49 and $5M in Retirement - Having trouble FIREing myself

[tb001]

Plan for much higher income taxes.

Than the OP is paying now? If it’s mostly portfolio gains, taxes should go down.

I would be looking very carefully at expenses in your shoes. It’s probably doable, assuming you have social security coming, but an extra 10-20k in spend can make a huge difference in success rates and at these spend levels and lots of free time, can happen fairly easily. You’re at the threshold where that extra can make a big difference over time.

We have a higher spend rate than you, but a lot of our spend tails off and isn’t subject to inflation. If a mortgage is a big chunk of that spend, it’s worth running the numbers and understanding the impact of inflation and this spend going away. You also want to be sure you understand your tax liability, healthcare/dental and other expenses over time.

I think the best part of your situation is that you’re FI and could always pull the trigger if you wanted to. It just might require some adjustments.

Another thought—there are lots of options for fractional CFOs, which could be an alternative to a full time position. And if you’re good at your job, I think finding another position at C level is more doable than you think, it may just not be at your current rate. I left private equity at the beginning of the year and we were always looking for good c suite people.

If you’re not miserable, I’d personally stick it out for a few more years and see if there’s an exit that might be interesting. That also gives you better clarity on current market shenanigans. I was miserable and pulled the plug, but the current conditions definitely give me pause.

Also, IMO, value those private investments at zero in your head. It doesn’t matter what someone puts on a valuation—they are worth nothing until an exit.

You’re in a great place and a lot depends on your risk tolerance and willingness to cut expenses if necessary.

 

[Fremontpoke]

Thanks. Quality of fokes on this forum is amazing

 

[daylatedollarshort]

I built a good career and have achieved highest level of corporate hierarchy. My earning power now and next few years will be highest of my career/life. Have a comfortable life but I'm drawn to making a change and retiring for simplier life.

As far as retirement savings: I have over $5M in networth and worrier in me says, may not be enough. I have couple of kids to send to college and who knows what the life challenges to come.

I can either stay where I am and make as much as possible to retire early or retire early and see what life will be like as early retiree - which has been my dream.

My monthly expense, even if I retire, will definitely be over $15k a month. Health care, food/dining out, kids expense, traveling, auto, insurance, etc.

With low interest environment, its going to be hard to get yields on conservative investments (ie CD/bond). So 4% rule may not be so comforting going forward.

How do you get comfortable Firing yourself? Welcome comments.

We used to spend the same as you per year and decided we would rather cut our expenses than keep working. We actually had a lot of fat in our budget so many of the cuts didn't really change our lifestyle, like renegotiating the cable bill every year to get the new customer rates, optimizing our insurance deductibles and changing cell phone plans. Lots of little changes like that really added up for us. The other big reductions were paying much less in taxes, the ACA came long and our health insurance premiums went to almost zero, our kids grew up and are off the payroll and we no longer have any job or home business costs.

Our kids went to community college and in state public schools, had internships and financial aid so college cost us very little out of pocket. We checked the salary surveys, and for our kids' chosen career fields more expensive colleges wouldn't have translated into higher post college salaries.

We really like not having to work, so for us FIRE was the right call. If I had to do it over again I would have saved more and retired even earlier. But for us our careers were mostly just a way to save for retirement and pay bills. We also had a couple of home businesses that actually were fairly interesting to work on, but being fully retired now and going to the beach or wine tasting during the week is still more fun

 

[IncomeEngines]

Blue Pill - Red Pill

Freemontpoke,



1st thoughts "Ship with no rudder" and the winds are mighty at this stage of the the journey!!


Admirable for what you've done thus far........that said, there simply is no red or blue pill answer. No wisdom in building a house by just buying the materials or tools - ie, before you buy wood, steel and concrete $ tools, you need to sit down and draw up your "blueprint plans" that are unique to you and your desires. You've got so many variables that are blanks in the "retirement plan template" that will answer itself as you fill in the voids. This thread can speculate on your possible future(s) till infinitum and they will all be correct based on limited perspective of your life's footprints thus far.



