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

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

Post by cherijoh » Tue Jul 31, 2018 9:07 am

aristotelian wrote:
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 These plans are not flexible, result in paying the 10% penalty on all funds withdrawn if you mess up, and must be continued for at least 5 years or until you hit 59.5 - which ever is longer.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.
Where did you get $2.5MM? I came up with just over $2M. Did you include home equity?

You are right about the Roth ladder, but with the OP having $100K + in ordinary income/yr before any Roth conversions, this strategy wouldn't exactly be cheap for them to put in play.

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

Post by aristotelian » Tue Jul 31, 2018 9:56 am

cherijoh wrote:
Tue Jul 31, 2018 9:07 am
Where did you get $2.5MM? I came up with just over $2M. Did you include home equity?

You are right about the Roth ladder, but with the OP having $100K + in ordinary income/yr before any Roth conversions, this strategy wouldn't exactly be cheap for them to put in play.
I just did $3.7M - $850K (value of house) - $400K (remaining mortgage) = $2.45M net investment. Maybe I am missing something though.

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

Post by retiredjg » Tue Jul 31, 2018 10:04 am

A Roth conversion ladder might be a benefit for some, but it will not make too little money into enough money. This poster does not have enough money to retire now unless there is a considerable reduction of expenses.

Some people are looking at net worth instead of spendable money. This is not accurate unless all of the net worth is spendable. That is not the case here.

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Meg77
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Meg77 » Tue Jul 31, 2018 10:22 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.
Dude, pay off your mortgage. This solves nearly all your problems!
1. Reduces fixed expenses which enables you to quit your job and live off your wife's income and your land income while you figure out your next chapter.
2. Eliminates the question of what to do with the cash and the uncertainty/fear of dumping cash into the market with stocks near all time highs.
3. Gets you a guaranteed "return" of 4%+ which we all know is more than you might make in the stock market over the remaining life of the loan.
"An investment in knowledge pays the best interest." - Benjamin Franklin

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

Post by MJS » Tue Jul 31, 2018 10:39 am

Please don't move until your 17 year old has finished their senior year. Also, are you actually living in DC, and thus entitled to pay in-state tuition at every US state college & university via the DCTAG program?

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

Post by msk » Tue Jul 31, 2018 10:45 am

typical.investor wrote:
Tue Jul 31, 2018 4:19 am

Naw, I'd take a 50%-50% portfolio over that.
As I said, one can flavor in bonds to taste. If one suspects that the "worst" he has to cater for in sequence of returns bad luck is 3 years, then I would simply stash away 3 years expenses into bonds. Of course, one can be more pessimistic, with 5 years, 10, etc. Stock market rises, withdraw from stocks. Stock market falls, withdraw from bonds. Of course 50:50 will cater for more years of bad stock performance than just 3, but it does clobber the very long term. Personally I am invested 100% in stocks and withdraw an annual spend at the beginning of "my" year. But I am invested primarily for my heirs. I disburse around 3.5% annually as gifts; 12 monthly stipends to each heir. I do not trust the frugality of some of my heirs; hence the monthly dollops for all :twisted: I have many heirs to distribute to :annoyed This is my first year of such monthly gifting and if the market falls 30% the annual withdrawal percentage will rise to 5% but I can, in theory, maintain the size of the stipends. Larger than a 30% stock market drop will lead me to curtail the stipends so as to keep the long term reasonably secure. Hence my annual withdrawal enables me to inform my kids and grandkids what they can look forward to during the next 12 months. My own needs are met with a COLA pension. My horizon is for the portfolio to last throughout my heirs' lives, in real terms, hence the emphasis on stocks. Very early retirement, like for the OP, poses similarly long horizon challenges.

In my 40 years of stock market dabbling I learned what is now obvious to all BHs:
You can't time the market for indexing (but you can with obscure individual stocks. I used options)
Lump sum in is the way to go. Market gyrations cost us less in the long term than allowing our own nervousness to color our investment decisions.

