3 Weeks Away!

[AnIntentionalRoad]

Hi,

We've been lurking on these boards for the past 6-7 months and have found your insights very valuable (and entertaining at times) and thought I would introduce ourselves. I was an old Motley Fool fan in the early 2000's and like the common sense, DIY vibe on this forum.

I'm 43 and my wife, er DW, is 42. We have two kids, 12 and 9. And, I plan to give notice to my employer on August 5th and join all of you fine FIRE'd folks!

My life's goal has always been financial independence. Not because I don't want to work but because I don't want to have to work. I've always strived to get to a critical mass as Bob Brinker says where I could choose how to live my life, working or not. Now, I live the phrase FIRE even more.

DW and I are very blessed that I started a company 7 years ago that was very successful (and very stressful). We sold the company last August 4th. Now, you understand why August 5th is such an important date--it is when I've completed my 1 year requirement to stay aboard the company after it was sold.

Then, on Sept 1st or thereabouts, we'll be moving onto a 42' sailboat with our kids and sailing the Florida Keys, Bahamas, etc for a 1 year Family Sabbatical--homeschooling our kids. After 7 years of stress on our family and marriage from building a company, we feel we need to do something really big and both physical and symbolic to mark our transition from being working drones to FIRE'd. This was a very tough decision to embark on such an epic (for us) trip--we've done very little traveling in our lives and have always LBYM and been very conservative. But now that moving onto the boat is only 6 weeks away, we are very excited and glad we've decided to challenge ourselves.

Another thing about FIRE that I am so excited about is that I am not one of those people who won't know what to do with my time. I have so many interests and hobbies that choosing which ones to spend time on will be the only hard part.

Financially, here is how things are shaping up:
Assets:
- $4.5MM portfolio in 3 buckets (using Buckets of Money approach):
- $677K cash
- $1.7MM bonds (mostly short term municipals and TIPS right now)
- $2.1MM Equities (mostly SP500 index, a value fund, an international fund)
- $500K in RE equity (primary home and a FL beach rental house)
- Over next 12 mos, expecting additional $2MM before taxes from business

Liabilities:
- $40k in student loads (yes, still)
- Two mortgages of $400k and $285k on the two properties

WR:
- We are planning a 3.5% WR from what is currently in our portfolio. This is abt $150k/year.
- The estimated $2MM we are supposed to receive this Aug 5th and in 2013 we are not counting as part of our retirement portfolio and when we receive this we plan to put it in a "Bucket 4" to be used for investing in RE or private placement investments or buying toys...whatever we want. Even if we donate it all, we'll have comfort that our "retirement portfolio" of buckets 1-3 will still be there.

Distribution:
We will annual distributions out of the large cash holding. Once the cash is expended (every 4 years), we will sell bonds to replenish the cash bucket. Once the bonds are expended, we will take the equity holdings and redistribute it into cash, bonds, and equities all over again.

One concern that we have is our 3.5% WR. Being only 43 and 42, we are worried that we are being to aggressive. I've run FIRECalc projections and it shows a 96.6% chance of success with my approx 48/37/15 AA with the worst case being I run out of money in 45 years. I figure if we are tracking our portfolio and we see things are not sustainable we can reduce our spending to match.

Of course, we are very, very fortunate to have such as portfolio at a relatively young age. But, I am dedicated to managing this ourselves. We want to be in charge of our finances and our lives. Believe me, there have been many financial managers and private banks that have sought our business. Being a DIY'er, though, I do have the fear of making some bonehead mistake and/or develop on projections that are just not solid because of a mistaken assumption.

Does this seem reasonable? What level of projected success do others seek in their FIRECalc projections? Obviously 100% would be better and if I tweaked my cash down to around 10% and equities up to 53%, I would be at 100% according to FIRECalc.

Thanks for listening,
AIR

[omni550]

Welcome, aboard, AIR!

omni

[REWahoo]

AIR, your numbers provide you with a lot of breathing room...

[Nords]

Welcome to the board, AnIntentionalRoad.

