Very high income… but how long to keep this up?

R

Ruminator

Dryer sheet wannabe
Joined
Dec 20, 2014
Messages
13
Thank you all for your thoughtful posts – I have learned a lot without ever having posted a thing, and am so thankful for you all and for this site.
My wife and I are in our very early 40’s. Am going to keep the details spare as my story is a bit unusual.

Home equity: $2.0M
Investments/savings: $1.9M
Retirement: $725K

My gross income this year was approximately $2M. In 3 years it will be approximately 3-4M and in 5-6 years will be $4-6M. In my tax bracket and state, take-home is about half that and we live on ~$300-400k. So we are living very well, but saving fast. Based on my modeling our net worth (ex-house) would likely be about $8M in 4 years, $12M in 6-7 years; $20M in 8-9 years, $30M in ~10 years, etc.

My real question I have is not “when can I retire”, it’s “when should I retire” – a deeply personal and complicated question, I know, but one that I am struggling with where I thought you all might have perspectives.

At times I enjoy my job. It can be challenging in a good way, and I am having an impact on the world. However, much of the time I am miserable on Sunday night. My work is quite demanding, involving a lot of time away from family, and pretty constant background anxiety punctuated with periods of intense "foreground" anxiety! :). So my fundamental question is:

- Should I stop now, reduce expenses significantly and live a life without (or with way less) work?

- Should I cut bait once I reach a reasonable FireCalc assumptions that put me at 100% historical likelihood of being able to fund my current expenses?

- Should I try to get more joy from my work and hang in there? How long? I can imagine enjoying having the money to do outrageous things like pay off my parents’ mortgages, support charities I care about in a big way, buy a great vacation home for my extended family, etc.

I also wonder whether if I quit too soon I will have regrets about not having pushed myself further (professionally or financially) after all the hard work I’ve put in to get where I am. If I stepped off this path it would be very difficult to get back on. Have heard a colleague of mine say “it is like winning the lottery every year” and therefore hard to stop, but I am also of the mind that money is of pretty limited utility past a certain point.

I understand this ultimately comes down to questions like (a) how happy/unhappy I am (or could be) doing what I’m doing, (b) how happy I’d be doing something different (I have plenty of hobbies and can be very happy with a simple weekend… but is that because life is so hectic / would I be bored in 5 years?) and (c) the utility of money for luxuries beyond what I really need. But these are fundamental question many seem to be grappling with on this site, so would much appreciate perspectives…
 
Is the nature of your work such that you can do it part-time? If so, that might be an option as long as you don't burn too many bridges.
 
I hear you, I don't make near that much but do have high stress job.
Sunday nights I get a sick feeling thinking about things at work. Once I get there and go to battle it is ok, however I stress over how much is to much vs time. We are limited on time too!!! I go back and forth on leaving at 55 or 60. It can make a huge difference in the bottom line for next generation.
My two cents. I have heard you will know when it is time to leave the job. And I believe that spending time on this site tells me I should pull the trigger sooner than later. Possible work little part time consulting after 55. Good luck with your decision



Sent from my iPhone using Early Retirement Forum
 
You might want to read the book What Happy People Know: How the New Science of Happiness Can Change Your Life for the Better. It is by a director of The Canyon Ranch who works with very high income but stressed out executives. Actually with your income you could afford to go there and check out their program. Here is an interview with the main author of the book:

Article: What-Happy-People-Know

I think some food for thought might be in your "being miserable on Sunday night". What would you like to buy with your money more than time with your family and freedom to not have to feel that way?
 
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You need to work exactly one more year. Why? Because it will cover the $2M I am charging you to tell you that you could otherwise retire right now without my fee. ;)

The real answer to your question (no fee!) is that you should retire at the intersection of when you have "enough" money to meet anticipated retirement expenses, have achieved "enough" profession satisfaction to give up your career and "not enough" time doing things you would otherwise rather be doing. I'm sure you've dealt with uncertainty and subjectivity like this before in your mega-buck job, so give it your best shot!
 
You are doing (very) well and are on your way to becoming rich - net worth over $10MM.

I am probably in the minority on this but working until you are at least 50 hardly seems like a stretch. At that point it sounds like you would be $12MM net worth. As you are FI already with what you have, I think it also possible to ease back on the accelerator a bit, keep working of course but for you and your wife to enjoy the journey.




