Author Topic: $4M investible assets, $1M paid off house, married w/2 kids - what would you do?  (Read 3682 times)

MountainLion

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I'm very new here, getting tuned in after seeing Tim Ferris post MMM on Facebook a while back.

I'm 44, and so is my wife. We have 2 kids, a daughter who is 10, and a son who is 8.

We have saved $4M through our income running a small business, all in Vanguard funds, mostly in a target retirement fund. About $3M is in taxable accounts, and $1M is in tax deferred accounts. We have maxed as much as we could out of IRA (traditional, Roth, Simple, HSA) over the years. We also have 529 accounts setup that we are on target to have $75k for each kid for college (state college, and the kids will have part time jobs while they go).

We have been debt free since 2007 - when we paid off our mortgage while listening to Dave Ramsey way back. Our house worth $1M.

We own and run a small business that that has provided us a high income for a long time.

As my wife and I approach midlife, we are looking around and determining what the next steps for us should be.

Running a business full of highs and lows. In general I feel very fortunate my wife and I have had our business all these years. I have not had a boss since 2002 and have maintained a high 6 figure income (one year hitting 7 figures) through most of the time owning the business. Still, when we go through a tough/low period, these days we look at ourselves and say, what are we still fighting for? We have saved a ton of money. We have a paid for house. We have no debt. Also, I got into the work I do (technical work) because I needed job - it picked me, I didn't pick it. So, I wonder, if left free to just do what I want, what would I do? That thought interests me. Overall, I have a great team of employees, and my job isn't hard, but it does take a lot of focus and effort. Selling the company, doesn't feel right for some reason and it does provide a lot of benefits.

So - my dilemma......

After doing some reading here on the MMM site, it got me thinking. If MMM and others here can live on $30,000 and be happy, I'm pretty confident my wife and I could live on $120,000/year (pre-tax income of 4% of $3M taxable accounts) - plus whatever side businesses we wanted to run that might generate another $100,000/year between the two of us? I'm sure everyone here would say, well, of course you can. The thing is currently, we make much more than that in our businesses - though we put in a solid 45 hours a week each in the business. It isn't retirement, though I'd say about 50% of the work we do, I do enjoy. If I could keep my hours down closer to 20 hours a week, I be much more comfortable with it.

Still, this is not my dilemma...

My dilemma, is that after we looked over how much we spend month to month and putting together what a retirement budget would look like, one item stuck out like a sore thumb....our property taxes.

I live in a state with INSANE property taxes.

On our $1M house, our property taxes are nearly $25,000/year - or roughly 2.5% of home value. I have yet to hear of another state higher than Illinois in property taxes.

I always knew they were high, but then after looking through some other states I'm interested in living in (Colorado, Utah, Wyoming) - I was SHOCKED to see similar $1M homes - with great public schools with similar stats to where I am now, paying around $5,000/year in property taxes, or roughly 0.5% of home value annually.

I was PISSED to see this information. Extremely pissed.

Our house is awesome, though probably about 1,000 square feet more than we need for our family of 4 (the house is nearly 6,000 square feet including the finished basement). The public schools are excellent (a key reason we are here), our neighborhood is great, and we have become close to several of our next door neighbors (similar sized houses and similar property taxes). My commute to my office is about 10 minutes. I fit in my community and have  a great network of social and business friends. Neither my wife or I have close family in the area though. Our closest family is about 2.5 hours away.

If not for this property tax issue, I probably wouldn't even be posting here. I'd likely be staying put in Illinois. Our state incomes is low, at 3.75%, though there is tremendous pressure to raise it as the state is in massive debt.

This has made my wife and I wonder...well, more me than her, but we are on the same page: is staying where we are effectively paying an extra $20,000/year in property taxes over other states we are interested in worth it?

I know this thing: I am where I am because I grew up in Illinois and my professional life developed here. I did not pick to live where I am at.

If I picked to live wherever I want, Colorado seems to be calling me. My wife and I have been coming here for years on ski trips and the more I'm here the more I like it. Specifically Fort Collins and Colorado Springs seem to bubble up for the stats we are looking for. Still that is not the key thing.

They key thing is this property tax issue. The only way to fight the property tax is to fight your assessment. We are working on that, but the best case it will only shave maybe 1 or two thousand off our taxes. They will still be high. While Illinois does have a low income tax rate, which is worth considering, it is not even a point lower than Colorado at 4.63% (versus 3.75% in Illinois).

We started floating the idea of moving to my daughter and son. My son doesn't seem to bothered by the idea, but my daughter is NOT HAPPY with what we are thinking about doing. VERY NOT HAPPY. She is 10 and along for the show, but I do care about her feelings. I feel the longer we put this off, the worse things will get. I feel like if we do this, we need to do it before junior high.

