Inheritance and semi-retirement

[prose3589]

I posted a few months back about the suicide of my father (who was suffering from chronic illness). With my father's death I inherited approximately 850k.

Both my father's death and the inheritance have been life altering. I am more certain now than ever that time is so precious and I no longer want to spend my time in a miserable profession (divorce and criminal lawyer). The inheritance has given me the ability to make a big leap.

I am currently negotiating an arrangement for the take over of my practice and lease of my building. I am maintaining a side gig which is all transactional work for a title company that allows me to work from home a few hours a day and make enough to cover my business and personal expenses. I am excited and nervous. While it is not complete retirement it is a big step.

Thanks to this forum I have tracked my expenses and feel confident that I have a handle on them. I anticipate spending of 72k without taxes. Income from side gig of 55k conservatively and rental income of approximately 18k annually.

Since I am semi retiring at 44 it is my goal to leave my nest egg alone to grow for the next 10-15 years.

I am concerned about calculating my tax obligation as part of budget. It is sort of my missing link. I will have a number of deductions for business expenses and rental property. Any input on this issue would be helpful. I have an accountant but I have not been hands on. I am considering buying software really as a learning tool.

I am certain I will have more questions as time goes on. I thank the folks on this forum for all the insight. I was on my journey to fire but because it has accelerated I need to speed up my learning process too.

As a side note- I believe that my dad would be happy for me.


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[MBAustin]

Thanks for the update, prose. Sounds like you have done some good planning and are making wise choices for yourself.

Regarding taxes, I generally plug estimates into last year's TurboTax software to figure out estimated tax payments, etc. And I always run the numbers in TT and compare with the accountant's answers (we're pretty much keeping her because DH wouldn't have a clue if something happened to me so it's one more thing he won't have to worry about - not that I'm planning to go anywhere soon!).

Good luck with all of the transition details!

[Bamaman]

$850K is a lot of money, however when you consider you're just 1/2 way through your projected lifespan, you can easily go through the money. But it sounds as if you're going in a positive path--working enough in the near future to maintain the status quo.

The future of the stock market and inflation is very important to younger retirees (and us 65 years olds too.)

But whatever you do, enjoy your inheritance. It'll allow you not to have to push so hard in life. You're very fortunate to be in the place in life you are with substantial financial resources.

[38Chevy454]

Agree with MB, you can get a pretty close estimate just using turbo tax or similar. Unless a major change to tax laws, it will be fairly accurate.

I assume you also have some of your own savings to add this inheritance to? Your estimate of P/T work and rental income just about covers your expenses, after taxes you may need a very slight withdrawal for the difference.

Both your father's passing and the sizable inheritance do have a drastic effect on your life and ability to make changes now. Go and make the best of it.

[prose3589]

Quote:

Originally Posted by 38Chevy454 Agree with MB, you can get a pretty close estimate just using turbo tax or similar. Unless a major change to tax laws, it will be fairly accurate. I assume you also have some of your own savings to add this inheritance to? Your estimate of P/T work and rental income just about covers your expenses, after taxes you may need a very slight withdrawal for the difference. Both your father's passing and the sizable inheritance do have a drastic effect on your life and ability to make changes now. Go and make the best of it.

Yes. I have a simple Ira worth approximately 125k. Rentals and primary residence are paid for. No debt except small student loan that is 2.25% and is forgiven if I die. I will receive funds from my practice though not sure how much and limited.

Being conservative, I am close on spending and want to avoid dipping in to nestegg. Taxes are that missing piece.

One positive- if I fall below 78k Agi I will be eligible for ACA subsidies. Though I don't know the cost savings yet.

I hadn't purchased software because I have the accountant but I think it may be worthwhile.


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[ivinsfan]

Quote:

Originally Posted by prose3589 Yes. I have a simple Ira worth approximately 125k. Rentals and primary residence are paid for. No debt except small student loan that is 2.25% and is forgiven if I die. I will receive funds from my practice though not sure how much and limited. Being conservative, I am close on spending and want to avoid dipping in to nestegg. Taxes are that missing piece. One positive- if I fall below 78k Agi I will be eligible for ACA subsidies. Though I don't know the cost savings yet. I hadn't purchased software because I have the accountant but I think it may be worthwhile. Sent from my iPhone using Early Retirement Forum

Where has all your excess money gone, into the real estate market? It's a little concerning that you don't have any personal savings except for the IRA.
Seems like you might have a lot riding on the real estate market.Are you a single man, I'm just wondering how good your budget numbers are. If you make 55 on a "side gig" you must have pretty good income and I'm wondering why there aren't more liquid savings.

