Major Life Decision -- Do we need to keep working?

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Baconquest
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Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 1:13 pm

My spouse and I are struggling to make a major life decision. We are in our late 40’s, early 50’s and have $1.4 million. We own no home, and currently do not even have an apartment. We are Americans who worked overseas for many years. We have come back to the U.S. and are now trying to decide where to live and what to do. About $250,000 of the $1.4 million is in cash, since we were (and are) considering buying a home. The rest is invested about 60% total market stock funds (two-thirds U.S., one-third international) and 40% bonds (all Total Bond Market, except for our small IRAs which hold Vanguard’s TIPs fund).

Option #1 – Go back overseas

We have an opportunity to go back overseas. We would receive free housing, full benefits, and earn about $110,000 combined, net of taxes. We should be able to save at least half of that. I do some consulting that nets about another $24,000 per annum. So let’s say if we go back overseas, we’d be able to save at least $75k per annum.

Option #2 – Stay in the U.S. and semi-retire

With $1.4 million and $24,000 per annum from consulting, we believe that we could essentially retire, as long as we’re willing to settle in a low cost of living area. We can’t retire to Malibu, obviously. But we could buy a nice house and get fully set up (furniture, second car, etc.) in lots of nice places for less than $400k. We would try to find enjoyable work that covered our living expenses, so that the remaining $1 million+ would stay invested for our later full retirement. One hope would be that I could grow my consulting business, something I would enjoy doing. Another possibility is opening a small service-based business that could net a couple of thousand each month. Again, that is something we would enjoy doing.

There are other scenarios, such as one of us works a full-time job in the states, while the other enjoys a semi-retirement, but options 1 and 2 define the continuum.

I guess this comes down to a question of whether it is reasonable or foolish for us to try to semi-retire at such an early age with the amount of money we have. On the one hand, I feel as though for a long time I did something that I didn’t really want to do (the overseas work) in order to amass a sizeable portfolio. (I was essentially broke when I first went overseas, so I do feel that I achieved my goal.) As I approach 50, I think: you should do what you really want this next decade. Do not trade time for more money. On the other hand, a few more years overseas could increase our net worth by another $200,000.

I will add that if we had $2 million (or maybe even $1.7 or less) we wouldn’t be deliberating. We would buy a house in the states and set-up our small business, even if it did nothing but break-even. Of course, if we go back overseas, we might reach that number in just a few years. Probably five at the most.

Finally, I want to mention that we have found re-entry into the states quite challenging. We were overseas long enough that we are experiencing reverse cultural shock and there is no obvious place to call home. If we go back overseas, those pressures are eliminated, but we will encounter them again whenever we decide to retire from overseas work. Part of our thinking is that we would rather spend the next decade in the states, becoming part of a community, than returning to states at 55, 60, or older, and having to find a home and cultivate new friends at that age.

Update (31 May 2015)

My wife decided that she wanted to return to work full-time, in a less stressful position. She quickly landed a dream job in a major U.S. city. We’ll be relocating in the next month or so. I’m going to continue with my consulting practice, which has already grown since I last posted. We’ll try this new arrangement for a couple of years and then re-assess. We will only be able to save around $50k per year (vs. $75k had we gone back overseas), but each of us will be working a lot less, and without the stress of international travel and living. Best case scenario is that our new arrangement will be very satisfying and we’ll stay there for five or so years, at which point we should be able to retire fully should we so choose.

Our new plan raises some new issues, so I have started separate threads to ask some questions.

How to furnish a new residence, completely from scratch

Returning from overseas - seeking portfolio advice

Thanks to everyone for the help they provided.
Last edited by Baconquest on Sun May 31, 2015 5:01 pm, edited 1 time in total.

retiredjg
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Re: Major Life Decision -- Do we need to keep working?

Post by retiredjg » Sat Dec 20, 2014 1:23 pm

If you set up now, you will have roughly $1 million left. From that, you could probably take no more than $30k a year. Are your expenses low enough to live on that? Can you even know since you've been gone so much?

psychoslowmatic
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Re: Major Life Decision -- Do we need to keep working?

Post by psychoslowmatic » Sat Dec 20, 2014 1:37 pm

You can, but I don't hear there's anything you particularly want to do, just one thing (going overseas) you don't. It'll probably be a little uncomfortable unless you're in a very low cost area with that nest egg, so I'd try to grow it while working in a job or an area you enjoy. It kind of sounds like you're having a hard time reintegrating. Just realize that is a mostly separate problem from whether you can retire. Best of luck to you!

david99
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Re: Major Life Decision -- Do we need to keep working?

