Retiring at 32

[donheff]

Welcome to the forum and good luck. I am in the prenup camp. I never had one but then I didn't bring significant assets into marriage. If a potential spouse objected to one I would question her (or his in the reverse situation) motivation. You are young and so, presumably, is your spouse. Regardless of your commitment either of you can change in ways that drive the other away. Shi* happens. In a similar vein, DW and I have been married 30 years and will remain together until death. We both have absolute trust in each other. Still, we setup a family trust for our individual assets on death. This was partly for tax reasons but also because things could change after the death of one. We agree on where our assets should go and we are jointly ensuring that to the extant possible they will. So called "bimbo" clauses help alleviate the undue influence of future partners. Do we expect the clauses will be need? No, but shi* happens.

For those who object to prenups, would you object to one for a single person in his or her 60s with several kids and a size-able estate?

 

[Walt34]

To each his own, but there is no way I would marry someone who was planning for the end of the marriage even before it began. And you would not have to worry about my motives because I would no longer be in your life.

There was a time when I would have agreed with you. That was before my divorce....

 

[Elbata]

Just me, so when it comes to the Bell curve, I'm placed usually on the fringes

Thirteen rental houses? I'd live in each one for 2 years, sell it, and keep all the profits up to $250K. Married, that's $500K. Let me know if there's a better way to make tax free money, and that includes a ROTH!

Pre nup: A few of my wife's attorney friends have recently gotten divorced and each one pays their husband a monthly stipend and exDHs get a percentage of exDW's retirements.

 

[AnIntentionalRoad]

Congrats on your success!

Your numbers look very reasonable. My only caution would be to avoid putting more cash into real estate unless you want to move from early retirement to professional RE investor. It is fine if you do want to do that, esp. at 32 yo. Being that young, you need worthwhile things to do and a second, more enjoyable career is a good way to go. And it WILL be a career with that much property to manage.

 

[MooreBonds]

So, $5.1m of your $5.5 m NW is tied up in residential real estate, or in excess of 90%. Are these homes also in the same geographic area? If I were in your shoes, I would diversify. If you sell the $1.9 million, I would not plow it back into more real estate.

+1 on this - no way I would add even more real estate, even if it is geographically diverse. Just remember that each and every home you own is a mini-j*b. And you want to add in 3 more mini-j*bs to your early retirement schedule

After reading your initial post and then glancing over the others (pre-nups) I couldn't help but ask myself some questions (actually for you). You seem to have done very well for yourself in the business sense. Then you cautiously plan for a $500K house but fiance wants a $1M house.

+1,000,000!!! I find it hilariously sad that she is presumably not bringing anything to the marriage financially (You said earlier that you were "going to be taking care of her"), yet she wants a home that is TWICE as expensive as you suggested.

However, the bigger aspect is NOT the price of the home, but the value! How does she know that you 2 won't find your dream home with a $700k price tag? What variables are important? Area? School district? Condition of home? Views? Lot size? # bedrooms/baths? Home layout? A fixer-upper vs move-in just the way you want it? 50 year old vs 5 year old? etc. Why is it that she automatically knows she 'needs' a home that is $1MM? (especially when she apparently doesn't have a dime to her name?)

You may have already had that discussion on a home variable list, but just from the single sentence you say, it sounds like she simply wants to 'live it up' and wants as expensive of a house as she can get. And ask her - what makes her say she wants a $1MM house? Did she price them? Does she know what variables on her list drive the price up to $1MM? Or (as I fear) is she merely doubling what you said in an attempt to extract more from you?

I've been engaged before (twice), and have finally learned some critical lessons about relationships. Both engagements were to uber manipulative and controlling women, and just from a few comments you've made so far, my initial first glance does not give me a warm fuzzy feeling AT ALL. And I can relate a little bit to your uneasiness - my portfolio is a hair north of $2MM, and as a single guy in his late 30s, it's difficult trying to do the dating game when it seems most of our peers (men as well as women) can barely make their rent/mortgage payment, let alone have made sacrifices to save up and amass at least a small bit of a portfolio to start with.

And to add to the pre-nup comments: Just remember that ultimately, the JUDGE and the JUDGE alone determines what gets divided up in a divorce. You can have a judge make a reasonable decision - but from the anecdotal stories I hear, it's FAR more often than not that a judge rules in ways that leave your head scratching in wonder on how he/she could make a decision like that. And there is no court of appeals in family court - what the judge says, you live with.

