Surfdaddy introduction

[Surfdaddy]

Hi, I'm pretty new to the boards and have posted a few times in the last couple of weeks -- yet I never did the formal intro!

I'm 49, married, have 2 kids 11 and 13. I work in middle management at a high tech company that is a leader in its field. My wife is a stay at home mom. We own a house and due to luck of stock options over the last 10 years, I have a substantial diversified portfolio of about $3-4MM; more of it in taxable than in retirement accounts.

So you're probably thinking - why am I not already ER'd? Well, we do have a somewhat expensive lifestyle, but much of that is the value of the current house (California), and the wife's desire to send the kids to private schools. Given some recent tough decision-making, we are sending the kids to schools that cost about the equivalent of college. So I'm essentially needing to cover college equivalent costs for 2 kids for the next 8-10 years. Even if we have the kids borrow some money in college, that's still a lot.

Lately work has taken a turn for the worse in terms of the BS bucket. I'm actively looking for a transfer at my current job to a different role. I've even considered a drop in grade level to get something I enjoy - the loss of even 30% income to a lower level would not be a huge problem, and I would still get the excellent medical and other benefits. Plus every year I work increases our nest egg and retired standard of living. One of the things that is interesting is that once you have a lot of savings, the amount you can save yearly is not a big factor in where you'll end up - the biggest factor is the growth of the current nest egg. Even though I save max 401K and max on our company stock purchase plan, that is still a much smaller factor than the annual appreciation of our assetts. So investment choices become very important.

My current thought is that I'll RE in about two years. That could end up as early as this year if I get too disgusted with work, or much longer if I find a role I truly enjoy much more.

These are great forums and it's wonderful to have this as a resource. Thanks to all for your being here!

 

[tangomonster]

Surfdaddy, you've kind of freaked me out! A few weeks ago, I posted my intro and everyone thought we could definitely do it. We decided to do it in 10 more weeks---but now your doubts and questions are making me have my own doubts and questions.

Our portfolio is similar to yours (4 million). You didn't say how much your annual expenses are---gotta be more than ours, since we don't have kids and live a very simple lifestyle.

Don't know how much you're paying for the private school tuition; you said it was equivalent to college educational expenses, but that covers a wide gamut (public community colege? private university?). And you didn't say what you would be doing in terms of health insurance.

Our biggest expense will be health insurance and care. I obtained a high deductible ($10,000) policy, but that means that I could be a couple of thousand out of pocket a year (more if there is a medical problem). DH got a $2500 deductible policy that costs $700 a month. So combined we're looking at over $800-- a month health insurance, at age 52. 13 years until Medicare kicks in. With health insurance premiums going up 15% or more a year, we could be paying $60,000 a year by age 65! Could have paid out by age 65 just for health insurance.

Don't know how this compares to your situation, with private tuition being your major expense, but it looks like you will have only seven years to pay it until both your kids are in college---whereas we will have twice that long until we get relief from insurance.

And I agree with you that there's not a whole lot to be gained by working longer to save a little more; at this point, additional savings would be small in comparison to the actual growth of the portfolio.

So---do you think you can ER? And do you think I can?
Would like other people's opinions as well as to how similar or different you see surfdaddy's situation versus my own.....

 

[Martha]

With health insurance premiums going up 15% or more a year, we could be paying $60,000 a year by age 65! Could have paid out by age 65 just for health insurance.

I too have run some inflation senarios for health care costs, which was running at about 11%. Our system simply can't support $60,000 a year for health insurance. There simply isn't enough people with that kind of money. So either current cost increases won't continue or some other resolution is likely. In fact, cost increases have slowed over the past year, though they still outpace inflation.

Tango, based on what you have said in the past about your expenses and the fact you always have lived a lifestyle that could easily be supported by a portfolio half the size of yours, I don't think that you are taking a big risk by retiring early.

Go for it.

 

[73ss454]

God bless you folks with 4M portfolios.

If you guys a scared to retire with that kind of money I should just jump off a bridge. Health costs are the problem? Put 1M on the side for health costs and live off the other 3M. I wish I had this problem.

 

[TromboneAl]

we do have a somewhat expensive lifestyle

What are your annual expenses?

Figuring a full-cost college education costs $200,000, multiply that by five, and subtract, and your new net worth is: $2M - $3M. With a 4% SWR that would give you $80,00 to $120,000 per year to live on.

 

[tangomonster]

73, don't jump off a bridge!  I'm just a worrier---I realize people can and do live on smaller portfolios.  Just like I lived on a much lower salary than most people.  You do have a point about being able to live on 3/4 of the portfolio and set aside $1 million for health care costs.

And Martha, I hope you're right about the health care system changing---but I don't see any rael resolution in sight.  Even the insurance companies don't seem to be trying to control costs.  I went to a gastronenterologist recently---an office visit just for him to okay me for a colonoscopy.  For a 10 to 15 minute office visit, asking me some routine questions about my health history and a very cursory physical (listening to my heart), he charged $333!  And the insurance company paid most of this!  I understand why a colonoscopy is an expensive procedure, but a routine office visit that was no different than an internist's $75 to $100 office visit costing 3 to 4 times as much just doesn't make sense!

