Dipping my toe into retirement - Need counsel

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Danno185
Posts: 1
Joined: Fri Mar 15, 2019 6:37 am

Dipping my toe into retirement - Need counsel

Post by Danno185 » Fri Mar 15, 2019 6:50 am

I’m 60, in a very high tax state and just starting semi-retirement with $13.5m investable assets (plus $5m homes) and have dropped my salary to $100k. Likely inheritance of $5m in 10-15 yrs. I probably need about $500k annual net of taxes (about $80k in property taxes - ouch!), have about 25% of my investable in commercial real estate that yields about 9% gross with the rest heavily weighted with managed equities. I’m willing to spend down assets some if needed.

Think I’ll be ok? The fallback is I downscale the house eventually if required, though hoping not to.

Carl

Strayshot
Posts: 598
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: Dipping my toe into retirement - Need counsel

Post by Strayshot » Fri Mar 15, 2019 7:39 am

There is a current thread ruminating on the common “4% safe withdrawal rate” topic as we speak. If your invested assets were in an appropriate mix of low cost bond and equity funds I would say you are fine, particularly with the options of a home sale and an inheritance on the horizon. Understand that if the time comes where you need to sell the home, it will likely be in an environment where the price you can get will be much less than expected because the same factors that drove the sale will affect the environment of the sale and the price.

However, your asset allocation does not sound appropriate. Commercial real estate can go badly quickly in the right environment, and I cringe every time I hear about actively managed funds (which it sounds like are 75% of assets). Your risk profile is not in alignment with your retirement needs.

If I were you, I would put serious thought into an appropriate asset allocation before entering retirement. I would also take a look at how much you can downscale from the 500k annual expenses if needed (you have a large property tax bill that is a fixed cost, what other large fixed costs are present in that figure?). You have the assets necessary but not the right allocation in my opinion.

User avatar
RickBoglehead
Posts: 4502
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Dipping my toe into retirement - Need counsel

Post by RickBoglehead » Fri Mar 15, 2019 7:43 am

I would concur with that assessment.

Can't count on inheritance.

If the homes are owned (vs. carrying mortgages), a simple analysis says $18.5m / $500 k = 37 years. So IF the asset allocation was changed to be more stable / less risky, then it's a no-brainer.
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.

dbr
Posts: 30574
Joined: Sun Mar 04, 2007 9:50 am

Re: Dipping my toe into retirement - Need counsel

Post by dbr » Fri Mar 15, 2019 8:43 am

The broad brush answer is the 4% safe withdrawal rate concept. That means taking 4% of the original asset value and increasing withdrawals with inflation and generally expecting to survive for 30 years most of the time. Those studies weren't done with significant fractions of the assets in real estate but only in stocks and bonds. Even so and being slightly conservative you want $500k/year out of about $20M or 2.5% and that sounds like the no brainer previously mentioned even with inflation provided you don't have too much in really risky holdings such as any particular real estate position, etc.

Be aware that these off-the-cuff estimates require that taxes and investment expenses come out of that 4% so a question is whether that $500K includes income taxes, all sources of spending on all assets, advisory fees on managed investments, etc. You could easily reduce 4% to 3% just by paying a 1% management fee to a broker.

Other than that your asset allocation is complicated enough I doubt any couple of paragraphs here is going to give a much better analysis than this.

User avatar
Wiggums
Posts: 1729
Joined: Thu Jan 31, 2019 8:02 am

Re: Dipping my toe into retirement - Need counsel

Post by Wiggums » Fri Mar 15, 2019 8:59 am

RickBoglehead wrote:
Fri Mar 15, 2019 7:43 am
I would concur with that assessment.

Can't count on inheritance.

If the homes are owned (vs. carrying mortgages), a simple analysis says $18.5m / $500 k = 37 years. So IF the asset allocation was changed to be more stable / less risky, then it's a no-brainer.
I agree

livesoft
Posts: 68117
Joined: Thu Mar 01, 2007 8:00 pm

Re: Dipping my toe into retirement - Need counsel

Post by livesoft » Fri Mar 15, 2019 9:03 am

Sounds like one foot in the grave already. You will be OK mostly because you don't really need $500K a year.
Wiki This signature message sponsored by sscritic: Learn to fish.

Jordan4FI
Posts: 190
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: Dipping my toe into retirement - Need counsel

Post by Jordan4FI » Fri Mar 15, 2019 9:29 am

I would sell it all and move to Asia...

Post Reply