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

Post by keystone » Tue Jul 31, 2018 11:08 am

J295 wrote:
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
Excellent post and I agree 100%. I think the OP can definitely make it work, but that might mean shifting some things around (e.g. paying off the mortgage, possibly selling the land, investing remaining cash). A lot of the answers boil down to what the respondents believe is an appropriate withdrawal rate for a 47 year old. If you believe 2%, then you're probably going to think the OP can't retire. If I were in the OP's situation, I'd personally feel comfortable with something in the neighborhood of 3.5% and would most definitely find a way to make this work.

Working2notWork
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Working2notWork » Tue Jul 31, 2018 11:34 am

Mako52 wrote:
Mon Jul 30, 2018 4:38 pm
...
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.
There are a lot of other, more affordable, areas in NoVA. Loudoun Cty has some of the best and housing *can* be reasonable.

Working2notWork
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Working2notWork » Tue Jul 31, 2018 11:44 am

J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...

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

Post by delamer » Tue Jul 31, 2018 11:46 am

Mako52 wrote:
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
Have you actually run the numbers to determine that you would have been better off DCAing into the S&P 500 over that 13 year period?

Assuming that you reinvested dividends — dividends make up about 1/3 of the return of the total return index — and that the money you hadn’t yet invested was earning a small amount in interest?

My best guess is that you are wrong about the result and that misconception is causing you to make less than optimal decisions now.

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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 11:58 am

If you punch USSPX or VFIAX into a chart for "Max" you can see the trajectory of an S&P fund. 2000-2002 and 2007-2009 were very ugly. 2009 to present has been awesome.

For example (change to "Max") https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1

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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 12:57 pm

Mako52 wrote:
Tue Jul 31, 2018 11:58 am
If you punch USSPX or VFIAX into a chart for "Max" you can see the trajectory of an S&P fund. 2000-2002 and 2007-2009 were very ugly. 2009 to present has been awesome.

For example (change to "Max") https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1
Yowzers! If you invested all your money at the peak in Aug 2000, you would have had to wait 13 years to get back to your original investment. There were dividends in there, but there was also inflation. We'll call that a wash.
Don't do something, just stand there!

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

Post by delamer » Tue Jul 31, 2018 1:39 pm

Mako52 wrote:
Tue Jul 31, 2018 11:58 am
If you punch USSPX or VFIAX into a chart for "Max" you can see the trajectory of an S&P fund. 2000-2002 and 2007-2009 were very ugly. 2009 to present has been awesome.

For example (change to "Max") https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1

I am not arguing the point that there have been high highs and low lows.

What I am asking is if you actually compared a lump sum investment in 1998 versus a DCAing investment through 2011, and what the result was? And I am also arguing that if you don’t include reinvested dividends in the analysis, then the analysis is flawed.

The total return S&P 500 index (reflecting capital appreciation and revinvested dividends) increased about 61% from Jan. 1, 1998 through Jan. 1, 2011.

The S&P 500 — without dividends, just capital appreciation — was up about 28% for the same period.

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BeBH65
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by BeBH65 » Tue Jul 31, 2018 2:15 pm

delamer wrote:
Tue Jul 31, 2018 1:39 pm
Mako52 wrote:
Tue Jul 31, 2018 11:58 am
If you punch USSPX or VFIAX into a chart for "Max" you can see the trajectory of an S&P fund. 2000-2002 and 2007-2009 were very ugly. 2009 to present has been awesome.

For example (change to "Max") https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1

I am not arguing the point that there have been high highs and low lows.

What I am asking is if you actually compared a lump sum investment in 1998 versus a DCAing investment through 2011, and what the result was? And I am also arguing that if you don’t include reinvested dividends in the analysis, then the analysis is flawed.

The total return S&P 500 index (reflecting capital appreciation and revinvested dividends) increased about 61% from Jan. 1, 1998 through Jan. 1, 2011.

The S&P 500 — without dividends, just capital appreciation — was up about 28% for the same period.
Personally i like porfoliovisualiser.
here is the evolution of the Vanguard s&p500 fund. One could say that outside of 2 periodes the investment was mainly positive.
Win the same tool I is easy to simulate the return of a regular monthly investment over that period. Do it to get a feel of the results.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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

Post by delamer » Tue Jul 31, 2018 2:56 pm

BeBH65 wrote:
Tue Jul 31, 2018 2:15 pm
delamer wrote:
Tue Jul 31, 2018 1:39 pm
Mako52 wrote:
Tue Jul 31, 2018 11:58 am
If you punch USSPX or VFIAX into a chart for "Max" you can see the trajectory of an S&P fund. 2000-2002 and 2007-2009 were very ugly. 2009 to present has been awesome.

