this is where i am....just turned 42

[ratraceout]

Hi all from London, England.

just an update on where i currently stand as i just turned 42 last week.

currently in a job where i earn basic salary of 167,000 USD per year. Taxes here are high so i take home about 60% of that. My bonuses used to be good but our market not so good so im probably looking at about 60-100,000 bonus this year. Last few years was a big fat 0.

I have 870,000 USD invested in stocks with a top wealth manager here and 250,000 usd in retirement account.

Married with 2 kids 3 and 1. DW does not work. We spend all my salary on living, schools etc.

We own a holiday property worth about 2.2m USD with no loan and our primary residence here in London is worth 1.4 usd with a mortgage of 225,000 remaining.

i know we are doing ok but i also know we have a lot of life (hopefully) left in us and also have very young children.

I would love to resign my high stress job and move somewhere warm and tropical but i also know its just a dream.

anyway any comments thoughts appreciated. Im not looking for "an answer" just for some comments if anyone feels like doing so.

thanks

 

[pb4uski]

Run your situation through Quicken Lifetime Planner. You may be able to do it if you get a handle on your expenses and liquidate one of your properties.

 

[jetpack]

I'm 42 and basically retired. I have a bit less money than you and enjoy a very comfortable lifestyle. You're in a very expensive area. Indeed, selling your properties and moving to a warmer climate, and you could retire. I don't know tax wise what you'd be hit with when a) selling your properties b) moving the money abroad?

Is there an option to rent that London residence? You could keep the investment and make some income.

 

[Fermion]

$4mil in assets at age 42 on a $160k salary? Either your taxes are not very high after all, you are a whiz at investments, or you inherited.

 

[rodi]

Are you tied to staying in England? (Or is your wife tied to that idea?)

I'll admit I have no idea what the British tax laws are for expat Britains. But someplace "sunny" sounds like you'd be interested in moving away.

I'm 10 years older than you, and my kids are a decade older than yours. I retired with a bigger investment nest egg - but not by orders of magnitude. Having a paid for home as well as a stream of rental income made the difference for me. Also, my kids go to public schools - which saves a lot.

You have a lot of your net worth tied up in non-income producing real estate. How tied are you to the vacation home? Or would you retire to that home, and sell the London property?

I wish you luck and success on your path to early retirement.

 

[rodi]

$4mil in assets at age 42 on a $160k salary? Either your taxes are not very high after all, you are a whiz at investments, or you inherited.

He mentioned bonuses and implied they were significant in past years. Perhaps he's an investment banker where the bonuses used to be pretty large.

 

[treeofpain]

You can certainly retire and move someplace warm and tropical if you sell your 2 properties. It comes down to what you pay for the move and what sort of income you need. A LOT of people could make it work in your scenario. I know I could.

 

[eta2020]

$4mil in assets at age 42 on a $160k salary? Either your taxes are not very high after all, you are a whiz at investments, or you inherited.

+1

I am not here to be nice polite guy........

I will tell you I am shocked that you have very small investments while you own real estate like a king of England. Also you make no money to own 2.2 million dollar holiday property. Makes no sense to me.

 

[pb4uski]

I was going to post a response to Fermoin's post and thought better of it but will now - what does it matter how the OP ended up in the situation he is in?

Other than envy, I don't see a point.

 

[eta2020]

It just looks like OPs situation is unreal. I mean you can not support 3 million dollars of real estate on this small salary. It simply does not add up unless he just inherited 2 properties from dead Uncle

 

[eta2020]

Hold down I meant 3.6 million dollars of real estate That simply is nonsense.

 

[Fermion]

I was going to post a response to Fermoin's post and thought better of it but will now - what does it matter how the OP ended up in the situation he is in?

Other than envy, I don't see a point.

It matters a lot if you want to give someone advice about retirement. If they did inherit, are they expecting more? If they did it all by risky investments, do they plan to tone that down during retirement? If they just managed to live on cat food for 20 years and saved every penny, then do they really need more than 4 million in assets (ie, retire now!)

 

[eta2020]

You know I knew people who had small houses and immense sums of investments but I never knew someone who had no investments but lived in two mansions.

 

[fidler4]

If you read some of his earlier posts from 2011 he talks about selling a business, making lots of money in sales, home in the Caribbean etc.


Sent from my iPad using Early Retirement Forum

 

[eta2020]

OK I may be wrong. I don't see in his post that he own business worth few million dollars........I think at 5 plus million dollar business that would make sense and he certainly would be in good shape to retire.

 

[daylatedollarshort]

If you cut your expenses you could retire tomorrow. If my math is right your net worth is $4.5M.

If you live to be 102, another 60 years, sold up the houses, rented and never worked again, you would have $75K USD a year to withdraw at even a zero real return after inflation, plus any UK or US pensions. Interest, dividends, capital gains or income from part-time or seasonal work you enjoyed would all be gravy. You don't have to actually rent, but as others pointed out you have a lot of money tied up in real estate right now that is probably very expensive to maintain. Getting rid of even at least one house cuts your expenses and by investing the proceeds increases your passive income.