You have 20 years to Medicare.. You might be better off in the long run staying at your business for a little while longer and simply dropping the side gig if that brings in more income. It sounds at though the side gig is tied to the state of the housing market and you already have enough riding on that, IMO. If you go to the side gig now, it sounds as though you will really have to guard the principle on that million dollar as you won't be adding much to it.You are dealing with a lot of emotions on top of stress now, so take your time figuring out what to do.

[prose3589]

I am a divorced woman. Divorce and criminal law. And you are correct about the lack of savings. I divorced at 30 completely broke and raised two kids without support. So I am definitely behind on savings.

Yes Money is tied to property. I am definitely too heavy. As to side gig. It is work for a title company that I have had for 12 years. I am quoting 2008 income levels. Which of course we're low.

Most of inheritance will be plowed into index funds. When possible. Some of that is currently in bank stock and private mortgages that my father held as mortgagor.

I have a SO we split household expenses but our money is completely separate and will remain that way.

I agree I was behind but in 14 years I clawed back fast. I am staying of counsel with the new firm so if I need more money I can take more work. Honestly not sure I can stomach much more divorce and custody battles though.


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[ivinsfan]

Quote:

Originally Posted by prose3589 I am a divorced woman. Divorce and criminal law. And you are correct about the lack of savings. I divorced at 30 completely broke and raised two kids without support. So I am definitely behind on savings. Yes Money is tied to property. I am definitely too heavy. As to side gig. It is work for a title company that I have had for 12 years. I am quoting 2008 income levels. Which of course we're low. Most of inheritance will be plowed into index funds. When possible. Some of that is currently in bank stock and private mortgages that my father held as mortgagor. I have a SO we split household expenses but our money is completely separate and will remain that way. I agree I was behind but in 14 years I clawed back fast. I am staying of counsel with the new firm so if I need more money I can take more work. Honestly not sure I can stomach much more divorce and custody battles though. Sent from my iPhone using Early Retirement Forum

Sounds like a stressful 15 years for you, I see why you need a break.Good Luck, but even some of your inheritance is apparently tied to the health of the real estate markets, including banks stocks. You might take a little harder look at your expenses, does you SO's contribution factor in the fact that your house is paid for, presumably by you. It seems like with a paid off home and paying 1/2 of living expenses you might have a little room in your budget.

You'll need to be a little flexible, what if you and the SO break-up. that will raise your monthly nut immediately.IMO I'd very concerned about the amount of real estate exposure you have.

[prose3589]

Quote:

Originally Posted by ivinsfan Sounds like a stressful 15 years for you, I see why you need a break.Good Luck, but even some of your inheritance is apparently tied to the health of the real estate markets, including banks stocks. You might take a little harder look at your expenses, does you SO's contribution factor in the fact that your house is paid for, presumably by you. It seems like with a paid off home and paying 1/2 of living expenses you might have a little room in your budget. You'll need to be a little flexible, what if you and the SO break-up. that will raise your monthly nut immediately.IMO I'd very concerned about the amount of real estate exposure you have.

Agreed as to the real estate exposure. Much heavier than I care for but I am working on moving more to the market. I have quite a cushion in the budget but it obviously makes things more comfortable to have SO contributing.

If at any time I start dipping into the nest egg I will likely reevaluate and be forced back to work (more). Let's hope this is ER and not a sabbatical.


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[ivinsfan]

Quote:

Originally Posted by prose3589 Agreed as to the real estate exposure. Much heavier than I care for but I am working on moving more to the market. I have quite a cushion in the budget but it obviously makes things more comfortable to have SO contributing. If at any time I start dipping into the nest egg I will likely reevaluate and be forced back to work (more). Let's hope this is ER and not a sabbatical. Sent from my iPhone using Early Retirement Forum

Sounds like you are ready to give it a try, keep us posed and I hope it all works out for you.

[prose3589]

OP here with an update on my status. Still in the process of downsizing my practice. Been an interesting few months. Pros, cons, and surprises.

Ok. The stress level for me has diminished greatly since the new attorney has been there. She is young and energetic and a joy to be around. Reminds me of myself 15 years ago. While there is less stress, I haven't seen a lot less work. I am still in the office 4 days a week. It has been very difficult extricating myself. Part of the reason though for that is actually my renewed interest in the business- the new attorney has given me a purpose. Her success is good for me and I am enjoying the mentoring process. I really never expected this to happen. That said, I am trying to take time for some things I want outside of work.

Another surprise, I am making a lot more money than I expected. I have less overhead and time to focus on the more lucrative matters. I don't expect that to last forever but it makes me more comfortable with my decision now.

Expenses are spot on so far. However I do want to make a few extravagant trips so I need to watch that area closely. I am certain that I want to completely retire by 55 so the expenses are something I need to continue to follow closely.

I downloaded turbo tax. Still haven't even touched it. The tax component is now my New Years resolution. Along with weight loss.

