How to convince my dear wife that 6M is enough ?

[Steve P]

I’m really glad I found this forum — I’ve learned a lot from all of you.

My wife and I are both 58. She retired about 18 months ago (after a lot of convincing from me). She worked incredibly hard while raising our four kids, who are now all finished with college and working.

I’d like to retire now, but she would prefer that I keep working another 2–4 years to add more cushion to our nest egg, help the kids when they’re ready to buy their first homes, and leave something for them and future generations. We both grew up poor, so financial security means a lot to her. Our total NW is 7.6M not including our paid off house worth about 1.4M.
Here are our numbers:
- Pre tax: 2.8M in 401K/IRA (DW 1.05M & Me 1.75M) 60% stocks funds and 40% bonds
- After tax: 600K in brokerage (70% stock funds, 30% bonds and a small stock trading account that is not doing well compared to the market… LOL)
- Cash: 1.1M in various CDs earing around 4%. I have this cash for a few years now, waiting to purchase in case market/RE crash...LOL.
- RE Rentals: 6 SFH, net equity 3.1M, net monthly income before tax is about 13K
- My current salary is shy of 200K (including bonus). Job is not stress and work from home.
- Our expenses is approximate $115K/yr ($135K/yr if retire to include funds to purchase health insurance)

Questions:
1. How can I reassure my wife that we likely have enough to retire now and still leave plenty behind?
2. What should we do with the cash currently sitting in CDs? I am realizing now that at our age, I’m not interested in buying more rental properties.
3. My company offers an HSA and Roth 401(k). If I keep working, should I max them out this year?

Thank you for your time.

I would triangulate different sources, perhaps 3-4 to get an overwheling consensus you'd be fine. Use tools like fidelity's retirement planner, firecalc, find some brokers who want your business and have them do independent analysis. If you've got multiple proof points, that can make it compelling.

 

[TripleLindy]

net monthly income before tax is about 13K

Our expenses is approximate $115K/yr ($135K/yr if retire to include funds to purchase health insurance)

Just a relatively minor point regarding cost of health insurance. Unless there is no other income and you have significant deductions, your income is above 4x the federal poverty limit, so you will not qualify for a subsidy if buying insurance through the ACA. $20k for an unsubsidized Bronze Plan is probably a low estimate for a couple. Our annual premium is $34k. Just an FYI. Selling your properties has the same issue due to capital gains.

Given your stash, an additional $15k expense doesn’t change your retirement decision, but thought I’d give you a heads up regarding the actual cost so you don’t experience sticker shock.

 

[planuntilthefisthits]

People learn differently. How does your DW learn?

When faced with a similar situation, I created a PowerPoint with our retirement business plan. That got her attention.

On prior occasions, DW would react to my saying We have $X, by saying she wanted 2x$X. I analyzed our continuous income over time and showed her we actually had $2X

She bought thr logic.

Worked for urs. Good luck!

 

[Cujet]

I’m really glad I found this forum — I’ve learned a lot from all of you.

My wife and I are both 58.
1. How can I reassure my wife that we likely have enough to retire now and still leave plenty behind?
2. What should we do with the cash currently sitting in CDs? I am realizing now that at our age, I’m not interested in buying more rental properties.
3. My company offers an HSA and Roth 401(k). If I keep working, should I max them out this year?

Thank you for your time.

1) Simply retire. You don't have to convince her of anything. You know you have more than enough.
2) You have plenty, X3
3) Matters not, in my opinion. Token amounts of money compared to your net worth.

I retired at 60 with 2 in the bank. Own an airplane, 3 cars, and have ample medical expenses due to my wife's vehicle accident. I don't collect SS.

I should have retired 2-3 years earlier. Then there is this, nearly all men have significant health issues in their 60's. I am 62 and already slowing down.

In the end my money is growing, not shrinking. You will likely find the same. I just don't have the same expenses as before, not even close. Of course, my aviation job required extensive un-reimbursed travel. Your work from home situation is different, but I suspect there are expenses and time consuming monsters there too.

I've been able to manage my income to keep the insurance subsidies.

 

[Act2]

Umm…. When you had to work to convince her that she could retire, and she did, was she assuming you’d still be working for several more years after she retired? Or did you explicitly tell her you planned to only work a little while longer and then retire shortly, and she was ok retiring even knowing you would not be working much longer either? Because that understanding/assumption (and then you wanting to retire so soon after her) could be the real issue. She might have not been comfortable retiring when she did if she thought neither of you would be working soon, regardless of the numbers. Not really a math issue here, as a couple others have said.

 

[AudiDudi]

Umm…. When you had to work to convince her that she could retire, and she did, was she assuming you’d still be working for several more years after she retired? Or did you explicitly tell her you planned to only work a little while longer and then retire shortly, and she was ok retiring even knowing you would not be working much longer either? Because that understanding/assumption (and then you wanting to retire so soon after her) could be the real issue. She might have not been comfortable retiring when she did if she thought neither of you would be working soon, regardless of the numbers. Not really a math issue here, as a couple others have said.

