35 Year Old - What would you do?

[cfischer]

Been lurking here a while, so wanted to get everyone's thoughts about my situation. I've always been "good with saving" having learned this from my parents, who were of modest means for most of my life. Sadly, my father passed away this past year, and now that I'm managing Mom's finances, come to find out he had accumulated nearly $3 million in assets (mostly from inheritance from my grandparents, which kept compounding.) My father worked hard until age 69, and only saw 2 years of retirement, mostly in poor health. Unknown to any of us at the time since he kept everyone in the dark about the money, he could have retired 10 years earlier.

I'm determined not to follow a similar path. I work for a mega corp and am doing well, I just can't see myself being a "lifer". I know many lower level execs that could have retired decades ago, but continue to work because that's their entire identity (my aunt is similar.) That scares me, there's more to life than that, and I work way too much now to want to keep up this pace.

My situation is as follows:
Taxable Investments (all liquid, stocks/bonds): $700k
401k: $200k
Income: $250k/year gross, $170k/year net (though various promotions and healthy bonuses my salary is up a lot recently)
Expenses: $4-5k/month

So saving $100-120k/year

Inheritance: I'll likely have a sizable one at some point in the future. Mom is 64. I'd be quite happy if I never saw a nickle for 30 years.
Houses: I own none, having owned 2 for many years. The freedom is priceless.

I don't live extravagantly, but walking away from a job I like and then having to every worry about money later seems crazy. I'm particularly concerned about the cost of health insurance and lower expected investment returns over the next 30 years, and knowing I'd retired, I would expect my spending to increase over its current levels, though perhaps not drastically.

Given the above situation, wen would you walk away?

 

[cooch96]

Id wait until your total NW is about $2mm plus. Then you have much freedom and time to find something rewarding, or live comfortably and do nothing.

 

[pb4uski]

+1 when you can walk away with a ~3% WR, which would be ~$2m ($170k net - ~$110 saved or ~$60 spending divided by 3% WR).

I would strongly suggest that you get a copy of Quicken and model out your situation in their Lifetime Planner as that will give you a good idea and also you can look and see how things change with different assumptions.

 

[Focus]

Obviously, this is a very personal decision.

You're very young and are making an amazing salary for your age (heck, any age). You don't appear to be a member of the "live extremely frugally and 'retire' in your 30s" club, since you expect your spending to be above $60,000 a year.

Some of what you wrote is a bit vague. You like your job but have too much work. Is there any way to readjust your work/life balance so that you can stay longer in the job you like? I get the sense you're a C_O, so maybe not.

There's nothing in your message that indicates what you'd look forward to after you retire. Remember the maxim that it's important to retire "to" something rather than "from" something.

Financially speaking, you might feel quite comfortable retiring in 10 years, especially considering that inheritance. But are you ready psychologically?

 

[cfischer]

Great advise and perspectives, thank you - this is why I posted. You are correct, I have no intention of living frugally if and when I stop working. To me that somewhat defeats the point since I'm not in a profession I hate.

Not C-Suite (no where close) I run a large Engineering department, but it would be nearly impossible to scale back and continue to be as effective. Team is geographically spread out and I'm on the road 100+ days a year. We're the overwhelming market leader for my product, but it's a cyclical business prone to a boom and bust cycles, and while we're in a boom cycle now, the bust cycles are downright miserable. Increasingly, my job has become less technical and more political, navigating bueracracy to set realistic expectations and stop foolish decisions from being made. Too often the yardsticks we are measured on are largely arbitrary and often outside our control. Right now, the ends (both personally financially, and in the people we help) justify the means and sacrifices, but it may not always be that way and likely will not. Our technical superiority will eventually be copied and commoditized, and there may not be another rabbit to be pulled out of a hat.

As far as what I would do? I have lots of hobbies. Really getting into golfing, enjoy fishing, traveling, and just spending time with good people. I would probably join a country club somewhere. I have degrees in finance and computer science, so managing my money will always be a part time job and hobby (and admittedly, it is a bit of a passion.)

 

[DrRoy]

I think if you can live off of a modest WR of 2-3% depending on the age you choose then you can afford it, but you do need a plan for what you are going to do with yourself. Run your situation through FireCalc and see where you stand.

 

[Greencheese]

I'm younger than you but would agree with everyone else here and stick it out a few more years. With that kind of earning power you can reach comfortable FIRE relatively quickly without needing to live the MMM spartan lifestyle. Plus getting more of a safety cushion gives you more ability to adopt to new social changes and future technology going forward. Afterall, someday we might be able to do space travel in this lifetime if Bezos/Musk have their way!