Post by david99 » Sat Dec 20, 2014 1:45 pm

It sounds like you would prefer to stay in the US. So I think that I would stay in the US but not retire. Personally, I would not want to retire at 50 with 1.4 MM. You can build your consulting business and your significant other could also find a job --- this way you can continue to let your portfolio build. If you do not touch your 1.4 MM and it earns 5% per year with a combination of stocks and bonds, then you'll have about 2MM in eight years.

Ldevelopment
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Re: Major Life Decision -- Do we need to keep working?

Post by Ldevelopment » Sat Dec 20, 2014 1:47 pm

I think you'd be fine with a few possible issues. I would plan on not adjusting for inflation in the early stages as would be typical with a 4% withdrawal rate. Just turn off the inflation adjustment and see how your lifestyle is. keep your options open for part-time employment as well.

retiredjg
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Re: Major Life Decision -- Do we need to keep working?

Post by retiredjg » Sat Dec 20, 2014 1:54 pm

At this age, I don't think you can even consider a 4% withdrawal. The 4% rate is associated with a 30 year withdrawal period.

Laura
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Re: Major Life Decision -- Do we need to keep working?

Post by Laura » Sat Dec 20, 2014 2:00 pm

Since you probably don't have social security or a pension and will be fully dependent on the $1.4 million I would probably work to beef that up a little more before slowing down. If you can stand a few more years overseas that will give you an extra financial buffer. I would spend that time really focused on finding the right place to live. And, before you jump into that new community with a home purchase, renting would give you the ability to see if you really fit there. As someone who has already identified reverse culture shock as a challenge you need to try and find a community that is more international and global and that might bring you to a slightly higher cost of living location. That isn't for sure but it could be so you should prepare financially. You want to be able to find the right place, not just the cheapest place.

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whomever
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Re: Major Life Decision -- Do we need to keep working?

Post by whomever » Sat Dec 20, 2014 2:02 pm

I don't know that I can answer your question - it's a personal decision - but a couple of thoughts:

1)You don't mention social security (or pensions, ...). Was your foreign work covered? If late in life your portfolio is running low, could you get by on whichever SS benefit is larger?

2)You don't mention expenses. You're planning on a long - maybe 40 plus year - retirement. I haven't looked closely, but isn't the conventional wisdom that a 2% SWR is appropriate for an indefinitely long period? If, after buying a house, you have $1M left, that would give you $24k + $20k = $44k in income. How sure are you that that is enough? I wonder how accurately you can estimate your expenses at this point; it's not like you have a few years of data at your desired location/lifestyle to help with prediction. And small differences in annual expenses, compounded over time, make a huge difference in portfolio survival rates.

3)What's Plan B if in say 10 years, at age 60, you do the annual books and realize things aren't working out? Will the consulting business be stable enough to keep doing it for longer? You sure don't want to find out you need to work as a Walmart greeter until 75 to make up for foregoing a couple of years of work now.

It's a hard decision - we're just deciding to retire ourselves :-)

Ldevelopment
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Re: Major Life Decision -- Do we need to keep working?

Post by Ldevelopment » Sat Dec 20, 2014 2:03 pm

retiredjg wrote:At this age, I don't think you can even consider a 4% withdrawal. The 4% rate is associated with a 30 year withdrawal period.
I agree but if you turn off inflation adjustment when starting out i would think the risk goes down a lot, especially with house that's paid for.
Last edited by Ldevelopment on Sat Dec 20, 2014 2:07 pm, edited 1 time in total.

livesoft
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Re: Major Life Decision -- Do we need to keep working?

Post by livesoft » Sat Dec 20, 2014 2:03 pm

I have lived overseas for a while, so this may color my thoughts.

I read the OP differently. It sure seems like overseas is drawing you back. I had a sense of community when I lived & worked overseas. I know many people that would not come back because they have all friends, community, etc that they would have in the US anyways.

One thing not mentioned is Social Security benefits (OK I see Laura & whomever mentioned it now while I was typing). Perhaps you have access to government benefits in your host country or countries when you reach age 65. I suspect (but I am not sure) that you all have not been paying into SS for awhile and your SS benefits may be limited. If that is a concern, then working enough back in the US to get benefits may be something to consider.
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retiredjg
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Re: Major Life Decision -- Do we need to keep working?

