Can I swing it? (one year later)

[Goodprovider]

All:

It's been almost exactly one year since I posted my initial "Can I swing it?" thread. As advised on this forum, I've stuck around at my present job. It's a high-paying job but very stressful with not very much security. After another year of that, I'm now more mentally ready than ever to make the move to retirement, and my financial picture has improved considerably. Here's my present info compared to what I'd written here last year:

Last year:

- 45 years old
- Divorced
- 2 kids who will be college age in 5 years - I pay for half
- Paid-off house worth about 750k
- About 600k in a 401k
- Another 600k in liquid assets
- No debt; net worth is about 1.95 million
- Expenses are about 50k per year.
- Only certain retirement income would be social security, though may be in line for inheritances

Now:

- 46 years old
- Divorced
- 2 kids who will be college age in 4 years - I pay for half
- Paid-off house worth about 800k
- About 766k in 401k / profit sharing
- Another 940k in liquid assets (555k in savings remainder in equities)
- No debt; net worth is about 2.5 million
- Expenses are about 60k per year. (I added another 10k to this to be on the safe side)
- Only certain retirement income would be social security, though may be in line for inheritances

When I factor in social security, FIRECALC says I should be fine 100% of the time. College expense is not included in my budget, though health care is. Frankly, I pay so much in taxes now, simply eliminating that cuts my spending nearly in half. I figure I could simply live off my savings until age 59 when I can then start accessing my 401k without penalty. The only factor really giving me pause is my kids' college expense.

This community offer me some real sage advice last time around, and I'm figuring that I'll revisit the well one more time before truly making the plunge. I'm in the kind of career where once I end things, relinquish my clients etc., there's no going back.

Many thanks!

 

[Dtail]

Are you holding ~30% of your portfolio in cash?

 

[Goodprovider]

Are you holding ~30% of your portfolio in cash?

Yes, for the time being.

 

[Bigdawg]

All:

The only factor really giving me pause is my kids' college expense.

This community offer me some real sage advice last time around, and I'm figuring that I'll revisit the well one more time before truly making the plunge. I'm in the kind of career where once I end things, relinquish my clients etc., there's no going back.

Many thanks!

I just looked up the International Rules of FIRE and it turns out that there is NO requirement for parents to pay for kids college. Who knew?

 

[JustCurious]

I think you are too young and you are cutting it too close. You have about 1.7 million at age 46, and with a SWR of 4% you could spend just a bit more than 60k per year which is essentially the same as your expenses. The numbers say you barely qualify but it would be too close for my comfort, especially at your young age since you could easily live another half a century and there are so many unknowns. I would not want to live that long and cut my expenses so close with little or no wiggle room for unexpected expenses, especially with two young kids and I wouldn't give up the prime earning years of my life so quickly especially since there would be no going back.

 

[street]

A suggestion would leave your present high stress job and find a job that is less stressful. You may find a new energy for something new and may lead to more satisfaction. Even if you did something you have a passion for would get you down the road a few more year so you could live off of that income and let your portfolio grow.

 

[ncbill]

I think you are too young and you are cutting it too close. You have about 1.7 million at age 46, and with a SWR of 4% you could spend just a bit more than 60k per year which is essentially the same as your expenses. The numbers say you barely qualify but it would be too close for my comfort, especially at your young age since you could easily live another half a century and there are so many unknowns. I would not want to live that long and cut my expenses so close with little or no wiggle room for unexpected expenses, especially with two young kids and I wouldn't give up the prime earning years of my life so quickly especially since there would be no going back.

Did you miss the "net worth: $2.5 million" in their first post?

Home equity is easily accessed via a cash-out refi or HELOC given the high income reported.

Kids can pay for their own college tuition...mine did, I covered room/board/etc.

 

[JustCurious]

Did you miss the "net worth: $2.5 million" in their first post?

Home equity is easily accessed via a cash-out refi or HELOC given the high income reported.

No, I did not miss that. I don't think it's wise to rely on your house as a piggy bank to borrow money to finance your retirement.

 

[Brat]

The OP may be required to pay 50% of his kids' college under the terms of his divorce agreement. No information if that would be limited to the cost of in-state universities.