Seek out a qualified "Retirement Planner" not just a investment guy. (No offense) Simply put a Retirement Planner is an expert in how to spend your money within your blueprint and with know results. With that personalized plan blueprint then you can run hypothetical draw-downs with variables in place to seek desired outcome. Until then its like a finely made ship with no rudder and lots of head winds.



Hope this helps.

 

[cfran]

Reduce your monthly expenses. I find it very difficult to accept that anyone has to spend more than $15k/month in retirement. That's a desire more than a necessity.

$5M net worth is likely not going to last for a 49 yo burning through at least $180k a year in retirement.

You need to make some changes in your spending, or keep working and saving.

I guess I don’t fully understand the logic here. $180k per year against a $5m portfolio is a 3.6% burn rate which will likely drop to the low 3’s once the OP starts drawing social security. I mean he’s got enough wiggle room here unless college costs erode a big chunk of his nest egg.

And why can’t this person spend 15k / month? Like it’s up to you to decide it’s necessary or a “desire”? Do you fully understand the budget, cost of living, etc? Pretty harsh comments honestly.

 

[tb001]

I guess I don’t fully understand the logic here. $180k per year against a $5m portfolio is a 3.6% burn rate which will likely drop to the low 3’s once the OP starts drawing social security. I mean he’s got enough wiggle room here unless college costs erode a big chunk of his nest egg.

And why can’t this person spend 15k / month? Like it’s up to you to decide it’s necessary or a “desire”? Do you fully understand the budget, cost of living, etc? Pretty harsh comments honestly.

Agree that everyone has a different view of what ‘enough’ is.

My big question with the OP’s situation as laid out is that it could be closer to ~4mm portfolio, not 5mm, once you remove equity in the home and potential college expenses. That’s closer to a 4.5% withdrawal rate prior to SS, on a long retirement horizon. Couple that with it being unclear to me that the OP has a strong handle on actual expenses, and it’s not a slam dunk case. Is it doable, yes likely, but it sounds like the OP is just dipping their toes in to see if it’s possible and there are a lot more questions to be answered.

Eta that I totally agree that withdrawing 180/yr on 5mm in investable assets has a high likelihood of success. And there’s a lot more room for adjustments if things go sideways.

 

[PandaBear]

I don’t think I have a strong knowledge base to give a lot of advice, just a couple of comments and maybe a suggestion.

I always said that state schools were fine for my kids, that I wouldn’t pay for private. However, I always added, if I had a kid who get into MIT or CalTech or other such school, we’d find a way to pay. Congratulations to your daughter!

I also just want to add that we are anticipating about 15K per month as our budget (includes taxes). However, that includes about 40K per year for travel. So I know we have wiggle room if needed.

I’d look at what that 15K a month budget actually is. Do you have a lot of financial commitments (mortgage, vacation home mortgage, car leases, etc) that have to be paid, or is your budget more flexible? If the market isn’t great and you don’t want to withdraw as much, will that be okay?

Good luck to you.

 

[Gumby]

Is the $15k per month spend grossed up for taxes? If you are taking the money from a taxable IRA account, you'll need to add around 25% for federal and state taxes.

 

[cfran]

Fremontpoke, I punched out at 51, have been retired for 7.5 years, had no debt left, more invested, and had two kids with just a semester or two left in college for both of them. I also had a pressure cooker role, CEO of a geographical division of a global firm, leading nearly 100k employees. My division was Asia Pacific, so I had a lot of water between my countries, which meant lots of red-eye flights (sleeper seats in business, but still, not really good sleep, night after night). As you know, the pressure just goes up, every year, regardless of a global recession or a COVID-like pandemic.

If I had any advice for you, it would be this: 1) you probably don’t have enough, just yet, to fund a great retirement and two kids at 80k per year schools. I’d probably wait until one was finished and the other mostly done, if not completely finished. 2) someone like yourself or myself who has been in the pressure cooker for so long, runs the risk of exploding if they wait too long...so, wait, a couple, maybe 4 more years, but not too long. 3) take that time to figure out what you are going to do with your time. If you don’t, you will find very quickly that you have too much time on your hands and not enough to keep your mind busy. When I left, it took a while to decompress. I think I got on my wife’s nerves a bit. But, I had some very big projects to work on around the home we had built while living overseas. We’ve now sold that home in CA so we could move here (I’m your neighbor, in Gilbert), but I have little to do every day and I’m looking for a new challenge. So, I’m researching a couple of things I can do that I might find I can be passionate about. Yep, you need something to do. Hanging by the pool all day gets tired really fast.

