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Am I yearning to retire early...or just change careers?
Old 01-16-2009, 07:14 PM   #1
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Am I yearning to retire early...or just change careers?

Hi this is my first post and this seemed like the right forum for it. I could use some advice. I am 38 years old and live in the New York City area. I have worked in advertising and PR since I was 19 years old, and consider myself really lucky that I found a career that played to my strengths. Seven years ago I was lucky enough to take a pretty significant ownership stake in an agency and we sold it several years later. Now I have a nice financial cushion and have found myself working with a financial planner to see how and when I might be able to live off of my investment income. It's probably not going to happen anytime soon. If I pay off my mortgage in the next year as planned, and depending on what the stock markets decide to do, I will probably have somewhere in the range of $1.5 to $2.5 million in investments by then. (I am still getting payments from the sale of the firm for another year or so). So I will have a home (paid for) worth at least $900k plus a seven figure portfolio and wonder what I should do with this cushion to "set me up" for life so that I can do what I want to do without worrying about how much money it will pay. I have been drawn toward teaching or counseling or doing something that will help others, while at the same time I have become pretty turned off by the stress and culture of my industry. In fact, I recently quit my job and took a consulting role with the company instead, working from home most of the time. So, my question is: given that I am so young, how much should I focus on becoming financially independent versus finding a new career that will be more fulfilling? Should I spend the money to go back to school and train for a different profession if spending that money will set me back in my financial independence goals? I feel like I'm at a crossroads where I need to either go into early retirement mode or into career change mode and I'm not sure which way to go. I'd love to hear from any of you about any similar experiences you've had or advice. Thanks.
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Old 01-16-2009, 09:03 PM   #2
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Sounds like you are already FI (financially independent) - that is, if you want to be.

What you don't say anything about are your expenses, your expectations of how much you want to have to spend each year, etc - there are many people on this forum already early retired, modestly albeit - & on much less $ than you currently have on your personal balance sheet - & then again there are some on here with as much & more than you have.

If you can provide the board a little better idea of your expenses, expectations/needs as to future annual income, etc - you will probably get better comments on your situation.

Although there is a wide variety of financial circumstances among the members of this forum, I think that many will tell you that the commonality of FI/RE is more about having the freedom to do what you want to do - while being financially secure - than it is about any certain level of $. Some people have little expectation of living in million dollar properties, traveling the world in style, or driving high $ cars in their retirement. Others do want & are planning for those things.

Without knowing at what standard of living you are planning for living off of your investments, it's difficult to ascertain how much you will need.
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Old 01-16-2009, 09:18 PM   #3
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Well, really its up to you and what you want to do...do you want to stay in NYC? Have a family (wifey & kids?). Prefer the city but coould be a smaller one? Really everyone is different, but if I was single, had 2.5m plus a 900k home, I would probably sell and move to a less expensive location, semi rural but in a small town, buy a home for 200-300k, and have 3-3.2m in the investment kitty. My location would be such that I could be in the mountains hiking, biking, kayaking, or fishing within 15-30 minutes from home. I am not a skier, so having snow doesn't help me, but I'm ok with it. At 38 or 40, you would want a SWR of 3% or so, which would give you about 90k income, largely tax free if you planned it right.

If it were me, though, I would wait a couple years to do all of this until the economy settles. Start the process of looking and deciding, and then engineering your cash flow from investments. I advise alot on career matters, and to anyone who listens, I am saying "if you have a job right now, keep it!" Who knows how the markets will shake out...having some work, even as a consultant, helps keep you on track until you are REALLY ready to pull the pin and toss the grenade.

Again, all of that is just what I would do...if I was single. I am married, have two kids, the second of whom will be launched in August (first already in college). I also have a home, in cali, probably worth about a mil now, down from 1.6 2 years ago. Wifey loves it there, me too. I am on assignment in asia, mean ol mr market has meant that I can't "graduate" when my daughter does in june (well I could, but I'm trying to follow my own advice). My home is about 1.5-2 hrs from good biking/hiking/kayaking/fishing/camping, but within 30 minutes of several good quilting and crafting stores...essential for DW's happiness.

The blurb about me is just to show you that we really are all different and depending on our circumstances the answers will differ. hope this helps though.

R
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Old 01-16-2009, 10:01 PM   #4
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What is it about paragraphs? Some people use them and some don't?