Home equity is not a piggy bank.

The OP needs to cut spending whether or not s/he retires soon.

The OP does not have adequate resources to retire. Get another, less stressful, job.

 

[Goodprovider]

Sounds like it could be done supposing I’m willing to downsize my house. That’s what I plan to do in 4-5 years when my kids depart. I’ll also need to smartly invest my cash.

I do have it in my divorce decree that I pay for 50% of the kids’ college.

 

[bloom2708]

Sell the house. Rent exactly what you want or down-price.

That gives you a bunch of extra buffer taxable. Get your cash to work. Maybe 50-50 if you are conservative.

Health insurance is going to be expensive, but if that is in your $50k and taxes are, then should be fine. Just lower spending or earn a bit part time if needed.

 

[ncbill]

The OP may be required to pay 50% of his kids' college under the terms of his divorce agreement. No information if that would be limited to the cost of in-state universities.

Home equity is not a piggy bank.

The OP needs to cut spending whether or not s/he retires soon.

The OP does not have adequate resources to retire. Get another, less stressful, job.

Sure it is...with the OP's high income they can either borrow against it or sell it outright as others have mentioned.

Though the latter usually happens only after the kids are through with college and have moved out.

I have to say I'm surprised the "I'll pay for half of undergrad" agreement doesn't have limits...like public school only...otherwise seems like a potentially very expensive blank check to write.

 

[Golden sunsets]

This would be too close for my comfort. I'd try to increase the buffer to a more comfortable level.

 

[MBAustin]

If you haven't found them already, suggest you check out this list:

Some Important Questions to Answer

Coverage for "lumpy" expenses (high medical deductible, replacing vehicles, major home expenses, etc.) is very important, especially with the long timetable you're talking about.

It also sounds like escaping your current high stress w*rk environment is more important than actually retiring, so the suggestion to investigate lower stress/lower income positions makes a lot of sense.

 

[Vacation4us]

You have made great progress in the last year. Since you are obligated to pay for 50% of college for 2 kids I would suggest you not retire until you have that money saved. A state college with room and board can run 20k a year. So the minimum you should have set aside for 2 is around 80k.

Continuing to work and save now will make the day you retire all the sweeter. Your still very young your goal is in sight it just needs some added adjustments.

 

[Brat]

Keep in mind the fact that the equity in your home doesn't count in your children's FAFSA but cash in the bank will. Keep your house until that is no longer an issue.

 

[RetireeRobert]

A suggestion would leave your present high stress job and find a job that is less stressful. You may find a new energy for something new and may lead to more satisfaction. Even if you did something you have a passion for would get you down the road a few more year so you could live off of that income and let your portfolio grow.

Just what I was going to suggest--find a different and lower stress job. Even if you take much lower pay, maybe just enough to live on but not to fund more savings, you gain by not yet having to tap and start eroding your retirement nest egg. Do the lower stress job for another four years, at which time the kid starts college, and your one half of the college bill becomes much more precise. At that point you can determine whether to keep working---and not yet eroding retirement nest egg, or pull the plug.

Good luck.

 

[Cayman]

You might consider consulting or a part-time gig. You'd reduce your stress level, have more free time and supplement your income.

 

[anothercog]

How attached are you to where you live. You’re still pretty young. Moving to a new location and taking a new job, maybe overseas, may help you avoid burnout for awhile longer.

 

[Goodprovider]

This is all very good advice. Thank you everyone!

 

[Koolau]

I think I would be negotiating now (if possible) on where the kids will go to school. Big difference between State U and Harvard. You have the advantage that Ex apparently will pay half so will ALSO have incentive to keep costs down. I would assume you could also negotiate what % kids will cover with their savings/summer j*bs/school year jobs AND their "college experience" limits. Hope it all works out as YMMV.

 

[cyber888]

So, liquid asset at 46 yrs old is about $1.6 million with an $800K home.
That will be tricky ..

If you are 56, I'd say go for it. But maybe if you do retire and you find yourself short, you can downsize your home to $400K, and add the $400k so you'll have $2 million in liquid assets.