Advice needed

[Savant]

Hello. This is my first post here. I'm looking for some financial advice, as it is difficult to find anybody to talk to in real life on this topic.

My questions are -

a) Can I retire in 10-12 years?
b) What should I do with my portfolio now?

Background information.

I am 31, married, no kids. We have separate finances.
I make $150k, after taxes. I spend $45k a year.
Residence is worth $800k. Mortgage is $155k. 9 years left.
Liquid assets worth another $800k. Distribution: Big caps individual stocks 70%. Bonds: 12%. Cash 15%. Misc. 3%. She has another $100k, I think

My problem is I don't know what to do with the cash.

My wife and I will get a pension when we reach 60.

Thank you.

 

[Delawaredave5]

Given a 4% safe withdrawl rate and if you expect expenses to continue at $45K, you'll need $1.1 mil (ish) to retire.

If you're netting $150K and spending $45K - that's saving $100K (ish). So with $800K already saved - you'll certainly exceed $1.1mil portfolio in 10 years (actually probably 2-3 years....).

Big unknowns to modify above would be having kids, securing medical insurance as ER, and higher overall expenses ($45K sounds "light" to me for someone netting $150K and living in an $800K house).

I personally wouldn't increase equity percentage now (but you're young and I'm not....) and would put cash in mix of CDs / TIPS / etc.

Good luck !!

 

[wcv56]

I would take 25% of your invested money and put it with Warren.
brk-b or A shares. It would be a great hedge to the average market.

 

[Sandy]

Savant,

Welcome.

You will find tons of advice and options for your cash as you read and participate. You are off to a great start and don't need to move in haste.

You may also want to better understand your wife's finances, since your FIRE will effect her lifestyle. While there are many different personal and financial arrangements here, ER seems to work best when the couples/partners discuss plans and are on the same page.

 

[Kronk]

We have separate finances.

Just curious, how do you work this, and why did you decide on separate finances?

 

[Puzzley]

Savant, I would echo Sandy's comments concerning your wife's finances. The fact that you keep your money separate, don't know what she has saved, and started your post with Can I retire jumped out at me right away.

Of course, you know better than I what your personal situation is, but in any relationship which will extend into retirement, it is my opinion that you and your spouse (or significant other) must be of one mind on finances and income......

 

[Savant]

Just curious, how do you work this, and why did you decide on separate finances?

Mainly because she pays a significant amount of her salary to support her parents. I want no part of it.

I am responsible for financing our home and fixtures by myself. We set up a joint account to pay for "common" expenses, including utilities, groceries, vacations etc and we both contribute to the joint account to meet those expenses. The rest we keep in our separate accounts, and we have agreed we can spend our own money as we like. The arrangement has worked well. She can support her parents as she likes, and I can save for retirement as I like

Oh, and my wife and I are on the same page regarding retirement. She and I will retire at roughly the same time. She is well aware of my plans, and I also have a rough idea of what her finances are. She makes $65k a year, and likely spends $50k of it.

This arrangement will probably end when we retire. I am planning on the basis that our joint expenses will be $77k when we retire, and we will need to support that using our joint liquid assets.

 

[jblack]

Interesting. Not sure it would be for me, but if you're both happy with it and are quite sure it's sustainable with no other marital or financial challenges then great. I prefer more transparency when it comes to such planning, but like many things perhaps it's just a matter of perspective. You both feel you're spending/saving your incomes how you want but indirectly it's still all the same joint income. Depending on where you live the law/courts may agree...

Only thing I would anticipate is change - 10 years is still a long time. Any chance her parent's financial need increases substantially? Is she willing to keep working and let you retire early? What if you end up having kids? What happens if she suddenly loses her job and now you need to continue helping the parents instead of saving for retirement? etc...

Either way, looks like you have a fortunate situation by hopefully being able to retire in your early 40s.

 

[wcv56]

Glad I am single and and have helped my parents for most of 20 years. Have not seen them but a few weeks as my work has been overseas most of 30 years.
Maybe your situation is not as dire as it sounds but have you thought of off shore retirement accounts.

 

[mb]

I suggest diversifying you equity exposure into small caps, international, REITS, etc. Consider funds in asset classes where it may be difficult with individual stocks such as small cap international. I would DCA.

Since your combined income requirement is $77k your combined liquid asset requirement according to the 4% rule is almost $2M. Based on your present net worth, income and savings/spending I suspect you will be in good shape in 10-12 years.

I think that the possibility of kids in the future are the wild card (I have two) even more so than health care or the needs of elderly parents.

