32 year old, shooting for 35?

I'm new to the forum and it's nice to find a community of people who realize there's more to life than work and money. I work in an industry where if you're successful, you can make a lot of money at a relatively young age. I often look around and wonder why my colleagues in their 40s and 50s are still working. Unless they were terrible at saving, I have to believe they're financially independent.

I'm 32 and have a net worth of around 3 million (around 700k in retirement accounts, rest in taxable investments or cash). I can increase my net worth by about 1 million a year and plan on doing so for the next 3 years at which point, I should have more than enough to walk away.

I could probably be FIREd now, but would prefer a margin of safety, especially if it's not going to take a stupid amount of sacrifice. In my mind, 5+ million would provide that margin of safety. Once I walk away for an extended period of time, it's highly unlikely I would be able to make anywhere close to the same amount of money again.

The last thing I want is to cut it too close and find myself in my older years needing to work a job paying 5% of what I make now, wondering why I didn't just work a little longer when I was younger.

Welcome to the forum, rb35!

When people under 40 declare that they are "retiring," I feel they are really taking a pause in search of something different to do. They just happen to have enough money to never to work again. 50+ year is a long time to live a retired life. You can leave that to us . Good luck with the "pause" and hope you find something that works for you (all my puns are intended).

rb35 said:

The last thing I want is to cut it too close and find myself in my older years needing to work a job paying 5% of what I make now, wondering why I didn't just work a little longer when I was younger.

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Were I in your shoes I would probably do exactly what you're doing for the same reasons. While it is certainly feasible to retire on $3 million, $5 million gives you a lot more room to deal with whatever comes.

If I had your stated earning potential and $3M NW, I'd press my luck for another decade based on the fact that you said you could do so without being overly stressed or harm to your health. I'd go for glittering rich because, well, retiring at 40 ain't all that bad.

Other stuff that would help: are you married? Getting married? Kids? Your assumptions about what you need now may not always be true later... $3M at 32 isn't a boatload to live on for 60 or 70 years. It's damn good, but it may not be enough depending on how your living situation/standard changes.

Disclosure: I'm 36 with NW over $1M. Aiming for FI at 42, and not sure if I will retire fully then or aim higher.

Sounds like a great plan. Welcome. I think it is very smart to save more than $3M since you can save so much each year and you have a very long retirement horizon to consider.

Very impressive, huge congrats. I like your plan. If you haven't already I'd start investing in stuff that throws off passive income (real estate, dividend stocks, etc) and once you have a nice 6-figure income from that, you're set for life.

Thanks, mchas. Yes, I've been investing in rental properties, dividend stocks and apartment buildings (via partnerships). Once it gets to a point where it's consistently generating more than enough for our lifestyle, I'm sure I'll feel even better about leaving my day job.

Nash031 - I'm married, but no kids. We have no plans for kids, though I wouldn't rule out the possibility one day.

Our spending hasn't really increased over time. The big variables that would change that after I stop working are travel, health and taking care of parents.

It's hard for me to imagine working another 10 years. I feel like I've already succumbed to OMY syndrome. I used to think 2 million was the bare minimum I would need and 3 million would be comfortable. Now, I'm shooting for 5 million for the extra safety. Beyond that, though, it's hard for me to justify trading more time for money. What would I do with it?

rb35 said:

Now, I'm shooting for 5 million for the extra safety. Beyond that, though, it's hard for me to justify trading more time for money. What would I do with it?

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Great question! Don't forget to ask yourself the corollary question: what will you do with your time once retired? If you're twiddling your thumbs without purpose for a decade (or two, or four) and not really finding fulfillment in life, you might as well earn that $1MM/year and put it toward something that really matters to you. Are there social, political, or charitable issues that you feel very strongly about? Perhaps you could run a charity or foundation to further those causes.

I think it takes a lot of courage to walk away. I commend you for it.

A Bird In Hand said:

Great question! Don't forget to ask yourself the corollary question: what will you do with your time once retired? If you're twiddling your thumbs without purpose for a decade (or two, or four) and not really finding fulfillment in life, you might as well earn that $1MM/year...

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Great question as well. I envision doing a combination of volunteer work, travel and taking better care of my health (more exercise).

