OMY syndrome, but 2024 looks like the year

[marko]

Thanks, appreciate the thought but I've spoken to some of the folks at those outfits and extremely not impressed - most of them still wet behind the ears as the saying goes. I get solicitations all the time from so-called advisors, and found them woefully unprepared for complex thinking.

I know, I know, I have a real bad attitude about this. There are for sure, real professionals out there - I will bite the bullet at some point.

"Assets north of $10MM", large real estate holdings, $300K burn rate, 50% tax bracket and you don't already have a competent, trusted accountant(s), finance/tax "guy", or big gun wealth management team?

Wow.

 

[LateToFIRE]

"Assets north of $10MM", large real estate holdings, $300K burn rate, 50% tax bracket and you don't already have a competent, trusted accountant(s), finance/tax "guy", or big gun wealth management team?

Wow.

I have most of those resources... and I'm also more than competent on the financial stuff. My philosophy is that your advisors will only get you so far - they make mistakes (which I have caught in the past), they don't always have the full picture (and sometimes you don't want them to), and their interests are not always aligned with yours (their 1st priority is to generate fees). The best protection for my $$$ is my own knowledge.

The 50% rate I noted is the MARGINAL tax rate, i.e. half of every EXTRA dollar of AGI goes to taxes. My proportional rate is more like 25% - about 25% of my total income goes to income taxes.

When your income is largely reported on a W-2, there are not many ways around taxes - sure you can do some deferred comp, max out 401K contributions, report a family business with losses on Schedule C, offset rental income with depreciation, etc., I've done all these. But this is what a lot of "tax the rich" folks don't get (not implying you're one of them). High income professionals (who are not in business for themselves) already pay insane taxes - the truly rich are rich from business interests, not from income, and being rich from business interests provides mucho tax dodges. Wage-slaves like me, not so much.

 

[pletal]

Good question. Broadly speaking, housing-related would be about $85K (prop taxes/insur, utilities, housekeeping, grounds/landscaping, pool, mortgage, etc.). Vehicles we pay for in cash and keep +10 yrs, but add-on $10K for insur/maintenance. I budget $25K for health insur and other medical (for a couple). And then $32K for at-home food & beverage. So we're up to $152K. Another $100K is somewhat discretionary spending (everything from eating out, travel, entertainment, spa treatments, etc.) and ~$50K for taxes. I did say there was a fair amount of fluff in the budget, but this reflects about what we spend today without paying too much attention to belt tightening. When there is no income, I know with 100% certainty DW will start cracking the whip on expenses.

I am not yet 60 but in same boat ad far as padding expenses (fluff) I added it up and added another 35%. AT about $400K per year. Looking at 30 years in retirement. Who knew? I was 21 yesterday!

 

[LateToFIRE]

I am not yet 60 but in same boat ad far as padding expenses (fluff) I added it up and added another 35%. AT about $400K per year. Looking at 30 years in retirement. Who knew? I was 21 yesterday!

LOL, thanks for the affirmation.

 

[PlayinwithFIRE]

Thanks for roughing out the budget. I don't know how attached you are to the house (it sounds really nice!) , but as a general category, it is taking up about a third of your budget when you put in mortgage, insurance, upkeep, pool guy, lawn guy etc. You live in an expensive area but I don't think that is substantially affecting this amount. Id guess its the house size/value.

I would consider downsizing if my interest were in stretching existing dollars further into the future. That said-I don't think you are in any danger of running out of $ .

If you want to keep the house, then you should make a list of its expenses and start aggressively trying to find lower cost options (cheaper insurance-higher deductibles, lower cost lawn care etc) or zero it out by learning to do some of it yourself.

With assets over 1M (maybe its less-i don't know), you would be a candidate for the improved services/perks at places like Vanguard/Fidelity/Schwab. I don't think these services are going to give better financial advice than a robo-advisor (i think they are all using robo-advisers behind the scenes anyways) - but they do offer generally lower costs associated with maintaining funds. I think the Vanguard Personal Advisor Service is 0.3% .

If you like to make periodic adjustments and think about this stuff on your own, you can save yourself the 0.3% per annum.

Overall-it sounds like you are in good position to retire though !