MB

 

[Savant]

We have decided that we will not have kids.

What is the meaning of DCA?

 

[REWahoo]

What is the meaning of DCA?

Dollar Cost Averaging

 

[Savant]

I have a question about this 4% rule.

I am going to retire in my early-mid 40s. But this isn't typical. Most people retire in their late 50s or 60s. The 4% rule maybe designed - and hence will likely work - for a 60-year-old. But does it work for a 40-year-old? Has anybody done the math?

 

[REWahoo]

I have a question about this 4% rule.

I am going to retire in my early-mid 40s. But this isn't typical. Most people retire in their late 50s or 60s. The 4% rule maybe designed - and hence will likely work - for a 60-year-old. But does it work for a 40-year-old? Has anybody done the math?

The 4% rule applies regardless of your age at retirement and the math has been done literally millions of times. However, that math is based on history and assumes the future will be no worse than the past.

Have you read this thread from the forum's Best of the Board? It should provide some insight into the 4% rule.

 

[MooreBonds]

Hello. This is my first post here. I'm looking for some financial advice, as it is difficult to find anybody to talk to in real life on this topic.

My questions are -

a) Can I retire in 10-12 years?
b) What should I do with my portfolio now?

Background information.

I am 31, married, no kids. We have separate finances.
I make $150k, after taxes. I spend $45k a year.
Residence is worth $800k. Mortgage is $155k. 9 years left.
Liquid assets worth another $800k. Distribution: Big caps individual stocks 70%. Bonds: 12%. Cash 15%. Misc. 3%. She has another $100k, I think

My problem is I don't know what to do with the cash.

My wife and I will get a pension when we reach 60.

Welcome Savant,

1) You mention that your wife assists her parents - will her parents' needs increase sharply in case of long-term care requirements down the road? Or would they sell their house/other assets to pay for expensive care? That $75kish estimate of your future needs could balloon sharply if her parents have greater health care needs in the future.

2) I presume you're using a small pension payout at age 60 given a possible retirement date at age 40ish?

3) Try going to the social security website, and plug in your earnings record from your annual SS statement that's mailed to you. Try putting in your record up thru this year, and assume you retire now - what does your SS payment look like at age 65? While a low estimate, this would be a fairly decent assumption to use for your SS benefit, given future SS budget crunches, etc.

Overall, it sounds like if you can save $50-$60k/year for the next decade, you should be in good shape (assuming a diversified portfolio) to pull the plug in your early 40s.

 

[firewhen]

Savant,

My goal is 2%, and we are not that far off. Given we are also in our 40's, I wanted an extra large cushion, and have read that a 30 year horizon poses less risk than 50 years. If you do not mind working into your 40's and exceeding a nest egg that would generate 4%, why not? I have played around in excel, and come up with scenarios where 4% and even 3% withdrawals went bust, but was not able to do so using 2% (though it is possible if you tried hard enough). Look at some of my old posts.

We do have children, and I do not want to limit their futures just so I can ER. In your situation, you are likely more willing to have some risk.

You are in wonderful shape for folks so young. Of course if the market averages in the future anything in the 8-10% range you will be swimming in money anyway.

 

[RetireeRobert]

I'm looking for some financial advice, as it is difficult to find anybody to talk to in real life on this topic.

Distribution: Big caps individual stocks 70%. Bonds: 12%. Cash 15%. Misc. 3%. She has another $100k, I think

My problem is I don't know what to do with the cash.

My wife and I will get a pension when we reach 60.

Thank you.

You can't find anyone in "real life" to talk to so you come here? Early-retirement forum IS real life---more real than "out there".

You say your problem is you don't know what to do with the cash. Yet you say cash is only 15% of your allocation. Not much of a problem, but you could add some smallcap and/or international exposure in equities.

More detail on the expected pensions please. If you both retire at 40-45, but don't get pensions till 60, what does 15-20 years of being inactive in pension plan in terms of contributions do to those pensions?

Welcome to the forum.

 

[Rich_by_the_Bay]

You may want no part of financially supporting her parents, but by her doing so you (plural) are spending $50k per year in after-tax money that is not going into retirement savings. I wouldn't presume to judge this as right or wrong, but you're into it whether you want to be or not.

It's pretty hard setting and sticking to ambitious financial goals if the relationship has two separate and independent finance departments.

I agree with the others about your impressive financial position and would keep a sharp eye on the health care insurance scenario before you quit any jobs -- it can be very chaotic getting private coverage.

