Net worth of $3.7M at age 47 - can I retire?

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Mako52
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Net worth of $3.7M at age 47 - can I retire?

Post by Mako52 » Mon Jul 30, 2018 2:06 pm

I’ve reached a "burned out" point where I really want to look at early retirement / FIRE possibilities and would greatly appreciate insight from early retirees who have been there and done that.

ETA: Wife will continue to work the next 10 years, currently making $60k P/T. I will earn residual land income of $30-42k. (also changed thread title to "can I retire?")

Married, ages 47 and 45, 2 kids (14 and 12). Income has been fairly variable but we have been in 28 and 33% brackets for the last 12 years.

Household Net Worth: $3.7M

Annual spending: $150k in the expensive DC area, including $34k mortgage and $11k in personal property taxes, but not Federal or State income tax. Could restrict discretionary spending, meals out, etc and reduce by $20k. Wife earns $60k in her P/T job and I earn 30-42k from land included in the $3.7M figure. Moving to Florida is an option we frequently consider but we do enjoy our home and local friends. Wife loves her job and can easily go another 10 years. I'm just tired of pulling my hair out.

Mortgage: 4.13% / 30 yr fixed. Roughly $400k in equity on $850k home value. Have made extra principal payments when cash flow and/or weak stock market performance have encouraged it.

College savings: need to put another $30k into 529 plans and I will be comfortable.

What's the highest burn rate out of non-real estate assets you'd feel comfortable with? 2%? 4%? A third of the market's return for that year?

Over what time period would you deploy sideline cash ($800k) into the market?

Other assets: Roth IRA $110k, Taxable IRA/401k $725k, Brokerage $380k, cars are paid for and in good shape.

I own an S corp and try not to tap into HSA. I want that to grow. We'll always spend on healthcare.....

Happy to provide additional info below. Thanks! :sharebeer
Last edited by Mako52 on Tue Jul 31, 2018 4:02 pm, edited 3 times in total.

financeperchance
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by financeperchance » Mon Jul 30, 2018 2:22 pm

[delete]
Last edited by financeperchance on Mon Jul 30, 2018 2:27 pm, edited 1 time in total.

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munemaker
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by munemaker » Mon Jul 30, 2018 2:24 pm

If I were in your position, I would experiment with this calculator:

https://earlyretirementnow.com/2017/01/ ... 7-toolbox/

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Pajamas
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Pajamas » Mon Jul 30, 2018 2:25 pm

Mako52 wrote:
Mon Jul 30, 2018 2:06 pm

What's the highest burn rate out of non-real estate assets you'd feel comfortable with? 2%? 4%? A third of the market's return for that year?
3% in your situation at your age.

Over what time period would you deploy sideline cash ($800k) into the market?

I would want a large cash buffer given the high expenses. Probably would put $500k in now and keep $300k for spending over the next few years. Sounds you are a market timer though.

Honestly in your situation I would wait until the kids were at least in college if not with undergraduate degrees in hand. That way you could get your house paid off and you expenses under control and have a better idea of how you are going to pay for health care, etc.

Looking at your total net worth is not really helpful if it includes house, cars, and other non-investment assets.

Also if your wife will be working part-time, what will you be doing?

retiredjg
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by retiredjg » Mon Jul 30, 2018 2:29 pm

Let's back up and get more information.

Your net worth is of no value in helping to determine what you should do. Let's look only at assets you have now that are available for spending if you retire. This does not include your home or the college funds. How much is that?

With taxes, your annual spending is closer to $200k. In order to maintain that spending level for only 30 years, you would need at least $5 million in spendable money to even consider retiring. That means not including your house because you always need a place to live. Just based on that...you are not there yet. Obviously, this is a very rough guestimate.
What's the highest burn rate out of non-real estate assets you'd feel comfortable with? 2%? 4%? A third of the market's return for that year?
For retiring at that age, I'd say something like 2%, maybe 2.5%.
Over what time period would you deploy sideline cash ($800k) into the market?
I would put it all in today. Since you have $800k sitting on the sidelines, I suspect that does not suit you. If that is correct, could you invest $300k this week and get the rest into the market within the next 6 months?

To do that, you would make a plan now of how much to put in every week and that would be a commitment - no questioning every Friday whether you should invest that week or not. The only question allowed would be wither you want to invest extra that week.


The numbers at the bottom are not adding up for me. I get about $2 million in retirement savings. Are you valuing the house and 529's at $1.7 million? With $2 million in retirement savings at your age, I'd plan to spend about $50k a year including state and local taxes (but not including college).

Maybe you need to look for a different job?

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Johnsson
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Johnsson » Mon Jul 30, 2018 2:31 pm

How much will healthcare be... added to the $150K?

With children at home I'd say 2.5 to 3%
'In theory there is no difference between theory and practice. In practice there is.' Yogi Berra

mountain-lion
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by mountain-lion » Mon Jul 30, 2018 2:35 pm

Don't forget to factor in the cost of health insurance for a family of four. Staying employed likely makes it comparatively cheap compared to buying independently.

With a net worth and income like that, you could probably take a different, lower stress job and still be ok.

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 2:37 pm

Thanks for the replies so far. I really need to credit my parents for living well within their means and teaching me a good work ethic.

As for market timing, I'm really not - I've done OK with dollar cost averaging through 401k. I'm reluctant to go "all in" at once because the S&P500 index fund I bought in 1998 took until 2011 to get back to my original cost.

I'd very much like to find a lower stress "remote" gig as the DC area is full of govt and IT stuff. Other options would be to work for a municipality, Home Depot, etc as the benefits are likely good.

Currently paying $900/mo from the S corp for high-deductible health insurance for me and the kids.

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Pajamas
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Pajamas » Mon Jul 30, 2018 2:41 pm

Mako52 wrote:
Mon Jul 30, 2018 2:37 pm

As for market timing, I'm really not - I've done OK with dollar cost averaging through 401k. I'm reluctant to go "all in" at once because the S&P500 index fund I bought in 1998 took until 2011 to get back to my original cost.
You can dollar cost average but you would have to really spread it out over several years in the context of long term investing to avoid a situation like that and you are spending money at a pretty good clip.

