Reassurance Wanted

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Topic Author
au1985
Posts: 13
Joined: Sat Apr 18, 2015 8:06 pm

Reassurance Wanted

Post by au1985 »

I think it is time to get out. I am tired and tired of the pressures of managing (location CEO) a operating unit (300 employees and $35 million operation) for a publicly traded company for the last 20+ years. I have worked long hours for many years and have had my share of stress given the performance expectations of the company. I am the 3 or 4th longest serving operating unit CEO in the company with about 150 operating units within the company. Median CEO tenure is 7 to 8 years in the company; used to be less. Each year I have saved 30% to 66% of my gross income since I was 23. My mindset early on was to become as financially independent as quickly as possible, instill a work ethic in my children, provide some type of financial legacy for my children, and get out because of a short male life expectancy in my family while I can enjoy the benefits of a previously relatively conservative lifestyle. However, I understand the retirement lifestyle I am proposing is not frugal nor conservative but that was the purpose of the high savings rate and long hours.

I am 58 and my wife is 57. She does not work outside the home. Currently, we have a net worth (no debt) of $7.1 million. $6.5 million is in investments 78.5% equity mutual funds and ETFs and 20% intermediate corporate bond fund (BIV), and 1.5% cash. House is worth about $500,000 and other non income producing assets of $69,000. We live in a low cost of living state and an area that is nationally recognized as a good place to live and affordable. Investments are as follows:

Taxable accounts: $1,200,000
Roth retirement accounts: $1,900,000
Non Roth retirement accounts: $3,400,000

Of the non Roth retirement accounts, $1,900,000 is in a non qualified retirement plan or Rabbi Trust. Most of the bonds are held in the non qualified plan because of tax reasons (ordinary income upon distribution) and because those assets will be distributed via a predefined schedule over up to 15 years starting within 6 months of retirement. I will rebalance with each years distribution with the goal of 8 years of expenses invested in bonds and cash. If I retire early next year, I would normally expect the annual distributions (because of growth over up to 15 years) to be in excess of $225,000 per year but not more than $250,000 per year until age 70 and then non qualified distributions slightly less until age 76 but the total income remaining over $250,000 annually inflation adjusted because of social security and other non Roth mandatory distributions at age 72. We do not plan to touch the Roth accounts but will just let them pass to our daughters.

Both daughters have finished college and one has finished graduate school. They will each have about $180,000 to $280,000 invested to fund weddings, additional college, or just to start life. The kids investments assets are outside of our net worth. Currently, we would expect to inherit in today's value about $2.2 million within the next 6 years and another $1.1 within the next 12 years. The vast majority of the inheritance is in marketable securities (i.e. diversified equities). However, the goal is to never touch either inheritance but just be good stewards and invest it for future generations and possible insurance in the unlikely events the non qualified plan becomes subject to creditors. Currently, the company is in very good financial shape but many things can change over a15 year distribution period.

We have 8 years of expenses invested in bonds or cash. They rest is in equities. The thought process is if a significant market correction comes we should be able with bonds, cash, interest and dividends fund expected living expenses for about 10 years before we would be forced to sell equities or adjust live style.

Our expected retirement expenses are $172,500 per year adjusted for inflation yearly. Taxes at $25,000, medical at $18,000 per year under COBRA and then $28,000 per year, vacation/entertainment at $65,000 per year, home occupancy costs of $18,000 per year (taxes, insurance, utilities, repairs, taxes, etc.), and second home expense of $20,000 per year are our largest expected expense categories.

We would take $800,000 to $1,200,000 from our investments to purchase a second home so investments would reduce to about $5.5 million and a 3.25% withdrawal rate would generate about $172,500 to fund expenses. Otherwise we could mostly finance 2nd home and keep money invested but have a higher annual interest/principal expenditure. Any non qualified forced withdrawals over this amount would be reinvested in taxable accounts. Core expenses with minimal travel and no second home would be about $98,000 per year and $108,000 with the non mortgaged second home. We could also rent out the second home to generate additional income if needed.

Although this plan and timing feels every doable, when you are at the precipice of retirement you find yourself looking for reassurance that the plan is good enough within reason and without going to very improbable sequence of events. I would appreciate any constructive thoughts from the collective wisdom provided on this board. Thanks.
Last edited by au1985 on Sun Jul 25, 2021 11:46 am, edited 2 times in total.
livesoft
Posts: 85971
Joined: Thu Mar 01, 2007 7:00 pm

Re: Reassurance needed

Post by livesoft »

You are blessed with wealth. I stopped working with much much less assets than you have and at an earlier age and an inheritance that would buy no more than a car, but I don't see how my experience should give you any reassurance.

