Laid Off - Want to Retire / Am I OK

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skime
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Re: Laid Off - Want to Retire / Am I OK

Post by skime » Thu Jul 25, 2019 11:17 am

marcopolo wrote:
Thu Jul 25, 2019 9:10 am
BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.

Sorry to hear about the unexpected layoff.
Congratulations on being so well prepared for things like this.
Hopefully, a couple years down the road you will view this as a positive thing.
Based on info provided, i think you are in great shape to retire right now and look forward to the next phase of your life.

Here is a post i wrote recently in answer to a similar inquiry about being financially ready to retire. I hope you find it helpful.

welcome to the forum, and congratulations on your success so far.

I will preface my comments by saying that i retired about a year and a half ago at the age of 51 with similar somewhat lower numbers as you.

There are no guarantees in the future, so all you can rely on on is looking at how things have worked out in the past, and then decide for yourself where you are comfortable on the conservative to aggressive spectrum, and try to balance the risk of running out of money against the risk of running out of time.

Everybody falls on a different portion of that spectrum, so you will get a similar diversity of responses to the question of "can I safely retire?"
This question, in various forms, gets asked quite regularly on this forum, and the answers almost invariably fall into several categories:

1) A small number will tell you that you are good to go

2) A larger portion will be cautiously optimistic and point out a few (hopefully helpful) things that you should consider. I would probably put myself in to this category, and ask if your budget includes plans for how to pay for health insurance/expense between now and Medicare eligibility.

3) A significant portion will say that you are close, but due to a variety of possible risks, you may want to consider working just a little longer to get your withdrawal rate (WR) a little lower and/or provide a little more cushion. You want will have about a 3% WR, they might suggest to work a couple more years to get to 2.5% WR. But, i suspect if you had come here proposing a 2.5% WR, they would give you the same answer and suggest a 2.0% WR.

4) A number of people will say you do not have nearly enough resource given all the risks that are out there for a 50 year retirement, and how are you going to handle the millions it is going to take to pay for Health Care, Long Term Care, Aging parents, boomerang kids, etc.

5) A small number of people will tell you that you are way too young to retire, what will you do? you can't possibly be a productive member of society without working for a paycheck.

I have to admit, I never understood the last one, but we do have that discussion more often than i would have expected. All the rest lie on various points along the spectrum i mentioned above, and quite often really say more about the person answering the question than your particular situation.

All you can really do is look at the historical data, consider the current environment, and where that fits in relative to historical norms, and considers the various risks that need to be balanced. Based on historical outcomes, you appear to be in a great position to pull the trigger, but only you can decide how comfortable you feel with that decision. The answers here will give you lots of perspective and useful information, and if you need more specific analysis, etc. there are some very knowledgeable people here always willing to help.


Best of luck to you.
Excellent post

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 11:26 am

ponyboy wrote:
Thu Jul 25, 2019 8:16 am


Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?
The cost can even vary from county to county!

As a point of reference, the best ACA option for DW (age 52) and me (54) is currently $28k/year with a $4k deductible. Higher deductibles are available at lower costs.

If we keep income below about $66k, a subsidy drops the "cost" to $6k per year.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 11:29 am

sc9182 wrote:
Thu Jul 25, 2019 8:31 am
Couldn’t possibly plan or do better than what you’ve done. Plenty of Taxable to cover till a few logical breaks: age 55 from employer 401k withdrawal, age 59 1/2 for Ira withdrawals, able to get SS (age 62-70, depending on health and other needs/circumstances).

This is not correct. The "age 55 rule" only applies if the employee stops working in the year they turn age 55 or later.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

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bligh
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Re: Laid Off - Want to Retire / Am I OK

Post by bligh » Thu Jul 25, 2019 11:47 am

BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
If I had that much at your age, I would temporarily tighten up my belt a little (ie. reduce a few unnecessary expenses) and consider myself retired. If I had a hobby or an interest I would pursue it. If I loved my job, I would reach out to my network and see if any great opportunity exists that tempts me, also make myself open to consult a few hours a week in an advisory type of role. I would be extremely selective when considering offers.

Put another way. I would adjust the way I look at money - You are in the top 2% of households in this country in terms of net worth (assuming a $6 million net worth.. I'm pretty sure your actual number would likely be higher). But you certainly don't have as much time left as the average American (Avg. American is ~39 years old). You are money rich, and time poor. So unless you have a good reason to trade the little time you have left to go even higher up that scale, at the very least, money should no longer be a deciding factor in what you do with your time.

bampf
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Re: Laid Off - Want to Retire / Am I OK

Post by bampf » Thu Jul 25, 2019 11:48 am

bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
Probably? $6MM and only probably? Assuming zero growth/downturn he can withdraw $16,666 a month or $200K a year for the next 30 years. That's if it stays flat. At even nominal growth OP can do better than that. It baffles me when someone with $6MM in assets is warned about the risk. There is no probably about it.

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HomerJ
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Re: Laid Off - Want to Retire / Am I OK

Post by HomerJ » Thu Jul 25, 2019 12:08 pm

skime wrote:
Thu Jul 25, 2019 7:49 am
It's a bit high of a withdrawal rate for my comfort level. However, like I said, I've never seen data to validate my thoughts about it. I tend to steer away from common knowledge to err on the side of safety. But that's just my own strategy. That doesn't mean it has to be everyone's.
This seems similar to saying, "Well, you shouldn't drive faster than 55 mph in a car these days. The wheels might fall off. I know I don't have any data to back up my feelings, but I tend to steer away from common knowledge to err on the side of safety."

