Age 34, semi-ready

[Chesh]

I am interested in hearing feedback on my situation.

I'm 34, wife is 33. 4 and 6 year-old kids, another on the way.
$400K in IRA and 401(k) accounts
We own about $300K of a house worth approximately $1M
$1.167M in a brokerage account
$130K in 529 accounts
The total is about $2M.
I also have equity in a privately held company. The equity is worth roughly $6M today. I can't get at any of that money until the company exits, which may happen in a few years, but who knows really.
My wife and I both work. Currently she makes $400k/year and I make $140k/year.
We spend about $140K/year after taxes.
When my equity becomes liquid, we will definitely be retiring.

In the meantime, I am thinking about quitting anyways. My wife is interested in continuing to work for a while, and we could live on her salary alone while waiting for my liquidity. She's okay with me quitting now if I take on more of household/kid duties.

What do you think; can/should I quit now, or should I keep working until liquidity? Thanks in advance for your thoughts.

[Notmuchlonger]

Keep working and donate your salary to your local soup kitchen.

[Avalon]

Until you get some helpful replies, welcome to the forum. Sounds like you're doing well.

[plex]

Sounds fine if both of you are OK with it, since you aren't actually going to be ready until you can get a good portion of the private equity, which requires a special event to get it out. Make sure that private equity isn't tied to you continuing to work until the special event. I'd estimate you need ~$5.2-5.5M, which includes enough to cover taxes, before you both are about there, and that is if you are sure about your budget. That's a pretty big gap you need filled in by an unpredictable event.

[Chesh]

Quote:

Originally Posted by plex Sounds fine if both of you are OK with it, since you aren't actually going to be ready until you can get a good portion of the private equity, which requires a special event to get it out. Make sure that private equity isn't tied to you continuing to work until the special event. I'd estimate you need ~$5.2-5.5M before you both are about there, and that is if you are sure about your budget. That's a pretty big gap you need filled in by an unpredictable event.

Thanks. My equity is fully vested, and I've reviewed my situation with a lawyer, who says the risk to my ownership stake is minimal if I quit.

$5.5M is right about where I thought we'd need to be as well. That means I'd need $3.5M from the liquidity event, conservatively assuming we don't manage to save any money from here on out. The event's timing is unpredictable but I feel like the chances of exiting for barely half of its current value are low, given what I know about the trajectory of the company. It's in my nature to ponder this stuff forever though.

[growing_older]

Private equity is tricky. I would want to stay involved until there is some kind of liquidity event. It's far too common for an unexpected bump in the business to mean new funding, dilution and changes in ownership. People who are no longer involved can find it difficult to defend their ownership interests against those in current control.

Your assets and income are extraordinarily favorable. If you walk away too early, it might be hard to get back into such a favorable state. At only 34, you can afford a few years of "one more year" to really shore up your position. Pondering is great, but a little extra margin of safety is nice too.

[pb4uski]

Quote:

Originally Posted by growing_older Private equity is tricky. I would want to stay involved until there is some kind of liquidity event. It's far too common for an unexpected bump in the business to mean new funding, dilution and changes in ownership. People who are no longer involved can find it difficult to defend their ownership interests against those in current control. Your assets and income are extraordinarily favorable. If you walk away too early, it might be hard to get back into such a favorable state. At only 34, you can afford a few years of "one more year" to really shore up your position. Pondering is great, but a little extra margin of safety is nice too.

+1, but financially you probably could quit and live off your DW's earnings until you PE stake is liquid. Good going and good luck.

[pixelville]

One important thing to plan for is, what you would do after retirement. Travel, chill out, hobbies, kids are all good for a while, but may not be satisfying for 40-50 years of retirement. Can you handle being a non-productive member of society...If you are somewhat Type A personality, increase your network, see if you can get on some company boards, advisor roles, non-profits, whatever will motivate you in the life ahead.

[LeavingOhio]

Quote:

Originally Posted by Chesh I am interested in hearing feedback on my situation. I'm 34, wife is 33. 4 and 6 year-old kids, another on the way. $400K in IRA and 401(k) accounts We own about $300K of a house worth approximately $1M $1.167M in a brokerage account $130K in 529 accounts The total is about $2M. I also have equity in a privately held company. The equity is worth roughly $6M today. I can't get at any of that money until the company exits, which may happen in a few years, but who knows really. My wife and I both work. Currently she makes $400k/year and I make $140k/year. We spend about $140K/year after taxes. When my equity becomes liquid, we will definitely be retiring. In the meantime, I am thinking about quitting anyways. My wife is interested in continuing to work for a while, and we could live on her salary alone while waiting for my liquidity. She's okay with me quitting now if I take on more of household/kid duties. What do you think; can/should I quit now, or should I keep working until liquidity? Thanks in advance for your thoughts.

My observations are as follows:

1) You mention that you have about $2 million right now, but really only $1,697,000 of that is liquid from which you could get INCOME, and $130,000 of that is for college for the kids, so really you have even less. Nice that you have $300,000 in equity in the home, but as far as income, it means nothing until you sell.

2) With a spouse who makes $400,000 a year when you spend only $140,000 a year (even though it's after taxes), I think it's a no brainer that you COULD quit now, especially if she's on board with it.

3) I'm a little leery of the equity in the business though...you don't know when you'll be able to get at that money or if it will still be $6 million when you do get it.