If I were picking where I wanted to live, it would be somewhere in the mountains near great skiing, in community of 100,000 to 500,000, with low taxes, very high performing public schools, and with a public university in or very close to the town where my kids can get a great college education at a public school price, saving us money, and allowing them to live with us a few years longer before they go off on their own. Where I live, there is no public university without a 1 hour commute.

What would you do?

MountainLion




surfhb

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You can live anywhere in the world you want, property taxes or not.    Your daughter will be fine once youre settled.   

Just pick a place and do it.    Honestly, your post seems a little silly.   $4 million dollars!  LOL

Side Note:   Why not hire someone to run the business?
« Last Edit: April 18, 2017, 08:53:53 PM by surfhb »

yachi

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Party for the rest of my life and tell my boss to kiss my hairy derriere.  But since you're your own boss, that would be weird.  Seriously, half your assets are more than I make at my job, and I have 3 kids, not 2.

You didn't mention the value of your business, or maybe you did mention it and I missed it.  You should be able to sell it for a decent profit.  Could you set up a manager and an employee or two to run things and you profit as a hands-off owner?

As for your property taxes, I pay 2.4% of actual value on my house but 2.9% of assessed value.  This is in Pennsylvania, a state not know for high property taxes.  The bulk of the taxes support our very good public school, so I don't complain much, but it helps that my house is less than 2x my more modest income.  I don't know if your scorn for taxes makes sense without seeing the rest of your budget. 

Also, you can withdrawal from your tax deferred accounts too.  By the way, what ideas do you have for a side business that generates 100K?

JLee

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You can calculate SWR on your entire portfolio, not just taxable -- as you draw down your taxable accounts, your tax advantaged accounts will grow untouched.

You can basically do whatever you want, with over three times the median household income at a very reasonable 4% WR.

If it makes you feel any better, look up NJ property taxes - they're higher.
« Last Edit: April 18, 2017, 09:28:55 PM by JLee »

seattlecyclone

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Some thoughts:

- You have earned plenty of money to live a happy, luxurious life without doing any work ever again, if that's what you want for yourselves. You might need to make some small lifestyle changes to make that sustainable, but perhaps not.

- 6,000 square feet is a really big house. Your property taxes are really high because you have a really big house. You claim you would be satisfied with 5,000, but why stop there? We're a family of three, about to upgrade our house from about 1,000 finished square feet (plus unfinished basement) to 2,000. Our current house does feel a bit cramped with a kid, but we honestly don't know what we're going to do with all the space in the new place. It's all relative. Envision yourself in a house half the size of your current place. 3,000 square feet should still be plenty of space to give everyone their own bedroom and bathroom, and have a spacious living room (or two), kitchen, and dining room. I struggle to understand how anything beyond that would meaningfully move the needle on happiness. For me it would probably be more of a negative than a positive because it's just more space to clean and maintain and pay property tax on, all of which require spending time earning money to pay for. Make sure the happiness you gain from having a bigger house is worth the time you spend earning it.

- You say you enjoy about half of the work you do. Why not hire someone to do the other half? You already have some employees. Would another one or two completely kill the company's profitability? Somehow I doubt it.

- Have you tried tracking and analyzing your spending? It's good to start with some solid data about where your money is currently going so that you can scrutinize what parts provide a good value in terms of happiness per dollar and what parts don't. Identifying the $120k of spending that makes you happiest would be a useful exercise. What if you spent no more money than that? Would your life seem significantly worse in some way?
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lhamo

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Have you spent any time in Boulder?   Housing is expensive there, but seems to tick many of your buttons.

I would promote one of your employees to manage your business, rent the current house out, and try a move to see how you like it.    If it doesn't work out, you can always go back.
Wherever you go, there you are

NathanDrake

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any tips on how you managed to get a business like that going?

Viking Thor

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A few thoughts:
- As others have pointed out, you have enough to retire now if you want to. Congratulations!
- Think about what makes you happy and where you want to live/what you want to do
- Your property taxes, though high, are not among the highest in the country. Below is a link to top 10 counties, and I'll bet your county is further down the list (top 10 is all NY/NJ, There are probably other counties in the northeast and CA that are higher than Chicago, where I live a 2000 square foot house can have 20k/year property tax.)
https://www.google.com/amp/www.nj.com/articles/15840671/7_of_the_10_counties_in_america_with_the_highest_property_taxes_are_in_nj_study_says.amp
« Last Edit: April 18, 2017, 10:59:59 PM by Viking Thor »

Bateaux

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Bogleheads may be a resource for you.
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Villanelle

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My husband is in the military and after years of living overseas, most of our everyday friends are military as well.  I am also the child of a military family.  I remember crying when we moved, and I also remember being fine within a few months once we were settled and I made friends though school and other activities.  Kids are resilient.  I am surrounded by kids who will have attended 6+ schools by the time they graduate, and sometimes many more than that.  They do cry when they leave, often times.  But they are okay. Your daughter will be fine as long as you help her with the transition.

