Mid Life Crisis

[InsertCleverHandle]

I’m 44 and my DW is 42. We have two young children. Financial details:

My income ~270K
DW ~160K. She still wants to keep working at least for a few more years.

Assets:
Roth/401Ks-$2.7M
Non-retirement investments-$1.1M
Real Estate rentals-$1.42M, produce a net of ~5K a month not included in our current income above.
Primary Home-350K in equity, we owe 450K on a mortgage. No other debt.

We spend 160K a year which includes 18K in childcare that will end in a year and 24K in mortgage principal/interest we could pay off. Firecalc shows 100% for 50 years and we could reduce spend if we needed too. But, there are also so many unknowns with our age and young children.

I’m well compensated and work reasonable hours. The people I work with are generally good people (clients are very difficult). But, I get very limited enjoyment from my job and it is high stress. Some days I want to quit that day, some days I want to grind it out for 5 more years and hit 10M. But, I know that number is an arbitrary benchmark, that may move once I get there. I have more money now than I ever thought I would. While I wasn’t raised to keep score with money, 20 years of professional conditioning has had an impact. I hate cocktail party talk about work and always avoid it when possible. I don’t have some alternative career I’ve always longed for, but not sure I'm ready to be fully retired at this age either. My question is have you had a similar struggle what did you do? What advice do you have for me? I also realize these are very first world problems, which adds some guilt and internal monologue to toughen up and just keep going because I’m fortunate to be where I am.

 

[Romer]

You have done very well for yourself so far and have a good handle on your finances

What I would make sure you do before you pull the plug is layout your plan for the kids for college, weddings etc. Kids are expensive and more so if you want to be a generous parent.

I would then use Firecalc to see how your plan maps out for 50 years since you are in your 40's along with whatever spread sheets you use for your self

If a couple more years gets you to the point you can retire and cover everything with no issues, then that would be worth considering. If you are there now you then that is another question

In my early 40's I was ready to move on from my job and went to another company that was a lot more fun for a few years. If it is the job with clients making you consider retirement, you should put that in your options as well

I should caveat I am a new member here and there are lots of people with much more knowledge then I have on the topic. My main thing to consider if I was in your shoes would be the kids

 

[aaronc879]

If you quit working and the wife kept working would you be willing to do 90% of the domestic work such as taking care of the kids, laundry and most cooking? If so, then retire and enjoy the time with your kids and hopefully reduced stress overall. I only issue I see is whether you have enough in taxable to get by until age 59.5. You may have to sell a rental. Either way, you should be able to retire if you want to. May have to cut costs a little when your wife stops working but would still be spending way above the average person.

 

[Bamaman]

You sound like a Type A personality, and many Type A's have difficulties in early retirement when going "cold turkey" in a profession.

And you're very young.

I would suggest you spend some time deciding what the next chapter of your life should be. Make a plan and execute it. Sounds as if you'd be great at being self employed in some kind of business.

 

[bearkeley]

DH and I retired at 48 and 46. He worked 6 months longer than I did, partly because he was nervous about the ‘what if’s. I have a type A personality and work was my identity. I went cold turkey and decided to consult for 3 months while husband was working. I was ok with working again, but now, 5 years into retirement, have no interest in it at all.

If you were to quit tomorrow, what would you want to do? How does your wife feel about you retiring if she is still working? How would you feel?

We had a few health scares that helped us get over the fear of retiring early. Thankfully, we are both healthy and able to do what we want now. If working is what you still want to do now, then maybe it’s just a break that you need. However, if there’s something else you want to do, and the numbers work and family agrees, then do it. You can always make more money but you can’t make more time.

 

[Ronstar]

.....I would suggest you spend some time deciding what the next chapter of your life should be. Make a plan and execute it. Sounds as if you'd be great at being self employed in some kind of business.

+1

 

[Sunset]

OP - You are doing well, and have save well too.

I notice no mention of kids college money stash.

The other issue right now is it's a BAD time to retire, Covid is killing a lot of the joy of having free time to travel (one of the benefits of retirement).

You could retire, but what will you do all day... it's far better to retire to something than from work.

 

[tb001]

OP - You are doing well, and have save well too.

I notice no mention of kids college money stash.

The other issue right now is it's a BAD time to retire, Covid is killing a lot of the joy of having free time to travel (one of the benefits of retirement).

You could retire, but what will you do all day... it's far better to retire to something than from work.

Because travel is sooo much fun with two young kids… And then when they’re finally fun to travel with, you have to travel with school schedules!

