I don't understand why you need so much income? You can retire now if you want and live confortably. I plan to live on about $50K in retirement. More would be nice but I am not willing to be a wage slave any longer to get it. Beyond a certain point money has diminishing utility.What that point is may be different for you than me. Time however, is finite. You don't know how much of it you have left either. But if you truly want to retire, $3 Million is enough. I am going to do it on half that.
Realistic INCOME question. Thinking of retiring.
- Thread starter WiltonKnight
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Great job at such a young age. 7 percent would be a great return. My situation is I am 47 , wife 54. Have $3.8 million. 85 percent in CD's returning about four percent, rest in muni's , 401k. still working. you may have to work for a little while longer. Educate the kids, don't spoil them, no need and good luck.. when we hit the 5 million mark, we are done, should be three years.
Bestwifeever
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Welcome to the boards. Congrats on the business you've built and you probably won't have any trouble repeating your success if you sell the current one. It sounds like you live in a higher cost of living area (NoVA=Northern Virginia?) with a lifestyle your family enjoys and you do not want to budget or cut back--nothing wrong with that!
Hi - You are to optimistic at 7% - it is not sustainable. You should plan on a 4% return on the $3M. The challenge is how to convert the $3M to a machine that generates 4% year-on-year. Strategy - buy numerous dividend stocks with a proven payment history - and buy them during market pullbacks to improve the yield to cost ratio. Buy a few tax free munies - they are out there at 4% a yield. Pray for higher interest rates !!!
yakers
Thinks s/he gets paid by the post
Good job! or is that NO JOB
Even Warren Buffett sees only 6% market gains going forward and that is over time with plenty of volatility. You are young enough that ALL the calculators are just guidelines and retaining flexibility is got to be part of the plan. It seems like 4% would be $120K a year under a lot of conventional planning. If you can live on that then go for it. Yes, some folks will tell you need to take out less but you still have your young age to fall back on and either cut some costs or do some work if the plan looks like it is performing far below expectations. You do, IMHO, have enough for an experiment.
Now, one more point. Folks here are better with financial planning advice, I want to add that one of the best things you can do with your now free time is spend it with your kids. IMHO more important than material things you pile up. And you can spend some resources on their education.
Even Warren Buffett sees only 6% market gains going forward and that is over time with plenty of volatility. You are young enough that ALL the calculators are just guidelines and retaining flexibility is got to be part of the plan. It seems like 4% would be $120K a year under a lot of conventional planning. If you can live on that then go for it. Yes, some folks will tell you need to take out less but you still have your young age to fall back on and either cut some costs or do some work if the plan looks like it is performing far below expectations. You do, IMHO, have enough for an experiment.
Now, one more point. Folks here are better with financial planning advice, I want to add that one of the best things you can do with your now free time is spend it with your kids. IMHO more important than material things you pile up. And you can spend some resources on their education.
Spanky
Thinks s/he gets paid by the post
Where can one buy CDs at 4%?
From the bank in Never, Never Land.
Sorry if that was misleading. At this time my CD ladder is returning just over four percent. Newer CD's are paying 2.75, older ones are still at high 4, low 5 percent. . Hopefully , by the time those mature in 2015-2016 the rates go up or I am going to bank in Never, Never Land
I would look carefully at how much of your current high spending level is connected to not having time to research/follow through with more economical choices and how having more time and shifting around your spending patterns so that you do more stuff yourself and plan ahead more may alter the cash outflow while still allowing you to enjoy things that are important to you.
So, for example, you appreciate good food -- in your current lifestyle that means you eat out, probably more than most people and maybe at fairly pricey restaurants. What about using some of your time off to really learn to cook well? The $100-200 you might spend on a nice dinner out with your wife could buy you a lot of really great gourmet food and cooking supplies. Once you have the time and the skillset, you may find that you enjoy making food for your family even more than paying someone else to do it for you.
Similarly with travel, look at ways to plan and execute your travel plans that bring down the cost while still getting you the same level of enjoyment. This doesn't necessarily mean dropping staying at luxury hotels, etc, if that is really important to you (I know not everyone wants to be a backpacker staying in hostels). But with more time to plan and research, I bet you can bring your travel costs way down, too. Try doing house swaps rather than staying at hotels. Or travel during the shoulder or off seasons when prices are lower -- since you won't have a business to worry about, you will be more free to travel when others are not.
If you are currently outsourcing childcare, that would be another place where you could probably save a lot.