And worrier that I am, when I saw the insurance statement I immediately thought "oh no---how can I ever ER when there are medical costs like this?"  But I need to kep reminding myself that I have the money to handle medical costs---that I do have insurance that will kick in after I spend $10,000---and that if I have too many medical costs, the bigger worry than medical costs and a diminished portfolio will be my health!

Thanks for helping me keep it in perspective

 

[Jarhead*]

Surfdaddy, you've kind of freaked me out!  A few weeks ago, I posted my intro and everyone thought we could definitely do it.  We decided to do it in 10 more weeks---but now your doubts and questions are making me have my own doubts and questions.

Our portfolio is similar to yours (4 million). You didn't say how much your annual expenses are---gotta be more than ours, since we don't have kids and live a very simple lifestyle.

Hey JG, I think this one's yours to handle.

 

[Nords]

I went to a gastronenterologist recently---an office visit just for him to okay me for a colonoscopy.  For a 10 to 15 minute office visit, asking me some routine questions about my health history and a very cursory physical (listening to my heart), he charged $333!  And the insurance company paid most of this!  I understand why a colonoscopy is an expensive procedure, but a routine office visit that was no different than an internist's $75 to $100 office visit costing 3 to 4 times as much just doesn't make sense!

Cost of doctor's time to answer colonoscopy questions-- $25
Training/experience to recognize whether or not a colonoscopy is worth your time/risk-- $308
Making sure the stethoscope and the colonoscopy probe end up in the correct locations-- priceless!

 

[Surfdaddy]

Tangomaster, you sound like you're in a better position than us.

We figure with $4M, we easily need to subtract >$500K for primary school and college (and that probably could go higher, depending upon college. My son wants to be an Orthodontist!).

If you then subtract $1M for self-insurance, you're left with $2.5M.

Being conservative, $2.5M *.035 = $87.5K/year.

Costs include 2 cars, $7K/year property tax, still gonna have some residual income taxes, $15K/year mortgage, food, utilities, home insurance, car depreciation, home maintenance, karate lessons, etc.

And something like cancer could still wipe us out.

We could do it, but I'm risk adverse enough that a couple more years' appreciation would be nice...

 

[Martha]

But Surfdaddy, why would you self insure? You don't want the cancer to whipe you out. That is why you get insurance. Even if you end up with a high deductible plan.

 

[Dawg52]

Buy you a $10,000 deductible plan. That's what I've done and my portfolio is muchhhh less than yours. You can easily support that. Go for it!

 

[Surfdaddy]

I mentioned self-insurance because somebody said to put $1M on the side and live on the remainder.

No, I would never self-insure. But since we have a family of 4 the insurance is bound to be pretty expensive. We're basically healthy, but I had some back problems last year and it's not out of the question that some day in years ahead I might needs some surgery. I'm sure the insurance company will love that. I've also had a chronic problem (I know, TMI) that I may need minor surgery every few years. So while we don't have big health issues, I suspect our premiums would be a bit higher than average.

I'm going to stick it out at the lately-sucky work for the remainder of the year. I'm currently looking for a transfer, but I'm at a high enough position that it may not be easy. I have also considered a transfer to a slightly lower level - the salary would still be pretty high, the benefits excellent, and I might actually enjoy it more. The last option is to look for another job elsewhere (but not requiring relocation). I figure about 2 years work and our nest egg will have built to the point that we can retire at the same or slightly higher std of living. Then we can have some real fun!

But if I get fed up enough it's good to know that I probably could make it work now if I had to....

 

[laurence]

Dude, DUDE! 4 mil is a crapload of money. Just so we are clear, this is a lifestyle choice, right? I think you can get a medium deductible health care plan for the year with the amount of interest your portfolio could throw off in a week!

I live in San Diego, my ER plan is ~$1 mil in today's dollars and a paid off house, with a small pension kicking in later, and we aren't eating mac and cheese. I'm honestly curious about what you are spending your money on, we could probably give you knocks advice about playing good defense, since you are already playing great offense!

 

[SteveR]

$4MM is quite a pile. It is hard to be too sympathetic about your expenses with that much available to create an income stream. Seriously, you can do a lot to cut your expenses. $500k for college? Your kids can also work and get loans. If you feel you must support them then put a $$ limit on it for each kid and let them make the choice about how to fund the rest. My two are in school now and both work part time. I help them but don't fund the whole ride. I think they appreciate it more when it hurts a little.

Health insurance is a must have these days. Self funding at your asset level does not make sense. Go shopping for a decent policy and forget about it. Spend the difference on some travel with the knowledge you bought peace of mind and financial stability with the premium.

Do a budget based on a couple of different concepts.

1-Maximum income from your investments over the maximum time-frame you both might live. Put in all the bells and whistles you want in retirement and see what it takes in income to fund it. If you have enough based on a conservative SWR (4%ish) then stop here and stop sweating.

