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on the fence and can't decide when to get off
Old 10-25-2017, 09:47 AM   #1
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on the fence and can't decide when to get off

Hello, Been on this forum for about a year. Would be in much better financial situation if I found this earlier. There is a lot of great information and great support. I will try to be as thorough as possible without boring everyone.

Myself; 59 years old, wife 59, 3 children, 3 grandchildren

Financial situation.
401k - $1,700k (mostly stock funds)
IRAs - $1,100k
Real estate - $1900k (rental and our house) very conservative numbers
Cash - $255k
Differed income - $638k (payable in 18 months for a period of 9 years)
After tax funds - $1707k
Total - $7300k
Also will eventually inherit $2000k. Mom is 86 and has some health issues. Hopefully she will pull though and live for 5 to 10 years.

Asset mix
Cash 4%
real estate 25% (including house)
bonds 10% (after tax bond money is in municipal bonds)
stock 52% (almost all mutual funds and ETFs)
differed income 9%

Work situation
Working for Mega-Corp for 38 years. Finally after all this time worked my way up to a good salary (200k plus bonuses of 200k to 400k). bonuses are paid in 6 months (May) and in 18 months until our company goes public. Recently have been reassigned to a new job and don't have a lot to do. Money is embarrassing considering what I do. It is also very stress full taking such a salary with my current responsibilities. I believe I will either be let go, or kept until the company goes public. Wife makes 85k and will probably retire this year or next and go part time for a while.

Rental property.
I own various rental property and do quite a bit of remodeling myself with my middle son. Overall the property is probably about break even due to the construction projects we are recently doing and paying my son.

Other income
I will start receiving differed income in 18 months (the account with 638k) This money is in an account earning about 4%. It will be paid for a 9 year period. I estimate it will be about 75k/year. My mom also gives us 36k/year. This is only because she gives the same amount to my brothers (one of them rely on this).

Family situation
Oldest son, out of the house and independent. Daughter is out of school and self sufficient. She is living at home but will most likely move within a year. My middle son is working for me managing my rental property and doing remodel projects. He is living in one of my buildings. He has had difficulty and is just getting his act together. I would like to keep him working for the next year or two until he gets more on his feet. His salary comes out of the rental income.

Expenses
We currently spend about 15k/month. I know this sounds like a lot but we have high taxes, travel a lot, eat out quite a bit (almost every night), and have a lot of support functions such as cleaning people, landscaping etc. My wife spends a quite a bit of money and I don't see this changing anytime soon.

Hobbies.
Mostly working. Most of my friends are at work. Outside of work, mostly working on my properties.

Questions
1. Can I retire with the current spending habits (15k/month)? I also would like to leave my children money, ideally $2000k each ($6000k total) What would my spending need to get to in order to accomplish the this or is it unrealistic?

2. Should I retire? I seem to get board being on vacation for more than a week. All of our friends are working. Most of them will move out of the area when they retire. I am thinking either after May bonus or possibly in 18 months.

3. Do we have the appropriate asset mix?

4. When should we take social security? Will the differed income of approximately 75K/year affect this?

Thanks in advance for any help. I know there is a lot of knowledge in this forum.
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Old 10-25-2017, 10:11 AM   #2
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1. Yes.... $15k/month * 12 months = $180k a year of spending... divided by a reasonably conservative for your age 3.5% gives $5.1 million... and you have much more than that.
2. Tough one... very personal decision... especially considering a potential IPO or termination windfall.
3. Looks ok to me... though the real estate probably adds a lot of risk since I presume that it is concentrated both in property type and geographically.
4. Since both of you worked, if your benefits based on your earning reccords are similar then it probably doesn't matter in the scheme of the numbers you are talking... you could try out SSAnalyze and see what it recommends.

P.S. I was also in a similar position of making a lot for the effort that I had to put in... such a sweet deal makes it even harder to pull the plug... in my case I got to the point that we had enough/plenty and continuing to work only enriched the federal and state governments and my kid's inheritances and I decided that more free time for what I wanted to do was more valuable so I resigned. In your case I would probably consider staying until the IPO windfall.
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Old 10-25-2017, 10:24 AM   #3
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Have you run FIRECalc? It can answer most of your questions.


