New Yorker: rich by most standards, but can I really FIRE?

[luckyiknow]

Any other NYC'ers on this board? I see alot of people talking about retiring with annual incomes way lower than you need to afford living in the NYC area. I get the feeling most people on this board are living in another universe.
I know I'm fortunate--I'm 50, have about 4M in total assets, not including a 1.8M house, with 750K in principal left. (No, in nice NYC suburb that's not a mansion). As my handle suggests, I know I'm lucky compared to 99% of Americans. But stay with me:

Would love to retire *now*, but:
1. 3 kids not yet college age. No way will I get financial aid. If they all go to decent private schools I calculate $1M cash after tax.
2. Would like to stay in NYC area, at least until kids are gone and probably thereafter.
3. House has gone down in value. Not sure how much. So some of my home equity has disappeared.
4. But my local taxes (property and school) are almost 50K a year!
5. Very, very, (very) conservative investor. Hate stocks. With interest rates this crazy low, can't find a safe investment to generate income necessary to live in this area with 3 kids, particularly after inflation.
6. Health insurance.

Any advice (other than "you greedy bastard, 4M is plenty" or "move")?

 

[haha]

Any other NYC'ers on this board? I see alot of people talking about retiring with annual incomes way lower than you need to afford living in the NYC area. I get the feeling most people on this board are living in another universe.
I know I'm fortunate--I'm 50, have about 4M in total assets, not including a 1.8M house, with 750K in principal left. (No, in nice NYC suburb that's not a mansion). As my handle suggests, I know I'm lucky compared to 99% of Americans. But stay with me:

Would love to retire *now*, but:
1. 3 kids not yet college age. No way will I get financial aid. If they all go to decent private schools I calculate $1M cash after tax.
2. Would like to stay in NYC area, at least until kids are gone and probably thereafter.
3. House has gone down in value. Not sure how much. So some of my home equity has disappeared.
4. But my local taxes (property and school) are almost 50K a year!
5. Very, very, (very) conservative investor. Hate stocks. With interest rates this crazy low, can't find a safe investment to generate income necessary to live in this area with 3 kids, particularly after inflation.
6. Health insurance.

Any advice (other than "you greedy bastard, 4M is plenty" or "move")?

I feel for you, and I understand what you are saying. But as you know there is no advice to give you. If you are smart enough to accumulate $4mm, you are smart enough to draw your own conclusions.

Ha

 

[Danmar]

Just keep working and saving. Eventually you will have a great retirement. Congrats you have done well.

 

[luckyiknow]

Just keep working and saving. Eventually you will have a great retirement. Congrats you have done well.

Thanks but don't wanna "just keep working." That's the point.

 

[FIREd]

Living in NYC has advantages and drawbacks. So does living in Alabama.

We all make choices and we have to accept the consequences of those choices. If living in NYC is important for you, then you have to accept that you will have to save more than most of us for retirement.

On the other hand, millions of New Yorkers live on less than $100K a year.

 

[LOL!]

Sell house. Rent in a cheaper place.
Folks who do well in NY are folks that have some kind of angle.
I used to live in housing I rented from my employer. Relatively cheap and I could walk to work. Even if you pay for kids' school, you are left with $3M. No problem.

Go move out to Shirley on Long Island. I think houses are going for $30K or so.

 

[MichaelB]

Any other NYC'ers on this board? I see alot of people talking about retiring with annual incomes way lower than you need to afford living in the NYC area. I get the feeling most people on this board are living in another universe.
I know I'm fortunate--I'm 50, have about 4M in total assets, not including a 1.8M house, with 750K in principal left. (No, in nice NYC suburb that's not a mansion). As my handle suggests, I know I'm lucky compared to 99% of Americans. But stay with me:

Would love to retire *now*, but:
1. 3 kids not yet college age. No way will I get financial aid. If they all go to decent private schools I calculate $1M cash after tax.
2. Would like to stay in NYC area, at least until kids are gone and probably thereafter.
3. House has gone down in value. Not sure how much. So some of my home equity has disappeared.
4. But my local taxes (property and school) are almost 50K a year!
5. Very, very, (very) conservative investor. Hate stocks. With interest rates this crazy low, can't find a safe investment to generate income necessary to live in this area with 3 kids, particularly after inflation.
6. Health insurance.

Any advice (other than "you greedy bastard, 4M is plenty" or "move")?

I lived in NY (westchester). After leaving my job we stayed just 'til our youngest was out of high school, then made plans to leave. NY is wonderful but it is a place to work. In order to live well you need assets and income. If you relocate, with enough assets, you can live just as well - minus the NY culture - but not have to work. Your choice.

 

[aaronc879]

It doesn't seem to me that private school is worth that much extra money particularly when you get to the college level. You could save half a million by sending them to a regular school. Supporting a family of 5 with an expensive house(even after paid off) and un-subsidised health care in NYC area may not be easy even with your savings. Have you considered working on a part-time basis?

 

[rescueme]

I live 80 miles west of NYC, just over the PA border. We have a great deal of folks that moved from the North Jersey/NY side well over the last decade+, even though the pace of moving has been greatly reduced over the last few years.