Maybe listen to this boglehead podcast hosted by Rick Ferri: https://bogleheads.podbean.com/e/episod ... ick-ferri/
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bampf
Posts: 1100
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Re: Reassurance needed

Post by bampf »

au1985 wrote: Sat Jul 24, 2021 10:06 pm I think it is time to get out. I am tried and tried of the pressures of managing (location CEO) a operating unit (300 employees and $35 million operation) for a publicly traded company for the last 20+ years. I have worked long hours for many years and have had my share of stress given the performance expectations of the company. I am the 3 or 4th longest serving operating unit CEO in the company with about 150 operating units within the company. Median CEO tenure is 7 to 8 years in the company; used to be less. Each year I have saved 30% to 66% of my gross income since I was 23. My mindset early on was to become as financially independent as quickly as possible, instill a work ethic in my children, provide some type of financial legacy for my children, and get out because of a short male life expectancy in my family while I can enjoy the benefits of a previously relatively conservative lifestyle. However, I understand the retirement lifestyle I am proposing is not frugal nor conservative but that was the purpose of the high savings rate and long hours.

I am 58 and my wife is 57. She does not work outside the home. Currently, we have a net worth (no debt) of $7.1 million. $6.5 million is in investments 78.5% equity mutual funds and ETFs and 20% intermediate corporate bond fund (BIV), and 1.5% cash. House is worth about $500,000 and other non income producing assets of $69,000. We live in a low cost of living state and an area that is nationally recognized as a good place to live and affordable. Investments are as follows:

Taxable accounts: $1,200,000
Roth retirement accounts: $1,900,000
Non Roth retirement accounts: $3,400,000

Of the non Roth retirement accounts, $1,900,000 is in a non qualified retirement plan or Rabbi Trust. Most of the bonds are held in the non qualified plan because of tax reasons (ordinary income upon distribution) and because those assets will be distributed via a predefined schedule over up to 15 years starting within 6 months of retirement. I will rebalance with each years distribution with the goal of 8 years of expenses invested in bonds and cash. If I retire early next year, I would normally expect the annual distributions (because of growth over up to 15 years) to be in excess of $225,000 per year but not more than $250,000 per year until age 70 and then non qualified distributions slightly less until age 76 but the total income remaining over $250,000 annually inflation adjusted because of social security and other non Roth mandatory distributions at age 72. We do not plan to touch the Roth accounts but will just left them pass to our daughters.

Both daughters have finished college and one has finished graduate school. They will each have about $180,000 to $280,000 invested to fund weddings, additional college, or just to start life. The kids investments assets are outside of our net worth. Currently, we would expect to inherit in today's value about $2.2 million within the next 6 years and another $1.1 within the next 12 years. The vast majority of the inheritance is in marketable securities (i.e. diversified equities). However, the goal is to never touch either inheritance but just be good stewards and invest it for future generations and possible insurance in the unlikely events the non qualified plan becomes subject to creditors. Currently, the company is in very good financial shape but many things can change over a15 year distribution period.

We have 8 years of expenses invested in bonds or cash. They rest is in equities. The thought process is if a significant market correction comes we should be able with bonds, cash, interest and dividends fund expected living expenses for about 10 years before we would be forced to sell equities or adjust live style.

Our expected retirement expenses are $172,500 per year adjusted for inflation yearly. Taxes at $25,000, medical at $18,000 per year under COBRA and then $28,000 per year, vacation/entertainment at $65,000 per year, home occupancy costs of $18,000 per year (taxes, insurance, utilities, repairs, taxes, etc.), and second home expense of $20,000 per year are our largest expected expense categories.

We would take $800,000 to $1,200,000 from our investments to purchase a second home so investments would reduce to about $5.5 million and a 3.25% withdrawal rate would generate about $172,500 to fund expenses. Otherwise we could mostly finance 2nd home and keep money invested but have a higher annual interest/principal expenditure. Any non qualified forced withdrawals over this amount would be reinvested in taxable accounts. Core expenses with minimal travel and no second home would be about $98,000 per year and $108,000 with the non mortgaged second home. We could also rent out the second home to generate additional income if needed.

