Update to: Another "Can I retire yet" post

[movingrightalong]

Wanted to provide an update to my post from last year at http://www.early-retirement.org/forums/f28/another-can-i-retire-yet-post-80774.html. Tried to reply to the original thread, but it was too old :^).

I ended up sticking around at megacorp, and intend to stick around for another year through '17. We paid off the house, taking our annual expense down by around $25K and slightly reduced debt load in our rentals. New balances:

Net worth $4.4M - Assets: $5.3M Liabilities: $870K (all in 30-year fixed mortgages on rentals)

"Not in the portfolio": ~$815K
$180K in kids 529s
$635K in first home

"In the Portfolio"~$3.6M
$620k in ready cash
$250K in deferred comp account (gets paid out 1/10th every year for 10 years after leaving the company. Heavy cash allocation of around 30%)
$990K in tax-advantaged accounts, equities + small cash exposure
$975K in cash equities, virtually zero cash exposure
$180K in private investments. This has returned a few thousand per year, and most of it will return to cash in the next couple of years
$610K in real estate equity on the rentals, cash flowing about $45K after tax.

Allocation to cash is too high, but we'll plan to either draw it down in lieu of the equities when we leave the workforce, invest in bonds or equities if valuations become more attractive, or pay off mortgages on real estate portfolio (last resort.) We wouldn't let it sit in cash for very long.

We should put another $400K-$500K into the portfolio this year, and will re-evaluate goals at the end of the year.

On the downside, we're concerned that we're letting a pretty unique time in our kids' childhoods pass by; we struggle with the decision, but outsized comp is adding to our financial security in meaningful ways, and should provide options we wouldn't have had otherwise.

Offsetting that concern to some extent, I've been successful in taking more time for family, and we have plans for a couple of *great* trips with the kiddos this year.

 

[sakowitzm]

Congrats! Sounds like you're in great shape and have your priorities in the right place. Don't fail to investigate the possibility of retiring slowly. For example, a few years back I was able to start working just 1/2 day on Thursday and take Friday off. Was a real blessing in terms of being able to get errands done, etc., and freeing up weekend time. Eventually I was able to go in to the office on Mondays only, and worked from home part time the rest of the week.

In your case, the above could help a lot. But also, perhaps you could work out an arrangement to have considerable time off (several weeks?) around the holidays, and also maybe twice during the summer. ie, when your kids are available to do things with.

Good luck!

 

[hlfo718]

Have you estimated out your monthly expenses including all taxes and healthcare costs for your family?

 

[euro]

As usual, it all depends on the expenses! In your old thread you say you need 120k for "normal expenses". Not sure what that means and whether it is still true. If it does NOT include allocations for say, new car, new roof, healthcare, taxes, etc, then you may end up in a tighter spot than what a quick first glance suggests (given you young age).
If all of those are included, you are way good to go (by MY arbitrary standards, anyway. )

 

[movingrightalong]

Thanks guys.

Sakowtzm- Unfortunately in my current role part time isn't an option. A lot of what we get paid for is outsized commitment. The prospect of leaving and doing something that takes less commitment is certainly there, but I would need to take the leap. With the comp the way it is for now, I've settled on making hay while the sun is shining.

Re: expenses, I'm pretty confident that we understand them. The $120k included our mortgage, which we don't have any more, and a pretty liberal vacation budget. We could easily live happily on considerably less than that even adding back in health insurance costs, and allocating for auto replacement.

Unless anything changes, we're in for another year, and will re-evaluate then!

This forum is a tremendous tool. Can't imagine how people managed to gain perspective enough to make such an important change in their lives without it.

 

[movingrightalong]

The years are starting to whip by quickly. Update on our ER situation:

I'd consider us FI at the moment, but plan to work at least through Summer to fully fund employer savings plans.

Net worth currently $5.7M:

$4.9M in retirement portfolio (including real estate investment equity)
AA is 50% equities, 18% cash, 15% real estate. The rest in private investments and a small bond fund. The real estate equity portion pays about $45K/year after expenses. I don't count appreciation in the real estate. We'll invest about half of that cash sometime in the next couple of years.

$815K "not in the retirement portfolio."
This is $635K in our first home (we'll downsize someday, but will count on staying until the kids leave for college) and $180K in 529s for the kids. These are now in conservative target date funds after having grown past what we intended to save.

Spending:

We spent $120K this year, with our biggest expense being some pretty big vacations. We spent around the same amount the year prior with a lower vacation budget but a few months of mortgage payments. There are some pretty big maintenance bills in there, with AC needing to be replaced last year, and a few $K in landscaping work.

We consider this to be very high spending in general; we haven't been managing our food/restaurant bills (which are our 2nd largest expense,) recreational spending (mostly outdoor gear,) clothing purchases, etc.

If we were to be even moderately more careful on these expenses, we could knock out $10K worth of spending and not miss it. If we want to really duck and cover, I'd consider our "essential" spending to be in the $75K range currently (without HC expense.) This is, of course, absurd....it wasn't that long ago that we very happily lived on a little over half of that with a great life and a mortgage payment.

I'm planning to budget about $25K/year for health insurance post-ER (we live in a state with a relatively low health insurance costs *ahem*.)

We'd need a little under 3.5% of the portfolio to support the "free spending" version of our lifestyle adding in taxes and $25K for healthcare, or ~2% to support 'essential' spending, adding in taxes and healthcare.

Now to pack away some additional breathing room and battle OMY.