2-Do a more conservative estimate of expenses based on ramping down on activities in your Golden years with a corresponding reduction in expenses. You can figure this with and without health insurance premiums. Keep in mind your mortgage will end someday and your expense for it will also end. Taxes will be with you forever both RE and income. If your number is fully funded with your income stream from #1 above, then stop sweating it. If not, cut expenses or...gulp...plan on saving more by working longer.

You need to plan your expenses so you can plan your income stream to fund your expenses. That means knowing how much you will spend in retirement as opposed to how much you CAN spend. When your income equals your expenses plus a safety factor (sleep at night buffer constant) you are done. Stop sweating it and enjoy retirement.

 

[Surfdaddy]

SteveR:

1 - yes, I have no intention of NOT having health insurance. I was playing along with responding to another post talking about setting $1M aside for that purpose.
2 - note that the $500K is not just for college, it is also for 10 years remaining private school education for the kids, PLUS college. About $250K each. I'm factoring in inflation, so that number is future dollars, not present dollars. Don't tell me about public schools, this is a battle I've tried and lost with DW. Just so we know who's really in charge!

My point was that yes, I can retire right now at about my current standard of living, even including the schooling. But I'm a chronic worrier (probably why I'm also a big saver). What if the market plunge happens in my early years? What about the screwed up world we're living in? What about Iran? What about China? The tradeoff I'm mulling over is the ability to have an additional cushion for either big drops or big extra lifestyle needs - sort of additional insurance, as it may.

 

[Cut-Throat]

But I'm a chronic worrier (probably why I'm also a big saver). What if the market plunge happens in my early years? What about the screwed up world we're living in? What about Iran? What about China? The tradeoff I'm mulling over is the ability to have an additional cushion for either big drops or big extra lifestyle needs - sort of additional insurance, as it may.

Surfer, don't sweat the details. We're all dead in the long run!

Get busy doing the things you really want to. - Do you know what they are?

 

[LEX]

I love surfdaddy and Tango.  They are good folks that made a great amount of coin, but have yet to fully grasp that they are now free to walk out the front door, tell everyone to put a fork in it, CAUSE ITS DONE! and have their own life.  They can do so long as they stop the getting and spending treadmill and budget for a livable cash flow. 

Here is what they need to know: the oppurtunity cost of letting their days slip away in the office when they could live a self directed life.

Hey guys, I am in Cape Town SA, looking out at the beach from my rented flat, and will be treating my DW to a day trip with at least one sea food feast fresh off the boat. 

Since I am reviewing an investment I already have equity in, I plan to write off the trip.  Gawd, I love the code! The SA wine is outstanding BTW.

 

[Sam]

SurfDaddy and TangoMonster,

I personally know a few people just like you two.  They're never positive about the future.  Given an outlook, they will only see the negative sides.

Your problem, as many have pointed out, is not the lack of money.  It's the way you look at life, and no amount of money can help you.  I am confident that you would still worry if you had 6 millions instead of 4 today.

Best of luck,
Sam

 

[Surfdaddy]

I personally know a few people just like you two. They're never positive about the future. Given an outlook, they will only see the negative sides.

... It's the way you look at life, and no amount of money can help you. I am confident that you would still worry if you had 6 millions instead of 4 today.

Sam,

Thanks for taking the time to respond. I do think you're a bit presumptuous about my personality; while there are a few elements of truth, your comments overstate things quite a bit.

There are some financial details I've omitted for the sake of privacy. I agree that I can FIRE today if I want to. I'm weighing my options right now and also exploring options where I work. If I can find a different role that I LIKE, I'd actually like to continue doing some work for a while longer. My current plan is something like this:

1 - try to find a transfer to a more interesting position, work another 2 years
2 - if no luck by July, then look for a more interesting job outside my current company
3 - if no luck on this by next March at the absolute latest, time to FIRE.
4 - if I get fed up enough before March I can FIRE anyway

Two of the dates are key - in July and March I have some vesting from work benefits that adds some more money to my portfolio. The July date is more important financially than the March '07 date.

The other factor to consider in FIREing is that I would need to get a firm quote on medical insurance, as I still have two early teen kids. The family has some health issues, that while not major, could add costs and may be excluded conditions as part of health insurance.

 

[Sam]

Thanks for taking the time to respond. I do think you're a bit presumptuous about my personality; while there are a few elements of truth, your comments overstate things quite a bit.

SurfDaddy,

I hope that you did not take my comment as a criticism.  It was not meant to be.  I was simply trying to say that the problem lies elsewhere outside of the financial realm.  My apology to you and to TangoMonster, if you were offended.

Sam

 

[Zipper]

What's with all the private school costs?

I bet the majority of residents here went to public schools? You did too I bet. Maybe your wife had a bad experience years ago but that's no reason to write off the whole system.

I taught in Ontario Public Schools for 33 years. I see former students all the time and we have friendly chats about "the old days". They still call me Mr. "Z".

Both my sons went through the public system and got a great education.

My grand-daughter started this year.

You sound like you can afford a good house in a good area with good schools. Your wife is at home. She can see the kids off in the morning have lunch ready at noon and be there when they get home.

You could pay for a lot of extra-curricular with the $$$$$'s you're talking.