Although this plan and timing feels every doable, when you are at the precipice of retirement you find yourself looking for reassurance that the plan is good enough within reason and without going to very improbable sequence of events. I would appreciate any constructive thoughts from the collective wisdom provided on this board. Thanks.
You have worked very hard and done very well. You can certainly retire with this plan and at $5MM you can absolutely live on $200K or less each year. Arguably you can live on much much more.

You can buy outright or finance your 2nd home. Totally a personal choice. You can afford either.

I have no concerns at all with your plan. Well done and congratulations.
Nescio
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David Jay
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Re: Reassurance needed

Post by David Jay »

I would be comfortable with any SWR under 3.5% at your age, especially in light of your ability to “belt tighten” if it became necessary.

Additionally, you have not mentioned SS but at some point you will see another $50,000+ from Social Security, further lowering your withdrawal rate.

To quote Nike: “Just Do It!”
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
slickracer
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Re: Reassurance needed

Post by slickracer »

I say job well done!
chipperd
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Location: here and now

Re: Reassurance needed

Post by chipperd »

I know in your situation, social security is a small percentage, but that will drop your needed expenses to around 135k/year when you hit 70 (assuming you qualify, which is seems you do).
Regardless of the social security amount, you sir, are clear for takeoff.
Well done!
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
bradinsky
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Re: Reassurance needed

Post by bradinsky »

You’re golden? What are you waiting for? Retire today & enjoy.
pantsmachine
Posts: 55
Joined: Tue Jun 30, 2015 11:21 pm

Re: Reassurance needed

Post by pantsmachine »

There, there. You're ok. Reassurance given.

Get on with it! Direction given.

All the best! :)

Until u walk thru that door and it all falls away behind you, you can't know. It really won't be about the money. Enjoy life pal, it's SO good.
Last edited by pantsmachine on Sun Jul 25, 2021 7:39 am, edited 1 time in total.
fortunefavored
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Re: Reassurance needed

Post by fortunefavored »

Plenty of money, well thought out plans for launching kids, plenty of room to cut back and/or sell 2nd home in in a Really Bad Scenario (divorce, chronic illness.)

Yeah, you get the green light. Do it.
chazas
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Re: Reassurance needed

Post by chazas »

If I were in your shoes I’d retire tomorrow. Congrats!
Topic Author
au1985
Posts: 13
Joined: Sat Apr 18, 2015 8:06 pm

Re: Reassurance Wanted

Post by au1985 »

Thanks for all the responses. They were helpful. I did watch the podcast. I have one more major project to complete by the end of the first qtr. of 2022 and now we are starting to make more definitive plans for what is next. Although I think the "can I retire" answer is fairly straightforward, its always seems less certain when it is you asking the question about yourself. Thanks.
bdwb
Posts: 63
Joined: Fri Jan 12, 2018 9:47 pm

Re: Reassurance Wanted

Post by bdwb »

Classic example of working hard, and living below means...question is have you carefully considered your life post full time, very busy exec life?

I am a bit younger than you, I plan to work about 7 more years but have started setting my personal schedule/goals first vs letting work dictate my life. Not sure what I will do with my time once fully retired to feel satisfied. Best wishes
Financologist
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Re: Reassurance Wanted

Post by Financologist »

This is what you worked for. If you don't do it, you are cheating yourself (and your family?).

Bid farewell to the grind and make your next great investment.. in your longevity.
Financologist
Oregon Beancounter
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Re: Reassurance Wanted

Post by Oregon Beancounter »

You earned your pile…..congrats! I’d cash in right now and enjoy life. I thought all was going grand in my life….but cancer got me three years ago and I now have limitations on how I can spend what I had invested in.

Life can be short
BillWalters
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Re: Reassurance Wanted

Post by BillWalters »

Congratulations, you won the game. Well done.
RadAudit
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Re: Reassurance Wanted

Post by RadAudit »

Tomorrow would be a good time to start improving your golf game.

Based on what I thought I saw, shorter male life expectations, I would pass on bringing the next project in during 2022 and let someone else take a shot at it. Good time to transition. If you've been there 20 years and doing your job, you've got at least three people ready to step up.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Normchad
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Re: Reassurance Wanted

Post by Normchad »

Congratulations! I’d be very comfortable with your plan.
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typical.investor
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Re: Reassurance Wanted

Post by typical.investor »

au1985 wrote: Sat Jul 24, 2021 10:06 pm Although this plan and timing feels every doable, when you are at the precipice of retirement you find yourself looking for reassurance that the plan is good enough within reason and without going to very improbable sequence of events. I would appreciate any constructive thoughts from the collective wisdom provided on this board. Thanks.
The only things that might undo your plan would probably require a bunker and supplies. But I don't believe prepping is the best course of action.
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AllMostThere
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Re: Reassurance Wanted