Mayber she doesn't want him "underfoot" all day. My grandparents next door neighbors divorced after 50+ yrs of marriage about 1 yr after he retired. Her comment was " I married him for better or worse, but not for lunch"

 

[marko]

I mean seriously. There are many folks on this forum who retired with less than 6m and spend the same or more.
Your rental income more than covers expected expenses. She retired 18 months ago, but YOU should keep working?
Not a chance I would still be working.
Check through any thread you can find and see if you can find someone bemoaning that they should have worked longer. Now check how many threads state they should have retired earlier.

+1. Of course, there's a certain bias to the folks here but even then, I've never met anyone who had to go back to work because their plan didn't work out. Ready/unready/under-funded, people find a way to make it work once they decide to go for it.

 

[audreyh1]

Mayber she doesn't want him "underfoot" all day. My grandparents next door neighbors divorced after 50+ yrs of marriage about 1 yr after he retired. Her comment was " I married him for better or worse, but not for lunch"

That usually occurs because a SAHM ends up considering the house “hers”. I’ve always considered that grossly unfair. But in this case the wife was working until recently, so no such excuse. She has a fear of the unknown, and if someone is unwilling to look are real numbers and various scenarios m it becomes quite difficult to address those fears.

To the OP - do you talk about the things you look forward to doing together once you are both retired? That’s pretty key. If you don’t know what you are going to do with your retired time it’s hard to look forward to things you can’t do now.

Also, how about: “we have too much money, honey, why do I have to keep working?”

 

[AudiDudi]

That usually occurs because a SAHM ends up considering the house “hers”. I’ve always considered that grossly unfair. But in this case the wife was working until recently, so no such excuse.<snip>

It was pretty common in the early 70's for people of retirement age to be a SAHM most of their lives.

 

[engineernerd]

[snip]

Questions:
1. How can I reassure my wife that we likely have enough to retire now and still leave plenty behind?

EDIT: I know the next two paragraphs are harsh. But if what you said actually convinced her to retire then I would say that means she heard it as a promise, for reasons you should not assume are her bad hearing. END EDIT

I think it was a big mistake to promise you would continue working in order to convince DW to retire. Following through on your promises is a basic bottom-line requirement for keeping anyone's trust.

If you have a history of making hasty ill-thought-out promises to her and then reneging on them, that may be the core problem you are facing here. Needs a serious heart-to-heart that includes telling her that unless she agrees wholeheartedly and without reservations to an earlier retirement date, you will honor your promise. And that you will work hard on thinking before you promise, and honoring promises once made, in future.

Secondarily it's possible she has reservations connected to how your retirement might change her days now that she is retired. Does she have immediate plans that might be changed/impinged on if you were also retired soon? No need to answer here, just something to consider.

2. What should we do with the cash currently sitting in CDs? I am realizing now that at our age, I’m not interested in buying more rental properties.

You have enough so it really doesn't matter much, unless your spending needs really go through the roof (SERIOUSLY through the roof). There are things you can do to optimize, if you'd enjoy spending time on it, but no rush.

One thing I notice is your stock allocation is very low; FIRECalc always shows stock allocations above 50% produce the highest spending power from a given portfolio size. BTW, not everyone notices that FIRECalc has those tabs at the top where a lot of its functionality is contained. I especially like the option under the Investigate tab titled "Investigate changing my allocation." And you might benefit from the "Leave some money in the portfolio for my estate" input option.

3. My company offers an HSA and Roth 401(k). If I keep working, should I max them out this year?

Thank you for your time.

Of course. Especially the Roth 401(k). The earlier you open and fund your first Roth account, the better. There is a 5-year rule that you'd want to start the clock on.

 

[USGrant1962]

Right now you have two jobs. Your full-time day job and your part-time landlord job. Seems like putting it in terms of just quitting your full-time job and focusing on your part-time job is more accurate than "retirement". So "Honey, I'm going part time" might help with the psychology?

And yes, you have more than 3 times what you need to retire. Your RE nets $156K/y and your $4.5M portfolio is good for another $157K withdrawal at 3.5%. That is without considering drawing down your RE equity (good for helping children buy homes). Or Social Security!

Again, just putting your portfolio into Rich, Broke or Dead? Post-Retirement FIRE Calculator: Visualizing Early Retirement Success and Longevity Risk - Engaging Data shows no failures (without even considering SS or your RE).

EDIT - oh, and "she would prefer that I keep working another 2–4 years" from 18 months ago starts later this year.

 

[pb4uski]

First, while it is good to have her concurrence, you need to make the best decision for you. I think her intransigence is selfish because you have plenty. It's just phycological.

You have no further obligation financially for your kids. They just get whatever is left over. Part of the reason that I retired is because we had plenty and continued work was enriching Uncle Sam and our kids, but I valued the time more than further enriching them.

Since FIRECalc is hard for many people to digest, take another tack. Have a local female Certified Financial Planner do a retirement analysis for you and she can convince her that you have plenty. Or to simplify it $3.9m *4% = $156k and $156k>$135k.

Another idea. Tell her that you are now retiring, just quitting work for an employer and focusing on running a multi-million investment portfolio and 6 property single family home residential rental portfolio. Also, a portfolio that just on its own provides more than what you spend.