For example (change to "Max") https://finance.yahoo.com/quote/USSPX?p ... in-srch-v1

I am not arguing the point that there have been high highs and low lows.

What I am asking is if you actually compared a lump sum investment in 1998 versus a DCAing investment through 2011, and what the result was? And I am also arguing that if you don’t include reinvested dividends in the analysis, then the analysis is flawed.

The total return S&P 500 index (reflecting capital appreciation and revinvested dividends) increased about 61% from Jan. 1, 1998 through Jan. 1, 2011.

The S&P 500 — without dividends, just capital appreciation — was up about 28% for the same period.
Personally i like porfoliovisualiser.
here is the evolution of the Vanguard s&p500 fund. One could say that outside of 2 periodes the investment was mainly positive.
Win the same tool I is easy to simulate the return of a regular monthly investment over that period. Do it to get a feel of the results.
Thanks. I have seen other references to this tool on Bogleheads, but never have used it myself.

Note that it assumes dividends are reinvested.

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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 3:02 pm

@BeBH65 - thanks for the link. Amazing info. I suspect that will make a very strong case for Large Cap Value ETFs over the long haul.

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

Post by retiredjg » Tue Jul 31, 2018 3:31 pm

I've been wondering how there could be such a divergence in answers to this question. Some people think you have enough and some think you are not even close.

My answer was based on your post's title....."can WE retire?" My answer is no way, no how without a significant reduction in expenses. Not even close.

Others are assuming that the spouse will continue to pull in $60k a year. If that is the case, the answer is not nearly as clear. That $60k represents an additional $2 million in the retirement portfolio if using a withdrawal rate of 3%. That is a completely different question.

With the $60k and $40k coming in from the land, much less is needed from savings to make it work - perhaps only $80 or $90k. Under the right circumstances, that might work although it could also require a reduction in living expenses.

Retiring at that young age, I would not take 4% from the nest egg, but I suppose some might. A good portion of the shortfall (of $80 to $90k) could be made up using a 3% withdrawal rate. Perhaps the rest could be made up by spending less.

Health insurance through that part time job could be quite helpful in reducing insurance costs.

Anyway, I suspect that $60k income - or lack thereof - is responsible for some of the widely divergent answers you are getting.

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

Post by Mako52 » Tue Jul 31, 2018 3:42 pm

Thanks @retiredjg - I just edited the original post and thread title to clarify that. Wife is super happy in her job and could probably go full time if necessary.

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

Post by retiredjg » Tue Jul 31, 2018 3:58 pm

Well, I assume this means not moving out of your high cost of living area.

What ways can you think of to reduce your expenses each year? I know you already addressed this, but I don't think a $20k reduction is going to do it.

One thing that concerns me is your reported living expenses in the first post did not include taxes if I read it correctly. Taxes can add a significant chunk to what it actually costs to live each year. If your taxes are $30k a year, that's an additional $1 million you need in the nest egg to cover just taxes (assuming a withdrawal rate of 3%).

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

Post by retiredjg » Tue Jul 31, 2018 4:00 pm

I will earn "mailbox money" of $30-42k.
Is this this money from the land or money in addition to the land?

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

Post by Mako52 » Tue Jul 31, 2018 5:46 pm

From the land.

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

Post by annebert » Tue Jul 31, 2018 8:06 pm

I am 15 years older than you, and had been stuck in a job I hated. Got headhunted to a new job, and that ended after only a few months due to government contracting pitfalls. I have a fair amount saved, so this was not a catastrophe. The first thing I learned was how relieved I felt. It sounds like you need that relief.

The second thing I learned is that I feel "ungrounded" because I currently have 2 part-time remote jobs, and not going into the office every day is disorienting. Talking to friends, it seems like this is common. Also, I went about 4 months without a paycheck coming in, and that is disorienting, too. It sounds like you have the resources not to need to keep whatever job is making you crazy, but rather than decide that you are going to stop working, maybe quit your current job, take some time to think (and get your financial planning in order) and then look for a job that you would enjoy; maybe the pay won't matter that much. The job market is very hot these days. If I can get jobs, so can you!

