Just turned 49...Looking to Retire at 59 1/2

[Cusingeorge]

Everyone who he’s left before me is enjoying retirement and living well, and the company is obligated to buy back all the stock. It may not be a lump payment, could be over 2-3 years if I had to guess.

 

[ERD50]

Everyone who he’s left before me is enjoying retirement and living well, and the company is obligated to buy back all the stock. It may not be a lump payment, could be over 2-3 years if I had to guess.

You simply can't "put aside" your single stock risk. We've had a few posters here in that position, confident it was a good reliable stock, and they got hammered, and it destroyed their retirement plans.

I can't diversify till I'm 55.

I can diversify up to 50% when I turn 55,

My company is solid.

I would strongly recc you diversify down to 50% at 55. Offer to do it at 10% a year if that works better for everyone. Look at expenses, to see if you can retire earlier than 59.5 (as mentioned , there are ways to tap those funds w/o penalty). If you retire, you can diversify.

... So let's set my ESOP aside guys and assume that when I reach 59 1/2 and I have ~$2.7 mil or so in my retirement account. ...

How do you go from $1.4M to $2.7M in 10 years on $60,000 salary, and $72,000 'fickle mineral royalties' of $~ $44,000 after taxes?

Proceed with caution.

-ERD50

 

[militaryman]

How do you go from $1.4M to $2.7M in 10 years on $60,000 salary, and $72,000 'fickle mineral royalties' of $~ $44,000 after taxes?

Proceed with caution.

-ERD50

'Rule Of 72'
The rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.

$1.4mm becomes $2.8mm in 10 years with an average return of 7.2% (without adding a dime) however OP will be adding to the $1.4mm and is counting on $2.7mm not $2.8mm so probably needs to see a return of 6% or less to reach $2.7mm

 

[broadway]

'Rule Of 72'
The rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.

1.4mil becomes 2.8mil in 10 years with an average return of 7.2% without adding a dime

Can that assumption be made for a company stock which isn't even public?

.

 

[militaryman]

Can that assumption be made for a company stock which isn't even public?

.

Nah, Op of course needs to make corrections to expectations as time advances (just like all investors) but the point was it is not a stretch to see investments double in 10 years without new capital. Just a decent average return and the power of compounding.

 

[Breedlove]

O & G business always shaky that's normal O&G Royalties always seem to work out OK

 

[ERD50]

'Rule Of 72'
The rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.

$1.4mm becomes $2.8mm in 10 years with an average return of 7.2% (without adding a dime) however OP will be adding to the $1.4mm and is counting on $2.7mm not $2.8mm so probably needs to see a return of 6% or less to reach $2.7mm

And factor in 3% inflation, and the 1.4M would grow to only $2M in buying power (all that maters, and that's how it would factor into FIRECalc). To get to $2.7M with 3% inflation would take ~ 10% annual growth.

Awful hard to count on 10% annual growth on a single, non-public stock.

-ERD50

 

[militaryman]

And factor in 3% inflation, and the 1.4M would grow to only $2M in buying power (all that maters, and that's how it would factor into FIRECalc). To get to $2.7M with 3% inflation would take ~ 10% annual growth.

Awful hard to count on 10% annual growth on a single, non-public stock.

-ERD50

Again the question was... "How do you go from $1.4M to $2.7M in 10 years on $60,000 salary....."

Rule of 72

OP is earning 60K now --- even with your lowered (inflation adjusted) figure of $2mm that is a very conservative 3% draw

 

[aaronc879]

In the next city over from me there was a paper mill that had been a major company in this small area since the early 1900's. They were thought to be as solid as can be. They too had a ESOP. When they suddenly went out of business last year hundreds of people lost their life savings. ESOP are very risky. I would get out of it as much as possible, as soon as possible.

 

[ERD50]

Again the question was... "How do you go from $1.4M to $2.7M in 10 years on $60,000 salary....."

Rule of 72

OP is earning 60K now --- even with your lowered (inflation adjusted) figure of $2mm that is a very conservative 3% draw

From my response, it should be obvious to you that I understand how the rule of 72 applies there (or more generally 1.xx^years).

What isn't clear is whether OP is taking into account inflation, and how he comes to the assumption of ~ 7% gain or 10% gain.


-ERD50

 

[militaryman]

In the next city over from me there was a paper mill that had been a major company in this small area since the early 1900's. They were thought to be as solid as can be. They too had a ESOP. When they suddenly went out of business last year hundreds of people lost their life savings. ESOP are very risky. I would get out of it as much as possible, as soon as possible.

100% agree with that! Diversify ASAP --

That said, since the early 1900's there were probably thousands of employees that (if structured the way the OP's company is) retired after a life of service, had their shares bought back and lived wonderful Golden years.

Nothing lasts forever of course and the OP definitely should get out when possible.

 

[ncbill]

That’s $72K before taxes, the IRS will take ~39%, and mineral royalties are fickle, and shouldn’t be depended upon for anything but “free money”. We are nearly finished with the emergency fund, three months expenses outside of any royalty income. I have been thinking about diversification at 55, and rolling that over into the 401(k). From what I’m learning here, it may be in my best interest to do so.

You're not paying 39% federal on royalties of $72,000 annually, even adding wages of $60,000/year.

 

[Golden sunsets]

You're not paying 39% federal on royalties of $72,000 annually, even adding wages of $60,000/year.

I had the same thought.

 

[winyaz]

Congratulations on your savings. I think you are well on your way to retirement and could do so prior to 59.5 (barring the risks others have pointed out). I agree with the suggestions to make paying off your mortgage a priority. There are ways to access IRA funds without penalty, such as using it for Education expenses (college) or SEPP - Substantially equal periodic payments. If you intend to use these know the rules, especially with SEPP, otherwise the 10% early withdrawal penalty could be applied.