Nervous

[Goblue1972]

I'm 40. I have 2 houses worth 2.5 to 3 million. Plus 2 condos worth over a million. And a couple of fractionals 400 ish. I have 9 million in securities...3 million in laddered munis and the rest in diversified equities. I have a pension at 62 of a lump sum of a couple of million. 2 young kids. I estimate retirement expenses of 240 ish. I have no debt. My questions are can I retire? If so what kind of portfolio would you suggest? If I do retire I cant be wrong...I want to avoid having to go back to work at target when I'm 68! So I would need a pretty conservative portfolio. Thoughts?

 

[73ss454]

I'd put the whole thing in TIPS and go have fun, you're done.

 

[steelyman]

Honestly, I don't think there is enough to go on here. It seems like you have plenty of money, and no debt (I assume all these properties are totally paid off).

What is it that makes you nervous?

 

[Goblue1972]

I'm a bit nervous bc I need to generate 500k ish of pre tax income while still creating generational net worth for my kids. I may live to 90...and 50 years is an extremely long time to live on 9 million. I have a lot of fixed costs. Maybe you are right nothing to worry about...it's just a big decision and I wanted to get others input before taking the leap.

I'm thinking of having 1 million in money markets, 4 million in go munis, and 4 million in a global diversified equity index fund. Thoughts? Tips protect me against inflation but are only yielding 1 or 2 percent right? In a long term low inflationary period like the last ten years don't know if that will create sufficient income, while still preserving my goals of creating generational net worth.

 

[Rustic23]

Quick answer, it depends, or NO! If you use 4% rule you can draw $360k from your portfolio. At 40 many would not be comfortable with 4%, 3.5 or 3%. So there you have it NO. However, are you willing to cut those expenses and LBYM's? Sell one of the houses, and the condos. Now you might be at eleven million and generate almost your $500,000 you 'need' to live comfortably.

 

[Westernskies]

Liquidate everything, take the ~$10million and learn to LBYM. 240K annnually is only 2.4% SWR. Shouldn't be too hard to do, though you might have to learn about used cars, triple coupon Tuesdays, recycling dryer sheets, ziploc bags and aluminum foil (makes a fun hat! ) shopping at Dollar General and Goodwill, and how to knit Christmas gifts for the whole family out of dryer lint- if things get really tight.

Welcome to the forum.

 

[Danmar]

You are over invested in real estate. I read a study recently that said the average person with more than $5mm net worth had about 12% of this in personal use real estate. If you liquidated some real estate you might generate enough income for your life style. I don't think you have enough otherwise. At your age a SWR of 3-3.5% to start might make sense. So at 3.3% you would need about $15mm of investable assets. Is the pension lump sum amount fixed? Keep working.

 

[Bestwifeever]

You have $9 million in securities alone? How much are they generating? Doesn't that answer your question?

Plus remember if you wait til 70, your social security will be worth more than if you take it at 62 (sorry, couldn't resist).

 

[Rambler]

I agree that you are over invested in real estate, unless it is generating cash flow equal to 4% of their value. One of those is probably your primary residence, I'd say cut a couple million from your RE port and add it to your diversified portfolio of yield generating investments. Have enough munis to create some stability and diversity. Get some growth stock, some hot stick, balance that with some high yield stock, and you are good to go. If I had 12-13 million in income producing assets, I would already be done. I'm bumping up close to 5 and still want just a little more for 1) more play money, and 2) intergenerational sharing. It will come soon enough if I am patient and stick to my plan.

R

 

[MasterBlaster]

Are the houses and condos for your personal use or are some of them for rental purposes ?

If they are personal houses scattered around the country and the world then yes I would agree with others that it may be worthwhile to downsize to just a couple (or three) residences.

Otherwise you'll (perhaps) need to keep working to support all that overhead.

My little calculator suggests that $500k is about 5.5% of $9M. Clearly you are outside of the safest withdrawal rates for a 30 year retirement. However if you are willing to throttle back the lifestyle should hard times come then I see no problem with retiring now. For many retirement cycles a 5.5% withdrwal rate is do-able. But should another financial thunderstorm sweep through, 5.5% is asking for trouble.

 

[SunsetSail]

Welcome.

I think you are good to go so long as your spending doesn't creep higher than inflation.

