to RE or not to RE, that is the question

[brandywine]

Hi, everyone, I just discovered this forum yesterday and have really been enjoying reading through the threads. Sounds like all of us are pretty much on the same wavelength!
I'm 53, been living happily on my own for 10 years (one grown child), and now dreaming about taking the plunge towards FIRE, but making absolutely sure first that I have all my bases well covered, because to me there's no point in RE if I'm going to worry all the time (or even part of the time) about money. I'm pretty frugal, have no debts (even mortgage is paid off), and expect to need less than $30K/year initially for a very nice (if simple) lifestyle (kayaking, biking, hiking, gardening, reading). But my home-grown calculations always assume another $5K of unexpected annual expense, because you never know. I've got $1.1M so far, and FIRECalc says GO, and my own spreadsheets (extensive--I'm an Excel junkie) say GO, but I'm still hesitating about leaving all those salary $$$ (and future Social Security $$$) on the table (I've only had 10 years of decent income, so another 5+ would make a substantial difference). It's true the calculations show I don't need them, but it would be nice to have the extra $$$ to (for instance) help my daughter buy a house in a few years or create a college fund for my grandchildren. Plus of course I'd sleep even better with more than enough (as opposed to just enough) in the bank. So at the moment I've decided to hold off on RE until I hit $1.6M.
Meanwhile, I've bet a large percentage of my nest egg on a single small-cap stock (long story which I won't go into), and either $1.6M will happen next year, or I could end up more or less starting over and working until I'm 67. Stupid? Oh, yes. And if/when I get my money out, it's going straight into Vanguard index funds.

 

[haha]

Meanwhile, I've bet a large percentage of my nest egg on a single small-cap stock (long story which I won't go into), and either $1.6M will happen next year, or I could end up more or less starting over and working until I'm 67. Stupid? Oh, yes. And if/when I get my money out, it's going straight into Vanguard index funds.

This makes anything we could say other than, Uh, OK, useless. Only thing I would add to that is if you are at $1.1, and if your single stock works you will only be at $1.6, but you could go bust- that is an unusually obtuse bet.

Could you be a troll?

Ha

 

[ats5g]

SELL, SELL, SSSSSSSSSSSEEEEEEEEEELLLLLLLLLLLLL!!!

Seriously though, sell it.


I can sort of understand having a big % in something like Berkshire Hathaway, but one stock. That's scares the beejesus out of me, though granted, I own over 7,000 stocks.

Hopefully there are others who overcame this hurdle and can share their experience. [where's CFB?]

- Alec

 

[chinaco]

If I had to take a bet... I would just use some leverage. Perhaps buys some LEAPS if available.

But then again, I stopped that sort of investing years ago.

I would not place a large amount on any single stock at this point.

 

[Rambler]

I agree with the above....SELL! Diversify! get some bonds to go with the stocks. If you REALLY believe in the one small cap you have, you could overweight it a little, but not that much. If you retire now, as you are, with over a million and most of it in a single small-cap, you are REALLY living dangerously.
R

 

[brandywine]

haha, I had to google "troll" to find out what you meant, and now I'm embarrassed! Looks like I inadvertently made a terrible first impression: please accept my apologies. I honestly wasn't trying to make trouble--I like this forum just the way it is!

 

[Webzter]

Are you unable to get out of this single-stock small cap? Stock options tied to a job?

I guess, fundamentally, I don't see it. You're afraid of quitting now becaues you _just_ have enough money to FIRE. However, if your bet (and it sounds, from the little you've told us) pays off then you're set.

If you moved your money into a diversified Vanguard fund (heck, if you don't know what to pick, just buy a LifeStrategy fund) and worked 5 more years you'd likely pass that 1.6 mark without losing sleep at night.

I'm truly hoping this is something like a stock option deal and you're under blackout until a certain date. At least then, as an insider, you might better be able to assess the sanity of your position.

 

[Dawg52]

Sell the single stock and diversify. Work another 5 years if you need more to sleep better.

 

[Achiever51]

Putting all your eggs in one -- possibly fragile -- basket is too risky for someone so close to RE. I agree with the suggestion to SELL now -- if that's an option.

And with $1.1 million set aside now, a 4% SWR will provide you with $44k yearly -- looks like you'd have sufficient to cover your expenses + +.

Just a thought, but is it REALLY the $$ that is keeping you from pulling the trigger? Or is there some other reason why you think you might want to stay?

 

[brandywine]

Thanks to everyone for their feedback, which is unanimous on the need to diversify. I will definitely do that (I'm not locked in in any way).