Sent from my iPad using Early Retirement Forum
 
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Ruminator said:
"...However, much of the time I am miserable on Sunday night. My work is quite demanding, involving a lot of time away from family, and pretty constant background anxiety punctuated with periods of intense "foreground" anxiety!"...
Click to expand...

Take Monday off! :) There, all better!

Seriously, you really should consider changing the character of your work. Some obvious options are:
  1. Quit!
  2. Reduce days per week
  3. Reduce hours per day
  4. Hire 4 assistants and learn to play golf
  5. Write down 3 specific things about your job that make you miserable, and find a way to make them go away
 
Ruminator said:
My gross income this year was approximately $2M. In 3 years it will be approximately 3-4M and in 5-6 years will be $4-6M. In my tax bracket and state, take-home is about half that and we live on ~$300-400k. So we are living very well, but saving fast. Based on my modeling our net worth (ex-house) would likely be about $8M in 4 years, $12M in 6-7 years; $20M in 8-9 years, $30M in ~10 years, etc.
Click to expand...

If you spend 300-400K annually, you need quite a bit to retire on. $10M, which would give a 4% WR, would be the minimum I would even consider retiring with. Likely $400K could be $500K easily, it's only 25% more.

Since you are younger (40s), a 3% WR would be more reasonable, or $13M.

But let me know when you are ready to quit, I want to get my resume ready...:bow:
 
I think that you're really talking about a lifestyle decision that has financial implications. If you can't stand to curb your lifestyle and reduce expenses, at $350k expenses per year and a 3% WR you would need about $12m. On the other extreme, if you sold your big house and bought a more pedestrian house for $625k you would then have $4m and at a 3% WR would have $120k a year to live on (which is much more than many of us here live on). And of course, lots of in-betweens.

At your comp, I assume that you are somewhere in the executive ranks. If so, once you quit you might be able to take on some board of director gigs that might help fund the gap between $350k a year and the $80k or so that your current portfolio might provide at a 3% WR (assuming you stay in your current house). Or perhaps some consulting gigs or a combination of both.

As a young man, I told myself that I would change jobs if it ever got to the point that I wasn't having fun (recognizing that every job will have bad periods of time and you just need to persevere through those) and I ended up doing that once in my career (though I only had 4 employers in 34 years working). So if you aren't having fun, make a change.... life is to short to stay in a job that makes you miserable.
 
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Ruminator said:
My gross income this year was approximately $2M. In 3 years it will be approximately 3-4M and in 5-6 years will be $4-6M. In my tax bracket and state, take-home is about half that and we live on ~$300-400k. So we are living very well, but saving fast. Based on my modeling our net worth (ex-house) would likely be about $8M in 4 years, $12M in 6-7 years; $20M in 8-9 years, $30M in ~10 years, etc.

My real question I have is not “when can I retire”, it’s “when should I retire” – a deeply personal and complicated question, I know, but one that I am struggling with where I thought you all might have perspectives.
Click to expand...
The risk you run is allowing your current lifestyle become a function of future, not current, income and savings. Once that happens you lose to ability to make the kind of choice you are considering.

You and your family may face considerable pressure to increase your standard of living. Your peers and more senior colleagues might distrust the level of commitment shown by someone who chooses to save rather than consume. Greed, and the need to continue working is important leverage for corporate management, especially at the senior level.

Should I cut bait once I reach a reasonable FireCalc assumptions that put me at 100% historical likelihood of being able to fund my current expenses?
Click to expand...
FIRECalc is a useful tool but assumes you are able to project your spending needs with a high degree of certainty, or at least a firm upper limit. One question you need to ask and answer is if your needs have stabilized in that way, or will you (or someone else) feel that, by leaving, you are depriving yourself in some way. This is a very difficult question to ask, much less answer, even more so when a spouse or partner is involved.
 
It does sound like you have a problem.
using stupid rules of thumb (4% rule), you would need 10 Million -- not including the house to sustain 400k indexed to inflation... and I believe this is before taxes. This is typically conservative... and I believe before taxes, so you may need quite a bit more for the taxes. Yes, I know this is not what you were asking.

Your description of stress sounds very minor. I've had many parts of my career where I would go to bed at 10 PM and wake up at 1 AM from stress and not be able to go back to sleep, so I would go work... And I was not making anything like your kind of money. I have always been pushing the limits of the technologies I worked on... and I don't like to fail.

