Author Topic: Can we retire today?  (Read 2784 times)

zoro

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Can we retire today?
« on: July 25, 2017, 06:42:26 PM »
Can we retire today?

Life Situation: Married filing jointly, me 45 wife 52, 2 kids 11 and 8 NJ

Gross Salary/Wages: $225,000 income $60k bonus $60k stock options,  Individual amounts of each Pre-tax deductions 401k, $18k per year + 4% company match HSA $6750 per year, IRA $5500 me $6500 wife non deductible per year,

Other Ordinary Income: $40k -$50k cashflow from 5 fully paid apartments. (depreciation/  fixing things usually results in no taxable income i.e. I put solar panels on the buildings this year with 50% depreciation ) -
Qualified Dividends & Long Term Capital Gains: about $60-$75 in dividends although I have tried to minimize this


Adjusted Gross Income: My agi was $994k last year but I cashed $500k of stock options from past few years. should be $400 this year

Taxes: paid $300k federal $85k NJ etc this year. $13k property tax I didn't pay amt this year but usually do.

Current expenses: Mint says I spent $105k last year although this includes a bit of saving i.e. mortgage principle, transfers to saving etc.

mortgage payments, $2360 15 year 2.8%rate $1750 principle and 610 interest (I keep it as I'm in the 39.8% federal bracket and I have had pretty good investment results over the years)
Expected ER expenses:expected expenses in retirement $110k per year

Assets: total net worth $7,650,000 including One house we live in $500k , 5 apartments free and clear $400k, $1.1M in 401k/IRA, currently $3.5 M stocks, $1,650,000 cash and "special situations" (stock to cash ratio is changed with market valuation) $280k pension annuity, $250k I bonds paying 3 - 4% + inflation,  Kids have UTGMAs of $400k each for college i sort of over shot investing for them. other assets are non cash things like cars 1999 Ford -$500, 2001 Toyota $1000 (you get the idea) .

Liabilities: 262k mortgage on primary residence

I have recently started to do really well moneywise at work but it is a lot of stress, by nature we are somewhat pathologically frugal, but not totally austere. if i walk away i don't think i would get my current salary again if i wanted to go back, so conservatively can i pull the pin and walk away and not worry about having to work again?

bender

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Re: Can we retire today?
« Reply #1 on: July 25, 2017, 08:57:09 PM »
I think you have some reading to do.  The answer is fairly obvious.

zoro

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Re: Can we retire today?
« Reply #2 on: July 25, 2017, 09:28:23 PM »
Thanks for your answer. I think I know as well, but we are also very conservative, and making an irreversible decision makes me pause. Assets are very highly priced at the moment, and the next 50 years is a long time to make them last. i could apply the 3-4% rule and retire happy, but such long time lines are difficult to model.

tyort1

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Re: Can we retire today?
« Reply #3 on: July 26, 2017, 12:03:39 AM »
Dude, you aren't just FI, you are freaking rich. 
Frugalite in training.

dess1313

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Re: Can we retire today?
« Reply #4 on: July 26, 2017, 12:42:29 AM »
Gross Salary/Wages: $225,000 income $60k bonus $60k stock options,  Individual amounts of each Pre-tax deductions 401k, $18k per year + 4% company match HSA $6750 per year, IRA $5500 me $6500 wife non deductible per year,

Other Ordinary Income: $40k -$50k cashflow from 5 fully paid apartments. (depreciation/  fixing things usually results in no taxable income i.e. I put solar panels on the buildings this year with 50% depreciation ) -
Qualified Dividends & Long Term Capital Gains: about $60-$75 in dividends although I have tried to minimize this

Current expenses: Mint says I spent $105k last year although this includes a bit of saving i.e. mortgage principle, transfers to saving etc.

Umh....I'd love to have your type of decision problems by the way!  Congrats on a job well done

My 2 cents for what they're worth(much smaller incomes here and property values) Is that you have already written down your answer. 

