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How do you get the Courage?
Old 02-14-2014, 02:08 PM   #1
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How do you get the Courage?

I am always trying to find the ‘right’ time to pull the plug. Where do you folks that retire early get the courage to just walk away from a good paying job?
My situation is this. 54 years old. No kids. House paid off. No debt. Healthy as an ox. A girlfriend who has been with me for a very long time and who is 11 years younger. She will work for another ~5 years after I retire, then we will move to a warmer climate. She also has ~$500K in assets and a decent pension at 65.

I have a great technical job, over $100K per year, with a 401K match and a pension. I max out my 401K every year ($23K) and get ~$4K in a match. I max out my Heath Care saving account ($3K). Save $6,500 in a Roth every year. My pension at 65 yrs. old will be ~$1100 a month, more if I keep working. I take in 10% VA Disability of $131 a month, with COLA, for the rest of my life, and that includes free VA health care. Social Security at 70 years old will be ~$2800 per month.

My portfolio value is $880K, with about 2/3 in retirement accounts. The goal is to have over $1M by the end of 2014, which should not be a problem as I can save over 10K per month. I have 24 rental units across 7 buildings that generate ~ 295K per year in gross rents. There is another ~65K per year in hard expenses (taxes, utilities, Assn dues), and another ~65K per year in soft expenses (vacancy, management, maintenance). Mortgages (P&I) are ~54K a year. The properties cash flow over $100K per year. I currently do my own maintenance and management. There is about $1.3M in equity between them, as three of the buildings are paid off.

I also pick up some part time work, which generates another ~$15K per year in my spare time. Most of the income I intend to keep for a few years after I retire from my real job. At some point, I intend on moving to a warmer state, which will require hiring a property manager, or doing a 1031 exchange. Then I will lose most, if not all, of the part-time income and the rentals will not generate as much cash flow.

My personal expenses are only $45K a year, max. Even accounting for a spending splurge once in a while, I should have more than enough income to retire now. I plan on maxing out my 401K in 2015 and 2016, getting the company 401K match, and retiring in the spring of 2016. I could probably bail now, but I want to hedge myself even more. But I am also feeing the desire to work less than 80+ hours a week.

Even with all of these income streams and assets, I get nervous about pulling the plug. Once I leave, it will be near impossible to come back after a few years. I don’t want to have to live in my own apartments, even though they are fairly nice. I have run many income planners, all come out well, except when I do some input incorrectly, which only increases the hesitation (what if it was really right…?).

What thoughts went through your heads when making the decision to retire and leave the workforce?

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Old 02-14-2014, 02:52 PM   #2
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Sounds like you have more than enough money so you don't need to work anymore. What's more fun? Saturday or Tuesday? If it's Saturday, you should retire.

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Old 02-14-2014, 03:08 PM   #3
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I find my courage in various places, but you didn't mention whether you have used FIRECalc to get some objective evaluation.
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Old 02-14-2014, 03:13 PM   #4
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Hello Senator and welcome to the forum.

What I don't get much of a sense of from your post is whether you are enjoying your job, think it's just OK, or can't stand it. If you still enjoy it, I don't see any reason to leave. If it's wearing on you, I think you already know that you have enough to call it quits.

It appears you have good cash flow from your apartments, but as you say, it's because you are doing almost all of the management yourself. I would think with that many units it would be pretty much a full time job for you to just keep up with everything. If you're working a full time job and maintaining your apartments on your own, I'm amazed it's only requiring 80 hours per week of your time.

If it were me, and I didn't care much for the job, I would just focus on keeping the $100K coming in from the apartments and let the job go. But everyone must decide when the timing is right. Most of us come to that conclusion when we realize we just don't want to go to work anymore and we think about how much we don't want to go to work on a daily basis.
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Old 02-14-2014, 03:16 PM   #5
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Many of the same thoughts as your's Senator, and it was only when we conducted a three way assessment via Firecalc, our brokerage firm advisor, and an independent financial advisor, all of which indicated we had adequate reserves to support our desired lifestyle and then some, that I finally gained the confidence to quit. If it helps, our combined income, including annual bonuses, was closer to seven figures than five, so it was a lot to walk away from. However, the big salaries came with a massively high price, and we were increasingly moving through our days like zombies.