Quote:

Originally Posted by REWahoo AIR, your numbers provide you with a lot of breathing room...

Quote:

Originally Posted by AnIntentionalRoad ... (and entertaining at times)...

REWahoo, maybe this comment was directed to you...

[Meadbh]

Welcome, AIR. You are in great financial shape and as a successful entrepreneur, you obviously have the intellectual smarts to be a DIY investor. However, your risk profile as an entrepreneur may need to change to a more conservative one when managing your portfolio, as diversification, capital preservation and income generation will assume greater importance when facing a long retirement. I note that you plan a 1 year sabbatical, which sounds very exciting. I hope it will bring you and your family closer together! (I guess that's a given on the boat LOL!) What are your plans for afterwards? You are young enough to start a new business, sit on boards, consult, or whatever takes your fancy.

[growing_older]

You look to be in great shape. Congratulations on winning the game.

People I know who cashed out great options or sold a company like you are have, are comfortably set for life, unless they make mistakes with private placements or Real Estate investments. If you can avoid overreaching (some can, some sadly cannot) then you have many, many years of enjoyment ahead of you.

[AnIntentionalRoad]

Thanks, everyone!

Quote:

Originally Posted by Meadbh What are your plans for afterwards? You are young enough to start a new business, sit on boards, consult, or whatever takes your fancy.

Yes, our intention with the Family Sabbatical is to bring us all together--there have been too many years of late nights and travel on my part. Now, time to focus my energy on who is truly important.

Regarding what I'll do after the trip, I hope to have a better understanding of that when we get back. I feel I need at least a year to get my head around it--am I really ready to leave the workforce completely. (Right now I say, YES!) My guess is I'll continue teaching part time at a local university and continuing sitting on a few company or charity boards, a bit of consulting here and there. Maybe get certified as a sailing instructor or delivery captain! But, other than that, my time would be spent on numerous hobbies, travel, reading and writing, managing our finances, etc. All the things I never had time for before.

AIR

[LeavingOhio]

Quote:

Originally Posted by AnIntentionalRoad Thanks, everyone! Yes, our intention with the Family Sabbatical is to bring us all together--there have been too many years of late nights and travel on my part. Now, time to focus my energy on who is truly important. Regarding what I'll do after the trip, I hope to have a better understanding of that when we get back. I feel I need at least a year to get my head around it--am I really ready to leave the workforce completely. (Right now I say, YES!) My guess is I'll continue teaching part time at a local university and continuing sitting on a few company or charity boards, a bit of consulting here and there. Maybe get certified as a sailing instructor or delivery captain! But, other than that, my time would be spent on numerous hobbies, travel, reading and writing, managing our finances, etc. All the things I never had time for before. AIR

Man, you are living the life! Funny how even with $4.5 million dollars you really only get just about $150,000 a year from that. That does make it tighter than many might think at first glance. If I were you, I would CONSIDER taking the $2 million (before taxes) you are about to get and paying off both mortgages and your student loan. You can then invest or save HALF of what you would have paid toward all of those each month and spend the other half on toys and fun stuff. You should still have a little left of that $2 million (before taxes) too.

[obgyn65]

Welcome and congrats.

[MichaelB]

Quote:

Originally Posted by PlanOnIt Have you considered looking at alternatives to the TIPS since the current yield is negative with inflation? Also, an alternative to donating the 2MM may be a charitable trust. Have you met with a wealth manager within the last year?

My understanding was they aren't planning on donating the money, the plan is to spend or invest it. I imagine they don't need much help on the spending part...

Welcome to the forum, planonit. Why not stop by and introduce yourself here

[REWahoo]

Quote:

Originally Posted by PlanOnIt Have you met with a wealth manager within the last year?

Based on the information in his introduction, it appears obvious he meets with a "wealth manager" whenever he looks in the mirror.

[Bestwifeever]

Welcome aboard!

I think people like you who had a successful business have an ace in the hole if your cash runs out (unlikely imho)--you probably can start another business and be fine.