Here's wishing you lots of success on all fronts.

 

[haha]

I am 31, married, no kids. We have separate finances.

I believe that in most states anyway, there is no such thing as married with separate finances. You may think finances are separate, but if the cold winds start to blow that will up to some judge- and he or she may not like this newfangled separate finances idea.

Ha

 

[Savant]

1) Her parents can take care of themselves fine. What my wife pays them enables them some bells and whistles.

2) I don't contribute to my pension. My employer does. The pension that I receive at 60 will be linked to my last month's salary when I quit at 40-something. Yes, that means inflation between the time I quit and 60 will eat up a large chunk of that. After 60 the pension is indexed to inflation. The pension consists of two parts. A lump-sum pay out at 60, and a monthly payment after that, into perpetuity.

3) I don't live in the US, so that doesn't apply.

Welcome Savant,

1) You mention that your wife assists her parents - will her parents' needs increase sharply in case of long-term care requirements down the road? Or would they sell their house/other assets to pay for expensive care? That $75kish estimate of your future needs could balloon sharply if her parents have greater health care needs in the future.

2) I presume you're using a small pension payout at age 60 given a possible retirement date at age 40ish?

3) Try going to the social security website, and plug in your earnings record from your annual SS statement that's mailed to you. Try putting in your record up thru this year, and assume you retire now - what does your SS payment look like at age 65? While a low estimate, this would be a fairly decent assumption to use for your SS benefit, given future SS budget crunches, etc.

Overall, it sounds like if you can save $50-$60k/year for the next decade, you should be in good shape (assuming a diversified portfolio) to pull the plug in your early 40s.

 

[Savant]

Yes and no. I agree that, if you think from the perspective of the household, I'm into it whether I want it or not. But the separate finance does make a difference in practice. See, my wife has a much greater tendency to spend money than me. In many months of the year, she blows her entire salary without saving a penny. The only reason she can't spend more is that - she doesn't have any more money to spend. By keeping the finances separate, I ensure that the bulk of our money is under my personal management without her having any say on it whatsoever. And my decision is that the bulk of the money will go toward preparing for early retirement.

She also makes some horrible investment decisions - like buying and selling stocks every few weeks. I buy and hold. Combined finances - she has a say on 100% of the household finances. More overall expenses, more silly stock horse trading. Separate finances - she only controls 25% of the household income. Less overall expenses, and the bulk of the investments will be buy and hold.

You may want no part of financially supporting her parents, but by her doing so you (plural) are spending $50k per year in after-tax money that is not going into retirement savings. I wouldn't presume to judge this as right or wrong, but you're into it whether you want to be or not.

It's pretty hard setting and sticking to ambitious financial goals if the relationship has two separate and independent finance departments.

I agree with the others about your impressive financial position and would keep a sharp eye on the health care insurance scenario before you quit any jobs -- it can be very chaotic getting private coverage.

Here's wishing you lots of success on all fronts.

 

[Savant]

Oh yeah one more thing to clarify. US$150k is my income only. She earns another $65k. So we save more than $100k per year, not $50/60k.

 

[kumquat]

3) I don't live in the US, so that doesn't apply.

So, why are you asking us? OOppps, I'm not an American (not US anyway). I guess it's different elsewhere? Enjoy

 

[Savant]

So, why are you asking us? OOppps, I'm not an American (not US anyway). I guess it's different elsewhere? Enjoy

Well, the tax rules are obviously different. No 401k or such for me. But I am sure a lot of wisdom displayed here will still apply to my case.

I live in Shanghai, by the way.

 

[RetireeRobert]

Yes and no. I agree that, if you think from the perspective of the household, I'm into it whether I want it or not. But the separate finance does make a difference in practice. See, my wife has a much greater tendency to spend money than me. In many months of the year, she blows her entire salary without saving a penny. The only reason she can't spend more is that - she doesn't have any more money to spend. By keeping the finances separate, I ensure that the bulk of our money is under my personal management without her having any say on it whatsoever. And my decision is that the bulk of the money will go toward preparing for early retirement.

She also makes some horrible investment decisions - like buying and selling stocks every few weeks. I buy and hold. Combined finances - she has a say on 100% of the household finances. More overall expenses, more silly stock horse trading. Separate finances - she only controls 25% of the household income. Less overall expenses, and the bulk of the investments will be buy and hold.

It always interests me how certain people end up together. It seems you married a "financial opposite". You're a saver, she's a spender. But you are both earners. So you are lucky the spender you love earns her own money to spend!

Isn't love grand!