How did you end up with $800k in cash?

delamer
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by delamer » Mon Jul 30, 2018 2:44 pm

It is unclear how much you actually have in income producing assets.

Can you breakdown the net worth into its components?

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 2:45 pm

retiredjg wrote:
Mon Jul 30, 2018 2:29 pm
Over what time period would you deploy sideline cash ($800k) into the market?
I would put it all in today. Since you have $800k sitting on the sidelines, I suspect that does not suit you. If that is correct, could you invest $300k this week and get the rest into the market within the next 6 months?

To do that, you would make a plan now of how much to put in every week and that would be a commitment - no questioning every Friday whether you should invest that week or not. The only question allowed would be wither you want to invest extra that week.


The numbers at the bottom are not adding up for me. I get about $2 million in retirement savings. Are you valuing the house and 529's at $1.7 million? With $2 million in retirement savings at your age, I'd plan to spend about $50k a year including state and local taxes (but not including college).

Maybe you need to look for a different job?
I like the idea of a fixed, weekly investment schedule, but would probably do it over a year vs 6 months. Question for the bond fans - why go heavy on bonds if you can earn 2.35% on short-term CDs?

Home equity = $450k, other land = $1M, college savings = $112k

Yes, a different job is on the "to do" list.

delamer
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by delamer » Mon Jul 30, 2018 3:21 pm

If you have $800,000 in cash plus another $1 million in land — out of a total of $3.7 million — then you are overinvested in those two types of assets.

And $800,000 in cash is too high within your $2.1 million in liquid assets.

Remrmber that your assets needs to last you 40+ years.

You should be 75%/80% in equities in your liquid assets. Studies have shown that in the long run it is better to jump into equities all at once when investing a lump sum: https://www.bogleheads.org/wiki/Dollar_cost_averaging

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 3:30 pm

delamer wrote:
Mon Jul 30, 2018 3:21 pm
If you have $800,000 in cash plus another $1 million in land — out of a total of $3.7 million — then you are overinvested in those two types of assets.

And $800,000 in cash is too high within your $2.1 million in liquid assets.

Remrmber that your assets needs to last you 40+ years.

You should be 75%/80% in equities in your liquid assets. Studies have shown that in the long run it is better to jump into equities all at once when investing a lump sum: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Thanks - I agree that the $800k in cash is way too high but I also know from my own experience what 3 bear markets in 10 years can do. I also believe that I'd go higher in equities as you recommend. Please keep in mind that the land kicks off $40-45k a year in pre-tax income, and the land (and the income it produces) can go up (or down) in value. And that income can be used for investing once I figure out the job situation.

retiredjg
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by retiredjg » Mon Jul 30, 2018 3:39 pm

Mako52 wrote:
Mon Jul 30, 2018 2:45 pm
Question for the bond fans - why go heavy on bonds if you can earn 2.35% on short-term CDs?
CDs could certainly be a portion, even a significant portion, of your "bond" allocation. I would not DCA that though. I'd put that all in at one time.
Home equity = $450k, other land = $1M, college savings = $112k
Ah....the other land....

bhsince87
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by bhsince87 » Mon Jul 30, 2018 3:52 pm

I would seriously consider relocating, assuming your wife and you could both get jobs elsewhere. I live about an hour 45 minutes from Dulles, hour and half from BWI. For $350k, you can buy a really nice house and cut your property taxes in half. Then you are down to probably $100 k annual spend.

If that's not in the cards, maybe you could consider paying off your mortgage with half the cash. Asuming a 2.5% safe withdrawal rate, that knocks about $1.3 million off your nest egg requirements

Then you're down to about $116k annual spend, right? Assuming your wife's income and land income are around $100k before tax, that probably bumps you down into a low tax rate. So lets assume $85k after tax.

$116k-$85k leaves you with about $31k to cover each year.

At a 2.5% withdrawal rate, you need about $1,250,000 to cover that.

Put 430k in cash into the college fund, and you should have about $320k in cash left 9after paying off the house) Add that to your other assets, and i get around $1,535,000.

So you may be in better shape then it would first appear. Or my math could be wrong...
Last edited by bhsince87 on Mon Jul 30, 2018 5:27 pm, edited 1 time in total.
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delamer
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by delamer » Mon Jul 30, 2018 3:56 pm

Mako52 wrote:
Mon Jul 30, 2018 3:30 pm
delamer wrote:
Mon Jul 30, 2018 3:21 pm
If you have $800,000 in cash plus another $1 million in land — out of a total of $3.7 million — then you are overinvested in those two types of assets.

And $800,000 in cash is too high within your $2.1 million in liquid assets.

Remrmber that your assets needs to last you 40+ years.

You should be 75%/80% in equities in your liquid assets. Studies have shown that in the long run it is better to jump into equities all at once when investing a lump sum: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Thanks - I agree that the $800k in cash is way too high but I also know from my own experience what 3 bear markets in 10 years can do. I also believe that I'd go higher in equities as you recommend. Please keep in mind that the land kicks off $40-45k a year in pre-tax income, and the land (and the income it produces) can go up (or down) in value. And that income can be used for investing once I figure out the job situation.
FYI, on January 1, 1998 the S&P 500 index was 963. On January 1, 2011, it was 1283.

That is an increase of about 33%, with dips in 2003 and 2009 below the 1998 level. In all other years, the index was above 1998.

So I am not sure how you figured it took to 2011 to get back to your original cost.

And my numbers do not include the impact of reinvesting dividends which would significantly increase the return.

The point being that it sounds like you are viewing your investment incorrectly; there certainly was not an extended bear market during the time that you held the S&P 500.

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 4:04 pm

delamer wrote:
Mon Jul 30, 2018 3:56 pm
Mako52 wrote:
Mon Jul 30, 2018 3:30 pm
delamer wrote:
Mon Jul 30, 2018 3:21 pm
If you have $800,000 in cash plus another $1 million in land — out of a total of $3.7 million — then you are overinvested in those two types of assets.

And $800,000 in cash is too high within your $2.1 million in liquid assets.

Remrmber that your assets needs to last you 40+ years.

