41 Yr Old Future Retiree - Please Donate to My Retirement Fund

[BadAtGolf]

41 Yr Old Future Retiree with 4 Kids

Age - 41

Desired Retirement Age - Yesterday? Still figuring this out. I enjoy work and have a very flexible job that allows me to have a lot of fun, so I'm not terribly rushed. Thinking 50-55, which is 9-14 years from now. One thing I'm struggling with is how much do I want to leave for my kids? I could retire now, but it wouldn't be the retirement I want and it would leave nothing for my kids now or when I'm gone.

Assets -

• Solo 401k - $55k (paying back $250/mo, I owe about $30k)
• tIRA - $10k
• Primary Residence Equity - $1M
• Rental Property - $800k value ($450k mortgage). Collect $3,600/mo in rent - $2,300 monthly payment
• Private Company Equity - ~$1M (see note below)
• Cash - $55k ($35k allocated to taxes)

Income - $135k salary plus annual bonuses

Expenses - ~$10k/mo (two mortgages make half of this. No other debt. Charity, food, gas, entertainment account for the rest)

Spouse - Married. She is 3 years younger. Currently not working.

Kids - 4 kids aged 7 to 15.

Relevant Location - Not sure what this means, but I'm in the Seattle/Tacoma area.

I've been reading the forum for about two weeks. I've read a lot of the FAQs/Stickied posts. I'm not ready to be baptized into the FIRE church, but I'm starting to believe.

I was fortunate to sell my startup this year and made some money. My wife is extremely anti-debt, so I lost the battle of investing the money and it instead went into paying down our home. I have an earn-out clause that pays out in a few years and will be worth a multiple of EBITDA - meaning it could be worth anywhere from $0 to a few million. I've included it under Assets above at a value of $1M for now. The startup ate much of my retirement portfolio. Combine that with my wife's aversion to debt and we are very heavy on the real estate side and light on cash/securities.

We are starting to max out our IRAs again. From what I've read so far it looks like Roth is the more popular choice. I won't do that this year because I'm in the top tax bracket. We'll stick to the traditional and then contribute to the Roth when we can (or do the backdoor conversions if we're not eligible).

I don't have too many questions right now. I wanted to introduce myself so I have a post to reference when I do start asking questions - hopefully saving me the trouble of repeating all of this info. I also wanted to say thanks for all the great info. It's been helpful to see all the different approaches and though processes that each person uses.


As I build out my retirement spreadsheet, the biggest question marks to me are around insurance. I won't have any work sponsored plans if I retire early. I also won't be able to touch my retirement accounts or SS for years, so that could be a big expense.

My thinking right now is that we will sell our primary home and put the equity into securities. It will be $1.5M - $2M in equity when I retire. Combine that with my earn-out money and I'm hoping to be sitting on ~$3M cash. I will have the rental home paid for, so there's an additional $4k - $4.5k/mo. We're considering buying a home or condo in FL now, while rates are so low, and using that as a retirement homebase. Quick Zillow searches show many places under $400k that would be great. Trying to be aware of things like high HOA fees down there and would appreciate any tips from others who have retired in FL.

I intend to spend a lot of time traveling in retirement. Grandkids may change those plans, but for now I dream of renting an AirBnB in Greece and spending the summer there. Then moving over to Thailand for a few months, and make my way to all the places I'd like to see. Occasional visits to the homebase in FL as well as traveling to see family.

I would love to hear from others who travel a lot in retirement (especially those with larger families). How is it working for you? Unexpected expenses I should consider? Is my math way off? I see places available for $1,200 - $$$$ a month in many places. Buying groceries at the local stores and just experiencing the culture shouldn't be too much more than staying in FL, right? Obviously we'll spend more money on sight seeing, possibly more on transportation since we won't own a car, (airfare) etc. But, overall I don't see it costing that much to have extended stays in places all over the world. Maybe this deserves its own thread?

 

[BadAtGolf]

Swing and a miss with my subject line. This place already feels like home - no one listens to me and no one laughs at my dumb jokes.