The final word of advice is this: hang in there a while longer, but with a smile on your face, because you DO have enough that if you HAD to pull the rip cord, with a few small alterations to your lifestyle, you could. Others will think it’s crazy to hang on any longer with $5m in the bank, but, you’ve had a big job with a big lifestyle, and that usually accompanies a big personality. In my opinion, that requires just a little bit bigger nest egg. In in case, remember sequence of returns can make or break a retirement. We’re in some very choppy water right now. I’d wait until both the asset bucket and the BS bucket were a little fuller. When the BS bucket starts to overflow, you’ll be glad you had a little extra cushion in the asset bucket. If you ever feel like you need to chat, send me a pm.

Really good post here, I’m frankly in the same position as the OP, and you hit on a lot of topical items that are well reasoned and logical. I much prefer this over the people who just say “you don’t need that much”, which is crazy. Thanks for your thoughts.

 

[HI Bill]

...a lot of topical items that are well reasoned and logical. I much prefer this over the people who just say “you don’t need that much”, which is crazy.

While people view life through the prism of their existence, I've learned that everyone has different tastes, budgets, desires, standards of living, etc. If one is monumentally successful with their career and accumulation, they likely have the lifestyle to go with that. Summer houses on the coast, etc. Regardless of lifestyle, the key with FIRE, to me, is to w$rk just long enough to be able to keep up your desired (realistic) lifestyle from RE to the end. In my case, in RE, I'm planning to double my spending to allow a 50% travel budget, compared to now, while w#rking, and saving.

 

[Elbata]

I went through my tax records and see that for the last 11 years I worked, my yearly average income was $3000. I don't think Mr. Fremontpoke would be interested in my advice. Hell, I'm pleased if he just reads my comment.

One thing that always gets me is watching HGTV and prospective home buyers tell the RE agents how much they can spend. No matter what the figure, it always seems like it's never enough for the home they want to purchase. Has anyone else noticed that?

Congratulations on your daughter being accepted to MIT.

 

[imnontrad]

Do you like what you do for a living? If so, then continue as long as you enjoy it. The advantage that you have is that if the office climate turns sour, you can walk away at any time.
Do you have things you would really like to do but cannot do because you are working? Then maybe you can see if you can work out a semi-retirement of either working part time or taking a few months away each year.
How is that 5 mil invested and how volatile is it? That would be a factor too.
Do you keep a budget? If you do not, keep track of all expenses each month. Plus "carve out' the expenses associated with the kids. That will let you know how much (or how little) you really need to live on with your current lifestyle.
Talk to your CPA and look at state income tax laws. It might be good to put money into a 529 for the kids to cover expenses and get a state income tax deduction. However, when I was in college, I found that the students I knew who had all of college paid for by their parents tended to pick worse majors and were not so diligent in graduating on time. So make sure they still have some skin in the game.
Also, I do not know if you are considering the future income from Social Security. Since that is based on your top 35 working years and assumes you keep working at your current income level until you reach your FRA, the estimate you see in the "My SS" page at ssa.gov is actualy higher than what you would receive if you left work now.

BTW, I know a couple who walked away from their careers (he, specialty dentist, she, housewife) when they were in their early 50's and the kids had graduated from college. They were active outdoors people and became seasonal park rangers in Alaska for the next 15 years - and loved it.

 

[Gavin60]

You could retire right now, How much home do you really need? Lower cost areas that are nice are out there.

How much do you really need to spend each month? 15k is faster than most folks can breath air.
If affluence is very, very important to you then Im afraid you might not ever be able to retire.
I know some wealthy people who dont need a lot of things, they drive around in beatup corrola's and have holes in their jeans, and still enjoy life immensely.

