Old 03-16-2010, 11:09 PM   #6
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Thanks Rambler....there is only one that might buy me out of family business. The others will want to be bought out at the same time so not sure if that will ever happen.
Live in a small city in Virginia. Cost of Living is probably moderate....Certainly nothing like New York or Washington D.C. House was worth 1/2 million before housing crisis.. 3,700 square feet, 4 bedroom 3 1/2 baths on 3/4 of an acre. Probably worth about $350,00 today. Comfortable enough and with the kids gone...more than enough.

Moving is probably not an option as husband will be tied to area for many years to come with his business.
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Old 03-17-2010, 02:29 PM   #7
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How does the family business continue? Who is minding the store now and in the next generation? If it needs to be sold is there a market for a going concern or do people do their own startup fresh.

If you are willing to live within the parameters of your portfolio and want to use up your net worth over time you can...if the money pours out faster then that, well that's a problem
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Old 03-19-2010, 07:18 AM   #8
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Hi lemming....eldest sister running it. That's been a problem as she doesn't think she works for us. Long story. Only three in the third generation. I happen to think they are not hungry enough and that we should sell the company while it is on a high note. I am alone in my thoughts on this. Ive seen many family business go down...if a non family member runs it or if the third generation gets in (too many entitlements).
Many attempts at succession plan and shareholder agreements but eldest sister always stops the process by not participating. While she doesn't have controlling interest...others ...seem ambivalent about it. Takes time and energy.

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