While we don't have direct rail service into the city, we do have direct bus service. Here's the current schedule:

http://www.biebertourways.com/schedules/NYC.100901.pdf

You can also take the High Bridge/Raritan Valley line into the city if you wish to take part of the trip by car/train:

http://en.wikipedia.org/wiki/High_Bridge_(NJT_station)

We use the bus to take day trips into the city several times each year, and meet a lot of folks that work there but can't afford to live there with their current j*bs. Local folks such as Christine Taylor (wife of Ben Stiller, and born/raised in the area) took the bus in her early years when she was doing modeling.

We also use it to go to the cruise ship terminal (55th Street) rather than drive or take a limo, both modes that we have used in the past (we still use a limo to Newark (EWR) but that's another story).

Other "escape from NY" types have gone to the Pocono area and use public transport (Martz) to go back/forth.

Yes, it is a hassle, but I'll assume you are pulling in sufficient coin to pay for the bus. Additionally, folks we talk to that take the bus every day don't have a problem with it (if they did, they would not be on the bus). They usually either sleep one/both ways or use their communication devices (text/PC - no cell phones allowed) to do w*rk or communicate with their family. You did say that it would only be till the kids left (that will happen sooner than you think!)

I know you said you did not want to move as an option, but I just wanted to give you some ideas of one who spends time in the city, but doesn’t live there.

Hey, at least you're home every night .

 

[brewer12345]

Personally, I will be bailing on the tristate area. Relocate to a lower cost area (translation: almost anywhere else in the world) and you can retire immediately.

 

[haha]

Thanks but don't wanna "just keep working." That's the point.

Que lastima!

 

[Danmar]

Thanks but don't wanna "just keep working." That's the point.

Ya I got that. As Ha said though you seem to be a pretty smart guy and looks like you are going to have to compromise on something. I would just keep working for a while until you can relax one of your other constraints? PS I don't think $4mm(less the mortgage) is enough for you to retire on given your lifestyle. I live in a less expensive city (Toronto) and had quite a bit more plus a large pension before I retired at 56.

 

[lemming]

So what are you buying (or selling here) if you hate stocks?

Send kids to the most expensive university you can find-they are the ones who will give the best financial aid packets.Why by the way is this still a problem-NY state has a great 529plan -you never wanted a tax break?

Take at least one kid into the biz that made you the big bucks.
Send one kid into the military before college-let her/him pay for it that way.(not Your kid you say? -don't go there-really. don't. Not on this board.)
This is a very schitzo reply even for me -

 

[MasterBlaster]

If you want a New York lifestyle, then you will just have to pay those NY dues. And that means working long and hard until all of the money is there. It's funny that way, the more you have the more you want. The hedonic treadmill in action.

Luckily for you, you have the option of re-locating to somewhere else, where it costs so much less to live.

 

[donheff]

$50K in property and school taxes -- wow! Couldn't you sell the house and rent in the same area and do better? As to the "I don't wannna" keep working reaction, it seems like you are finding the balance weighing more toward working than moving since you could afford to quit and school the kids if you moved.

 

[HornedToad10]

I know I'm fortunate--I'm 50, have about 4M in total assets, not including a 1.8M house, with 750K in principal left. (No, in nice NYC suburb that's not a mansion). As my handle suggests, I know I'm lucky compared to 99% of Americans. But stay with me:

Would love to retire *now*, but:
1. 3 kids not yet college age. No way will I get financial aid. If they all go to decent private schools I calculate $1M cash after tax.
2. Would like to stay in NYC area, at least until kids are gone and probably thereafter.
3. House has gone down in value. Not sure how much. So some of my home equity has disappeared.
4. But my local taxes (property and school) are almost 50K a year!
5. Very, very, (very) conservative investor. Hate stocks. With interest rates this crazy low, can't find a safe investment to generate income necessary to live in this area with 3 kids, particularly after inflation.
6. Health insurance.

Any advice (other than "you greedy bastard, 4M is plenty" or "move")?

You know what you need to do or at least consider, but probably need a push to help you get there.

The easiest would be to move. Take the ~$600k in home equity from your house after the sell and buy a new house and then enjoy roughly ~160k/year from the remainder of your portfolio. I would think that amount could be livable...

The second easiest is to cut expenses.

As for your points:
1. $1mil is unbelievably pessimistic unless you are including funding their masters/phd/md and they get no financial aid. I'd guess it's more like $500k for 3 bachelors and possibly masters even at expensive private schools. And presumably your kids could get some partial merit scholarships.
2. That's definitely a major problem since the NYC needs 10mil for what your standards probably are.
3. You still have 4mil in investments plus enough remaining from equity to buy a very nice house in another part of the country. And I don't just mean the flyover states.
4. See point #2 about NYC or cutting expenses.
5. Learn to get over it. Some good books would presumably help. Bogleheads guide to retirement planning. Alot of the Bogle books, etc. At least 20% stocks and 80% bonds is less risky than strictly 100% bonds. And if you aren't even in bonds that's a bigger problem. This is emotional, and information and research will help you overcome it.
6. Yep it sucks.