Hopefully, that would be enough to keep me from being bored and wanting to keep trading time for money.

Has anyone else retired early and regretted it cause they were bored?

rb35 said:

Has anyone else retired early and regretted it cause they were bored?

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No.

Glad to hear

rb35 said:

Has anyone else retired early and regretted it cause they were bored?

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People do it all the time. They just rarely show up on this forum.

Ha

I know a hedge fund guy who made $200 million and decided to retire early. He got bored after a year and went back to work part time. He is no longer in charge as in one of the co-founders but 3 days a week for him is like 5 day for someone else. He is relatively young, about 45 to 47. In general, I don't recommend retire this early for selfish reason, somebody has to pay my SS :smiley: but seriously, I'm glad I waited until now to wanting to retire for good. I had thought about it 10 years ago but that was too early, now that I look back.
I mean a healthy body should be able to work until 55. I would take a longer vacation to recharge.

My DH was mostly a stay at home dad so he never really had a day job. However, he's a phenomenal musician and arranger and is in high demand by all the community theaters in the area. He is now so busy, sometimes he's gone every evening for a couple if weeks at a time. If people who never has a day job can stay that busy, I'm sure you'll find plenty of productive things to do.

I'm proud that I was able to give our DS the gift of a stay at home dad and our community a talented musician. I can 't wait to join DH in pursuing my other interests.

rb35 said:

I'm 32 and have a net worth of around 3 million (around 700k in retirement accounts, rest in taxable investments or cash). I can increase my net worth by about 1 million a year and plan on doing so for the next 3 years at which point, I should have more than enough to walk away.

I could probably be FIREd now, but would prefer a margin of safety, especially if it's not going to take a stupid amount of sacrifice. In my mind, 5+ million would provide that margin of safety. Once I walk away for an extended period of time, it's highly unlikely I would be able to make anywhere close to the same amount of money again.

The last thing I want is to cut it too close and find myself in my older years needing to work a job paying 5% of what I make now, wondering why I didn't just work a little longer when I was younger.

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What I find telling is that you only use vague references and descriptors on the most important parts of your plans and question.

While you give definite numbers of your portfolio balance, you don't say anything at all about what budget you foresee having, nor of what your assumed returns would need to be, nor of what your withdrawal rate is that you're planning for.

Because of this, I would definitely have a long, hard look at just what it is you want to do with your life once retired. Depending on the self control that you (and/or your spouse) have, it can be relatively easy to simply "start spending" on anything and everything if you don't need to be somewhere during the day - whether it's lavish meals out, or traveling, or buying consumer goods, or automobiles, or all of the above, or whatever.

Also, I'm assuming that you're 100% sure, without any doubt, that you will still be with your spouse in 30 years? Any changes to those plans could easily slash 50% off of your stash in a blink of an eye. Obviously, no one can say that with 100% certainty, given the society we live in...which is exactly the point I'm trying to make.

I'm pretty sure we wouldn't ramp up our spending a lot, except for maybe some travel. We've been spending about 70k/year for the past few years. Neither of us are into consumerism or status symbols. It just doesn't align with our values.

Our budget would need to be increased in retirement to account for health insurance and adjusted up or down for where and how we decide to live. We used to spend less when we owned a house outright, but currently rent because we want maximum mobility and liquidity.

We've never come close to spending 100k so that's why I didn't get into too much specificity around spending and withdrawal rates.

If we can get to a net worth of 5+ million, a conservative SWR of 3% would be around 2x what we've ever spent. That's a lot of wiggle room for increasing spending or other unforeseen events.

I'm assuming we'll be able to achieve a long-term investment return of at least 6%.

rb35 said:

If we can get to a net worth of 5+ million, a conservative SWR of 3% would be around 2x what we've ever spent. That's a lot of wiggle room for increasing spending or other unforeseen events.

I'm assuming we'll be able to achieve a long-term investment return of at least 6%.

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Given your ranges above, I'd say you have a pretty good preliminary plan - but I'd still strongly recommend actually discussing with the wife just what your budgets will be like post-working. Saying you "might do some traveling" indicates there could still be a large bump up in the budget once you get a taste of various things you hadn't really experienced before, and now have the opportunity to indulge in.