If your rental income plus dividends end up being routinely more income than what you spend yearly, it sounds like you are Financially independent at the moment. Part of your costs of retirement is your mortgage at ~28k of payments in a year. 

If you want to be conservative and do a test run for 6 months, try in theory living off only what income amounts that come from the dividends and rental income.  Any extraneous income can punted to savings, investments and or mortgage.  It would be a way for you to feel more comfortable about your decisions.

If you were to be rid of your mortgage, your yearly needs would only be about $80,000 which is more than half covered by just your rental income alone, and then further covered by dividends income.  Having a solid cash cushion for market down turns and emergencies wouldn't be a bad idea either but with the amount of property and assets you have, i don't think its as much of an issue as it would be for some.
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zoro

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Re: Can we retire today?
« Reply #5 on: July 26, 2017, 10:13:19 AM »
interestingly the i bonds were originally supposed to be my "emergency fund" / cash cushion, i started buying them in 1998 on the day they first came out, when everyone else was running around buying NASDAQ stocks at the time. so they give 3 or 4% plus inflation risk free. So as it turns out it would have to be a devastating emergency before I ever cash them.  the government went nuts in 1998-2004 and allowed you to buy them on your credit card, so i only paid 98% of face value for them too.
i have quite a bit of cash as when i sell securities at the moment im not finding much to invest in, at a reasonable price. this could be the money i use to live on / during down turns.
other than i bonds i hold no bonds, as they seem to offer return free risk at the moment

dougules

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Re: Can we retire today?
« Reply #6 on: July 26, 2017, 10:42:36 AM »
So you would have around a 1.5% withdrawal rate spending 105k.  I think you'll probably be ok.  If we saw a crash worse than 2008 and 1929 put together, you could just cut back to the $40k-ish the median American household spends and still live a very comfortable first world middle class lifestyle. 

waltworks

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Re: Can we retire today?
« Reply #7 on: July 27, 2017, 09:46:24 AM »
Dude, are you trolling us? Asset prices are high? Who cares? You don't even need to do anything but hedge against hyperinflation, really. Otherwise, at your current ($100k/year) spend rate, you have 70 years of savings with no investment returns whatsoever!

In your shoes I would be looking at maximizing time with the family and actively looking for ways to deploy my wealth and skills to make the world a better place, rather than piling up more money for no good reason. But that's just me.

-W

Roots&Wings

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Re: Can we retire today?
« Reply #8 on: July 27, 2017, 10:39:13 AM »
Since you are admittedly conservative, consider asking the same on Bogleheads (a site known for fiscal conservativeness) and see what feedback you get there. You know what this site thinks :)

zoro

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Re: Can we retire today?
« Reply #9 on: July 28, 2017, 09:06:38 AM »
i dont think i would go down too well on the Vanguard Boglehead site. I have some non standard views about market efficiency.i.e. they aren't. Like Buffett says" if markets were efficient i would be a bum on the street." Worse than that i dont believe in mutual funds either mainly due to the weak hand risk for managed funds.  Over the years i have done quite well shorting some of the Index ETF's - especially the ones sold by people who dont care, to people who dont think.

tyort1

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Re: Can we retire today?
« Reply #10 on: July 28, 2017, 09:48:26 AM »
Why are you still working?
Frugalite in training.

zoro

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Re: Can we retire today?
« Reply #11 on: July 28, 2017, 10:18:05 AM »
Out of habit I guess - I've always worked starting from 14 (not us born) on either two jobs or a job and a side hustle. When i sold my rental units in 2004-2005 because the prices became stupid I didn't know what to do with myself. I started getting into my main career more, but Ive risen to a place where it is quite a big role, and i dont think i need that. As for the buildings i ended up buying most of them back through the foreclosure process for cash between 2010 and 2015.

