Am I OK to retire?

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Zosima
Posts: 349
Joined: Wed Apr 15, 2015 12:32 pm

Re: Am I OK to retire?

Post by Zosima »

helloeveryone wrote: Wed Nov 30, 2022 6:54 pm

Question for others - Is there a role for OP to fund a Donor Advised Fund with a chunk of money up front to take the tax deduction - then watch that grow and donate money through that? I’ve read on BH about DAF’s and was wondering if in this scenario that would be a benefit. (Either while working or when retired to offset Roth conversions)
This is a great suggestion. In the three years prior to "retirement" (which for me means working 20%), we funded approximately 10-15 years of anticipated charitable contributions in a Donor Advised Fund. We used appreciated mutual funds for the contributions so we were able to obtain the charitable deduction at a higher tax bracket than we will have in "retirement" and avoid capital gains.
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gopack
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Re: Am I OK to retire?

Post by gopack »

Parkinglotracer wrote: Wed Nov 30, 2022 5:38 am
Would it be appropriate to simplify your portfolio a bit closer to the 3 fund /etf boglehead goal?
My portfolio is considerably simpler than it was before I found Bogleheads! But I agree it could be even more simple. My taxable portfolio just got a little more complicated about a month ago because I did some tax loss harvesting. Now I have two different international funds and I have the S&P 500 fund and Total Stock market fund. After the big down turn I sold my lots that were in a loss position and bought the other similar fund.

At your age / wealth I’d spend a considerable amount of time thinking about how I can use the human capital and financial resources I have to optimize my and spouse’s quality of life the next 3-4 decades. I’d think of transitioning from work is a good thought process aka, or rewirement vs retirement. Would you be happier working part time? Consulting? What do you do well and like to do? I have no where the wealth you have but retired at age 50 for three years and went back to my old job for 6 years because I enjoyed it. What do you envision your day being like?
I have not seriously considered part time, but maybe I should. This is going to sound weird but I've never really taken a real vacation in 30 years. I mean, I take PTO, but I can never get away from voice mail, email mail, texts, etc. and it's just not relaxing. But maybe a part time gig with less responsibility, even at my current employer, could solve that.

Ever played Pickleball? It’s a hoot. Great group of people. Social, exercise, and fun.
I haven't, but one retired friend tells me it's great.

Any thought of taking a small portion of your savings and buying immediate annuities to help smooth your income needs in retirement? Sometimes folks are reluctant to spend what they have accumulated once they stop working … setting up a partial income stream gives one permission to spend and my experience / studies have shown this could reduce one’s stress and make one happier in retirement. You transfer the risk of that income from you to the insurance company. There are discussions here in boglehead land on this idea and websites to look at. Of course one’s health plays a role in this decision. I have not done this but I have a cola adjusted retirement check that covers more than half of our fixed expenses in retirement.
I have thought about this, but honestly recent inflation scares me. I will give it some additional thought.

Thanks for the helpful comments.
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gopack
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Re: Am I OK to retire?

Post by gopack »

stan1 wrote: Wed Nov 30, 2022 11:52 am
gopack wrote: Wed Nov 30, 2022 11:31 am
HMSVictory wrote: Wed Nov 30, 2022 10:30 am
In all seriousness congrats on your success! I'd be more interested in hearing how you did it!
Thanks. My story is not that interesting, though. Worked throughout college to get through with no debt. State schools were not expensive at the time. Worked at a number of employers and consulting firms early in career. Worked hard, became an expert in my field, and most recently lead a large technical team critical to my employer’s success. Saved aggressively from the beginning, allowed lifestyle to inflate modestly compared to income, and benefited from equity grants that paid off. Pretty burnt out now. Will walk away from significant equity to leave but might be worth it at this point.
You have done very well. It's a tough decision to walk way, but you don't have to frame it that way as all or nothing. It's a continuum not a binary decision. You've invested a lot into your intellectual capital likely since elementary school. You don't have to discard it, it can still be monetized in different ways.

It sounds like you could very easily transition into a different type of role where you are more selective about WHAT you work on, HOW MUCH you work, WHERE you work from, and WHO you work with. All of that can have a big impact on quality of life. You likely have an extensive professional network you've worked with over the years who value your expertise and contributions as an advisor not as the primary doer who has to put in all the extra hours.

