Hello Again

[TOPDAWG]

It's been a while since I last posted. The last time I posted I was preparing to sell my business. Now that everything is complete, I really need some more advice, and some assurance.

To refresh, I recently sold my business.

I am in a state of flux, as I am unsure as what direction I should head.

I am 43 years old.

My house is 100% paid for. 400K

I currently have $660,000 in an IRA. (Most of this was rolled over from a profit sharing plan)

My wife has $31,000 in her IRA

I have a total college savings of $140,000. I have two kids, so thats $70,000 each.

My current Savings account is $2,400,000.00

My current yearly expenses are around $110,000.00, to $115,000.00

I have zero debit.

I am trying to understand a few things.

1. Can I retire now?

2. If I can't retire now, how much more do I need?

3. I feel I have done a good job to this point in saving money, and preparing for retirement, but at the same time this isn't something I normally discuss with other people. Any thoughts?

4. I have a job position lined up that will pay me 100k per year, plus insurance, profit sharing etc..

5. As exciting as the new job opportunity is, I am burned out and not that excited to go back to work. At the same time, I can't take a year off and have this same opportunity.

6. I am just wanting to get peoples opinions on my situation, and thoughts and retiring early.

Thanks for reading this, and taking time to respond.

 

[Rambler]

Topdawg - welcome again. You have about $3m saved, house paid for, college lined up nicely.


questions:

1) is the 110-115k expense including whaat you pay to uncle sam and your state income tax, or is that after tax expenses?

2) You said the $2.4m is in your savings account...is that really a savings account at a bank? or is it invested, with cash dividends and interest ready to flow your direction?

3) do you have health insurance lined up?

Comments:

$115k is about 3.8% of your total nest egg, less than the normally touted 4%, BUT we are in a down and unstable market, and you are still very young. If that is post tax expense level, you are over the 4% mark...warning bells and sirens. I'm a little older at 47, expect expenses of about $125k including taxes, and my nest egg is about the same as yours (will be soon, anyway, when a certain trigger event occurs and gives me a little boost). My home is also paid off, but I am not comfortable at such a high withdrawl rate, due to relative youth and the current market (better to retire in a bull than a bear market).

I would also have to say that if your "savings account is not invested wisely with a well considered asset allocation and cash generation mechanism, you will find that you and inflation will burn thru that savings account very quickly.

Help us wth these questions, but until then, I would lean toward advising you to take the job you are offered, esp if it comes with health insurance, ride out the down market, get your AA in order, then FIRE.

R

 

[TOPDAWG]

1. The $110-115k is after tax.

2. 2.4m is in an investment account.

3. I do not have Health Insurance Lined up yet, as I am not sure which direction I am heading.



1) is the 110-115k expense including whaat you pay to uncle sam and your state income tax, or is that after tax expenses?

2) You said the $2.4m is in your savings account...is that really a savings account at a bank? or is it invested, with cash dividends and interest ready to flow your direction?

3) do you have health insurance lined up?

 

[Rambler]

OK... my guess at pre-tax need is 144k-155k, depending very much on your asset allocation and your state of residence (is there a state income tax, etc). In round figures, 144k expense level incl taxes puts you at a wthdrawl rate of 4.8%...wisdom around here would probably say that is too high and that you should plan for 25x your expenses for a 30 yr retirement. If you end up with a high effective tax rate and need the 155k, that's 5.2%. I would take the job for a couple years, re-examine expenses in that time, and (hopefully) the market normalizes and your nest egg grows a bit while you are working.

BTW, I am trying to get to about 32x est expenses, to have a cushion, to cover my relative youth, and to be able to sleep at night while the market rumbles...

hope that helps a bit.

R

PS: try FIREcalc...its seems to be a pretty good indicator

 

[TOPDAWG]

That helps me a lot.

I can certainly curb my spending, but for now, I will take the job for 3 to 5 years and see what happens.

I assume I am in a really good position compared to the majority of people that retire?

 

[samclem]

That helps me a lot.