You first need to decide the parameters of what is important to you. How much you really want to live on. Remember when you quit working, you will likely increase your spending as you now have more time to spend and experience life. Having a $2M house (you noted equity.. not value) has expensive up keep.

Next.. and likely you biggest problem, is your self esteem. Many people put a lot of the self into what they do, what they make, or what they create. This is often difficult to just leave even when the money is not the issue any longer. Are you able to keep your self worth together without the job? Can you feel good about yourself without the income, people reporting to you, others looking for your input?

Finally, what are your priorities? Your self esteem and priorities are likely the real question after you balance your savings and cost of living. Maybe you could answer how much your self esteem is wrapped up in your work and what your priorities are.

If you retire now with about 2.6Mil in investments/retirement and live on about 400k after taxes (and keep the house), don't expect it to last.

bingybear
 
pb4uski said:
At your comp, I assume that you are somewhere in the executive ranks. If so, once you quit you might be able to take on some board of director gigs that might help fund the gap between $350k a year and the $80k or so that your current portfolio might provide at a 3% WR (assuming you stay in your current house). Or perhaps some consulting gigs or a combination of both.
Click to expand...

This was my thought also... I read your post and assume that you are a c-exec of a fortune 100 company - and that you could downsize your career to being a board member on other fortune 100 companies.

That's what I've seen the CEOs and CVPs do at my previous employer.... and the board gigs pay decent relative to the amount of work (at least it appears that way to this non-exec, non board member who worked a regular job and made less than half what the board members were compensated.)
 
I can't tell you what to do. But, I can tell you why I chose to retire before my 'official' retirement age. It boils down to this:
 
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Chuckanut, thanks for the cartoon. It is something I need to think about more.

Ruminator, I sent you a private message.
 
Your decision is more than than financial. It includes kids if you have them, your social peer group; the expense to keep up with them if they are also high earners, your neighbors in a 2 m house, the upkeep expense can be quite high and most important, how will you feel about giving up all those millions in 3 to 5 years knowing that if you had saved and waited, you could have had a far more extensive retirement with money to keep your home, travel and whatever else you would like to do.

On the other hand you'll find that you never have enough.......that's the challenge many successful people face......they don't need the money to live a reasonable life style, they look at money as a scorecard......andd like traveling 1st class, eating at Steak restaurants, buying their family "nice" Christmas and birthday presents, etc.

No one here can give you YOUR answer......that's up to you and your immediate family to decide. Me? I had enough earlier than I retired. I've hidden most of my wealth from my family......they'd want to borrow or be gifted from me......We still love pizza and mexican restaurants, but we do fly 1st class, give to charities, paid for very expensive private colleges......bought DW parents a new car.....told them NOT to tell anyone we had paid for it and I've set up decent size trust funds for my kids........yet, I look at my net worth each year and think what it could have been if I had worked longer.

So, again, you have to look at your options and determine the decision you should make to be happy a few years from now. What I would do doesn't matter.......what will make you and your family happy for the rest of your lifetime does. Good Luck
 
Looks like you just started making big $ recently, and your prime earning years are still ahead of you. If I were you (making this kind of $ and knowing the much bigger prizes are yet to come), I'd definitely suck it up and hang in there for 10 yrs! Your job is NOT making you miserable, instead you say at times you even enjoy it. Plus it has an impact on the world. It sounds to me like apart from the very financially rewarding aspect of it, your job brings a sense of self accomplishment that you will probably never find in retirement. This alone would give me enough reason to stay with the job, if I were you.

Also, do you have kids? If so it adds more reasons to stay and make sure you secure enough resources for them. In 10 years you will be in your early 50s, with $30+M, and still plenty time to spend with family, kids, develop hobbies, travel, etc. Retiring earlier than that, you may find yourself bored and regret quitting your job. The bottom line is, I bet this job means more than you think right now, both mentally and financially.
 
I think your problem, if you call it that, is to decide what std of living and lifestyle you want for the future. If you want to stay at current level, than you need to get the total savings up to the $10M range. This is a personal choice decision on your part, evaluate what you want.

If you can downsize, maybe move to a lower COL area, and have less luxuries; then you can get by with a smaller savings and less yearly expenses. This also enables to get out and retire sooner. However, you state early 40's, so even 2-3 more years is not going to put you anywhere beyond early retirement. Is your health any issue? High stress can wreck your health and then any amount of money is potentially no use. Consider the trade-offs you make.