That said, I think downsizing to "only" 3000 or 2500 sqft is would be where I started if you otherwise like where you are.  You say you'd be okay with 5000, but that's ridiculous.  You'd be fine in 2000 or 1500 if you wanted to be. 

deborah

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Several thoughts:

1. You haven't said what your current expenditure per year is, but let's say it's $400k. And you think you can get that down to $220k. Try to live on that for a few months.

2. If you are going to live on $220k, $25k is peanuts! Why are you quibbling about that?

3. It sounds like there should be a few other really big expenses in there for you to be spending that much. Find them and eliminate them if they are unnecessary to you.

4. It is probable that your lifestyle includes a lot of work expenses, that could be eliminated if you stopped working. Work out what they are and whether they actually will be eliminated.

5. As others have said, your business should be worth something (quite a bit actually). Work out how to sell it, and how much it is worth. It could replace the other $120k that you think you might get for 20hours work a week.

6. I am retired, and find it had to spend more than $20k - how can you possibly be spending so much?

nottoolatetostart

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With a 10 yr daughter, I would not move until kids are graduated from high school. I was 10 when I moved as a little girl and hated it. I would never move my kids, unless we HAD to (military, unemployed and needed to move because of a shot at a job). I would not move for hedonic reasons.

If you are THAT concerned about property taxes, are there NO 3,000 sq ft homes in the same school district? I find that hard to believe. You could move within the same school district and then move when youngest is out of high school. But won't you guys really miss your community?

Otherwise, take comfort that our budget is about 40k (tight, but doable) and our 4k property taxes are 10% of our budget. If your annual expenses are 200k, them 20-25k in property taxes is also 10% of your budget, respectively. Maybe that helps....

2Birds1Stone

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Sounds like you are in a good spot!

You could downsize your home to something at half the price (which would still be likely more than you need for a family of 4) and do whatever you want for the rest of your life.
"A small house can hold as much happiness as a big one." - Fortune Cookie

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albireo13

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With young kids, having a good school system is very important and should be valued. 
If I were in your shoes, I would stay in the area but, downsize to a smaller house where you can live more modestly.
This keeps the kids in a good school system, minimizes life disruption, and addresses your concerns over RE taxes.

It would also give you the opportunity to start living more frugally for a spell.  This is good training before you FIRE.

In my case, we raised 5 kids in what we now consider a clown house ... 4000 sqft, inground pool, 5 acres.  It was valued at $460k.
That was too big for us. 





Fishindude

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Sounds like you are probably located in a Chicago suburb.  If you don't like those ridiculous taxes, move somewhere more rural.  I've got a 20 acre farm & house in southern, IL and taxes are less than $500 per year.

I would start working on a succession plan for your business.  You don't want to just close up shop and leave people hanging, particularly if you have a few good employees.
Identify the next leadership team for the business and structure a long term plan to turn over the reins and buy you out.

boarder42

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why is downsizing your home and staying in the same area not a real option for you?  no family of four needs 6k square feet.  half of that is more than sufficient.  if you bought at 500k house in the same district your property tax in theory would be cut in half, but what are your real costs.  you have 160k you can spend and in all likelihood never run out of money you talk like you'd need 220k.  I think you're in the correct place and a case study could help you make the right choices for you and your family.

also kids living at home when in college - maybe your kids will want to but for me that was a big step towards independence.  getting out and living on my own.  A college kid doesnt want to come home to mom and dad.
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Laura33

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So, first, you are on the MMM board.  You should expect that most people are going to tell you to downsize your house considerably, sell the business, and live on your magnificent 'stache.  Because, you know, you have already achieved far, far more than 99.9% of folks here would require for a more-than-ample retirement.  So please consider all of those comments made so I can move on to the rest of it. 

Respectfully, the key thing is not your property taxes -- that is the tail wagging the dog.  The issue is that you live in an area where the lifestyle you want requires a house that costs $1M with $25K in property taxes, and that is where the business is located that funds this lifestyle.  So the key question is whether you can find the lifestyle you want in another area, for a total overall cost that is within the realm of what you can afford on your 'stache -- and, if so, what you are going to do about the business.

I think the business question comes first.  You say that it doesn't feel right to sell the business.  OK.  So if you move to CO, what's the plan to keep it running?  Are you going to hire another manager?  Travel back and forth periodically?  Take on a co-owner?  If so, what does that do to the income that you are currently pulling from it?  And will that provide sufficient relief from the stress you feel when business drops off again? (Hint: the answer to that is no, because there is no one like an owner who is going to care enough to put in the effort to build the business back up).  You must figure this part of the equation out first, because if you're not willing to sell and you can't make the money work with any of the other options, then moving isn't really an option.