All told it sounds like you have close to $10M in assets including real estate and the set asides. Maybe you want to hear conservative advice to be cautious, which you can and will get here on Bogleheads, but that is a substantial sum of money that likely puts you into the 99th percentile of households, well above that in MN.
Thanks for the valuable perspective. Much appreciated.
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gopack
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Re: Am I OK to retire?

Post by gopack »

Zosima wrote: Wed Nov 30, 2022 5:30 pm
gopack wrote: Wed Nov 30, 2022 11:31 am
HMSVictory wrote: Wed Nov 30, 2022 10:30 am
In all seriousness congrats on your success! I'd be more interested in hearing how you did it!
Thanks. My story is not that interesting, though. Worked throughout college to get through with no debt. State schools were not expensive at the time. Worked at a number of employers and consulting firms early in career. Worked hard, became an expert in my field, and most recently lead a large technical team critical to my employer’s success. Saved aggressively from the beginning, allowed lifestyle to inflate modestly compared to income, and benefited from equity grants that paid off. Pretty burnt out now. Will walk away from significant equity to leave but might be worth it at this point.
Congratulations on your financial and professional success! I am in a similar situation, albeit approximately three years older. I can relate to the burnout. I announced I was going to retire approximately a year ago and after a lot of discussions, I was able to work out a part-time (20%) arrangement with a lot less stress and responsibilities and the ability to focus on the aspects of my job that I enjoy. I will try this for a year and see how it works out. Good luck on your journey!
Zosima, would you mind sharing more about your part time arrangement? Did they approach you with the idea or you approach them? How does the arrangement work? Are you able to actually keep it at 20% and how do you draw the line? Would really like to hear how it is working out for you and if there are any landmines I should be aware of. You could private message me if that would be better. Thank you for any further perspective you can give.
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Re: Am I OK to retire?

Post by ClaycordJCA »

Several off-topic posts discussing inflation and asking others with substantial investments to explain their success have been removed. Please address OP’s situation when responding so the thread remains personal and actionable.

Moderator ClaycordJCA
bltn
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Joined: Mon Feb 20, 2017 8:32 pm

Re: Am I OK to retire?

Post by bltn »

stan1 wrote: Wed Nov 30, 2022 11:52 am
gopack wrote: Wed Nov 30, 2022 11:31 am
HMSVictory wrote: Wed Nov 30, 2022 10:30 am
In all seriousness congrats on your success! I'd be more interested in hearing how you did it!
Thanks. My story is not that interesting, though. Worked throughout college to get through with no debt. State schools were not expensive at the time. Worked at a number of employers and consulting firms early in career. Worked hard, became an expert in my field, and most recently lead a large technical team critical to my employer’s success. Saved aggressively from the beginning, allowed lifestyle to inflate modestly compared to income, and benefited from equity grants that paid off. Pretty burnt out now. Will walk away from significant equity to leave but might be worth it at this point.
You have done very well. It's a tough decision to walk way, but you don't have to frame it that way as all or nothing. It's a continuum not a binary decision. You've invested a lot into your intellectual capital likely since elementary school. You don't have to discard it, it can still be monetized in different ways.

It sounds like you could very easily transition into a different type of role where you are more selective about WHAT you work on, HOW MUCH you work, WHERE you work from, and WHO you work with. All of that can have a big impact on quality of life. You likely have an extensive professional network you've worked with over the years who value your expertise and contributions as an advisor not as the primary doer who has to put in all the extra hours.
I think this is a very good point. Rather than walk away completely, you could gradually retire,working part time, perhaps consulting. That kind of change might remove the burned out feeling.

I cut back on my work load in my early fifties. I then cut back again at about age sixty working shorter hours two weeks out of three. A few years later I went to one week out of three and finally retired completely a couple of years after that. I could have retired in my early fifties but I got some satisfaction from my work, and by cutting back and maintaining a large degree of control, I eliminated a lot of the stress. Even with less work and income, my retirement accumulation grew quite a bit, even as we increased our lifestyle moderately over the years. And I got a lot of gratification from my work that last dizen years.

