desperate to retire

S

sofl mom

Confused about dryer sheets
Joined
Jan 29, 2009
Messages
7
I am 43. DH is 45 and has been retired as a stay at home Dad. I want to join him! I sold my business and generated a nice lump of cash. But I am petrified it is not enough. Here is the financial situation...

I have about $3 million (still!) in stocks, bonds and other assets. I have $1.5 mm in a money market account. My house is worth about $5 mill and has no debt. I have another house I am trying to sell for about $1.3 mill. Also has no debt - so I can rent if I have to. I have a son, we have prepaid his college tuition and have about $50k in a 529 for expenses. I have no debt any where - no car loans, no credit card, mortgages or equity lines.

I am working in a yucky job making $200k. I need about $150 -200k per year to support my current expenses, but would be willing to sell the house at some point in the distant future - maybe 20 years and lower expenses? I also may like to work again doing something I love and generating far less income.

Do I have enough to retire? I am petrified to do it despite running models. I have already secured private health insurance and I get no other benefits from my current job. I also have a pension that I will get when I am 65 for $50k.

Any ideas on how to structure a portfolio to get income I need? Need all the help I can get!
 
My guess is about 99% of the people on here wish they had your problems! $10M in assets, counting the house, $5M to spend, which at 4% gives you $200,000. Which is what you make now.
 
If you were *desperate* to retire, you could easily do it with your current assets. It might mean trading down in house, it might mean adjusting your lifestyle expectations, but hey, that would be easy-peasy if you're truly *desperate*. And if you weren't willing to do those things, I'd question the level of desperation.
 
Hi sofl mom, and welcome to the forum!

As you know, you certainly have enough to retire -- by a very healthy margin. But still you're petrified. Perhaps your fears are not financial? That happens to plenty of folks.

We're mostly a do-it-yourself group here, but we do have some members who benefit from working with a financial advisor. Have you considered consulting with one? On a straight hourly fee basis one could help you develop an investment plan that will lay out clearly how you could fund retirement.

Best of luck in your planning!

Coach
 
I suspect you are right - that there are things other than the $$$'s. Despite my current assets - I was very poor growing up and I have a fear of being there again. I worry about things like health insurance, etc. It leaves me sleepless to think about not having a paycheck and using "assets" to pay for living expenses. I guess I am trying to find something that would give me a paycheck like feeling. Perhaps bonds would do that. I don't like annuities.

As for my net worth, I don't usually look at the house. It is so illiquid - especially in the current market - that I don't really like to rely on it's worth. I know if I sell it - I could easily retire. What I can rely on, is that selling it would greatly lower my annual expenses. There is also an emotional attachment to the house, especially for my DH.

I like the FIRECALC - thank you for the link.
 
Good grief - pull the plug. And think of that $5M house as an asset that can be downsized from if things don't improve.
 
sofl mom said:
I am 43. DH is 45 and has been retired as a stay at home Dad.
[...]
I have about $3 million (still!) in stocks, bonds and other assets. I have $1.5 mm in a money market account. My house is worth about $5 mill and has no debt. I have another house I am trying to sell for about $1.3 mill.
[...]
I am working in a yucky job making $200k. I need about $150 -200k per year to support my current expenses
Any ideas on how to structure a portfolio to get income I need? Need all the help I can get!
Click to expand...
sofl mom,

One important question is whether the $150-200k that you need to live on is after tax money. In other words, do you need to have a gross income of approx $300k, or do you need to have a gross income of $150-200k?

Let's set aside the houses for just a moment.

Without them, you have $4.5M in investable assets (presuming that all income from that money is accessible to you right now -- not investments that can't be touched for some reason).

That in itself is not enough to safely retire at your standard of living and at your age, because at this exact moment in time, stocks and bonds aren't generally producing much income (if at all), and MM accounts are yielding very little. IMO, your SWR should be approx 2.5%, not 4%.

In the future (hopefully in just a year or two), the picture will be very different for you. At that time, if the economy picks up, you'll be able to live the "true" standard of living that matches your superb financial accomplishments. Your $3M in stocks and bonds may be worth a lot more than now, your MM accounts will yield more, and real estate in your area might be more easily sellable.