I really admire people who are so comfortable on sail boats--a year on one definitely is a "big and physical and symbolic" (and scary to me ) way to start your new life! Promise you'll post here during that year so we can live vicariously through your journeys (photos of sunsets, etc., would be nice too).

[Sarah in SC]

Welcome and congrats on the big move to the sailboat for your sabbatical! Such a great time to do this with your family and the chance to see some of the world in slow motion with your kids at this age. Kudos for making this a priority.

And 42'er? Y'all will get to know each other awfully well! We lived for a long summer on a short sailboat in the Abacos years ago. A wonderful experience but we realized traveling by boat was just one of the many ways we wanted to see the world. But for the chance to experience it...worth every night of planning, every book read, every decision weighed.

Fair winds,
Sarah

[AnIntentionalRoad]

Quote:

Originally Posted by Bestwifeever Welcome aboard! ... Promise you'll post here during that year so we can live vicariously through your journeys (photos of sunsets, etc., would be nice too).

Thanks! We'll make sure to post pics. We are at our beach house this week in New Smyrna Beach, getting ready to put it on the vacation rental market. Then tomorrow we'll be heading down to our boat in Ft Lauderdale to check to on the work being done to the boat.

Theeeeeen, next week maybe my last week of corporate work!

[AnIntentionalRoad]

Quote:

Originally Posted by Sarah in SC And 42'er? Y'all will get to know each other awfully well! We lived for a long summer on a short sailboat in the Abacos years ago.

Very cool! We plan to head from FL Lauderdale to Key West in Nov. Then over to Bimini and eventually to the Abacos. Then we'll head south toward the DR.

[AnIntentionalRoad]

Quote:

Originally Posted by PlanOnIt Have you considered looking at alternatives to the TIPS since the current yield is negative with inflation? Also, an alternative to donating the 2MM may be a charitable trust. Have you met with a wealth manager within the last year?

The TIPS are only about 15% of our fixed income and primarily for inflation hedge purposes. Not sure if this is a great idea.

We did set up a charitable trust last year when we got the big payout so that will cover any normal charitable giving for the rest of our lives. For the coming $2MM (best case, actual amount depends on performance based in an earnout formula), we plan to invest portions in riskier businesses, invest in some RE, and spend some on toys. The idea is that it is separate from the portfolio fueling our retirement.

We have met with wealth managers but given my experience working in the financial industry for a few years out of college, I don't have a high regard for most.

[MBAustin]

Quote:

Originally Posted by AnIntentionalRoad Thanks! We'll make sure to post pics. We are at our beach house this week in New Smyrna Beach, getting ready to put it on the vacation rental market. Then tomorrow we'll be heading down to our boat in Ft Lauderdale to check to on the work being done to the boat. Theeeeeen, next week maybe my last week of corporate work!

You must be really enjoying these last weeks!

I miss New Smyrna Beach - really lovely town and great beaches. My parents retired to that area in the early 90s and I really enjoyed visiting once or twice a year. When my father died in 2006, my mother moved north to be near my sister so I haven't been back.

Although I generally avoid fried foods, the Ipswich clams at Boston's are totally unique (I've not spent any time in New England to know if they are authentic in any way). I made sure to leave time to have lunch there before I headed to the airport after I finished packing up their house.

[AnIntentionalRoad]

Quote:

Originally Posted by MBAustin Although I generally avoid fried foods, the Ipswich clams at Boston's are totally unique (I've not spent any time in New England to know if they are authentic in any way). I made sure to leave time to have lunch there before I headed to the airport after I finished packing up their house.

We'll have to try Boston's. We drive by it frequently as we stay on the south side of the island.

Thanks!

[Quantum Sufficit]

Wow...that sure is impressive return after 7 years.. What sort of business was it you sold?

[AnIntentionalRoad]

Quote:

Originally Posted by Quantum Sufficit Wow...that sure is impressive return after 7 years.. What sort of business was it you sold?

Thanks, Quantum. It was a smallish custom software business. We built it up to 50 employees over 6 years before it was acquired by a multi-billion dollar technology company last year.