Am I Missing Something?!

[Burnout2022]

Here is my situation, I’m 48 my wife is 49 and we have a 13 year old. I have been burned out with my business for years and I’m ready to retire however a couple people who are very close to me whose opinion I respect think I’m crazy for even considering retiring because my business has been so profitable for the last few years and they think I’m to young to retire. The business will likely continue to be successful but it won’t be nearly as profitable as the last several years due to changing market conditions (in my opinion).

Here is our situation:

Zero debt/mortgages

We travel quite a bit now and our expenses are about 10k per month however we are very accustomed to living frugal and could really improve that if needed.

2.5 million cash in a money market at nearly 5% interest
1.0 million cash position in my company (undistributed profits)
1.0 million dollar farm/vacation home which will pay about 200k over the next 10 years in several separate payments when the timber is cut.
400k pre tax accounts
50 k brokerage account
35k checking acct
45 k 529 plan for 13 year old
1 million worth of rental houses that nets about 4500 a month after taxes
250k condo in Florida (I may turn this into a long term rental when I retire)
200k airplane (that will be liquidated once I retire and that will reduce our 10k a month expenses quite a bit)


My business partner and I are currently working on exit strategies and I will either get a lump sum or more likely I might retain a small percentage of the company and get distributions from the profits in perpetuity however for planning purposes I don’t want to count this in my planning as anything can happen here.

We currently live part time in Latin America (fairly low cost area) and will likely spend most of our time here when we are not traveling so that 10k a month in expenses will likely go down even further.

My plan is to get a professional financial adviser to help me invest the 2.5m in cash and the 1m in business profits once distributed and live off the interest/dividends of that once I retire along with my rental income. My wife will get a very small pension (700 per month) when she turns 57 and I plan to start my ss at 62 or as early as possible because based on my family history I don’t think I will live a super long life although I am in fairly descent shape now although I could stand to lose 10-15 pounds

I think financially I will be ok, am I missing something??!!

 

[SecondCor521]

Doesn't sound like it.

Only you can tell if you'll be happy on that budget the rest of your life. Certainly wouldn't hurt to try for a few years, especially if you can retain your ownership in the business and let your partner run it for a while.

Only you know if now or soon is "too early to retire". Sometimes when people say this they say it out of concern that you'll be bored or don't have enough money. Sometimes people say this out of envy.

$10K a month is a rather round figure. There are other ways to do it, but most people who retire early and succeed have a very good handle on their expenses and what realistically will change.

Yeah, selling a $200K plane will reduce your run rate! (I've puttered around in Cessnas and have about 50 hours PIC I think but don't have my PPC.)

You might be able to DIY your investments and if you're thoughtful about it you can probably save yourself quite a bit in advising fees. Any financial advisor who sees your balance sheet (especially the $2.5M in cash) will likely salivate over trying to land you. Terms to watch out for are "wealth management", "assets under management", "we do better when our clients do better", "wrap fees", "annuities" (mostly), "active management", "stock pickers", "investing is complicated", "here's our fancy analysis personalized for you", and similar.

To me, the $45K in the 529 is on the low side, but there is a wide range of opinion on how much and how to pay for kids' college and you didn't outline the whole picture there so it's more of a question than a critique.
HTH.

 

[Route246]

Is your business partner 50:50 owner? How much cash income does this business generate for you now? 2.5M cash is a big number and gives you far more financial freedom since this cash has no deferred taxes? Do you have plans on what to do and stay occupied in retirement? Those are the questions I would ask

 

[Burnout2022]

Doesn't sound like it.

Only you can tell if you'll be happy on that budget the rest of your life. Certainly wouldn't hurt to try for a few years, especially if you can retain your ownership in the business and let your partner run it for a while.

Only you know if now or soon is "too early to retire". Sometimes when people say this they say it out of concern that you'll be bored or don't have enough money. Sometimes people say this out of envy.

$10K a month is a rather round figure. There are other ways to do it, but most people who retire early and succeed have a very good handle on their expenses and what realistically will change.

Yeah, selling a $200K plane will reduce your run rate! (I've puttered around in Cessnas and have about 50 hours PIC I think but don't have my PPC.)

You might be able to DIY your investments and if you're thoughtful about it you can probably save yourself quite a bit in advising fees. Any financial advisor who sees your balance sheet (especially the $2.5M in cash) will likely salivate over trying to land you. Terms to watch out for are "wealth management", "assets under management", "we do better when our clients do better", "wrap fees", "annuities" (mostly), "active management", "stock pickers", "investing is complicated", "here's our fancy analysis personalized for you", and similar.

To me, the $45K in the 529 is on the low side, but there is a wide range of opinion on how much and how to pay for kids' college and you didn't outline the whole picture there so it's more of a question than a critique.
HTH.