Perhaps when you do your 2035 tax return and she can see your income and what your income will be if you quit working she will see the light.

Right now you have $2.8m in pre-tax, $1.1m in taxable CDs and $3.1m of residential rental real estate for a total of $7.0m (excluding your paid off home). You want $135k to spend in retirement.

If you work two more years at $200k a year, after payroll and income taxes, you would add $250k to it so it would be $7.25m. That additional measly 3.6% increase won't make any difference in your retirement.

And all of the above ignores social security, which I'm guessing will cover a lot of your $135k desired spend.

 

[engineernerd]

[snip]

EDIT - oh, and "she would prefer that I keep working another 2–4 years" from 18 months ago starts later this year.

Ha, good point. Maybe the time has flown by so fast she didn't notice this!

 

[Koolau]

u tube videos help my wife understand

these 2 guys are a good start

Yes. Have her watch the videos.

 

[SJhawkins]

Right now you have two jobs. Your full-time day job and your part-time landlord job. Seems like putting it in terms of just quitting your full-time job and focusing on your part-time job is more accurate than "retirement". So "Honey, I'm going part time" might help with the psychology?

This, then sell one rental per year!

I may be tempted to gift the rentals to the kids if they have interest in being an landlord.

 

[Stormy Kromer]

I am of similar age and similar financials. My real estate holding in farmland with a similar income as your real estate. There is no depreciation on farmland. I'm guessing that your SFH's are on a depreciation schedule. Once they are depreciated out your tax liability will increase accordingly. Any sale would trigger quite a bit of ordinary income for the previous depreciation.

Does your anticipated expense numbers include income tax ? Income tax is by far our biggest expense in retirement. Next is health insurance (Bronze HSA, non subsidized, $21,000 annually).

We contributed to HSA accounts for years and have about $100k in the balance. It is comforting to have here in the ER years prior to Medicare. We have a bronze ACA plan so the HSA covers our large deductible if need be. Once Medicare begins we can use the HSA to cover part of the Medicare premium. Medicare and supplement cost more than a lot of retirees plan on. Plan on at least $5,000 a year per person.

 

[Flyfish1]

I'm guessing that your SFH's are on a depreciation schedule. Once they are depreciated out your tax liability will increase accordingly. Any sale would trigger quite a bit of ordinary income for the previous depreciation.

I thought the depreciation recapture tax was maxed at 25% . Wouldn't the rest of the profit be long term cap gains as opposed to ordinary income?

 

[Route246]

Nobody really needs more than 4 or 5mm for a 30 year span with a few kiddos. I am aiming to quit at 50 with about 2.5mm. Our goals are identical, perhaps not the same scale though.

Help the kids, leave a legacy.

This is dependent on local cost of living. Here in NorCal the cost of living is much, much higher than parts of the heartland where a nice home can still be had for $500K. A nice home in the SF Bay area equivalent to that $500K home in the heartland is going to be $3M+. Zillow doesn't lie, just in case anyone has doubts. Energy costs out here are the highest in the civilized world. PG&E has the highest rates in the nation. Regular gas in excess of $4.00.

 

[Stormy Kromer]

I thought the depreciation recapture tax was maxed at 25% . Wouldn't the rest of the profit be long term cap gains as opposed to ordinary income?

I'm not sure about the depreciation recapture tax maximum. Even if it capped at 25% that is a significant rate, especially if you live in a state with a high income tax rate, it could push you over 32 or 33%. I understand that the profit over this would be long term cap gains which eases the tax liability substantially. With real estate it is typically a large sale or no sale, it is hard to plan income around it.

The comment I made about watching the depreciation schedule is the impact it has on your annual taxable income once a property is fully depreciated out. When that happens your cash income doesn't change but your taxable income goes up accordingly.

 

[livingalmostlarge]

I would be kind but I would say I'm done and retire. Then again I'm "retired" and dh isn't so I have no right to speak

 

[pb4uski]

I thought the depreciation recapture tax was maxed at 25% . Wouldn't the rest of the profit be long term cap gains as opposed to ordinary income?

That's my understanding... ordinary tax rates or 25%, whichever is lower. And rest is LTCG so 0%, 15% or 20% depending on your income.

 

[Rothman]

Congratulations on accumulating that nest egg. There is no logic-based question if you have enough to meet your needs, it’s emotional. Paying a fee-only CFP to review your situation with tools to make it all visual. Then have the meeting with them with wife to help her understand your position and ask all the questions she may have. This approach may get her comfortable.

 

[Cassius King]

If your wife is scared the portfolio is not enough for you to retire on, SHE could always go back to work to calm HER fears.

 

[Cujet]

As I've discovered, doing contract work is a great way to make a few extra bucks and stay in the loop. If you decide to retire, make sure to consider this. While I don't make an income doing this, it is absolutely a help and covers certain expenses.

 

[Dtail]

If your wife is scared the portfolio is not enough for you to retire on, SHE could always go back to work to calm HER fears.

Agree - can't always be Happy Wife Happy Life as the only choice, when it is just not logical.