If you quit your job you could move some place warm, tropical, with good public schools and a lot less expensive than London. It isn't really a dream. You would just need to plan it out and decide if you could be happy on a scaled down lifestyle, like not owning a $2.2M vacation home.

 

[ratraceout]

replies to messages

firstly thank you to everyone for your input. much appreciated.

i will try and answer everyone on this post -

pb4uski - thanks for your advice i will try the quicken lifetime planner.

Jetpack - thanks yours. indeed selling the holiday home and renting London is one option we are seriously considering. the values of the homes are after tax so nett to me. no problem moving the monies abroad.

Fermion - I sold a business for around 3 million usd nett to me in 2008. also from 2002 - 2009 my bonuses were in the 200-400 range. i saved all my bonuses always. both properties were bought at about half of what they are worth now. both have doubled in value since i have held them. hope this adds to above explanation as to how im in the situation.

Rodi - thanks advice. the vacation home is rented out for a considerable part of the year. obvioulsy the vacation home would go and we would probably rent the london house for some income. I would also not retire as in put my feet up copletely but would do something part time as would the DW which is not a 8am to 8/9/10pm.

Tree of pain - thanks for your input. i know that its possible and i also know we can cut expenses by not living in one of the most expensive cities in the world

eta 2020 - i believe in real estate. I bought at lows in the market in both places and have doubled my investment on both in 10 and 5 years respectively. stocks are great until one morning some crazy bombs another crazy or invesment bankers decide its time to dump the market. i have been burned so i prefer to have a tangible asset. There is no nonsense in my post. the holiday home pays for itself and my house here is not grand (its a 2 bedroom flat - real estate prices in London are nuts - which is not my fault

also do you really call 1m$ usd invested in the markets as considered no invesments?

i didnt inherit a dime for the record.

daylatedollarshort - thanks for your assesment. the rental place was always bought as an investment. it was a steal and i had to buy it. someone overstretched and had to sell and i was in the position to buy it for cash. The properties maintain themselves through rental and as i said the flat in London is a 2 bed.

Fidler 4 - thanks for relating to my previous posts

sorry if i missed anyone and thanks again for all the input.

 

[LastOfTheBoomers]

As for your warm tropical living - you should apply for an Australian visa - at your age and hopefully education background you tick enough boxes

 

[eta2020]

eta 2020 - i believe in real estate. I bought at lows in the market in both places and have doubled my investment on both in 10 and 5 years respectively. stocks are great until one morning some crazy bombs another crazy or invesment bankers decide its time to dump the market. i have been burned so i prefer to have a tangible asset. There is no nonsense in my post. the holiday home pays for itself and my house here is not grand (its a 2 bedroom flat - real estate prices in London are nuts - which is not my fault

Well if convert 3.6 million dollars in Real Estate to something that generates income (could be event renting) then you can call it quits soon.

 

[Maenad]

I'm not getting a feeling for where your wife is at with respect to a scaled down lifestyle (if indeed you need to scale down). Is she going to be upset if you say, "Sorry Debbie, no Mercedes this year. We have to set an example."*? Or will she say, "Yes, let's do whatever it takes, I miss having you around and the girls would love to grow up with their dad actually being there." The difference between those two attitudes can make or break ER.

I'd cash out the properties and get out of your high COL area. Or, if you could find a good property management company, you could rent them out for income even if you're thousands of miles away. The passive income from those alone may be enough to support you, depending on your expenses.




*Guess the movie and you get a warm fuzzy for the day.

 

[ratraceout]

Thanks Maenad. You bring up a very good question here. she definitely is not of the former Merc type or i would never have married her in the first place. She sees that the job drains me of all my life energy and if i came up with a plan that could envigorate me and we could still live an adequate life she would be more than happy. Im all about passive income, its just finding the avenue that generates it that is tough. to give you an example the rental on a 1.4m usd flat in london is 30,000 usd per year before tax of 20% and then there would be a managament fee. doesnt quite stack up does it.

 

[Golden sunsets]

A 1.4 million dollar flat can only generate $30,000 per year in income? That's crazy. I'd sell the flat and rent a 2bedroom flat rather than tie up that much cash. What would induce an investor in London real estate to purchase when he/she could not make a decent ROI?

 

[ratraceout]

sorry i miscalculated. the rental income is 57,000 usd before tax and mgt fee.

 

[daylatedollarshort]

Ratraceout - If you keep both the properties then doesn't that bring you back to your current status quo? You have a lot of your eggs not just in real estate but only in two properties. Your gains on the properties are not locked in unless you sell:

The Money Pit and The Decline of Enhanced Millionaires

There is a forum called biggerpockets where a lot of experienced rental property owners post. I would post your same questions there and perhaps they can give you more specific advice on how to live off rental income alone with assets like yours.

You might also want to read the book Retire on Less Than You Think by Fred Brock. It has sample before and after budgets for a couple with a lot of equity in a house in a high COL with high taxes who retire to a sunny, lower tax, lower COL area.

 

[ratraceout]

Thanks yours. if i was to think about ER or a change of lifestyle then of course at least one of the properties would have to go. thanks your advice on the books.