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Old 02-04-2012, 04:31 PM   #21
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Would you recommend 4% for someone at age 36...
I think 2% is better - 4% is plausible but risky.
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Old 02-04-2012, 04:35 PM   #22
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Congrats on the pending sale of your business.

While 230k gross is nice, do you really have working knowledge of your true needs and expenses? Don't be a Lotto winner one day and be broke in a few years.

We are a family of 4 with a SAHM, eat out, have nice things, no debt, and can live fine on less than 75k.

Maybe take some time off and get a better understanding of your expenses and create a budget.
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Old 02-04-2012, 05:01 PM   #23
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Yeah, sadly...I've been concluding that a realistic spend rate is around $105-120k per year. If it were just me, this wouldn't be a debate, I'd be retired and totally opted out of the 'system'.

It's just that, while I want to teach my kids to be good with money, I also want them to have many of the things I didn't. I don't want to deprive them of stuff just because daddy didn't want to work.

I think I will go thru with the sale of the business, just to put 'real money' into the bank.

Probably take 6 months to 12 months off, and get back into a new business, albeit with a bigger cushion in the bank.

If it wasn't for employees and customers, I'd sure love my work.
Assuming that you were NOT born with a silver spoon in your mouth, I don't think your kids would be deprived at a family spending of $100-120k a year.

More importantly, Dad would be around a lot to go to sports and other activities that your kids end up doing, perhaps volunteering as a coach or whatever and that is worth a bunch in a kid's mind.
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Old 02-04-2012, 05:11 PM   #24
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I will spend only about 2% of the gross asset.

As analogy, I am much older at 61 yrs old and will retire this year with a very diversified asset of about 5.6M. I do not have any big expenses and no kids to support.

I'm actually thinking of living on $5000 a month or $60,000/year, and
another $20,000 for discretionary spending like travel, etc, fun stuff.
I will stay on a budget of $80,000/year, unless I happen to trade or replace my vehicles.

Don't try to buy your kids nice stuff. Give them education and motivation to work hard, perhaps start a business on their own.

BTW, those two kids are your biggest expense, specially if you send them to college. So you should reduce your yearly expenses.

YOu can still have fun at about 90-100K/year.
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Old 02-04-2012, 05:27 PM   #25
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Originally Posted by WiltonKnight View Post
Hello everyone, what a marvelous forum here.

I'm going to spare everyone the history and details, but feel free to ask anything. Here is my general question and quandary:

I'm 36. And while I've been rather successful in the small-business world, I've got NO college education...point being, tough to find a job.

I'm about to sell my business and here will be my financial picture:

$3,000,000 cash in bank. House paid off. Cars paid off.


Family: Wife, 4 year old, 1 baby on the way.

Lifestyle: While we NEVER lived over our means, I am kind of used to a 'nice' lifestyle, i.e. never worrying about money, nice travel, eating out, etc...and don't want to "give up" a lot of that.

(For argument's sake, I don't want to include inflation in any equation here)

I could go into another business venture, but to be honest...I'm sick of it. I'm sick of customers, employees, the government, the whole nine yards. I'd LOVE to just retire but due to lifestyle,..not sure if I can do it.

Bottom line: I need a "gross income" in retirement of $230,000 to retire.

This means, on $3 million....I'd need 7.7% annual returns.

I've got some mentors, who are very successful...telling me that it can be done.

I've got other advisors, telling me....no way.

Does 7.7% annual return seem realistic?