You should be 75%/80% in equities in your liquid assets. Studies have shown that in the long run it is better to jump into equities all at once when investing a lump sum: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Thanks - I agree that the $800k in cash is way too high but I also know from my own experience what 3 bear markets in 10 years can do. I also believe that I'd go higher in equities as you recommend. Please keep in mind that the land kicks off $40-45k a year in pre-tax income, and the land (and the income it produces) can go up (or down) in value. And that income can be used for investing once I figure out the job situation.
FYI, on January 1, 1998 the S&P 500 index was 963. On January 1, 2011, it was 1283.

That is an increase of about 33%, with dips in 2003 and 2009 below the 1998 level. In all other years, the index was above 1998.

So I am not sure how you figured it took to 2011 to get back to your original cost.

And my numbers do not include the impact of reinvesting dividends which would significantly increase the return.

The point being that it sounds like you are viewing your investment incorrectly; there certainly was not an extended bear market during the time that you held the S&P 500.
Correction - there were 2 (not 3 as I stated above) bear markets between 2000 and 2009....in looking at quarterly statements and charts for that S&P fund, one lasted from April 2000 to January 2003, and the other from Sept 2007 until March 2009. Both were ugly.
https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1

ReadyToRetire
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by ReadyToRetire » Mon Jul 30, 2018 4:11 pm

Congratulations on all you have accomplished.

I am just a bit older than you - couple of years - and I don't have any kids. I too am feeling the stress and want out - or at least to slow down. I am looking forward to the replies you get. Maybe I can apply them to my own situation.

Many others on this board are more knowledgeable than me regarding the investments, but I would agree that it appears you have a lot of cash. That being said, I probably can be accused of the same thing. My aim is to go into retirement with 2 to 3 years of cash or cash equivalents available. I want to be able to ride out any reasonable recession.

I would also consider downsizing the house to something cheaper if at all possible. With a house there are always a lot of non financial aspects that go into the decision, but if you can it might free up some assets to become a bit more productive.

For the withdrawal rate, I am aiming for right around 3% in my projections. No real thought went into my choosing 3%. 4% just seemed a bit too risky to me and 2% would mean I would have to save up 50 years of living expenses. I'd be a long time doing that. So I just went in the middle and am striving for 33 years of expenses saved - again with about 3 of those years sitting in cash or equivalent.

I don't know about you - and I don't know you, but my thought is that at around 50 years of age, we will probably take a year or three off and get it out of our system. And then we will probably end up doing something. It might be consulting in our current fields, something on our own, or maybe mow lawns or playing penny ante poker with some friends. I don't know. But 50 to 55 is still pretty young and I bet neither one of us will be spending the next 40 years sipping umbrella drinks. And if you do end up doing something , it may bring in a bit of money. And not even big money - maybe just enough to offset a small micro-brew habit. And that will end up helping your withdrawal rate.

I hope whatever you decide your stress levels decrease a bit. Life is too short to be miserable.

Best of luck!

delamer
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by delamer » Mon Jul 30, 2018 4:12 pm

Mako52 wrote:
Mon Jul 30, 2018 4:04 pm
delamer wrote:
Mon Jul 30, 2018 3:56 pm
Mako52 wrote:
Mon Jul 30, 2018 3:30 pm
delamer wrote:
Mon Jul 30, 2018 3:21 pm
If you have $800,000 in cash plus another $1 million in land — out of a total of $3.7 million — then you are overinvested in those two types of assets.

And $800,000 in cash is too high within your $2.1 million in liquid assets.

Remrmber that your assets needs to last you 40+ years.

You should be 75%/80% in equities in your liquid assets. Studies have shown that in the long run it is better to jump into equities all at once when investing a lump sum: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Thanks - I agree that the $800k in cash is way too high but I also know from my own experience what 3 bear markets in 10 years can do. I also believe that I'd go higher in equities as you recommend. Please keep in mind that the land kicks off $40-45k a year in pre-tax income, and the land (and the income it produces) can go up (or down) in value. And that income can be used for investing once I figure out the job situation.
FYI, on January 1, 1998 the S&P 500 index was 963. On January 1, 2011, it was 1283.

That is an increase of about 33%, with dips in 2003 and 2009 below the 1998 level. In all other years, the index was above 1998.

So I am not sure how you figured it took to 2011 to get back to your original cost.

And my numbers do not include the impact of reinvesting dividends which would significantly increase the return.

The point being that it sounds like you are viewing your investment incorrectly; there certainly was not an extended bear market during the time that you held the S&P 500.
Correction - there were 2 (not 3 as I stated above) bear markets between 2000 and 2009....in looking at quarterly statements and charts for that S&P fund, one lasted from April 2000 to January 2003, and the other from Sept 2007 until March 2009. Both were ugly.
https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1
If you are using the fact that there was a bear market or correction during the time that you held equities in the past to avoid holding equities going forward, you will never hold equities again.

Equity values go up and down over the short run. You should be focusing on your long run holding period, which is 40+ years.

TallBoy29er
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by TallBoy29er » Mon Jul 30, 2018 4:35 pm

ReadyToRetire wrote:
Mon Jul 30, 2018 4:11 pm
Congratulations on all you have accomplished.

I am just a bit older than you - couple of years - and I don't have any kids. I too am feeling the stress and want out - or at least to slow down. I am looking forward to the replies you get. Maybe I can apply them to my own situation.

Many others on this board are more knowledgeable than me regarding the investments, but I would agree that it appears you have a lot of cash. That being said, I probably can be accused of the same thing. My aim is to go into retirement with 2 to 3 years of cash or cash equivalents available. I want to be able to ride out any reasonable recession.

I would also consider downsizing the house to something cheaper if at all possible. With a house there are always a lot of non financial aspects that go into the decision, but if you can it might free up some assets to become a bit more productive.

For the withdrawal rate, I am aiming for right around 3% in my projections. No real thought went into my choosing 3%. 4% just seemed a bit too risky to me and 2% would mean I would have to save up 50 years of living expenses. I'd be a long time doing that. So I just went in the middle and am striving for 33 years of expenses saved - again with about 3 of those years sitting in cash or equivalent.

