HI-can someone please Advise...

[Ryan75]

Can anyone give me some Ideas.... Currently I am a workaholic been working in my own small businesses for 20 years... Now I need to evaluate what life means and start enjoying my child...
My current situation is 2 small businesses one very intense(cash-flow) the other our retirement business(lots of debt,but pays its own bills,(should be paid off by the time we are 60) married to a corporate workaholic wife,we are both mid forties and raising a young child ,My wife makes more money with more flexibility,but we all know corporations,here one day,gone the next.

Our Financial situation is 2 million in the bank,stock,retirement accounts,equity in our home and businesses. we don't live extravagant but enjoy vacations and some toys, in order for me to "retire" I would have to take approximately $50,000 a year from our savings now... what would you guys do?

 

[MichaelB]

Hello Ryan75 and welcome to the forum. You might find this post informative and helpful. http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

 

[Ryan75]

Thanks, I have looked at most of the Financial calculators, searched most everything,talked to close friends and advisers and they all say its pretty much a go... I guess I was looking at the forums as kind of a place I could get peoples unbiased opinions and advice not jaded by knowing me...

 

[Closet_Gamer]

$50k/$2m is a 2.5% withdraw rate so mathematically feasible but it sounds like there is a lot of complexity running around in the system so MUCH more analysis and detailed planning required. Real expense analysis including saving for junior's college and the cost of raising a kid in general. Also really risk-adjusting the future cash flow from the businesses.

I'd offer another viewpoint: try to just chill out on the workaholic thing. Make a commitment to time box work and learn to really set it aside when at home (difficult I know as I've had to learn to do the same).

Life is not a balance sheet exercise. Enjoy the kid.

My $0.02. Good luck.

 

[MichaelB]

Thanks, I have looked at most of the Financial calculators, searched most everything,talked to close friends and advisers and they all say its pretty much a go... I guess I was looking at the forums as kind of a place I could get peoples unbiased opinions and advice not jaded by knowing me...

You'll get lots of that - unbiased and the other kind as well.

Our Financial situation is 2 million in the bank,stock,retirement accounts,equity in our home and businesses. we don't live extravagant but enjoy vacations and some toys, in order for me to "retire" I would have to take approximately $50,000 a year from our savings now... what would you guys do?

Just to clarify, is that $2M in portfolio value, or does that include home and business equity as well?

 

[ivinsfan]

I'm not clear if you will retire solo and your wife will continue to work? At your age that's probably not a good plan.Don't count on your spouse to be a "corporate workaholic" to help pay the bills forever.

 

[Ryan75]

You'll get lots of that - unbiased and the other kind as well.
Just to clarify, is that $2M in portfolio value, or does that include home and business equity as well?

2 million in our portfolio including Retirement accounts, Our house we have about 200,000 in equity, My one business thinking about selling has about $175,000 in equity, Our other business should be paid off in 15 years that will bring in $150,000 in income a year....

 

[Ryan75]

I'm not clear if you will retire solo and your wife will continue to work? At your age that's probably not a good plan.Don't count on your spouse to be a "corporate workaholic" to help pay the bills forever.

Wife will continue to work until we figure out her exit strategy, she has a lot of flexibility and does well....

 

[euro]

You need a good grip on your expected expenses and how they will be funded. I assume the 50k a year you think you'll need to draw from your investment is only a small part of the total? In order to assess the risks, you need to know all the other components, including how reliable those are as income streams.
Just based on what you told us, you'd be good to go now, but I suspect your situation is MUCH more complex than that.
Either way, focusing attention on your child will be rewarding and highly recommended!

 

[Ready]

2 million in our portfolio including Retirement accounts, Our house we have about 200,000 in equity, My one business thinking about selling has about $175,000 in equity, Our other business should be paid off in 15 years that will bring in $150,000 in income a year....

Is it practical to anticipate $150K/year in income in a business 15 years from now? What impact could competition, changing business trends, or other factors have on a business that many years from now?

 

[Ryan75]

Is it practical to anticipate $150K/year in income in a business 15 years from now? What impact could competition, changing business trends, or other factors have on a business that many years from now?

That's our current revenue, so not adjusting for inflation or anything else I feel
it's something we can maintain or better.

 

[OldShooter]

@Ryan75, I will try to add to the good advice here but from a little bit different perspective. I have owned a couple of small businesses and have been volunteering as a SCORE mentor to small businesses for about five years. I have seen a lot of businesses in intimate detail.

