My Retirement Situation (38 yrs old)

[Shabber]

OK, I am 38 married to a 30 yr old woman that works.
No kids or plans for them.
House is bought this year for $650K with $130K down on 30 yr fixed at 6%
I own 45% of service business with a partner.
Business makes me about $150K-$200K per year Equity draws and salary)
Business Net's about $200K per year.
My partner would buy me out for approx $250K now (more as time goes by I would guess)
I have $170K saved in Money Mkt
Currently spend like I make about $50K/yr.
Wife makes $100K/yr.
Our finances are seperate and we split every bill.
I will save about $100K/yr on my current job.
No retirment or 401K
Mother 60 yrs old will will about $2million to me upon death.
How much longer do I need to work before I sell my half of the business to my partner and retire?
Wife will keep on working but since we split everything it doesn't have a huge impact on me either way.
OH, my job is a real bear and I would likely want to retire and work somewhere part time that would be fun but earn just a little $$ like a Park Ranger.

[retire@40]

If you currently spend $50K a year and you split that 50/50 with your wife, you need to generate $25K a year to live.

$25K x 25 = $625K minimum in income-generating assets needed to retire.

[Shabber]

No, I personally spend $50K per year. She spends her own money and it's about $80K. Basically keep her out of the equation.

[retire@40]

Ok, then you need at least $1,250,000 ($50K X 25) in income-earning assets to retire.

[maddythebeagle]

130k equity in house +170k in MM acount +250k equity in business = 550k and no other investments.

for a guy that is almost 40 and says he saves more than 100k a year and makes a 150-200k/yr, that doenst seem to add up.

[justin]

Quote:

Originally Posted by maddythebeagle 130k equity in house +170k in MM acount +250k equity in business = 550k and no other investments. for a guy that is almost 40 and says he saves more than 100k a year and makes a 150-200k/yr, that doenst seem to add up.

True. Shabber, did you drastically reduce your spending recently? If you are bringing in 150-200k and you spend 50k, where has the other 100-150k gone (besides taxes)?

[PJ03]

sounds like his business is very new and he has only had a year or two with that income.

Quote:

Originally Posted by justin True.* Shabber, did you drastically reduce your spending recently?* If you are bringing in 150-200k and you spend 50k, where has the other 100-150k gone (besides taxes)?*

[cute fuzzy bunny]

I know a park ranger at Yosemite. Loves his job. Its not easy or safe by any means though. He frequently has to deal with dangerous animals and people, or has to find and help rescue idiots. Very much a physically demanding job, although working in a 'flatter' park than yosemite might reduce that a bit.

[Jay_Gatsby]

Quote:

Originally Posted by () I know a park ranger at Yosemite.* Loves his job.* Its not easy or safe by any means though.* He frequently has to deal with dangerous animals and people, or has to find and help rescue idiots.* Very much a physically demanding job, although working in a 'flatter' park than yosemite might reduce that a bit.

Would that include dealing with Yogi and Boo Boo?

[TomSimpsonAZ]

Quote:

Originally Posted by Jay_Gatsby Would that include dealing with Yogi and Boo Boo?

Hey Hey
This is serious
Boo Boo

[slepyhed]

I have an uncle-in-law who retired early after working as a park ranger! Now he spends his time with his adopted daughter, working with stained/leaded glass, golfing, etc.

He had lots of things come together to allow him to retire: frugal living, pension (government job, after all), lives in Canada (socialized medicine), recently married a Doctor who still works...

[cute fuzzy bunny]

Quote:

Originally Posted by Jay_Gatsby Would that include dealing with Yogi and Boo Boo?

Oh yeah, lots of yogi and boo boo, and some snagglepuss's too.

Dont go there.

[maddythebeagle]

I think rangers are credentialed officers (and get to carry a gun!) so you have to go through all of that. In our state, the game warden's have bachelor’s degrees and often double majors to get the jobs. Competition is high and you have to learn all of the regulations and be smarter than the average bear, boo-boo.

[wildcat]

Quote:

I know a park ranger at Yosemite. Loves his job. Its not easy or safe by any means though. He frequently has to deal with dangerous animals and people, or has to find and help rescue idiots. Very much a physically demanding job, although working in a 'flatter' park than yosemite might reduce that a bit.

I would rather find and rescue dangerous animals.

[Shabber]

Yes, the business will be finishing year 2 in May. So I have only been saving normal amounts before that earning $70-100K and saving 10-30K/yr

[Enuff2Eat]

i would love to work as a ranger if my parents are rich. that's sound more like "play" not work.

u know what u really love to do AFTER u're financially secure...

enuff

[kat]

Look for a "ranger-like" job, on a seasonal basis. There are always non-profit organizations looking for guides, hosts, trail workers, etc. I'll be doing that in my favorite mountains.

[Slarty]

Shabber,

I don't know all the details involved in your business, but it seems that buying you out for $250k is way too cheap of a price if the business is generating $200k a year for you. I would expect a full buy out to be more like $1Million (4 year payback period assuming no growth). You may want to calculate how much you would need to FIRE and tell your partner you're willing to sell your share at that price.

Another option would be structure the buyout differently so you would get some cash flow from the business in the future. This is a way to risk share so you'll need to assess the risk of how your partner operates. Maybe you can sell to your partner for $500k and then agree that he pays $50k per year for 10 years or something like that. This way the partner gets a bayback period of 2.5 years instead of 4 and you get a cash flow into the future that still lets you FIRE.

Another option would be to sell it to your partner for maybe $400k and then calculate the percent of revenue that $50k per year comes to. Agree that your partner would pay you that percent of revenue for the next 10 years. This way your payments will increase as the partner grows the business, but the percentage stays constant so the partner still benefits greatly from the growth.

You'll have to play with these numbers since I'm just pulling numbers out of the air, but keep in mind that this is a negotiation and its important to know "your number" in a negotiation. You can structure "your number" in a mixture of lump sums and cash flows, but the key is to know just how much you'd need to FIRE.

[PJ03]

His business , if it were five years or more would be worth 2.5 -3 times gross income.
Your best bet would be to put in a few more years of work and build it up and try to get the 3X earnings or to except a buy out over a period of time, say like 5 to 8 years at a 40% to 50% of net per year. I'm thinking of doing that with my business if I'm able to find a good employee who could keep improving the company after I opt out, maybe wishful thinking on my behalf.

[Oliver]

I would also look at establishing a retirement plan in your business to shelter your $. Here is a link that shows the alternatives.

Oliver

SmartMoney Tax Guide
Small Business Retirement Plans
http://tinyurl.com/dtonz