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

Post by Peppergrass » Tue Jul 31, 2018 11:04 pm

can't read all the other replies as I don't have time..

NOPE, you're kinda close.. 5 is the starting point, with I would say your goal should ideally be 7.. I know as I have more then you and have been living off it for some time, like any project you've ever done, it always takes more then you thought...


just my real world experience.. if you burn that much a year, if you want to retire then I would say you need to start lowering to at least 100k

also and people might get mad.. as I "retired" at 20... there is no such thing as retirement, life should be lived everyday till you die, and that means working on stuff you love, this is way too subjective and not my place, but please take it from a early retired person, I believe as I was fortunate to never be subjected to the "real world" where people work to just look forward to retirement, just do something you love, if it doesn't make money find a side thing to make some money, that simple, and before people call me a rich kid.. I started working at 15

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

Post by HomerJ » Wed Aug 01, 2018 12:10 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.
Your argument makes little sense when you have 800k in cash.

Pay off the mortgage with the cash and lock in a guaranteed 4.13%
The J stands for Jay

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

Post by kacang » Wed Aug 01, 2018 12:31 am

Mako52 wrote:
Mon Jul 30, 2018 8:25 pm
... Also, a 4.13% interest rate, which we can itemize, is pretty low ...
With the tax law changes, is standard deduction or itemizing more beneficial for you?

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BeBH65
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Re: Net worth of $3.7M at age 47 - can I retire?

Post by BeBH65 » Wed Aug 01, 2018 1:31 am

@Mako52,

You already received a lot of feedback. Maybe time to consolidate. Can I suggest you update the opening post.
We would be able to give you better feedback if we would have more information. Please consider expansing the opening post according to the format of Asking_portfolio_questions

Your fear to invest in the market is an important aspect and will ultimately be key to be able to answer your question.
With the additional information and tools that you have received; how do you now view the evolution of the stock market in the last 20-25 years?
Related to your 800k cash. Was this a recent windfall or did you accumulate it over the past years?
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

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

Post by retiredjg » Wed Aug 01, 2018 9:32 am

Here's what I think you are looking at.

If you (alone) retire or take a break, there will be about $100k coming in from spouse's job and the land. Your annual expenses not including taxes are $150k. Let's call it $200k with federal and state taxes. So you need to make up a shortfall of at least $100k a year from your portfolio.

Your portfolio consists of about $2,015,000 over 1/3 of which is not invested.

Your debt consists of $450k on the house and an unknown amount on the land and other things.

In order to make up a shortfall of $100k, you would need to take a 5% withdrawal rate from your current retirement portfolio. This would include just your spending now, not increased spending that could occur as the kids become teens and college actually happens.

In 10 or so years, when your wife retires, that withdrawal rate would go up again. It might go down again when SS starts for each of you and after the kids are out of the house.

What we know about withdrawal rates in the past is that a portfolio holding a reasonable amount of stock (probably 40% or more) reliably lasted for 30 years with a 4% withdrawal rate. Yes, higher withdrawal rates did work in many of the time periods looked at. They also failed in many of the time periods looked at. But 4% was the number found to be reliable (portfolio did not go bust in the 30 years looked at).

What we don't know.....We don't know that the future will look like the past. We don't know what withdrawal rate has a reasonable chance of success when a portfolio is asked to last more than 30 years - the time frame for one of you could easily be 50 years. People guess the number is probably 2% to 2.5%. I suppose some guess 3%.


If "burned out" means you are just sick of it, that happens to most people at one point or another. Maybe you could take a nice vacation, re-evaluate your situation, and come back with renewed enthusiasm. If "burned out" means this job is putting your mental health and/or your family life at risk, maybe you need to take a break - several months, maybe even a year. I think you can afford to do that.

But I don't see that you have the resources to retire at this point without a very significant change in annual expenses.

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

Post by CaliJim » Wed Aug 01, 2018 9:41 am

retiredjg wrote:
Wed Aug 01, 2018 9:32 am
Here's what I think you are looking at.