Thanks for ANY opinions and be blunt as possible.
Try to remain gainfully employed / establishing a new business for another 5 - 9 years. With your prior success / knowledge / experience you might well find an endeavor that's rewarding and more pleasant. Retirement at 41 or 45 is still pretty early.
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Old 02-04-2012, 05:44 PM   #26
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I don't understand why you need so much income? You can retire now if you want and live confortably. I plan to live on about $50K in retirement. More would be nice but I am not willing to be a wage slave any longer to get it. Beyond a certain point money has diminishing utility.What that point is may be different for you than me. Time however, is finite. You don't know how much of it you have left either. But if you truly want to retire, $3 Million is enough. I am going to do it on half that.
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Old 02-04-2012, 05:46 PM   #27
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Great job at such a young age. 7 percent would be a great return. My situation is I am 47 , wife 54. Have $3.8 million. 85 percent in CD's returning about four percent, rest in muni's , 401k. still working. you may have to work for a little while longer. Educate the kids, don't spoil them, no need and good luck.. when we hit the 5 million mark, we are done, should be three years.
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Old 02-04-2012, 05:58 PM   #28
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Welcome to the boards. Congrats on the business you've built and you probably won't have any trouble repeating your success if you sell the current one. It sounds like you live in a higher cost of living area (NoVA=Northern Virginia?) with a lifestyle your family enjoys and you do not want to budget or cut back--nothing wrong with that!
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Old 02-04-2012, 06:27 PM   #29
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Hi - You are to optimistic at 7% - it is not sustainable. You should plan on a 4% return on the $3M. The challenge is how to convert the $3M to a machine that generates 4% year-on-year. Strategy - buy numerous dividend stocks with a proven payment history - and buy them during market pullbacks to improve the yield to cost ratio. Buy a few tax free munies - they are out there at 4% a yield. Pray for higher interest rates !!!
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Old 02-04-2012, 06:42 PM   #30
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Good job! or is that NO JOB

Even Warren Buffett sees only 6% market gains going forward and that is over time with plenty of volatility. You are young enough that ALL the calculators are just guidelines and retaining flexibility is got to be part of the plan. It seems like 4% would be $120K a year under a lot of conventional planning. If you can live on that then go for it. Yes, some folks will tell you need to take out less but you still have your young age to fall back on and either cut some costs or do some work if the plan looks like it is performing far below expectations. You do, IMHO, have enough for an experiment.

Now, one more point. Folks here are better with financial planning advice, I want to add that one of the best things you can do with your now free time is spend it with your kids. IMHO more important than material things you pile up. And you can spend some resources on their education.
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Old 02-04-2012, 06:43 PM   #31
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85 percent in CD's returning about four percent,
Where can one buy CDs at 4%?
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Old 02-04-2012, 06:54 PM   #32
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Where can one buy CDs at 4%?
From the bank in Never, Never Land.
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Old 02-04-2012, 07:13 PM   #33
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From the bank in Never, Never Land.
Sorry if that was misleading. At this time my CD ladder is returning just over four percent. Newer CD's are paying 2.75, older ones are still at high 4, low 5 percent. . Hopefully , by the time those mature in 2015-2016 the rates go up or I am going to bank in Never, Never Land
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Old 02-04-2012, 09:06 PM   #34
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I would look carefully at how much of your current high spending level is connected to not having time to research/follow through with more economical choices and how having more time and shifting around your spending patterns so that you do more stuff yourself and plan ahead more may alter the cash outflow while still allowing you to enjoy things that are important to you.

So, for example, you appreciate good food -- in your current lifestyle that means you eat out, probably more than most people and maybe at fairly pricey restaurants. What about using some of your time off to really learn to cook well? The $100-200 you might spend on a nice dinner out with your wife could buy you a lot of really great gourmet food and cooking supplies. Once you have the time and the skillset, you may find that you enjoy making food for your family even more than paying someone else to do it for you.

Similarly with travel, look at ways to plan and execute your travel plans that bring down the cost while still getting you the same level of enjoyment. This doesn't necessarily mean dropping staying at luxury hotels, etc, if that is really important to you (I know not everyone wants to be a backpacker staying in hostels). But with more time to plan and research, I bet you can bring your travel costs way down, too. Try doing house swaps rather than staying at hotels. Or travel during the shoulder or off seasons when prices are lower -- since you won't have a business to worry about, you will be more free to travel when others are not.

If you are currently outsourcing childcare, that would be another place where you could probably save a lot.