 

[LateToFIRE]

Thanks for roughing out the budget. I don't know how attached you are to the house (it sounds really nice!) , but as a general category, it is taking up about a third of your budget when you put in mortgage, insurance, upkeep, pool guy, lawn guy etc. You live in an expensive area but I don't think that is substantially affecting this amount. Id guess its the house size/value.

I would consider downsizing if my interest were in stretching existing dollars further into the future. That said-I don't think you are in any danger of running out of $ .

If you want to keep the house, then you should make a list of its expenses and start aggressively trying to find lower cost options (cheaper insurance-higher deductibles, lower cost lawn care etc) or zero it out by learning to do some of it yourself.

With assets over 1M (maybe its less-i don't know), you would be a candidate for the improved services/perks at places like Vanguard/Fidelity/Schwab. I don't think these services are going to give better financial advice than a robo-advisor (i think they are all using robo-advisers behind the scenes anyways) - but they do offer generally lower costs associated with maintaining funds. I think the Vanguard Personal Advisor Service is 0.3% .

If you like to make periodic adjustments and think about this stuff on your own, you can save yourself the 0.3% per annum.

Overall-it sounds like you are in good position to retire though !

Thanks - appreciate the feedback. Yes, the house is certainly a big expense. But, we enjoy it immensely! And it is a very valuable asset unto itself - practically doubling in value since we bought it as its in a very scenic area with extremely strict limits on new construction. I like to think we've got good instincts when it comes to r.e. because this isn't the first time we've hit doubles or even triples on r.e.

At any rate, the house provides a financial safety valve of sorts - in 20 years the mortgage will be paid off (if I don't pay it off early), and I conservatively estimate with only modest appreciation the property will be worth at least a couple mil by then. At that point (or sooner) I would anticipate we'd move to a lower-maintenance condo type of arrangement. We could sell or use the house as a rental property - a summer MD-Labor Day vacation rental could easily cover the most of the expenses.

In terms of concerns about running out of $$$, I agree, my fears are irrational - I think comes from growing up with a lot of economic scarcity/uncertainty. When I run my own projections, with conservative assumptions, I come out with about as much $$$ as I start with after 20 years. If the stars align, I come out with a megaload more, if disaster strikes, like a deep recession just as I retire, end up somewhat less, but not totally busted until I'm over 90, at which point if I'm still kicking, I really don't think I'll care.

I've also tried out some of these online calculators, and results vary by a lot between them - so they are used mostly as a sanity-check. I do think at my asset level, though my expenses are high, there is enough flexibility to make changes in spending and living situation if things go sideways. It won't be a set it and forget it plan by any means. My belief is that financial FLEXIBILITY is the key - its served me well so far. Plan A doesn't always pan out, but I always make sure I've got a Plan B/C/D.

 

[marko]

I have most of those resources... and I'm also more than competent on the financial stuff. My philosophy is that your advisors will only get you so far - they make mistakes (which I have caught in the past), they don't always have the full picture (and sometimes you don't want them to), and their interests are not always aligned with yours (their 1st priority is to generate fees). The best protection for my $$$ is my own knowledge.

The 50% rate I noted is the MARGINAL tax rate, i.e. half of every EXTRA dollar of AGI goes to taxes. My proportional rate is more like 25% - about 25% of my total income goes to income taxes.

When your income is largely reported on a W-2, there are not many ways around taxes - sure you can do some deferred comp, max out 401K contributions, report a family business with losses on Schedule C, offset rental income with depreciation, etc., I've done all these. But this is what a lot of "tax the rich" folks don't get (not implying you're one of them). High income professionals (who are not in business for themselves) already pay insane taxes - the truly rich are rich from business interests, not from income, and being rich from business interests provides mucho tax dodges. Wage-slaves like me, not so much.

Yes, my "seven figure severance" that you took notice of was essentially my year's salary, so I'm quite familiar with the intricacies.

What seems to be hampering you is being able to trust a competent wealth management company. Perhaps for good reason but that only means that you haven't found the right fit. (And why would you not "give them your full picture "?) At your level, if you're dealing with Fido, Schwab et al, your in the wrong place.

You mentioned "...that in the circles I typically inhabit, work-wise, neighbors, boards, social, etc., my NW is no big deal....". Might I respectfully suggest that next time you're hovering in those circles to inquire--as I often hear in my circle--"who are you with?"