But, in general, I agree with pb, you can retire now if you want. On your social security question, I would expect that before your full retirement age, your social security benefits would be reduced if you take the deferred comp. And, at 75k, I would expect your SS to be whipped out. After FRA, you'll be fine. So, don't plan on taking it at 62.
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Old 10-25-2017, 10:42 AM   #4
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Yes, at that overall net worth level + the deferred compensation you can easily retire from a financial viewpoint, with, IMO, a perpetual asset base that can leave a substantial legacy amount to the kids as you suggest.

Your spending is totally commensurate with that plan, no need to change it.

As to your emotional readiness to retire, that is another matter entirely and needs to be addressed. I suspect you are going to have to take a small leap of faith on that one or wait until it is forced on you. While a force-out might be nice financially, it wouldn't be my personal choice about how to go out if I had the means to do otherwise, which you clearly do.
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Old 10-25-2017, 10:54 AM   #5
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In your original post, I saw no solid reason stated why you want to retire. Given that, just keep working until you'd rather be retired.
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Answers to questions 1 and 2
Old 10-25-2017, 11:38 AM   #6
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Answers to questions 1 and 2

Can you retire? Certainly. You paint a superb financial picture, with assets which would easily support your proposed spending.

Should you retire? Not nearly as easy an answer. This is a retirement forum, so leaving ASAP is a popular viewpoint.

But by staying a relatively short time you would add a few more hefty bonuses to your already fully-funded pile. No doubt your heirs will appreciate that.

However, you don't indicate that there is a particular urgency to leaving. You don't suggest the w*rk environment is unpleasant: no nightmarish bosses or intolerable colleagues or lousy commutes. "It is very stressful taking such a salary with my current responsibilities." Relieve your stress by counting your dough... or consider gratuitously taking on a few more responsibilities.

You appear to have few outside interests. No doubt a powerful focus on your j*b helped you achieve a lot of career success. But once your days are open, what will you do? There are several posters here who ended up returning to w*rk, not because they ran out of money but because they discovered they still had some unmet non-financial need (wanted to contribute/achieve/help; bored; missed their friends, etc.) I think the lesson they teach is to retire to something, not just from something.

Good luck with whatever you decide, and welcome to the board.
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Old 10-25-2017, 11:42 AM   #7
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If I had your money I would throw mine away. I also would have been retired yesterday. Good luck in your decision.
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Old 10-25-2017, 11:42 AM   #8
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Originally Posted by Mdlerth View Post
I think the lesson they teach is to retire to something, not just from something..
+1
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Old 10-25-2017, 01:33 PM   #9
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As others have stated, you have achieved financial independence (and then some). Congratulations! If your job, or waiting for the IPO, or working for your estate will bring you joy, then hang around. If you have other interests you would like to pursue, retire yesterday. I walked away from similar income at 46 and worked part time (from home 3-4 days per week) for a few years before I retired at 53.

I agree with pb4uski on your other questions.

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Old 10-25-2017, 01:33 PM   #10
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sorry didn't mention that I ran numbers through firecalc several ways. Also every other retirement calculator I could find.

I guess I want to retire because I'm tired of the politics at work. Don't like the current situation because the new role I have is very limited. Went from managing a large group to having no one actually report to me as of yet. I am supposed to put a team together but all my attempts have been frozen. I'm kept out of the loop to what is going on. The resistance to retire is the upcoming bonuses. I thought I would attempt to stay until spring but see how it goes. Thanks for suggestions
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Old 10-25-2017, 02:25 PM   #11
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Sounds like they have "mushroomed" you.... they want to make work so miserable and unfulfilling that you quit.
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Old 10-25-2017, 02:34 PM   #12
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Originally Posted by midwestguy View Post
sorry didn't mention that I ran numbers through firecalc several ways. Also every other retirement calculator I could find.

I guess I want to retire because I'm tired of the politics at work. Don't like the current situation because the new role I have is very limited. Went from managing a large group to having no one actually report to me as of yet. I am supposed to put a team together but all my attempts have been frozen. I'm kept out of the loop to what is going on. The resistance to retire is the upcoming bonuses. I thought I would attempt to stay until spring but see how it goes. Thanks for suggestions
Since most feel you have enough to retire today, maybe use this time to "practice" retirement. You have fewer responsibilities so the only stress there is "will they fire me?" - even if they do, you have enough and you likely will get a good severance package.

If you are truly sick of your job, go into "minimal work" mode - do not cause any delays in meeting deadlines, but do not stick your neck out for things and stay low on the radar. Do not violate company policies, but take a lot of "mental health" time for yourself. If you are able to work from home some do that as much as you can, again without violating company policies.