If you (alone) retire or take a break, there will be about $100k coming in from spouse's job and the land. Your annual expenses not including taxes are $150k. Let's call it $200k with federal and state taxes. So you need to make up a shortfall of at least $100k a year from your portfolio.

Your portfolio consists of about $2,015,000 over 1/3 of which is not invested.

Your debt consists of $450k on the house and an unknown amount on the land and other things.

In order to make up a shortfall of $100k, you would need to take a 5% withdrawal rate from your current retirement portfolio. This would include just your spending now, not increased spending that could occur as the kids become teens and college actually happens.

In 10 or so years, when your wife retires, that withdrawal rate would go up again. It might go down again when SS starts for each of you and after the kids are out of the house.

What we know about withdrawal rates in the past is that a portfolio holding a reasonable amount of stock (probably 40% or more) reliably lasted for 30 years with a 4% withdrawal rate. Yes, higher withdrawal rates did work in many of the time periods looked at. They also failed in many of the time periods looked at. But 4% was the number found to be reliable (portfolio did not go bust in the 30 years looked at).

What we don't know.....We don't know that the future will look like the past. We don't know what withdrawal rate has a reasonable chance of success when a portfolio is asked to last more than 30 years - the time frame for one of you could easily be 50 years. People guess the number is probably 2% to 2.5%. I suppose some guess 3%.


If "burned out" means you are just sick of it, that happens to most people at one point or another. Maybe you could take a nice vacation, re-evaluate your situation, and come back with renewed enthusiasm. If "burned out" means this job is putting your mental health and/or your family life at risk, maybe you need to take a break - several months, maybe even a year. I think you can afford to do that.

But I don't see that you have the resources to retire at this point without a very significant change in annual expenses.
This is a good analysis by JG as per usual.
+1
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Pajamas
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Re: Net worth of $3.7M at age 47 - can we retire?

Post by Pajamas » Wed Aug 01, 2018 9:53 am

Mako52 wrote:
Mon Jul 30, 2018 8:25 pm
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.
Why would you be unwilling to pay off a 4.13% mortgage because stock market returns are higher but are okay with holding a significant chunk of your assets in property that pays you only 4%? Seems contradictory.
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.
That is just a preference land and buildings over shares in a company. If property prices are cut in half, you still have the property. If equity prices are cut in half, you still have the stock. Of course with the property you would still have to make loan payments if there is a mortgage.
Last edited by Pajamas on Wed Aug 01, 2018 9:54 am, edited 1 time in total.

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

Post by dayzero » Wed Aug 01, 2018 9:54 am

retiredjg wrote:
Wed Aug 01, 2018 9:32 am
What we don't know.....We don't know that the future will look like the past. We don't know what withdrawal rate has a reasonable chance of success when a portfolio is asked to last more than 30 years - the time frame for one of you could easily be 50 years. People guess the number is probably 2% to 2.5%. I suppose some guess 3%.
Even 3% is quite conservative. Respectfully, 2% is borderline paranoia. IIRC pension funds / endowments use 2.25% for perpetual SWR.


OP - have you read through this?

https://earlyretirementnow.com/2016/12/ ... t-1-intro/

Definitely the best analysis I've seen on ER SWR, been discussed here many times.

Sure ER means a longer period living off your assets, but it's important to include human capital in your total assets. You have a lot more of it in your 40s than in your 60s and you can always tap into it if things go sideways and financial risk shows up (i.e. sequence of returns risk). If risk to your human capital shows up (i.e. health catastrophe), well you probably have less future time to worry about and you'll probably also be glad you took some time up to that point to enjoy life.

There is a trade-off between risks - too little money vs. too little time to use it. The difference being you can always trade time for money, but you can't trade money for time.

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

Post by Mako52 » Wed Aug 01, 2018 9:58 am

Thanks to everyone for their replies. I can find work in a new industry/sector with 100k+ in income and be much happier, allowing us to get the youngest out of college and not dip into savings/investments, while also reducing our expenses and investing some ongoing income.

Portfolio Visualizer has been very helpful. PV makes me thoroughly question conventional wisdom for international exposure of 10+% over the long term. @mike_slc - that looks like a great article and will def read.

To answer this: "Why would you be unwilling to pay off a 4.13% mortgage because stock market returns are higher but are okay with holding a significant chunk of your assets in property that pays you only 4%? Seems contradictory."

