Another "Can I Retire Yet" Post

[movingrightalong]

Folks-

I've lurked here for a year or so, and have PM'd a couple of you about your individual experiences (thanks for sharing) but I could use some help. I'm particularly interested in feedback on experiences of folks who left a lot of salary behind to be more free for their own pursuits.

Since I started my career my goal has been to become financially independent. With a couple of exception years, my wife and I lived below our means with the express intent of leaving regular work for a more flexible lifestyle. I've been fortunate enough to make it to the executive ranks in a large tech company, and my comp far exceeds what I thought I'd ever make when I started my career as an enlisted soldier 20 years ago.

While generally my work life is fine, I've lost patience with a couple of factors that will be difficult to change, and can't stop thinking about pulling the plug and clawing back a bunch of my personal time.

I'm 44, my wonderful wife is 46, we have 2 great kids 10 and 11. We live in a place that is an outdoor sports paradise, that we take broad advantage of.

Our "regular" expenses total right at about $120K/annually and our net worth is about $3.6M details:

$5M in assets / $1.4M in liabilities (all liabilities consist of 30-year fixed mortgages under 4.75%, ~$1M in the investment real estate, and ~$375K in first home, which is under 4% interest.)

$375K in investment real estate equity (not counting appreciation): 2 vacation properties and 3 single family homes that we manage consistently for about $25K in after-tax cash flow.
$850K in cash
$900K in taxable account, all equities
$800K in non-taxable accounts, 80% equities/20% cash.
$200K in private investments, yield ~5%
$230K in 1st home equity
$250k not "in the portfolio" (kids' 529s, cars)

We'll probably use $375K of the $850K in cash to pay off the mortgage on the house, reducing our expenses to right at $100K/year. This would put our portfolio (minus first home) right at about $3M.

We bought the real estate (including our first house) during the crisis, and they've done great. I don't count the appreciation on the properties (or on my first home) in the calculations above, but there's easily another $300K in there after sale expenses and depreciation recapture. I consider it a margin of safety rather than a part of the investable portfolio.

I have absolutely worn a groove in firecalc and fourpercentrule.com for several years, but now that I think it's technically possible, I'm scared to death to leave a job which is paying $600K/year, even though I've *had it* with a number of factors at work that make me miserable if I think about them.

It's not important to me never to work again; the prospect of helping smaller tech companies out part time (ala #anintentionalroad) or investing time with friends' companies is interesting, I just don't want to *have* to do something that's not fun otherwise.

Also, feels like the clock is ticking with the kiddos; they'll be starting their teenage years soon, and the prospect of taking an outsized amount of time with them now is very attractive.

Wife's very supportive, my Dad (FIRE'd at 55 16 years ago) thinks I'm nuts for leaving the comp behind.

Need a tiebreaker :^). Or a fresh perspective.


Thanks.

 

[jabbahop]

January was the month my old high tech company would give bonuses and stock would vest. This was my first year retired so missed that windfall. As many on this site have said, if having that extra money wouldn't change your life in an important way, then it isn't something you need to stay for.

Good luck with your decision.


Sent from my iPad using Tapatalk

 

[rodi]

I did not have the assets, nor the comp, that you do, but managed to retire in time to annoy the heck out of my teenagers. It's a noble goal. I strongly believe that kids need MORE attention during their teen years than their pre-school years. At least mine do. (Ages 13 and 15)

How confident are you that you can live within the 100k (or 120k)? Could you try it - and therefore bank another $500k for the year.

Does your $100k/year spend include health insurance, taxes, etc? Have you accounted for everything?

I'm all for retirement young... just want to make sure you've thought of all the gotcha's.

 

[DROPOUT]

...

~$1M in the investment real estate, and ~$375K in first home,

... I'm scared to death to leave a job which is paying $600K/year

I'm quite a bit younger than you (will be 32 this year) and make around the same (about $700-800k)

We have about half the assets you do, but are looking to pull out of the rat race at about the $4-5M mark.

Taking in to account the kids ages, your yearly spend down $, and total assets ... I'd be comfortable pulling the plug.

Just my $.02 cents Good luck with whatever you decide and let us know what you do decide!

 

[Whisper66]

My turning point was when I challenged myself to honestly list the reasons that I was continuing to work.

The only reasons I could come up for staying were (a) the added money provided even more unnecessary financial security than we already had and (b) it was easy to stay in a comfort zone even if that job was no longer fun or interesting anymore.

When I turned the question around and asked why would I retire, I found the reasons were several and came easily. Mostly family oriented reasons.

Wish you the best as you go through your considerations. Take your time, no reason to make the change until you are ready.