OP, I was in your shoes 5-6 yrs ago and stuck it out a little longer. Glad I did. It took a few years to execute on a longer term plan and that paid off for us.

In your spending figures, you didn’t mention if they include several potentially big ticket items; healthcare, taxes, college, etc… You also didn’t mention how your spouse feels about you leaving the work force while she stays in.

 

[chassis]

I have had several moments of pause in my career. Put the topic through a discernment process of your choosing. I choose Ignatian discernment, there are others.

If you don’t get an answer through the discernment process, do nothing. Make no changes. Continue with the status quo.

 

[plex]

The numbers themselves do sound fairly close to good enough, assuming you will continue the rental income work. As others have mentioned the big issues is are:

1) are you factoring in the large expected future expenses (college help, potential large future repairs, possibly high cost hobbies).

Which leads into 2) what hobbies/series of fulfilling activities that you honestly expect to interest you are you planning to fill the huge hole from going form a high engagement/time-consuming job to a mostly clear schedule.

Finally 3) Make sure your spouse is actually happy with the plan regularly, changing the sharing of responsibilities if she needs to keep working while you are at home,...etc.

 

[DrRoy]

Is the cost of healthcare in there?

 

[pb4uski]

I had a friend that retired in his early 50s and the biggest problem that he had was finding people to do things with. He enjoyed skiing and windsurfing so was able to plod along. I do recall that he got very involved in volunteering with an adaptive skiing program for disabled kids.

While it may be a longshot, is there any chance to downshift to part-time with your current employer? I did that... since my billing rate was ~3x my pay with benefits, the firm decided that 50% of pb4uski was better than 0% of pb4uski.

Alternatively, many early retirees transport their skill and aptitude to the non-profit world and get higher job satisfaction... at least until the politics cause the BS bucket to overflow and they fully retire.

 

[WhenIsItTime]

Your savings are significant. Congrat’s! Does your work income noted include bonus, 401k match, equity earnings, etc?

I was in similar situation. Given strong earnings and that annual savings rate was still significant to total assets, I chose to grind until non-retirement assets and income potential would easily cover spend rate. I was fortunate and it only took a couple more years. By then, I was completely burnt out on work and easy decision to retire.

In other words, a few more years of work was more tolerable then thought of cutting spend rate (especially when making the decision in 40’s with grade school kids).

 

[someguy]

As someone else mentioned, are 529s for the kids in the non-retirement investments? Are the rentals owned outright (ie, $1.2mm in realistic equity)? And what about healthcare -- even if your SO can provide that for now, if she's only a few more years, too, make sure to factor in for a family of four after she retires.

You're close to FI if not fully FI, so I second the notion of aggressively making work what you want it to be. Maybe drop the 20% of your clients that are probably the source 80% of your stress. Or perhaps take on a senior mentoring type role. Or take a sabbatical or go part-time -- unofficially if they won't permit officially. You are in a position of leverage with your employer.

I would also have specific discussions with your SO about expectations if you do retire. I would rather work a few hours a week than be expected to handle the majority of "housekeeping" or yard work or become the kids' full time nanny. Of course, one or more of those roles may be your dream "job".

 

[Markola]

One never really knows how one will react to FIREing until they’ve done it. After 14 months at 55, I find myself enjoying earning some part time contract money helping a nonprofit fishing organization by using the skills of my career. I thought I had satisfied my interest fully in that work but have found a way to apply all the unique and valuable expertise that I built up over 3 decades.

I guess the moral is, you don’t have to assume you’re faced with only an on/off switch. With an open mind, it can be a dimmer switch that you control and that brings some needed balance back to your life.

 

[InsertCleverHandle]

Thanks for all the feedback, I appreciate it.* To answer some of your questions:

My wife is supportive of me stopping working or cutting back.* Part of our challenge has been both working challenging jobs with kids (and through Covid).* We split home chores 50/50, but if a child is sick or quarantined, she handles the brunt of the child care.* If I could do more, I think she would be happier in her work and overall.* I would enjoy cooking, groceries, laundry, at least for the first 6 months.* I would say I'm a recovering type A.* If you give me a goal, I want to hit it.* But, I also am now old enough to understand that just hitting goals, isn't fulfilling an objective.**

Working part time would probably be ideal, but I think that would be difficult.* I could spin up a consulting business, but may be difficult to be half time and not all/nothing.* I really don't like the work any longer, which is the other part.**