Once you figure out the business side of things, that will give you a 'stache/income number you can work with when you look at your options.  So take that figure and look at the overall cost of living as compared to the quality of life.  Hyper-focusing on one part of the equation (property taxes) may miss the forest for the trees.  E.g., what if another state has high property taxes but lower housing prices and no state income taxes?  What if the taxes are low but the schools suck and you need to send your kid to the awesome private school down the street?  Also consider things like fees (the first time I had to register my car in TX I about passed out, it was *so* much higher than where I came from -- and some places now have development fees on top of property taxes, even for SFH), electricity prices, water access/cost (especially if you are moving to the West -- you cannot take water for granted out there), food costs (from what I understand, CA has massive taxes but cheap groceries, because that's where much of the produce is grown), etc. etc. etc.  Generally, if you are looking for a top neighborhood in a place with great schools and excellent public services, you should expect to pay higher taxes for that one way or the other -- someone has to pay for those things.  But even if the property tax rates are just as high in your target location, you might still be better off if you can get an awesome house for half the price of your current one; OTOH, lower property taxes are meaningless if you need another $1M house and have to pay higher state taxes as well. 

Personally, I am a huge, huge fan of Colorado Springs -- favorite place I've ever lived, largely due to the combination of proximity to the mountains and awesome weather that makes you want to get out and play in them.  But it doesn't meet all your criteria -- your kids couldn't go to school up in Boulder and still live at home, for ex.  OTOH, you could move to Boulder, and sacrifice on either house size or cost (it's sort of ridiculously expensive up there).  So you are going to need to figure out which of your priorities are the most important.  The classic saying is that you can have anything you want, but you can't have everything you want.  Size, cost, or early retirement:  pick two.
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Lentils4Lunch

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I agree with other posters that 1) downsizing your house while staying in the same school district should be a real option to consider. And 2) please take your daughters feelings into account here. Middle school is already a difficult time in a girl's life. Having to switch schools during this time might be a very, very stressful event for her. I know that families do it all the time and kids adjust, but that doesn't mean they don't carry some emotional baggage with them for a long time.

Please talk to her about it, let her in on your thought process and assure her that her input is valued. (Same goes for your son.) Obviously, you don't have to share with the kids all the details of your financial situation, but give them some pros and cons of what a move to colorado or wherever would mean for the family. And then really listen to daughter's reasons for being against it.
« Last Edit: April 19, 2017, 09:41:46 AM by Lentils4Lunch »

SKL-HOU

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I live in Houston. Even 3.2% taxes is not unheard of. In fact, 2.5% is low for here. But we do not have state income tax (not sure if Illinois does).

canyonrider

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If I were picking where I wanted to live, it would be somewhere in the mountains near great skiing, in community of 100,000 to 500,000, with low taxes, very high performing public schools, and with a public university in or very close to the town where my kids can get a great college education at a public school price, saving us money, and allowing them to live with us a few years longer before they go off on their own. Where I live, there is no public university without a 1 hour commute.


I can't think of any community in Colorado that meets all of those criteria. Boulder comes very close, but it is not at all "in the mountains near great skiing." Taxes also aren't particularly low here relative to other parts of CO, although I suppose they are lower than your current location.

Yes, Colorado's taxes are generally low compared to many other states, but the trade-off is that our schools, roads, and other infrastructure and public services are crumbling in a bad way because of the lack of funding. Tuition at state universities has also risen dramatically in recent years because of this, making them less of a bargain.

Figure out what you want to do with your business/work, then pick where you want to live and raise your family and go from there. But don't base your decision on taxes.

honeybbq

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If I were picking where I wanted to live, it would be somewhere in the mountains near great skiing, in community of 100,000 to 500,000, with low taxes, very high performing public schools, and with a public university in or very close to the town where my kids can get a great college education at a public school price, saving us money, and allowing them to live with us a few years longer before they go off on their own. Where I live, there is no public university without a 1 hour commute.


I can't think of any community in Colorado that meets all of those criteria. Boulder comes very close, but it is not at all "in the mountains near great skiing." Taxes also aren't particularly low here relative to other parts of CO, although I suppose they are lower than your current location.

Yes, Colorado's taxes are generally low compared to many other states, but the trade-off is that our schools, roads, and other infrastructure and public services are crumbling in a bad way because of the lack of funding. Tuition at state universities has also risen dramatically in recent years because of this, making them less of a bargain.

Figure out what you want to do with your business/work, then pick where you want to live and raise your family and go from there. But don't base your decision on taxes.

Boulder has one of the best high schools in the country... and is an hour from skiing. Not bad. With 4MM OP has plenty of money to rent a condo in the mountains whenever they want.

zolotiyeruki

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I live in Houston. Even 3.2% taxes is not unheard of. In fact, 2.5% is low for here. But we do not have state income tax (not sure if Illinois does).
I'm a Former Houston-area resident, current Illinois resident.  Illinois currently has a 3.75% income tax, with very few deductions.  Although Texas property taxes are about the same percentage, housing prices tend to be lower in TX, depending on your area, of course.  Even though IL has similar property taxes and sales taxes, plus a significant income tax that TX has, IL is somehow bankrupt...

