We are 40 - Aiming to retire at 50 (or at least find a less stressful lifestyle)

[Fromwithin]

Hi,
Me and my wife are 40 years old, with a 5 year old daughter. We are both working professionals making 6 figure salaries. We are aiming to retire at 50, or possibly find jobs sooner than later that are less demanding and less stressful.

We live in Canada, we own a house, a condominium (which we rent) and we own a cottage. The cottage is paid for, the condo and home still have a mortgage.

However, the housing market right now in Ontario is on fire. We just put our house up on the market. If we get what we think we will, it will allow us to pay off the current mortgage and all debts (we will still keep a mortgage on the condominium as the tenants are paying it off). It will also provide us roughly $600K to put into savings along with our current savings of $300K. We will be just shy of $1m.

We feel the real estate market has reached a ceiling as interest rates are no doubt about to begin rising shortly. If there is a market correction in the next few years we may jump back into the housing market and use our cottage as leverage and draw on the equity to start a new mortgage.
The money mentioned above in investments, I typically look for an average return between 12-15% annual, so I would rather let that money work for us and compound over the next few years.

We will likely rent in our same area for the next while (we spend a considerable amount of time at our cottage through the summer and we do enjoy travelling throughout the year).

Ideally, we are looking to save between $2.7M - $3M to live comfortable and live off interests and dividends.
However, my job is extremely stressful and I'm not looking to continue this lifestyle for another 10 years until retirement. My goal would be to work another 2 years let the money grow and downgrade my job to something less stressful but still bringing in enough money to cover our current expenses and allowing to funnel savings into our RRSP & TFSA accounts

Any thoughts and feedback would be great!

Thanks

 

[kgtest]

I would like to retire at 50 as well with similar Net worth with one exception. We will own our home outright, and have the 2.5MM spread between taxable and tax-free accounts IRA, Roth and Broker. I plan to work the next 10 years and keep stacking cash so that I have about 3 years in cash and broker min.

So are you planning on refinancing the cottage to buy a new home? I guess I'm not sure the sense or meaning of this. So you will essentially be replacing one mortgage with another, adding the fee's associated with selling and buying 2 properties but netting $600k of liquidity.

Maybe I am missing some conventional wisdom, but this seems or appears like a situation of robbing Peter to pay Paul. On top of this, you are going to reduce your earning potential in the final leg of the race?

 

[RetiredHappy]

If I may rephrase based on my understanding, you will sell your main house and net $600k and invest the money. You already own your cottage outright and will continue to have a mortgage on your rental, a condo. So you are not paying down on any mortgage. You will now rent a home after selling your main home. At $900k in investments you are looking to have your investments grow till $2.7m to $3m when you retire.

It is alll about income and expense. If you change jobs and make less, will your income be sufficient to support your expenses and maybe continue to save more? You cannot count on investments growing at 12 to 15% annually. It is simply not realistic as you cannot count on an extended bull run over the next decade. Add a young child to your equation, there is no crystal ball that can tell you whether you can retire at 50.

 

[Fromwithin]

If I may rephrase based on my understanding, you will sell your main house and net $600k and invest the money. You already own your cottage outright and will continue to have a mortgage on your rental, a condo. So you are not paying down on any mortgage. You will now rent a home after selling your main home. At $900k in investments you are looking to have your investments grow till $2.7m to $3m when you retire.

It is alll about income and expense. If you change jobs and make less, will your income be sufficient to support your expenses and maybe continue to save more? You cannot count on investments growing at 12 to 15% annually. It is simply not realistic as you cannot count on an extended bull run over the next decade. Add a young child to your equation, there is no crystal ball that can tell you whether you can retire at 50.

Hi Kgtest,
My logic is that the housing market is extremely overvalued right now (at least in Ontario). To give some perspective, we purchased our home 11 years ago for $350k and homes on our street are selling right now for $1.5-$1.7M. most of that rapid growth took place over the last 2.5 years.
Interest rates have been ridiculous low and inflation is at record highs.
I feel there is going to be a correction in my area. As Warren Buffet says "you need to jump quickly on opportunities as opportunities don't wait for you!".
The risk I face is if housing prices continue to raise, but I feel based on the above we are nearing a ceiling.