We have 100K in 529s for the kids, but that is included in the nontaxable total.* That may grow to be enough with their current ages. Rentals are owned outright and that's a conservative estimate, because I think today's market is likely over priced.* My wife's employer would cover healthcare*for us while she worked.* I've run numbers through ACA*and looks like around $1100/month based on current income, but if that drops to 80K in retirement it would be $400.* We've never really had to cut back on our spend and spend a decent amount on convenience with us both working-meal boxes, grocery delivery, that would go away.* We could do that without much pain.* * We have personal/family reasons we need to stay where we are right now.* Otherwise, we would do a year sabbatical*in South America.* I would also love the flexibility to be off for the summer to travel as a family.* * *

 

[InsertCleverHandle]

Not sure what's up with all the *s. Not intentional!

 

[pb4uski]

That seems to happen sometimes if one drafts a response in another program and then copies and pastes into a message window here.

 

[jebmke]

I was educated in finance and spent most of my career in finance. But at various times in my career I sought out and took assignments in completely different functions. I found that it rejuvenated me, I learned a lot of transferable skills. It also had the side-effect of making me much less vulnerable to down-sizing.

 

[WhenIsItTime]

Additional comments helpful. Two careers is tough with kids. I went from full speed to retired within about 3 months including notice period. No desire to start over someplace else, have dismissed part time solicitations (hassles!). No regrets! I don’t mind housework, yard work, running errands. I use those things + exercise to satisfy my daily achievement desires. Also lowered my golf handicap 5 strokes. Beats zoom and weekly “walking the dog” (the 20+ hours a week of BS filler that comes from working for a Fortune whatever company). I miss the people. I slightly miss being part of something huge and successful. However, I enjoy being part of kids lives and attending their activities without thinking about work the entire time. Waking up all summer without an alarm is awesome!

I get asked all the time - aren’t you bored? After 2 years, I’ve only had moments of boredom and it’s refreshing. More to life than the Corporate grind! I feel very fortunate.

 

[RetireeRobert]

.......I also realize these are very first world problems, which adds some guilt and internal monologue to toughen up and just keep going because I’m fortunate to be where I am.

Why not scratch the itch imlicit in your closing statement of your post? How about exploring some charitable, humanitarian, make the world a better place activities? You might find some significant fulfillment and meaning for a new phase of your life, now that financial survival is not the necessary drive in your life.

 

[Sand101]

Real Estate rentals-$1.42M, produce a net of ~5K a month not included in our current income above.

This is a pretty poor return on invested capital here. RE prices are sky high right now; selling some of this should be looked into.

 

[InsertCleverHandle]

@Sand101. That's all true. We've been fortunate that the price appreciation has been 3x to 4x in the last ~8 years, but the rents are up ~60%. I've never liked that about cap rate metric, price appreciation reduces cap rate... We've also had to hand off the management to a third party because we moved out of the area. Taxes have gone up do to price appreciation, and we've been a little conservative on rent increases the last 18 months due to Covid. They are all small homes in trendy/up and coming neighborhoods, so have more room to run in my opinion. If we sell we would then have to pay cap gains on the sale and do something with the money... No great place I've found to do a 1031 exchange and dropping a big chunk of the money in the market doesn't feel great right now either. Cash flow is a good hedge no matter what the market stock market does.

 

[Sand101]

@Sand101. That's all true. We've been fortunate that the price appreciation has been 3x to 4x in the last ~8 years, but the rents are up ~60%. I've never liked that about cap rate metric, price appreciation reduces cap rate... We've also had to hand off the management to a third party because we moved out of the area. Taxes have gone up do to price appreciation, and we've been a little conservative on rent increases the last 18 months due to Covid. They are all small homes in trendy/up and coming neighborhoods, so have more room to run in my opinion. If we sell we would then have to pay cap gains on the sale and do something with the money... No great place I've found to do a 1031 exchange and dropping a big chunk of the money in the market doesn't feel great right now either. Cash flow is a good hedge no matter what the market stock market does.

A 3x increase in price is a great reason for a low cap rate! I guess the biggest question is do you want a part time job once you're done with the full time job? Even with a management company it takes significant effort (as I'm sure you know) to keep those rentals going.

We had a beach rental that had about doubled in price over the last 5 years. After Sally, the upkeep (salt eats everything) and the constant effort of managing the managers we rang the register this spring. No regrets (other than the tax bill!). Our cap rate was very similar to yours after the 22% of the management agency was taken out.

We demurred at the thought of a 1031 exchange - simplify, simplify, simplify.