:)

It's all good as long as you give your disclaimer ("This is just my opinion and not based on any data").
Last edited by HomerJ on Thu Jul 25, 2019 8:22 pm, edited 1 time in total.
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whodidntante
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Re: Laid Off - Want to Retire / Am I OK

Post by whodidntante » Thu Jul 25, 2019 12:13 pm

You have too much money to retire.

coffeeblack
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Re: Laid Off - Want to Retire / Am I OK

Post by coffeeblack » Thu Jul 25, 2019 12:51 pm

BGeste wrote:
Wed Jul 24, 2019 12:21 pm
I have been laid off from my job and want to retire. The layoff came as a surprise so I have not had time to think about planning for retirement. Here is my situation.

Age: 51. Married. Two Daughters: 20 and 16. One Daughter currently in college the other in high school. Wife does not work.

Investments: $4 million taxable. 60% equities, 40% bonds. 90 percent index funds. 10 percent individual stocks. Also about $2 million in 401k / IRA. 90% equities, 10% bonds. All index funds. 529 plans: $175K, expected to fund both daughter's college educations at state university.

Expenses: $145,000 per year. Includes mortgage, insurance, property taxes, and all living expenses. No debt except mortgage.

Is it safe for me to retire now and live on my investments? Recommendations on how to maximize my portfolio welcome. Thank you in advance for all your help.
For what it's worth. I posted something similar a few day ago. My situation is similar to you. 51 years old, 5 mil, no kids no mortgage.
The general consensus was that I was good to go on about 3% wr.

You are definitely OK.

Since my last post I had vanguard adviser service give me a plan. I don't like the entire plan because it has a good amount of international bonds and stock in it but even with that they predict a greater than 90% success rate.

Depending on what you do for a living chances are there will be consulting work, part time work etc. to help the jitters stay away and lower your SWR to perhaps 2% in the next 14 years.

As far as taxes go on 145K net. I think you will be around 170K to 180K gross.

Hope this helps.

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 2:17 pm

bampf wrote:
Thu Jul 25, 2019 11:48 am
bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
Probably? $6MM and only probably? Assuming zero growth/downturn he can withdraw $16,666 a month or $200K a year for the next 30 years. That's if it stays flat. At even nominal growth OP can do better than that. It baffles me when someone with $6MM in assets is warned about the risk. There is no probably about it.
There is simply not enough information given.

How conservative is the OP? Personally, I'm going with a 3% withdrawal rate at age 54. Maybe he feels the same.

What about health insurance and health care expenses? I'd ballpark that at maybe $35k per year, with two daughters to potentially cover for the next 6-10 years.

What's the mortgage balance? How much equity? How much time remaining on the loan?

What are state taxes?

What are desires for leaving inheritance for the daughters? Wedding expenses?

What about long term care insurance? Life insurance?

How much flexibility do they have with expenses?

Do they expect to travel more?

What is wife's age?


And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate.

That's a 3.8% withdrawal rate. Is that safe enough for 40-50 years? Probably. But I wouldn't start out at that rate myself.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

ponyboy
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Re: Laid Off - Want to Retire / Am I OK

Post by ponyboy » Thu Jul 25, 2019 2:22 pm

bhsince87 wrote:
Thu Jul 25, 2019 11:26 am
ponyboy wrote:
Thu Jul 25, 2019 8:16 am


Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?
The cost can even vary from county to county!

As a point of reference, the best ACA option for DW (age 52) and me (54) is currently $28k/year with a $4k deductible. Higher deductibles are available at lower costs.

If we keep income below about $66k, a subsidy drops the "cost" to $6k per year.
So essentially...if you retire early and you live off of savings and some investments, you can get cheap healthcare. I assume when you cash in investments they are counted towards income? So keep that low enough and you're good to go.

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 2:27 pm

ponyboy wrote:
Thu Jul 25, 2019 2:22 pm
bhsince87 wrote:
Thu Jul 25, 2019 11:26 am
ponyboy wrote:
Thu Jul 25, 2019 8:16 am


Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?
The cost can even vary from county to county!

As a point of reference, the best ACA option for DW (age 52) and me (54) is currently $28k/year with a $4k deductible. Higher deductibles are available at lower costs.

If we keep income below about $66k, a subsidy drops the "cost" to $6k per year.
So essentially...if you retire early and you live off of savings and some investments, you can get cheap healthcare. I assume when you cash in investments they are counted towards income? So keep that low enough and you're good to go.
Under current rules (Affordable Care Act), in most areas, yes. And investment income does count toward total income.

Just be aware that the choices and quality of services available under the ACA rules can vary significantly from one location to the next.

And that the current laws/rules could change at any time. There are multiple lawsuits against them still ongoing, and lots of political talk too.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

sc9182
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Re: Laid Off - Want to Retire / Am I OK

Post by sc9182 » Thu Jul 25, 2019 2:41 pm

bhsince87 wrote:
Thu Jul 25, 2019 11:29 am
sc9182 wrote:
Thu Jul 25, 2019 8:31 am
Couldn’t possibly plan or do better than what you’ve done. Plenty of Taxable to cover till a few logical breaks: age 55 from employer 401k withdrawal, age 59 1/2 for Ira withdrawals, able to get SS (age 62-70, depending on health and other needs/circumstances).
This is not correct. The "age 55 rule" only applies if the employee stops working in the year they turn age 55 or later.
Good point! One possible work around is - join a job briefly, rollover your Rollover IRA or previous 401k into its 401k (with 401k), then start withdrawals!