Best of luck whatever you decide.

 

[luckyiknow]

Thanks for all the helpful replies. Yeah, I didn't expect a magic answer. I know I could/should move. The problem is I don't want to move the kids, at least right now, and my youngest is 10 so a few more years before they're all off to college.

As to college costs, someone above said: " $1mil is unbelievably pessimistic unless you are including funding their masters/phd/md and they get no financial aid. I'd guess it's more like $500k for 3 bachelors and possibly masters even at expensive private schools."

Well, I'm not sure how you're saying that. Tuition and costs at good private schools for 2011 have already been announced. At UPenn for example (on the expensive side I know), 2011-12 tuition, fees and costs are 57K. 3 kids X 12 years of college, including avg. increases of 5-6% or so adds up to around a million (given my kids' ages). And given my assets described above, I don't see any possibility of financial aid.

 

[beowulf]

Grew up in the Bronx in a very nice apartment. Went to public schools all the way through CCNY (lived at home). Had the Army pay for advanced degrees. Parents never made more than $15K a year combined, yet I had everything I wanted.

Yes, you are lucky and you know it - but you have to make hard choices. You clearly have a lifestyle that's not sustainable with your assets if you retire now. Given your savings, I'd work until the kids are in college, sell the house, move to a very nice rental on the upper West Side and live well. Kids do not need to go to Ivy League schools for undergrad - I only did that when someone else was paying. NY has some fantastic state schools for less than $25K a year including room and board. Cost you $300K for 3 kids plus a bit for inflation. And the 529 plan is the way to go. I'm sure you might not believe it, but your kids will be what they want to be whether they go to Harvard or community college.

If you maintain the position that you truly hate work and don't want to do it anymore, your only choice is to become frugal enough to live within your means with an income of approximately $160K a year - 4% SWR of $4M.

It ain't that hard .

 

[luckyiknow]

Also, to answer questions about what I invest in if I don't like stocks: The vast majority of my savings are in short term high-rated munis. I do have some exposure to stocks in a 429 plan and 401(k).

 

[Moemg]

Welcome , I love New York and think it is a great place to live but it is expensive . So you either have to work longer or find a place that is not New York that you could live happily in.

 

[haha]

Welcome , I love New York and think it is a great place to live but it is expensive . So you either have to work longer or find a place that is not New York that you could live happily in.

Or figure out how the Russians and Chinese and Colombians and Albanians and Puerto Ricans and Dominicans manage to struggle along without moving to Oklahoma?

Ha

 

[M Paquette]

Or figure out how the Russians and Chinese and Colombians and Albanians and Puerto Ricans and Dominicans manage to struggle along without moving to Oklahoma?

Ha

Well, with them all sharing that two bedroom walkup with the efficiency kitchen, the cost per person isn't so bad...

(DD moved from a building on the upper upper west side last year where one of the apartments qualified for 'all of the above'. )

 

[braumeister]

There has been some excellent advice so far in this thread, so I'll just toss out a tidbit.

I was born and raised in NYC (Brooklyn, actually), and I honestly feel that it's mostly wasted on kids. I wasn't really able to appreciate the city until I was in college (which was in NYC). So I don't think you would really be doing your kids such a huge favor by not wanting to move them. They can always go back later on their own if they want to.

When I left the city after college, I never looked back. I still have friends there, and I visit them every year or two, but I could never live there again, and cost has absolutely nothing to do with it.

 

[haha]

Well, with them all sharing that two bedroom walkup with the efficiency kitchen, the cost per person isn't so bad...

(DD moved from a building on the upper upper west side last year where one of the apartments qualified for 'all of the above'. )

True. Here, depending on neighborhood it is Mexican workers, often young well paid Indian software workers, Indian families, or Somali and other African extended families.

Ha

 

[HornedToad10]

Thanks for all the helpful replies. Yeah, I didn't expect a magic answer. I know I could/should move. The problem is I don't want to move the kids, at least right now, and my youngest is 10 so a few more years before they're all off to college.

As to college costs, someone above said: " $1mil is unbelievably pessimistic unless you are including funding their masters/phd/md and they get no financial aid. I'd guess it's more like $500k for 3 bachelors and possibly masters even at expensive private schools."

Well, I'm not sure how you're saying that. Tuition and costs at good private schools for 2011 have already been announced. At UPenn for example (on the expensive side I know), 2011-12 tuition, fees and costs are 57K. 3 kids X 12 years of college, including avg. increases of 5-6% or so adds up to around a million (given my kids' ages). And given my assets described above, I don't see any possibility of financial aid.

So at 57*12 I get 684k. That's assuming absolutely no private/partial scholarships for any of your kids at one of the most expensive colleges around.

The increase in tuition over the years in the future should also be roughly equivalent to the earnings on the savings set aside for college. So right now you have $684k set aside for college but when they actually go, the 684k would grow by roughly the same amount as the tuition increase grows. I know college is going up by more than inflation, but so should your savings.

Really it comes down to what's more important to you: Living in New York and working the next 10+ years or not living in New York and being retired/semi-retired right now.