Law of diminishing returns and taxes..and I'm a schmuck

[Toddtheformeraccountant]

OK, I'm the schmuck that last year posted that he was going to retire, and decided to hold off because they offered me more money (in fairness, they basically doubled my comp).

Let me set the stage.

Today I have about $7M saved, of which say $1.6M is in IRA/401K, and the rest in taxable accounts. House is paid for (not included in the $7M). Last one going off to college, education is funded. Expenses of living, at most, are probably $150,000 per year.

I just realized some math...and common sense...that I hadn't thought of. Others wiser than me probably have....I'm the schmuck.

My current income is well into the top tax brackets. And my income in retirement (even before RMD's) will be in the aggregate 32% marginal rates.

So, if I earn $1 by working another year....I'm left with $0.53 to invest when you consider federal and state (california) tax rates. That earnings on that $0.53 will be taxed 32% in retirement on marginal rates (even before RMD's and social security), so it will be worth effectively $0.35. So I'm getting 35 cents of every dollar i earn in retirement income generating potential. That I don't need.

Working more just means padding the nest more. More for the kids to inherit. Period. 35 cents for every dollar earned. Woopee, for the privilege of giving up another year of my life.

So...why would I continue working? Can anybody give me a reason? I sure can't come up with one. It's time to pull the ripcord. I've been an idiot the last year.

Thanks.

 

[REWahoo]

So...why would I continue working? Can anybody give me a reason?

Sure I can!

Those of us drawing SS appreciate you continuing to fund the program. Thank you for your support!

 

[pacergal]

You learned. Don't be so hard on yourself. If you haven't already, walk into work this week and give notice. Retire and enjoy life. Use that $$ and post in the "Blow that Dough"!

 

[socca]

So...why would I continue working? Can anybody give me a reason?

As discussed many times on this board, some folks continue working (in one fashion or another) for reasons other than financial need (this includes me). So, merely having finances in order may not be enough for some people to pull the trigger. If your current situation isn't working for you, by all means seek greener pastures.

 

[sengsational]

It's doubtful anyone on this site would find reason to keep working. Time > Money, and all of that.


You probably should have something to retire to, though, not just to retire from.

 

[pb4uski]

I agree with your conclusion, but not all of you math (the last part, from .53 to .35).

You are on to the very reason that I retired... since we were well funded, continued work enriched the federal and state governments and our heirs but did little for me... the freedom of time being retired is worth more to me than our heirs getting more.

So what are you waiting for?

 

[Masquernom]

I remember at my former megacorp, the old hands would always say they planned to work a few more years. Then HR would come to our department and put on a retirement seminar. The old guys would sit around their cubicles and be thinking really hard afterward. They'd tell me "I'm only working for the difference between my pension and my salary, I'm only making $XX dollars an hour now." A few months later they'd be retired and gone.

 

[Dtail]

You have posted other times in various forms on this subject. Admit that you have OMY syndrome. lol
Then you can move forward to the best part of your life. Never know when the health quotient changes.

 

[ERD50]

I agree with your conclusion, but not all of you math (the last part, from .53 to .35).

You are on to the very reason that I retired... since we were well funded, continued work enriched the federal and state governments and our heirs but did little for me... the freedom of time being retired is worth more to me than our heirs getting more.

So what are you waiting for?

Agreed that financials look good. If the $150,000 expenses are high side, then even disregarding the tax deferred, 150K of the $5,400K taxable is a very, very conservative 2.7% WR.

But you didn't mention age, and I don't feel like digging for it. I assume you aren't very young though, with those $.

Back to the math above. You're the accountant (I assume), but that doesn't look right to me. The earnings were not taxed twice. Seems like double counting to me.

-ERD50

 

[Aerides]

Why continue working?

Power
Identity
Fear of unknown
Worry about your family life should the home dynamic change
Lack of a vision of retired life (no real interests or hobbies - who you will be)

Not being an idiot by any means, and the gist of your post could be written by many, many members here. I half read this thread expecting to see about 3 or 4 other names as the author before yours.