The question is do you have to continue the job to continue withdrawals- or stop working shortly afterwards?

Thx

smitcat
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Re: Laid Off - Want to Retire / Am I OK

Post by smitcat » Thu Jul 25, 2019 2:50 pm

bhsince87 wrote:
Thu Jul 25, 2019 2:17 pm
bampf wrote:
Thu Jul 25, 2019 11:48 am
bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
Probably? $6MM and only probably? Assuming zero growth/downturn he can withdraw $16,666 a month or $200K a year for the next 30 years. That's if it stays flat. At even nominal growth OP can do better than that. It baffles me when someone with $6MM in assets is warned about the risk. There is no probably about it.
There is simply not enough information given.

How conservative is the OP? Personally, I'm going with a 3% withdrawal rate at age 54. Maybe he feels the same.

What about health insurance and health care expenses? I'd ballpark that at maybe $35k per year, with two daughters to potentially cover for the next 6-10 years.

What's the mortgage balance? How much equity? How much time remaining on the loan?

What are state taxes?

What are desires for leaving inheritance for the daughters? Wedding expenses?

What about long term care insurance? Life insurance?

How much flexibility do they have with expenses?

Do they expect to travel more?

What is wife's age?


And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate.

That's a 3.8% withdrawal rate. Is that safe enough for 40-50 years? Probably. But I wouldn't start out at that rate myself.

"And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate."
I am pretty sure it would not work like that even if all of your worst case scenarios align.
Tax is not on healthcare - tax for MFJ worst case will be about $22K.

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AerialWombat
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Re: Laid Off - Want to Retire / Am I OK

Post by AerialWombat » Thu Jul 25, 2019 3:05 pm

Congratulations on your early retirement. You’ve won the game, so just go enjoy it! :beer
“Life doesn’t come with a warranty.” -Michael LeBoeuf

deltaneutral83
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Re: Laid Off - Want to Retire / Am I OK

Post by deltaneutral83 » Thu Jul 25, 2019 3:17 pm

There is little doubt with the assets OP has acquired OP can do what OP wants for the remainder of OP's time. If the market gets halved the first 24 months OP retires and OP strikeouts in the sequence of returns game, OP will simply tighten belt with expenses (or not, whatever). 60/40 with even a a gloomy look would get what(?) 5.5% and baking in 3% for inflation leaves you at the desired income (2.5%) and tremendous downside protection with 40% of portfolio in bonds. And SS at some point. I suspect OP will find an encore career that is more desirable with health care options but 6 months off may be exactly what OP needs for now. I think either way a shift to bonds in some capacity is probably prudent.

bampf
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Re: Laid Off - Want to Retire / Am I OK

Post by bampf » Thu Jul 25, 2019 5:02 pm

bhsince87 wrote:
Thu Jul 25, 2019 2:17 pm
bampf wrote:
Thu Jul 25, 2019 11:48 am
bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
Probably? $6MM and only probably? Assuming zero growth/downturn he can withdraw $16,666 a month or $200K a year for the next 30 years. That's if it stays flat. At even nominal growth OP can do better than that. It baffles me when someone with $6MM in assets is warned about the risk. There is no probably about it.
There is simply not enough information given.

How conservative is the OP? Personally, I'm going with a 3% withdrawal rate at age 54. Maybe he feels the same.

What about health insurance and health care expenses? I'd ballpark that at maybe $35k per year, with two daughters to potentially cover for the next 6-10 years.

What's the mortgage balance? How much equity? How much time remaining on the loan?

What are state taxes?

What are desires for leaving inheritance for the daughters? Wedding expenses?

What about long term care insurance? Life insurance?

How much flexibility do they have with expenses?

Do they expect to travel more?

What is wife's age?


And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate.

That's a 3.8% withdrawal rate. Is that safe enough for 40-50 years? Probably. But I wouldn't start out at that rate myself.
Chuckle. OK. This group is very odd sometimes. $6MM is enough for almost anyone, and if it ain't enough for OP, then what the heck is he doing asking random internet strangers for advice? What if, what if but... what.. wait.. what if... Seriously?

Wannaretireearly
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Re: Laid Off - Want to Retire / Am I OK

Post by Wannaretireearly » Thu Jul 25, 2019 5:09 pm

Sorry OP for losing your job. You are well prepared!
Get rid of that mortgage and enjoy your days.

Keep us updated. Your my new idol.
Fyi I think there are better models for retirement/enjoyment planning than the US (in general).

My 2 cents. Look to Europeans and South Americans for good models on 'how to live' (I'm generalizing!)
Buy Low, Sell High

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 7:16 pm

smitcat wrote:
Thu Jul 25, 2019 2:50 pm
bhsince87 wrote:
Thu Jul 25, 2019 2:17 pm
bampf wrote:
Thu Jul 25, 2019 11:48 am
bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate.

That's a 3.8% withdrawal rate. Is that safe enough for 40-50 years? Probably. But I wouldn't start out at that rate myself.