Post by retiredjg » Sat Dec 20, 2014 2:08 pm

Ldevelopment wrote:
retiredjg wrote:At this age, I don't think you can even consider a 4% withdrawal. The 4% rate is associated with a 30 year withdrawal period.
I agree but, if you turn off inflation adjustment when starting out i would think the risk goes down a lot, especially with house that's paid for.
I suppose not using the inflation adjustment for several years might help. Not sure I'd risk it though unless there is SS and/or pension to smooth things out.

The house paid off is not relevant - if they take 4% it does not matter what it is spent on.

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Re: Major Life Decision -- Do we need to keep working?

Post by blevine » Sat Dec 20, 2014 2:21 pm

If you like the kind of work you do, and the daily life in the destination, I would go back overseas.

You can make friends as long as you are healthy and active, when you come back.
Seems having a job you like will contribute to mental health,
and having money is important to buy medical insurance.

You were not so clear, but seemed you like living overseas, did not mention any dislike
of working, only afraid of missing out. I don't think you'll miss out on anything.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 2:22 pm

Thanks so much for all the comments so far. We both appreciate all the advice and will weigh it carefully.

Two clarifications:

1. We WILL have social security benefits. Assuming no additional social security wages, we each have a PIA of approximately $1,475, or $35,400 per annum combined pre-tax. If we wait until age 70 to draw, the monthly payment increases to about $1,820, or $43,700 per annum combined pre-tax.

2. If we stay in the states, we are not planning on drawing down any of the $1 million+ left over after purchasing a home and getting set up. My consulting earns $24,000 net of taxes, and I would try to grow the business. It is not inconceivable that I could double that income in less than two years. Regardless, as I stated in my OP, we would work enough to earn enough to cover our living expenses. The $1 million plus left over after settling would stay invested for retirement. At the very worst, we’d spend the dividends generated by the portfolio. ($20k or so?)

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patriciamgr2
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Re: Major Life Decision -- Do we need to keep working?

Post by patriciamgr2 » Sat Dec 20, 2014 2:44 pm

deleted by poster - i hadn't seen OP's response when I posted. Good Luck1

Laura
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Re: Major Life Decision -- Do we need to keep working?

Post by Laura » Sat Dec 20, 2014 3:39 pm

The social security situation makes this far less risky but I would still probably try to build that nest egg a little bit more before taking the plunge. Since your earnings level living in the US is so unclear you want some excess in my opinion.

Laura
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market timer
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Re: Major Life Decision -- Do we need to keep working?

Post by market timer » Sat Dec 20, 2014 6:20 pm

This is more a lifestyle question than financial question, so hard to give advice. It sounds like you don't really like the overseas work, but you don't explain why. What if you took the overseas job and didn't try to save as much for a few years? Rather than take an extra side consulting job for $24K and save $75K, why not work your normal job only, take better holidays, eat at better restaurants, and save only $30K? Financially, this is still much better returning to the US and starting to draw down your portfolio. In your situation, I'd probably be inclined to follow that route. You'd always have the option of returning to the US in a couple years and starting over at that point.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 7:29 pm

When overseas, we take whatever vacations we want, eat wherever we want, buy whatever we want, etc. Our tastes are simple, but we traveled extensively. Europe, Asia, Middle East, Africa. We traveled so much, in fact, that we began looking forward to "staycations". For the time being, at least, we've traveled enough. (As my spouse put it: "We're tired of traveling and seeing other people living their lives. We want to be living *our* life!")

So spending more money while overseas won't help. It's the job and that general expat lifestyle that I'm tired of. We want to live a simple life in a nice small house, working on projects that we enjoy, rather than flying all around the world, having more "adventures", and working exciting but stressful jobs.

I just don't know that we can afford it. And we don't know what it might be like to be worrying about money, although we're getting a feel for it, because we're already worrying that we might not have enough to semi-retire!

P.S. The consulting is something I want to do whether we go overseas or stay in the states. It's almost like a hobby that generates additional income.

Rodc
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Re: Major Life Decision -- Do we need to keep working?

Post by Rodc » Sat Dec 20, 2014 7:48 pm

They are both fine options. I do not know why you would call #2 semi-retired, especially if you are trying to be self employed and working at growing your business.

This is entirely an emotional decision far more that an economic one, really.

So what do you WANT to do?
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Leemiller
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Re: Major Life Decision -- Do we need to keep working?