Would you keep working for nothing? If the answer is yes (and you basically are), perhaps taking a short leave to figure things out might be a good start.

 

[MarieIG]

No point in regretting the past. It is part of what makes you, you; and it sounds as if it was necessary for you to reach this point. Good luck.

 

[Chuckanut]

No point in regretting the past. It is part of what makes you, you; and it sounds as if it was necessary for you to reach this point. Good luck.

+1

A very wise insight.

 

[ivinsfan]

OK, I'm the schmuck that last year posted that he was going to retire, and decided to hold off because they offered me more money (in fairness, they basically doubled my comp).

Let me set the stage.

Today I have about $7M saved, of which say $1.6M is in IRA/401K, and the rest in taxable accounts. House is paid for (not included in the $7M). Last one going off to college, education is funded. Expenses of living, at most, are probably $150,000 per year.

I just realized some math...and common sense...that I hadn't thought of. Others wiser than me probably have....I'm the schmuck.

My current income is well into the top tax brackets. And my income in retirement (even before RMD's) will be in the aggregate 32% marginal rates.

So, if I earn $1 by working another year....I'm left with $0.53 to invest when you consider federal and state (california) tax rates. That earnings on that $0.53 will be taxed 32% in retirement on marginal rates (even before RMD's and social security), so it will be worth effectively $0.35. So I'm getting 35 cents of every dollar i earn in retirement income generating potential. That I don't need.

Working more just means padding the nest more. More for the kids to inherit. Period. 35 cents for every dollar earned. Woopee, for the privilege of giving up another year of my life.

So...why would I continue working? Can anybody give me a reason? I sure can't come up with one. It's time to pull the ripcord. I've been an idiot the last year.

Thanks.

Why you would continue to work, because evidently it's not about the money. When you figure out what else you are getting from continuing to work, only you can decide if you should stop.

My DH is 70 and continues to farm and believe me, with prices at this level it's not about the money. We just invested in a different tractor which on paper was a really dumb decision. Yet, he's happy as a clam about it...

Can I ask why you even started this thread, word for its almost a duplicate of a thread you started last Spring? What do you hope to gain from another couple of pages of virtually identical responses?

 

[flintnational]

I have a friend (business owner) that said he would never be able to sell his business for $50M. I said, "You are a smart guy and you work hard it might happen". He said, "You misunderstood me. I would sell at $5M"!

 

[socca]

Why continue working?

Power
Identity
Fear of unknown
Worry about your family life should the home dynamic change
Lack of a vision of retired life (no real interests or hobbies - who you will be)

Some other options:
• intellectual stimulation / challenge
• social opportunity
• satisfaction from exercising a core competency
• avoid having an empire collapse 'on your watch'
• inertia / habit
• moral obligation to other stakeholders (e.g. employees, current or future owners, suppliers, etc.)

Don't forget: there is a big difference between part-time vs. full-time work and a big difference between being the hammer vs. being the nail.

 

[Walt34]

They'd tell me "I'm only working for the difference between my pension and my salary, I'm only making $XX dollars an hour now."

That was one of the reasons I retired. I actually liked my job and the people I worked with, but traffic and the process of staying current in the field were issues. Looking at the pension numbers, I realized that I could sell t-shirts out of a van on the side of the road and make more money.

It turned out to be even worse than that. My net income actually went up a few dollars (single digits) after retirement because a lot of work-related deductions, mostly 457 contributions, went away.

 

[Sunset]

OP - With your stash of cash, you can support your expenses with a 2% withdrawal rate.

I'd retire, unless you LOVE working.

 

[HI Bill]

OK, I'm the schmuck that last year posted that he was going to retire, and decided to hold off because they offered me more money (in fairness, they basically doubled my comp).