"And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate."
I am pretty sure it would not work like that even if all of your worst case scenarios align.
Tax is not on healthcare - tax for MFJ worst case will be about $22K.
No, the tax is not paid directly on the health care costs.

But the $35,000 to pay those costs will need to be withdrawn from one of the accounts (probably taxable). And that is when it will be taxed.

And I agree, 22k might be a good estimate for Federal taxes. But what about state and local income taxes. He could be looking at 8% in, say California.

And I need to repeat, I congratulated the OP. I think they are probably set. We took the plunge with about half that amount. But our annual expenses are around $60k outside of health insurance, (close to $100k with worst case ACA), and we have no kids.

I'm just trying to point out some things they might not have thought about. And I think they are all reasonable concerns. In other words, not black swan events.
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

Bfwolf
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Re: Laid Off - Want to Retire / Am I OK

Post by Bfwolf » Thu Jul 25, 2019 7:23 pm

bampf wrote:
Thu Jul 25, 2019 5:02 pm
bhsince87 wrote:
Thu Jul 25, 2019 2:17 pm
bampf wrote:
Thu Jul 25, 2019 11:48 am
bhsince87 wrote:
Wed Jul 24, 2019 3:59 pm

Yes, you can probably afford to retire now.
Probably? $6MM and only probably? Assuming zero growth/downturn he can withdraw $16,666 a month or $200K a year for the next 30 years. That's if it stays flat. At even nominal growth OP can do better than that. It baffles me when someone with $6MM in assets is warned about the risk. There is no probably about it.
There is simply not enough information given.

How conservative is the OP? Personally, I'm going with a 3% withdrawal rate at age 54. Maybe he feels the same.

What about health insurance and health care expenses? I'd ballpark that at maybe $35k per year, with two daughters to potentially cover for the next 6-10 years.

What's the mortgage balance? How much equity? How much time remaining on the loan?

What are state taxes?

What are desires for leaving inheritance for the daughters? Wedding expenses?

What about long term care insurance? Life insurance?

How much flexibility do they have with expenses?

Do they expect to travel more?

What is wife's age?


And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax. Now we're looking at annual income of $230k needed, with no other adjustments to initial spend estimate.

That's a 3.8% withdrawal rate. Is that safe enough for 40-50 years? Probably. But I wouldn't start out at that rate myself.
Chuckle. OK. This group is very odd sometimes. $6MM is enough for almost anyone, and if it ain't enough for OP, then what the heck is he doing asking random internet strangers for advice? What if, what if but... what.. wait.. what if... Seriously?
For real. The OP obviously has enough money to retire and just needs a few people to say "yeah, go for it" but instead we get this fearmongering which could convince the OP to go back to work unnecessarily. All those worst case scenario assumptions (which probably are overestimating costs) and yet no mention of Social Security (which will almost certainly happen) or mortgage getting paid off (same). I know the intention is good, but I think some people need to consider how the OP is going to take the post before responding. Overly-conservatizing (if I may make up a word) a situation for someone who is clearly already conservative isn't helpful.

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BGeste
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Re: Laid Off - Want to Retire / Am I OK

Post by BGeste » Thu Jul 25, 2019 7:57 pm

All these replies are very helpful. My primary concern is sequence of risk, that is why I want to try and live on mostly dividends / income in the initial years. My current estimate of dividend and interest income is about 130K. The individual stocks I have pay above average dividends. So the rest will have to come from selling shares. My monthly mortgage payment is fixed at $3,400 so I do not want to pay off my mortgage (700K) because that will require me to sell income producing shares. I plan to leave my 401K / IRA balance untouched until I qualify for SS.

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HomerJ
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Re: Laid Off - Want to Retire / Am I OK

Post by HomerJ » Thu Jul 25, 2019 8:24 pm

bhsince87 wrote:
Thu Jul 25, 2019 2:17 pm
And let's say healthcare costs $35k per year. That takes annual spend to $180k. Assume 22% income tax.
That's not how taxes work in retirement. Not all of the money you pull from taxable is considered "income".
Last edited by HomerJ on Thu Jul 25, 2019 8:45 pm, edited 1 time in total.
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HomerJ
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Re: Laid Off - Want to Retire / Am I OK

Post by HomerJ » Thu Jul 25, 2019 8:36 pm

bhsince87 wrote:
Thu Jul 25, 2019 7:16 pm
But the $35,000 to pay those costs will need to be withdrawn from one of the accounts (probably taxable). And that is when it will be taxed.
But not as income.

And not all of it. Some (most?) of the money in a taxable account has already been taxed. That's why it's called a taxable account.

You only pay taxes on the gains. You cash out $50,000 and you might pay capital gains taxes (less than income tax) on $20,000 of it. 15% of $20,000 is $3000... $3000 hit on the $50,000 is a 6% effective tax.

You can also buy municipal bonds in a taxable account and get dividends tax-free.
The J stands for Jay

skime
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Re: Laid Off - Want to Retire / Am I OK

Post by skime » Thu Jul 25, 2019 8:45 pm

BGeste wrote:
Thu Jul 25, 2019 7:57 pm
All these replies are very helpful. My primary concern is sequence of risk, that is why I want to try and live on mostly dividends / income in the initial years. My current estimate of dividend and interest income is about 130K. The individual stocks I have pay above average dividends. So the rest will have to come from selling shares. My monthly mortgage payment is fixed at $3,400 so I do not want to pay off my mortgage (700K) because that will require me to sell income producing shares. I plan to leave my 401K / IRA balance untouched until I qualify for SS.
In a downturn like 2008, s&p dividends were cut by about 20%. You might want to make a plan for a scenario like that.