Post by Leemiller » Sat Dec 20, 2014 8:15 pm

Maybe you can move to a place in the states where you think you want to live and just rent for awhile. Then see how the consulting builds up for a year or two. That way you don't have to make a big decision just yet.

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Re: Major Life Decision -- Do we need to keep working?

Post by seeshells » Sat Dec 20, 2014 8:20 pm

You did not specify your age, you said late 40s-early 50s, so I used 45 for safety sake. 1M's needs in 1969, is right about 6.5M 's needs today, using only inflation's ravages as a measure. Suppose you live another 45 yrs. You seem to want to keep your 1M intact, maybe for a bequest, using only its proceeds. I'd keep working. Retirement, well, someone I was speaking with recently said they never wanted to "retire", because they were not yet "really tired". Good luck in your decision, as Laura and others have suggested, I too would keep accumulating because of it's availability, your accumulation path that is, might disappear. You never realize what you have till its gone. ETA: You are right, you cannot buy TIME, however I'd prefer knowing I'd be financially secure given I'd set sail relying on the wind's temperament till 100yrs old or beyond, given medical advances and all. Good Luck!
Last edited by seeshells on Sat Dec 20, 2014 9:22 pm, edited 2 times in total.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 8:21 pm

Rodc wrote:I do not know why you would call #2 semi-retired, especially if you are trying to be self employed and working at growing your business.
My consulting business is like a hobby and doesn't take much time. I can gross $30k in about 150 hours of work. If we started our small service-oriented business, we would work part-time, and it's something that we love to do. Two part-time, income-generating hobbies where we are our own bosses sounds like the best semi-retirement I could imagine! Not the best retirement, but the best semi-retirement.
Rodc wrote:This is entirely an emotional decision far more that an economic one, really. So what do you WANT to do?
I want to stay in the states, buy a small house and semi-retire in the manner I described above. But I don't want to be stupid. I worry that we may not have enough money, and that it might be foolish to pass on the opportunity to work for another few years at a job that will allow us to save $75k per annum.
Leemiller wrote:Maybe you can move to a place in the states where you think you want to live and just rent for awhile. Then see how the consulting builds up for a year or two. That way you don't have to make a big decision just yet.
That is a good suggestion, but if we don't accept the overseas positions now, there's no guarantee that we'll have the opportunity again. Our skills and knowledge and contacts have a pretty short shelf-life. We would be confident that we could still do our jobs well. But the companies hiring wouldn't.

Allow me to re-frame the decision:

Do we have enough ($1.4 million plus social security as described above) that we can pretty confidently pursue what we want?

If not, should we pursue it anyway? (Because "life is short" or "money isn't everything" or some other cliche?)

Buckeye
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Re: Major Life Decision -- Do we need to keep working?

Post by Buckeye » Sat Dec 20, 2014 8:29 pm

Since you are interested in either consulting or working fun jobs after you "retire"....the answer is an easy NO.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 8:30 pm

seeshells wrote:You seem to want to keep your 1M intact, maybe for a bequest, using only its proceeds.
We only want to keep the 1 million invested until we "really" retire around age 65 or 70, at which point, we'd be happy to begin a typical withdrawal strategy that ends with complete depletion. We have no heirs.
seeshells wrote:I too would keep accumulating because of it's availability, your accumulation path that is, might disappear.
We agree, and it's definitely a concern of ours.
seeshells wrote:You never realize what you have till its gone.
Yes, but that includes TIME as well!

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Watty
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Re: Major Life Decision -- Do we need to keep working?

Post by Watty » Sat Dec 20, 2014 8:36 pm

Baconquest wrote:Allow me to re-frame the decision:

Do we have enough ($1.4 million plus social security as described above) that we can pretty confidently pursue what we want?
You could easily retire if you needed to but I don't think that there will be a lot left over for things like extensive travel so it would be good to take a hard look at what you mean by retirement.

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Re: Major Life Decision -- Do we need to keep working?

Post by letsgobobby » Sat Dec 20, 2014 8:41 pm

The idea that $1.4 million plus $24k+ annually plus eventual social security of $36k per year might not be enough is ridiculous. The vast majority of Americans could live indefinitely on that much. If you spend $60k or less per year I think you're ok. You said you don't want to trade time for more money. Then don't. You have enough if you want to come home, work part time, live modestly.

What about health care?

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Re: Major Life Decision -- Do we need to keep working?