Because then our portfolio would be even more exposed to real estate. Having seen what 1991 and 2007 did for real estate, the downturn is much much longer than the stock market. As an example: a modest 3BR home in suburban Virginia went for $35k in 1970. The same home today sells for high 500s. Compare that to what $35k invested into the S&P would have done....roughly $2.5M according to a Backtest (1972-2017).

Again, I'm not at all opposed to investing into the market - I'm just reluctant to go "all in" while the market is near historic highs. But this thread has made me look at things differently, for sure.
Last edited by Mako52 on Wed Aug 01, 2018 10:13 am, edited 2 times in total.

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

Post by TheClash » Wed Aug 01, 2018 10:05 am

I wonder how many of these "can I retire early" questions came up in 2009 and 2010? I'm not pointing fingers here, I posted one of these some months ago. Just wondering....

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

Post by cherijoh » Wed Aug 01, 2018 10:07 am

aristotelian wrote:
Tue Jul 31, 2018 9:56 am
cherijoh wrote:
Tue Jul 31, 2018 9:07 am
Where did you get $2.5MM? I came up with just over $2M. Did you include home equity?

You are right about the Roth ladder, but with the OP having $100K + in ordinary income/yr before any Roth conversions, this strategy wouldn't exactly be cheap for them to put in play.
I just did $3.7M - $850K (value of house) - $400K (remaining mortgage) = $2.45M net investment. Maybe I am missing something though.
The kid's 529 plans - which I don't think the OP listed as a specific amount - just that they needed an addition $X to fund.

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

Post by cherijoh » Wed Aug 01, 2018 10:09 am

retiredjg wrote:
Tue Jul 31, 2018 10:04 am
A Roth conversion ladder might be a benefit for some, but it will not make too little money into enough money. This poster does not have enough money to retire now unless there is a considerable reduction of expenses.

Some people are looking at net worth instead of spendable money. This is not accurate unless all of the net worth is spendable. That is not the case here.
+1

The devil is always in the details. :wink:

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

Post by Dottie57 » Wed Aug 01, 2018 10:10 am

Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.

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

Post by dayzero » Wed Aug 01, 2018 10:29 am

Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.

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

Post by Dottie57 » Wed Aug 01, 2018 10:39 am

mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
I think running out of money in 70’s and 80’s would be worse .

My mom had friends who sold their house in their 60’s because housing would never go up more. They sold at 50k and their house was last sold at 250k. They felt you only live once and so they bought an RV to travel. The couple had fun traveling for 5 to 10years. However they ran out of money and had to start working again to supplement SS. Husband died and wife needed subsidized housing. The housing was not bad, but not nice either. The couple really regretted the decision to travel.

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

Post by WhiteMaxima » Wed Aug 01, 2018 10:47 am

Buy into a balanced idex fund paying 2% dividend and live on that 3.7 mil x 2% = $74000, more than enough for a small family.

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

Post by dayzero » Wed Aug 01, 2018 10:48 am

Dottie57 wrote:
Wed Aug 01, 2018 10:39 am
mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
I think running out of money in 70’s and 80’s would be worse .

My mom had friends who sold their house in their 60’s because housing would never go up more. They sold at 50k and their house was last sold at 250k. They felt you only live once and so they bought an RV to travel. The couple had fun traveling for 5 to 10years. However they ran out of money and had to start working again to supplement SS. Husband died and wife needed subsidized housing. The housing was not bad, but not nice either. The couple really regretted the decision to travel.
Definitely running out of money in 70s and 80s would be terrible. It begs the question though - was this with a 4% or less withdrawal rate (were they being responsible)?

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

Post by Pajamas » Wed Aug 01, 2018 10:49 am

Mako52 wrote:
Wed Aug 01, 2018 9:58 am
Because then our portfolio would be even more exposed to real estate. Having seen what 1991 and 2007 did for real estate, the downturn is much much longer than the stock market. As an example: a modest 3BR home in suburban Virginia went for $35k in 1970. The same home today sells for high 500s. Compare that to what $35k invested into the S&P would have done....roughly $2.5M according to a Backtest (1972-2017).

