Yet another OMYer

[geeky_grrl]

I've been thinking about early retirement for a long time and lurking here for a few years. I think I'm in good shape to get out soon but I'm having a hard time getting the nerve up to take the leap.

Financial situation
- We're 44 and 45 years old, no kids
- Paid off house (though we will upsize in retirement) - probably worth $250,000
- About $4 million total investment; $2.5 million in taxable accounts, $1 million in 401ks, $.5 million in Roth accounts

Our current spending is $50,000 a year excluding taxes. It's been pretty consistent at that level for the past 3 years. Our costs will go up some in retirement due to health insurance, lost work perks, and increased leisure costs. I'm budgeting $100,000 a year to cover those costs plus have reserves for big periodic expenses like car replacements, roofs, etc.

Firecalc gives us 100% chance even without counting future Social Security income. The main thing holding me back now is our salaries. A few years ago we got substantial raises and equity grants and now each make over $300,000 a year. I'm pretty certain if we changed our minds and wanted to go back to work we'd never get another job paying anything like this.

I'm hoping to convince myself that it is safe and jump ship in January 2017 once I get my annual bonus.

 

[kgtest]

I could make 4million last a loooong looong time. Wish I had your earning potential. nice work.

 

[Walt34]

It sure looks like you're good to go.

Just to be sure, take a look at these questions:

http://www.early-retirement.org/for...re-asking-can-i-retire-69999.html#post1399715

 

[braumeister]

You didn't say, but do you enjoy your jobs? If you do, then at your age I would probably keep up those salaries until the daily grind started to pall.

But if you've been thinking about ER because you don't look forward to going to w*rk on Monday mornings, then I would go ahead and jump.

 

[FreeBear]

Wow, nice job on saving such a nest egg. Sure demonstrates the power of high income combined with relatively low expenses (DINKS!).

Just rather confused by the comment "The main thing holding me back now is our salaries." You are financially independent, you can pull $ 120K/year for decades (3% withdrawal rate)! Perhaps it's more of an emotional thing than just cash flow...

FIRE, as opposed to financial independence, requires both the money and a certain attitude and midset. Some folks have only one or the other. It's not for everyone. May want to give substantial thought as to what you're going to do if/when you retire. What are you going to do all day?

Also times change, the jobs may not be as fun in a another decade. At least you can afford to stop anytime, from a purely financial perspective.

FB

 

[geeky_grrl]

Neither of us like our jobs, but they are both pretty cushy for our pay. Mostly we are both bored with what we are doing and we both have hobbies that we'd rather be doing.

My fear is that if something happened where we needed more money (stock market collapse, natural disaster wiping out all we own) we'd never have the earning potential we have now. I'm probably worrying over events that have an extremely low likelihood, but it is in the back of my mind whenever I decide if we have enough.

 

[jim584672]

With that kind of stash even in a worst case situation you would be able to make spending adjustments and be ok.

 

[folivier]

If you would have a significant loss of your investments at your current and even projected spending in retirement at your age you shouldn't have too much problem finding jobs to survive off of. There really would be no need to have such high incomes again. Many people live quite well on much less.

 

[Yarnstormer]

What if you invested a portion of your savings in something very low risk, over even put a good bit in cash to help you feel "safe"? I'd be out the door if I were in your situation! Congrats on your savings and willingness to live on less than you earn.


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[supernova72]

Making that kind of salary and being bored is not what I was expecting to hear. I thought it would be too much stress and the grind, commute, etc has beat you down. Does not sound like that is the case. Congrats on such an accomplishment at such a young age. Be curious what field of work you are both in but that's none of my business either.

 

[chris2008]

In case of such a permanent stock market crash or natural disaster that wipes out all accounts:
WOuld your jobs still exist or pay?
Would you be able to buy anything worthwile with money?
In such worst case I'd rather have memories of some happy years.

 

[cooch96]

In case of such a permanent stock market crash or natural disaster that wipes out all accounts:
WOuld your jobs still exist or pay?
Would you be able to buy anything worthwile with money?
In such worst case I'd rather have memories of some happy years.

+1

 

[geeky_grrl]

That's true, there is no guarantee of anything in an event like that. Revenue solving all ills doesn't work if I don't have revenue or if its worthless.

 

[petershk]

geeky_grrl: Similar financial picture 4.5m 550k paid off house... 41 yo, 2 young kids, spending is around 8k/mo. Making up mind about work, and the pay part can be a tough one.

Here's how I've starting thinking about it. You can EASILY afford to never work again more than 99.99% of the planet (unless you do something really risky/stupid or get REALLY unlucky). Any financial situation that kills you will crush most of society as well... so there's no point worry about that.

Second thing. Imagine you DON'T have your job right now and it was offered to you. Would you leave retirement to take the job? If the answer is no, then you are suffering from choice by inertia. Because you are used to working and earning money and you're not sure what you should do the default is to keep doing it. That can keep up a long time.