Achiever51, to answer your question: it IS the $$$ that makes me hesitate, though as I said, it's not so much for me (I really live a very simple life) but the thought of how nice it would be to have extra $$$ so I could help my daughter buy her first house and set up a college fund for the grandchildren. (My parents did this for me, and I'd like to "pay it forward"). What do other RE'ers think about this? Are gifts for their children/grandchildren built into their retirement budgets? How do you decide how much is enough, and how much is too much? You don't want to spoil the kids, or undermine them standing on their own two feet, and of course it makes no sense for ME to work several more years just so SHE can retire super early. But on the other hand, I keep coming back to the fact that in one year at my salary I could accumulate what it would take her 10 years to save at hers, and give her a big head start on saving for her own retirement.
I'd love to hear what thoughts other folks have on this topic.

 

[Rambler]

We hope to leave some behind. Don't plan to help the kids with house-buying. Both DW and I do not believe it will be good for them. We will be there for them if something disastrous comes along, and they truly need the help, but barring that I think it not be good for them to help very much. Over time and depending on what happens with the tax code, we may begin gifting to trusts that could only be touched after a certain age, or whatever, but we still have a lot of research to do on that subject.

 

[Nords]

Welcome to the board, BW.

Thanks to everyone for their feedback, which is unanimous on the need to diversify. I will definitely do that (I'm not locked in in any way).

As an ER with 30% of the portfolio in Berkshire Hathaway, I hereby concede my "aggressive equity investor" crown to you. I've never really believed that people need a financial advisor to help with their asset allocation, but this is one case where I'd be willing to make an exception. There's absolutely no reward to be gained that even remotely compares in significance to the risk you're taking. To do so without a pension or other safety net isn't a question of whether there's danger, only of how much danger.

Achiever51, to answer your question: it IS the $$$ that makes me hesitate, though as I said, it's not so much for me (I really live a very simple life) but the thought of how nice it would be to have extra $$$ so I could help my daughter buy her first house and set up a college fund for the grandchildren. (My parents did this for me, and I'd like to "pay it forward"). What do other RE'ers think about this? Are gifts for their children/grandchildren built into their retirement budgets? How do you decide how much is enough, and how much is too much? You don't want to spoil the kids, or undermine them standing on their own two feet, and of course it makes no sense for ME to work several more years just so SHE can retire super early. But on the other hand, I keep coming back to the fact that in one year at my salary I could accumulate what it would take her 10 years to save at hers, and give her a big head start on saving for her own retirement.

I think the sweetest ER accomplishments are the ones achieved by one's own efforts. If doing those things make you feel better then it's not such a bad thing to do, but perhaps for their own independence it's better to let the kids make those goals on their own.

I also think that they'd much rather you kept your own $$ in case of emergencies (catastrophic illness, long-term care) than to give them a leg up and then later need their financial assistance. Based on what I'm hearing from both my father and from my parents-in-law today, I'm not sure that their occasional gifting of the late '90s was such a good idea. It didn't significantly affect our plans back then and I sure hope it's not affecting their lifestyles today...

 

[brandywine]

Thanks for the feedback, Nords and Rambler--what you say makes good sense. It's certainly been a huge relief to me to see my widowed mother so well provided for in her 80s.

 

[Moemg]

First off diversify so you can sleep at night
Secondly I wrestled with the same feelings toward my daughter .I offer to help out if they really need it but I try to step back and let them solve it on their own first . I do give my daughter and her husband very generous gifts (hey she'll get it anyway ).There is enough in my budget to do this without any belt tightening .. If it required belt tightening I would cut back on the gifts .Too much is when you are solving all their problems and not letting them figure it out even if it means the dreaded Ramen Noodle diet .

 

[cute fuzzy bunny]

Hopefully there are others who overcame this hurdle and can share their experience. [where's CFB?]

Hey, thats not mine, baby. Quite the opposite in fact!

I sold the company stock every year when my options vested and diversified. Granted the single stock was a heck of an ATM machine, spitting out plenty of money...but I kept it.

Seems I was considered an idiot for 7 years for doing this, as the company stock well outpaced the market. Then I was a genius. Then I retired. Then watched all the former geniuses keep working

I often struggle with watching pre-ER accumulators taking on a lot of risk trying to 'get there' more quickly than a market-indexer/asset allocator/lbym/this-is-going-to-take-a-while strategy.

I guess if it works, you're a genius. If it doesnt, well...

 

[megacorp-firee]

Welcome to the board. ditto what everyone has said ... diversify.
You don't mention health insurance. I have found that the two biggest 'costs' are (in my area) property insurance and medical insurance after retirement. If you have those covered in your 30K then it looks like you're golden. Good luck on you decision.

btw, I also agree with the comments about accomplishments being sweeter if they are earned.