But... If you really want to, you can easily set aside $300-400k to pay for your expenses for the next 2 years, and stop working right now. In 2 years, you will see how the economy is, and if you're really cut out for staying at home with your husband constantly dealing with kid obligations, and with each other all day long. :)

I can relate very well to your situation, and I predict that people who have achieved a certain level of success as entrepreneurs at a fairly young age are likely to get back into the game after taking a break from working.

When I seriously contemplated my own ER, I tried to visualize how life would be, and I realized that I was already planning out my next venture... I realized that a life of Starbucks, gym, expensive salads for lunch, and kid projects would only work for a few months before I'd need to get back to what I enjoy doing most, which is business. You may or may not find the same to be true.

In terms of a retirement strategy, I would suggest heading to Vanguard.com and reading up on income-producing funds. That would be a starting point. Also, there is some great books available at your local Barnes & Noble.
 
Hi, Sofl Mom. I'm curious about what you mean by "Sofl"?

Regarding assets, it seems to me that many of us come to this site wondering if we have truly reached "FI." It took me some months to convince myself that I have enough. I found this site immensely helpful in thinking through that and other questions relating to finances and retirement.

Welcome, looking forward to hearing more about your plans.
 
CuppaJoe said:
Regarding assets, it seems to me that many of us come to this site wondering if we have truly reached "FI." It took me some months to convince myself that I have enough. I found this site immensely helpful in thinking through that and other questions relating to finances and retirement.
Click to expand...
Indeed. We often talk about the "one more year" syndrome here -- the feeling that you might be just about ready, but with "one more year" at work you should be good to go. And then a year passes and you think: maybe I need just one more year still...

But in your case, unless you have a rather high need to live luxuriously for the rest of your life, I don't see any need for "one more year" even with a relatively conservative assessment. That's especially true if downsizing to a "reasonably priced" home is an option. (If it's not, you may need to keep working to pay those property taxes. Just thinking about what the taxes must be on those places makes me shudder and enter a fetal position.)
 
Hello Sofl Mom,

First, don't make major changes while you are feeling "desperate." Take your time. You have got the rest of your life to figure all this out, and there's no rush.

With $4.5M in assets to invest and (I presume) draw income from, you should easily be able to produce $150-200k in income (dividends and interest) from a balanced portfolio. If you do sell the other house, you would pretty much have a lock on $200k, but that would still be before taxes. At present, income-oriented funds such as Vanguard's Wellesley would boost that into the high 200's. We are in a time of reasonable valuations in the stock market, so you may find your portfolio growing over the next several years as the economy recovers.

As you know, your primary house is both a major expense and a major asset. Sometime down the road you would likely want to down-size a little. Perhaps in time your priorities will have changed and you will feel much better about finding a gorgeous place that better suits your long-term needs. At that point, you would easily add another few million to your portfolio, while reducing expenses, and both your income and long-term security would rise.

Many, if not most of us, have experienced and understand the stress of the "but will I have enough?" question. You just have the privilege of suffering that question with far more resources than average. As you know, that doesn't seem to help much, does it? But it's commonly reported that this anxiety peaks tremendously before early retirement and fades quickly from there. After a few years, you would likely find that, no, you will not be going broke any time in the next century or so, and with luck you will be doing better than ever. By then you will be focused on the much more important task of living.

I say go for it.
 
CuppaJoe said:
Since it is linked with mom, it could also be "special olympics Florida" which may indicate "extraordinary expenses."
Click to expand...

Good point--and if one has a special needs child, there are other considerations for financial security.
 
Occam's razor puts a bet on "South Florida." Anyway, she seems to feel her son is taken care of, with pre-paid tuition, etc. There seems to be nothing to stop her except the natural fear of taking that step.
 
CaseInPoint said:
...you have $4.5M in investable assets...
That in itself is not enough to safely retire at your standard of living and at your age, because at this exact moment in time, stocks and bonds aren't generally producing much income (if at all), and MM accounts are yielding very little. IMO, your SWR should be approx 2.5%, not 4%.