4) If you quit (which I think you can if your wife continues to work for a little longer) and you end up losing ALL the money in the business equity, then you COULD sell the million dollar home and buy a $250,000 home somewhere else where it would still be a nice home. This makes your OUTGO much less. Hopefully by then you'd have at least $2 million invested that you COULD use as an income stream. You don't need to add more to your kids' college fund, you'd have a paid for house and I'm assuming no other debt. You could then take 4% of that $2 million and live on $80,000 a year. I think that is worst-case scenario, and even there you'd be ok. Your life will be MUCH different if you actually get the $6 million. That plus another $2 million would give you $320,000 a year if you take 4%. You could keep the $1 million house and live on that.

[nun]

Quote:

Originally Posted by Chesh I am interested in hearing feedback on my situation. I'm 34, wife is 33. 4 and 6 year-old kids, another on the way.

I see no issue with you retiring and being at home for the kids as long as your wife continues to work, but knowing whether your wife can retire as well requires a detailed budget and projection for things like putting 3 kids through college. Given $2M in assets, 3 young kids, in your 30s and $140k annual expenses I'd say you AND your wife cannot retire yet. If, or when, the company equity can be tapped I'd re-evaluate.

[Chesh]

Quote:

Originally Posted by LeavingOhio My observations are as follows: 1) You mention that you have about $2 million right now, but really only $1,697,000 of that is liquid from which you could get INCOME, and $130,000 of that is for college for the kids, so really you have even less. Nice that you have $300,000 in equity in the home, but as far as income, it means nothing until you sell. 2) With a spouse who makes $400,000 a year when you spend only $140,000 a year (even though it's after taxes), I think it's a no brainer that you COULD quit now, especially if she's on board with it. 3) I'm a little leery of the equity in the business though...you don't know when you'll be able to get at that money or if it will still be $6 million when you do get it. 4) If you quit (which I think you can if your wife continues to work for a little longer) and you end up losing ALL the money in the business equity, then you COULD sell the million dollar home and buy a $250,000 home somewhere else where it would still be a nice home. This makes your OUTGO much less. Hopefully by then you'd have at least $2 million invested that you COULD use as an income stream. You don't need to add more to your kids' college fund, you'd have a paid for house and I'm assuming no other debt. You could then take 4% of that $2 million and live on $80,000 a year. I think that is worst-case scenario, and even there you'd be ok. Your life will be MUCH different if you actually get the $6 million. That plus another $2 million would give you $320,000 a year if you take 4%. You could keep the $1 million house and live on that.

Thanks for the thoughtful response. Totally agree on these points. The way I've imagined our worst case scenario is that the equity becomes liquid at about $1M (the company would have to really f it up from here to do worse than that), and/or that we have to work and save for another 7-10 years. Sooner or later we'll get there. If I want to quit now, in the worst case it means potentially delaying DW's ER because our savings rate is lower. Whether that happens or not depends on the likelihood of the equity disappointing us.

[FIREd]

I would be hesitant to pin my future on a single, illiquid asset (private business equity), but it seems like your wife's high paying job provides a good backup.

We are about the same age and I too retired while my wife continues to enjoy her career. This has worked fine for us over the past 2 years. However, This type of arrangement can also create lots of tension and resentment in a relationship. Some people might also have a hard time adjusting to the gender role reversal. So money should only be one factor in your decision making process.

[aida2003]

I'd like to be nosy and ask what your wife does for living. I think it's the very first time I've read it on the forums. I mean, of course, we all hear about the stars and C-suite ladies in the corporate America, but none of them or their spouses know about such forums and here a mere mortal came and said his wife earns $400K/yr. I'm totally impressed and curious now.

As far as responding to your thread, I have no clue about private equity, etc., but I'd like to ask if you've totally thought through about quitting. Is it because you don't like your job or is it because you'd like devote your time to your children? If you're going to have a nanny, a cook and a gardener, then it's going to be easy for you...kind of very relaxed parenting, but if you alone plan to take over all of these chores, you'll go nuts, IMO.

[sunrise]

Quote:

Originally Posted by FIREd I would be hesitant to pin my future on a single, illiquid asset (private business equity), but it seems like your wife's high paying job provides a good backup. snip

+1

I was a teenager in the early 80's, when the stock market crash left the ceo (my dad) and cef penniless, because the bank didn't liquify their assets soon enough. Before that, they were both multimillionaires on paper.

[Chesh]

Quote:

Originally Posted by FIREd This type of arrangement can also create lots of tension and resentment in a relationship. Some people might also have a hard time adjusting to the gender role reversal. So money should only be one factor in your decision making process.

Totally. I was actually a stay-at-home dad for one year prior to starting my business. Partly due to that prior experience, I'm not as worried, but in general it's definitely something to consider.

[Chesh]

Quote:

Originally Posted by aida2003 I'd like to be nosy and ask what your wife does for living. I think it's the very first time I've read it on the forums. I mean, of course, we all hear about the stars and C-suite ladies in the corporate America, but none of them or their spouses know about such forums and here a mere mortal came and said his wife earns $400K/yr. I'm totally impressed and curious now. As far as responding to your thread, I have no clue about private equity, etc., but I'd like to ask if you've totally thought through about quitting. Is it because you don't like your job or is it because you'd like devote your time to your children? If you're going to have a nanny, a cook and a gardener, then it's going to be easy for you...kind of very relaxed parenting, but if you alone plan to take over all of these chores, you'll go nuts, IMO.

My wife is awesome. She's a harvard-educated computer scientist, and works in a giant software engineering company as a high-level manager of program managers. She's been responsible for the design of several software products that were mission critical to her employer. She's one of the smartest, hardest-working people I know.

Being a stay-at-home dad before, I think I have a sense of what I'd be signing up for. I'd be spending more time on my kids (both fun and chores), and then I'd be using the remaining time to work on projects that have been on the back burner during my time as a company founder.