Gradually retiring has its benefits.

Well done with your management of your family s finances. Best of luck.
vrr106
Posts: 354
Joined: Wed Feb 11, 2015 9:27 am

Re: Am I OK to retire?

Post by vrr106 »

gopack wrote: Tue Nov 29, 2022 12:51 pm
HouseOfLancaster wrote: Tue Nov 29, 2022 10:56 am
gopack wrote: Tue Nov 29, 2022 7:50 am
HouseOfLancaster wrote: Mon Nov 28, 2022 8:56 pm My initial instinct is that you're not as safe as I would want to be to shut off the human capital engine, but everyone has a different risk tolerance. The biggest challenge is that you have a very long planning period. I encourage you to do some research on Wade Pfau's "funded ratio" and see how your's comes out. But the present value (i.e. assuming your expenses grow at the same rate as inflation during your 47 yr planning period) of your cost of living liabilities is around $8,030,000 ($185k x 14 yrs; then $155k for 33 yrs). So, you'd need at least this much in present value of after-tax assets to cover your present value liabilities. Your $7m will be reduced once you remove the portions that belong to the IRS in the forms of unrealized cap gains and ordinary income taxes but will be increased by the present value of your after-tax social security benefits. And of course your home equity is an additional asset that could be tapped if necessary, so some people like to include some portion of that on the available asset side of the ledger.

This is obviously a highly conservative way to look at things, as it effectively assumes a 0% real return on your entire portfolio. But I find it helpful as a fairly quick and dirty way to assess the situation, particularly for much longer planning periods than the traditional 4% SWR over a 30-yr period rule of thumb.
One thing to note is that the spending in my initial post did not include taxes. I've estimated taxes at 20% (federal+state). So, I guess that means you would think I'm even less safe than you initially did. That concerns me.

I will research the funded ratio. Thank you for the suggestion.
Yes, I understood that. The taxes would be fully accounted for in the step (bolded above) where you figure out your current capital gains and ordinary income taxable amounts within your $7m and apply an appropriate income tax rate to both. For example, if the $7m includes $3m in amounts that will be taxed at ord inc rates, you would multiply this amount by your combined rate (both fed and MN), so that your tax liab would be (at, say, 25%) $0.75m. Similarly, if the $7m includes $1.0m in unrealized cap gains, your tax liab would be (at, say, 20%) $0.2m. This combined $0.95m tax liab reduces your overall portfolio to $6.05m of assets that belong to you. And you would add your SS and, perhaps, some portion of your home equity.
Yes, you are right you did address the tax issue. Sorry, I missed that. Thank you.

Figuring out the likely tax liability in retirement has been the most difficult part of this whole decision making process for me. The taxes get very complicated with the different kinds of accounts. I need to spend a little more time on this.
As HouseofLancaster states, you should be able to do a rough cut estimate of taxes in the sense that you can estimate how much of your portfolio belongs to the IRS. For your 401ks it will probably be around 24% and for the taxable I'm sure you know the cost basis and can apply a LTCG factor. Either way I think you are more than fine, but personally when I look at my portfolio/investments, I use a "post tax" figure to put into the firecalcs and similar tools. Others would recommend adding taxes to spending but I think it's much easier in my case to user this method that HouseofLancaster has here
"It is not necessary to do extraordinary things to get extraordinary results"-Buffet| "Anytime that something is romanticized, you have to really question whether it exists"-Unknown
makingmistakes
Posts: 423
Joined: Sun Jan 19, 2020 6:59 am

Re: Am I OK to retire?

Post by makingmistakes »

bltn wrote: Thu Dec 01, 2022 8:35 am
stan1 wrote: Wed Nov 30, 2022 11:52 am
gopack wrote: Wed Nov 30, 2022 11:31 am
HMSVictory wrote: Wed Nov 30, 2022 10:30 am
In all seriousness congrats on your success! I'd be more interested in hearing how you did it!
Thanks. My story is not that interesting, though. Worked throughout college to get through with no debt. State schools were not expensive at the time. Worked at a number of employers and consulting firms early in career. Worked hard, became an expert in my field, and most recently lead a large technical team critical to my employer’s success. Saved aggressively from the beginning, allowed lifestyle to inflate modestly compared to income, and benefited from equity grants that paid off. Pretty burnt out now. Will walk away from significant equity to leave but might be worth it at this point.
You have done very well. It's a tough decision to walk way, but you don't have to frame it that way as all or nothing. It's a continuum not a binary decision. You've invested a lot into your intellectual capital likely since elementary school. You don't have to discard it, it can still be monetized in different ways.

