Where am I at?

[DJ_Jazzy_Jeff420]

I'm early forties, as is wife. I own a business and make a lot of money- like around $350/yr. I have a million in a taxable and about $450K in retirement (ira and 401k). I own a house worth around $200K with no mortgage and a couple of cars that are nice. I have about $200K in cash. If I cashed out my business I could probably take another $150k after tax- I don't know that I can sell it- I am the business.

I'm kind of bored. I'd like to retire to some other area. The areas we contemplate would cost more to buy into- probably 400-500K. We live a relatively low cost lifestyle. Our total spending per year is around $50K, which includes some pretty exotic and frequent travel. I'm not sure what we would do about health insurance. My business pays 100% of the cost of insurance for my wife and me. We have no kids.

I am concerned about cashing out, because I've got this goose right now that keeps crapping golden eggs. If I cash out and leave, it's over. When is enough? How much longer should I do this?

 

[Blue Collar Guy]

Go fishing

 

[Fermion]

If you sold everything except your cars, you would have $1,800,000? Not including whatever you could get from the business.

That would give you $54,000 (before taxes) at 3% which should be good for 40 years or more. That is right on the edge and would include selling your house and renting (or paying a mortgage out of the $54,000).

How much of your $350k income from your business are you managing to put into a retirement account each year? I would hope a ton (like $100,000 a year?)

 

[RunningBum]

I'd hang on. Medical is going to jump that $50K expense amount. Are you going to want to take even more exotic trips? How often do you replace those nice cars? How about taxes and maintenance on the more expensive house?

My math on your plan is that you use the house equity, most of your cash, and the proceeds from cashing out the business to buy the new house, and have about $1.5M to fund over $50K in expenses, maybe more like $60K. You're looking at 3.5-4% WR for probably a long time. It might work, but might not. If it doesn't, I guess you can cut those trips down and move to a cheaper area, but do you want to do that? Or you can go back to work, but how many years would you have to work to make the $350K you make in one year now?

 

[Scrapr]

Go fishing

You didn't finish the joke. A boat is a hole in the water you throw money into

You're welcome

 

[DJ_Jazzy_Jeff420]

I totally agree with everything said- I don't have enough now. I don't want to do the "lean fire" thing- I want to keep living like I do now. The question really is how much more? If I work until i'm 65 I will have millions- I just don't want to. How much is enough? Two years? Five? One?


I anticipate higher health care costs. I just don't know how much. Even in a higher cost of living location, I anticipate lower property tax (right now I pay $7,500 on my $200K home). But, as has been pointed out, once I kill the goose- that's it. And I will have to replace cars and things- and I want to keep traveling...

Right now we put $11,000 a year in our IRAs and max out the 401K. As I said, I spend about $50K per year- I save the rest in taxable.

 

[Fermion]

It is tough to say. We picked a figure and a date and stuck with it but in hindsight we probably should have kept at our jobs for about 2 more years to really take advantage of this market surge. Dumping another $150k each year into 401K/IRA/HSA/taxable during 2015 and 2016 would have given us a really big buffer instead of just a modest buffer. That is two years though. Two years is worth a lot when you are 70. Some people pay millions for six months more.

 

[CaliKid]

I'd go hang out with the Fresh Prince. You guys would make a good team.

 

[DJ_Jazzy_Jeff420]

I'd go hang out with the Fresh Prince. You guys would make a good team.

Can't- he moved away to go live with his uncle in a HCOL area.

 

[CaliKid]

Can't- he moved away to go live with his uncle in a HCOL area.

I hear ya. Phili is cold in the winter though. You got to find somewhere warmer to go!

 

[aaronc879]

Is your business all or nothing or could you do it part time. I think I would hold on full time for a couple more years or part time for several more years.

 

[Golden sunsets]

$1,450,000 is not all that much money, especially when you are only 43+/-. If it were me, I'd keep at it until you have at least double that number. In the interim, I'd also focus on finding "that thing" that increases your interest and lessens your boredom. If that is travel, then take more time off. I suspect you'd miss your golden goose after a short while with your somewhat small nest egg.