Even if there is a pre-nup, there have been times a pre-nup is thrown out for errors/incorrect procedures (like if you present your fiance with the pre-up the night before the wedding). Also, even if you live in a state where you keep what you have before the marriage, it's not so clear-cut as it seems. Say you sell one of your rentals - what do you do with that money? Deposit it in the bank. Is that account a joint account? Suddenly, that could become marital property, and anyplace that goes afterwards is marital property. Or if you do as another poster suggested - live in a rental house for part of 2 years to get a pro-rated $500k tax-free capital gains. If you file jointly and use part of her exemption to get $500k in tax-free gains, a slick lawyer might argue that filing taxes as "married filing jointly" makes any gains declared on that tax form as marital property - and thus, the judge could then make the home sale proceeds marital property. (I don't have a story about this - just pointing out that judges can rule however, and it's a bit of a gamble without a prenup)

And with dividends/capital gains distributed from your investment accounts - whether you reinvest them or use it to buy new stocks, that could arguably become marital property since it was income earned during the marriage. Along with any stocks you sell after marriage and then buy something else.

 

[travelover]

......... I was thinking $500k, but fiance thinks 1M...........

I'd consider this a red flag. Having your spouse on board to control expenses enough for a 50 year retirement is critical. When the opening salvo is "I want a million dollar house", expect problems.

And yes on a prenup, been there, done that.

 

[AnIntentionalRoad]

Or (as I fear) is she merely doubling what you said in an attempt to extract more from you?
.

I think it is sad that a new person to the forum posts a question about his assets in real estate and so many people turn it into an opportunity to attack this guy's future wife based on 1 or 2 innocuous statements about her wanting a $1MM home.

The fact is that where he likely lives (where dotcoms are prevalent), a $1MM house is barely above average. It says nothing about his fiancee's morals or intentions. Wanting to live in an above average house dos not mean one is planning to bilk one's obviously overly-sheltered tech nerd future husband.

To the contrary, it sounds like OP is a pretty smart and financially astute person who is retiring at an age when most of our careers were just getting going.

 

[MooreBonds]

I think it is sad that a new person to the forum posts a question about his assets in real estate and so many people turn it into an opportunity to attack this guy's future wife based on 1 or 2 innocuous statements about her wanting a $1MM home.

Well, he did ask for input in his opening post:

Some questions...

Given about 5.5M net worth @ 32 and making about $175k/year currently - how much should I spend on a home for myself, and fiance (who I'll be supporting), and 2 kids in the future? My current main home is 1.7M, but there is a loan on it. Next one will be owned for cash. I was thinking $500k, but fiance thinks 1M. Any money left over from the 1.7M will be invested and I'll add that to my yearly income/grow wealth. I want to live off the interest.

He didn't say he wanted a $900k and she wanted $1MM. A $500k difference (double the price) is a big difference in price. And if your assumption is correct about $1MM being "barely average", I doubt that his target of $500k would put them in the ghetto and risk their personal safety. The biggest telling indication is that they are already at odds over their first major act together as a couple. He states that he will be supporting her and they hope to have 2 kids together. I speak from personal experience (my own and seeing immediately family go through this), that if there's that big of a difference on just 1 big ticket item, I'm willing to bet dollars to doughnuts that this is just the tip of the iceberg for things to come on differences in lifestyles, especially if kids are around. If she had a career and brought in a sizable % of total household income, that's one thing - but given that the OP says he wants to use the savings left over after buying the house and help life off the income from that stash, that says a lot about
1) her own understanding of 'real world' expenses (in terms of not realizing the expenses of a $1MM are likely significantly more than a $500k home)
2) her own willingness to realize that she is living off of his assets

I realize that he shouldn't hold his wealth over her head and make all the decisions....but what he didn't say was that "we had a discussion, and she said that she'd like a $1MM home, but that's just her dream, and would be willing to live in a comfortable, nice $500k home". Again, I'm willing to bet that she isn't the compromising type.

Sure, I could be way off base - but I've seen a number of people's behavior, and I can be very intuitive at times, and I fear for what else lay under the surface regarding the fiance's fiscal discipline, behavior, and spending habits if there's this much of a difference in both tastes as well as apparent compromises and willingness to 'sacrifice' regarding expenditures.

To the contrary, it sounds like OP is a pretty smart and financially astute person who is retiring at an age when most of our careers were just getting going.

Obviously, the OP has had great success and timing with selling his business. But that doesn't mean the OP is incredibly astute at possibly seeing some danger signs in a potential future spouse. I'm an extremely nice guy, extremely knowledgeable with finances, and extremely accommodating to people (especially a significant other), but that didn't save me from almost making a major mistake (twice) with women who would have been the death of me. He posted about his decision regarding a future home and posted some relevant thoughts, and we are responding to that. We aren't saying that the fiance is "definitely bad" - we are merely voicing our thoughts and personal life experiences to shed some light and make him evaluate things in a different light.

A benefit that many have not had in the past.

 

[travelover]

There was a time when I would have agreed with you. That was before my divorce....

X2

 

[explanade]

Does the OP have two kids or are planning to have two kids?

Is he sure they will only have two kids?