This statment makes me very nervous:

... My current situation is 2 small businesses one very intense(cash-flow) the other our retirement business(lots of debt,but pays its own bills,(should be paid off by the time we are 60) ...

A successful business is one that pays the owner a market-rate salary for the time he puts into the business and pays him a reasonable rate of return on his equity. "Reasonable" is certainly north of 10% and I would argue for 20% due to the risky nature of such an investment.

I suggest contacting your local SCORE office (start at https://www.score.org/find-mentor) and asking for a face-to-face meeting with a mentor who has run and has successfully sold a small business. Get an independent assessment of these businesses, maybe even from more than one mentor. We each have different perspectives.

I also think you should begin thinking about selling one or both of the businesses. IMO the idea of a "retirement business" is usually an oxymoron. Some personal-service businesses, like CPAs and attorneys, can be tapered down and the time commitment can be managed as a component of an enjoyable retirement. But businesses with employees, retail or wholesale customers, etc. cannot be managed from retirement so easily. So look yourself in the mirror and ask "Really, will I be retired when I am running this 'retirement' business or will I still be working?"

Selling a business soon will also contribute to your other goals of not being so much of a workaholic and beginning to enjoy life more. And, if it was a good business for you then you should be able to get a good price that will add to your cash resources for retirement. And if it is not a good business, then why are you slaving away at it? Ditch it now at a low or zero price instead of slaving for more years and then doing the same thing.

 

[ivinsfan]

Revenue is not profit....this business won't be paid off until you are 60? And inflation is the least of your concerns with this business..market conditions change.

So your wife went from a "corporate workaholic" to someone who does well and has lots of flexibility in 8 posts?

 

[Ryan75]

Revenue is not profit....this business won't be paid off until you are 60? And inflation is the least of your concerns with this business..market conditions change.

So your wife went from a "corporate workaholic" to someone who does well and has lots of flexibility in 8 posts?

flexibility meaning she has weekends off,works from home, travels a bit unfortunately, but also puts in 10-12 hour days, but if has to take a bit of time off she is able .... Loves her job.

 

[Ryan75]

@Ryan75, I will try to add to the good advice here but from a little bit different perspective. I have owned a couple of small businesses and have been volunteering as a SCORE mentor to small businesses for about five years. I have seen a lot of businesses in intimate detail.

This statment makes me very nervous:


A successful business is one that pays the owner a market-rate salary for the time he puts into the business and pays him a reasonable rate of return on his equity. "Reasonable" is certainly north of 10% and I would argue for 20% due to the risky nature of such an investment.

I suggest contacting your local SCORE office (start at https://www.score.org/find-mentor) and asking for a face-to-face meeting with a mentor who has run and has successfully sold a small business. Get an independent assessment of these businesses, maybe even from more than one mentor. We each have different perspectives.

I also think you should begin thinking about selling one or both of the businesses. IMO the idea of a "retirement business" is usually an oxymoron. Some personal-service businesses, like CPAs and attorneys, can be tapered down and the time commitment can be managed as a component of an enjoyable retirement. But businesses with employees, retail or wholesale customers, etc. cannot be managed from retirement so easily. So look yourself in the mirror and ask "Really, will I be retired when I am running this 'retirement' business or will I still be working?"

Selling a business soon will also contribute to your other goals of not being so much of a workaholic and beginning to enjoy life more. And, if it was a good business for you then you should be able to get a good price that will add to your cash resources for retirement. And if it is not a good business, then why are you slaving away at it? Ditch it now at a low or zero price instead of slaving for more years and then doing the same thing.

Yes I am in the process of exploring a sale of the one business that's more hands on... As for my "retirement" business that is a small resort and even though some may consider it work, we are looking at it as a reason to get up in the morning,May change as we get older but for now we still love it.

 

[OldShooter]

Yes I am in the process of exploring a sale of the one business that's more hands on... As for my "retirement" business that is a small resort and even though some may consider it work, we are looking at it as a reason to get up in the morning,May change as we get older but for now we still love it.

Glad to hear it. I hope you get a good price for the one you're selling. Once the sale closes, your finances will have a different look and your answer re retirement will probably be clearer.

