I'd like to stop working soon - ideally this summer, or perhaps next year if it makes sense to push it out a little. I would like to take a chunk (1 year?) of time off, and then maybe start tutoring kids in technology or find some other endeavor about which I can feel some passion again.
Why? I'm over-stressed and just tired of the grind at my job. I've been very fortunate to have been at the right place in the tech world at the right time and I'd like to take a step back to spend time with my teenage kids and with my terminally ill mother while I still can. I also have had a couple of health scares in the past year (day in the emergency room with chest pain - it was nothing, sky high blood pressure that broke through my meds, and anxiety keeping me from sleeping led to start taking an antidepressant)...I don't want to keep adding new drugs. I'm 49 and have just recently dropped enough weight to not be on the doorstep of diabetes. I'd like to continue working on my health.
Financially, I think we're doing very well. My main question is "How do I make this transition?". Here's the picture (I'm cribbing the format from other posts, I hope I get it right):
Two kids: 16 year old likely headed to an out of state college. I plan on reserving $60k times four years for his education with draws beginning in 2021. 13 year old in a small private school ($1k/month)...I plan on reserving the same amount ($240k total) for her education; she'll need that in perhaps as soon as six years.
Wife is 60 and no longer works but has a long history of working. We'll likely wait until age 67 to trigger her social security.
Mom is (as mentioned) terminally ill. We don't know how long she'll be with us, but it's not decades but likely more than a couple of years. If her needs go as anticipated, when she passes, my portion of the estate will likely total around $400-600k. That could obviously be radically lower or slightly higher; I do not count this in my planning.
- We owe $250k on a house worth $2.1M in a very high cost area (the SF Bay Area), 10 years left on a 15 year fixed mortgage at 2.875%.
- We owe on one car loan ($50k @3%, payments of $800/month) and one lease ($600/month, 14 months remaining).
- Large home equity (approaching $2M) that is sacrosanct...Only as an absolute last resort would we borrow more against the house. Maybe we would consider moving...but likely only after the kids have moved out and landed somewhere else (7 years from now?).
- My retirement accounts: total of just around $1.1M mostly in traditional 401k accounts scattered at various employers and a rollover IRA from another 401k.
- Wife's retirements accounts: total 900k in traditional 401k plans.
- Stock in my current employer (roughly 50/50 split in unexercised options and vested RSU grants): $600k
- Stock in previous employer: $1.5M - long term holding, with a near zero cost basis.
- Other brokerage accounts: 150k
Notable Fixed Expenses:
- Tuition for daughter: $1000/month (annualized, likely three more years of that)
- Property tax: $1200/month
- Car and home insurance: $800/month (clean driving records, but newly licensed son kicks us way up)
- $40k reserve for health insurance costs
- $14k in property taxes
- $12k in tuition for kid #2
- $10k auto insurance
- $10k/year "expected unexpected" fund
- Does NOT include the mortgage payment (because I'm not sure if we'll pay it off or not).
The basic question, then, is, can I fund this desired retirement with $4.25M in assets (plus home equity for emergency use)? Using the magic 4% rule, I'm there! Except I have doubts. College tuition? OK, let's back out 50% of that cash (the rest can ride another 5-6 years with my portfolio)...4.25M becomes 4M...That's just under my desired spend. Or, is 3% a more realistic draw? Or, can I tolerate more risk (especially given I am sitting on some home equity) and something more like 5% would be sustainable?
If not, let's discuss how far off I am.
If so, let's talk about a portfolio. Option #1: 100% long on S&P 500 index funds...Yield around 1.8% ($76k/year), withdraw remaining amount of principal each year. Option 2: Move a large chunk ($250k?) to a near-liquid holding, then park the rest in index funds? Option 3: I don't know. Some percentage of bonds (Meh...never been a fan, actually...my risk tolerance has always been high, but maybe it's time to rethink?).