Before I forget, welcome to the forum. It is always nice to have different perspectives and outlook on things, I am sure you have some good info that can contribute.
 
38Chevy454 said:
I think your problem, if you call it that, is to decide what std of living and lifestyle you want for the future. If you want to stay at current level, than you need to get the total savings up to the $10M range. This is a personal choice decision on your part, evaluate what you want.

If you can downsize, maybe move to a lower COL area, and have less luxuries; then you can get by with a smaller savings and less yearly expenses. This also enables to get out and retire sooner. However, you state early 40's, so even 2-3 more years is not going to put you anywhere beyond early retirement. Is your health any issue? High stress can wreck your health and then any amount of money is potentially no use. Consider the trade-offs you make.

Before I forget, welcome to the forum. It is always nice to have different perspectives and outlook on things, I am sure you have some good info that can contribute.
Click to expand...

+1

And welcome.
 
I'd also suggest watching House Hunters International. If you live in an expensive area you might feel poor or even middle class compared to many of your peers, even though by U.S. or certainly world standards you are of course already very wealthy.

Seeing how much it costs to live pretty well in some exotic cities or tropical paradises where nice homes do not cost anywhere near $1M+ might be kind of an eye opener if you are used to a very high COL area.
 
I do not know how likely your excellent income is likely to continue or if there are external factors which could limit your favorable run. If your expenses really are 300K-400K, then you will need a very large capital base to sustain them. At least 10M, more if you haven't accounted for taxes which could be significant. With an opportunity to pull yourself into a much more secure situation financially, I would certainly tend to make hay while the sun shines and plan to keep at this occupation (whatever it is) for at least several more years. You say there is no going back once you leave this job, so I'd target savings comfortably above the minimum to sustain my lifestyle and make myself somewhat future-proof while I can.
 
Ruminator said:
At times I enjoy my job. It can be challenging in a good way, and I am having an impact on the world. However, much of the time I am miserable on Sunday night. My work is quite demanding, involving a lot of time away from family, and pretty constant background anxiety punctuated with periods of intense "foreground" anxiety! :). So my fundamental question is:

- Should I stop now, reduce expenses significantly and live a life without (or with way less) work?

- Should I cut bait once I reach a reasonable FireCalc assumptions that put me at 100% historical likelihood of being able to fund my current expenses?

- Should I try to get more joy from my work and hang in there? How long? I can imagine enjoying having the money to do outrageous things like pay off my parents’ mortgages, support charities I care about in a big way, buy a great vacation home for my extended family, etc.

I also wonder whether if I quit too soon I will have regrets about not having pushed myself further (professionally or financially) after all the hard work I’ve put in to get where I am. If I stepped off this path it would be very difficult to get back on. Have heard a colleague of mine say “it is like winning the lottery every year” and therefore hard to stop, but I am also of the mind that money is of pretty limited utility past a certain point.

I understand this ultimately comes down to questions like (a) how happy/unhappy I am (or could be) doing what I’m doing, (b) how happy I’d be doing something different (I have plenty of hobbies and can be very happy with a simple weekend… but is that because life is so hectic / would I be bored in 5 years?) and (c) the utility of money for luxuries beyond what I really need. But these are fundamental question many seem to be grappling with on this site, so would much appreciate perspectives…
Click to expand...

All very good questions you present, and you've received many good comments to ponder. But one area that was defining factor for me wasn't really discussed. Your situation is likely different from mine, but little was mentioned regarding the impact your work has on your family life.

In my case, being an older dad, and pondering an opportunity to retire early, was the sudden realization that I'm being handed an opportunity to be very much a part of my children's life. Not a dad with a checkbook who visits a few hours each evening when not traveling, but to be the dad that is always there to be the soccer coach or scout leader or just be available. Don't know the age of any children you may have, but this was the factor that made the decision easy. The boys were 1 and 3 when I retired (I was 50).

It was the family life that was the deciding factor for me, and I'm struggling now with what do I want to do next as the boys are now 16 and 18, much less dependent, and I'm finding myself with much more free time than I'm accustomed to. And at 65, my old hobbies are getting more difficult (was an active runner, snow skier, backpacker). The past 15 years were priceless, but I'm also aware that they will be pretty much on their own within next few years. Maybe DW and I will RV/travel a lot more!
 
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