Roots&Wings

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Re: Can we retire today?
« Reply #12 on: July 28, 2017, 10:41:39 AM »
i dont think i would go down too well on the Vanguard Boglehead site. I have some non standard views about market efficiency.i.e. they aren't. Like Buffett says" if markets were efficient i would be a bum on the street." Worse than that i dont believe in mutual funds either mainly due to the weak hand risk for managed funds.  Over the years i have done quite well shorting some of the Index ETF's - especially the ones sold by people who dont care, to people who dont think.

Yes, but you aren't asking about investment strategy/holdings, you are asking about your ability to retire early. Your investing approach of shunning mutual funds isn't in line with this site either.

tyort1

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Re: Can we retire today?
« Reply #13 on: July 28, 2017, 11:18:17 AM »
Out of habit I guess - I've always worked starting from 14 (not us born) on either two jobs or a job and a side hustle. When i sold my rental units in 2004-2005 because the prices became stupid I didn't know what to do with myself. I started getting into my main career more, but Ive risen to a place where it is quite a big role, and i dont think i need that. As for the buildings i ended up buying most of them back through the foreclosure process for cash between 2010 and 2015.

You need to ask your self some pretty serious questions.  You don't ever have to work again, if you don't want to.  Given unlimited freedom, what do you want to do with your time and your life?
Frugalite in training.

PJC74

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Re: Can we retire today?
« Reply #14 on: July 28, 2017, 12:16:12 PM »
Dude you are rich. Time to trade in the high mileage wife for a newer model ;)  just kidding :)

waltworks

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Re: Can we retire today?
« Reply #15 on: July 28, 2017, 12:51:52 PM »
Ok, this is really a what-do-I-do-with-my-life post dressed up with humblebrag - OP knows he can retire, he/she isn't stupid.

Zoro, only you can answer the question. I already told you what I'd do (family time + use skills to better the world). Do you have any hobbies or interests that don't involve work or money? Do you have skills that you would enjoy teaching to others? Like to travel?

You won the money game. Time to figure out what that means. Check in on the Post-FIRE forum and there will be lots of folks with ideas.

-W

zoro

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Re: Can we retire today?
« Reply #16 on: July 28, 2017, 06:08:57 PM »
thanks for the advice. i have the answer i need. i will have a look at the post FIRE postings also

libertarian4321

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Re: Can we retire today?
« Reply #17 on: July 29, 2017, 02:10:32 AM »
Ok, this is really a what-do-I-do-with-my-life post dressed up with humble brag - OP knows he can retire, he/she isn't stupid.

I have a similar question.

I'm 34 years old.

I spend $40k per year, mostly donating to charity. 

I have an AGI of $997k and a net worth of $8,000,000.  I own 73 rental properties, I have a drop dead gorgeous 22-year old wife and a perfect family, and I'm hung like a donkey.

Can anyone tell me if this is enough to retire from my job as a CEO and spend my retirement competing in body building competitions?  Or will I have to sell my $20 million mansion in Beverly Hills first in order to make ends meet? 

This is a serious question, people!

Please help me as I barely got through my math classes at Harvard, Yale and Princeton.

zoro

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Re: Can we retire today?
« Reply #18 on: July 30, 2017, 10:30:10 AM »
I know you guys are having a bit of a laugh but I was being serious. My situation may be more common than you think. I'm pretty insecure around money. I grew up poor before I came to the US. It is likely that scarcity and fear of not having  that drives me to earn and not spend.
Sorry if it is obvious to you. The answers were useful and reassuring.

aFrugalFather

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Re: Can we retire today?
« Reply #19 on: July 30, 2017, 10:38:50 AM »
"My situation may be more common than you think"

Please define "common" as it seems you have a different definition than what you would find in Websters.

waltworks

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Re: Can we retire today?
« Reply #20 on: July 30, 2017, 11:30:08 AM »
$7 million net worth puts you roughly in the top 1% of the United States, and certainly in the top 0.1% or maybe 0.01% of the world. So no, your situation is not "common".

If you mean that you were raised to accumulate money and have a hard time NOT working, then yes, your cultural/social/personal work ethic is not uncommon, and more difficult to deal with especially when trying to balance with non-monetary goods such as free time/family.