As to weight loss- down a whole pant size. Exercising 6 days a week. I am very proud of this accomplishment. Intend to make this a priority as well.

As to the recommendations given previously... I am taking the inheritance money as it trickles in (my dad had several mortgages he held) and putting it into vanguard. Continuing to max simple IRA, and HSA.

Still have the bank stock. Not easy to get rid of. My sister has an FA. He is working to find a buyer for her shares. I am still not sure.

Overall, things are good. I am gearing up for a great future. I just need to keep things balanced and my eye on the prize. Thanks to everyone here for all the advice. I have learned so much.


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[pb4uski]

Sounds like you are in a great spot. Congrats. Keep it up.

[LOL!]

Do your expenses include contributing $18,000 plus $5,500 to your 401(K) and Roth every year? And more starting the year when you reach age 50?

For weight loss: Give up carbohydrates almost totally: No potatoes, rice, pasta, bread, sugar, candy, alcohol. It is amazing what can happen.

[prose3589]

Quote:

Originally Posted by LOL! Do your expenses include contributing $18,000 plus $5,500 to your 401(K) and Roth every year? And more starting the year when you reach age 50? For weight loss: Give up carbohydrates almost totally: No potatoes, rice, pasta, bread, sugar, candy, alcohol. It is amazing what can happen.

I am self employed and have a simple ira. Not included in my expense total. However it appears that I may have excess income to cover the simple. Max for simple is 12500. My goal for semi retirement was to leave my nest egg alone. Income looks strong enough that I may continue to contribute. In the past my income was not Roth eligible. Not sure going forward. No 401k.

Part of the weight loss is decreased carbs. Just about eliminated all alcohol. Eating high protein breakfast. Still more work to do in this area.


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[prose3589]

Decided to update this thread. I enjoy reading this to see all the changes over a short time. More personal but financial as well. My dad died over a year ago when I received a very generous inheritance. That started me down the path of change. I reevaluated every area of my life.

Firstly I took on a new partner. Still working with new partner. Things are going well on that front. Working 35-40 hours a week. I don't really mind it anymore. She has alleviated stress. Income has actually increased. I bought a new larger office and am selling the old office. Our firm pays me rent on a long term lease.

I sold my other residential rental. Tired of the headaches.

Lost 50 pounds! Exercise daily, eat right, drink less wine. This might be the biggest change of all. Loving it.

Last big change is occurring now. SO and I have been together 13 plus years. We own a house together. I decided it was better for both of us to live separately. I expect we will still see each other. He is a wonderful person but their are personal circumstances that making living apart necessary for me. He is buying me out of our existing home. For a very fair price. I am buying another home individually.

The new living arrangement will cost more as I am no longer sharing expenses. But I have decided ER was just too early for me at this point. That said I am on track to retire completely in 10 years. Firecalc gives me gives me anywhere from 85-100 percent success depending on the variables.

Thanks to everyone on this forum. I take the advice to heart. Trying hard to reduce my real estate holdings and still maxing simple Ira and hsa. Still putting all money in vanguard index funds. Learned a lot from all of you. Hope to learn more.


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[panacea]

Prose,

Just caught up on your thread. Wow, what positive changes since only 1 year ago! You lost 50 pounds!?! Congrats! Sounds like life has taken a new and very positive direction both personally and professionally. And I really like the sound of your new financial plan.

[ivinsfan]

Great update and I see that my question about expenses if you and the SO should separate was very on point. This can always be the wild card in anyone's ER plans.

Keep up the good work.

[prose3589]

Quote:

Originally Posted by ivinsfan Great update and I see that my question about expenses if you and the SO should separate was very on point. This can always be the wild card in anyone's ER plans. Keep up the good work.

This is 100% correct. The shared expenses helped and change dynamics. I am glad to still be working while making this change. That way I can iron out the kinks in the expenses.

I also took to heart advice about having too much real estate. I am working on that part. But it will take time with the bank stock and private mortgages that I hold. Again glad to be working while that piece of the puzzle is being addressed.

One side note to the weight loss- it is costly. I have spent a fortune on a trainer and the gym, new bike and finally a new wardrobe. But I have to say it has been worth every penny.

Thanks to all.


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[Bestwifeever]

You are an inspiration, Prose. What a year you have had and big decisions were made. It sounds like you are enjoying life so much more, and at your age I think it's great that even your work is more fulfilling. Thanks for updating.

[CaliKid]

Great thread. I am sorry that you had to have such a loss but congrats on all your positive changes that have sprung since your loss. I hope they continue to be positive.

I would definitely focus on the expense side of things. Live as frugally as you can as that will enable you to retire with less stress.

I am in similar circumstances. Just trying to work as long as I can deal with it to increase my nest egg.

Being a lawyer is nothing like the glamour of LA Law or similar tv shows! LOL!

Good luck to you!