Sent from my iPad using Early Retirement Forum

 

[IMATERP]

I'm early forties, as is wife. I own a business and make a lot of money- like around $350/yr. I have a million in a taxable and about $450K in retirement (ira and 401k). I own a house worth around $200K with no mortgage and a couple of cars that are nice. I have about $200K in cash. If I cashed out my business I could probably take another $150k after tax- I don't know that I can sell it- I am the business.

I'm kind of bored. I'd like to retire to some other area. The areas we contemplate would cost more to buy into- probably 400-500K. We live a relatively low cost lifestyle. Our total spending per year is around $50K, which includes some pretty exotic and frequent travel. I'm not sure what we would do about health insurance. My business pays 100% of the cost of insurance for my wife and me. We have no kids.

I am concerned about cashing out, because I've got this goose right now that keeps crapping golden eggs. If I cash out and leave, it's over. When is enough? How much longer should I do this?

You are in a great situation to start the transition process, while working. Use the next two years to vacation periodically in the location you desire to move and get to know the different communities.

It sounds like it's time to do something different and you can always "do something part time" in your new digs and/or just do nothing. I'd work two more years, though just to create a little more of a buffer in order that you can live the same lifestyle if inflation began creeping up.

Michael

 

[RunningBum]

I totally agree with everything said- I don't have enough now. I don't want to do the "lean fire" thing- I want to keep living like I do now. The question really is how much more? If I work until i'm 65 I will have millions- I just don't want to. How much is enough? Two years? Five? One?


I anticipate higher health care costs. I just don't know how much. Even in a higher cost of living location, I anticipate lower property tax (right now I pay $7,500 on my $200K home). But, as has been pointed out, once I kill the goose- that's it. And I will have to replace cars and things- and I want to keep traveling...

Right now we put $11,000 a year in our IRAs and max out the 401K. As I said, I spend about $50K per year- I save the rest in taxable.

I'd do more work to figure out your real retirement budget, including an estimate for health care (insurance premiums plus what you'll likely spend before hitting deductibles), retirement travel, taxes, and a yearly fund for replacing cars and other large expenses. Current expenses are a start but some go up and some go down in retirement and that's what you have to base it on.

Then decide on what withdrawal rate you'd want to use. At your age, I'd want no higher than 3.5%. 3% would be even safer and with your income and savings rate it shouldn't take you that much longer to get there. You'll need to come up with (annual expenses) * (100/WR).

So if you come up with $75K in estimated expenses and use 3%, you'll need 2.5M. If you're saving 150K a year and your portfolio grows 100K/yr, that's about 4 more years.

Confirm the numbers with Firecalc.

Maybe your expenses will be less. I'm a bit suspicious of $50K/yr with frequent exotic travel, but that's your business. And if you get really tired of it you can probably pull the trigger earlier, but I'd be inclined to get the padding while you've got the goose laying those eggs.

If you have the opportunity to scale back and work less that can be a nice transition into retirement. Any chance you could take on a partner who could eventually buy you out, or take over the active part while you take some income as owner?

 

[RenoJay]

I'd suggest talking to a business broker. Depending on the type of business it might be sellable for more than you think. Or maybe you can train someone to take over and you split the profits. It'd be great to FIRE while still getting a six figure annual income from your former business.

 

[DrRoy]

I'd do more work to figure out your real retirement budget, including an estimate for health care (insurance premiums plus what you'll likely spend before hitting deductibles), retirement travel, taxes, and a yearly fund for replacing cars and other large expenses. Current expenses are a start but some go up and some go down in retirement and that's what you have to base it on.

Then decide on what withdrawal rate you'd want to use. At your age, I'd want no higher than 3.5%. 3% would be even safer and with your income and savings rate it shouldn't take you that much longer to get there. You'll need to come up with (annual expenses) * (100/WR).

