Ready to retire - how I calculated it.

[37andhappy]

I am 37, have been working damn hard since graduating. Actually I have also been partying pretty hard during this time also, so the biggest thing I am initially looking forward to is being able to get more sleep! Also looking forward to being able to exercise more, and also to being able to stay out at night to any time I like! And travelling to other countries, without the need to check emails, and counting the days down until I need to be back in the office....

I have had a reasonably good income, especially the last 10 years of my career, and I invested it pretty well. Net assets are now valued at USD 4.1m, consisting of properties in Australia, New Zealand, Hong Kong, Singapore, and stocks in relatively high-yielding primarily blue chip companies. Annual investment income from these various assets, after tax and other costs is approximately USD 160,000, with the underlying assets (and the income) keeping pace with inflation.

One of the biggest issues I faced when planning to retire is "how much is enough?". Asking friends produced a really wide range of answers. Some (who had retired already) are living on much lower incomes, whereas others (the guys partying every night, driving fast cars, drinking champagne and buying designed clothes etc, suggested that one would need USD 10mil or more of assets to retire.)

What I did, while still work, is put all of my monthly salary into an account that I did not touch, and then as a test, tried to live only off my investment income (which goes into several accounts in countries where the assets are based). I did this for a year, to see whether I would have a gain, loss, or break even on my "retirement income".

The result - my monthly expenditure averaged out at 9USD a month, totallying 108K a year, leaving me with 52K a year surplus.

So, my thinking is that I can now retire, and especially if I move to a lower cost country, where housing and food is cheaper, I can live a nice life. Any surplus, I can either reinvest (most likely shares or bonds), or just and accumulate as cash and spend when a good opportunity comes along.

A final comment - my spending of 9USD a month may sound high compared to some people who have posted here. It consists roughly of 3.7K per month for housing, and the remaining amoung for food, drinks, partying, travel, clothes, utilities etc. It would be lower if I lived in a cheaper location. Part of the problem is that many of my friends are still working, and this I do spend quite a lot in nice restaurants and nice hotels etc.

Some final, final comments. I am not at all worried of "what will I do when I retire". There are so so many things I want to do (many which do not require large amounts of money) and I am looking fwd to getting started!

 

[kumquat]

Using a 4% SWR, if you have $4.1M in INVESTED assets then you can reasonably expect ~$160K for 30 years or until the black swan lands in your lap.

I'd say go for it, even the equivalent of $100M might have disappeared if you ER'd in 1930's Europe.

 

[retire@40]

This is what I would call a no-brainer.

 

[FANOFJESUS]

Using a 4% SWR, if you have $4.1M in INVESTED assets then you can reasonably expect ~$160K for 30 years or until the black swan lands in your lap.

I'd say go for it, even the equivalent of $100M might have disappeared if you ER'd in 1930's Europe.

Sounds Good

 

[tryan]

yeah, go for it!

Others might learn from how you accomplished such a feat at such a young age.

Congrats!

 

[CaseInPoint]

Annual investment income from these various assets, after tax and other costs is approximately USD 160,000, with the underlying assets (and the income) keeping pace with inflation.

It really depends on what the future holds for you, whether you will start a family and be interested in having an upper-middle class lifestyle.

For life as a bachelor focused on partying, the $160k is enough, for a reasonable level of spending. You'll be able to do a lot of what you'd like, but will still have to watch your spending to some extent. It will not be carefree partying.

But at your age, there's a fair chance that things will change radically in the future, especially if you meet someone who will make you think of settling down. There can also be things like various family tragedies, which will become more frequent now that you're hitting the age for that kind of stuff. Those will cost you and will change your outlook on things.

Yes, many people here view ER as living on the edge of poverty, with extreme bizarro frugality. But I highly doubt that's your plan.

If there's a chance that you'll want to settle down in a place like CA, NY and do the family thing, $4.1M in investable assets will not do the trick for ER, considering your age.

Your best bet is to keep on putting away money for the next few years. Or, just take a 6 month or a year's vacation, then resume saving.

 

[jIMOh]

yeah, go for it!

Others might learn from how you accomplished such a feat at such a young age.

Congrats!

Yes, you could probably write a book and make more money when retired. tell us how, please.

 

[CitricAcid]

The 160k I assume would be aftertax to assume that you have 52k extra every year to spend/reinvest how you please. It seems, however, that a lot of your holdings are in international property and the different tax structures/sheltering that could be taken advantage of with that. Also, it seems that you are able and willing to move to a separate country, so a lower standard of living and tax sheltering should make it even better now that you've retired!