Also, as you yourself have noted, once you call it quits, the odds of you landing a similar gig are slim to none - and even with the extra taxes you are hit with for a high income these days, working just 2 more years in your 30s would require you to work maybe 8 more years (possibly even more) if you left the workforce for 20 years, then hit some stumbles with your portfolio and tried to find employment in your 50s.

Some may be willing to roll the dice and take the risk, but if I had the chance to virtually 'guarantee' that I could work just 2-4 more years now in my 30s, vs having a 15%-25% chance of having to work 8-10 (or even more!) years in my 50s/60s, I'd take my lumps now to be done with it all.

Also, don't forget the fallacy of armchair quarterbacking: it's easy for everyone to look at the past 6 years from 2008-now and say "yeah, my portfolio turned out fine"....but at the time in 2008/2009, when the market was down 40%-50%, we didn't know what things would look like 6 years hence (and we still don't know what lurks in the next 5-50 years). It's easy for us to say "I can live on a 3% withdrawal rate", but seeing your portfolio drop 40%-50% and not knowing how long it will have the protracted drop requires you to live it in real time for months - maybe even years.

Granted, those situations are rare, and you may not ever experience it again in your investing lifetime...but our individual lives don't have the luxury of playing the odds over many rolls of the die: what works in theory over 100 years and many outcomes may not be as palatable if we hit the odds in our own lifetime.

If you'd like that super extra insurance coverage (like buying a $5 million umbrella policy for liability protection vs just standard $300,000 with your homeowner's policy), then work a few extra years and be nearly guaranteed of a full lifetime free from financial worry. Otherwise, realize that there is a chance of things happening that may see you experiencing worry on a daily basis over the span of a few years in the future.

MooreBonds said:

Also, don't forget the fallacy of armchair quarterbacking: it's easy for everyone to look at the past 6 years from 2008-now and say "yeah, my portfolio turned out fine"....but at the time in 2008/2009, when the market was down 40%-50%, we didn't know what things would look like 6 years hence (and we still don't know what lurks in the next 5-50 years). It's easy for us to say "I can live on a 3% withdrawal rate", but seeing your portfolio drop 40%-50% and not knowing how long it will have the protracted drop requires you to live it in real time for months - maybe even years.

Granted, those situations are rare, and you may not ever experience it again in your investing lifetime...but our individual lives don't have the luxury of playing the odds over many rolls of the die: what works in theory over 100 years and many outcomes may not be as palatable if we hit the odds in our own lifetime.

If you'd like that super extra insurance coverage (like buying a $5 million umbrella policy for liability protection vs just standard $300,000 with your homeowner's policy), then work a few extra years and be nearly guaranteed of a full lifetime free from financial worry. Otherwise, realize that there is a chance of things happening that may see you experiencing worry on a daily basis over the span of a few years in the future.

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If it were me, I would work enough to be able to live off income only from assets I could reasonably control, like rental income, CD ladders and TIPS interest. I would not earn $6M from long hours at work and then risk losing $3M. I might work longer to invest some extra in stocks, but I'd invest the $6M in lower risk investments, the Bill Bernstein won the game approach -

The worst retirement investing mistake - Sep. 4, 2012

MooreBonds said:

Some may be willing to roll the dice and take the risk, but if I had the chance to virtually 'guarantee' that I could work just 2-4 more years now in my 30s, vs having a 15%-25% chance of having to work 8-10 (or even more!) years in my 50s/60s, I'd take my lumps now to be done with it all.

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Thanks, MooreBonds. Working another three years, as opposed to stopping now or a year from now was my idea of taking my lumps now and "guaranteeing" my financial independence, but your points are well taken. They're many of the issues that I've been debating in my own mind.

daylatedollarshort said:

If it were me, I would work enough to be able to live off income only from assets I could reasonably control, like rental income, CD ladders and TIPS interest. I would not earn $6M from long hours at work and then risk losing $3M. I might work longer to invest some extra in stocks, but I'd invest the $6M in lower risk investments, the Bill Bernstein won the game approach -

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daylatedollarshort - I agree with your thinking. I plan / hope to be generating enough passive income from real estate and stock dividends to live off of in a year or so. The extra money I expect to be earning beyond that will be invested in growth oriented stocks.