Does he like spending a lot of time with his future wife and kids? You hear about couples finding they can't stand each other once they're retired and have to be around each other all day.

Maybe budget for some individual hobbies.

And of course, some of the planning should take into account what kind of estate he wants to leave for the kids.

 

[explanade]

To each his own, but there is no way I would marry someone who was planning for the end of the marriage even before it began. And you would not have to worry about my motives because I would no longer be in your life.

Male or female?

 

[explanade]

Hmm, dot.com in the late 90s or early 2000s?

The OP made his windfall in his teens and bought real estate before the housing bust?

 

[LoneAspen]

To each his own, but there is no way I would marry someone who was planning for the end of the marriage even before it began. And you would not have to worry about my motives because I would no longer be in your life.

You're certainly welcome to your opinion. But not planning for future events, especially when statistics show the majority of marriages fail, to me, is unthinkable.

I've known people whose lives were devastated financially because they were taken to the cleaners after a bitter divorce. Some never recovered, and will never have a retirement because they'll be working until the day they drop dead. All because they fell in love with Mr/Ms Right, didn't protect themselves, and then things fell apart. Happens all the time.

 

[travelover]

You're certainly welcome to your opinion. But not planning for future events, especially when statistics show the majority of marriages fail, to me, is unthinkable.

I've known people whose lives were devastated financially because they were taken to the cleaners after a bitter divorce. Some never recovered, and will never have a retirement because they'll be working until the day they drop dead. All because they fell in love with Mr/Ms Right, didn't protect themselves, and then things fell apart. Happens all the time.

Exactly right. Love makes even the most intelligent person do stupid things and anachronistic laws can make that really, really expensive.

 

[Gill]

"I was thinking $500k, but fiance thinks 1M."
Somehow I see the beginning of a pattern...
Bruce

 

[Ready]

Since this is a forum of relatively conservative investors who have practiced LBYM their entire lives for a chance to reach FI and ER, it certainly does not surprise me that the general consensus is to do a prenup. A younger person who hasn't reached FI yet, or hasn't gone through the pain and devastation of divorce, focuses on different things, or simple doesn't have the life experience to know why it's an important step to take.

I used to think I didn't need a will or a trust. I reasoned that as long as I don't have one, I won't have to worry about dying. But as soon as I put one together, I'm all ready to go! So I figured the best way to stay alive was to avoid the documents completely.

Now that I've aged a bit, I see the error of my ways. But we've all had silly thoughts when we were young and naive.

 

[gozer]

When both individuals come into the marriage with similar levels of assets, this seems like less of an issue. But if one person is quite wealthy, it does not seem unreasonable for the person to ask for a prenup. And if the less wealthy person refused, I would question their intentions. After all, a prenup doesn't leave the less wealthy person destitute in the case of a divorce. It simply doesn't allow them to become mega-millionaires simply because the marriage failed. I can't imagine why this would seem unreasonable.

+1

I have never been divorced and my wife and I started with nothing so there was no prenup. But, I have seen far too many end up in this situation. Very few I have seen are amicable in the divorce. It is usually an extremely hostile asset grab situation on both sides.

 

[Elbata]

What a pleasure to know about this forum. Damn you folks make some great comments.

Now if OP would come forward again, I'd love to know if we've given him something to think about, or it's all nonsense.

 

[dtbach]

Anyone who has accumulated $5.5 million in assets at 32 has no reason to ask anyone on this board about anything. He has it made. If he only makes 2.5% a year on that he will have $138K a year to spend.

Sounds doable.

 

[travelover]

Anyone who has accumulated $5.5 million in assets at 32 has no reason to ask anyone on this board about anything ...........

I think that you are confusing wealth with wisdom. I'm a lot wiser now than I was at age 32, regardless of portfolio size.

 

[InParadise]

There was a time when I would have agreed with you. That was before my divorce....

My first marriage was 6 years of hell, and a divorce that had the ex threatening to go for my future wages since "he put me through college." Was I ever glad that I had insisted on declaring the income on the house cleaning business I had started to pay my way through, and of course had all the loans to show I paid my way. He was an a$$, changing when the ring went on my finger, to the point where I knew we were in trouble on my honeymoon.

Yet, when current DH asked me to marry him, I asked myself if I still believed in the institution of marriage. It was simple, if I did not, if I focused more on ending the relationship than beginning it, I would say no. That was over 20 years ago, and though it has been a good marriage, like any relationship there are bumps in the road that may have resulted in us not getting over them together if there were an easy out.

IMO when you prepare to fail you are much more likely to fail. I see the "well look at how many divorces there are today" argument, but suspect the ease of divorce today has much to do with the lack of motivation to take the time to make the right decision in the first place, (3 mos the first time, 2 years the second,) or to fight towards each other when hurdles appear in front of you.