Better to wake up eventually, than wake up dead (sorry for the morose humor)...but you get the jist. Today's a fine time to write and submit your letter of resignation. If you truly thought working was worth it to you, you wouldn't be calling yourself a schmuck for staying on! Carpe diem.

 

[travelover]

What? Only $7million? What if you need a new roof or something? Better get back to work.

 

[savory]

Are you sure there isn't a minimum of people required to maintain the schmuck club. I am afraid if you drop out, they might try to recruit me. I expect I already know many of them. Some are likely family. I'll stay with the shemizal and shemazel group.

 

[Toddtheformeraccountant]

I agree with your conclusion, but not all of you math (the last part, from .53 to .35).

You are on to the very reason that I retired... since we were well funded, continued work enriched the federal and state governments and our heirs but did little for me... the freedom of time being retired is worth more to me than our heirs getting more.

So what are you waiting for?

I will not be waiting! Going to give notice following payment of my year-end bonus in mid January.

On my math...it's a little sketchy I agree but defensible...what I'm saying is that, those 53 cents that are left, the earnings thrown off from those 53 cents will be taxed 35% so it's just like having 34 cents (65% times 53 cents) of income generating potential pretax. Said another way, Uncle Sam owns 35% of that 53 cents, I own 65% of that 53 cents. Hope that helps.

 

[Toddtheformeraccountant]

You have posted other times in various forms on this subject. Admit that you have OMY syndrome. lol
Then you can move forward to the best part of your life. Never know when the health quotient changes.

Thank you! You are right. I've had OMY syndrome for the last year. But no more.

 

[Toddtheformeraccountant]

Agreed that financials look good. If the $150,000 expenses are high side, then even disregarding the tax deferred, 150K of the $5,400K taxable is a very, very conservative 2.7% WR.

But you didn't mention age, and I don't feel like digging for it. I assume you aren't very young though, with those $.

Back to the math above. You're the accountant (I assume), but that doesn't look right to me. The earnings were not taxed twice. Seems like double counting to me.

-ERD50

what I'm saying is that earning $1, and paying the tax on the earned $1 and the taxes on the future earnings of what's left, it's like I invested 35 cents. Math is simply $1 * (1-48%)*(1-35%). I'm left with 52 cents of the dollar....I invest it and the earnings that it generates are assessed 35% taxes (retirement tax rate) so I effectively get to "keep" 34 cents of every dollar earned in terms of income generating potential.

 

[Toddtheformeraccountant]

Why you would continue to work, because evidently it's not about the money. When you figure out what else you are getting from continuing to work, only you can decide if you should stop.

My DH is 70 and continues to farm and believe me, with prices at this level it's not about the money. We just invested in a different tractor which on paper was a really dumb decision. Yet, he's happy as a clam about it...

Can I ask why you even started this thread, word for its almost a duplicate of a thread you started last Spring? What do you hope to gain from another couple of pages of virtually identical responses?

You are correct...and the criticism you are hitting me with, I definitely deserve...I guess I'm just looking to people who think alike for confirmation. I don't need the money. And it's sad to think that I would continue working just because I have nothing else to do but slave away at a desk. I just need to get out and figure out what I want to do with the rest of my life. I'm up to the challenge! I guess I know the answer!

 

[Toddtheformeraccountant]

I remember at my former megacorp, the old hands would always say they planned to work a few more years. Then HR would come to our department and put on a retirement seminar. The old guys would sit around their cubicles and be thinking really hard afterward. They'd tell me "I'm only working for the difference between my pension and my salary, I'm only making $XX dollars an hour now." A few months later they'd be retired and gone.

Masquernom: That's a great analogy and not really that far off from where I'm at, even though I'm not getting a pension. Our investment pool is our pension. To some extent it's even worse for me....I would be surprised if we could spend $150,000 per year, and it's already well covered with our funds now, so to some extent I am working for zero marginal benefit. Geez, I'm really convincing myself here....time to go!