Sent from my iPhone using Early Retirement Forum

 

[Jerry1]

Folks-


It's not important to me never to work again; the prospect of helping smaller tech companies out part time (ala #anintentionalroad) or investing time with friends' companies is interesting, I just don't want to *have* to do something that's not fun otherwise.

My don't you just go do ^^that^^? You certainly have enough to live a different life style even if it is considered work. You've don't the hard part and are financially on very good footing, now go find something you want to do and that you will enjoy. There are things out there that are rewarding and allow you to balance family. They don't often pay the kind of coin you're making, but if you're making $600K now, I can't imagine you don't have the skills that someone would want who would be willing to be more flexible with you in order to get your services at a different price point.

 

[TallTim]

You certainly have enough to live a different life style even if it is considered work. ... There are things out there that are rewarding and allow you to balance family. ... I can't imagine you don't have the skills that someone would want who would be willing to be more flexible with you in order to get your services at a different price point.

+1 to this idea.

I 'walked away' from an exec officer job of a >$1.5B tech company at age 48 with kids in high school. Similar income, a bit more in assets, but admittedly higher expenses. Teenagers (18, 16) at home and college imminent (DD was accepted in Dec early decision at an Ivy back east).

6 months into it, I would not change a thing. I have picked up a small public co board seat, a couple of moderately lucrative consulting projects @ < 10 hours a week, and also consistently trade futures and options. With those sort-of income streams we haven't touched the principal since RE in July of 15.

I tell all my former colleagues who could have cashed out in the big merger but are still working and flying 150-200k miles a year around the world (as I was) that they're literally killing themselves slowly while just adding to their kids' or grand-kids' inheritance(s).

If you have run the #s and think you'll be fine, then IMO run do not walk to the exits. Even if you have to do some kind of work - either b/c you want to or b/c you end up needing to, there are far better alternatives than the big company exec meat grinder. Been there, done it for years, and I speak from experience!

Courage and take flight as soon as you can!

 

[Ronstar]

I'd say pull the plug if you can get your expenses down to around the $100k range. Life is too short to be spent in a job that you're not comfortable in. Since you are young, maybe find some part time work to bolster your finances in the short term.


Sent from my iPad using Early Retirement Forum

 

[Mr. Tightwad]

Your freedom and time with your kids are more important. But for 50k a month I'd probably go to work Monday morning.

 

[steveark]

I did it.

I made half a million last year after a career of making much less most years. My savings and investments totalled about 3 million. Zero debt, kids grown and self sufficient. And I turned 60 a few weeks ago working a job I used to enjoy but which had turned into a source of constant stress and worry.

So, I walked away. Now I am self employed as a consultant working about two days a week doing something I enjoy for under six figures, playing more tennis, hiking more with my wife and enjoying a new less structured life. It is somewhat scary, I don't quite cover our expenses with my consulting but it pays 75% of our bills. Would I make the same decision knowing what I know now? Yes. Have I missed having hundreds of employees and controlling billions of dollars in cash flow and equipment. Not for one second.

Go with your heart!

 

[movingrightalong]

Wow, you guys are great...thanks very much for your perspectives. Lots to think about, but your feedback is incredibly helpful.

I bet there's an opportunity for early-retirement.org to form a niche consulting firm given the talent walking these halls. I wonder if they need a manager for that. :^).

 

[REWahoo]

I bet there's an opportunity for early-retirement.org to form a niche consulting firm given the talent walking these halls. I wonder if they need a manager for that. :^).

Heck, we're all retired or tying to be, not looking for a job!

 

[movingrightalong]

How confident are you that you can live within the 100k (or 120k)? Could you try it - and therefore bank another $500k for the year.

Does your $100k/year spend include health insurance, taxes, etc? Have you accounted for everything?

I'm all for retirement young... just want to make sure you've thought of all the gotcha's.

I'm pretty confident that those are my expenses. I budgeted a couple k/month for health care, budgeted for taxes and insurance on the house, new telecom expense (covered by work currently.)

The $600K turns into considerably less when our dear leaders get their share, but yeah, we're trying it out (deferring almost all of my comp, and seeing what we take out of cash reserves to make sure we're really living within the budget.)

+1 to this idea.

I 'walked away' from an exec officer job of a >$1.5B tech company at age 48 with kids in high school. Similar income, a bit more in assets, but admittedly higher expenses. Teenagers (18, 16) at home and college imminent (DD was accepted in Dec early decision at an Ivy back east

Congrats for making the call, and congrats to your daughter, that's very cool!

Your freedom and time with your kids are more important. But for 50k a month I'd probably go to work Monday morning.