Third, I think about my income as money I'm paid to NOT work. By that I mean if I need 100k/year and I work 160 hours/mo I need 52$/hr working full time. If I make 104$/hr my goal is to work 80 hours a month. If I make 200$/hr, my goal is to work about 40 hours/mo. So when you look at your pay and your hours try to adjust them to cover your expenses. Now almost no employer will allow you to do this because ordinarily raises come with expectation of MORE hours. But it also allows you to compare your passive income to your active income on a more level basis.

So if you have 4M, you're probably getting about 11,500$/mo in cashflow (around 3.5%). That's a salary of $16/hr, 24 hours a day, 7 days a week without doing ANYTHING. So if you work 12 hour days, they have to pay you 32$/hr just to be comparable. Very quickly, the salary starts to look very small considering the value of time, frustration, effort, etc.

Finally, I look at the cost of financial disaster as compared to other risks. For example, every year you get older your chance of dying goes up a small %. At 4M in assets, that chance is probably going up much faster than your chance of financial ruin. Add to that the risk of dying in the commute, the impact of stress on your health, etc and you may very well find out that your risk of death is far greater than risk of financial ruin so it might be much more dangerous to keep working .


I put all of this here because it helped me get an even perspective. I think the basic reality is that with your current assets you should only work if it's what you really, REALLY want to do. Hope that helps!

 

[socca]

That's a salary of $16/hr, 24 hours a day, 7 days a week without doing ANYTHING.!

Assets that produce passive income and/or are expected to appreciate need to be managed, and this is w*rk. So, the OP's choice is not really between w*rk and no w*rk. True, you can hire someone to manage your assets for you, but it's w*rk to find and monitor a manager.

In my case, I will never be able to fully 'retire' due to my obligation to w*rk in the family business, but being self-employed/senior management is so different than running in the corporate rat race that my activities can hardly be called w*rk.

 

[petershk]

Assets that produce passive income and/or are expected to appreciate need to be managed, and this is w*rk. So, the OP's choice is not really between w*rk and no w*rk. True, you can hire someone to manage your assets for you, but it's w*rk to find and monitor a manager.

In my case, I will never be able to fully 'retire' due to my obligation to w*rk in the family business, but being self-employed/senior management is so different than running in the corporate rat race that my activities can hardly be called w*rk.

Fair enough, but I think the scale of work is dramatically different. To get 3.5% I think you can use a lazy portfolio and rebalance (or not even rebalance) annually. Then it's maybe a few hours a year. You CAN make it hours a day of work if you want to, but my own experience is that the more I "work" on my portfolio the lower my pay

 

[Shanky]

I spent the last 10 years of my career earning in the $400K -$500K range along with an expensive lifestyle. (Yacht, Country Club, Kids in Boarding School and Ivy league Tuitions) Took a Sabbatical for a year at age 49 and decided I was working myself to an early grave. Launched kids, made lifestyle changes and now happily retired on 25% of my former pay. To maintain my former lifestyle I would have had to work into my 60's. I am pretty sure I would not have survived that long. Leaving a lot of equity on the table is tough, but if you are not enjoying work, it may not be worth it. It took me 55 years to figure out what 'enough' is.

 

[Ready]

It's certainly a nice situation to be in. My advice would be to either spend more money or work less. At the pace you're going, you're going to be leaving a boat load of money to your heirs.

Could one of you quit while the other one stays put?

 

[geeky_grrl]

One of us could quit while the other works but I would like to relocate to a warmer sunnier location which wouldn't be possible unless we both quit.

I guess work less is the answer. We don't have much for heirs so we should enjoy the money I guess

 

[socca]

I guess work less is the answer. We don't have much for heirs so we should enjoy the money I guess

How about an encore career in politics? You would have my vote!

 

[Markola]

Speaking of politics, on behalf of the country, thanks for working a third of your year just to pay all of those taxes! (Sorry, just trying to motivate you ). It's amazing you have both a high household income and low expenses. Well done. I can understand the reluctance to quit because it sounds like your married life is focused on work, which is something you built over a long period and a lot to just chuck. We're kind of the same, though when I see your salaries, I wonder about our sanity for being that way.

What if you set a goal to go on a long vacation together to somewhere you really want to go and see how you do? Or, just keep OMYing until something changes and you "know." Congrats on your options.


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[RobbieB]

Yeah, pretty sweet!

One day you will "have enough" or get "pissed off" one too many times and then you'll know -

 

[Winemaker]

In case of such a permanent stock market crash or natural disaster that wipes out all accounts:
WOuld your jobs still exist or pay?
Would you be able to buy anything worthwile with money?
In such worst case I'd rather have memories of some happy years.

You would still be better off than most others.

 

[geeky_grrl]

OK, I took a leap today. I gave my boss unofficial notice that I plan on leaving next year (probably around February). Only six months to go and I have quite a bit of vacation and comp time so it should hopefully go by quickly.

 

[MBAustin]

Congratulations, geekygrrl! Enjoy thinking about what's next over the coming months and I see you've already joined the Class of 2017 - good for you!