I tried to edit the subject line but it still looks like I'm a Nigerian Prince trying to scam everyone on the main forum page. I took the sticky advice to "make it unique" a little too far. I'll try harder next time, lol.

 

[aja8888]

Swing and a miss with my subject line. This place already feels like home - no one listens to me and no one laughs at my dumb jokes.

I tried to edit the subject line but it still looks like I'm a Nigerian Prince trying to scam everyone on the main forum page. I took the sticky advice to "make it unique" a little too far. I'll try harder next time, lol.

PM a mod and they can change the thread title.

 

[RobbieB]

I'm retired in California, don't have HOA fees or kids and don't travel much. Only have 1 house.

Nothing to add re your questions, but welcome and have fun!

 

[RunningBum]

Swing and a miss with my subject line. This place already feels like home - no one listens to me and no one laughs at my dumb jokes.

I tried to edit the subject line but it still looks like I'm a Nigerian Prince trying to scam everyone on the main forum page. I took the sticky advice to "make it unique" a little too far. I'll try harder next time, lol.

HaHa, nice try!

 

[RetiredHappy]

A few things stand out for me. I think the earn-out clause is the biggest uncertainty whether you will get $0 or several million dollars. The 4 kids are expensive and you need to figure out how much they will cost you for the next 15 years or so. When you said sell your home, I assume that you will do so when you retire, which means you will be able to invest the difference into equities then. I am not into rental as I prefer to invest the money into the stock market.

We don't live in FL and pay $475 per month to 3 HOAs. It covers nothing on our single family home. It is the price of living where we love.

If you get nothing else out of the sale of the company (earn-out), then your retirement assets look a little lean. We travel extensively, about 3 months a year, through timeshare (which we own a ton), hotel points and airline miles, and cruises. We usually do cruises in Europe and Asia, and supplement stays with hotel points. We use airline miles to buy business and first class tickets. But we don't travel with children. Kids are expensive. Our good friends have 4 kids and many grandchildren. They "sponsor" family trips using their timeshare portfolio to Hawaii, Carribean and East Coast locations.

 

[chris2008]

I don't want to be a downer but:
Don't count on the earn out unless you stay to be the majority shareholder of the business.
Don't count on staying onboard as employee of the buyer.

Save and invest with care till all your eggs are in your bucket.

 

[BadAtGolf]

A few things stand out for me. I think the earn-out clause is the biggest uncertainty whether you will get $0 or several million dollars. The 4 kids are expensive and you need to figure out how much they will cost you for the next 15 years or so. When you said sell your home, I assume that you will do so when you retire, which means you will be able to invest the difference into equities then. I am not into rental as I prefer to invest the money into the stock market.

We don't live in FL and pay $475 per month to 3 HOAs. It covers nothing on our single family home. It is the price of living where we love.

If you get nothing else out of the sale of the company (earn-out), then your retirement assets look a little lean. We travel extensively, about 3 months a year, through timeshare (which we own a ton), hotel points and airline miles, and cruises. We usually do cruises in Europe and Asia, and supplement stays with hotel points. We use airline miles to buy business and first class tickets. But we don't travel with children. Kids are expensive. Our good friends have 4 kids and many grandchildren. They "sponsor" family trips using their timeshare portfolio to Hawaii, Carribean and East Coast locations.

Thanks. Yes, the plan is to sell the big home when the kids are out, buy a smaller one and invest the difference. That should be about $1.5M to invest on top of about $4k a month in rental income. Even if we don’t get another penny from the business that puts us over $100k a year in income at a 4% withdrawal rate which should be ok, but I’d definitely feel better with more ($48k rental income and $60k from 4% of $1.5m).

Maxing out our IRAs (and my company will start a 401k next year) should help us earn another $500k before we can touch it. SS will be a few thousand a month (if it’s there). Anything extra from the earn out will be gravy.

As for travel, it would be just the two of us. I’d love to spoil the kids with some paid for reunions/trips when possible, but they won’t be with us the majority of the time. We are currently deciding how much to cover for their college, and other life expenses. That will probably shape the retirement date as we get nearer.