If there was ever a time to do something you always wanted to do but didn't have the time; this is it.
It doesn't appear that you are under any pressure to make a decision.
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More on expenses
Old 01-17-2009, 06:32 AM   #5
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More on expenses

Texarkandy -

Thanks for the response. You're right about lifestyle and expense questions. Here's a bit more. I have calculated what I spend and on the highest side, we're talking about 120k per year AFTER I pay off the mortgage. One fifth of that is property taxes in the town where my house is. The bare minimum in annual expenses is more like 75k if I had to really budget for food, entertainiment, vacations, etc. (But still includes almost 20k in property taxes). I just bought the house this past year (as part of my escape from the city strategy) so not wanting to sell it in the next two or three years, and certainly not until the housing market stabilizes. I am with someone who has worked for the government for 26 years, takes home 65k after taxes, and will retire in four years with a decent lump sum, a monthly pension check, and healthcare for life. I also own a small cabin on a lake upstate which is paid for. It's kind of my Plan B if I ever really want to change my lifestyle dramatically and get rid of everything and go live in the woods, although its's very small and very remote and I'm not sure I could last for more than a year or two without going crazy.

So far, it sounds like you guys think I can be FI right now if I make some lifestyle changes. That's nice to hear. And you're right about New York - I definitely do not want to "retire" in the New York area - but I do plan on staying around here for several more years.
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Old 01-17-2009, 07:15 AM   #6
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am with someone who has worked for the government for 26 years, takes home 65k after taxes, and will retire in four years with a decent lump sum, a monthly pension check, and healthcare for life.

If you and your SO are married, or plan to become so, please factor in the potential costs of eventual divorce. Such a thing, one hopes, will never happen; if it does, you may find it quite expensive to go through.

Also, if your SO is retiring from The Government (vice military or law enforcement) in 5 years, he/she, presumably, is now around age 50. You 2 may possibly want to think about long-term-care insurance, which will be cheaper now than when he/she hits 60.

Other than those 2 cautions, I'd say...congratulations, get ready for the rest of your life!

[Dex, not to hijack Mike's thread, but I got a kick out of your comment about paragraphs. My undergraduate degree was in journalism, and I sometimes find myself inserting mental "para" marks in long posts to be sure I've understood them. Those raised in the Internet age don't always have the same punctiliousness about punctuation, yet still seem to understand one another's posts].

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Old 01-17-2009, 07:54 AM   #7
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Quote:
Originally Posted by Mike on fire View Post
Texarkandy -

I have calculated what I spend and on the highest side, we're talking about 120k per year AFTER I pay off the mortgage....

I am with someone who has worked for the government for 26 years, takes home 65k after taxes, and will retire in four years with a decent lump sum, a monthly pension check, and healthcare for life.
Is that $120/K year in addition to the contribution of your SO? Or are your joint expenses $120k? Big difference. If the later (or if you can get expenses down towards the later) you are in a great position to explore your opportunities. You could live off a relatively small percentage withdrawal against your portfolio and look for employment or activities that fulfill you. Many of us blunder into our careers without knowing our real strengths and preferences, and with little knowledge of what employment options may be available to us. Being FI at your age gives you a golden opportunity to reverse that.
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Old 01-17-2009, 08:19 AM   #8
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Thanks, Don. The 120k is total household expenses for both of us, including the costs of maintaining that cabin upstate. And if I really push myself to think about what is essential and what's not, I think those expenses could get down to 80k or even less (I just did some back of envelope calculations). Thanks for the great advice.
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Old 01-17-2009, 09:10 AM   #9
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At 38 y/o you potentially have a looooong time to be retired. BTW - what's your long term plan for health insurance, since the IRS expects you to live about 45 more years?

I'm surprised no one has recommended it to you yet, but I suggest you play around a bit with the FIRE calculator associated with this forum.

FIRECalc: A different kind of retirement calculator



(As to the property taxes thing - you could always move to Texarkana, TX & buy my house, then we could both retire Taxes are only $5500 for 3400 sq ft, which we consider that kinda high around these parts - but supposedly the governor is working on it)
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Old 01-17-2009, 12:53 PM   #10
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Mile, Welcome.

Just to make this really simple, you need to be able to live on about 3% of your investments per year, adjusted for inflation yearly. This is including all income taxes, health care, etc.

Unless you sell your house, don't count this as part of your investments. Sure, you can sell it later and buy a less expensive one, but we're being simple, now.
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Old 01-17-2009, 10:52 PM   #11
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You didn't say what level of teaching you are interested in, but one option would be to apply for the NYC program they have to encourage people from other fields to enter the teaching profession. It is probably pretty intense, but you get your teaching MA paid for as part of the program and you would quickly get a sense whether teaching is the right choice for you. If you do like it, you could try to get a teaching job upstate eventually. Or if you didn't want to work full time as a teacher you could be a sub or work as a tutor as a way of bringing in extra income.

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