I think if you really apply yourself during that 6-12 month period and figure out how to best invest your time to bring down your household spending, you may just find that you are able to retain most of the things you currently enjoy in your high-income lifestyle, though perhaps in modified form, while bringing our out of pocket costs waaaaaay down.
Remember, the less you have to draw from your investments in the form of capital gains, etc. the lower your taxes are going to be. So bringing down your cash outgo is really a win-win situation.
Congrats on the upcoming sale of your business. That will give you a lot of freedom to figure out what is really important to you.
So, for example, you appreciate good food -- in your current lifestyle that means you eat out, probably more than most people and maybe at fairly pricey restaurants. What about using some of your time off to really learn to cook well? The $100-200 you might spend on a nice dinner out with your wife could buy you a lot of really great gourmet food and cooking supplies. Once you have the time and the skillset, you may find that you enjoy making food for your family even more than paying someone else to do it for you.
Similarly with travel, look at ways to plan and execute your travel plans that bring down the cost while still getting you the same level of enjoyment. This doesn't necessarily mean dropping staying at luxury hotels, etc, if that is really important to you (I know not everyone wants to be a backpacker staying in hostels). But with more time to plan and research, I bet you can bring your travel costs way down, too. Try doing house swaps rather than staying at hotels. Or travel during the shoulder or off seasons when prices are lower -- since you won't have a business to worry about, you will be more free to travel when others are not.
If you are currently outsourcing childcare, that would be another place where you could probably save a lot.
I think if you really apply yourself during that 6-12 month period and figure out how to best invest your time to bring down your household spending, you may just find that you are able to retain most of the things you currently enjoy in your high-income lifestyle, though perhaps in modified form, while bringing our out of pocket costs waaaaaay down.
Remember, the less you have to draw from your investments in the form of capital gains, etc. the lower your taxes are going to be. So bringing down your cash outgo is really a win-win situation.
Congrats on the upcoming sale of your business. That will give you a lot of freedom to figure out what is really important to you.
Take some time off, and see how you like the retired lifestyle. I agree with ihamo -- you'll probably find a lot of cost savings come with having more free time. You might also find you out whether you really want to be done, or perhaps that you want to try something else that you might like better than the kind of business you just sold. Given your financial picture, and the freedom it can provide you, it would be a mistake to do anything that you know you hate. If you want to give your kids the very best in life, give them a dad who is happy, fulfilled, and has plenty of time to spend with them.
rescueme
Thinks s/he gets paid by the post
Simple. Not everybody has the same requirements/expectations in retirement.
Based upon prior posts (like "how much do you expect to spend in retirement") I know that DW/me are multiples of what most are/expect to spend.
Is that wrong? Of course not. It is just reality in our expected lifestyle, based upon what we had and how we lived before, and after retirement. BTW, we planed for 100% of our pre-retirement net income (increased by our personal rate of inflaton - PROI) to continue to live the live we had before we both retired.
Nobody (IMHO) should be called to task on what they are (or will be) spending while retired. We chose (and planed for) no reduction in "lifestyle" while retired.
In our case? Let's just say that it is upwards of $100k/year. So what does that mean? Nothing, really. Our joint income before retirement was well beyond that level, and we planned on living the same lifestyle after we retired.
We met our goal and don't expect anybody else to fund our desires; IMHO, that's all that counts
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Short answer, I wouldn't want to plan on 7.7% annual returns over a 50-year period.
Also, does the $230k include savings for college for the kids?
I would think about what will make you happy, as well as provide an acceptable lifestyle for your children. It may not be as much as you think. You may find that your children will value time with you more than certain "high-end" material things.
I'm not sure I could have retired in your situation, given your age and the age of your children. I am now ten years older than you with teenagers and I am FIRE'ing this month.
ronocnikral
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I agree. But, what I think is annoying is someone who acts like you have to spend that much, and then throws the children in front to justify it (which fuels the fire). Simply saying, it is the lifestyle we enjoy, and it is what we are going to spend should be satisfactory. Most people live on significantly less paying a mortgage and with debt. I don't blame the man/woman for wanting to spend a lot, I'd do it if i could.
Now, what gets even more annoying is one tries to force the round peg in the square hole. IMO, the OP is not ready to retire. If so, they would seriously look at adjusting their spending. My hope is the OP doesn't end up like Mike Tyson (and I'm not talking about a tattoo on their face).
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
It is so much fun to get to tell someone else what is wrong with their choices and suggest better ones! Most of us might have tried that, a few times, with spouses or lovers or grown children, only to get slapped down.
Thank heavens for an outlet via ER.org!