22twain
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Re: Laid Off - Want to Retire / Am I OK

Post by 22twain » Thu Jul 25, 2019 9:00 pm

bhsince87 wrote:
Thu Jul 25, 2019 2:27 pm
ponyboy wrote:
Thu Jul 25, 2019 2:22 pm
So essentially...if you retire early and you live off of savings and some investments, you can get cheap healthcare. I assume when you cash in investments they are counted towards income? So keep that low enough and you're good to go.
Under current rules (Affordable Care Act), in most areas, yes. And investment income does count toward total income.
If you "cash in" (sell) investments from a taxable account (i.e. not a traditional IRA or 401k, etc.), only the capital gains count towards taxable income. The price you originally paid for the investments (the cost basis) doesn't count. Also, if you sell investments that you've held for more than one year, you have long term capital gains which are taxed at a lower rate than ordinary income.

This doesn't apply to a tax-deferred account like a traditional IRA or 401k. When you sell something and withdraw the proceeds from the account, it all counts towards taxable income, and is taxed at the same rate as ordinary income.
My investing princiPLEs do not include absolutely preserving princiPAL.

harrychan
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Re: Laid Off - Want to Retire / Am I OK

Post by harrychan » Thu Jul 25, 2019 9:36 pm

ponyboy wrote:
Thu Jul 25, 2019 8:16 am
harrychan wrote:
Wed Jul 24, 2019 8:15 pm
I'm 39 and even I would retire (or at least semi retire) with that amount!
Im 36 and wife is 35...we wouldnt think about work ever again with those kinds of numbers, even at our age. Then again, our expenses are significantly lower than OP's.

Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?
Right. Our current monthly spend is $80k. I'm not sure about state to state but there is ACA now. I can't imagine a world where health insurance is astronomical. I do have status in another country that has social medicine so I can always use that.
This is not legal or certified financial advice but you know that already.

bhsince87
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Re: Laid Off - Want to Retire / Am I OK

Post by bhsince87 » Thu Jul 25, 2019 10:45 pm

harrychan wrote:
Thu Jul 25, 2019 9:36 pm
ponyboy wrote:
Thu Jul 25, 2019 8:16 am
harrychan wrote:
Wed Jul 24, 2019 8:15 pm
I'm 39 and even I would retire (or at least semi retire) with that amount!
Im 36 and wife is 35...we wouldnt think about work ever again with those kinds of numbers, even at our age. Then again, our expenses are significantly lower than OP's.

Side question...is the cost of health insurance different in each state? Insurance that you're buying on your own? What would a family typically pay? $20k/year for insurance with a high deductible?
Right. Our current monthly spend is $80k. I'm not sure about state to state but there is ACA now. I can't imagine a world where health insurance is astronomical. I do have status in another country that has social medicine so I can always use that.
With a monthly spend of $80k, I expect you don't have many worries at all!
"If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace." Samuel Adams

jjface
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Re: Laid Off - Want to Retire / Am I OK

Post by jjface » Thu Jul 25, 2019 11:38 pm

Without a doubt yes

chipperd
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Re: Laid Off - Want to Retire / Am I OK

Post by chipperd » Fri Jul 26, 2019 4:17 am

ponyboy wrote:
Thu Jul 25, 2019 8:15 am
123 wrote:
Wed Jul 24, 2019 3:48 pm
With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
Yeah...what a terrible example that father is setting. Saving $6 million by the age of 51. What ever will his kids think of him!?
+1. Being concerned about what other's think is a terrible reason to decide if the OP should go back to work. Certainly, working hard and showing your kids how to retire with more than necessary by age 51 is a great example for your kids and many on this board. Congrats OP, on your new stage of life; the one you get to decide how to live every day you wake up. It's like that memorable summer when you were in grade school: no time pressures, bike to ride, friends to visit, pools to jump in and a world to explore. Enjoy.

msk
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Re: Laid Off - Want to Retire / Am I OK

Post by msk » Fri Jul 26, 2019 4:56 am

My dumb approach: For reassurance, leave 5 years expenses in bonds, $750k, rest in stocks. Withdraw a max of 5% each year from the stocks portfolio balance, 95% gets reinvested. i.e. spending money starts off at 5% of $5.25million or $260k annually. Stocks portfolio will last forever since withdrawal is always <=5% of balance. Calamitous 50% stock market fall and you can consider withdrawing from bonds if $130k is not enough to cover expenses that year. The stock market has been delivering 5+% REAL terms for more than 100 years. I see no special reason why the next 100 will be much different. I would simply restrict myself to a max of 5% from the stocks portfolio in any year and I would feel much safer than a blind 4% or 3% withdrawal that I inflate regardless of market falls and rises. At age 51 my only yardstick is that my portfolio lasts "forever" and for that I have to cap the withdrawal percent of balance. 5% of the initial $6 million leaves plenty of breathing room, and for splurging when the markets do well, belt tightening when disaster strikes.