 

[BadAtGolf]

I don't want to be a downer but:
Don't count on the earn out unless you stay to be the majority shareholder of the business.
Don't count on staying onboard as employee of the buyer.

Save and invest with care till all your eggs are in your bucket.

Thank you. There are some safeguards protecting me, so my risk is only in the company not performing well. They can’t let me go to save that money.

That said, I agree that we can’t count that money until it’s in my account. I will have a few paydays between now and the final one. Money was put into escrow accounts as part of the acquisition. It totals a couple hundred thousand for my portion. That’s not fully guaranteed, as it’s held to cover certain expenses that could come up - but there’s almost zero chance of that happening.

Without getting into all the details, we provided everything during the due diligence period, so I’m mot worried about any skeletons coming out and costing me money.

 

[The Cosmic Avenger]

One thing I'm struggling with is how much do I want to leave for my kids? I could retire now, but it wouldn't be the retirement I want and it would leave nothing for my kids now or when I'm gone.

There's nothing wrong with this, but my approach is to make sure I don't run out of money, and in 99 out of 100 cases I'll probably leave money for my (one) child. However, my own approach to personal finance is to *never* count on an inheritance; all it would take is one big medical issue or lawsuit to wipe out what might otherwise seem like a sure thing. So I've told my kid that, too. Instead, we've set them up to succeed, by being reluctant to spend money on things they don't need, by paying all of their tuition so they can graduate debt-free and get a head start on saving, and by starting a Roth IRA for minors and matching what they earned in HS, so they can already see their money growing there and have a place to put it as soon as they're in a position to contribute. (They're currently in college.)

Just something to think about, because I'm wary of raising a trust fund baby who can't (or, more likely, won't) support themselves without money from mommy and daddy, and then finding that a disaster wipes us out and leaves us nothing to pass on.

 

[BadAtGolf]

There's nothing wrong with this, but my approach is to make sure I don't run out of money, and in 99 out of 100 cases I'll probably leave money for my (one) child. However, my own approach to personal finance is to *never* count on an inheritance; all it would take is one big medical issue or lawsuit to wipe out what might otherwise seem like a sure thing. So I've told my kid that, too. Instead, we've set them up to succeed, by being reluctant to spend money on things they don't need, by paying all of their tuition so they can graduate debt-free and get a head start on saving, and by starting a Roth IRA for minors and matching what they earned in HS, so they can already see their money growing there and have a place to put it as soon as they're in a position to contribute. (They're currently in college.)

Just something to think about, because I'm wary of raising a trust fund baby who can't (or, more likely, won't) support themselves without money from mommy and daddy, and then finding that a disaster wipes us out and leaves us nothing to pass on.

Thank you. These are some of the same concerns we have. I’ve read some threads here discussing it and there seems to be a million different opinions.

We originally had no plans of paying for their schooling, but lately we’re feeling like we want to help there. I definitely don’t feel a strong need to leave an inheritance. Like you, I don’t plan on receiving one, so anything I may get will be a bonus.

I don’t want to raise unmotivated, selfish kids. But, I also recognize that the world isn’t fair and as a parent I want to give them every advantage I can. That means financially as well as mentally and emotionally.

 

[The Cosmic Avenger]

Thank you. These are some of the same concerns we have. I’ve read some threads here discussing it and there seems to be a million different opinions.

We originally had no plans of paying for their schooling, but lately we’re feeling like we want to help there. I definitely don’t feel a strong need to leave an inheritance. Like you, I don’t plan on receiving one, so anything I may get will be a bonus.

I don’t want to raise unmotivated, selfish kids. But, I also recognize that the world isn’t fair and as a parent I want to give them every advantage I can. That means financially as well as mentally and emotionally.

Exactly. I was conflicted about paying for school, since I had to pay off a lot of student debt myself, but I realized that "paying your dues" is an overrated concept. As long as our kids understand the value of a dollar and how compounding works, and know how to delay gratification when they should, they don't have to undergo hardship to have good financial sense.