I hear you [grabs laptop case and heads for the door]

Thanks guys. I'll keep you posted.

 

[enginerd]

$375K in investment real estate equity (not counting appreciation): 2 vacation properties and 3 single family homes that we manage consistently for about $25K in after-tax cash flow.
$850K in cash
$900K in taxable account, all equities
$800K in non-taxable accounts, 80% equities/20% cash.
$200K in private investments, yield ~5%
$230K in 1st home equity
$250k not "in the portfolio" (kids' 529s, cars)

In your net worth, let's not count your house, college funds and your cars...you're not making any money off of those to pay for "regular expenses". You have left about $3.1MM. With expenses being $120k, your spend rate is 3.8%. This seems a bit high to have a 40+ year retirement.

Also, you have over $1MM or 30% of your NW in cash. Again, this is too high to last a 40+ year retirement. (although, maybe you're just waiting for the markets to bottom out)

IMO...you're almost there, save a bit more and find a way to put that cash to work for you.

 

[PoF]

My target is similar to yours, and I should be about the same age when I hit the target, assuming the markets do what they usually do and recover in the meantime.

You could pull it off now but you should willing to make sacrifices and reduce your expenses in down years. Another year or 2 could put you in a much safer position. Only you can decide if OMY or 2MY is bearable.

You didn't mention if any of your non-taxable accounts were Roth. If yes, the pendulum swings a bit more in the favor of being able to retire sooner than later. Also, you're holding just over $1 million in cash. I would nail down an IPS and determine a better asset allocation and stick to it prior to retiring.

Good luck! You're in an enviable position.

 

[Looking4Ward]

You might be surprised what expenses you incur while you're working that you no longer feel like you need when you're not.

 

[movingrightalong]

Also, you have over $1MM or 30% of your NW in cash. Again, this is too high to last a 40+ year retirement. (although, maybe you're just waiting for the markets to bottom out)

IMO...you're almost there, save a bit more and find a way to put that cash to work for you.

Agree on the cash...I'll probably pay off the house, and will either roll half of what's left into paying off other real estate, or into a broad market index. MY AA won't show that much cash for very long.

Thanks!

 

[movingrightalong]

Quick update:

Using cash to pay off mortgages. First home is paid for, one of the investment properties is paid, and I've got enough cash to pay off another one. Evaluating strategies for which one to pay off next (kill off slightly higher interest, or the one with a higher likelihood of income volatility.)

I intend to use the combination of dividends from taxable account combined with deferred comp and cash from real estate proceeds to bail out when I can safely hit $120K after tax with those sources of income. Will probably take the rest of the year. Tax advantaged accounts grow until I can access them 15 years from now.

Spent a ton of time going back and forth on the soundness of paying off mortgages for which interest is tax deductible, etc, etc, but ultimately questions about safe withdrawal become simpler for me when I don't have to sell something in order to generate the cash I need to live on, so that's the way I'm going.

 

[eta2020]

I would work another 4-6 years.

I think you had done great job, but once you have what you have you know it is not really
all that big pile of money especially if you are relatively young.

And once you are out of work for 2-3 years going back is not an easy option. Once you work
with frame of mind that you do not need that job (do not give a F&%^).... it is pretty relaxing IMO

 

[movingrightalong]

Once you work
with frame of mind that you do not need that job (do not give a F&%^).... it is pretty relaxing IMO

Fair point indeed, but I lead an extraordinarily high-performing team, and it's not fair to them not to add the value I'm compensated to provide.

Would absolutely consider doing something where fewer people relied on me day to day.

 

[PapaBear67]

I was in a similar place as you, albeit I did not have the liquid assets you did and was a bit older. But I was a mid Sr exec with a Fortune 100 company. Working the life you would expect...until at 51 they wheeled me out of the Executive conference room during a meeting at 830pm. I cracked severely and my body shut down. That day I decided that what mattered most wasn't the income or the position, it was my family and my health. I retired at 54. We live comfortably on about $100k a year. My pension and the wife's salary (she went to work when the kids hit high school) covers everything we need.

I say transition out as soon as is practical. I sense that you, like me, work to live, not the other way around. Take advantage of the opportunity you have in front of you. You will adapt. You will love the FIRE life.

The exec lifestyle takes it from people. I've seen too many of my mentors go hard until they were 60 or 65, and then never make it alive two years after retiring. Its not worth it.

 

[RobbieB]

Maybe they died of boredom? Some do me thinks. The hard chargers, make stuff happen, win the battles, command and conquer types?

I dunno. You know the type A & B personalities? I'm sorta like a C-, not even on the charts so I drifted into this pretty easy.