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Re: Laid Off - Want to Retire / Am I OK

Post by Bacchus01 » Fri Jul 26, 2019 5:07 am

123 wrote:
Wed Jul 24, 2019 3:48 pm
...
The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
This is such a pathetic view, but yet one often expressed here. Why in the world would ones friends or family be suspicious? Only if they lived under a rock and didn't know what the OP did in this scenario. Please. As for setting an example for children, what a terrible view. "Hey kids, no matter what, you should continue to toil your life away." vs. "Hey kids, if you work hard and prepare well, even when things get bad you can turn them into good and maybe even change your entire outlook on life going forward."

It's time this early-retirement shaming be put to bed.

chipperd
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Re: Laid Off - Want to Retire / Am I OK

Post by chipperd » Fri Jul 26, 2019 5:23 am

Bacchus01 wrote:
Fri Jul 26, 2019 5:07 am
123 wrote:
Wed Jul 24, 2019 3:48 pm
...
The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
This is such a pathetic view, but yet one often expressed here. Why in the world would ones friends or family be suspicious? Only if they lived under a rock and didn't know what the OP did in this scenario. Please. As for setting an example for children, what a terrible view. "Hey kids, no matter what, you should continue to toil your life away." vs. "Hey kids, if you work hard and prepare well, even when things get bad you can turn them into good and maybe even change your entire outlook on life going forward."

It's time this early-retirement shaming be put to bed.
+1000. I cut back work to 1 day per week last year. My kids all work in the summer. They have trained themselves to budget out what they need to live on for the next two years, work until they have it, then quit and enjoy the rest of their summer. They are always two school years ahead in their planning. A microcosm of what their careers should be. Kids well trained in work/life balance is a gift you can give them that will last a lifetime.

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Re: Laid Off - Want to Retire / Am I OK

Post by hightower » Fri Jul 26, 2019 7:02 am

Yes you are definitely ok to retire.
Life is short. Enjoy your hard earned money and go travel the world or do something you have always dreamed of doing. And don't listen to the garbage about "people go down hill after they retire" or "your kids will become lazy like you" That's all total BS. They're just jealous they can't do it.

If you're concerned about not having enough and you aren't ready to stop working, find another job that seems fun and interesting to you and do it part time if you can. That will allow you to spend what you're earning and decrease the amount you need to withdraw for awhile. When you get tired of that, you could fully retire from there.

FI4LIFE
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Re: Laid Off - Want to Retire / Am I OK

Post by FI4LIFE » Fri Jul 26, 2019 7:35 am

RETIRE ALREADY! If you can't make adjustments to make $6 million work for the rest of your life you should feel deep deep shame. Once kids are out for good you can cut your expenses significantly. :beer

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Cycle
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Re: Laid Off - Want to Retire / Am I OK

Post by Cycle » Fri Jul 26, 2019 7:41 am

Definitely, even if the market tanked for decades youd be fine. Condolences and congratulations.
Never look back unless you are planning to go that way

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Re: Laid Off - Want to Retire / Am I OK

Post by z3r0c00l » Fri Jul 26, 2019 7:45 am

aristotelian wrote:
Wed Jul 24, 2019 3:49 pm
You are probably in the top 1% of net worth on the planet. You will be fine.
Much better than top 1%. Takes under a million to get top 1% globally.

louiethelilac
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Re: Laid Off - Want to Retire / Am I OK

Post by louiethelilac » Fri Jul 26, 2019 7:53 am

It does not seem that the issue is whether you have enough assets to retire (sure looks like you do), but whether you are comfortable with your asset allocation. You seem concerned with sequence of returns risk and having to sell shares (on top of dividend income) to meet your expenses, but there is nothing wrong with doing that (even in a downturn). But if that concerns you, maybe you should shift some of your equity to fixed income and have more to draw from that pot when needed. Good luck!

CnC
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Re: Laid Off - Want to Retire / Am I OK

Post by CnC » Fri Jul 26, 2019 7:57 am

123 wrote:
Wed Jul 24, 2019 3:48 pm
With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).


I just want to jump in and say I disagree 100% with everything this poster said.

51 is a perfect time to retire if you are able.

There is no reason that you have to start hanging out with "old" people. And no reason that you have to start acting old. Assuming you like your wife there is one person your age who is also retired that you can spend time with. You can still spend the exact same time with friends that you did before. The key is communication. Explain that you have saved money and are in no hurry to take one you don't want. Say you think that have enough to last untill social security and Medicare kicks in. The fact that you have 4x that amount is irrelevant. This will keep all but the most nosey people from being suspicious.

Also, retiring early is a GREAT!!!!!!!! EXAMPLE for your children. Once again this commenter got it backwards. My dad retired at 55 and he is the sole reason I am saving as diligently as I am. Because we talked about finances and saving and I saw the results.



To answer your question, I think you are completely financially safe to retire. Congratulations! :beer . But since you haven't planned it. Make sure you have a plan for after the time clock ends.

Make sure you like spending so much time with your wife and kids. (sounds bad but for some it's a struggle)

Make sure you have things to do (some city dwelling high earners never had time for a hobby.)