2Birds1Stone

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I live in Houston. Even 3.2% taxes is not unheard of. In fact, 2.5% is low for here. But we do not have state income tax (not sure if Illinois does).

Here on long island 3-5% is the average range.......crazy!
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tyort1

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You have enough $$ to quit and live forever without ever working again. 

Regardless of whether you quit or not, I'd recommend dialing back your lifestyle quite a bit.  Why?  Because of the children.

Having a luxurious life sets children to expect that life will always be luxurious.  And when they start out on their own, dialing back their lifestyle is seriously difficult. 

That's when they get into problems with debt.  They try to live the life they grew up in, and can't because they don't have the income.

You can fix that, now, by living a more normal life.  That will not only save you $$, but it will free your kids from unrealistic expectations about their own lives.
« Last Edit: April 19, 2017, 11:22:22 AM by tyort1 »
Frugalite in training.

DTaggart

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You have a $4 million stache. 4% of that is 160k per year. Subtract your $25k annual property taxes, and that leaves you with $135k/year to live on. There is no problem here.

Lentils4Lunch

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You have a $4 million stache. 4% of that is 160k per year. Subtract your $25k annual property taxes, and that leaves you with $135k/year to live on. There is no problem here.

+1


boarder42

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not to mention a business thats profitable enough for you to save that size of a stash so its probably worth something to sell to someone. for at least 500k if not 1MM
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KBecks

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You are the grown up and it's really up to you to decide where to live.  10 year olds don't get to run the show.   

Good luck figuring it all out!   You have wonderful resources so be careful with visioning what you want and what's your best plan.

honeybbq

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TO answer the OP, I'd scale back the business to maybe part time ish levels, scale down the house, horde some more cash, and pull the plug in a few years.

boarder42

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TO answer the OP, I'd scale back the business to maybe part time ish levels, scale down the house, horde some more cash, and pull the plug in a few years.

what data are you basing the need to work anymore at all ... scaled down house frees up another 500k making an SWR of 180k possible.  what on earth do you need that much money for i dont know but OP is FI they just need to evaluate spending.
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Blissful Biker

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I have also been frustrated by our property taxes, which are much higher in our beautiful ski resort town than neighbouring towns.  But from this post I have learned that at 1.1% they are still very reasonable.  Thank you!

zolotiyeruki

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Can you hire someone to handle the work you don't enjoy?  That would 1) allow you to work less, and 2) allow you to only do the part of the work you like!

tyort1

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Can you hire someone to handle the work you don't enjoy?  That would 1) allow you to work less, and 2) allow you to only do the part of the work you like!

Why work at all?  Just pull the plug and be done with it.  Or sell it.  Or groom a replacement to take over.  But with $4m, there's no reason to work again, ever.
Frugalite in training.

Tetsuya Hondo

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First, invest a little money in a nice bottle of Champagne to celebrate because you've won the game.

acroy

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Welcome OP
Badass on you! great job!
You now have only good problems. Good place to be ;)
Prioritize what you want, and go for it. I highly suggest identifying your top 3-4 places, then doing an extended stay , 3-4weeks or more, at each of them. For a place with weather extremes, like CO, maybe do the trips twice: summer & winter, to get a feel for the place and find out if you really want it.
Good luck!!
SWAMI (Satisfied Working Advanced Mustachian Individual) 1 stash, 1 DW, 7 Mini MM's...
God, Family, Country. Everything else is details.

Malum Prohibitum

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I'm pretty confident my wife and I could live on $120,000/year
  Why the confidence?  Have you tried tracking your expenses?  Is it less than $120k?  Will it still be less than that living in a resort town?

affordablehousing

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Nothing like a little stache envy to get the boards lit up! I think the property tax, like others mentioned, is a bit of a red herring. It's insignificant in the grand scheme of things and represents the itch that you know will turn into a greater question, now that you've won all that you could want, what do you do with the yawning chasm of the next 50 years of your life? Sounds like this is either a masquerade post of MMM himself, getting others to move to his hometown, or a cry for help for others to decide life for you again, just as your business found you when you left employed work.

Frankly, you've got the time and money to spend on some truly helpful psychotherapy. That never gets suggested on these forums but in the bay area, anyone in your situation would be hashing it out with a therapist getting to the nut- what do you want to do?

ysette9

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I think that fundamentally the question you are asking is one of squishy introspection and has little to do with numbers. We are all blown away by how much you have saved and the insane house with property taxes. I am blown away and I am in the process of buying a house for $1.03M right now. Granted, I am in a HCOL area so that is buying me a 3 bed/2 bath at about 1100ft^2. This is for our family of three with one (knock on wood) on the way. I expect we could stay there comfortably all the way through.