-W

zoro

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Re: Can we retire today?
« Reply #21 on: July 30, 2017, 11:45:12 AM »
So if you believe the data in the Millionaire next door 21% of Scottish immigrant households are at least millionaires and that data was collected twenty years ago. 1.7% of all households are Scottish. So that is at least a million people, that is about 5 times more than the general population. The Russians do even better. That seems fairly common. They don't have data on 5 or 10 million.

waltworks

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Re: Can we retire today?
« Reply #22 on: July 30, 2017, 11:52:05 AM »
What are you trying to say? The vast majority of the US is of "immigrant ancestry" at this point. That has very little bearing on your situation, nor does it make your situation "common" in any meaningful sense.

-W

zoro

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Re: Can we retire today?
« Reply #23 on: July 30, 2017, 12:48:55 PM »
I guess what I'm trying to say is that I don't think my situation is that unusual and a lot of people may be in my position. I didn't do anything exceptional like invent FEDEX. I have had a pretty normal job and  been frugal saved and invested in typical ways for my peer group.
thinking about retiring at 45 may be the most anomalous thing about me which is why I want to make sure I can from a financial perspective
Given I think there are lots of people like me, I also think there are lots of people who would be struggling with this type of call.

nara

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Re: Can we retire today?
« Reply #24 on: July 30, 2017, 01:15:41 PM »
We had a family member who was very well off but also very frugal (i.e.drove old cars, refused to buy a bottle of water if she was thirsty, re-gifted items from her closet for holidays, etc.) She had $25 million net worth when she died. The majority of her estate went to charity (she didn't want to "spoil" her heirs with too much money). I always wondered if she enjoyed her life enough or if she was just overly anxious about money and frugality.

waltworks

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Re: Can we retire today?
« Reply #25 on: July 30, 2017, 01:52:21 PM »
Your financial situation is extremely unusual if we are looking at the entire population of the US or the world.

Within the subgroup of folks who have a NW of $5-10 million, I have no idea if your problem (trying to figure out what to do with your life) is common or not. I know quite a few folks who are very rich and still work, but I have never asked them specifically why they keep working. Presumably some of them indeed are in the same boat (could retire but unable to quit working even if they don't particularly like their jobs).

So if what you mean is "my problem is common among multimillionaires" then I will agree that in my experience it might be.

-W

2Cent

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Re: Can we retire today?
« Reply #26 on: July 31, 2017, 12:50:36 AM »
I think the reluctance comes from a same mindset that buys an item you don't need because it was such a good deal. If you accept you're FI and still want to work, you can at least feel free to spend/invest in other things than saving (as long as you don't inflate your lifestyle beond your means). Maybe some project that means something to you. Like Bill Gates and his foundation.

Feivel2000

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Re: Can we retire today?
« Reply #27 on: July 31, 2017, 06:05:09 AM »
Ignoring all financial advise:
A collegue told me once about a friend. This friend delayed his retirement by a year because he wanted to see the fruits of his labour regarding a project he worked on.
He dropped dead from a heart condition weeks after retirement.


Peanutty

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Re: Can we retire today?
« Reply #28 on: July 31, 2017, 01:09:54 PM »
Yep, I heard a story today about a former work colleague who just passed away suddenly. Early 50's. He only retired 6 months ago.

Decide what you want to do with your life and do it. You have more than enough money and cushion to walk away from typical corporate employment.

But on your note about being conservative and risk-adverse. I get it. Kind of. Our situation is age 35, 46, 4 kids, total assets $2.5M. We're both still working and too scared to pull the FI trigger. For my husband it's definitely about how he was raised - security = money. For me it's the unknown of having currently 4 little kids, and not being totally sure how the costs of our large family will escalate over time. For me if I was 10 years older, only had 2 kids and had $7.5M I would FOR SURE be done with corporate life. But I guess everybody has their own comfort zone. And maybe some people will never truly be comfortable enough to walk away from employment.