It sounds like you could very easily transition into a different type of role where you are more selective about WHAT you work on, HOW MUCH you work, WHERE you work from, and WHO you work with. All of that can have a big impact on quality of life. You likely have an extensive professional network you've worked with over the years who value your expertise and contributions as an advisor not as the primary doer who has to put in all the extra hours.
I think this is a very good point. Rather than walk away completely, you could gradually retire,working part time, perhaps consulting. That kind of change might remove the burned out feeling.

I cut back on my work load in my early fifties. I then cut back again at about age sixty working shorter hours two weeks out of three. A few years later I went to one week out of three and finally retired completely a couple of years after that. I could have retired in my early fifties but I got some satisfaction from my work, and by cutting back and maintaining a large degree of control, I eliminated a lot of the stress. Even with less work and income, my retirement accumulation grew quite a bit, even as we increased our lifestyle moderately over the years. And I got a lot of gratification from my work that last dizen years.

Gradually retiring has its benefits.

Well done with your management of your family s finances. Best of luck.
I agree that gradually retiring has its benefits, but I wonder what percentage of companies allow it. I know mine doesn’t.
bltn
Posts: 1844
Joined: Mon Feb 20, 2017 8:32 pm

Re: Am I OK to retire?

Post by bltn »

makingmistakes wrote: Thu Dec 01, 2022 12:04 pm
bltn wrote: Thu Dec 01, 2022 8:35 am
stan1 wrote: Wed Nov 30, 2022 11:52 am
gopack wrote: Wed Nov 30, 2022 11:31 am
HMSVictory wrote: Wed Nov 30, 2022 10:30 am
In all seriousness congrats on your success! I'd be more interested in hearing how you did it!
Thanks. My story is not that interesting, though. Worked throughout college to get through with no debt. State schools were not expensive at the time. Worked at a number of employers and consulting firms early in career. Worked hard, became an expert in my field, and most recently lead a large technical team critical to my employer’s success. Saved aggressively from the beginning, allowed lifestyle to inflate modestly compared to income, and benefited from equity grants that paid off. Pretty burnt out now. Will walk away from significant equity to leave but might be worth it at this point.
You have done very well. It's a tough decision to walk way, but you don't have to frame it that way as all or nothing. It's a continuum not a binary decision. You've invested a lot into your intellectual capital likely since elementary school. You don't have to discard it, it can still be monetized in different ways.

It sounds like you could very easily transition into a different type of role where you are more selective about WHAT you work on, HOW MUCH you work, WHERE you work from, and WHO you work with. All of that can have a big impact on quality of life. You likely have an extensive professional network you've worked with over the years who value your expertise and contributions as an advisor not as the primary doer who has to put in all the extra hours.
I think this is a very good point. Rather than walk away completely, you could gradually retire,working part time, perhaps consulting. That kind of change might remove the burned out feeling.

I cut back on my work load in my early fifties. I then cut back again at about age sixty working shorter hours two weeks out of three. A few years later I went to one week out of three and finally retired completely a couple of years after that. I could have retired in my early fifties but I got some satisfaction from my work, and by cutting back and maintaining a large degree of control, I eliminated a lot of the stress. Even with less work and income, my retirement accumulation grew quite a bit, even as we increased our lifestyle moderately over the years. And I got a lot of gratification from my work that last dizen years.

Gradually retiring has its benefits.

Well done with your management of your family s finances. Best of luck.
I agree that gradually retiring has its benefits, but I wonder what percentage of companies allow it. I know mine doesn’t.
As a managing partner in my own small company I had more control over my job than most employees. As an employee of a bigger company, I might have made more money, but having control over my job later in my career was very valuable to me.
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