Post by Laura » Sat Dec 20, 2014 8:44 pm

I would go back overseas but not lock myself into a long term contract. While there, focus on building your consulting business as much as possible to see how far you really can push it income wise. I think what we are all saying is that you are on the cusp of being where you want to be but we don't feel like you are there just yet. Since you have the ability to significantly increase your savings I would go for it. If you are in your 40s or even early 50s, a few more years isn't going to mean you are ready for a retirement home. You can still move to the small house and run your business at that time. You will do it knowing that if it doesn't go as planned you still will be in fine shape.

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edge
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Re: Major Life Decision -- Do we need to keep working?

Post by edge » Sat Dec 20, 2014 10:16 pm

You cannot retire. Unless you want to be poor.

"Setting yourself up" reduces your portfolio to about $1MM, investing in a business would reduce it further (significantly). You probably cannot draw maximum SS when the time comes.

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Watty
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Re: Major Life Decision -- Do we need to keep working?

Post by Watty » Sat Dec 20, 2014 10:23 pm

I had another idea. You can try running your numbers through firecalc or one of the other simulators to see how that your have worked out in past.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sat Dec 20, 2014 10:44 pm

Appreciate all of the replies. The wide range of opinions is interesting!
edge wrote:You cannot retire. Unless you want to be poor.
That's fine. We don't want to retire. We want to work part-time, as I described above.
edge wrote:"Setting yourself up" reduces your portfolio to about $1MM, investing in a business would reduce it further (significantly).
Actually, starting our small, part-time business would not reduce the $1 million. At all. My current consulting practice requires nothing but a basic computer. The small part-time business we would start would be similar. Very, very low start-up costs. As I've said, we would keep the $1 million invested until full retirement. (At most we would spend the dividends from the portfolio.)
edge wrote:You probably cannot draw maximum SS when the time comes.
I don't know what you mean. We plan to delay benefits until age 70, at which point we will receive at least $43,700k per annum per-tax in today's dollar.

sdaehelgob
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Re: Major Life Decision -- Do we need to keep working?

Post by sdaehelgob » Sat Dec 20, 2014 11:41 pm

24k in my field is the type of gig that can run forever or evaporate, difficult to predict more than a few months in advance. Maybe your field is different but to put it another way it doesn't sound diversified. Is there an option to get your side gig growing without sacrificing all of your primary income? Could you find work domestically and leave on good terms?

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Re: Major Life Decision -- Do we need to keep working?

Post by market timer » Sun Dec 21, 2014 3:52 am

edge wrote:You cannot retire. Unless you want to be poor.
Median retired household in the US spends about $37K/year, according to the BLS. I agree with letsgobobby that OP can cover $60K/year spending from investments, side income, and eventual SS. Doesn't seem poor to me, at least not by typical US standards.

I would strongly suggest screening for locations using property taxes. Think of them like an expense ratio on a mutual fund. My retired parents recently bought a mountain house with only a $500/year property tax bill ($125K house value).That's one way to save massively on shelter.

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Re: Major Life Decision -- Do we need to keep working?

Post by EnjoyIt » Sun Dec 21, 2014 4:26 am

To OP:

It seams like people are answering every question except the one you asked.

The answer is that yes you can probably semi-retire and have a great life in a nice low cost of living area.

The only thing I would do different is rent for a year or two in whatever location you wish to settle before commiting to a house. This will allow your wealth to grow a little more while you make a final decision.

Also, 1 million today will double in 14.4 years at 5% real return. I think you two can set up for a great and enjoyable life with semi-retirement today.

Good luck and don't listen to the crazy pecimists on this site that are trying to get you to have a SWR of 2% or spending down your savings as soon as you semi-retire.

Check out http://www.mrmoneymustache.com
This is a blog written buy a guy who retired in his early 30s with his wife with a life savings of well under 1 million. He did it without the consulting business or part time work. Try asking the same question there and you will be cheared on by those participants.

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Re: Major Life Decision -- Do we need to keep working?

Post by obgyn65 » Sun Dec 21, 2014 5:04 am

I agree with this. I am 49 and 4% is too high from my retirement model, but 2.5-3% has a much better chance to work until age 95.
retiredjg wrote:At this age, I don't think you can even consider a 4% withdrawal. The 4% rate is associated with a 30 year withdrawal period.
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Re: Major Life Decision -- Do we need to keep working?