 

[cfran]

You could retire right now, How much home do you really need? Lower cost areas that are nice are out there.

How much do you really need to spend each month? 15k is faster than most folks can breath air.
If affluence is very, very important to you then Im afraid you might not ever be able to retire.
I know some wealthy people who dont need a lot of things, they drive around in beatup corrola's and have holes in their jeans, and still enjoy life immensely.

Similar to an earlier post by someone else, do you have a problem in principle with a 15k/month burn rate? I spend that much every month, and it’s not faster than breathing the air. What if a third of budget was charitable? It’s our largest line item.

So when I start reading comments like yours I’m curious if I’m detecting your lack of approval of the spend rate. I think it’s a fair question.

 

[DawgMan]

OP, ignore the "do you really need" comments. What you "need"/want to spend your $$ on is your business. I have had similar comments on my FatFire posts. I set my watch to age 55 because that was when the last kid (4) graduated college and I knew my heavy lifting was done. In my experience, those college/early adult years produced some additional unexpected expenses so I wanted to see more light at the end of the tunnel before I launched. You may want to do the same unless your JOB is kicking your A$$! Oh, sometimes those little boogers want to get married (I have 3 girls), so put that in your budget!

Short answer... I suggest you hang on a little longer and get at least part/most of college costs behind you.

 

[zippy2020]

Is the $15k per month spend grossed up for taxes? If you are taking the money from a taxable IRA account, you'll need to add around 25% for federal and state taxes.

Good point, plus the "expect taxes to go up" - #1 IMHO. And don't forget at that income level, your SocSec is almost all taxable.

Healthcare is expensive, especially if you are covering your kids. Assume you have a well-funded HSA already. As you age, you'll need it. Medicare is in serious financial difficulties and it's getting worse. I expect premiums to go up and the tier levels to get "tighter". When you get closer to 65 you'll want to keep an eye on that. We have retiree health benefits and Medicare tripled our monthly costs.

PandaBear's and Dawgman's posts re college costs/help to young adults are on point. It's a real struggle for Millennials right now and will probably get worse before it gets better. And none of us can be 100% sure what the economy/job market is going to look like when your kids start their careers. What happens when they want to buy their first houses? It's tempting to want to pitch in some $$$$ help.

Also, are you looking at the possibility of graduate school costs? Because even in today's job market, and probably more so in the future, college degrees are just an entry level step. In some careers a graduate degree is a necessity to be considered for any kind of promotion.

I mention this because a friend of mine ten years ago left a very good marketing job with a major corporation (everybody would recognize the brand name), to get an MBA at Harvard. She was well-regarded, but she realized that every single one of her co-workers had graduate degrees; she was the only one who did not. She was never going to get any further promotions without an MBA.

After getting the degree and re-entering the workforce - right at the height of the recession - she's had no trouble finding marketing jobs in both finance and technology companies. She pretty much writes her own ticket these days.

Just something else to think about, LOL. Good luck to you as you consider your options going forward.

 

[goingtotravel]

DH and I will also have a FatFIRE plan and will retire (hopefully if the COVID stuff ever ends) in our mid-50's. Our monthly budget is higher than yours and every single calculator we use shows us at a 100% success rate. But we just got to 100% in the last few years.

As far as comfort, yes, I agree it feels risky. We aren't there yet. The numbers work in theory but it's still nerve wracking to make that decision. We don't want to ever have to w*rk again after we FIRE, not ever, not 10 hours a week or 10 hours a month. Keep thinking we forgot something in our planning so the next step for us is to hire a fee only advisor to review our plan. Maybe hearing from a third party will help us move on.

 

[2177V]

One option is keep working. Your $5M should grow to $8M to $10M in 10 years if invested wisely in a simple index equity fund. At that point, you should be less worried about money. The question is whether you want to continue to work in your current position or another more satisfying job elsewhere.

I went through this same situation and I choose the latter. As expected, my nest egg grew to a comfortable amount. My more satisfying job was better than expected. Good job, good pay and good co-workers. I was planning to work for 5 more years but I ended up working 10 more years.