 

[cfischer]

I'm younger than you but would agree with everyone else here and stick it out a few more years. With that kind of earning power you can reach comfortable FIRE relatively quickly without needing to live the MMM spartan lifestyle. Plus getting more of a safety cushion gives you more ability to adopt to new social changes and future technology going forward. Afterall, someday we might be able to do space travel in this lifetime if Bezos/Musk have their way!

I'm not planning on making a move anytime soon. 40 would be the earliest and that would only be if something happened that made work unbearable and I really did not want to start over at another company. 42 might be a great goal, with 45 being more realistic because of all of uncertainty in a 40+ year retirement. My biggest concern is health care costs for 40 years, coupled with a lower interest rate/expected returns investing world.

While it's been accurately pointed out that this is a very personal choice, I'm still interested in others perspective. $2M by 40 enough? $2.5M by 43? $3M by 45-46?

The MMM thing is every bit as crazy to me as multi millionaries that don't enjoy work but continue with it.

 

[ESRwannabe]

You could retire right now if you are willing to reduce living expenses.

Pretty much as long as you stay out of the major cities you could retire easily on $700k.

I live easily on $28k a year in the south east. Rent is my largest expense at $1k, but that is abnormally high due to a large military base in our town. In a "normal" town rent would be easily half that.

I don't have any kids and I'm in good health. So those are additional factors to consider.

If you were willing to expat you could reduce costs even more. I have friends in Thailand and I could live my same lifestyle there for around $15k. I'm a "home body" with no expensive hobbies that rarely travels.

EDIT:

"Great advise and perspectives, thank you - this is why I posted. You are correct, I have no intention of living frugally if and when I stop working. To me that somewhat defeats the point since I'm not in a profession I hate."

Doh... that's what I get for not reading the entire thread before posting.

Ok, for $60k I'd probably shoot for a 4% withdrawal rate on a stock heavy portfolio. So you need around $1.5 million.

Although keep in mind $60k where you live may be the equivalent of $30k somewhere else. You might want to look up a cost of living comparison calculator.

 

[Focus]

I don't have any kids and I'm in good health. So those are additional factors to consider.

Oh, yeah. There's that. Cfischer, you sound as if you're single. If you get married and have kids, that'll change everything.

 

[cfischer]

Even if I cut down the living expenses, doing anything this early would make me worry about money too much, which defeats the point. Even with $2M in the bank, I'll still have concerns about what could happen over a 40 year timeline.

Yes, I'm single and hope to stay that way. This all goes out the window if I add wife and kid into the mix.

You could retire right now if you are willing to reduce living expenses.

Pretty much as long as you stay out of the major cities you could retire easily on $700k.

I live easily on $28k a year in the south east. Rent is my largest expense at $1k, but that is abnormally high due to a large military base in our town. In a "normal" town rent would be easily half that.

I don't have any kids and I'm in good health. So those are additional factors to consider.

If you were willing to expat you could reduce costs even more. I have friends in Thailand and I could live my same lifestyle there for around $15k. I'm a "home body" with no expensive hobbies that rarely travels.

EDIT:

"Great advise and perspectives, thank you - this is why I posted. You are correct, I have no intention of living frugally if and when I stop working. To me that somewhat defeats the point since I'm not in a profession I hate."

Doh... that's what I get for not reading the entire thread before posting.

Ok, for $60k I'd probably shoot for a 4% withdrawal rate on a stock heavy portfolio. So you need around $1.5 million.

Although keep in mind $60k where you live may be the equivalent of $30k somewhere else. You might want to look up a cost of living comparison calculator.

 

[Matthew J]

I think this is not nearly as complicated as it seems.

First off, your life will change. Accept that you don't know exactly what it will be like 10 years from now.

Second: Start to put money into any tax advantaged accounts you can. Roth IRA, 401k, health savings account (HSA, but only if you will use it). Then fill up your taxable accounts. Make sure you have a good asset allocation also, 80/20 is what I use, but your tolerances may/will be different.

Third: At some point in the future you will eventually realize you have enough to retire with what you have.

Also don't worry about getting married or having kids. My wife works and is thus a financial asset. At your salary you should be able to pay for the entire upbringing of a child, including college, with one to two years salary, ie you work for one maybe two extra years. (invest into a 529 college plan early to keep college costs a little lower).

 

[cyber888]

Are you an only child If so, tell your Mom, you need some $$$ from your Dad's money. Retire now, and enjoy life. Don't listen to others, if you feel like you want out .. there's more to life than work.

Your Dad had 2 years of retirement and had $3 million he never enjoyed. Maybe he left it for you and your Mom to enjoy. If you croaked suddenly, then the US government might get your Mom's $3 Million when she pass on. It's a waste of your Dad's hard work. The IRS will only be too happy to get all that money.