Post by floatingdoc » Sun Dec 21, 2014 5:23 am

To OP:

My wife and I are in a similar boat. I have a similar sized portfolio and this is the calc you need to do. Get software like quicken, put a pot of coffee on, sit down with your wife and hash out a "semi retirement" budget. Be HONEST with your likely expenses in the U.S. and multiply 1.4million by 3 TO 3.3%. If expenses are less than this number, inclusive of income you are sure will be there, You will likely be fine. I think the 3% number allows a 50 plus retirement based on the reading I have done. Good luck and there are many in this country who can only dream of being in our position. I have decided to stop practicing in 3/15 because I think continued work in a position of massive stress is not worth it. My screen name on early retirement.org is Quantum sufficit.

This means enough in medical speak. That is where I think we both live right at this moment.

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Re: Major Life Decision -- Do we need to keep working?

Post by jstrazzere » Sun Dec 21, 2014 8:19 am

I will add that if we had $2 million (or maybe even $1.7 or less) we wouldn’t be deliberating. We would buy a house in the states and set-up our small business, even if it did nothing but break-even. Of course, if we go back overseas, we might reach that number in just a few years. Probably five at the most.
If it were me, I'd take the "go back overseas" route.

And this time, I'd sit down with my spouse, think really hard, and come up with a 5-year plan that gets us to where we actually want to be. I'd figure out what I wanted to do, and where I wanted to do it. Then I'd work hard for 5 years and start my next life on a far more confident note.

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Re: Major Life Decision -- Do we need to keep working?

Post by hexagon » Sun Dec 21, 2014 9:00 am

EnjoyIt wrote:To OP:
Also, 1 million today will double in 14.4 years at 5% real return. I think you two can set up for a great and enjoyable life with semi-retirement today.
+1
I hesitate to disagree with those who suggest you return overseas (especially Laura who always gives wise advice), but if you can (a) limit set up expenses to $400K (which seems very doable outside of high cost of living areas) and (b) find sufficient work to leave the $1M fully invested for 15 years, then Option #2 is not at all foolish and so I agree with those (e.g., legsgobobby, market timer, EnjoyIt, and floatingdoc) who say you are well prepared to `go for it'--just make sure you are realistic with your estimates for expenses and income and that you do not allow set up costs to creep above $400K. Also, I agree with the recommendation to rent for a couple of years before buying.

Rajsx
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Re: Major Life Decision -- Do we need to keep working?

Post by Rajsx » Sun Dec 21, 2014 9:09 am

I think you would probably do fine semi retiring now, except 1 requirement you need before you jump --- Health Insurance. Apply first & get those numbers down and make the move.


Good Luck
We do not stop laughing because we grow old, we grow old because we stop laughing !!

retiredjg
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Re: Major Life Decision -- Do we need to keep working?

Post by retiredjg » Sun Dec 21, 2014 9:13 am

With the additional information
  • -you are really ready to settle into your own life,

    -you will have SS,

    -you don't need the $1 million now,

    -you will have the income to meet your expenses now....
I think it is time to go for it. :D

However, since you have no ties to a location in this huge country, I think a somewhat nomadic existence would be reasonable for awhile. Pick some places and commit to 3 or 4 months - furnished homes/apartments are available - until you find one that feels right.

The other option is a motorhome.

cherijoh
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Re: Major Life Decision -- Do we need to keep working?

Post by cherijoh » Sun Dec 21, 2014 9:52 am

Baconquest wrote:I guess this comes down to a question of whether it is reasonable or foolish for us to try to semi-retire at such an early age with the amount of money we have. On the one hand, I feel as though for a long time I did something that I didn’t really want to do (the overseas work) in order to amass a sizeable portfolio. (I was essentially broke when I first went overseas, so I do feel that I achieved my goal.) As I approach 50, I think: you should do what you really want this next decade. Do not trade time for more money. On the other hand, a few more years overseas could increase our net worth by another $200,000.

I will add that if we had $2 million (or maybe even $1.7 or less) we wouldn’t be deliberating. We would buy a house in the states and set-up our small business, even if it did nothing but break-even. Of course, if we go back overseas, we might reach that number in just a few years. Probably five at the most.
One of the biggest risks to a retirement portfolio is to have a large pull-back in the stock market right at the time you are starting to draw on it. Since we have had a long bull market, this is unfortunately quite possible in the near future. One poster suggested planning on 5% real return going forward - I certainly wouldn't count on that. Never use expected average returns when you get to the de-accumulation phase. Someone else suggested running your numbers through FIRECALC - good idea!