In the future (hopefully in just a year or two), the picture will be very different for you. At that time, if the economy picks up, you'll be able to live the "true" standard of living that matches your superb financial accomplishments. ...
Click to expand...
If she has to figure such a low rate now, 2 years won't make much difference. Many prognosticators are saying 4% or higher makes sense now with stocks possibly at a low. If they rise significantly over the next two years I would assume you would want to drop the SWR even further down than 2.5% to adjust to the higher priced equities (albeit, against a larger portfolio).
But... If you really want to, you can easily set aside $300-400k to pay for your expenses for the next 2 years, and stop working right now.
Click to expand...
Hunh? That is what she is proposing to do but up above you said she shouldn't
 
Sorry - still working the day job and couldn't answer. SOFL - is SOuth FLorida. No special needs child.

You have all done a good job of describing my dilemma. It seems like enough assets - but if you crunch numbers with some draconian scenarios for the next few years and raise expenses like medical, it doesn't seem like all that much. I lost alot - like everyone - and I have fear of retiring and losing more.

When I do detailed forecasts and analysis, I do HAVE to sell the house when I am 70. What if I can't? What if it isn't worth much? - it is a 20 year old house at that point and it may only be worth land value - which is volatile here in SoFL. I can't go back to work at 70 and command a $200k per year salary.

My $150-200k is after tax. That is not a ton as you have all pointed out after my house expenses of insurance and property taxes.

It is also a very good point that I am sure I will work at some point. Again, I may like to do something that is much less lucrative. But even a salary of $25-50K would make a big difference in my forecasts.

I still get heart palpatations when I think of no salary! Please keep your thoughts coming. They are helping.
 
Many of us are smart and driven and used to being in control. So one principle that is sometimes hard for us to accept is that one can't be sure of what will happen 30 years from now. A certain amount of faith is necessary, as well as enough self-confidence to know you will adapt and not just survive, but thrive.

As for the house: Why not tentatively plan on selling it in 5 or 10 years? If things work out well, you won't have to. Otherwise, by then you may be tired of taking care of it and paying for it, and you will be ready for a change. You can spend some time traveling to exotic, beautiful destinations while shopping for a lovely newer home with a gorgeous view that is much more practical and affordable. It sounds like fun!
 
If one keeps expanding his/her lifestyle to the current income level, it is always difficult to retire.

I keep reading of CEOs or financiers with hundreds of million or even billionaires who got margin calls recently, and had to liquidate at severe losses. You would think they already had plenty, and would not have to leverage for even more income. But then, I have never incurred yacht, jetliner, and French Riviera villa maintenance expenses. It's tough to make ends meet then.
 
donheff said:
If she has to figure such a low rate now, 2 years won't make much difference. Many prognosticators are saying 4% or higher makes sense now with stocks possibly at a low. If they rise significantly over the next two years I would assume you would want to drop the SWR even further down than 2.5% to adjust to the higher priced equities (albeit, against a larger portfolio).
[...]
Hunh? That is what she is proposing to do but up above you said she shouldn't
Click to expand...
I've seen (and participated in) a lot of debate about the SWR topic. It's my opinion that 4% is good for someone retiring in their 60s (25yrs 60/40 asset split, etc.), 3% in their 50s, 2-2.5% in their 40s. Just my 2% cents... :)

The OP can retire now, but it would not be a secure retirement. Much would depend on how the economy goes, and how quickly the markets can rebound. That's what I meant to say.

BTW - sofl, on a different topic - just out of sheer curiosity, do you consider your lifestyle to be upper middle class, or upper class?
 
NW-Bound said:
If one keeps expanding his/her lifestyle to the current income level, it is always difficult to retire.

I keep reading of CEOs or financiers with hundreds of million or even billionaires who got margin calls recently, and had to liquidate at severe losses. You would think they already had plenty, and would not have to leverage for even more income. But then, I have never incurred yacht, jetliner, and French Riviera villa maintenance expenses. It's tough to make ends meet then.
Click to expand...
Right on.

And the same is true even for many people with lesser lifestyles, especially if they want to FIRE young.
 
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