Yes, I know a lot of WMs start at $20MM+ but there are dozens of smaller private shops handling smaller balances. Most of those trust fund kiddies are doing quite fine with no idea of what's going on. A serious private wealth management outfit could go a long way in easing your concerns.

 

[Unpaintedhuffhines]

Why waiting? Well, since I expect I'll be shown the door soon enough, makes sense to wait it out a bit for an incentive if you know what I mean.

I'm right there with you. I loved my job (well, for the most part). I also had rumblings of potential layoffs (packages) coming, but for me, it was too far away (it turned about to be about 7 months after I left). Looking back, I don't know if I could have made it, but I probably would have been offered a package that would have been quite lucrative. I still think I made the right decision (but if it was impending, I'd probably do the same thing as you are doing).

I didn't really know what I'd do either, and you'll see a lot of people here suggest that you need to have a plan - I don't actually agree with that, but I had some vague ideas. It works for me but may not work for everyone (I remember asking people on my team "are you running from or running to?" when talking about an opportunity. My recommendation was always to run to.

And if you are good at what you do (and it sure sounds like it), you will most definitely be lured by the Next Great Opportunity. Be ready with your answer.

Good luck - you're in an enviable position.

 

[Alex The Great]

All kidding aside, interested in what your budget looks like (not that I'd be in a position to come anywhere close to it, so really just plain nosy curiosity).

No I don't live in a cavern I live in the nice house in the heart of San Francisco Bay Area. And I do pay high tax because of my wages. Hope it will change after the retirement. The budget for 2022 look like that:
Expenses 2022
-----------------------------------
Electric & Gas $1,357.00
Water $1,055.08
Home insurance $736.68
HOA dues $1,164.00
Property tax $13,957.60
Car insurance $671.04
Car registration $391.49
Car maintenance $167.65
Gas $462.93
Internet $627.20
Phone $61.44
Web $330.14
Medical cost $1,690.06
Food $6,463.09
Restaurants $123.15
Dept & Amazon $3,593.60
Travel $6,178.51
Tax Preparation $20.00
AAA Member $59.00

 

[brett]

My impression of the OMY club people that I knew was that they never had any intention of OMY. There intention was to keep working. Nothing wrong with that but why pretend that it is OMY when it truly is not.

The OMY people that I know of who really meant it said nothing until they were ready to go. Even then, a few kept it very quiet until the very end when they could no longer deny that retirement was here and now for them.

 

[LateToFIRE]

No I don't live in a cavern I live in the nice house in the heart of San Francisco Bay Area. And I do pay high tax because of my wages. Hope it will change after the retirement. The budget for 2022 look like that:
Expenses 2022
-----------------------------------
Electric & Gas $1,357.00
Water $1,055.08
Home insurance $736.68
HOA dues $1,164.00
Property tax $13,957.60
Car insurance $671.04
Car registration $391.49
Car maintenance $167.65
Gas $462.93
Internet $627.20
Phone $61.44
Web $330.14
Medical cost $1,690.06
Food $6,463.09
Restaurants $123.15
Dept & Amazon $3,593.60
Travel $6,178.51
Tax Preparation $20.00
AAA Member $59.00

This is really fascinating. Glad I asked. Your home insurance is incredibly cheap, maybe because condo? Your car insurance is seriously cheap - mine on a 13 year old beater is three times as much - maybe cause I'm in a big city on the other coast. What really jumps out is your restaurant tab - either you never eat out, or somebody else pays, lol.

Either way, congrats on extraordinary discipline. So... can I be even nosier and ask how that translates to savings?

 

[Alex The Great]

No this is a single family house. I believe home insurance is cheaper on west coast because we don't have much hurricanes but earthquake damage is not covered. But this year the cost is up sharply to almost $1K. I rare go to the restaurants and cook at home most times.
As regarding savings: I do have may be ~10 times less than you are so you definitely have much greater success in translation to savings.

 

[LateToFIRE]

No this is a single family house. I believe home insurance is cheaper on west coast because we don't have much hurricanes but earthquake damage is not covered. But this year the cost is up sharply to almost $1K. I rare go to the restaurants and cook at home most times.
As regarding savings: I do have may be ~10 times less than you are so you definitely have much greater success in translation to savings.