 

[kcowan]

I think you have bigger issues than your stock selection. You cannot justify giving up the big bucks you are earning. You can make a difference to important people in you life. And in your heart, you want to have $1.6M.

Now we have no idea what stock you are holding. If it is BRK, I would vote with Nords and say hang in there because you need $1.6M anyway. If it is AAPL which is now officially a 10-bagger for us, I would say maybe (probably not another 10x in the offing). We have done well on many buy and hold stocks. As long as their numbers continue to add up, we hang on for the ride. YMMV

 

[tightasadrum]

The world as a crazy place right now. And as the father of a daughter myself, I understand your feelings. Somehow you expect boys to just do what it takes to make it through. But for women it is not a flat playing field. Things are much better than when I started working, but... I just hope I'm in a position to help if needed. Although, deep down, I want to see her hit the home run by herself. That means I need to suppress my daddy feelings and let her work it out herself. Tough.

On the working thing, do you enjoy your job? If so, and you can put a lot more away, that's what I would do. But that's just me. Up until the last few years I enjoyed my jobs. I needed to stay busy. But that's me. It sounds like, deep down, working a few more years is what you would feel better doing.

 

[militaryman]

Target

You say you have enough $$ for you but want to give to daughter/grandchildren ....

Pick a timeframe , perhaps a year, and say I will save 6 months all I can for my daughter and put that away and 6 months for my grandchildren and put that away -- and then after that year GO , You will still have your 1.1m plus a years interest and you can feel satisfied that you sacrifice to give to them.

 

[kumquat]

I too have a big chunk in a single stock, currently about 30%. However, I don't really need the 30% and it's a large cap (at least in Canada). If I were you, I reduce my holding to maybe 10-15%. Still a big gain if you are right but maybe you can handle the loss if the sky falls.

Since you would be more comfortable with more $ and if you don't hate your j*b, why not hang in a bit and get closer to the 1.6. A good nights sleep helps.

We intend to give the kids some of their inheritance sometime soon for house down payment but the bubble has to burst first. They will probably end up with a lot of $ anyway so let them crash & burn with a bit first so they appreciate and keep the rest.

 

[cute fuzzy bunny]

it's a large cap

So were worldcom, enron, tyco, aig and a host of others. To paraquote some financial porn mag I was reading in the doctors office some years ago "Super blue chips that every investor simply has to own, at any price".

Concentration can make you rich or make you poor. Granted dilution is rarely a get rich quick tactic, but its also rarely a get poor strategy.

 

[megacorp-firee]

Concentration can make you rich or make you poor. Granted dilution is rarely a get rich quick tactic, but its also rarely a get poor strategy.

CFB has a good point here. During accumulation and while working, you could take a little more risk. In retirement and distribution, you may want to ensure you have something to distribute. One 'Enron' and you're toast.

Best of luck in you decison.

 

[brandywine]

Thanks to all for your very helpful comments and suggestions.

megacorp-firee asked about whether I have health insurance covered in my proposed $30K retirement budget. I do, to the tune of $5K a year, which I see as $2400 for a high-deductible catastropic insurance plan, plus $2600+ (whatever more I can spare, up to the limit) to tuck away in an HSA account, never to be touched except in dire emergency. I'm currently 54 and in good health. Can I get some feedback from those of you who have retired, are those figures more or less realistic? My budget also contains several thousand per year for unexpected expenses, which is where I'd pull the money from if I actually had some medical expenses (besides the insurance), which usually I don't.

 

[cute fuzzy bunny]

Do you have "capital" items worked into your budget? Home repairs, replacement cars, lawn mowers, tires, new furnace, water heater, etc?

How about a handle on miscellaneous small expenses?

I havent looked at my budget in a while, but I think I was running about 8k a year just for those items...

 

[megacorp-firee]

Thanks to all for your very helpful comments and suggestions.

megacorp-firee asked about whether I have health insurance covered in my proposed $30K retirement budget. I do, to the tune of $5K a year, which I see as $2400 for a high-deductible catastropic insurance plan, plus $2600+ (whatever more I can spare, up to the limit) to tuck away in an HSA account, never to be touched except in dire emergency. I'm currently 54 and in good health. Can I get some feedback from those of you who have retired, are those figures more or less realistic? My budget also contains several thousand per year for unexpected expenses, which is where I'd pull the money from if I actually had some medical expenses (besides the insurance), which usually I don't.

Just retired, and my COBRA for me and DW will cost $630/month. We are 56 and 57 yo. I expect these costs to go up every year. when COBRA runs out (18 months), we will be at $900/month at todays prices for 'retiree med insur' from megacorp. I will be shopping around for a less expensive alternatives. So be aware that if your $30K retirement budget is not COLA'ed you can expect less and less discretionary funds available.