 

[Finance Dave]

Are you married? Will you be in the future? Will you have kids? Do you carry insurance? Where do you purchase your health insurance? It seems at first blush that you're ok, but you have so long to go that you can't be careless. The nice thing is that you COULD go back to work later if need be...although a long break in your career resume may look odd.

Over long periods of time, inflation should be your biggest concern. Make sure you are earning interest/growth over inflation or you'll be in trouble eventually. And remember that if you're exclusively in stocks now, and the market goes down 25%, your $160k has just become $120k.

 

[TromboneAl]

Although I agree that you could go for it, I'd say that your system for deciding: not so good.

That is, you used the results of one year as a basis of deciding what would happen over the next 50-60 years.

But if you can indeed live on $9 a month, you should have retired long ago.

 

[Milton]

Your best bet is to keep on putting away money for the next few years.

Oh, come on. The o/p's current annual are $108,000. His or her investment income - $160,000, effectively indexed - is 48% higher than those expenses. That 48% should provide an ample buffer against any reasonably foreseeable negative contingencies down the road. Also, consider that if the o/p gets ill, or settles down and has children, his or her partying expenses will presumably drop significantly.

Looking at it another way, the $108,000 the o/p requires works out to a 2.6% withdrawal rate, which is substantially more conservative than the 4% commonly recommended.

There is no need to continue working unless s/he wants to.

 

[Midpack]

Anyone else ever wonder which of these stories are real and which are made up/hypothetical? Anyone believe they are all real? If this particular post represented your situation, would you even be asking? IMHO, the point of this post isn't really to ask anything at all, it's all about telling us something...but I could be wrong.

My name is Bill, I am 52. I worked at a software company and I am now worth billions. I hope to give most of it to charity, but I expect to have enough left to generate over $2,000,000/year in income. I own my house outright and have no debt. I have lifetime healthcare and every conceivable benefit/perk imaginable. My portfolio is not well diversified, but with an effective SWR of 0.3% I think I can tolerate some risk. I am seriously considering retiring now, what do you think?

 

[MGYog]

my 2 centimes worth

Anyone else ever wonder which of these stories are real and which are made up/hypothetical? Anyone believe they are all real? If this particular post represented your situation, would you even be asking? IMHO, the point of this post isn't really to ask anything at all, it's all about telling us something...but I could be wrong.

Yup, I do know somebody like him. Gordon Gekko.

 

[Nords]

Welcome to the board, 37&. Whether your ER portfolio is $4.1M or $400K, the advice is the same-- track your spending and run your numbers through FIRECalc.

In your case you might also want to consider what happens if you end up married and/or with kids, relocating to a different kid-friendly home and considering saving for their college tuition. I'm not suggesting that you may actually want to do any of this, just that you might want to have a "Plan B".

Anyone else ever wonder which of these stories are real and which are made up/hypothetical? Anyone believe they are all real?

Yeah, how many 37-year-olds do you know who want to stay up and party all night?

 

[clifp]

My name is Bill, I am 52. I worked at a software company and I am now worth billions. I hope to give most of it to charity, but I expect to have enough left to generate over $2,000,000/year in income. I own my house outright and have no debt. I have lifetime healthcare and every conceivable benefit/perk imaginable. My portfolio is not well diversified, but with an effective SWR of 0.3% I think I can tolerate some risk. I am seriously considering retiring now, what do you think?

I think this Bill guy may have been able to retire at 37 also. BTW, not sure if he has lifetime healthcare. Although, I think he has a bunch of doctors numbers in his Outlook contact list.

 

[Spanky]

Some final, final comments. I am not at all worried of "what will I do when I retire". There are so so many things I want to do (many which do not require large amounts of money) and I am looking fwd to getting started!

What's stopping you? Go for it since the income from your international properties alone is sufficient to support your spending.

 

[kumquat]

Anyone else ever wonder which of these stories are real and which are made up/hypothetical? Anyone believe they are all real?

Who cares?

 

[plex]

I am just curious what type of income source allowed him to reach that amount so quickly, over such a short time frame. Pretty much the only things I can think of are an entrepreneur who started and successfully sold their company, being part of a really successful start-up or being really successful at some finance type job, such as a fund manager. Would be curious what other ways are out there.

 

[dinodino]

To the OP: retiring now sounds like a no-brainer to me. However, with the property market softening in Singapore (I don't know about the others), I would not feel comfortable holding all that real estate. I would sell it and diversify, but that's just me.

 

[37andhappy]

Thanks for all the comments

Guys - thanks for all the comments - 17 responses in one day! Thanks for all the comments telling me to go for it! It really does seem like a scary choice. Giving up a good income, but getting all that freedom myself in return.

