| Assets: Tax Deferred: 1185000 Tax Free: 5750 Taxable: 635000 Real Estate: House Value: 375000 Rental Value: 290000 Debts: Mortgage: (227,000) 2.875% Fixed, 12yrs. Left Total Assets: 2,263,750 Education 529: 55000 (Not included in overall assets) |
| Gross Pay 115000 DW Gross Pay 50000 Taxes - Federal (19000) SS/Medicare (12000) Taxes - State/Local (6500) Property Tax (2300) Net Income 125200 Rental income, net: 15000 (note this is new this year so not included in current salary). Tax Deferrals: 401k 18000 DW 401 2000 HSA 6900 Roth IRA 5500 Total 32400 Take home pay: 92800 Employer Matches: 401k Match 9200 DW 401 Match: 5800 Total all tax deferred/free savings: 47400 |
| Expenses Monthly Annual Mortgage 1875 22500 Property Insurance 125 1500 Umbrella ins. 65 780 Car maint 200 2400 Gasoline 150 1800 Car Insurance 200 2400 House maint. 175 2100 Electricity 250 3000 Gas 100 1200 TV 175 2100 Phone 105 1260 Water/Sewer 100 1200 Grocery 600 7200 Restaurants 200 2400 Medical ins 600 7200 Education/child care 500 6000 529 175 2100 Charity 900 10800 Vacation 250 3000 Random 150 1800 Totals 6495 82740 Take home pay 92800 After Tax Saving 10060 |
Hi, you have two million dollars, plus enough to pay off the mortgage. That is enough to fund an extremely lavish lifestyle at 80k/ year. Since you think you can live on 60k, you are good. That extra 20k safety margin can go towards extra medical costs, college, to mitigate sequence of returns risk, travel, etc. Now go cancel your cable and spend some quality time with your kids.
You have FU money now, and if I were you, I'd exercise it. IMO, you don't make enough to justify those kinds of hours/that kind of pressure.
If your rental income is consistent, you'd probably be okay to retire now...but if you are first-time landlords and/or if you haven't been exceptionally diligent at running those numbers, then I wouldn't completely pull the plug yet.
Can you downshift for now? Your wife's income covers half of your expenses. Could you find another lower-stress job or a part-time job in your field? Can you go to management and tell them you've had enough of the hours and the overwork and it's time for a change or you are out? If you are that valuable, they may actually make changes to keep you.
This is what I'd do if I woke up in your shoes.
Tomorrow: "Boss, here is my 2-weeks notice."
Two weeks from tomorrow: "So long, boss."
Sometime next year: Sell the rental (15k net is a ~5% return on a 290k value, you can do better with less hassle with a balanced index fund). I'd wait until next year to minimize taxes, since your earned income next year would be low or zero. If you want to keep the rental, it doesn't really change much, that's just what I'd do.
A few years from now: Enjoy having a very low income when applying for financial aid for your younger child. With increased FAFSA aid and the 529 you've got, you should be fine, college-wise.
Your rental 290k, plus your taxable 635k, is 925k, which is just about 11-12 years at your current spending of 80k/year. That assumes you don't cut your expenses, don't earn anything on those taxable investments, and don't do any Roth conversions, all of which you'd probably do. The education expenses alone are 6k/year and you said that goes away in a couple years, plus you shouldn't need to contribute more to the 529 if you're going to qualify for more financial aid due to a lower income, so that's another 2k. I'd say that *easily* gets you to 59.5, at which point you can withdraw normally from your 401k, and probably gets you to 62 or 65, so you can start taking SS. It also gets you to the end of your mortgage, so your expenses will drop by $22.5k right around the time you start withdrawing from your 401k.
Your total assets are fine. Your withdrawal rate will be a bit below 4% to start, and will drop significantly as your mortgage is paid off and you qualify for SS in about a decade. Since your job is causing you stress, I don't think it's worth staying. Quit and don't look back.
Downshifting currently isn't doable. It may be something I can work mid term, though. My job is extremely specialized (good and bad there), so I do have opportunities, but they're sporadic.
While the fantasy of walking in with a 2 week notice is epic (also, the thought of letting my boss know exactly how much power he has over me is very appealing, but that isn't something I want to drop for momentary awesomeness), I can't leave the folks I work for high and dry at present. Clients, not management. Some of the stuff I'm doing qualifies as "important" on a pretty large scale. That certainly won't last forever, and it's part of a plan I'm going to try and develop with your and others input here. Your thoughts much appreciated.
You're also not limited to "stay vs retire." There's a third option here: leave your current job and take up something else with a better work/life balance, even if it pays less. Stay at that less-demanding job for a couple years until your stache hits your magic number, then retire. Your current assets are appreciating more rapidly than you're contributing to them, anyway.