Thanks for the clarification. Something tells me with this kind of discipline that you have done extremely well converting income to savings. It's all relative. Think I saw elsewhere you're about to retire. More than one way to achieve financial independence and winning the low overhead game is a thing to be celebrated.

My scale is a lot more about taking outsized, educated risks - using significant levels of debt to leverage investment, working in a high pay-off, competitive, eat what you kill kind of career, etc. The rewards look real nice after the race is done, but man, it takes a physical/emotional toll most people would not be willing to pay.

 

[LateToFIRE]

Yes, my "seven figure severance" that you took notice of was essentially my year's salary, so I'm quite familiar with the intricacies.

What seems to be hampering you is being able to trust a competent wealth management company. Perhaps for good reason but that only means that you haven't found the right fit. (And why would you not "give them your full picture "?) At your level, if you're dealing with Fido, Schwab et al, your in the wrong place.

You mentioned "...that in the circles I typically inhabit, work-wise, neighbors, boards, social, etc., my NW is no big deal....". Might I respectfully suggest that next time you're hovering in those circles to inquire--as I often hear in my circle--"who are you with?"

Yes, I know a lot of WMs start at $20MM+ but there are dozens of smaller private shops handling smaller balances. Most of those trust fund kiddies are doing quite fine with no idea of what's going on. A serious private wealth management outfit could go a long way in easing your concerns.

FYI, some of my funds are with an an AUM-based advisor, so I do have some experience with the concept. That said, I cring when I look at what I'm being charged and sometimes wish I'd simply bought index funds. I'm extremely familiar with their tools and financially adept myself. And you're right, trusting the advice is an issue - I've found their idea of investment and wealth creation to be fairly narrow (mutual funds & insurance products, rinse, repeat). That was all fine and well 30 years when I was starting from scratch, but things are about to get a lot more complicated.

To your point, perhaps I haven't given them a good chance to fully demonstrate their capabilities and/or have not yet found a good fit yet. And there is always the question of - how much of my own time do I want to spend on this stuff (though I actually enjoy it for now) and what if something happens to me. Good food for thought. Thx

 

[Unpaintedhuffhines]

First, I'm fascinated by your budget...are these annual numbers? - $123 in restaurants? For a year? I expect we're at that number, but probably per week. And $5/month for phone? (I presume you mean cell phone).

I worked a deal with our AUM-based advisor where he charges us, but only on the $ we have in IRAs (and it's below 1%). For that, he manages our money, but also acts as our CFO: pull cash from this investment and not that investment, invest here to get best tax benefits, set us up with trusts, has a guy do our taxes, etc. He's does much more than just picking mutual funds for us. It works for us, but it's not for everyone. His clients typically have $10M+, but he started with me when I had about $750K because he's an old college friend, and did it as a favor. His best advice to me was just before 2007 crash when he said "I think it's time to go to a full cash position for a bit," so we missed on the big downturn. Luck or good advice? Dunno, but it saved us a lot of money.

 

[marko]

FYI, some of my funds are with an an AUM-based advisor, so I do have some experience with the concept. That said, I cring when I look at what I'm being charged and sometimes wish I'd simply bought index funds. I'm extremely familiar with their tools and financially adept myself. And you're right, trusting the advice is an issue - I've found their idea of investment and wealth creation to be fairly narrow (mutual funds & insurance products, rinse, repeat). That was all fine and well 30 years when I was starting from scratch, but things are about to get a lot more complicated.

Well, there it is. If they're just offering MFs and insurance products to someone at your level, you're definitely dealing with the wrong people.

You're a multimillionaire. Start behaving like one.

Find a "quiet" private firm that specializes in UHNW individuals and generational wealth. The kind of people who come to your house, can help with trusts, estate planning, custodial services and such. You may not need all those things but that’s the level you should be looking for.

No, they're not cheap but most often can deliver within the parameters that you define. Someone that almost operates as a family office for you.

Good luck. YMMV

 

[LateToFIRE]

You're a multimillionaire. Start behaving like one.

SIR, YES SIR!!! [insert salute visual]. Thank you for the tough love (and advice)!

 

[LateToFIRE]

First, I'm fascinated by your budget...are these annual numbers? - $123 in restaurants? For a year? I expect we're at that number, but probably per week. And $5/month for phone? (I presume you mean cell phone).