I assume I am in a really good position compared to the majority of people that retire?

Yes. Absolutely.

Every family is different, but if I were in your shoes I'd take a hard look at my expenses. I'd ask if i and my family could be just as happy if we cut back on the things that matter less (things) and invested more in things that matter more (time together, etc). (Frankly, this is advice I haven't always heeded myself.) As you'll appreciate, due to taxes and other "friction," you have to earn a lot more than one dollar to have one discretionary dollar to invest/spend. Now, when you start multiplying those expenditures by 25-30 to see how big your nest egg would have to be to support it, and then add that "overhead" of taxes, etc on top of that, you can see that cutting back on expenses a little can easily save a guy years of extra time in the office cubicle.

 

[dex]

Are you really spending almost $10,000 per month after tax, excluding health insurance, with no debt?
Are the two children in private schools?

If so I would suggest preparing an after retirement, no children school costs budget. You might find the annual spending less than now.

 

[Rustward]

At 43, I would suggest that you learn as much as you can about health insurance in RE. It varies a lot from state to state.

Martha's thread at http://www.early-retirement.org/forums/f47/buying-private-health-insurance-30756.html is a good place to start.

There are a lot of interesting threads and posts related to insurance in the Health and Early Retirement Forum. It takes a while to find and read them all, but it might be worth the time.

 

[DangerMouse]

I would be reviewing your expenditure to see if there was any fat to be trimmed from the budget with a mind to finding a way to make your current investments throw off sufficient to allow an immediate retirement. I can't believe that you have so much but questions should remain as to if you have enough. I would be shaking coins out of the couch to see if I could make it with that amount.

Remember, your kids are only going to be around until they are 18, this time you could spend with them can never be clawed back. At the least why not take a couple of years off, and if you don't like it or need to boost your portfolio you can always go back to work in a few years.

 

[Nords]

My current yearly expenses are around $110,000.00, to $115,000.00

I can see how some posters have formed the misguided impression that it's penurious poverty or a financial impossibility to ER on $2000/month...

 

[samclem]

. . . you can always go back to work in a few years.

Every case is different, but this is probably not true for many of us. I imagine an individual with a fairly "standard" skill set could take a few years off and hop back into the job market where he left off, but that's far from universal. Sometimes a particular job is available only at present or for a year or so--until the people who know you and want to work with you have moved to other jobs and unrelated work. If you hop out and try to hop back in, you are back into the "resumes and interviews" cycle, which is not a good spot when you are more "mature."

Just an observation. For some people, there's a little hesitation in the door, for when they jump out they can only likely get back in at a significantly lower level.

 

[DangerMouse]

Every case is different, but this is probably not true for many of us. I imagine an individual with a fairly "standard" skill set could take a few years off and hop back into the job market where he left off, but that's far from universal. Sometimes a particular job is available only at present or for a year or so--until the people who know you and want to work with you have moved to other jobs and unrelated work. If you hop out and try to hop back in, you are back into the "resumes and interviews" cycle, which is not a good spot when you are more "mature."

Just an observation. For some people, there's a little hesitation in the door, for when they jump out they can only likely get back in at a significantly lower level.

We are in this situation ourselves. If my DH quits his job, if he goes back into the workforce his earnings would probably be reduced by 80%. We know if we hop off the particular gravy train we are on at the moment, it is going to be all over. However, for us it is so worth it. Quality of life and enjoying whilst you can sometimes outweigh the $ aspect. We do not have anywhere near as much as the OP does, however we are probably 90% we are going to make our move to FIREing in the next couple of months and roll the dice and see what happens.

 

[Milton]

Breaking things down last night, I know I can live for sure on $80,000 per year after taxes, but $85,000 to $90,000 would be a little nicer. 100K was a little overboard.

Given that you need $80,000 a year after tax, the short answer is yes, you can afford to retire now.

If you nevertheless want greater retirement income, then you should work for a few more years.

Only you can decide whether your desire for extra [-]luxuries[/-] income outweighs the fact that you are "burned out and not that excited to go back to work".