So if you come up with $75K in estimated expenses and use 3%, you'll need 2.5M. If you're saving 150K a year and your portfolio grows 100K/yr, that's about 4 more years.

Confirm the numbers with Firecalc.

Maybe your expenses will be less. I'm a bit suspicious of $50K/yr with frequent exotic travel, but that's your business. And if you get really tired of it you can probably pull the trigger earlier, but I'd be inclined to get the padding while you've got the goose laying those eggs.

If you have the opportunity to scale back and work less that can be a nice transition into retirement. Any chance you could take on a partner who could eventually buy you out, or take over the active part while you take some income as owner?

+1. This is exactly what I was thinking as I read through this thread. Have your full RE budget worked out including medical, taxes, cars, other, and a contingency for the unexpected. Multiply by 33.3 and that is the amount you need in investments. Don't count the house.

 

[brucethebroker]

Is your business all or nothing or could you do it part time. I think I would hold on full time for a couple more years or part time for several more years.

PT work would also keep the business paid health insurance.

BTW, here in the LCOL Midwest, a $200k house, with the owner/occ homestead exemption, would be taxed about $1200-$1500 a year.....Just stay away from IL and WI.

 

[ncbill]

If "you are the business" are you taking advantage of the much more generous retirement plans business owners can use versus traditional W-2 retirement limits?

 

[Scout]

My wife and I are in a very similar situation. We've even gone as far as selling the house in anticipation of retiring and moving to a more desirable location. However....
We're early 40's with a bit more than double your assets assuming you sold all your stuff. Our spend rate is right at 60k which doesn't include taxes, but does include 17k for health insurance(!!!!!). We have two new cars which are paid off and we hope to keep for 10-15 years. We also enjoy traveling and will likely travel more as we stop working, but it's so hard to accurately budget for that. It's discretionary, so in a pinch you could simply not travel, but you sound like you don't want to live a strapped lifestyle once you pull the trigger.
With the two big variables of travel and health insurance (not to mention expenses you don't always plan for) and our relatively young ages we decided to increase our projected budget to 110k while keeping SWR at 3-3.5%.
That is likely more conservative than we need to be, but IMO you've gotta be pretty conservative when retiring early 40's.
You're making 350k and with the limited data you've provided I'd guess you're saving 170-180k per year. Add 20k per year to be safe for health insurance/expenses (probably will be less, but not if you spend deductibles) and another 10k to account for increased travel and fun stuff as you'll be doing a lot more with your time at your age.
Total budget of 80k.
81k is 3% of 2.7 mill.
You have 1.8 now if you sold everything, but now u have no house so we'll say 1.5 million.
If you plug your numbers into a compound interest calculator with a portfolio earning 6% and contributing 180k per year it will take you right at 4 years to reach your goal.

 

[someguy]

If "you are the business" are you taking advantage of the much more generous retirement plans business owners can use versus traditional W-2 retirement limits?

+1 on this. With a Solo/Individual 401(k) via your business, if your wife contributes to the business you could jointly save over $100K/year tax deferred. If you are making $350K now and will only need 50-60K in retirement, that's some good marginal tax rate arbitrage.

Also, I wouldn't trade a business generating $350K/year in cash flow for a $150K lump sump.....typically you'd be looking at a 2-5x multiplier not a 0.5 or less one. Maybe scale back and/or consider bringing in help?

 

[Mdlerth]

$1,450,000 is not all that much money, especially when you are only 43+/-. If it were me, I'd keep at it until you have at least double that number. In the interim, I'd also focus on finding "that thing" that increases your interest and lessens your boredom. If that is travel, then take more time off. I suspect you'd miss your golden goose after a short while...

+1

One and a half million is enough at age 60. But you aren't close to 60. Stack some more and call back when you have another million.

 

[candrew]

How Much Longer?

When is enough? How much longer should I do this?

No one should work a day longer than they absolutely have to and/or want to.

 

[Yarnstormer]

Work a few more years, cut a deal where you get to stay on group insurance til 65 perhaps in exchange for consulting...maybe reality check about expenses in the meantime.