Three years in, we now find that money has moved to the bottom of our list of concerns. Once we gained the confidence that our budgeting was sound, and our new lifestyle satisfying, it simply stopped being an above-the-radar issue.

We have about four contingency plans in the event things go haywire, but recognize that even if they do, we'll still be better off, even without jobs, than 99% of Americans simply due to our financial resources.
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Old 02-14-2014, 03:31 PM   #6
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Originally Posted by braumeister View Post
... you didn't mention whether you have used FIRECalc to get some objective evaluation.
I have used FireCalc, Fidelity RIP, AARP's planner, virtually every retirement planner I could Google, all appear well. I try to limit rental income to only ~42K per year, to be conservative. Also, put in a requirement of at least $85K in income needed.

The secret of keeping a rental property low maintenance is having quality tenants. I went from a Section 8 landlord, to only renting to quality tenants. Tenants with 650+ credit scores and 4+x the income.

Another secret is having the tools and doing work in a professional and efficent manner.

I do not want to be in a situation where I say "I should have stayed another year"

FIRECalc found that 0 cycles failed, for a success rate of 100.0%.
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Old 02-14-2014, 03:40 PM   #7
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Maybe ask, "how do you get the courage to stay in the job?"

Knowing that your time on earth is finite, and that your health is not a given as you age and that you seem to have planned well for you and your family...jump man!!!
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Old 02-14-2014, 03:52 PM   #8
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Originally Posted by Newventurer View Post
Maybe ask, "how do you get the courage to stay in the job?"

Knowing that your time on earth is finite, and that your health is not a given as you age and that you seem to have planned well for you and your family...jump man!!!
+1 . You mention being healthy as an ox. That can shade your judgment, as wellness can be fleeting, then you are screwed. I elected to extend my retirement period with years on the front end, 'cause I don't know how to tack them on to the back end.
You probably mean principal not principle. Judgment only has one "e".
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Old 02-14-2014, 03:57 PM   #9
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The hard part of this for you is that retirement calculators are mostly built to stress test portfolios of financial assets. Your net worth is dominated by commercial real estate, so the calculators won't do too great a job on stress testing that asset. So this is (like it is for everyone else) a case of you pays your money and you takes your chances. All that said, on the face of it, it looks like you are in good shape to pull the plug.

Do you hate your job or your workload? For me it was a case of get busy living or get busy dying. I was in a dull, astonishingly bureaucratic job with no upside. Tomorrow is promised to no man.
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

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Old 02-14-2014, 04:07 PM   #10
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As far as I can see, the OP is FI already. Perhaps, the question is about what to do after RE. Others are forced into RE (unplanned lay off, e.g), or RE as soon as they reach FI. Others keep doing OMY for no reason other than padding more $$$$ for RE. The OP has a good problem to have.
I did it .... my way.
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Old 02-14-2014, 04:19 PM   #11
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Agree with the other comments. You are in position to RE financially.

But what will you do after RE? Judging only by your original post, you are a pretty work oriented person (full time job, plus part time job, plus real estate job). Are you looking to work less? What are your plans for retirement? Do you want to "coast" for a few years before your girlfriend retires?

Everyone is different. But I wouldn't RE because you CAN, I would RE because you are ready to move to the next (not final, but next) stage.
I reserve the right to change my mind as I get smarter.
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Old 02-14-2014, 04:51 PM   #12
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Hey Senator - welcome to the forum. I recently moved from Eagan to Los Angeles, CA (life bucket item). Missing the first winter is great (mid 70's today), but my move was more of a 2 - 3 - 5 year, one more job syndrome vs OMY as I'm still in my 40's and not sure what to do next. It is not completedly out of the question to return to MN as I have family and rental properties in the Twin Cities. Similar to you, my rental income is enough to cover a reasonable family budget of 4.

Based on your current expenses, you are good to go! Now, you just have to plan your exit =) Sometimes you don't need the courage, but a good excuse. What's you excuse for working vs not working.

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Old 02-14-2014, 05:39 PM   #13
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I was in your shoes when I was 54 (I'm 57 now). All of the calculators showed I was good to go. Plus I was hating my job, so I pulled the cord and retired. One of the things I thought about was "if not now, when?". I didn't want to get into the one-more-year-syndrome. One thing to watch out for is what you will do in retirement since your GF is younger and will continue to work. My DW continues to work, so it can be a bit boring for me once in a while, but retirement is definitely better than working.
Retired in 2011 at 54
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Old 02-14-2014, 06:27 PM   #14
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Thank you for all of the responses.