Again, I'm not at all opposed to investing into the market - I'm just reluctant to go "all in" while the market is near historic highs. But this thread has made me look at things differently, for sure.
I don't see how it would change your exposure to real estate, just the amount of money you owe on your holdings. Only exception would be if you were willing to hand the keys to the mortgage holder and walk away. If you prefer a mortgage on your house you should also consider borrowing against your other property.
Last edited by Pajamas on Wed Aug 01, 2018 10:51 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 » Wed Aug 01, 2018 10:51 am

Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
Why? All that means is that they make less conservative guesses about the unknowable future performance of the market. It's not like they know any more about what will happen than the BH forum.

Admittedly I've seen BH posts that are too conservative - figure out a retirement budget then pad on 25 - 50% for totally discretionary expenses AND decide on a maximum withdrawal rate of 2%. :oops: Most people of course will be smart enough to cut discretionary expenses if the market tanks.

But here's a partial list of bad assumptions that I've seen posted (and challenged) here at BH in the "can I retire?" or "can I afford this house?" posts:
  • Ignoring taxes and the placement of funds (traditional/Roth/after-tax) when calculating their required retirement withdrawal
  • Using nominal rates of return to calculate how large their current nest egg will be in X years when they plan to retire
  • Ignoring the current stock market valuations when estimating the future return from their portfolio
  • Assuming that they can wait until shortly before retirement to adjust to a more conservative AA
  • Ignoring the cost to purchase a new home or pay rent when estimating how much downsizing their current (or proposed new) house will juice their retirement nest egg
  • Assuming that they (or a spouse) will be able to work as long as they like at a job paying their current salary or better
If you posted elsewhere, would you get the careful analysis you do here at BH? I kind of doubt it!

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

Post by Pajamas » Wed Aug 01, 2018 10:53 am

Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
https://www.reddit.com/r/wallstreetbets/

At least they think they know the market pretty well.

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greg24
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Re: Net worth of $3.7M at age 47 - can I retire?

Post by greg24 » Wed Aug 01, 2018 10:54 am

Mako52 wrote:
Wed Aug 01, 2018 9:58 am
Because then our portfolio would be even more exposed to real estate.
Paying off your mortgage does not expose you to more real estate. Your real estate exposure is the exact same. But you no longer have mortgage loan debt to pay off.

I agree with the others above. Pay off the mortgage. You have $800k sitting in the bank, and a 4.13% $450k loan.

Paying off the mortgage is a very good return for half of your cash. It simplifies expenses: the fewer moving parts will make your financial standing appear more clearly, and may reduce the stress that makes you feel that you need to retire at 47.

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

Post by HomerJ » Wed Aug 01, 2018 11:02 am

Before my wife retired a few years back, we made it paying off the mortgage a precondition. Being debt free, and keeping expenses low is key.

The OP should do the same...

If he pays off his house, he'll still have $1.5 million in investable assets, and his expenses will drop to $116k a year.

Wife makes $60k, and the $1 million in land is throwing off $30k-$40k.

So that's $60k + $30k (should stick with the conservative number), which means they need the $1.5 million to generate $26k a year (which is 1.7%).

But that ignores taxes, but still I bet he could make it work.

As long as the wife keeps working.

And if spending doesn't go up as the kids get older

How is the OP planning on paying for college?
The J stands for Jay

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

Post by HomerJ » Wed Aug 01, 2018 11:03 am

Of course, since he's borderline able to retire today, it would be a BREEZE to just change jobs to something that pays less, but he enjoys more.

Even a $30k a year job would make the numbers work easily.
I can find work in a new industry/sector with 100k+ in income and be much happier
Well, there you go. Easy peasy.

My wife (who I mentioned retired a few years back, completely burned out by her job), did the same thing. A work-from-home job opportunity fell into her lap a year after she retired, and she took it intending to just do it for 6 months (it was winter anyway), and she's been working there for several years now.

Half the pay she used to make, but only 1/3 of the hours and and 1/4 of the stress.
Last edited by HomerJ on Wed Aug 01, 2018 11:10 am, edited 1 time in total.
The J stands for Jay

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

Post by cherijoh » Wed Aug 01, 2018 11:09 am

mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
You can always come up with some example of a miser who lives very frugally (to the point that everyone assumes they are barely scraping by on SS) and then they end up leaving millions to charity. Or someone who dies prematurely and doesn't have time to spend their money. But I think most sensible people would prefer to know they are likely to leave an estate than run the risk of being destitute and dependent on others for support. I would hardly define that as a failure.