A note on the schools. In our area at least schools are judged by an API score, which is basically a composite of standardized tests. From the research I've done so far, these scores tend to correlate very strongly with the education and income of the parents, and very little else. So a school with high poverty and a lot of English language learners will score low whereas a school with lots of rich white and Asian parents will do very well, regardless of quality of teachers, extracurriculars, parent involvment, or funding. Chances are your kids are going to do just fine because they already won the genetic lottery being born to you two. Don't get caught up in the loop of obsessively fretting over school quality when most of the elements of a successful education are already in place at home.

I strongly recommend you spend some time reading through The Quit Series on LivingaFI.com. This post in particular would be relevant to where you are right now. https://livingafi.com/2015/03/09/building-a-vision-of-life-without-work/ In short, you have completely won the money game and now you have to do the hard part of figuring out what you really want in life and what will bring you joy. You don't need to work for a living. You don't have to stay where you are currently located. This opens up a world of possibilities that can be scary and hard to navigate. Do the hard work there and then choose a path based on finding fulfillment and not something silly and arbitrary like property tax rate. Good luck. Many of us would love to be in your shoes, though that doesn't make your decisions any easier for you. :)
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honeybbq

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TO answer the OP, I'd scale back the business to maybe part time ish levels, scale down the house, horde some more cash, and pull the plug in a few years.

what data are you basing the need to work anymore at all ... scaled down house frees up another 500k making an SWR of 180k possible.  what on earth do you need that much money for i dont know but OP is FI they just need to evaluate spending.

The OP doesn't really know what they spend. 180k less taxes is close to 120k. Just adding a little padding. Also, it doesn't seem like they are 100% to pull the plug yet or they already would have. Some people like the bandaid pulled off slowly........

tyort1

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I'd recommend by starting to track ALL spending and doing the work to understand where the $$ goes.

Some things you can look out for is "work spending" - ie what do you spend either directly on work, or on things that are work related?  Because those things will go away after RE.

Once you have that teased out, look at the rest and start cutting.  IMO, even high income people really do need to go through the work of setting and following a budget.  Because in the absence of that type of discipline it's hard to ever feel comfortable pulling the plug. 

Especially if your prior approach was simply "let's just out-earn what we can spend", which is kind of how a lot of high earners approach finances. 
Frugalite in training.

MountainLion

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Thanks everyone, I was wondering if posting here, would help me get feedback through my thinking and it really did.

I should have made a few things clearer than I did in my original post.

I totally agree that a 6,000 square foot house is too much, and I my wife and I feel a 2,500 or 3,000 square foot house with a finished basement is more than enough room. We see, that in Fort Collins, CO, with good public schools, we can get a new house, for half the price ($500,000), and 80% less property taxes (a $20,000/year savings...). We like the idea of getting a house that is just big enough for a family of 4, but also small enough that when my wife and I become empty nesters we can stay in the same house and 2,500 - 3,000 square feet with a finished basement should do just fine.

To those who asked about hiring someone to run the business, or get help to take some of the work off my shoulders - good point. My wife and I go back and forth on that. Hiring someone to "run" the business - well, I really would probably be OK to have someone handle a lot of the sales follow up/admin tasks. I do have someone who does a lot of that now, though they are not a salesperson. I suspect if I can get a salesperson to take some of the more routine/day-to-day sales stuff, I'd be a lot happier.

My wife does all the financial stuff. The MMM "thing" made me look at our spending, and we realized that our "required" spending is about $9,800/month, with about $2,000 of that being our property taxes - and that is why the whole "property tax thing" sprang up. So nearly 20% of our required spending was property taxes, whereas if I lived in other places it would be about 5%--similar house, similar schools ect.

Now, after seeing what other people were reporting with property taxes elsewhere in the US, I was surprised. Illinois is high (or at least my school district is high), though I can see there are plenty others that are as high as what I'm dealing with - and, surprisingly, not as frustrated about it as me.

It seemed to me that if I could live somewhere near the mountains, good public schools, and perhaps half the house - and near a good public university, I could really stretch my money further and enjoy my life more. Getting half the house returns $500,000 to savings (or about that), and reduces my property taxes by about $20,000/year, and then going to a town with a public university in town, reduces my kids college expense by half. I believe the deal I'll make with my kids are: mom and dad have X amount of money for your college. If you complete your bachelors or masters degree, whatever is left - you keep, ideally, to use to start a small business of their own. This is my current thinking anyway...

Boulder seems CRAZY expensive - I mean, NUTS expensive. Boulder has really excellent schools, looks very pretty and is a big college town, but 800 square foot houses go for $800 - $900k. Crazy. Boulder seems like going right back into the rat race to me.

And by the way, this whole thing started because my wife and I got frustrated with our business a few months back and though, well, what if we retired? What could we generate in income, and what would our expenses be? Another thing happened, was that this year was the first year that our dividends alone in our savings came very close to $100,000 by themselves -not even counting the gain in value. Again, this is when I though...what the F am I still grinding things out with my business for? I'm 44, is there something else I'd like to do?