I would liquidate some of the real estate to get your investment portfolio up to about $13 million, set an asset allocation of 45% laddered munis, 45% tax-efficient equities and 10% liquid investments (probably a combination of CDs and MMFs). You won't need to generate $500K pre-tax because the bulk of your income will come from tax-exempt munis. You will be able to live off muni interest and rebalance from/to equities to hedge against inflation killing the real value of your bonds. That's just what I would do if I were in your situation.

 

[Aiming_4_55]

Nice problem to have! Congrats!

Does the real estate bring in a cashflow or it it strictly pleasure use?

 

[Arnie]

Where were those guys when I was a kid. Great story, thanks for sharing.

* Sorry wrong thread.

 

[Goblue1972]

The real estate is for personal use. But when I retire will sell main house approx 1.7 ish and then move back to the city place. Then have a Miami condo plus a lake Summer place that we love. The 2 fractionals r through the four seasons which we often give to the charities we support and to family and friends. My wife is really pushing me...brutally so... to retire and get back to the city...while I think I would like to work a couple more years and make absolutely sure I have enough. Candidly I really miss the city as well and while we live in an ok town with great weather...can't wait to get out of here as well.

 

[JBmadera]

Given your apparent wealth I would suggest that you get some professional assistance, everyone here is just great but it wouldn't hurt to get some structured advice.

 

[haha]

My wife is really pushing me...brutally so...

Spousal brutality is generally frowned on. Are you sure this is the right foundation on which to build a 50 year happy retirement?

Ha

 

[Aiming_4_55]

I'm sure the real estate has a major overhead of expenses. I would suggest taking a step back to review what it cost to use vs. what you can make if you invested that $$. Perhaps the investment returns, can replace more than your donations, personal use cost if you rented, etc. Depending on age of your kids, school schedules maybe impact future use.

I'm not suggesting dumping all at once, but develop a strategy based on use, tax impacts, market, etc.

The real estate is for personal use. But when I retire will sell main house approx 1.7 ish and then move back to the city place. Then have a Miami condo plus a lake Summer place that we love. The 2 fractionals r through the four seasons which we often give to the charities we support and to family and friends. My wife is really pushing me...brutally so... to retire and get back to the city...while I think I would like to work a couple more years and make absolutely sure I have enough. Candidly I really miss the city as well and while we live in an ok town with great weather...can't wait to get out of here as well.

 

[BigNick]

I'm a bit nervous bc I need to generate 500k ish of pre tax income while still creating generational net worth for my kids.

500K pre-tax, 300K after-tax...

1. You do know that this represents waaaay over the 99th percentile? I'm particularly questioning the word "need" here.

2. What do you spend $25K/month, aka $800/day, on exactly?

 

[Danmar]

500K pre-tax, 300K after-tax...

1. You do know that this represents waaaay over the 99th percentile? I'm particularly questioning the word "need" here.

2. What do you spend $25K/month, aka $800/day, on exactly?

It's not as much as you might think Nick. After all it's his story and that's what he says he needs. We spend quite a lot more because that what our dividends and pensions are.

 

[Goblue1972]

The fixed costs are large with the real estate...property taxes 65k, and associated utilities and assessments are another 30 ish. Kids, private school tuition...you get to north of 200 quickly. We love all of our real estate would rather work another year or two than have to sell it.

 

[LightningDawg]

I sure wish I had your problem...........

 

[steelyman]

Given your apparent wealth I would suggest that you get some professional assistance, everyone here is just great but it wouldn't hurt to get some structured advice.

Probably the best comment of the lot (including mine). This is way more money than I had accumulated at the age of 40, for sure. Or anyone I know. Makes me wonder. Hmm..

 

[RunningBum]

One factor about the real estate is that you can have a plan without much buffer. The emergency plan can be to sell some of the real estate, which not only adds to your net worth but reduces your expenses.

But, I don't see $9M supporting $500K, or even $400K for such a long period.

 

[Goblue1972]

Steelyman. I actually just turned 39.

 

[Goblue1972]

Running...I agree with your assessment. I'm likely to work 2 more years and with sale of my existing house and income stream for the next couple of years hopefully have a portfolio that exceeds 13. I think that should do it.. And yes in an emergency I could sell some of the real estate if I had to. Assuming a not crazy inflation scenario...would like to be able to lock in 5 or 6 million in go munis at 4 ish after tax percent and retain most of the rest of the portfolio to pass on. Thx for the advice...