In addition, a lot of people make sacrifices specifically so that they do end up with an estate to pass on to their kids or grandkids or to a charity that they support.

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

Post by HomerJ » Wed Aug 01, 2018 11:13 am

cherijoh wrote:
Wed Aug 01, 2018 11:09 am
mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
You can always come up with some example of a miser who lives very frugally (to the point that everyone assumes they are barely scraping by on SS) and then they end up leaving millions to charity. Or someone who dies prematurely and doesn't have time to spend their money. But I think most sensible people would prefer to know they are likely to leave an estate than run the risk of being destitute and dependent on others for support. I would hardly define that as a failure.

In addition, a lot of people make sacrifices specifically so that they do end up with an estate to pass on to their kids or grandkids or to a charity that they support.
People here focus way too much on the risk of running out of money, and completely ignore the risk of running out of time.
The J stands for Jay

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

Post by dayzero » Wed Aug 01, 2018 11:16 am

cherijoh wrote:
Wed Aug 01, 2018 11:09 am
mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am
J295 wrote:
Tue Jul 31, 2018 7:57 am
This forum, in my opinion, is notoriously conservative. That’s neither good or bad, just a fact. Filter the responses accordingly
Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
You can always come up with some example of a miser who lives very frugally (to the point that everyone assumes they are barely scraping by on SS) and then they end up leaving millions to charity. Or someone who dies prematurely and doesn't have time to spend their money. But I think most sensible people would prefer to know they are likely to leave an estate than run the risk of being destitute and dependent on others for support. I would hardly define that as a failure.

In addition, a lot of people make sacrifices specifically so that they do end up with an estate to pass on to their kids or grandkids or to a charity that they support.
Again, this a straw man argument. I agree with you 100% - you cannot be irresponsible with your future and no one here is arguing for risking destitution and dependency on others. We've often defined the line between responsible and irresponsible as 4% SWR for a 60-65 year old. The only question is, what is responsible for a 47 year old. The Ultimate Guide to SWR series suggests it's probably in the low to mid 3s. It also depends on the value of your human capital and how willing you are to use it if things go bad early on.

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

Post by dayzero » Wed Aug 01, 2018 11:17 am

HomerJ wrote:
Wed Aug 01, 2018 11:13 am
cherijoh wrote:
Wed Aug 01, 2018 11:09 am
mike_slc wrote:
Wed Aug 01, 2018 10:29 am
Dottie57 wrote:
Wed Aug 01, 2018 10:10 am
Working2notWork wrote:
Tue Jul 31, 2018 11:44 am


Are there any other, less conservative, investment forums you can recommend? I find myself feeling very financially conservative and would love to hear opinions of others that aren't but *know* the market pretty well...
To me conservative financially means less likely to fail.
Depends how you define failure. Working until 65 and dying at 67 with a huge pile of assets could also be defined as failure.

There are a number of forums that fall on the other end of the spectrum. MMM and ERE are two.
You can always come up with some example of a miser who lives very frugally (to the point that everyone assumes they are barely scraping by on SS) and then they end up leaving millions to charity. Or someone who dies prematurely and doesn't have time to spend their money. But I think most sensible people would prefer to know they are likely to leave an estate than run the risk of being destitute and dependent on others for support. I would hardly define that as a failure.

In addition, a lot of people make sacrifices specifically so that they do end up with an estate to pass on to their kids or grandkids or to a charity that they support.
People here focus way too much on the risk of running out of money, and completely ignore the risk of running out of time.
this

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

Post by Mako52 » Wed Aug 01, 2018 11:21 am

@HomerJ "How is the OP planning on paying for college?"
We've been investing into 529s and each kid currently has $40k in the 529 PLUS a year of prepaid tuition.

For those advocating a mortgage payoff:
1) Given that real estate appreciation in our area has been minimal (weak ~1% a year over the last 10 years), why would you shift funds that could be earning 6%?
2) Taxes will go up when $20k in mortgage interest deduction goes away....is that something to consider?

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