I don't know about you - and I don't know you, but my thought is that at around 50 years of age, we will probably take a year or three off and get it out of our system. And then we will probably end up doing something. It might be consulting in our current fields, something on our own, or maybe mow lawns or playing penny ante poker with some friends. I don't know. But 50 to 55 is still pretty young and I bet neither one of us will be spending the next 40 years sipping umbrella drinks. And if you do end up doing something , it may bring in a bit of money. And not even big money - maybe just enough to offset a small micro-brew habit. And that will end up helping your withdrawal rate.

I hope whatever you decide your stress levels decrease a bit. Life is too short to be miserable.

Best of luck!
Thank you for this post. It echoes thoughts I've had about my future. And I associate w the micro-brew comment. :happy

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 4:38 pm

"Equity values go up and down over the short run. You should be focusing on your long run holding period, which is 40+ years."

Agreed, but if my holding period is 40+ years, why wouldn't I want to be able to buy when the market is going down? Putting everything (or a significant percentage) in there now wouldn't allow to buy on the dips as much as DCA does. On the other hand, I also need to keep in mind that 2000-2015 was the worst 15 year period in US stock market performance since the 1930s. So perhaps I'm a bit jaded, not being able to take full advantage of the great 80s and 90s.

I'd agree that relocating could make a lot of sense for us, particularly since my wife and I can pretty much work anywhere. It's just that with kids their ages in good public schools, and good public Virginia colleges, I'm not sure it's so easy to cut the cord from the area.

ETA: just to clarify, when I said "buy on the dips", I meant that because I would have already gone "all in" due to lump sum investing, I'm not able to buy systematically through dollar cost averaging as the market is going down. All the money would have already been invested at one share value.
Last edited by Mako52 on Mon Jul 30, 2018 5:38 pm, edited 1 time in total.

Grt2bOutdoors
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Grt2bOutdoors » Mon Jul 30, 2018 4:54 pm

Find another job but I wouldn’t fully retire just yet. I see 800+380k or roughly $1.2 million as easily accessible. Retirement money is for retirement- $725k needs to carry you far into retirement- 15 or 20 years down the road. $1.2 million in accessible assets at a 2.5% burn rate (2% is a more conservative figure) gets you $30k + 40k land +60 k wife, that’s 130 pre-tax. You say you’re spending $150 after-tax. You need to work and I don’t know what job paying that number is “low stress”. I don’t think HD is going to cut it. You can’t spend home equity. You have some time to come up with $30k for college, they can always take a loan.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

delamer
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by delamer » Mon Jul 30, 2018 5:05 pm

Mako52 wrote:
Mon Jul 30, 2018 4:38 pm
"Equity values go up and down over the short run. You should be focusing on your long run holding period, which is 40+ years."

Agreed, but if my holding period is 40+ years, why wouldn't I want to be able to buy when the market is going down? Putting everything (or a significant percentage) in there now wouldn't allow to buy on the dips as much as DCA does. On the other hand, I also need to keep in mind that 2000-2015 was the worst 15 year period in US stock market performance since the 1930s. So perhaps I'm a bit jaded, not being able to take full advantage of the great 80s and 90s.
There isn’t anything wrong with a systematic plan to DCA into the market as long as 1) you stick with it and 2) it is not stretched out too long.

That said, Bogleheads are not fans of market timing, which is what you mean by “buy on the dips.” It does not work if you are doing it arbitrarily because no one can predict the future. (This is different than doing so as part of a DCA plan.)

If the market dips 5% tomorrow, would you buy? Or would you decide to wait until in dropped 10%? But what if it doesn’t dip that much?

What if the market goes up 15% in the next 6 months, and then declines 10%. If you buy on the 10% decline, you’ll have “bought on the dip” but still paid more than if you had bought today.

The overriding point is that some day —maybe in 2 years or maybe in 5 years or maybe in 20 years — you will look back on today’s stock values and be amazed at how low they were and wish you’d bought more.

And if you don’t believe that then you should not be investing in stocks.

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8foot7
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by 8foot7 » Mon Jul 30, 2018 5:15 pm

Pretty simple. Yes, you can retire, but you can’t live as you are now.

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Tamarind
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Tamarind » Mon Jul 30, 2018 5:25 pm

Congrats on your savings. If you can dial down the lifestyle, you can retire today - it's your choice to make. (If I were you I'd have retired about $1M ago :twisted: )

Can you imagine what life might be like for you and family if you could only spend $100k per year? Because if you could knock $50k off your expenses you'd be well under 4% withdrawal rate and I think would have more than enough buffer to call it a day.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Jablean » Mon Jul 30, 2018 5:33 pm

Am I reading right that you have two jobs? Time to pick the one you like and drop the other. Best thing that happened to us was when DH got layed off at the one he didn't like. You have a lovely cushion to go looking for your dream job too, sounds like your DW likes hers, find one for you.

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goodenyou
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by goodenyou » Mon Jul 30, 2018 5:36 pm

Do not underestimate the tremendous cash burn of older teenagers/young adults. Your expenses will very likely go up significantly. I was (am) amazed at the rate that we spend on the kids’ needs with college, cars, insurance, clothes etc. My recommendation is to find gainful employment that is acceptable and keep investing. You’re not there yet.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by aristotelian » Mon Jul 30, 2018 5:54 pm

I think you are fine, it's just a matter of detail. Paying off the mortgage takes your portfolio down to $3.2M while reducing your spending to $116k. That gives you a nest egg of about 28X expenses. I think that is pretty solid.

If you or your wife can work part time, move to a lower cost area, or simply tighten your budget, this would be a slam dunk.

Might be helpful to break down your portfolio with more specifics since it sounds like at least a portion is in an unconventional asset.

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munemaker
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by munemaker » Mon Jul 30, 2018 7:09 pm

Use out of those calculators that tells you what you would need to live equivalently in another city. The DC and Northern VA area is really expensive. Relocating would reduce your living expenses, potentially a lot, depending on where you would move.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by JBTX » Mon Jul 30, 2018 7:21 pm

Why retire cold turkey at 47? What about a leave of absence? What about a different job, something between what you do now and selling woodscrews at Home Depot.