How long have you been consulting? Did you maintain it during the last economic downturn? If your consulting dried up and your nest egg took a hit at the same time, you could get into a bad position where you were drawing more than you expected while watching your balance spiral downward. If you had said that the $24K was a pension from a former employer covered by the PGBC (i.e., guaranteed), then I would feel you were on firmer ground to semi-retire.

If you don't want to return overseas, then I would explore opportunities to earn more money stateside ASAP - either as a contract or F/T employee, not some nebulous small business. Unfortunately, you and your partner are at the age where many employers may be reluctant to hire you at a salary commensurate with your experience - if they are willing to hire you at all. (I speak as someone who was hired at my current employer at 50+). It will only get more difficult going forward, so if your current plan doesn't work you may put yourself in an untenable position.

Before making this decision, you really need to figure out your retirement budget and determine how much you need per year for the basics. I wouldn't lock myself into a home until you were settled somewhere where you feel you fit.

liberty53
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Re: Major Life Decision -- Do we need to keep working?

Post by liberty53 » Sun Dec 21, 2014 10:22 am

Financially, I think you are set for a semi-retirement as long as you settle down in a low COL area.

I can comment on the desire to return overseas. I spent over 14 years overseas as an expat. The culture shock of returning home will take a while to dissipate. Expect at least a year to feel like you belong again. During this period the desire to return will be very strong. I succumbed to that after coming home around year ten and then returning back overseas. In hindsight I would have probably done better staying in the U.S., but it's difficult to say that for sure. At your age, I think you are at the point where you have to bite the bullet and commit to your home country lest you slip into permanent wanderer status.

Also understand the desire to settle down and not travel. Having traveled to many other countries for work, I have way less desire for travel as I contemplate ER.

Best of Luck.

flyingaway
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Re: Major Life Decision -- Do we need to keep working?

Post by flyingaway » Sun Dec 21, 2014 10:40 am

I cannot understand why other people said that you cannot stay in the States to do what you want to do.

You can spend $400,000 to buy a house and set up your business. You said you can make $30,000 in 150 hours, why not make $60,000 in just 300 hours. You have $1,000,000 in investment as insurance, and you have reasonable social security to expect.

Best of all, you are still young and can explore some unknown opportunities in the States.

Note that many people come to the United States with nothing. You just come back with loaded experience and money.

letsgobobby
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Re: Major Life Decision -- Do we need to keep working?

Post by letsgobobby » Sun Dec 21, 2014 12:09 pm

Exactly, even many bogleheads will retire with less than one million dollars and less social security and no consulting income and be very happy. Because of your young ages you will just readjust in 1 or 5 years as needed. One thing I still haven't seen mentioned is health care. That aside, life is short. Stuff happens. Live the dream now.

Baconquest
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Re: Major Life Decision -- Do we need to keep working?

Post by Baconquest » Sun Dec 21, 2014 12:47 pm

Thanks for all of the responses. We're finding all of the perspectives and advice helpful.

Regarding my consulting work...

If I could double my client base and earn $60k rather than $30k, I would. And I might well be able to do that. I just don't know. The consulting is quite diversified in that I have many clients in many different countries. It is not inconceivable that in another two years, I will be grossing $100k. It's also not inconceivable that in another two years, I will be put out of business. Currently, I'm providing a service that no one else is. A large company might enter the space rendering me obsolete. But I doubt it. The service I provide is pretty complicated, and the demand seems small (from the perspective of a large company).

I like Laura's advice to go back overseas on a short contract (two or three years), save some more money, and try to grow the consulting business. But after some reflection, I think that would be pretty stressful. 150 hours on top of an already demanding full-time job is not something to take lightly. I think at best I could keep my current clients, but I wouldn't have time to grow my base or even to serve new clients who fell into my lap. I might even have to forgo the consulting, which would reduce my estimate of how much we could save each year overseas by $24k. It's hard to explain, but I should also note that if I close down my consulting practice, I will not be able to restart it in a couple of years.

Ldevelopment
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Re: Major Life Decision -- Do we need to keep working?

Post by Ldevelopment » Sun Dec 21, 2014 1:16 pm

letsgobobby wrote:Exactly, even many bogleheads will retire with less than one million dollars and less social security and no consulting income and be very happy. Because of your young ages you will just readjust in 1 or 5 years as needed. One thing I still haven't seen mentioned is health care. That aside, life is short. Stuff happens. Live the dream now.