Now that there are kids in the picture, if anything happened to DH followed by my wanting to remarry, I would simply discuss the issue with my intended. DH and I worked together to build these assets, with the goal in mind that if we don't use them up, they were going to the kids. My kids will be the beneficiaries of my accounts. It would be disrespectful to DH to leave the money to you, though certainly I will draw funds from these accounts while alive for us to use. That would be acknowledging my past relationships, explaining who I am, and what would happen when our relationship ended via my predeceasing him. If need be I would set up my assets as a trust for the kids with life benefits for me. It is so theoretical, given DH is hopefully not going anywhere, that I have not put together details.

What I would not do is say if we don't work out, I keep what's mine. This is what you would get for your years of servicing me. Really, how do you make that sound respectful?

Doubt I would ever get married again anyway. If no kids are involved I think there is a lot to be said for serial monogamy, and since I am not a big believer in organized religion, I have no real constraints to convince me that marriage as we know it is all that natural. I do however believe that my word is worth something, and as long as I have someone like DH who is willing to fight with me as opposed to against me to keep our relationship vibrant and caring, then I am in it for the long haul.

 

[Spanky]

Anyone who has accumulated $5.5 million in assets at 32 has no reason to ask anyone on this board about anything. He has it made. If he only makes 2.5% a year on that he will have $138K a year to spend.

Sounds doable.

+1. Why would anyone with that kind of financial success at age 32 ask for an advise on money management or investment in this forum? Nevertheless, the discussion has been very interesting and entertaining, the protection of assets is especially provocative.

 

[MooreBonds]

+1. Why would anyone with that kind of financial success at age 32 ask for an advise on money management or investment in this forum? Nevertheless, the discussion has been very interesting and entertaining, the protection of assets is especially provocative.

While there's always the risk of people joining the forum and making up fantastically wealthy portfolios out of thin air and throw a post out there for their own mentally messed-up kicks and grins, there are also many successful people who don't know squat (or know very little) about investments.

In many financial topics, we (a majority of members of this forum) easily forget how we are literally LIGHT YEARS beyond the end of the investment/personal finance bell curve we are. We may say that we know that the average American (or other country's citizens for the international members among us) isn't too financially astute, but it's easy to forget how far that intellectual chasm is that separates the average member on this forum from "everyone else". Just like with musicians, actors, and professional athletes who make buku bucks but then managed to run through it like water in just a few years' time - the only difference between them and the average consumer is that they have a hell of a lot more of money to start with, and a higher plateau to fall from.

And just as those people are fiscally unaware/uneducated, there can be quite a few financially successful people (in terms of salary and/or net worth) whom you might assume magically have instantaneous knowledge of investments just because they worked hard to achieve a high salary or build a business (doctors, lawyers, entrepreneurs, etc), but don't. Being able to earn a high salary or grow a business doesn't require astute financial knowledge of investments, just like having astute financial knowledge of investments doesn't guarantee a high salary or being able to grow a company.

My father was fairly successful in the construction industry. If you looked at his portfolio, you'd slap your head and shout "Oh my God! How could someone make such frequent and crazy/stupid investment decisions?!?!?" Yet, in spite of this, my parents have managed to accumulate a respectable nest egg.

 

[Ready]

While there's always the risk of people joining the forum and making up fantastically wealthy portfolios out of thin air and throw a post out there for their own mentally messed-up kicks and grins, there are also many successful people who don't know squat (or know very little) about investments.

I have to agree. I see little correlation between being successful in a career and having good investment knowledge. NBA players make millions of dollars every year. It doesn't mean I will be seeking their investment advice.

 

[retiredat32]

Thank you all so much!

Many of you are right. I know nothing about investing, retiring etc. I do have a CPA who helped me with some investment ideas in general, but when he referred me to a specialist, it was more like a high pressure invest with me game. So I wanted to come here where no one has skin in the game and wanted some general opinions. I realize the number is enough. I just didn't know if at my age, future family etc, if it will be. But after reading all of this and analyzing more, I think I will be just fine if I'm smart with it. Thanks again for all the tips.

Regarding the prenup - we had a talk a couple days ago about it. It didn't go we'll at all hah. Almost gave the ring back. She says she's upset about not being a partner and that it will divide a wall between us. Not protecting the assets part. But I told her its what I need and am willing to form an agreement with her before even approaching attorneys. So the compromise so far is all real estate and investments owned prior to marriage is separate property. Bank accounts, primary house etc can be marital. It will be wise of me to make sure almost all my wealth is tied up and the primary house is already bought and is a modest home before actually doing the wedding. I'll just never put any proceeds from a house if I sell it into our joint accounts. It kinda sucks that's how it has to be, but I'd be so unbelievably mad at myself if it didn't protect myself and I got screwed.

Any more tips, please bring me on, thanks again!