50 and getting a push to FIRE?

[Terhathum123]

I've been a long-time member here and have learned from, and taken action on, some of the advice I've gleaned from the many posts I've read here and other sites.

I'm working in corporate America in an industry that has become morally repugnant to me. IMO, much of our economy is based on morally questionable activities (extraction - oil, gas, mining - corporate farming, insurance, prison industrial complex, plastics, general consumer marketing, importing cheap products using cheap 3rd world labor . . . pick your poison).

I'm expecting to be laid off or moved to another division of the company I'm working for within 6 months. This company move towards lay off, or a different division, may be the push I need to finally quit the corporate world. I'm Posting here as I've been the 3rd party beneficiary of some great advice from this Early-Retirement.org crowd.

I'm 50 and my DW is 54. We have one kid starting college in 2023 and another in 2026. We live in Wisconsin.

I'd like to "retire" in 2023.

Assets:
Taxable stock market based - $1,450,000.00
Alternatives (private real estate lps, crowd funded real estate, debt funds) - $1,600,000.00
Crypto - $130,000.00
Cash - $175,000.00
Personal Investment Real Estate - $600,000.00
Personal Home - $650,000.00


Debts:
$80,000.00 mortgage for personal Investment Real Estate
$220,000.00 mortgage personal home

Net worth is roughly $4,300,000.00.

My wife and I are both driving old beater cars. I am expecting to have roughly $120,000.00 in cost to get new cars for us sometime in the next year. I've driven my current 2006 F150 truck for 260,000 miles, my wife's station wagon is a 2003 model with 300,000 miles on it. I expect the next vehicles we buy will last us another 20 years i.e. the way we treat our vehicles we may never need to buy another.

My other big known expense is college tuition. I expect to have expenses of around $400,000.00 over the next 8 years paying for their college/university degrees.

Total known big expenses of roughly $500,000.00 over the next few years.

Our budget for daily life (including health insurance) is roughly $90,000.00 per year.

So, my costs over the next decade are roughly $1,400,000.00 to live, buy vehicles and put two kids through college.

Current annual Revenue:
DW small parttime business - $25,000.00
Personal Investment Real Estate - $25,000.00
My corporate job - $100,000.00

FIRE calc says I've got enough to retire, but the big expenses (cars and college) have me spooked.

I've read the experiences from some similar profiles who seem to have successfully "retired". I don't think I'm going to completely quit earning money, but, I'd like to feel confident that I can quit if I want to.

What am I forgetting?

Thanks much!

 

[SevenUp]

Some Important Questions to Answer Before Asking - Can I Retire? - Early Retirement & Financial Independence Community is a good list for self-checking.

Requiring your kids to take the maximum Unsubsidized Loans | Federal Student Aid would not be unreasonable, but that's a choice you get to make.

 

[Aerides]

Financially you look set - start looking for those new cars.

 

[Dtail]

Financially you look set - start looking for those new cars.

+1

 

[Kork13]

Short answer: Yes, without a doubt.

Looking at it from a very basic level, you've got enough assets (excluding your personal home) to cover your expenses with a 2.5% withdrawal rate...which is easily sustainable.

Additional factors making it even easier:
- Your rental property's income dramatically reduces what you need to pull from your investments -- get that paid off & it'll cover even more of your income requirements.
- When your properties (investment & personal) get paid off, that'll obviously reduce your expenses a good deal.
- With such a low withdraw rate, your investments' growth will almost certainly outpace what you pull out of them, so you'll end up with more than you could ever need.

You might consider reducing your overall risk profile -- you've got over 1/3 of your assets in alternative investments that, while probably earning good average returns, expose you to a fairly high degree of investment risk that you may not want in retirement.

If able, start buying those new cars mostly out of income before you retire -- but even if not, they won't be a problem. Do you already have plans in place for health insurance after you leave your jobs?

 

[Bigdawg]

My other big known expense is college tuition. I expect to have expenses of around $400,000.00 over the next 8 years paying for their college/university degrees.

I grew up in WI. My parents met at Madison. I attended college in MN. A ton of awesome Colleges and Universities to choose from. Most/all offer competitive financial aid packages. Lots of less expensive 2 year schools in WI/MN also. I believe Michigan and IL offer tuition reciprocity also. College doesn't have to cost 200k per kid.

