Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
I am now ready
Old 02-16-2015, 11:26 AM   #1
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 24
I am now ready

Hello,

I have visited and read a far amount on this forum years back when I sold my business, and received some great advice on here from some very friendly and helpful people. Some updated information....

I am currently 49 years old, and would like to retire in the next 6 months. I am married with two kids 20-18.

Liquid assets - $3.6mm+ of which $2.6mm in non-retirement accounts and $1mm in retirement accounts. College accounts for both kids are separate. See below.

Other assets/debts - $475,000 House, Cars, etc.. No Debt

Life Insurance: $2mm Me, $2mm Wife.

Kids (ages 20 and 18) assets set aside for college - $125k, each (250k total not included in the above 3.20

Budget - My Current Budget is $150k pre-tax dollars. I know this is high, but that's my current lifestyle. I don't see this changing in the next 8 years, but obviously it will slow down.

Portfolio - Our portfolio is professionally managed. I am pretty confident the portfolio will average 4.5% to 5.5%

Income - My wife is 44, and likely will retire also.

Health - We are fortunate to have great health.

I currently have no plan on what I will do. I know I will volunteer and help in the community. I would like to get in better shape (I'm not overweight). I want to get myself fit. I may start a small development business with some rentals. I would ease into that. I want to spend time with my wife while I still can, and enjoy things before I break down.

If I give up this job, there is no turning back. I will be done. Finding another job is not easy, and I would have to start from scratch establishing myself. I'm making $175k per year, but it's simply no fun. It's a drag coming to work.

I am looking for advice on how my situation looks? I am confused on my tax situation post retirement. Any advice is appreciated. Can I survive?

Thanks in advance TD
__________________

__________________
TOPDAWG 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 02-16-2015, 12:33 PM   #2
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by TOPDAWG View Post
Liquid assets - $3.6mm+ of which $2.6mm in non-retirement accounts and $1mm in retirement accounts. College accounts for both kids are separate. See below.

Other assets/debts - $475,000 House, Cars, etc.. No Debt

Life Insurance: $2mm Me, $2mm Wife.

Kids (ages 20 and 18) assets set aside for college - $125k, each (250k total not included in the above 3.20

Budget - My Current Budget is $150k pre-tax dollars. I know this is high, but that's my current lifestyle. I don't see this changing in the next 8 years, but obviously it will slow down.

Portfolio - Our portfolio is professionally managed. I am pretty confident the portfolio will average 4.5% to 5.5%
You are right on the edge of having enough to meet your significant spending budget. You didn't mention SS or any pension but either of these will give you a little more breathing room. I really suggest you consider some spending reductions.

I'm not sure what the purpose of the life insurance is since you and your DW are financially secure. If it's whole life it's time to consider cashing it in. If it's a cheap level term, it's probably worth keeping for a few years.

The elephant in the room is the "professionally managed" portfolio. If you've read many of the threads here, there aren't many that support someone having someone else manage their portfolio. I will assume you have a nominal 1% management fee. On your $3.6MM that is a $36,000/year hit (ouch) plus you are probably being put into higher expense funds than the typical index fund. I'll suggest you read Andrew Hallam's Millionaire Investor. If you want a more advanced read on index investing, read William Bernstein's Investor's Manifesto.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-16-2015, 12:39 PM   #3
Recycles dryer sheets
Lagniappe's Avatar
 
Join Date: Mar 2006
Posts: 207
So, you need $150K annually from a $3.6M portfolio. Unknown asset allocation or expense ratio. No flexibility in reducing expenses. Unknown future pension or SS.

A few questions. Does the "150K pre tax dollars" mean that taxes are a part of the $150K, or that you need to add that in as well? Is health insurance included? What is the ER of your portfolio (including fund and manager costs?)

At first glance, a 4.1667% withdrawal rate seems a bit high for a 49 year old. Given that it does not include portfolio expenses, it looks like you will need to cut your planned spending a bit, or work another year or two. Personally I'd choose to examine the budget more closely for reduction opportunities.
__________________
Lagniappe is offline   Reply With Quote
Old 02-16-2015, 12:43 PM   #4
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 24
Reducing the budget isn't a problem.
It can be chopped down.

Also, I certainly don't have an issue managing my own portfolio. In fact, I would enjoy that. I selected a professional simply because of the lack of time for studying investments.

Quote:
Originally Posted by Lagniappe View Post
So, you need $150K annually from a $3.6M portfolio. Unknown asset allocation or expense ratio. No flexibility in reducing expenses. Unknown future pension or SS.

A few questions. Does the "150K pre tax dollars" mean that taxes are a part of the $150K, or that you need to add that in as well? Is health insurance included? What is the ER of your portfolio (including fund and manager costs?)

