Hello and thanks for any advice. I've been monitoring these forums since late last year and have occasionally posted on BH's since 2009, but I thought I might as well lay out my current situation and plans and get any feedback/reality checks from this informed group.
I am about 50 and working in a very high-paying (but extremely stressful) job. I'm beginning to get signals from my employer that my compensation may start moving down to allow for increases for some of the slightly younger guys who have been nipping at my heals. That won't be pleasant, as a person's comp level in my organization is THE badge that determines the level of respect a person gets from others in the organization. I've seen people in similar positions in my organization get marginalized very quickly when they start getting comp decreases.
I had expected to work about another 5 years, but I've gotten to the point where I feel my head will explode if I have can't hang it up by the end of 2016. "Cutting back" somewhat is really no option - this job is all or nothing - and the "all" means about 60-65 stressful hours most weeks and lots of travel. I feel like we have worked so hard for what feels like so long (my wife hasn't worked outside the home, but she has borne the brunt of running a household and having to take care of most burdens by herself). However, there's no going back to anything like these comp levels if I needed to return to work after I quit - my clients will be immediately taken over by others.
If the markets are relatively flat between now and the end of 2016 and we continue current level of savings/investments for the next two years, this would mean we would have around $8 million in investment assets (about $1mm in tax deferred and the rest in taxable). We are 56% equities (tilted a bit to small/value), 4% REITS and 40% fixed (mainly short and intermediate term high quality). House paid off and no debt.
Our ideal budget would be about $320k first year (4%), out of which we would pay taxes (but income taxes should be pretty low for me in early years), pay all expenses and make desired charitable contributions. About $80k of that is for 4 high end vacations (we have put off much desired travel due to my job requirements), which obviously could be cut if needed, and we believe that we could cut back another $35k on other matters if needed without feeling our lifestyle was taking much of a hit.
I have a defined benefit pension in which I am fully vested that will begin paying $140k per year (no inflation adjustment) at age 65, for the life of both my spouse and me. I don't really know how to think about this pension when thinking of overall risk of running out of money (or having much less to spend than hoped) - obviously, it doesn't kick in for a while and we need to live on our existing portfolio until then.
We have one child in graduate school, and the amounts above don't include funds to finish funding grad school (which we've held separate).
Yes, it is a bit embarrassing that we want to spend so much money, but I would like to splurge some in retirement after so many years of hard work by me and other sacrifices by my wife. I also understand that many say you should take less than 4% if you are retiring in your early 50's, but I hope that the flexibility we can have in our spending can go a long way toward making this jump a bit less risky. My current thinking is to start out with a combination of percentage of current balance and inflation adjusted withdrawals. Take 4% the first year. In subsequent years, divide the withdrawal amount calculation into two parts - take the original 2% and adjust that for inflation each year, and also take 2% of whatever the value of the porfolio is that year. This would be a buffer against huge swings in spending in early years. We could assess this after a few years and see how it is going. And then, there is the pension at 65 and social security at some point.
Apologies for the long message. Thanks in advance.
I am about 50 and working in a very high-paying (but extremely stressful) job. I'm beginning to get signals from my employer that my compensation may start moving down to allow for increases for some of the slightly younger guys who have been nipping at my heals. That won't be pleasant, as a person's comp level in my organization is THE badge that determines the level of respect a person gets from others in the organization. I've seen people in similar positions in my organization get marginalized very quickly when they start getting comp decreases.
I had expected to work about another 5 years, but I've gotten to the point where I feel my head will explode if I have can't hang it up by the end of 2016. "Cutting back" somewhat is really no option - this job is all or nothing - and the "all" means about 60-65 stressful hours most weeks and lots of travel. I feel like we have worked so hard for what feels like so long (my wife hasn't worked outside the home, but she has borne the brunt of running a household and having to take care of most burdens by herself). However, there's no going back to anything like these comp levels if I needed to return to work after I quit - my clients will be immediately taken over by others.
If the markets are relatively flat between now and the end of 2016 and we continue current level of savings/investments for the next two years, this would mean we would have around $8 million in investment assets (about $1mm in tax deferred and the rest in taxable). We are 56% equities (tilted a bit to small/value), 4% REITS and 40% fixed (mainly short and intermediate term high quality). House paid off and no debt.
Our ideal budget would be about $320k first year (4%), out of which we would pay taxes (but income taxes should be pretty low for me in early years), pay all expenses and make desired charitable contributions. About $80k of that is for 4 high end vacations (we have put off much desired travel due to my job requirements), which obviously could be cut if needed, and we believe that we could cut back another $35k on other matters if needed without feeling our lifestyle was taking much of a hit.
I have a defined benefit pension in which I am fully vested that will begin paying $140k per year (no inflation adjustment) at age 65, for the life of both my spouse and me. I don't really know how to think about this pension when thinking of overall risk of running out of money (or having much less to spend than hoped) - obviously, it doesn't kick in for a while and we need to live on our existing portfolio until then.
We have one child in graduate school, and the amounts above don't include funds to finish funding grad school (which we've held separate).
Yes, it is a bit embarrassing that we want to spend so much money, but I would like to splurge some in retirement after so many years of hard work by me and other sacrifices by my wife. I also understand that many say you should take less than 4% if you are retiring in your early 50's, but I hope that the flexibility we can have in our spending can go a long way toward making this jump a bit less risky. My current thinking is to start out with a combination of percentage of current balance and inflation adjusted withdrawals. Take 4% the first year. In subsequent years, divide the withdrawal amount calculation into two parts - take the original 2% and adjust that for inflation each year, and also take 2% of whatever the value of the porfolio is that year. This would be a buffer against huge swings in spending in early years. We could assess this after a few years and see how it is going. And then, there is the pension at 65 and social security at some point.
Apologies for the long message. Thanks in advance.