Maybe buy 2 new to you vehicles that are 2-3 years old and don't cost $60k each.

Over all you look like you are in good shape. My friends in Wi (and MN) all talk highly about the current job market there. Maybe look for something different/less stressful/parttime? Good luck

Your finances look to be in good shape. I would agree about too much concentration. I would diversify if I was you.

 

[marinauser]

How liquid are your alternative investments and how much are you allocating for bad debt losses on those assets? How much, if any income do those investments throw off or is the ultimate return on those assets based on potential capital gains?

I am surprised at the bitcoin holding given your apparent environmental concerns and the high energy consumption involved with bitcoins from what I have read. On the surface, it appears that you only have $1.6 million or so in liquid assets and you expect to spend nearly one third of that on near term big ticket items.

 

[Terhathum123]

Good links. Gumby has been a long-time font of wisdom.

Also - great call with the loan advice, I intend to max those options.

 

[aaronc879]

Why do you budget $400K for 2 kids college costs? Wisconsin state schools would cost around $80K per kid for 4 years. Private schools are a waste of money IMO so I hope you are not planning to go that route.

If $60K cars make you nervous then buy $30K cars. I just bought a new one for $25K, $30-40K gets you all you could need and then some.

Even with your inflated college and vehicle budgets you can still afford to retire whenever you choose to do so. Good luck.

 

[ivinsfan]

Short answer: Yes, without a doubt.

Looking at it from a very basic level, you've got enough assets (excluding your personal home) to cover your expenses with a 2.5% withdrawal rate...which is easily sustainable.

Additional factors making it even easier:
- Your rental property's income dramatically reduces what you need to pull from your investments -- get that paid off & it'll cover even more of your income requirements.
- When your properties (investment & personal) get paid off, that'll obviously reduce your expenses a good deal.
- With such a low withdraw rate, your investments' growth will almost certainly outpace what you pull out of them, so you'll end up with more than you could ever need.

You might consider reducing your overall risk profile -- you've got over 1/3 of your assets in alternative investments that, while probably earning good average returns, expose you to a fairly high degree of investment risk that you may not want in retirement.

If able, start buying those new cars mostly out of income before you retire -- but even if not, they won't be a problem. Do you already have plans in place for health insurance after you leave your jobs?

Exactly what I was going to type. On the rental or personal RE investment they don't actually say it's a rental house. I don't think you can count the income yearly and count the rental as part of your SWR,,,it's a minor form of double dipping..on the alt investments, is the 25K what it's returning to you yearly? Cause that's not much on 1.6 if not what is it returning in yearly income. I'm not as thrilled about his numbers as some of you are..as he pulls money to pay for vehicles, college et all his taxes will be rising in concert...also will means he pays more for HI on ACA.



I didn't say his numbers are bad just I'm not as thrilled as some of you are.

 

[Exchme]

The studies on withdrawal rates were done on market indices of stocks and bonds - very liquid investments that could be held or approximated by anyone and there are pretty good records on how they behaved going back a long time. Most of your portfolio is not like that, so historical studies of the overall market volatility and their effect on sequence of return risk are not applicable.

Crypto is very volatile and has unknown risks. Your alts may not be at all liquid, especially in a downturn when you may need the money. Real estate may not be very liquid and has risks specific to your particular properties.

As they say, you get rich taking risk, you stay rich not taking risk. Time to lighten up on the risk profile.

 

[Terhathum123]

Yes, I agree, my kids are trending towards some expensive schooling. I'm estimating private school cost, but even public option is roughly $30K/year.

 

[Terhathum123]

The studies on withdrawal rates were done on market indices of stocks and bonds - very liquid investments that could be held or approximated by anyone and there are pretty good records on how they behaved going back a long time. Most of your portfolio is not like that, so historical studies of the overall market volatility and their effect on sequence of return risk are not applicable.

Crypto is very volatile and has unknown risks. Your alts may not be at all liquid, especially in a downturn when you may need the money. Real estate may not be very liquid and has risks specific to your particular properties.

As they say, you get rich taking risk, you stay rich not taking risk. Time to lighten up on the risk profile.

Short answer: Yes, without a doubt.

Looking at it from a very basic level, you've got enough assets (excluding your personal home) to cover your expenses with a 2.5% withdrawal rate...which is easily sustainable.