I constantly see these posts essentially saying people are tired of driving at 120mph and just want to come to a complete halt. Why not instead pull over at a rest stop, and later try resuming at 65-70 mph.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by UncleBogle » Mon Jul 30, 2018 7:41 pm

ReadyToRetire wrote:
Mon Jul 30, 2018 4:11 pm
Congratulations on all you have accomplished.

I am just a bit older than you - couple of years - and I don't have any kids. I too am feeling the stress and want out - or at least to slow down. I am looking forward to the replies you get. Maybe I can apply them to my own situation.

Many others on this board are more knowledgeable than me regarding the investments, but I would agree that it appears you have a lot of cash. That being said, I probably can be accused of the same thing. My aim is to go into retirement with 2 to 3 years of cash or cash equivalents available. I want to be able to ride out any reasonable recession.

I would also consider downsizing the house to something cheaper if at all possible. With a house there are always a lot of non financial aspects that go into the decision, but if you can it might free up some assets to become a bit more productive.

For the withdrawal rate, I am aiming for right around 3% in my projections. No real thought went into my choosing 3%. 4% just seemed a bit too risky to me and 2% would mean I would have to save up 50 years of living expenses. I'd be a long time doing that. So I just went in the middle and am striving for 33 years of expenses saved - again with about 3 of those years sitting in cash or equivalent.

I don't know about you - and I don't know you, but my thought is that at around 50 years of age, we will probably take a year or three off and get it out of our system. And then we will probably end up doing something. It might be consulting in our current fields, something on our own, or maybe mow lawns or playing penny ante poker with some friends. I don't know. But 50 to 55 is still pretty young and I bet neither one of us will be spending the next 40 years sipping umbrella drinks. And if you do end up doing something , it may bring in a bit of money. And not even big money - maybe just enough to offset a small micro-brew habit. And that will end up helping your withdrawal rate.

I hope whatever you decide your stress levels decrease a bit. Life is too short to be miserable.

Best of luck!
ReadytoRetire - You just described the situation that my wife and I are in right now. We too are burned out, and ready to slow down.

"Life is too short to be miserable" - I wholeheartedly agree. I have a very close friend that was just diagnosed with cancer at 45. It puts things in perspective......Life should be lived well and enjoyed, not just survived. I just have to figure out how.... :?

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Mon Jul 30, 2018 8:25 pm

Thanks everyone for their feedback.

Given that stock market returns have far outpaced residential real estate appreciation over time, I'm a bit reluctant to pay the house off immediately. Also, a 4.13% interest rate, which we can itemize, is pretty low (not as low as the 2.875% I was close to getting 2 years ago in a refinance)....especially if the market is outperforming that. But I'm happy to consider the counter to this.

Stocks and real estate can both go down very quickly at any time, but I guess the advantage with real estate is that you actually have something to show for your hard work when it goes down.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Kidneydoc » Mon Jul 30, 2018 8:26 pm

My situation is not different from yours. Age near 50. 2 young teenagers. Mortgage $150,000 left (but can pay off in 4 years, interest 3.875%) Reside in HCOL area. Burnout is setting in at my work badly.

My plan:
1. Work 4-8 years until kids finish high school, preferably college unless burnout intolerable, mainly to keep family happy rather than uproot them and to cover there education costs. However, we probably can fund a significant portion of college more than the average college student as my kids' already have significant 529s.
2. Plan transition out of work, either part time or find meaningful hobby or task.
3. Start filling my cash and fixed income buckets to ride out sequence of returns risk.
4. Figure out how my wife will deal with me once I retire.

I would withdraw 3-4% a year, and consider moving to LCOL area once kids in college.

Good luck! There are more people like you out there.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by ge1 » Mon Jul 30, 2018 9:02 pm

Fairly sobering to read this thread. In similar circumstances (age, net worth) and dreaming of early retirement every now and then as well :happy. Our plan is to get to investable assets of 4m (should take another 2-3 years) or close to it and then take 1-2 years off. After that the plan would be to only work on part time basis and/or volunteer.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Bacchus01 » Mon Jul 30, 2018 9:20 pm

JBTX wrote:
Mon Jul 30, 2018 7:21 pm
Why retire cold turkey at 47? What about a leave of absence? What about a different job, something between what you do now and selling woodscrews at Home Depot.

I constantly see these posts essentially saying people are tired of driving at 120mph and just want to come to a complete halt. Why not instead pull over at a rest stop, and later try resuming at 65-70 mph.
Those options are pretty hard to come by. It would be very hard for someone going 120, as you say, to simply put it on cruise. We (people that go 120) kind of have an all or nothing mentality. It’s behavioral and hard to break.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Bacchus01 » Mon Jul 30, 2018 9:22 pm

Kidneydoc wrote:
Mon Jul 30, 2018 8:26 pm
My situation is not different from yours. Age near 50. 2 young teenagers. Mortgage $150,000 left (but can pay off in 4 years, interest 3.875%) Reside in HCOL area. Burnout is setting in at my work badly.

My plan:
1. Work 4-8 years until kids finish high school, preferably college unless burnout intolerable, mainly to keep family happy rather than uproot them and to cover there education costs. However, we probably can fund a significant portion of college more than the average college student as my kids' already have significant 529s.
2. Plan transition out of work, either part time or find meaningful hobby or task.
3. Start filling my cash and fixed income buckets to ride out sequence of returns risk.
4. Figure out how my wife will deal with me once I retire.

I would withdraw 3-4% a year, and consider moving to LCOL area once kids in college.

Good luck! There are more people like you out there.
I’m 44, have a 17, 13 and 10 yr old. Net worth is <$3M and expenses are ~$140k. I’m burned to a crisp right now. If net worth was $5M, I’d probably punch out tomorrow even facing 3 kids to put through college

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by JBTX » Mon Jul 30, 2018 10:38 pm

Bacchus01 wrote:
Mon Jul 30, 2018 9:20 pm
JBTX wrote:
Mon Jul 30, 2018 7:21 pm
Why retire cold turkey at 47? What about a leave of absence? What about a different job, something between what you do now and selling woodscrews at Home Depot.