Good luck!

skime
Posts: 122
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Re: Laid Off - Want to Retire / Am I OK

Post by skime » Fri Jul 26, 2019 7:59 am

Bacchus01 wrote:
Fri Jul 26, 2019 5:07 am
123 wrote:
Wed Jul 24, 2019 3:48 pm
...
The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).
This is such a pathetic view, but yet one often expressed here. Why in the world would ones friends or family be suspicious? Only if they lived under a rock and didn't know what the OP did in this scenario. Please. As for setting an example for children, what a terrible view. "Hey kids, no matter what, you should continue to toil your life away." vs. "Hey kids, if you work hard and prepare well, even when things get bad you can turn them into good and maybe even change your entire outlook on life going forward."

It's time this early-retirement shaming be put to bed.
I could not agree more. OP has prepared himself well. Of others don't get the retiring early thing, oh well.

smitcat
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Re: Laid Off - Want to Retire / Am I OK

Post by smitcat » Fri Jul 26, 2019 8:07 am

CnC wrote:
Fri Jul 26, 2019 7:57 am
123 wrote:
Wed Jul 24, 2019 3:48 pm
With $6 million in assets you could withdraw 3% a year and get $180K annually. I'd say you should be able to do it with a little belt tightening.

The biggest issue with retiring early at 51 is that friends will get suspicious about how you can afford it. From my perspective when I've seen relatives and neighbors retire earlier than 60 they tend to turn into "old people" faster. It's likely due to the people they hang out with, if you hang around with older retired people you tend to take on their characteristics. There are no "young" retired people out there.

Not going to work can also work against you in terms of serving as an example for your kids. Kids will often model their parents behavior, if the parents don't work they may not have an incentive to either, it gets to be a family culture. The alternative is to have a job that your interested in and excited to go to work everyday (maybe doesn't happen too often).


I just want to jump in and say I disagree 100% with everything this poster said.

51 is a perfect time to retire if you are able.

There is no reason that you have to start hanging out with "old" people. And no reason that you have to start acting old. Assuming you like your wife there is one person your age who is also retired that you can spend time with. You can still spend the exact same time with friends that you did before. The key is communication. Explain that you have saved money and are in no hurry to take one you don't want. Say you think that have enough to last untill social security and Medicare kicks in. The fact that you have 4x that amount is irrelevant. This will keep all but the most nosey people from being suspicious.

Also, retiring early is a GREAT!!!!!!!! EXAMPLE for your children. Once again this commenter got it backwards. My dad retired at 55 and he is the sole reason I am saving as diligently as I am. Because we talked about finances and saving and I saw the results.



To answer your question, I think you are completely financially safe to retire. Congratulations! :beer . But since you haven't planned it. Make sure you have a plan for after the time clock ends.

Make sure you like spending so much time with your wife and kids. (sounds bad but for some it's a struggle)

Make sure you have things to do (some city dwelling high earners never had time for a hobby.)

Good luck!
A great example for your children....
- not to wait for retirement to do things you really want to do in life.
- do not see a hard divide between work and fun
- seek work that you can spend less time doing over time
- teach them about savings but also about living , balance is the key

ponyboy
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Re: Laid Off - Want to Retire / Am I OK

Post by ponyboy » Fri Jul 26, 2019 9:26 am

I hope everyone realizes that "123" was trolling. Bravo to them...they kept a thread going and we all responded to you. You win.

delamer
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Re: Laid Off - Want to Retire / Am I OK

Post by delamer » Fri Jul 26, 2019 9:51 am

skime wrote:
Thu Jul 25, 2019 8:45 pm
BGeste wrote:
Thu Jul 25, 2019 7:57 pm
All these replies are very helpful. My primary concern is sequence of risk, that is why I want to try and live on mostly dividends / income in the initial years. My current estimate of dividend and interest income is about 130K. The individual stocks I have pay above average dividends. So the rest will have to come from selling shares. My monthly mortgage payment is fixed at $3,400 so I do not want to pay off my mortgage (700K) because that will require me to sell income producing shares. I plan to leave my 401K / IRA balance untouched until I qualify for SS.
In a downturn like 2008, s&p dividends were cut by about 20%. You might want to make a plan for a scenario like that.
This is an important point. Even if you have above average dividends now, there is no guarantee that will continue for individual stocks or for the group.

Here is what happened to dividends in the S&P 500 during the Great Recession: https://www.multpl.com/s-p-500-dividend/table/by-year

It took 4 years for dividends to get back to their pre-recession nominal (never mind real) value.

Bogleheads as a group are total return investors, not dividend investors. Because in the long run, focusing on total return yields the best results. And it allows you to control taxes better, since you sell when you need cash as opposed to automatically incurring taxes when dividends are paid.

WhiteMaxima
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Re: Laid Off - Want to Retire / Am I OK

Post by WhiteMaxima » Fri Jul 26, 2019 10:48 am

Get a part-time (*bucks, unlimited coffee :beer ) just that offers health insurance. Pay could be lower but you need to protect your family. While you earned income is very lower, do Roth conversion and enjoy paying 0% income tax and LCGT. Work until you are 65 and you are 6 mil rich man.

CnC
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Re: Laid Off - Want to Retire / Am I OK

Post by CnC » Fri Jul 26, 2019 10:55 am

WhiteMaxima wrote:
Fri Jul 26, 2019 10:48 am
Get a part-time (*bucks, unlimited coffee :beer ) just that offers health insurance. Pay could be lower but you need to protect your family. While you earned income is very lower, do Roth conversion and enjoy paying 0% income tax and LCGT. Work until you are 65 and you are 6 mil rich man.
Why?