Do not feel guilty about having little work and getting paid a lot - IF you really feel you are ready to retire. It can be a great way to transition into the retirement lifestyle.
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Old 10-25-2017, 03:10 PM   #13
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It clearly isn't a financial question.

What will you do all day after you retire?
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Old 10-25-2017, 03:43 PM   #14
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Jollystomper. Thanks I think Iím heading in that direction. A little hard to do with my type A personality

When I retire, I guess Iíll work on more home projects, ride my bike more often .
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Old 10-25-2017, 03:58 PM   #15
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Are there any volunteer organizations or causes that you are interested in and could use your expertise? I moved out of Corporate Finance after 24 years a few years back and found that I felt more fulfilled being able to use my financial skills helping a few non-profits as a board member. That may be a start to help you bide your time as well as might turn into something to look forward to retiring to have more time for. I also joined a large outdoor organization and took a few classes until I found a hobby I was interested in, another thing I am looking forward to having more time for when I do retire.
Good luck with your decision!
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Old 10-25-2017, 04:12 PM   #16
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Was surprised no one else mentionedyour asset allocation. Your cash and bonds are at 14% of your portfolio, that is really low. While you have real estate that provides some income, the issue is that is not liquid.
So if stocks drop 50% you dont have alot of bond reserves to draw on while the market recovers.
You already won the game building up your wealth, why not move to a more conservative AA to lower your equities risk?
If you do decide to move to a more conservative AA i would encourage shorter term and investment grade or CDs. Rates are on the way up, and long term bonds could suffer losses easily at this point.
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Old 10-26-2017, 06:37 AM   #17
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interesting. I thought that I had too much cash (over a year of spending), But I see your point. Was going to invest some of the cash into more stock funds but I think that I won't after your suggestion. what would an ideal percent bond and cash portfolio look like? Maybe 7% cash, 15% bond?
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Old 10-26-2017, 07:13 AM   #18
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Like you, i have alot of my NW tied up in real estate, and like you (maybe) I had always viewed my real estate as kind of bond like. I had always had the stocks bonds cash portion of my portfolio very aggressively in stocks. I had always asked myself the question: If the market declined by 50 percent would i investmore or sell some stock? with that i would invest more.

I am probably biased a bit because i recently changed my thinking. I like you have won the game and am close to RE with high spend and assets (though less than you relative to spend). I asked myself a different question:

Would I still RE if the stock market declined by 50%? The answer was an obvious no. So I changed my AA.

What to change it to? Professionals would tell you 50-60 percent of your non RE portfolio in stocks most likely. 70 at absolute max. But i think you can arrive at your own answer a different way. Ask yourself if we enter a secular bear market for a full decade or more and most of your cash needs should come from your real estate, deferred comp, and bonds and cash, how much do you need in bonds and cash?

Short term govt and corporate pay about the same as laderred cd these days. Youcould go intermediate with a portion of it. As i said before i would stayaway fromlong term and or low grade. You are not chasing yield here, you are preserving capital.

If you feel the need to gamble you can set aside 100-300k in a separate account (perhaps tax deferred) and trade and option your heart out.

Hope this helps
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Old 10-26-2017, 08:01 AM   #19
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I see the deferred income as CD like since it is a guaranteed interest amount and no risk of principle. I have maybe 300k in individual stocks with the rest in mutual funds and ETFs so I guess that's subject to overall market risks.

Interesting I discussed the situation with two separate Financial advisors. One (from Edward Jones) like you said why are you gambling with your money, you have already won. They are recommending higher percentage of bonds. I have my IRAs and a little after tax money with them.

The second Financial Advisor (from Fisher) says, I should be 100% in stocks, and they recommend European and Japanese stocks. They claim the market is less risky over the long run than bonds. They recommend individual stocks (a portfolio of about 85) and they claim my portfolio is too large for mutual funds. They see at least two more years of stock growth. They claim to have received an average return of 20% for their investors in the last year and 9.8% over the last 10 years. I haven't invested any money with them.
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Old 10-26-2017, 08:10 AM   #20
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The deferred income is more like a 10 year bond from a company with the same credit as your CORP. Ie not govt guaranteed

I think you already sense the guy from Fischer may not be making a good recommendation that is really in your interest

I would agree if people tell you to buy individual bonds rather than bond funds.
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