I worked a deal with our AUM-based advisor where he charges us, but only on the $ we have in IRAs (and it's below 1%). For that, he manages our money, but also acts as our CFO: pull cash from this investment and not that investment, invest here to get best tax benefits, set us up with trusts, has a guy do our taxes, etc. He's does much more than just picking mutual funds for us. It works for us, but it's not for everyone. His clients typically have $10M+, but he started with me when I had about $750K because he's an old college friend, and did it as a favor. His best advice to me was just before 2007 crash when he said "I think it's time to go to a full cash position for a bit," so we missed on the big downturn. Luck or good advice? Dunno, but it saved us a lot of money.

This sounds more like a worthwhile arrangement! FYI, I pay slightly less than 1%, just adds up when the AUM is significant.

 

[FLJim]

"I live in (and plan to retire in) a very high cost of living area".

Ever had any thoughts, consideration, anaylsis, or research on retiring in a location with lower cost of living, better weather, more activities, and a better lifestyle Just wondering what is so special about New York.

 

[artsy-B]

Make way for someone to grow.

Call me crazy, but I am trying to figure out if I can retire on $2500/month with 15K in 401k. LOL.

Seriously, though, my inclination would be to offer to just step out of the way and let the next generation have a chance to grow and earn. Yours is done, you will be fine, stop accumulating, start your new life, and let someone else have a chance at opportunity.


Just my thoughts.

 

[marko]

"I live in (and plan to retire in) a very high cost of living area".

Ever had any thoughts, consideration, anaylsis, or research on retiring in a location with lower cost of living, better weather, more activities, and a better lifestyle Just wondering what is so special about New York.

From what I read, half of New Yorkers are asking that same question.

 

[anothercog]

Any kids to worry about? What does your wife want you to do in retirement?

How long is your pay out period for your deferred comp? Probably not much you can do about taxes, especially for the real estate sale and deferred comp. Regardless it sounds like you are in great shape.

I’m 53 and expect similar numbers and spend need/want when I get to 60 and hopefully also receive an offer to leave. Also in a very HCOL and likely won’t leave. I’m amazed people can live on $40k/year but realize I live in a bubble.

 

[LateToFIRE]

"I live in (and plan to retire in) a very high cost of living area".

Ever had any thoughts, consideration, anaylsis, or research on retiring in a location with lower cost of living, better weather, more activities, and a better lifestyle Just wondering what is so special about New York.

Actually, we are relocating away from the city, just not going too far afield. The great thing about New York City is that within 1.5 to 3 hours you can find yourself in some really beautiful beachy, rural, hilly, pastoral, mountainous, etc. communities where you are in a totally natural habitat completely removed from the city (other than the other city folk that tend to also be looking for exactly the same thing).

NYC is special because of both its commercial and creative energy. No other place like it. But, it's also just a hard place to exist. Great place to make your fortune and then exit stage right.

 

[FLJim]

Actually, we are relocating away from the city, just not going too far afield. The great thing about the New York City is that within 1.5 to 3 hours you can find yourself in some really beautiful beachy, rural, hilly, pastoral, mountainous, etc. communities where you are in a totally natural habitat completely removed from the city (other than the other city folk that tend to also be looking for exactly the same thing.

NYC is special because of both its commercial and creative energy. No other place like it. But, its also just a hard place to exist. great place to make your fortune and then exit.

Understood! We were natives of ChicagoLand with all the benefits of the city,. but still close to the pastoral environs. But taxes, politics, and crime issued a wake-up call 8 years ago and we now enjoy central Florida - low taxes, low crime, great hospitals, 90 minutes from either coast, and we sold our snowblower and winter clothes.

 

[LateToFIRE]

Understood! We were natives of ChicagoLand with all the benefits of the city,. but still close to the pastoral environs. But taxes, politics, and crime issued a wake-up call 8 years ago and we now enjoy central Florida - low taxes, low crime, great hospitals, 90 minutes from either coast, and we sold our snowblower and winter clothes.

Understood - we've investigated Florida as well, not so much as primary residence, but as a winter home, more towards the coast(s) (Tampa, Sarasota, Naples, Lauderdale, etc.). Wish I'd pulled the trigger on buying something a few years ago - asking prices now literally double in past 3 years. The FL state tax (i.e. lack thereof) is also compelling, but most of close friends and fam in the NorthEast.