What is the purpose for this? So he can die with 10million rather than 8 million and have an extra 2,000,000 bills in his funeral pyre?

If he can't protect his family with 6,000,000 then no one can.

wolf359
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Re: Laid Off - Want to Retire / Am I OK

Post by wolf359 » Fri Jul 26, 2019 11:11 am

CnC wrote:
Fri Jul 26, 2019 10:55 am
WhiteMaxima wrote:
Fri Jul 26, 2019 10:48 am
Get a part-time (*bucks, unlimited coffee :beer ) just that offers health insurance. Pay could be lower but you need to protect your family. While you earned income is very lower, do Roth conversion and enjoy paying 0% income tax and LCGT. Work until you are 65 and you are 6 mil rich man.
Why?

What is the purpose for this? So he can die with 10million rather than 8 million and have an extra 2,000,000 bills in his funeral pyre?

If he can't protect his family with 6,000,000 then no one can.
So he can set an example of hard work ethic for his mostly grown kids.

"My Dad is a multi-millionaire with over $100K in passive income. What does he do? He works at Starbucks as a barista."

Inspiring.

:sharebeer

visualguy
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Re: Laid Off - Want to Retire / Am I OK

Post by visualguy » Fri Jul 26, 2019 11:40 am

WhiteMaxima wrote:
Fri Jul 26, 2019 10:48 am
Get a part-time (*bucks, unlimited coffee :beer ) just that offers health insurance. Pay could be lower but you need to protect your family. While you earned income is very lower, do Roth conversion and enjoy paying 0% income tax and LCGT. Work until you are 65 and you are 6 mil rich man.
If he wants to work longer for financial or other reasons, wouldn't it make a lot more sense to work at his profession?

These low-paying restaurant/coffee/retail jobs like the one you mentioned are anything but easy or rewarding, and I don't see how they can be an effective or sensible use of time for anyone who is in OP's situation.

Figaro
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Re: Laid Off - Want to Retire / Am I OK

Post by Figaro » Fri Jul 26, 2019 11:56 am

Yeah nothing to worry about - you're done working. Congrats!

You have a boat load of options available to you because of your careful planning.

Consider buying real estate around the college that your children plan to be at. They could "manage" your property for you while they're at that school. Also allows for in-state tuition if they plan on being in a different state. Its another way to produce income as well.

But have fun - enjoy the rest of the summer with the kiddies and breathe easy.

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Re: Laid Off - Want to Retire / Am I OK

Post by Meg77 » Fri Jul 26, 2019 1:54 pm

BGeste wrote:
Thu Jul 25, 2019 7:57 pm
All these replies are very helpful. My primary concern is sequence of risk, that is why I want to try and live on mostly dividends / income in the initial years. My current estimate of dividend and interest income is about 130K. The individual stocks I have pay above average dividends. So the rest will have to come from selling shares. My monthly mortgage payment is fixed at $3,400 so I do not want to pay off my mortgage (700K) because that will require me to sell income producing shares. I plan to leave my 401K / IRA balance untouched until I qualify for SS.
If your home was paid off, would you borrow $700K against it and invest the money in bond index funds? I'm guessing that sounds crazy...but effectively from a balance sheet perspective that is what you're doing. Sell some taxable bonds and pay off the mortgage. You'll be able to live easily on remaining dividend and interest income alone, and sequence of return risk goes way down. Bonds and stocks are near all time highs (again). Sure the party may continue, but you're talking about retiring and trying to live off dividend income. It seems like a no brainer to me to pay off debt and get rid of that fixed cost. No way your bonds are paying more than your mortgage rate, after taxes are considered especially. A mortgage is a negative bond; moving bonds to pay that off is just good a risk mitigation, particularly when you move out of the accumulation stage.
"An investment in knowledge pays the best interest." - Benjamin Franklin

jacksonm
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Re: Laid Off - Want to Retire / Am I OK

Post by jacksonm » Fri Jul 26, 2019 2:58 pm

I suspect that the average person reading this forum will find it almost laughable that you are trying to decide whether $4 million is enough to retire on.

Of course you can retire if that's what you want to do. I think the real question you are asking is whether you can retire without having to downsize your life in ways you might not be comfortable with. Looks like you are getting some good advice along those lines.

Good luck. Just a guess but I'd be willing to bet you won't stay fully "retired" for very long.

marcopolo
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Re: Laid Off - Want to Retire / Am I OK

Post by marcopolo » Fri Jul 26, 2019 3:46 pm

jacksonm wrote:
Fri Jul 26, 2019 2:58 pm
I suspect that the average person reading this forum will find it almost laughable that you are trying to decide whether $4 million is enough to retire on.

Of course you can retire if that's what you want to do. I think the real question you are asking is whether you can retire without having to downsize your life in ways you might not be comfortable with. Looks like you are getting some good advice along those lines.

Good luck. Just a guess but I'd be willing to bet you won't stay fully "retired" for very long.
It is actually $6m, and yet we have people saying "maybe, if you cut back a little," "probably", "have you considered xxx risk", etc...

It must seem odd to the casual observer.
Once in a while you get shown the light, in the strangest of places if you look at it right.

chipperd
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Re: Laid Off - Want to Retire / Am I OK

Post by chipperd » Fri Jul 26, 2019 3:55 pm

For the record, if my kids ever find being a barista an inspiration, or even a goal, I have failed as a parent.

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