Additional factors making it even easier:
- Your rental property's income dramatically reduces what you need to pull from your investments -- get that paid off & it'll cover even more of your income requirements.
- When your properties (investment & personal) get paid off, that'll obviously reduce your expenses a good deal.
- With such a low withdraw rate, your investments' growth will almost certainly outpace what you pull out of them, so you'll end up with more than you could ever need.

You might consider reducing your overall risk profile -- you've got over 1/3 of your assets in alternative investments that, while probably earning good average returns, expose you to a fairly high degree of investment risk that you may not want in retirement.

If able, start buying those new cars mostly out of income before you retire -- but even if not, they won't be a problem. Do you already have plans in place for health insurance after you leave your jobs?

I grew up in WI. My parents met at Madison. I attended college in MN. A ton of awesome Colleges and Universities to choose from. Most/all offer competitive financial aid packages. Lots of less expensive 2 year schools in WI/MN also. I believe Michigan and IL offer tuition reciprocity also. College doesn't have to cost 200k per kid.

Maybe buy 2 new to you vehicles that are 2-3 years old and don't cost $60k each.

Over all you look like you are in good shape. My friends in Wi (and MN) all talk highly about the current job market there. Maybe look for something different/less stressful/parttime? Good luck

Your finances look to be in good shape. I would agree about too much concentration. I would diversify if I was you.

Yes, I agree, my kids are trending towards some expensive schooling. I'm estimating private school cost, but even public option is roughly $30K/year.

 

[aaronc879]

Yes, I agree, my kids are trending towards some expensive schooling. I'm estimating private school cost, but even public option is roughly $30K/year.

Again, not sure where you are getting your numbers. I also live in Wisconsin and have recently looked up college costs and it's around $17K/yr for UW-Oshkosh and that includes tuition, room and board, books, and unlimited meals plan. UW schools are good schools. If I were you I would steer them toward a state school. I would pay for the cost of a state school and if they want an overpriced private school then they can pay the difference IMO.

 

[HawkeyeNFO]

Yes, I agree, my kids are trending towards some expensive schooling. I'm estimating private school cost, but even public option is roughly $30K/year.

Just dropped my daughter off at her private college in Virginia last Thursday. I used to be opposed to private schools until finding out that they typically offer far more scholarships than state schools. In our case it ends up being far more cost effective than going to UVA, Virginia Tech, or just about any other state schools.

 

[Physics Guy]

I"ll join the chorus of saying that you are doing fine and don't need to worry. Even so I wouldn't want to go into retirement with that distribution of assets. But that is because I am not knowledgeable about crypto or what you list as alternative investments.



Unlike many of the posters here I wouldn't worry too much about the cost of private colleges as long as they were ones that seemed to be very good fits and not simply vanity names. Obviously I don't think you should push your kids to private school but both of mine specifically wanted to get away from the in state schools for social reasons that I think were valid. While you might have some liquidity issues it looks like you can afford it.

 

[pacergal]

OP-Great savings!
Do you have any pension coming or any pre tax savings/IRAs for retirement?

Personally, I would be a bit hesitant to completely retire if I was planning on $500,000+living expenses spend down over the next several years.

However, If you can honestly answer the questions in the link posted by seven-up, and numbers look good to you, then fire away!

 

[ERD50]

OP-Great savings!
Do you have any pension coming or any pre tax savings/IRAs for retirement?

Personally, I would be a bit hesitant to completely retire if I was planning on $500,000+living expenses spend down over the next several years.

However, If you can honestly answer the questions in the link posted by seven-up, and numbers look good to you, then fire away!

The way I would look at that, is to just remove the $500,000 from the portfolio, poof-it's gone! Then run your analysis.

If your analysis looks good w/o that allocated $500K, then why not?

-ERD50

 

[ncbill]

Yes, I agree, my kids are trending towards some expensive schooling. I'm estimating private school cost, but even public option is roughly $30K/year.

I made my kids apply for every scholarship under the sun, including ROTC, which is what ended up covering their tuition & fees.

Oldest is now a military pilot and probably will go career before moving over to the airlines...they moved on to a military academy after their first year of college (~$10,000) & so saved me even room and board.

Youngest just graduated and has chosen National Guard service to pay back Uncle Sam...they were more expensive @ ~$15,000/year.

 

[Terhathum123]

I made my kids apply for every scholarship under the sun, including ROTC, which is what ended up covering their tuition & fees.