I think you are right about the 529K, I have upped the monthly contributions the last couple of years but I think I need to up them even more. Oh and the thought of hiring a financial adviser really scares me! I’ve talked to a couple and had to shower afterwords.

 

[Burnout2022]

Is your business partner 50:50 owner? How much cash income does this business generate for you now? 2.5M cash is a big number and gives you far more financial freedom since this cash has no deferred taxes? Do you have plans on what to do and stay occupied in retirement? Those are the questions I would ask

No my partner is majority owner and is a good bit older than me so he is ready to retire yesterday. The income swings wildly and this year I will make probably 6-700k while the last couple of years I’ve made low 7 figures. The 2.5 is all after taxes, I’m probably a little behind on my quarterly estimates (taxes) for 2023 so far but I accounted for that in the cash position in the company which is really 1.25-1.3m but I’ll owe about 200k of that in taxes by the end of the year so I only listed my cash pos in the company as 1m.

The plan with the company right now is to sell it for a small down payment (much less than it’s worth) to a company we work with overseas and my current partner and I retain a small percentage but would not be active in running the company. Our main concern is our employees being in good hands down the road.

I have plenty of hobbies and may even work part time (at something I enjoy) when I don’t hv to ring the bell every morning.

 

[DrRoy]

We spend more in RE then before, and you will need medical insurance. You may still be just there, though.

 

[street]

With 6 to 7 million in total portfolio I don't see problem with ER. You do have income coming in from farm and rentals. I see no problems and with that diversity of portfolio you have so many options to create opportunity to have a very successful ER.

If you keep an open mind and if you have too, you can tighten the belt if need be. I don't see that being a problem with the cash flow you have.

The money you receive get it invested as soon as you can and get it working for you.

 

[Aerides]

however a couple people who are very close to me whose opinion I respect think I’m crazy for even considering retiring because my business has been so profitable for the last few years and they think I’m to young to retire.

You have to ignore them, kindly. Anyone else who isn't focusing on ER won't "get it" and will of course say you're nuts.

The Too Young argument implies one should not retire until they are too old to actually enjoy it, and that youth and health is when one should work. But you have won the financial game so why? Because you want to enjoy a younger and healthier retirement.

 

[Surewhitey]

You have the large war chest. Now just organize it all. Seems like you know what needs to be done. Ditch the plane, invest the 3.5mil & raise the kiddo right. Oh, and enjoy Latin America!

Curious of what happens when you decide to sell. The multiple on profit would get you a decent windfall I would imagine.

 

[Exchme]

You can retire without qualms, my only caution is the "Professional Advisor", realize that you might as well stick leeches on your body.

Study after study shows that their investments don't add returns, just costs. Most of them charge around 1%/yr for their existence and then often put you in funds that have an additional 0.6-1% fees. The unscrupulous ones will sell you extremely high fee indexed annuities, whole life insurance or funds with additional loads. Their revenue targets are normally to extract 2-3% of your investment each year to put in their pocket.

At 2%/yr, over 40 years, they may take half your wealth. You would have a hard time doing that badly in the market on your own. Just buy a Total Market Index fund for your stocks, extend duration on the bulk of that cash by buying a Total Bond fund and go to the beach.

 

[ut2sua]

My plan is to get a professional financial adviser to help me invest the 2.5m in cash and the 1m in business profits once distributed and live off the interest/dividends of that once I retire along with my rental income

Professional adviser would normally charge ~1->2% of your 3.5M per year. That would be 35K to 70K you could save per year if you don't use one. Members of this forum will give you good suggestions on how to invest, and no one will charge you anything. You could start with 60% in VTI and 40% in a MM fund for now (investing is simple, but it will take you time and some effort to educate/convince yourself on how to keep things simple and effective). Good luck and welcome to the forum.

 

[OldShooter]

Two comments from someone who has sold a business:

1) If you think profitability is peaking, now is the time.

2) Never do a deal where you get paid a share of future profits. This number is far too easy to manipulate. (If you think for five minutes you'll probably come up with at least a half-dozen ways.) Always take your cut from the top line. That is much more difficult to fiddle with. Ideally, take a share of the top line plus an increasing share of top line growth after you sell.

 

[HI Bill]

Congrats on getting to where you are! If I were you, I'd look up the Bogleheads 3-fund portfolio (https://www.bogleheads.org/wiki/Three-fund_portfolio). This is an easy DIY porfolio that you can establish at Vanguard [no advisor needed]. I'd personally divest myself of the Florida condo and take a buyout on the business. Keep things simple and manageable, and enjoy your ER! I wanted to ER at 50, which would have been my ideal age to ER (I waited to 55 as I didn't have adequate funding for my desired standard of living).

 

[Koolau]

It would seem you have enough assets to retire early. I'd avoid a financial advisor UNLESS it is strictly pay-by-the-hour for advice on how to set things up. Don't let the leaches get their teeth into you. Of course, YMMV.