I think if you really apply yourself during that 6-12 month period and figure out how to best invest your time to bring down your household spending, you may just find that you are able to retain most of the things you currently enjoy in your high-income lifestyle, though perhaps in modified form, while bringing our out of pocket costs waaaaaay down.

Remember, the less you have to draw from your investments in the form of capital gains, etc. the lower your taxes are going to be. So bringing down your cash outgo is really a win-win situation.

Congrats on the upcoming sale of your business. That will give you a lot of freedom to figure out what is really important to you.
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Old 02-05-2012, 10:47 AM   #35
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Take some time off, and see how you like the retired lifestyle. I agree with ihamo -- you'll probably find a lot of cost savings come with having more free time. You might also find you out whether you really want to be done, or perhaps that you want to try something else that you might like better than the kind of business you just sold. Given your financial picture, and the freedom it can provide you, it would be a mistake to do anything that you know you hate. If you want to give your kids the very best in life, give them a dad who is happy, fulfilled, and has plenty of time to spend with them.
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Old 02-05-2012, 10:56 AM   #36
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I don't understand why you need so much income?
Simple. Not everybody has the same requirements/expectations in retirement.

Based upon prior posts (like "how much do you expect to spend in retirement") I know that DW/me are multiples of what most are/expect to spend.

Is that wrong? Of course not. It is just reality in our expected lifestyle, based upon what we had and how we lived before, and after retirement. BTW, we planed for 100% of our pre-retirement net income (increased by our personal rate of inflaton - PROI) to continue to live the live we had before we both retired.

Nobody (IMHO) should be called to task on what they are (or will be) spending while retired. We chose (and planed for) no reduction in "lifestyle" while retired.

In our case? Let's just say that it is upwards of $100k/year. So what does that mean? Nothing, really. Our joint income before retirement was well beyond that level, and we planned on living the same lifestyle after we retired.

We met our goal and don't expect anybody else to fund our desires; IMHO, that's all that counts ...
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Old 02-05-2012, 12:02 PM   #37
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Bottom line: I need a "gross income" in retirement of $230,000 to retire.

This means, on $3 million....I'd need 7.7% annual returns.
Short answer, I wouldn't want to plan on 7.7% annual returns over a 50-year period.

Also, does the $230k include savings for college for the kids?

I would think about what will make you happy, as well as provide an acceptable lifestyle for your children. It may not be as much as you think. You may find that your children will value time with you more than certain "high-end" material things.

I'm not sure I could have retired in your situation, given your age and the age of your children. I am now ten years older than you with teenagers and I am FIRE'ing this month.
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Old 02-05-2012, 12:06 PM   #38
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Nobody (IMHO) should be called to task on what they are (or will be) spending while retired. We chose (and planed for) no reduction in "lifestyle" while retired.
I agree. But, what I think is annoying is someone who acts like you have to spend that much, and then throws the children in front to justify it (which fuels the fire). Simply saying, it is the lifestyle we enjoy, and it is what we are going to spend should be satisfactory. Most people live on significantly less paying a mortgage and with debt. I don't blame the man/woman for wanting to spend a lot, I'd do it if i could.

Now, what gets even more annoying is one tries to force the round peg in the square hole. IMO, the OP is not ready to retire. If so, they would seriously look at adjusting their spending. My hope is the OP doesn't end up like Mike Tyson (and I'm not talking about a tattoo on their face).
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Old 02-05-2012, 12:43 PM   #39
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It is so much fun to get to tell someone else what is wrong with their choices and suggest better ones! Most of us might have tried that, a few times, with spouses or lovers or grown children, only to get slapped down.

Thank heavens for an outlet via ER.org!

Ha
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Old 02-05-2012, 01:05 PM   #40
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It is so much fun to get to tell someone else what is wrong with their choices and suggest better ones! Most of us might have tried that, a few times, with spouses or lovers or grown children, only to get slapped down.

Thank heavens for an outlet via ER.org!

Ha
Yes, I wonder if all those passing judgment on the OP's spending habits would be quite so forthright in a face-to-face social setting.
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