I constantly see these posts essentially saying people are tired of driving at 120mph and just want to come to a complete halt. Why not instead pull over at a rest stop, and later try resuming at 65-70 mph.
Those options are pretty hard to come by. It would be very hard for someone going 120, as you say, to simply put it on cruise. We (people that go 120) kind of have an all or nothing mentality. It’s behavioral and hard to break.
I've seen a few get to around 40 - years old - then just check out for a while due to burnout. Take some time. Pursue a hobby. Then after some number a months up to a year or so come back recharged back to their existing jobs - but return at maybe 80mph vs 120. When they are back they tend to have a healthier perspective on life in general. They still often retire early, but maybe get another good 10 year run before doing so.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by gotester2000 » Mon Jul 30, 2018 10:40 pm

Find less stressful work and enjoy life.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Sasquatch » Tue Jul 31, 2018 12:03 am

Probably a dumb question but have you modeled any of this on firecalc, i-Orp, and portfoliovisualizer?

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by msk » Tue Jul 31, 2018 2:31 am

No need for complicated arithmetic. Take your average income over the past 3 years. That's probably all you have to finance the rest of your working life anyway. Multiply that by 20. Those are the investable funds you need to retire at any age. How?

You can withdraw 5% of a 100% stocks portfolio annually and the remaining 95% should grow and keep pace with inflation forever. The 5% annual withdrawal will yo-yo up and down with the market but, on average, it will keep pace with inflation forever. Just never exceed 5% of a 100% stocks portfolio in any year. I came to this conclusion by checking the 50 year history for 1966-2016, and you can also use Monte Carlo simulations in
https://www.portfoliovisualizer.com/mon ... sisResults
to check out your own tolerance for luck and chance. You can then clobber your 5% by allocating to bonds to reduce market yo-yoing. Reducing volatility reduces returns... Any investable funds beyond 20x current income ought to increase your comfort level.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by typical.investor » Tue Jul 31, 2018 4:19 am

msk wrote:
Tue Jul 31, 2018 2:31 am
No need for complicated arithmetic. Take your average income over the past 3 years. That's probably all you have to finance the rest of your working life anyway. Multiply that by 20. Those are the investable funds you need to retire at any age. How?

You can withdraw 5% of a 100% stocks portfolio annually and the remaining 95% should grow and keep pace with inflation forever. The 5% annual withdrawal will yo-yo up and down with the market but, on average, it will keep pace with inflation forever. Just never exceed 5% of a 100% stocks portfolio in any year. I came to this conclusion by checking the 50 year history for 1966-2016, and you can also use Monte Carlo simulations in
https://www.portfoliovisualizer.com/mon ... sisResults
to check out your own tolerance for luck and chance. You can then clobber your 5% by allocating to bonds to reduce market yo-yoing. Reducing volatility reduces returns... Any investable funds beyond 20x current income ought to increase your comfort level.
Naw, I'd take a 50%-50% portfolio over that.

Enter in sequence of returns with worst three years first.
Historical returns, historical inflation
5% withdrawal on a $4,000,000 portfolio.

Here are the inflation adjusted amounts that yields (50th Percentile):

_____________________
100% US stocks (a)
$200,000
$125,809
$78,452
$63,107
$64,688
$68,631
$72,115
$75,588
$79,317
$82,983
$87,205

The historical return for the selected portfolio for this period was 11.92% mean return (10.41% CAGR) with 15.37% standard deviation of annual returns.
_____________________
50% -50% (US stocks - 10 year treasuries) (b)
$200,000
$156,877
$136,610
$119,930
$122,595
$124,359
$126,057
$128,602
$130,391
$132,687
$134,632

The historical return for the selected portfolio for this period was 9.79% mean return (9.34% CAGR) with 8.90% standard deviation of annual returns.
*** 1972 inflation rate 3.21%
*** 1972 10 year treasury yield 5.95%
_____________________

CONCLUSION:

Sure, 100% stock will more starting in year 25 and be 50% more when you get to year 40, but I'd rather not encounter having to cut spending that much for the first decade or so.

Today isn't really the same starting point for real bond yields, but then again today's equities probably have higher valuations and lower expected returns too.

_____________________
For both portfolios

Monte Carlo simulation results for 10000 portfolios with $4,000,000 initial portfolio balance using available historical returns data from Jan 1972 to Dec 2017.
The sequence risk of returns was stress tested by having the worst 3 generated annual returns upfront.
The simulation results are based on generated nominal returns and fixed 5.00% year withdrawals.
The generated inflation samples were correlated with simulated asset returns based on historical correlations.
The simulation time period was constrained by the available history for US Stock Market [Jan 1972 - Jun 2018].
The simulated inflation model used historical inflation with 3.98% mean and 1.32% standard deviation based on the Consumer Price Index (CPI-U) data from Jan 1972 to Dec 2017.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by RickBoglehead » Tue Jul 31, 2018 5:01 am

Mako52 wrote:
Mon Jul 30, 2018 8:25 pm
Thanks everyone for their feedback.

Given that stock market returns have far outpaced residential real estate appreciation over time, I'm a bit reluctant to pay the house off immediately. Also, a 4.13% interest rate, which we can itemize, is pretty low (not as low as the 2.875% I was close to getting 2 years ago in a refinance)....especially if the market is outperforming that. But I'm happy to consider the counter to this.

Stocks and real estate can both go down very quickly at any time, but I guess the advantage with real estate is that you actually have something to show for your hard work when it goes down.

So you don't want to invest in the market because you'll miss the dip, but you use market returns to justify not paying off the mortgage? Nice try!

As stated by others, your view of what happened from 1998 to 2011 isn't right.

I put as much as I can in the market all the time. I have stock and bond index funds, and one managed fund. Over the past ten years, the market has returned 10%. At your age, you would be averaging 8% at least with a 80/20 split. I can't imagine not getting that. You would double your money in 9 years.

I worked in the mutual fund industry in 1987 and lived through that crash. I lost money in the tech crash. And I can retire early anyway because I believe in investing my earnings in the market all the time.

Stop waiting. Put a lot of that cash to work.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Tue Jul 31, 2018 6:49 am

RickBoglehead wrote:
Tue Jul 31, 2018 5:01 am
Mako52 wrote:
Mon Jul 30, 2018 8:25 pm
Thanks everyone for their feedback.