Ha
Thank heavens for an outlet via ER.org!
Ha
Peter
Full time employment: Posting here.
Yes, I wonder if all those passing judgment on the OP's spending habits would be quite so forthright in a face-to-face social setting.
Spanky
Thinks s/he gets paid by the post
No one appears to pass judgement on his spending habits but to point out that the required income/expense is not inline with the proceeds from the upcoming sales of business.
Mulligan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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IMHO- I thought Wilton was very direct in his question. I dont think he was trying to put the square peg into the round hole. He was just wanting to know if people thought a 7.7% expected return was reasonable. He clearly articulated what his required income level was needed. He wasnt asking for ways to reduce his expenses to fit his nest egg. He already commented he would continue to work if need be to support his lifestyle. Congrats on the business sale!
Welcome to the board, WK.
I'm surprised that nobody has mentioned health insurance yet. (You're covered for your spouse's upcoming delivery, right?) Your premiums would probably start out pretty cheaply but you'd have to watch out for emerging issues. In about 25 years you'd have to address the long-term care insurance question.
You need to spend the next few months not just with your family, but teaching yourself about asset allocation and realistic investment returns. You're going to need to learn how to safely annuitize that $3M to provide about five decades of reliable after-tax after-inflation income without consuming the principal. For example, you could put it all in Vanguard's Wellesley and see if your budget would fit within those returns. None of your mentors have a clue how to simultaneously cover all the adjectives in front of the word "income", unless they're running endowments for private universities.
I've been ER'd for nearly 10 years since age 41, and I suspect that sometime during the next 30 years of your life you're going to find some sort of paying hobby or project consulting that will produce at least $25K/year. It might not happen until your kids leave the nest, but I'd say the odds of it happening are at least 60%.
It's all too easy to spend money on a kid to inspire an entitlement attitude that leads right to affluenza.
I'm surprised that nobody has mentioned health insurance yet. (You're covered for your spouse's upcoming delivery, right?) Your premiums would probably start out pretty cheaply but you'd have to watch out for emerging issues. In about 25 years you'd have to address the long-term care insurance question.
You need to spend the next few months not just with your family, but teaching yourself about asset allocation and realistic investment returns. You're going to need to learn how to safely annuitize that $3M to provide about five decades of reliable after-tax after-inflation income without consuming the principal. For example, you could put it all in Vanguard's Wellesley and see if your budget would fit within those returns. None of your mentors have a clue how to simultaneously cover all the adjectives in front of the word "income", unless they're running endowments for private universities.
I've been ER'd for nearly 10 years since age 41, and I suspect that sometime during the next 30 years of your life you're going to find some sort of paying hobby or project consulting that will produce at least $25K/year. It might not happen until your kids leave the nest, but I'd say the odds of it happening are at least 60%.
You're inviting yourself to go on a self-imposed guilt trip. Kids that age don't give a rat's ass about the finer material possessions in life. They want you there to spend time with them. If you do a consistent job over the next decade then they still won't care about the finer material possession. They may whine about it, but they won't be deprived.
It's all too easy to spend money on a kid to inspire an entitlement attitude that leads right to affluenza.
obgyn65
Thinks s/he gets paid by the post
Please can you clarify from your two quotes below how much you need to retire. Is it 230k or 100k ? If the latter, I would consider ER. If the former, I would not.
OP wrote $230k, someone else wrote $100k.
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+1
Our kids (now early 20s) knew lots of kids with affluenza, fortunately they didn't catch it.
Major Tom
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Fair enough, but make sure not to deprive them of your time either.
EDIT: While I was writing this, looks like Nords beat me to it, with a more elegantly worded response to this issue.
+1
Our kids (now early 20s) knew lots of kids with affluenza, fortunately they didn't catch it.
In our son's 1st year of High School (aged 14) a teacher had the class do an "affluenza" quiz, and asked the kids to take the quiz home and have their parents take it from the point in time they were aged 14.
It was a great exercise and eye opener for our son, not that he has ever complained about us depriving him of stuff.
I am very much in agreement that "time spent with" is much more important than "money spent on" your kids.
We met our goal and don't expect anybody else to fund our desires; IMHO, that's all that counts
+1
You achieved the goals you set, and you aren't asking anyone to pay your bills. I won't enjoy your spending level when I'm retired but that's no one's fault but my own. Congrats!
Lemme guess: was it my elegantly-worded use of the phrase "rat's ass"?
Do you happen to have a link or some memories that I could Google? I smell a blog post and a part of a book chapter in this...
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