The best time to look for a more satisfying job is when you still have an existing job. If that second job turns out to be less satisfying, then you still have the option to retire as you originally planned from your existing first job.

Remember that when you get another job you do get re-energized in meeting new people, learning your new job and you will find that change in environment will help you mentally because your mind is being challenged. If you do not like to be challenged mentally, then it is time to retire for good.

 

[Animorph]

This is also a good time to remind that FIRECalc retirements of longer than 30 years have tended (or used to tend) to look rosier than 30 year retirements. The reason is that the last historical period it can look at for a 30 year period starts in 1990 or so. Longer retirements have to start even farther back. Fewer trials and less chance of seeing a recession at the beginning of retirement can result in a seemingly better probability of success for a 50 year period than a 30 year period, which is not likely to hold true in real life.

 

[WhenIsItTime]

Its a private company and im fully vested. Theoretically the private company, if sold would be more than I can spend in a life time.

FIREcalc, im still learning but the financial industry doesnt make sense to me. For example, financial advisor at wellsfargo daid they'll charge 1%. Then the mutual funds the invest in charges 0.5% -1%.

How the logic work if Im to live on 3% and i have to pay tax on it.

Bonds and CDs rate cant live off of. Any wisdom will be appreciated it.

Pick up Bogleheads guide to Investing. Great book written based on thoughts of founder of Vanguard. As a CFO, you should be able to pick up concepts easily. If you choose to go advisor route, just remember they are in sales business.

I’m in similar situation as you and waited until my withdrawal rate was 2%. Helped tremendously avoid panic during Covid stock market dip.

 

[urn2bfree]

Originally Posted by Fremontpoke

"FIREcalc, im still learning but the financial industry doesnt make sense to me. For example, financial advisor at wellsfargo daid they'll charge 1%. Then the mutual funds the invest in charges 0.5% -1%."


Yeah-- that does not make sense at all-- DO NOT GO TO ANY ADVISOR LIKE WELLS FARGO or anyone who claims their compensation should be proportional to your success. AUM fees are a bogus rip off perpetuated by those who profit from them. If you need investment or financial advice pay for it by the hour or a flat fee unrelated to how much money YOU have, but how much work they DO. Several hundred dollars an hour should more than suffice for any honest professional for a one time charge. On going portfolio management should not exceed a few thousand a year maximum. If they are doing more and claim that justifies higher fees they are really just taking more risk than necessary and running up your costs. Do it yourself is best, but may not be something you enjoy. If you think you might, the Bogleheads or one of several of the good books by William Bernstein will set you on a good path. A good website is also the Oblivious Investor.

 

[Safe Harbour]

Don't do it

Similar situation 15 years ago. I can tell you with your investments and expenses of $15K/month and kids with college still to go, you need to work till they are finished.

 

[Mountain skier]

Hi OP...you and I are neighbors. One way the wonderful people of this forum could help you is if you are willing to do a comprehensive expense breakdown of your budget. Forum members can offer ways to trim the budget and make FIRE immediately very realistic.

 

[djfiii]

Similar situation, but a few years behind you. Currently 42, was the CISO for a F100 corporation, now run the Security portfolio at a large consulting firm. Current NW around $3.5M, but would expect I'll have another $2M on the pile by the time I'm 49. I'm already itching to pull the rip cord, but know it's too soon. Hearing the pros/cons in this thread for a similar income / NW scenario, just fast-forwarded a few years, is super helpful to me, so thanks!

 

[DogGone]

I pulled the trigger last year at 52 with a slightly higher nest egg and lower expenses.

Be sure your expenses show the enormous reduction in taxes. If you invest wisely and manage tax loss harvesting, you can be easily less than $10-15k per year in total taxes until you have Soc sec and RMDs.

For me, the final catalyst was timing, not math. My children were early college and late high school, so this time was best to maximize family time. My parents are also just moving to a retirement home and I wanted to maximize that time too. Even my lifetime best dog is 10 so these next few years are special. OK, it’s really all about the dog, I don’t need much more.