Oldest is now a military pilot and probably will go career before moving over to the airlines...they moved on to a military academy after their first year of college (~$10,000) & so saved me even room and board.

Youngest just graduated and has chosen National Guard service to pay back Uncle Sam...they were more expensive @ ~$15,000/year.

You've done well! Great advice.

 

[Terhathum123]

Short answer: Yes, without a doubt.

Looking at it from a very basic level, you've got enough assets (excluding your personal home) to cover your expenses with a 2.5% withdrawal rate...which is easily sustainable.

Additional factors making it even easier:
- Your rental property's income dramatically reduces what you need to pull from your investments -- get that paid off & it'll cover even more of your income requirements.
- When your properties (investment & personal) get paid off, that'll obviously reduce your expenses a good deal.
- With such a low withdraw rate, your investments' growth will almost certainly outpace what you pull out of them, so you'll end up with more than you could ever need.

You might consider reducing your overall risk profile -- you've got over 1/3 of your assets in alternative investments that, while probably earning good average returns, expose you to a fairly high degree of investment risk that you may not want in retirement.

If able, start buying those new cars mostly out of income before you retire -- but even if not, they won't be a problem. Do you already have plans in place for health insurance after you leave your jobs?

I agree with my risk profile - I'm slowly moving into what I hope is more stable.


Also, I don't have insurance yet. I've had a few quotes and think I'm trending towards getting it on the ACA.

 

[Terhathum123]

I grew up in WI. My parents met at Madison. I attended college in MN. A ton of awesome Colleges and Universities to choose from. Most/all offer competitive financial aid packages. Lots of less expensive 2 year schools in WI/MN also. I believe Michigan and IL offer tuition reciprocity also. College doesn't have to cost 200k per kid.

Maybe buy 2 new to you vehicles that are 2-3 years old and don't cost $60k each.

Over all you look like you are in good shape. My friends in Wi (and MN) all talk highly about the current job market there. Maybe look for something different/less stressful/parttime? Good luck

Your finances look to be in good shape. I would agree about too much concentration. I would diversify if I was you.

I'm agree with your reasoning on the vehicles - I'm estimating pretty pricey rides.


I'm also considering another job - need some downtime first.


Thanks!

 

[Terhathum123]

How liquid are your alternative investments and how much are you allocating for bad debt losses on those assets? How much, if any income do those investments throw off or is the ultimate return on those assets based on potential capital gains?

I am surprised at the bitcoin holding given your apparent environmental concerns and the high energy consumption involved with bitcoins from what I have read. On the surface, it appears that you only have $1.6 million or so in liquid assets and you expect to spend nearly one third of that on near term big ticket items.

The alternatives are not very liquid. Between 3 and 8 year cycles with most the gain seen when properties sell. I plan to harvest enough from the income this year to cover my taxes and reinvest the rest. I've seen some good returns - assuming no bad debt losses.



I get your environment concerns with crypto. I'm a long time holder of these assets . . . purchased for pennies on the dollar. I'm just going to HODL these, unless I really need the cash. Not buying anymore.


I appreciate your questions/comments, thanks!

 

[Terhathum123]

The way I would look at that, is to just remove the $500,000 from the portfolio, poof-it's gone! Then run your analysis.

If your analysis looks good w/o that allocated $500K, then why not?

-ERD50

Agreed, but, I needed some group support to actually take the plunge! Thanks!

 

[Terhathum123]

I grew up in WI. My parents met at Madison. I attended college in MN. A ton of awesome Colleges and Universities to choose from. Most/all offer competitive financial aid packages. Lots of less expensive 2 year schools in WI/MN also. I believe Michigan and IL offer tuition reciprocity also. College doesn't have to cost 200k per kid.

Maybe buy 2 new to you vehicles that are 2-3 years old and don't cost $60k each.

Over all you look like you are in good shape. My friends in Wi (and MN) all talk highly about the current job market there. Maybe look for something different/less stressful/parttime? Good luck

Your finances look to be in good shape. I would agree about too much concentration. I would diversify if I was you.

Yes, I'm looking into another job - maybe I'm just too cautious to completely cut the cord from new cash flowing into my coffers.

And, I agree my car estimates are high. We've never owned luxury, or even new, vehicles. I'm estimating high car cost as I'm unsure about our eventual purchase.

Thanks!