Given that stock market returns have far outpaced residential real estate appreciation over time, I'm a bit reluctant to pay the house off immediately. Also, a 4.13% interest rate, which we can itemize, is pretty low (not as low as the 2.875% I was close to getting 2 years ago in a refinance)....especially if the market is outperforming that. But I'm happy to consider the counter to this.

Stocks and real estate can both go down very quickly at any time, but I guess the advantage with real estate is that you actually have something to show for your hard work when it goes down.

So you don't want to invest in the market because you'll miss the dip, but you use market returns to justify not paying off the mortgage? Nice try!

As stated by others, your view of what happened from 1998 to 2011 isn't right.

I put as much as I can in the market all the time. I have stock and bond index funds, and one managed fund. Over the past ten years, the market has returned 10%. At your age, you would be averaging 8% at least with a 80/20 split. I can't imagine not getting that. You would double your money in 9 years.

I worked in the mutual fund industry in 1987 and lived through that crash. I lost money in the tech crash. And I can retire early anyway because I believe in investing my earnings in the market all the time.

Stop waiting. Put a lot of that cash to work.
I'm not sure how you concluded that I don't want to invest in the market. What I'm trying to avoid is putting a huge lump sum in, which several have advocated, only to see a jigsaw pattern that took a decade to correct after my lump sum "lock in" on a share value. Please tell me how my view of 1998 to 2011 isn't right - I would have been much better off DCA'ing that money into the S&P.

Does the stock market yield better returns than real estate? I suspect you believe so too - otherwise you would be buying rental/investment properties instead of stocks and bonds. So why would I pay off the house early and rely on real estate market returns with high transaction costs instead of buying stocks, ETFs, funds, bonds, CDs, etc consistently? If I thought that long-term stock market appreciation would be less than 3 or 4%, then paying the house off ASAP would be a no brainer.

Hopefully that makes sense! :sharebeer

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by J295 » Tue Jul 31, 2018 7:57 am

Flying from 30,000 feet here, but from there it certainly looks to me like you can make it work.

Perhaps I’ll grab some time later and post again for you, but here are some quick observations from someone who is thoroughly enjoying having retired at age 53 ( married with grown children) ...

Under current law, it seems that your family of four may qualify for insurance under the affordable care act, and with the premium tax credit will be very very inexpensive for premiums. Take a look at the Calculator at the Kaiser foundation

When I read of someone with material assets and high stress my thought is – – find a way to change things. We did, and it has been marvelous.

If you decide to take the leap, it’s a chance to see if your parachute works. There’s no guarantees of course ..... if you want to guarantee buy a Sam’s Club battery.

Let’s all remember your posted that your spouse enjoys her work and can generate $60,000 per year, and apparently there is real estate that kicks off $40,000 per year.

I should add that we live in a low cost of living area and our expenses are relatively modest. We probably have a mindset that is different then nearly all of our acquaintances. That is, although we have a very nice home on a private golf course, winter away from our cold-weather state, etc., if our life were to change financially so that we could not do those things, it would not really matter or inconvenience us at all. It would just be a different and less materially comfortable existence.

This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Last edited by J295 on Tue Jul 31, 2018 8:24 am, edited 1 time in total.

cherijoh
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by cherijoh » Tue Jul 31, 2018 8:04 am

aristotelian wrote:
Mon Jul 30, 2018 5:54 pm
I think you are fine, it's just a matter of detail. Paying off the mortgage takes your portfolio down to $3.2M while reducing your spending to $116k. That gives you a nest egg of about 28X expenses. I think that is pretty solid.

If you or your wife can work part time, move to a lower cost area, or simply tighten your budget, this would be a slam dunk.

Might be helpful to break down your portfolio with more specifics since it sounds like at least a portion is in an unconventional asset.
Aristotelian, I think you missed the fact that included in that 3.7M is home equity, $1M in other real estate, the kids college funds, etc.

Liquid assets are $800K in cash, $380K in a brokerage acct, $110K in Roth IRA, and $725K in 401k/trad IRA.

OP, have you established how long it would take you to pay off your mortgage if you cut out all extra payments towards principal? I would run an amortization schedule to determine this. Because of the mortgage, you don't have a lot of flexibility in being able to cut your spending. But paying off the mortgage with a portion of your cash stash would mean losing a significant portion of your available liquid assets.

Remember that using your Trad IRA/401k means ordinary income taxes - and a 10% early withdrawal penalty unless you set up a SEPP (substantially equal payment plan) with all or a portion of your retirement assets. These plans are not flexible, result in paying the 10% penalty on all funds withdrawn if you mess up, and must be continued for at least 5 years or until you hit 59.5 - which ever is longer. I have a friend who retired right before the dot com bubble at about your age and who was funding her retirement using an SEPP arrangement. Within 2 years she had torpedoed her 401k and was back at work full-time. She's in her late 60s and still working due to necessity.

IMO you need to have another job and it should be one that is covering the bulk of your residual expenses (after wife's income and income from other RE) - better yet one where you could continue to save money towards your retirement. Your wife could work another 10 years at her P/T job, but what happens if we have another recession and she loses her job while you still have that mortgage and kids at home? This scenario played out in 2008 for a number of people I know who expected to be able to retire to a carefree life. It didn't work out that way for them.

Even if your wife does work for 10 more years, you will still need to make up for her income and you will still be too young to start drawing SS.

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Mako52
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Mako52 » Tue Jul 31, 2018 8:24 am

@cherijoh - with no additional principal payments, mortgage would be paid off in 21.5 years, or early 2040 (vs Feb. 2042 with no extra payments in the original loan amount)

Perhaps one solution is to do a mix of both - invest the cash into the market on a consistent weekly or bi-weekly DCA basis, and reserve some so that we can pay extra principal payments to get the mortgage paid off in 10 years, at which time the youngest should have finished college. And do this while I'm still earning at least $75k in income. One reason why we didn't do a 15 year mortgage a couple of years ago is because we realized that having a 30 year gave us more flexibility to pay down principal when possible and appropriate.