I have been on the go for the past several years. I have been a landlord since 2000, but in 2008, I started buying additional properties. I was looking in 2006 - 2007, but no properties were cash flowing enough. In 2007 that changed.

So I purchased five 4-plexes, one each year. All were foreclosures. Most were purchased with creative buying strategies so I got excellent deals, buying for fifty cents on the dollar. I did a complete remodel on the units’ one at a time. New kitchens, bathrooms, remove walls, etc. I poured a lot of money back into them. Now that I am slowing down on the remodels, I realize that I have quite a bit of cash flow and profit. That’s especially true when I start to look at my taxes that I will have to pay this April.

So the concept of FI is still new to me. Slowing getting my head around the idea of being able to retire, but that’s another obstacle. In my head, retirement is for ‘old’ people, not people like myself. I would still continue to do the property thing, but at my own pace. Not working every minute of the days that I have off, and taking vacations to work on the properties. I may even start a new type of venture, some ideas I have had in my head for a while. So I will still be busy, and working, just not for a company.

I also grew up relatively poor, with a single mother, and we had a Coleman cooler we used for a cheap refrigerator. It was small, but it worked. So, I know I want to make sure of what I have, and not quit just before the finish line.

I also just got the 10% disability rating from my time in the service, back in 1978-82. That capped one of my large expenses, health care. If the VA care isn't what it’s cracked up to be, I can just purchase a policy without worries about pre-existing conditions. I don’t have any now, but every day is different. I am healthy, but not as solid as I used to be.

Anyway, I have been scouring many retirement websites and looking for ideas to give more confidence. Intuitively I know I could do it, but feel like I am on the high-dive looking over the edge.
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Old 02-14-2014, 07:00 PM   #15
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Why not quit your day job and just consider yourself a real estate investor? Sounds like you enjoy it, and are earning excellent income from your properties. A slower pace might be a very good thing.

You're in a great position! Good luck thinking through the options.
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How do you get the Courage?
Old 02-14-2014, 07:09 PM   #16
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How do you get the Courage?

You don't want to get stuck thinking you should have worked another year. I didn't want to get stuck thinking I'd run out of time, and should have retired last year. Or sooner. Glass half full or half empty? How long do you expect to live, and what is the quality of your life now? How will you feel if you work another year, only to come down with a terminal illness, and never have retired? It's entirely up to how you feel, but I personally built up enough, and saw no need for more. Life is much more satisfying and fulfilling, now, after I've FIRE'd.
"Growing old is no excuse for growing up."
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Old 02-14-2014, 08:10 PM   #17
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24 rental units you do the property management and the maintenance on!. Senator you are not retiring you are just quitting one of your two fulltime jobs.
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Old 02-14-2014, 08:21 PM   #18
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Originally Posted by clifp View Post
24 rental units you do the property management and the maintenance on!. Senator you are not retiring you are just quitting one of your two fulltime jobs.
+1. I would just quit one job or the other. I don't know much about rental real estate, but if your income / equity would not fall apart if we had another real estate crash, it sounds like that is the job where your heart and talents lie.
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Old 02-14-2014, 08:27 PM   #19
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Senator, you are obviously a hard working and intelligent person. Congratulations on your financial matters. You definitely will have to search inward to make the correct decision. I know two people personally who are in their 60s that draw 6 figure pensions with cola, and are presently now working 6 figure jobs and still haven't spent the first dollar they ever made. They won't quit working until someone fires them or buries them. My pension is less than theirs, but now I am comfortable not doing anything. I have to admit though I had to work a couple more years in PT to convince myself I did not have to do it financially or emotionally. I do spend a lot of time alone since my GF works and my friends do also, but I was prepared for it mentally and have embraced it. Good luck!
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Old 02-14-2014, 08:48 PM   #20
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As already noted by others, you are working two full-time jobs. So I can see why you don't want to retire: Retirement would just be more work for you.

I will guess that you don't like to do the property management job, so that's why you don't quit your other job … because then you would really be working on your real estate business without fooling yourself with your other job.

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