So maybe not quite the numbers you specified, but I'm thinking 3 million or so in income generating investments that should provide for our annual spending needs and another 2-3 million in growth oriented investments like a well diversified stock portfolio.

Hi Everyone,

It's been about a year so I thought I'd check back with an update. It was very interesting to have a "paper trail" of what I was thinking last year and I'm happy that not much has changed in my big picture plan. I'll definitely do this at least once a year to hold myself accountable. Here are the highlights:

* My net worth is now around $4 million.

* I plan on working 2 more years (glad to see I didn't push that out).

* I've spent the past several years aggressively building passive income sources and I should begin enjoying the fruits of that labor. I project I should get 120k or so of passive income this year.

I did make some adjustments to my savings strategy which jives well with my 2-year horizon. I enrolled in my company's non-qualified deferred compensation plan. If all goes well, I'll have about 2 million saved in the plan when I call it quits in 2017. That'll shift a significant amount of money from a 39.6% federal tax burden to something much more modest. Once I quit, the money will be paid to me in 10 annual installments. Besides the tax savings, I like the psychological benefit of continuing to have an "annual salary" for 10 years to smoothe the transition from working to FIREd.

There are a couple of questions I'm still trying to figure out. I have about $1 million of deferred compensation that I will lose if I quit. I haven't included that in my net worth since I don't see any way of ever getting it. The only way to get it is to work until normal retirement age (NOT happening) or getting laid off (seems unlikely). It's going to be a bummer to just walk away from all that money, but I guess I just have to mentally write it off and come to peace with that decision. There's a small chance the company would work out some arrangement with me, but I'm not counting on it.

The second idea I'm toying with is starting a personal finance blog or something that would both be enjoyable and potentially generate some extra income. That's not a big deal, though, and is probably something that will just naturally happen if I find myself getting bored.

Questions, comments? Feedback welcome. Thanks!


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Very impressive progress with FI! There are many that post on here with very big retirement portfolios, but very few have the NW at your age. You must be the envy of this board. However, as someone has advised, retiring before 40 is very tricky. You don't say where you live or what field you work in, but given your income from a W-2 job, NYC and Finance would be a guess, or Houston and Oil, or North Carolina and Biotech, or LA and Entertainment, etc. If you have kids your expenses would change drastically. I think if I were in your shoes with the earning potential you have without stressing yourself out, I'd work until 40 or slightly less and aim to have at least 6-8m in NW before walking away, to rule out having to go back to work again and survive bear markets, depressions, bad health, disability, divorce, etc. and be able to live well, travel freely and pay for health insurance.

mohenjo said:

Very impressive progress with FI! There are many that post on here with very big retirement portfolios, but very few have the NW at your age. You must be the envy of this board. However, as someone has advised, retiring before 40 is very tricky. You don't say where you live or what field you work in, but given your income from a W-2 job, NYC and Finance would be a guess, or Houston and Oil, or North Carolina and Biotech, or LA and Entertainment, etc. If you have kids your expenses would change drastically. I think if I were in your shoes with the earning potential you have without stressing yourself out, I'd work until 40 or slightly less and aim to have at least 6-8m in NW before walking away, to rule out having to go back to work again and survive bear markets, depressions, bad health, disability, divorce, etc. and be able to live well, travel freely and pay for health insurance.

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Thanks for your comments, Mohenjo. I do work in finance, which has the dual benefit of a high W-2 income and being able to use my finance skills to manage my personal finances.

As far as working to 40, I understand where you're coming from, but at the moment, I just can't see myself lasting that long. I find my job increasingly boring/meaningless and am constantly thinking about my eventual exit. I'm also valuing my time more and more and would happily work less and take a prorated pay cut if I could. Unfortunately, it's very much all or nothing in finance, which is why the only option I see is to work/save really hard early on and then call it quits.

I am genuinely curious, what do you see as the big difference between a $5-6 million net worth (what I'm targeting in 2 years) and an $8 million net worth? It seems to me that either should allow one to rule out having to go back to work again in the event of a bad scenario. Or put another way, if I find myself having to go back to work after having saved $5-6 million, would an additional $2 have really made a difference? Thanks




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