Post by AllMostThere »

You have won the game! In the immortal words of Bill Paxton - "Game over man, GAME OVER!" :twisted: Having worked and lead an organization for many years, I'm sure you have witnessed co-workers and/or direct reports who worked too long and died soon after retirement, or even worse, died before they could reach their retirement goal. Please don't let this be you while falling into OMY syndrome. You have planned well and have enough. Your family deserves their Husband, Father, Brother or even Son. You are good to go. :beer
Last edited by AllMostThere on Mon Aug 02, 2021 6:28 pm, edited 1 time in total.
It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown | Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
kimura king
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Re: Reassurance Wanted

Post by kimura king »

delete
Last edited by kimura king on Fri Oct 01, 2021 8:21 pm, edited 1 time in total.
MoonOrb
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Re: Reassurance Wanted

Post by MoonOrb »

This is an easy call, you're good to go. You're prepared for a whole range of less-than-optimal scenarios and even in some of the worst of them you...travel less for a few years, or something.
Dave55
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Re: Reassurance Wanted

Post by Dave55 »

Congrats. You graduated from the work a day world with honors.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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Watty
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Re: Reassurance Wanted

Post by Watty »

Reassurance Wanted
One thing that you might find reassuring would be to do a "fire drill" of what your situation would be in 5, 10, 20,... years if you retire then your finances go horribly wrong.

I would suspect that it might be something like you would have to sell the second home or cut your spending down to $125K a year.

Hardly a dire situation.
au1985 wrote: Sat Jul 24, 2021 10:06 pm Our expected retirement expenses are $172,500 per year adjusted for inflation yearly. Taxes at $25,000, medical at $18,000 per year under COBRA and then $28,000 per year, vacation/entertainment at $65,000 per year, home occupancy costs of $18,000 per year (taxes, insurance, utilities, repairs, taxes, etc.), and second home expense of $20,000 per year are our largest expected expense categories.
A couple of things to keep in mind;

1) As a wild guess I would would think you might get something like $40K a year in Social Security when you start that.

2) The medical expenses will be greatly reduced when you get on Medicare.

3) Even if things are going well you will likely travel a lot less by the time you are 75 or 80. I have seen relatives naturally slow down by the time they were about in their mid 70s even though their health was still good for their age. At that point they did not want to travel much and even a big evening out was a rare event. They could have easily afforded to spend more but there were often months when they did not even spend their entire Social Security check. Try to picture your budget when you are 75+ years old.

4) You live in a low cost of living area so you could find that your yearly expenses go down a lot if you need to go into assisted living. You can get an idea of the costs in your area here.
https://www.genworth.com/aging-and-you/ ... -care.html
Topic Author
au1985
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Joined: Sat Apr 18, 2015 8:06 pm

Re: Reassurance Wanted

Post by au1985 »

7 month update, today I talked to my company about my transition plan out. Few details to work out but one big final project to be completed in the next couple of months and I will gladly leave the corporate grind after 22 years. Not sure exactly what is next or if I want any work next but there is not a lack of opportunities in today's environment and my location. I feel blessed and at peace.
Topic Author
au1985
Posts: 13
Joined: Sat Apr 18, 2015 8:06 pm

Re: Reassurance Wanted

Post by au1985 »

Last Friday retired after 22 years with the same company. Seminal project completed and left on my terms. The last 3 days have felt great. Net worth now about $500,000 lower than my first post but still feel blessed to be done with the corporate grind. Miss the people but not the work.
av111
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Re: Reassurance Wanted

Post by av111 »

au1985 wrote: Mon May 16, 2022 8:23 pm Last Friday retired after 22 years with the same company. Seminal project completed and left on my terms. The last 3 days have felt great. Net worth now about $500,000 lower than my first post but still feel blessed to be done with the corporate grind. Miss the people but not the work.
Congrats and post your retirement experience. Might inspire yours truly
AV111
DebiT
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Re: Reassurance Wanted

Post by DebiT »

au1985 wrote: Mon May 16, 2022 8:23 pm Last Friday retired after 22 years with the same company. Seminal project completed and left on my terms. The last 3 days have felt great. Net worth now about $500,000 lower than my first post but still feel blessed to be done with the corporate grind. Miss the people but not the work.
Congratulations! My husband did not live long enough to retire. You have made the right choice. Blessings to you!
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
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