The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: beekeeper on February 12, 2014, 03:47:06 AM
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I would like to know if I have in fact already retired. That is, am I only working for fun, like Mr. MM? Or do I actually need to?
Age: 35.
Income:
~$400K average. Each year this is either all cash or all equity in an early-stage startup company.
Current expenses:
$100K per year.
Expected ER expenses:
$60K per year.
Assets:
House worth $500K.
Cash $300K.
Pension fund $100K in a carelessly selected retirement investment account.
Unlisted shares in Company A with dividend $80K per year.
Unlisted shares in Company B with paper value $3M and no dividend.
Liabilities:
$250K mortgage on the house.
Specific Questions:
Have I already retired? I enjoy my work and I do it on my own terms. I enjoy the challenge of trying to make a monetary return on the time I spend. I occasionally take time off, anything up to a year, but I always want to get cracking again sooner or later. (However, I'd like to be prepared in case I lose this enthusiasm for work some day.)
Is my hair on fire? What are the three most important things I should do right now?
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In stead of giving 3 reasons lets just say this. If you love your job and you making that kinda money and you can work when you want than that's pretty much ER so the best thing i would suggest is to figure out what kinda lifestyle you want, tax shelter as much money as you can and ride this out till you don't like it. When i was your age i was in the same boat and i lived the high life and while i was conservative enough that i am in good shape I made alot of bad decisions thinking i was just going to go up up and up. Life will throw some curve balls and hopefully not at you like it did at me so nothing wrong with building up some protectionism. Congratulations on all you success at such an early age! But it is important to make the right decisions and being here at MM is a very good one. A lot of smart people on these boards. I wish i would of found it earlier despite at 49 being in ER and still learning.
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Thanks for the encouragement!
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I would say that you have not retired, even in the MMM sense, because your assets have no hope of supporting your annual expenses over the long term at this time. $300K in cash is losing value every day to inflation, and the shares in unlisted companies have no usable value other than the dividend.
Were I in your shoes, I would get that cash into the market, and fast. I would also aggressively work to reduce expenses and/or start accumulating-- for a person making $400K a year, you have comparatively little saved. If you really want to be retired in any sense, and your expenses continue to be $100K a year, then you need 2.5 Million in assets appreciating at %7 a year or greater, and some flexibility in the years where that doesn't occur.
Now, if you can look at your life and adjust your COL to ~30K a year, then you might be at the point of being able to retire. Remember, the "magic" multiplier is 25 x your annual expenses. So if your post-retirement expenses are 60K, you're almost halfway to that.
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I would say that you have not retired, even in the MMM sense, because your assets have no hope of supporting your annual expenses over the long term at this time .... So if your post-retirement expenses are 60K, you're almost halfway to that.
You must have missed his stock that is providing 80k annual of dividends (not to mention the 3MM in other stock, but who knows about the ability to liquidate, there were a lot of paper millionaires in the 2000s).
I'd be worried about the lack of diversification, but if it holds, he's doing okay.
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find it shocking there are so many millionaires on here. asking for a checkup. The guy who started this web site is taking $30k per year from investments for living expenses, rides only bicycles, and lives in a house that he paid off (I think) through lost of sweat equity. Its almost like the questions are "do I make enough, have I saved enough" when they are really ten times better than the owner of this web site.
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Yes, but you need to diversify!!!
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find it shocking there are so many millionaires on here. asking for a checkup. The guy who started this web site is taking $30k per year from investments for living expenses, rides only bicycles, and lives in a house that he paid off (I think) through lost of sweat equity. Its almost like the questions are "do I make enough, have I saved enough" when they are really ten times better than the owner of this web site.
Some people are better at making it than they are understanding it, preserving it, and protecting it. That's okay. :)
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Thanks all for the feedback.
Yes, I see the big issue that the "income" and "wealth" is mostly illiquid paper assets and dividends from one single company. This could disappear overnight (as it has for countless many before me). I don't know how to reduce that risk in practical terms. This means I'm not really in an ER situation today (not that I am feeling sorry for myself).
The only diversity strategy I see now is to try to work for cash and save that until I have more stable assets.
Reducing expenses in MMM style also seems like an effective way to reach ER.