I asked myself the question - would 70 year old me be annoyed with the 44 year old me for not taking a little risk and changing course, trying something else at this state, especially with finances in good shape? I think 70 year old me would. 44 year old me likes hunting/fishing/skiing/hiking, ect.

My business, though while generating a comfortable income and a nice "stache", is probably worth at most $500k to $1M and I wouldn't get the money all at once.

There are things I do enjoy about the company. I get to work with my wife, we built it together from nothing. She has been with me the whole way and we get along fine running the business together (people always ask how it is running a business with my wife- assuming it is not good). There are certain employees that we have that really cause me to want to hard, and create opportunities for them because they are loyal and good at what they do. Challenging employees and challenging clients make it awful, though, I'm trying to be much more selective on both these days.

The thing about downsizing my house and staying in the same school district is that I'd have a house, half the space, older, with an older layout, but still $12,000/year in property taxes. It seems nuts to me that a $500,000 house should have $12,000/year in property taxes.

Thanks again everyone - super helpful input. I read everyone's posts 3 times and am going to share with my wife.

We are already bought tickets to do our family summer vacation in Colorado, specifically to visit Fort Collins, Colorado Springs, and Vail (just to get a few days in the mountains in the summer during off season). We plan to visit some of the schools (if possible) and a few other things that are important to us. We want to rent Airbnb and "live" there for a few days each. From there we want to determine if what we see, we like better than what we have. Is the pull, off an early retirement lifestyle in Colorado, stronger than staying where we live in the community we live in. We just won't know unless we go. If we are going to move, we realized it has to be after this next school year (sell the house, deal with the business, ect.), so we either get moving on this, or we are just all talk.

One other issue is neither my wife or I know what we would do if we were retired. We worry we'll have deep regret letting go of a profitable business that we built together. Neither of us has real hobbies. Though, the idea of clearing my head and letting other things comes in, really sounds very intriguing.




MountainLion

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Respectfully, the key thing is not your property taxes -- that is the tail wagging the dog.  The issue is that you live in an area where the lifestyle you want requires a house that costs $1M with $25K in property taxes, and that is where the business is located that funds this lifestyle.  So the key question is whether you can find the lifestyle you want in another area, for a total overall cost that is within the realm of what you can afford on your 'stache -- and, if so, what you are going to do about the business.

I think the business question comes first.  You say that it doesn't feel right to sell the business.  OK.  So if you move to CO, what's the plan to keep it running?  Are you going to hire another manager?  Travel back and forth periodically?  Take on a co-owner?  If so, what does that do to the income that you are currently pulling from it?  And will that provide sufficient relief from the stress you feel when business drops off again? (Hint: the answer to that is no, because there is no one like an owner who is going to care enough to put in the effort to build the business back up).  You must figure this part of the equation out first, because if you're not willing to sell and you can't make the money work with any of the other options, then moving isn't really an option.

Once you figure out the business side of things, that will give you a 'stache/income number you can work with when you look at your options.  So take that figure and look at the overall cost of living as compared to the quality of life.  Hyper-focusing on one part of the equation (property taxes) may miss the forest for the trees.  E.g., what if another state has high property taxes but lower housing prices and no state income taxes?  What if the taxes are low but the schools suck and you need to send your kid to the awesome private school down the street?  Also consider things like fees (the first time I had to register my car in TX I about passed out, it was *so* much higher than where I came from -- and some places now have development fees on top of property taxes, even for SFH), electricity prices, water access/cost (especially if you are moving to the West -- you cannot take water for granted out there), food costs (from what I understand, CA has massive taxes but cheap groceries, because that's where much of the produce is grown), etc. etc. etc.  Generally, if you are looking for a top neighborhood in a place with great schools and excellent public services, you should expect to pay higher taxes for that one way or the other -- someone has to pay for those things.  But even if the property tax rates are just as high in your target location, you might still be better off if you can get an awesome house for half the price of your current one; OTOH, lower property taxes are meaningless if you need another $1M house and have to pay higher state taxes as well. 

Personally, I am a huge, huge fan of Colorado Springs -- favorite place I've ever lived, largely due to the combination of proximity to the mountains and awesome weather that makes you want to get out and play in them.  But it doesn't meet all your criteria -- your kids couldn't go to school up in Boulder and still live at home, for ex.  OTOH, you could move to Boulder, and sacrifice on either house size or cost (it's sort of ridiculously expensive up there).  So you are going to need to figure out which of your priorities are the most important.  The classic saying is that you can have anything you want, but you can't have everything you want.  Size, cost, or early retirement:  pick two.


I appreciate the reply on this.

I personally don't need much. I am definitely in area with a high consumption rate though, and until recently I was one of those hi consumption people. My wife and I both have new German cars we both paid $75,000 each for. We didn't take a lone and paid cash. The cars have been fun, but I suspect ultimately their true cost to own is around $1,500/month EACH, when factoring depreciation, gas, maintenance, ect. I just replaced 4 tired and got an alignment on mine - $1,600, and here is the kicker - those tires are good for 2 years!! The cars will likely be gone soon no matter what we do. So I had my fun there, but that fun has worn off and now my fancy car just gets me from point A to point B at 16 miles per gallon.