If I was in your position, I would quit very soon. Sadly, my Dad left us only with tons and tons of debt, so I had to work to get my brothers to college and also accumulated wealth on my own.

 

[CabinLifeAt50]

I was in a similar situation to yourself, and am 36, though just recently switched companies. The politics in senior leadership can be rough on quality of life. My suggestion would be rather than asking for a particular dollar value is look more at how much you think you'll need each year when you do retire throwing in the fun extra activities/costs you may want. Also nail down an investment strategy that provides the income you need. Dividends, bonds, etc I'm not a fan of dipping into principal if I don't have to, but many are fine with that by taking X percent each year off the top, it works too. Once you have a strategy that will provide the yearly payments you need, and you calculate the amount of $$ needed for that strategy to pay, then just build to that. Just my two cents, others may have different thoughts.

 

[cfischer]

Matthew,

Thank you for the reply. Wife and kid is more of a personal choice not a financial one, but who knows what will happen.

As far as the finance stuff, I'm a finance MBA and have a good handle on that - I was more asking for the philosophical side of this. I think having a number in mind early will help avoid the "one more year" syndrome. My Dad got stuck in the one more year syndrome for about 5 years before passing away 2 years after he retired.

To me, everything in life is a risk reward trade off and carries opportunity cost. The longer you wait to do things, the greater your chance of being physically unable to do them. Maybe overly morbid, but it's how I frame the decision.

I think this is not nearly as complicated as it seems.

First off, your life will change. Accept that you don't know exactly what it will be like 10 years from now.

Second: Start to put money into any tax advantaged accounts you can. Roth IRA, 401k, health savings account (HSA, but only if you will use it). Then fill up your taxable accounts. Make sure you have a good asset allocation also, 80/20 is what I use, but your tolerances may/will be different.

Third: At some point in the future you will eventually realize you have enough to retire with what you have.

Also don't worry about getting married or having kids. My wife works and is thus a financial asset. At your salary you should be able to pay for the entire upbringing of a child, including college, with one to two years salary, ie you work for one maybe two extra years. (invest into a 529 college plan early to keep college costs a little lower).

 

[cfischer]

Not an only child, there's 5 of us. I'm smarter than to let the IRS touch that money. The Federal Estate exclusion is over 5 million and Mom is a Florida resident. She started gifting sizable amounts since he passed so we never come near that limited.

Good for you for putting your family through college. That's awesome.

Are you an only child If so, tell your Mom, you need some $$$ from your Dad's money. Retire now, and enjoy life. Don't listen to others, if you feel like you want out .. there's more to life than work.

Your Dad had 2 years of retirement and had $3 million he never enjoyed. Maybe he left it for you and your Mom to enjoy. If you croaked suddenly, then the US government might get your Mom's $3 Million when she pass on. It's a waste of your Dad's hard work. The IRS will only be too happy to get all that money.

If I was in your position, I would quit very soon. Sadly, my Dad left us only with tons and tons of debt, so I had to work to get my brothers to college and also accumulated wealth on my own.

 

[Focus]

As far as the finance stuff, I'm a finance MBA and have a good handle on that - I was more asking for the philosophical side of this. I think having a number in mind early will help avoid the "one more year" syndrome. My Dad got stuck in the one more year syndrome for about 5 years before passing away 2 years after he retired.

To me, everything in life is a risk reward trade off and carries opportunity cost. The longer you wait to do things, the greater your chance of being physically unable to do them. Maybe overly morbid, but it's how I frame the decision.

Makes sense to me. As noted in my signature line below, retiring early is a leap of faith, because there are always uncertainties outside our control.

When I was in your shoes but with a much smaller salary, I had a talk with a friend who was very well off. I told him I had determined my target number (relatively modest), after which I would retire. He said, "Double it, then pull the trigger. That way, you'll have no doubts."

By the time I reached a point at work where I was entirely ready to hit the exit, I was 75% above my target number. Having that buffer did make me more comfortable, since I knew there would be no looking back. I never considered staying until I had exactly doubled my number, though, since the timing should be determined by your overall readiness, not a number.

 

[someguy]

I wouldn't walk away now, but I would look at ways to cut back from what I'm implying from below might be pretty long hours and/or higher stress. Once you have a certain amount of cushion -- and I'd say you have it -- you can be more aggressive in terms of asking for what you want and taking calculated risks to get there.

The FI/RE situations are often framed as all or nothing: life sucks while you work to the max and spend "nothing" and then life is great when you FIRE. I didn't like how front-loaded the risk was in that scenario. Those who die early or otherwise have major derailments probably aren't posting on here.