At first glance, a 4.1667% withdrawal rate seems a bit high for a 49 year old. Given that it does not include portfolio expenses, it looks like you will need to cut your planned spending a bit, or work another year or two. Personally I'd choose to examine the budget more closely for reduction opportunities.
__________________
TOPDAWG is offline   Reply With Quote
Old 02-16-2015, 12:51 PM   #5
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by TOPDAWG View Post
Reducing the budget isn't a problem.
It can be chopped down.

Also, I certainly don't have an issue managing my own portfolio. In fact, I would enjoy that. I selected a professional simply because of the lack of time for studying investments.
Read the books I suggested. Managing your own investments will take an hour per year or less.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-16-2015, 01:04 PM   #6
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 24
How's the other items look? Bin your opinion?
Quote:
Originally Posted by 2B View Post
Read the books I suggested. Managing your own investments will take an hour per year or less.
__________________
TOPDAWG is offline   Reply With Quote
Old 02-16-2015, 01:07 PM   #7
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by TOPDAWG View Post
How's the other items look? Bin your opinion?
As said before, you are on the edge with your budgeted spending but you leave gaps on any pension, SS and investment expenses.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 02-16-2015, 01:32 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Comments:
- You don't have enough to be "worry free" at your present spending level. Every dollar you can reduce from your monthly expenses reduces the size of the needed portfolio by about $400 (assuming 4% WR, 25% taxes), so that's the first place to look. Cut out $200/month and you've reduced the needed size of your portfolio by $80K. For many people, reducing expenses is easier than trying to pile up more money.
- Play around with FIRECalc and include your anticipated SS and any other income streams.
- I echo 2B on the need to manage your own investments. This is a great place to reduce your expenses in a very meaningful way--you'll earn much more than your present hourly rate at your job, and can do it from here on out.
- Look into those health care costs--just go online and checkout the info on your state's marketplace or the one run by the Federal government for your state. These costs can be substantial, and you need to know them when figuring your expenses.
- Spending plan: If you think you can belt-tighten, you'd be well advised to set up a budget and have the whole family live with it before quitting your job. This will also allow you to set aside a cushion for any unanticipated expenses.
- If you decide to pull the plug and you know you'll be close to the go/no-go point, I'd consider getting a mortgage >before you quit your job<. People will differ on this point, but having $400K from the refi of your house placed in a MM fund would provide a nice bit of insurance against sequence-of-return risk in the early years of your retirement. This insurance is very cheap, given today's mortgage rates. If the market takes a tumble just as you quit, this money could buy you 3+ years of breathing room and a chance for the market to come back before you need to sell shares. If the market does well in the early years, you can pay back the mortgage as soon as there's a bit more fat in the portfolio.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 02-16-2015, 02:09 PM   #9
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 2,201
You said in your OP that you didn't see your budget changing in the next 8 years. Have you done some numbers to prove that "reducing the budget isn't a problem"..because these two statements contradict each other.
__________________
ivinsfan is online now   Reply With Quote
Old 02-16-2015, 02:28 PM   #10
Dryer sheet wannabe
 
Join Date: May 2008
Posts: 24
Correct, I can change and reduce my budget easy enough, but I will not reduce that any further for another 8 to 10 years.

Quote:
Originally Posted by ivinsfan View Post
You said in your OP that you didn't see your budget changing in the next 8 years. Have you done some numbers to prove that "reducing the budget isn't a problem"..because these two statements contradict each other.
__________________
TOPDAWG is offline   Reply With Quote
Old 02-16-2015, 02:43 PM   #11
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 2,201
Quote:
Originally Posted by TOPDAWG View Post
Correct, I can change and reduce my budget easy enough, but I will not reduce that any further for another 8 to 10 years.
Not to be a pest, but from your posts your kids are almost launched and college costs are already funded. What do you see as being different in 8 to 10 years. Do you have large amounts budgeted for travel or home improvements? You are young enough that in 10 years your hobby and your travel lifestyle will still be possible. Between inflation and lifestyle enjoyment, I'm curious why you are thinking lower instead of the same amount or possibly higher. Most ER's will tell you spending is the most important factor to have nailed down.

Are you consistently tracking your spending to see where these future cuts might come from?
__________________

__________________
ivinsfan is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
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
Ready to RE, now they want me to go part time! Taxman59 Hi, I am... 35 12-19-2014 07:46 AM
Hello All - 55 and ready to Retire now! MJN7 Hi, I am... 10 09-15-2014 10:22 PM
Cable Ready TVs Now Obsolete? Southern Geek Other topics 11 04-07-2014 06:44 AM
"I felt a pop. I'm ready to go now." LOL! Health and Early Retirement 33 02-08-2012 09:15 PM
I'm Ready Right Now! Stillwaiting Hi, I am... 9 06-24-2008 02:25 PM

 

 
All times are GMT -6. The time now is 02:42 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.