 

[PapaBear67]

Maybe they died of boredom? Some do me thinks. The hard chargers, make stuff happen, win the battles, command and conquer types?

I dunno. You know the type A & B personalities? I'm sorta like a C-, not even on the charts so I drifted into this pretty easy.

There is some truth in what you say. Many of the guys I see retire, don't have any passion to follow. They sit at home idle and quickly wither away. for me it's golf, tournament bowling, and mild hikes with the Mrs. And since mama works.....dusting, vacuuming, laundry, and grocery shopping.

 

[movingrightalong]

I would work another 4-6 years.

I think you had done great job, but once you have what you have you know it is not really
all that big pile of money especially if you are relatively young.

Man, you've got a point....I've been thinking a lot about the prospect of working full time another 4-6 years. I could add materially to my portfolio by then, but my kids will be in their mid-late teens. Currently, after tax, my income adds ~9% to my NW annually. Deferred comp is helping that a lot.

For the group, here's how I'm slicing my portfolio as I forecast it for early '17 when equity vests:

non-invested (529s) - $200,000 Cash gen: $0
First Home: $635,000 Cash gen: $0
Cash: $350,000 Cash gen: $0
Company Stock: $50,000 Cash gen: (3%) $1500
Deferred Comp: $250,000 Cash gen: (3%) $7500
Retirement accounts $800,000 Cash gen: (2.0%) $16,000
Cash equities $850,000 Cash gen: (2.0%) $17,000
Personal Loan $100,000 Cash gen: (5.5%) $5,500
Real estate equity $760,000 Cash gen: (7.0%) $53,000

Total Net worth $3,995,000

Total Invested portfolio $3,160,000 Cash Generation ~$101,000

Withdrawal rate across the portfolio of about 3.3%, much more conservative on the stock portfolios. I modeled them that way partly in order to account for the fact that I can't withdraw from retirement accounts for another decade and a half, so there's material SOR risk in the taxable account. My dividend and distributions equal roughly that amount in my taxable account annually. I could see myself increasing these marginally as I got more comfortable over time, but don't want to plan on it.

I'd still be carrying about $655K in mortgages on investment real estate across 3 properties. I could pay off portions of that to increase cash gen, but won't do so if it means reducing cash reserves to less than 3 years' living expenses. The real estate at 7% is pretty heavily burdened by my pro-forma holdbacks for maintenance. Actual cash returns on real estate equity over the last few years have been closer to 9% or so.

Given my orientation around risk, I'd probably try to figure out how to put $30-50K on top of this by consulting, or doing something part time. I'd use that to cushion the portfolio, or spend more on vacation travel.
Prospect of traveling for an extended time and renting out the first home is really high, and unaccounted for in here.

The question is whether my quality of life is better working and not having to worry about money, or budgeting a little more aggressively than I have over the last few years and getting a bunch of time back.

Not sure if there's a question in there.....typing it out is therapeutic. .

 

[petershk]

Just as an idea. Maybe inverting the problem will help some.

I have a similar situation to you and am currently taking a bit of time off work to "test run" retirement.

Beyond that, I kind of came up with two approaches to the problem. The problem being "how do you even think about leaving a high paying job you don't necessarily hate, but something inside you tells you to stop and spend more time with kids, family, etc."

It's a surprisingly hard problem and the default decision is to do nothing which means keep going to work and making money. LEAVING requires active decisions that are hard and consequential... so how to even it out?

1) Don't give up something you need for something you don't.
I apply that rule to financial decisions, but have recently found it also works for non-financial decisions. For example, I have 2 young kids. They learn new stuff every day. How much do I value being around that? If it's a lot, then it becomes a "think I need." If I then look at work as a source of income and also some life value, how does that stack up? Well... if money isn't a problem, then it quickly becomes a "thing I don't need." So then the question is... to what extent does going to work (thing I don't need) interfere with kids/family (something I need) and that helps guide my decision. In my case it might mean reducing the amount of time I spend working... and if I can't make that work at my job... well... not the end of the world because I don't need it, right?

2) imagine the situation was the opposite of what it was
By this I mean my current situation is I HAVE a job I am NOT retired. Thus to change the state requires direct action.
So imagine the situation was the opposite. You ARE retired and you are OFFERED your current job. Would you stop being retired and go back to work doing what you do for the amount of time you do it for the compensation you get? If the answer is an immediate "NO" then it makes the decision a bit easier. It's probably not quite as easy as that... but even if it's a "MAYBE" that means if the situation were reversed (you were retired and given that offer) you'd probably stay retired for the same reason you may continue to work now .
So in this situation it's the precedent that is making the decision for you as opposed to the analysis. something about that "feels" wrong somehow.