I found a middle ground that works better for me. I got out of the traditional corporate rat race around 8 years ago and laser focused on whatever mattered most to me in all areas (work, income, expenses, etc.).

At the time, I assumed my timeline would extend but it has turned out that what I am making now is more, enough so that it more than offsets my increased budget. I credit that mostly to that laser focus and being happier as a result. I probably average around 20 hours/week, taking off 10+ weeks each year, depending on travel and other desires. It's funny: even though my overall timeline to FI has shrunk I think I may actually end up working longer because it doesn't feel like work.

Been lurking here a while, so wanted to get everyone's thoughts about my situation. I've always been "good with saving" having learned this from my parents, who were of modest means for most of my life. Sadly, my father passed away this past year, and now that I'm managing Mom's finances, come to find out he had accumulated nearly $3 million in assets (mostly from inheritance from my grandparents, which kept compounding.) My father worked hard until age 69, and only saw 2 years of retirement, mostly in poor health. Unknown to any of us at the time since he kept everyone in the dark about the money, he could have retired 10 years earlier.

I'm determined not to follow a similar path. I work for a mega corp and am doing well, I just can't see myself being a "lifer". I know many lower level execs that could have retired decades ago, but continue to work because that's their entire identity (my aunt is similar.) That scares me, there's more to life than that, and I work way too much now to want to keep up this pace.

My situation is as follows:
Taxable Investments (all liquid, stocks/bonds): $700k
401k: $200k
Income: $250k/year gross, $170k/year net (though various promotions and healthy bonuses my salary is up a lot recently)
Expenses: $4-5k/month

So saving $100-120k/year

Inheritance: I'll likely have a sizable one at some point in the future. Mom is 64. I'd be quite happy if I never saw a nickle for 30 years.
Houses: I own none, having owned 2 for many years. The freedom is priceless.

I don't live extravagantly, but walking away from a job I like and then having to every worry about money later seems crazy. I'm particularly concerned about the cost of health insurance and lower expected investment returns over the next 30 years, and knowing I'd retired, I would expect my spending to increase over its current levels, though perhaps not drastically.

Given the above situation, wen would you walk away?

 

[GrayHare]

It's a stretch for you to unplug now without more $. If the j*b is fun and pays well, by all means keep going, there is no more enjoyable way to secure your retirement. Reevaluate when the w*rkplace becomes a drag, which it will eventually.

 

[nash031]

My story is very similar. My dad was diagnosed with Pancreatic Cancer at age 77, just two years after he retired. His assets were far less than your father's.

Now I'm 38, my dad died last year at 81. Our total NW is similar, though I have about 1/4th of that in home equity. Investable assets have grown quite a bit, and I'll have a significant pension starting in 3.5 years.

I fully understand the "that won't be me" mind set. I'm in it.

Still, at 35, things can change so much over the course of the rest of your life. For me, even with a pension estimated worth of about $2.5MM, I'm aiming for $1.5M+ before I even consider pulling the plug, and will probably work past that. I could retire as soon as 42, but chances are I'll work till 50 or so. That'll give plenty of buffer, allow me to explore another career path more in line with something I love, and still give me time with wife and kids while we're all still young.

Bottom line: I am resisting the urge to err excessively in the other direction from what my parents did, but going for a still very early retirement, but with an adequate level of security to where I don't need to worry about our standard of living.

Indeed, time > money, but I'd prefer that time to be as stress-free and comfortable as possible. Use your big head start to your advantage, but resist the urge to go overboard.

My $0.02.

 

[Milton]

The Prodigal Son

You might want to check out The Number: A Completely Different Way to Think About the Rest of Your Life (2006). Although not a particularly useful book, it's an entertaining read and tries to consider the question you've asked.

Are you an only child If so, tell your Mom, you need some $$$ from your Dad's money. Retire now, and enjoy life.

It's Mom's money now, and maybe she has other plans for it. It's rarely wise to count on an inheritance.

Could be wrong but I don't have the sense from the OP's posts that he's interested in financing early retirement at his mother's expense.

Personally I would consider it rather presumptuous, selfish and, frankly, tacky to ask for a cash advance prior to Mom's death (unless the money was necessary to help cope with a medical emergency or similar crisis situation, which is obviously not the case here). Just my opinion.

 

[younginvestor2013]

I am now/will likely be in a somewhat similar position to you at your age as well.