Be sure to run the resort like a business, though, and take a hardnosed look at the numbers so you know whether it is really just a hobby. There's nothing wrong with having a hobby, but there's probably a limit to how much money you want to spend or forego if it really is just a hobby. Also, when the day comes to sell, a good set of books will probably be valuable.

 

[Ryan75]

Glad to hear it. I hope you get a good price for the one you're selling. Once the sale closes, your finances will have a different look and your answer re retirement will probably be clearer.

Be sure to run the resort like a business, though, and take a hardnosed look at the numbers so you know whether it is really just a hobby. There's nothing wrong with having a hobby, but there's probably a limit to how much money you want to spend or forego if it really is just a hobby. Also, when the day comes to sell, a good set of books will probably be valuable.

We do run the Resort like a business, Have a 85% return rate summer over summer, but I agree How much money you put in for return is an issue...If I could only teach my Wife, but she loves it and because of it we never ended up in a McMansion as our primary residence!
thanks for input!

 

[OldShooter]

Trying not to be a PITA here, but the real question is: Returning guest rate is nice, but after you have deducted a market rate pay for yourself, how much money is left as profit each year? And how is that as a % of your investment/aka owner's equity in the property? For accounting-grade numbers this is based on your purchase cost not on what the property might currently be worth.

But typically small resorts are worth more for their land, sold to a developer, than they are as a going business. For example, if you are earning 10% based on a historical equity of $500,000, then that's $50,000/year. But if you could sell the resort to a developer and net $1M, then your investment is "really" earning only 5%. Lots of variables here: Is 5% enough? How much will the property increase per year if you hold it? But that's what I meant when I used the word "forego." Market value has to be part of your business calculation too.

But, finally, if you love the place and can afford it as a hobby, that may be all you care about. Let your heirs sort out the money. Life is not always about financial rates of return.

 

[ivinsfan]

How much money is in non-retirement accounts? That's what you will be spending for the foreseeable future....

You can't have everything, it sounds like selling the retirement business would make your workload more manageable, but the bigger issue is it sounds like the cash flow business helps pay for the retirement business. Is the resort adding anything to your net per year?

 

[ivinsfan]

flexibility meaning she has weekends off,works from home, travels a bit unfortunately, but also puts in 10-12 hour days, but if has to take a bit of time off she is able .... Loves her job.

So this not really the definition of flexible, not in my book anyway, I have corporate DD's and SIL's with jobs like this and they often say the hassle before and after vacations is a nightmare.

You are a couple and to say she can keep going because she "loves her job" and you will "work her exit plan later" is a recipe for strife. What if you find out HI will cost you 20K a year and she needs to keep working indefinitely, what happens then.

 

[Ronstar]

I would start by finding a buyer for your intense cash flow business. That could take a while. Then evaluate your position again after that. I would also start making a plan now - how to transform your current assets into retirement income producing assets, and a detailed spending analysis. The plan needs to answer when you and your wife expect to retire, and a timeline to get there.

 

[Al in Ohio]

So



You are a couple and to say she can keep going because she "loves her job" and you will "work her exit plan later" is a recipe for strife. What if you find out HI will cost you 20K a year and she needs to keep working indefinitely, what happens then.

I have been doing just that for years. When I announced this plan years ago I heard a few of these comments /concerns. It works perfectly fine for my wife and I. This is unfair to say. I dare say it assumes a flawed relationship from the start. This would not occur in a healthy marriage.

 

[pb4uski]

Late to the party but it sounds like you may not necessarily want to retire, but want to downshift from constantly running 120 mph to a more comfortable 55 mph. As you hae already thought of, sell the more time consuming business and spend some time growing and nurturing the less time consuming business and your retirement portfolio. Make sure your $50k/year is right before you leap by doing a deep dive into your expenses if you haven't already done so. Good luck.

 

[ivinsfan]

I have been doing just that for years. When I announced this plan years ago I heard a few of these comments /concerns. It works perfectly fine for my wife and I. This is unfair to say. I dare say it assumes a flawed relationship from the start. This would not occur in a healthy marriage.

I disagree, it's a realistic comment about how things should be talked over in advance of a big change like this. I know nothing about anyone's marriage but I do know that people get stressed out at work, have health problems, need time to deal with elderly parents and get laid off.

The OP said his spouse works 50-60 hours a week at a high pressure job..and that he wants to quit his job and talk about her situation at a later date. I'm pointing out the later date might never come and then what?