But the 120mph analogy is right - when you've been working like this it's hard to slow down to a "moderate" level.

autopeep
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by autopeep » Tue Jul 31, 2018 8:34 am

cherijoh wrote:
Tue Jul 31, 2018 8:04 am
aristotelian wrote:
Mon Jul 30, 2018 5:54 pm
I think you are fine, it's just a matter of detail. Paying off the mortgage takes your portfolio down to $3.2M while reducing your spending to $116k. That gives you a nest egg of about 28X expenses. I think that is pretty solid.

If you or your wife can work part time, move to a lower cost area, or simply tighten your budget, this would be a slam dunk.

Might be helpful to break down your portfolio with more specifics since it sounds like at least a portion is in an unconventional asset.
Aristotelian, I think you missed the fact that included in that 3.7M is home equity, $1M in other real estate, the kids college funds, etc.

Liquid assets are $800K in cash, $380K in a brokerage acct, $110K in Roth IRA, and $725K in 401k/trad IRA.

OP, have you established how long it would take you to pay off your mortgage if you cut out all extra payments towards principal? I would run an amortization schedule to determine this. Because of the mortgage, you don't have a lot of flexibility in being able to cut your spending. But paying off the mortgage with a portion of your cash stash would mean losing a significant portion of your available liquid assets.

Remember that using your Trad IRA/401k means ordinary income taxes - and a 10% early withdrawal penalty unless you set up a SEPP (substantially equal payment plan) with all or a portion of your retirement assets. These plans are not flexible, result in paying the 10% penalty on all funds withdrawn if you mess up, and must be continued for at least 5 years or until you hit 59.5 - which ever is longer. I have a friend who retired right before the dot com bubble at about your age and who was funding her retirement using an SEPP arrangement. Within 2 years she had torpedoed her 401k and was back at work full-time. She's in her late 60s and still working due to necessity.

IMO you need to have another job and it should be one that is covering the bulk of your residual expenses (after wife's income and income from other RE) - better yet one where you could continue to save money towards your retirement. Your wife could work another 10 years at her P/T job, but what happens if we have another recession and she loses her job while you still have that mortgage and kids at home? This scenario played out in 2008 for a number of people I know who expected to be able to retire to a carefree life. It didn't work out that way for them.

Even if your wife does work for 10 more years, you will still need to make up for her income and you will still be too young to start drawing SS.
This post seems correct to me. Can the OP retire early on 2 million dollars? Of course. Can the OP retire early and not substantially change his lifestyle/spending. Ehhh... Seems unlikely

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by aristotelian » Tue Jul 31, 2018 8:56 am

cherijoh wrote:
Tue Jul 31, 2018 8:04 am
Aristotelian, I think you missed the fact that included in that 3.7M is home equity, $1M in other real estate, the kids college funds, etc.

Liquid assets are $800K in cash, $380K in a brokerage acct, $110K in Roth IRA, and $725K in 401k/trad IRA.

Remember that using your Trad IRA/401k means ordinary income taxes - and a 10% early withdrawal penalty unless you set up a SEPP (substantially equal payment plan) with all or a portion of your retirement assets. These plans are not flexible, result in paying the 10% penalty on all funds withdrawn if you mess up, and must be continued for at least 5 years or until you hit 59.5 - which ever is longer. I have a friend who retired right before the dot com bubble at about your age and who was funding her retirement using an SEPP arrangement. Within 2 years she had torpedoed her 401k and was back at work full-time. She's in her late 60s and still working due to necessity.
Doh, I did miss that. So he is really looking at about $2.5M after the mortgage. So yeah, I agree, OP does need to either cut expenses, or work longer to supplement the portfolio. Personally I would be inclined to cut expenses, as I am very comfortable on $60K spending.

Do note that "Roth conversion ladder" is an alternative to SEPP. You can convert Traditional IRA to Roth and withdraw the conversion penalty-free after five years. As long as you have five years of liquidity in other accounts, accessing funds in the 401k should be no problem.

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Re: Net worth of $3.7M at age 47 - can we retire?

Post by cherijoh » Tue Jul 31, 2018 8:58 am

Mako52 wrote:
Tue Jul 31, 2018 8:24 am
@cherijoh - with no additional principal payments, mortgage would be paid off in 21.5 years, or early 2040 (vs Feb. 2042 with no extra payments in the original loan amount)

Perhaps one solution is to do a mix of both - invest the cash into the market on a consistent weekly or bi-weekly DCA basis, and reserve some so that we can pay extra principal payments to get the mortgage paid off in 10 years, at which time the youngest should have finished college. And do this while I'm still earning at least $75k in income. One reason why we didn't do a 15 year mortgage a couple of years ago is because we realized that having a 30 year gave us more flexibility to pay down principal when possible and appropriate.

But the 120mph analogy is right - when you've been working like this it's hard to slow down to a "moderate" level.
To continue the driving anology, you also don't want to be heading into the desert and run the risk of an empty gas tank when there isn't another gas station for hundreds of miles, do you?

When doing retirement planning, it is rarely a good idea to use only the optimistic scenario... maybe it will work out the way you want, but if it doesn't you end up between a rock and a hard place.

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corn18
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by corn18 » Tue Jul 31, 2018 9:05 am

I did a spreadsheet that takes a backwards approach to deciding if I can retire. I run the numbers and it spits out how much I can spend. Then I decide if that is enough. Right now, I am at $100k retirement income available @ 4%, age 52. I have a COLA pension from the military, free healthcare for life and plan to start SS @ 70. So I have a lot of goodness going for me.

The way I figured out the $100k is I bridge myself to SS and assume a 4% WR after that. I figure out how much it takes to get to SS and maintain the same income and set that for the entire retirement period. That takes care of the multiple income streams. Once that number hits something I am comfortable with, I will retire. Right now I am targeting $150k @ age 55. If the BS meter gets too high, I might decide I can live on less or maybe I slow down for a few years and retire @ 58 instead of 55. Heck, my wife and I have even talked about is $100k enough? Retire now or slow down now and enjoy the next 3 years of freedom vs. working my backside off to get to $150k.
Don't do something, just stand there!

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