I do also like the suggestion of just taking 6 months off and seeing how it goes. After that, I could find a similar job, or I could perhaps try starting my own business, or, I could keep not working and living the "retired life"

Let me address a few of the comments.

Dinodino - I was even more weighted in real estate a 18 months ago. Since then I have sold off a bit, taking some nice gains, and moved into stocks and cash. I agree diversification makes sense. I do plan to hold my Singapore property long term, and I think Singapore (and property in Asia has a good future).

Plex - I earned a reasonably good income working as a lawyer, based in Asia (the country I am based in has a 16% tax rate, which helped, and being single helped). With that income, I invested primarily in property, but also in stock, following the very basic principles of buying when the market is low, and selling when it is high, and looking for investments that pay good yields. Hong Kong, during the last financial downturn, which is one location I made quite a few investements, was an excellent place to invest in property. I have now pretty much deleveraged (by selling off some property and using the gains to reduce debt), so I now have very little debt, with all the assets being pretty much paid off. I think this same "buy low" sell high principle can be used by you guys in the US. At some point, US property will be a great investment, and the big gains will go to those who have the guts to buy in when everyone else still wants to sell.

Nords/Finance Dave/CaseInPoint - yip - the issue about what if I have kids, etc does concern me. Do I keep working, knowing that I will likely have kids and need to cover their costs? Or, do I retire now, because it seems financially I can do it? Its a tough question, but I do of course have the option of working again at some point in the future if needed.

Midpack - yes. This is a real post. I did concern me reading some of the other posts that some reading my post might think I am "showing off". Let me tell you, I have some friends to whom USD 1mil is a lot of money that they are unlikely to ever achieve. At the same time I have friends who have 10-50mil in assets (some even more) and for them, 5 mil would simply not be enough. So, I just am providing my own situation and do appreciate the advice from you all. With regard to the figure I have, I can tell you that I earned it all myself, wiht almost no support (let alone money) from parents. Those people I know in the 10 mil+ category all pretty much inherited family businesses or assets.

Citric Acid - yes, the figures are after tax

 

[Spanky]

I am just curious what type of income source allowed him to reach that amount so quickly, over such a short time frame.

May be from real estate speculations?

 

[Spanky]

Hong Kong, during the last financial downturn, which is one location I made quite a few investements, was an excellent place to invest in property.

[FONT=&quot]Hong Kong, one of the [/FONT][FONT=&quot]most corrupted city in this world,[/FONT][FONT=&quot] is a place in which many scam artists reside. Many have made billions in [/FONT][FONT=&quot]real estate transactions and stock market and financial investments while many have lost everything in the past few years.[/FONT] [FONT=&quot][/FONT]

 

[CaseInPoint]

Oh, come on. The o/p's current annual are $108,000. His or her investment income - $160,000, effectively indexed - is 48% higher than those expenses. That 48% should provide an ample buffer against any reasonably foreseeable negative contingencies down the road. Also, consider that if the o/p gets ill, or settles down and has children, his or her partying expenses will presumably drop significantly.

Looking at it another way, the $108,000 the o/p requires works out to a 2.6% withdrawal rate, which is substantially more conservative than the 4% commonly recommended.

There is no need to continue working unless s/he wants to.

Milton,

Your calculations may be true for someone with no more major family decisions, and a 20-30 year retirement horizon.

In this case, this person is 37, which could mean a 50-60 year retirement (or more), with the possibility of major long-term family obligations. As has been suggested, inflation is one of the major problems for planning a secure retirement in this case.

Also, I wonder if you are really taking into account today's cost of living for an upper middle class lifestyle, including a typical mortgage in a good neighborhood, private school tuition, and new cars every 5 years or so. It's a completely different story than the more typical retirement plans I often see in this forum.

For an upper middle class lifestyle (not even extravagant, or wealthy in that class of people), $160k/year is probably not sufficient, nor is a net worth of $4.1M.

 

[Marquette]

God am I glad to have the upper middle class income without the upper middle class lifestyle. Living like that looks like an incredible amount of work.

 

[CaseInPoint]

God am I glad to have the upper middle class income without the upper middle class lifestyle. Living like that looks like an incredible amount of work.

Yes, it's a lot of work. But probably not as much work and worry as living in old houses which constantly are in need of repairs, driving old unsafe cars which also need constant repairs, sending one's children to marginal, crime-ridden public schools, and watching every penny as a retirement strategy. Obviously, there's a reason why people strive to live a good lifestyle, despite it being a lot of work.