So take the proceeds and invest. The return on that amount will far outweigh the monthly price we would be paying for rent (we will downsize for sure).
If market corrects than get back into the market. Use the equity from the cottage to fund a down payment for a new house (if we decide to do this). The money in the investments will grow quicker than the house appreciation.

That's my logic.

 

[Fromwithin]

If I may rephrase based on my understanding, you will sell your main house and net $600k and invest the money. You already own your cottage outright and will continue to have a mortgage on your rental, a condo. So you are not paying down on any mortgage. You will now rent a home after selling your main home. At $900k in investments you are looking to have your investments grow till $2.7m to $3m when you retire.

It is alll about income and expense. If you change jobs and make less, will your income be sufficient to support your expenses and maybe continue to save more? You cannot count on investments growing at 12 to 15% annually. It is simply not realistic as you cannot count on an extended bull run over the next decade. Add a young child to your equation, there is no crystal ball that can tell you whether you can retire at 50.

Hi Retired happy,
While there is always risk in investments, since I started investing in the markets over 20 years ago, I have averaged 17% returns. There are always ups and downs and I'm likely a more aggressive investor than others. But simple fact the S&P 500 has returned almost 14% over the last 10 years and that's just a common index fund.
Even at an 8% average return over the next 10 years without contributing a dime will see the investment at $2M.

That being said, you are correct we need to do our homework on what our anticipated expenses will be and what we will be able to continue to contribute to our retirement funds.
My thoughts are to down size and cut our monthly living costs considerably .
I do appreciate the feedback

 

[Markola]

You might find, as I did a few times, that a new boss or new job or new company fixes enough of the madness to allow you to continue on for a while. Or you might find that quitting without burning any bridges, as I did another time, taking a mini-retirement and decompressing, leads to some creative thoughts that attract you back into the workplace on your terms. There are lots of ways to do this.

 

[Fromwithin]

You might find, as I did a few times, that a new boss or new job or new company fixes enough of the madness to allow you to continue on for a while. Or you might find that quitting without burning any bridges, as I did another time, taking a mini-retirement and decompressing, leads to some creative thoughts that attract you back into the workplace on your terms. There are lots of ways to do this.

Markola, appreciate the insights and I truly believe you are right.
I'm not one to just sit around I do like staying busy, but there's a fine line been being busy and happy and burnt out and miserable.
I've been at my organization for almost two decades and they have been good to me, so not looking to burn bridges. Would like to leave on good terms and find something much less demanding.

Thanks again for your input it helps!

 

[Bamaman]

I'd hate to be a millennial today starting to save for retirement with the cost of housing (and rentals) completely out of sight. Starting a savings portfolio with a net zero interest rates and the equities market at an all time high would also be difficult.

As a Canadian, you also have other issues. Last time I was in Nova Scotia, sales taxes were 15% and the cheapest beer was $12.99 a six pack. The cost of living's so high which makes saving difficult. I lived through the Jimmy Carter Voodoo economic times, and times of high inflation is not enjoyable.

With a young child, retiring in 10 years may be optimistic. If I had any advice, study the equities markets and invest smartly. But the best thing you could do is save 100% of your wife's salary--living off your income. And when it's time to retire, find a cheaper place to live.

 

[Ronstar]

You might be able to retire at 50 by cutting expenses as much as possible. But not easy to cut expenses with a 5 year old who will only be 15 when you want to retire.

Tripling your savings from $900k to $2.7m in 10 years is somewhat optimistic. Especially if you quit your high paying job for a lower paying job that just meets expenses 2 years from now.

Selling some real estate now is a good start. Then cut expenses to the bone and save as much as possible. Then re-evaluate in a couple of years when you want to go to a less stress less pay job to see if retiring at 50 is feasible. A lot can change in a couple of years, and your retirement plan will become more clearer as time goes by.