I do realize I don't need much, and really except for a fancy French/Italian purse and nice piece of jewelry from her husband once in a while, my wife is otherwise pretty frugal too.

I'm pretty sure we could get our expenses down to $6,000/month if we needed to fairly quickly. Then from there, what do we want to do...

After seeing the posts, here, I need to drill down and get someone to take more work off my plate in my business, and enjoy what I have more. I'll visit Colorado in the summer, determine if I want to pursue this as my lifestyle, and make some big decisions. And, hey, staying where I am now is fine too :)

Thanks again for your help on this!

MountainLion

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I can't think of any community in Colorado that meets all of those criteria. Boulder comes very close, but it is not at all "in the mountains near great skiing." Taxes also aren't particularly low here relative to other parts of CO, although I suppose they are lower than your current location.

Boulder has one of the best high schools in the country... and is an hour from skiing. Not bad. With 4MM OP has plenty of money to rent a condo in the mountains whenever they want.
[/quote]

I can't see how to make Boulder work. Everything I see in Boulder that is more than 1,500 square feet and looks decent is well over $1MM. I look on Zillow.com and don't see anything in the $500k price range that looks good. Boulder is a super expensive town.

MountainLion

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A note on the schools. In our area at least schools are judged by an API score, which is basically a composite of standardized tests. From the research I've done so far, these scores tend to correlate very strongly with the education and income of the parents, and very little else. So a school with high poverty and a lot of English language learners will score low whereas a school with lots of rich white and Asian parents will do very well, regardless of quality of teachers, extracurriculars, parent involvment, or funding. Chances are your kids are going to do just fine because they already won the genetic lottery being born to you two. Don't get caught up in the loop of obsessively fretting over school quality when most of the elements of a successful education are already in place at home.

I strongly recommend you spend some time reading through The Quit Series on LivingaFI.com. This post in particular would be relevant to where you are right now. https://livingafi.com/2015/03/09/building-a-vision-of-life-without-work/ In short, you have completely won the money game and now you have to do the hard part of figuring out what you really want in life and what will bring you joy. You don't need to work for a living. You don't have to stay where you are currently located. This opens up a world of possibilities that can be scary and hard to navigate. Do the hard work there and then choose a path based on finding fulfillment and not something silly and arbitrary like property tax rate. Good luck. Many of us would love to be in your shoes, though that doesn't make your decisions any easier for you. :)

I COMPLETELY agree on the public school thing. I heavily researched public schools before moving to where I am at now. We must have personally visited about 6-7 different public schools (and a few middle and high schools before my daughter was in kindergarten!). My takeaway was ultimately the same as you mentioned: "top performing" schools were really just a coagulated collection of educated and well off families - the schools themselves can't really take credit for the performance as it is the families that group together around these schools that are performers to begin with. Still, tell that to my Asian wife :) She gets all of that but doesn't care. She wants her kids with other high performing kids/families. In my own case, I went to a little country school in rural Illinois that had a nearly 30% free/reduced lunch program (I was one of them!). I did fine. I completely agree with you.

tyort1

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You should check out Golden - I'm in west Denver and it's a 13 minute drive from my house, so it's till close (ish) to all the universities in Denver.  I haven't checked out prices there in a while, but it has to be cheaper than Boulder, and it's about as close to the mountains.
Frugalite in training.

mad9q

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It is not Colorado but Charlottesville, Va would meet your criteria.  Property taxes on a $500K house are roughly $5000 (lower if you are out of the city limits).

seattlecyclone

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Property taxes on a $500k house in Seattle are about $5,000 as well, but $500k houses are a lot smaller here than you're used to in Illinois.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

milliemchi

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I would not move kids to another state to avoid an expense that is, in the end of it, inconsequential. From what I read, money is not an issue.

aetheldrea

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Slightly contrarian view here. What I would do is sell the house and business and buy a much smaller and more expensive house on the Southern California coast, some place with its own boat dock. Property taxes are pretty low in California, but you could buy expensive enough that the propery taxes would be about the same. No worries, you have planty of money. And you really don't need a house too big to even clean by yourself. You would probably be spending less time in your house when it is 72 degrees in February, and your sailboat is calling.

boarder42

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you dont have to move at all you're well past FI... you can retire now and keep the life you have.  the question is, is that the life you want you said yourself your expenses are 98k above bare bones.  you have 4MM in the bank and a business worth something.  Lets assume its only worth 500k.  then you have 4.5MM at a 4% SWR you can withdraw 180k per year ... take off the 100k you spend you have 80k left over for taxes and other fun things.  you're FI now you just have to decide if its what you and your wife wants and where your FI life is going to take you but there is 0 reason you cant do what you're doing right now and sell your business tomorrow.
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