+100

Laura
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Re: Major Life Decision -- Do we need to keep working?

Post by Laura » Sun Dec 21, 2014 2:51 pm

The demanding full-time job overseas would be there but since you know it is for the short term you could find it easier to pack it in on time and head home to focus on the other work that gets you the golden ring in just a few years. In other words, I would tilt to "life" in the "work-life" balance debate much more than normal with "life" being the activities that grow your own business which will benefit you in the future. Although it is work it benefits you only and gets you a solid foundation for the future.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

target2030
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Re: Major Life Decision -- Do we need to keep working?

Post by target2030 » Sun Dec 21, 2014 2:52 pm

I would go back (overseas) for five years and save 75K per year, and continue the consulting business so you can switch to consulting full-time upon return.

I would approach it like this: Simply do not touch the current savings. Work for 5 years (or may be less) and save enough to come back and be able to buy a house cash down and be all set up. Hopefully, you will make an average annual return of between 5% and 6% which has the potential to push your current savings to an amount close to 2 million.

EnjoyIt
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Re: Major Life Decision -- Do we need to keep working?

Post by EnjoyIt » Sun Dec 21, 2014 3:40 pm

Ohh, one more piece of advice, if you do decide to go part time, mull it over for "X" months and if the plan still feels good, then go for it and don't look back.

Personally I believe life is way too short to spend all of it slaving away at a job you don't enjoy if you don't have to. I personally would rather live in a smaller house and drive 15 year old beaters than die on the job. I am told though that once you realize you can retire, for some the job becomes much more enjoyable as you realize you don't need to do this anymore and just do it for the joy of doing something.

Basic Math time:
250K home at a very high 3% property tax = $7,500K
Utilities with internet and cable $500/month or $6K/yr
Food with going out $1K/month or $12K/year
Gas and car maintenance (should be low since no commuting to work) $200/month or $2.4K/year
Health insurance should be awfully cheap if low income at worst $200/month $2.4K/year
Home maintenance 1% value of home = 2.5K / year

Yearly basic living expense = $31,800

Make changes to those numbers based on your assumptions, bring in a little more income though part time work, use extra cash to build nest egg further and enjoy the US until social security kicks in. If you want to garden or raise chickens/cows you can cut that expense even lower while eating healthier. You can learn to hunt and fish as well.

This is a clear cut budgeting problem. You just need to put your numbers into the equation.

Boglemama
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Re: Major Life Decision -- Do we need to keep working?

Post by Boglemama » Sun Dec 21, 2014 6:51 pm

You CAN semi-retire. Very easily. There are areas of the country where you can live so inexpensively. Not Malibu, as you mentioned, but good, enjoyable places. You have enough money set aside and plans to grow your consulting.

I think that you are wavering because you have the opportunity for so much more money by going overseas, which is quite an opportunity, but that's really not what you want to do. You describe it as "stressful". You have worked long enough and traveled so much (I really envy that) that now financially, and emotionally, you can live here and decompress a bit. Maybe rent a place as some have suggested to see what area of the country you enjoy best.

You have a wonderful choice to make. You have freedom to decide the course of your life. You really have earned this, it's what you want, and you can accomplish it in a financially sound manner. GO FOR IT!

floatingdoc
Posts: 147
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Re: Major Life Decision -- Do we need to keep working?

Post by floatingdoc » Sun Dec 21, 2014 7:21 pm

Your most important asset is your health. Take it from me (Family MD), I see a lot of disasters strike out of no where, just when the skies are bluest. Work your budget and semiretire now.

Doc

JGM1965
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Re: Major Life Decision -- Do we need to keep working?

Post by JGM1965 » Mon Dec 22, 2014 1:00 am

Wow, thanks for posting this. I am in a very similar position, except for not coming from overseas. 49 y/o, Similar $ saved up and employed in public service for 26 years. I don't like my job much anymore and really don't care for the city we live in any more. I have a very secure position making good money with great benefits I just don't feel very energized anymore after all these years.

Recently, a good friend offered me the opportunity to partner with him in his consulting/ auditing business where I will have the opportunity to make decent but less money on a part time basis until I'm ready to draw on my pension at 55. Obviously, I'd be trading security and adding to my pension service time vs pursuing work I think I'd rather do and being able to move to somewhere more appealing. Deciding whether to make the jump is about the hardest decision I've ever made in my career to date.

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