I can't give solid advice but I have had many similar thoughts that you have had. I am 27 with a NW ($310k) and income ($85K) much lower than yours, but I suspect by 35 I will have around the same NW as you (and hopefully the same income! ). My parents are also affluent with a NW of about $5m but they live fairly frugally for their NW (only spending $100-110k/year). I spend about $4k a month max (likely less) in after tax money, so would also need about a $2m portfolio to support a 3% SWR.

I have thought my future plans countlessly over and over again given my situation. Given my current portfolio and annual savings rate, I might not reach $2m (in today's dollars) until my ate 40's, assuming my pay only increases with inflation each year. However I am confident I will be promoted and will be due for some sizable promotions which will increase my savings, but I don't factor that into my modeling.

At any rate, I basically have come up with three scenarios for me, which may apply to you too:

1) Work until I can support a 3% SWR (basically until 45-50).
2) Work until I have enough assets to withdraw 5-10% a year with the idea that I would inherit more funds later in life. Obvious there are inherent risks/tough decisions involved with this one.
3) Do #2 above, but find part time work so that I am essentially only withdrawing 3% a year.

Of course, there are pros and cons to all of the above. #1 is the least risky but #2 and #3 provide more freedom. #2 and #3 would also involve some family estate/inheritance conversations with your mom which might not be welcomed - it all depends on how close you are with your mom and what you think her plans would be for the money. The conversation may be very welcomed and well received by her. Or, it may be very unwelcome. I haven't had any inheritance talks with my folks, but I will say that they are very impressed with my disciplined savings and the fact that I haven't frivolously blown through my trust fund that they gave me. Another thing to keep in mind is that you have 5 siblings, so that $3m won't go nearly as far divided 5 or 6 ways.

#2 and #3 above also would give you freedom to spend more time with your mom in her old age (think, spending a winter in FL with her), which would be invaluable, of course, and something you could never replace.

 

[cfischer]

It's a stretch for you to unplug now without more $. If the j*b is fun and pays well, by all means keep going, there is no more enjoyable way to secure your retirement. Reevaluate when the w*rkplace becomes a drag, which it will eventually.

Very much agree. Trying to be proactive and plan now for the inevitability of the workplace becoming a drag. Always better to plan when times are good and your head is clear, versus in bad times when you're stressed.

 

[cfischer]

I actually forgot to mention that about Dad.. he has a significant pension (which my mother now gets) on top of it. He really should have stopped 10 years earlier.

Another data point, we did lunch with than an older coworker (similar job to mine) with a successful career that pulled the plug in his late 50's, and he does not regret leaving at all.

So part of the way I'm thinking about that early 40's - 50's timeframe. I place a lot value on that, because (hopefully!) I'll still be young enough to explore activities that require physical fitness/endurance, which may be harder to do at 50+. Counterbalanced with those being "peak earning years" and not wanting to ever stress about money. Not an easy call.

My story is very similar. My dad was diagnosed with Pancreatic Cancer at age 77, just two years after he retired. His assets were far less than your father's.

Now I'm 38, my dad died last year at 81. Our total NW is similar, though I have about 1/4th of that in home equity. Investable assets have grown quite a bit, and I'll have a significant pension starting in 3.5 years.

I fully understand the "that won't be me" mind set. I'm in it.

Still, at 35, things can change so much over the course of the rest of your life. For me, even with a pension estimated worth of about $2.5MM, I'm aiming for $1.5M+ before I even consider pulling the plug, and will probably work past that. I could retire as soon as 42, but chances are I'll work till 50 or so. That'll give plenty of buffer, allow me to explore another career path more in line with something I love, and still give me time with wife and kids while we're all still young.

Bottom line: I am resisting the urge to err excessively in the other direction from what my parents did, but going for a still very early retirement, but with an adequate level of security to where I don't need to worry about our standard of living.

Indeed, time > money, but I'd prefer that time to be as stress-free and comfortable as possible. Use your big head start to your advantage, but resist the urge to go overboard.

My $0.02.

 

[cfischer]

You might want to check out The Number: A Completely Different Way to Think About the Rest of Your Life (2006). Although not a particularly useful book, it's an entertaining read and tries to consider the question you've asked.

It's Mom's money now, and maybe she has other plans for it. It's rarely wise to count on an inheritance.

Could be wrong but I don't have the sense from the OP's posts that he's interested in financing early retirement at his mother's expense.

Personally I would consider it rather presumptuous, selfish and, frankly, tacky to ask for a cash advance prior to Mom's death (unless the money was necessary to help cope with a medical emergency or similar crisis situation, which is obviously not the case here). Just my opinion.

You're spot on. Zero interest in any of that money now, or really ever. I'm heartbroken my parents didn't enjoy it together, and I hope I'm long since set on my own by the time I'd inherit any of it.