What to plan for the future?

[Coronita]

[quote=exsdgal][quote=earlyretirement]Do you have a large nest egg (7 figures +) to plan on taking this early retirement?

Or do you have any assets that will generate cash flow each month/year like rental properties?
[/quote]

[quote=flu]without a balance sheet (even in vague terms), hard to tell if you’re ready for retirement.
I guess what are your liabilities, what are your assets?
Also, realistically how good is your investment returns? <5% or >5%…
[/quote]

Fair questions. We have a ballpark figure of the expenses and are working to generate 3-5x as near-passive income to provide some buffer in case of emergencies. As for liabilities it is mostly the mortgage and should be paid off in about seven years.

The stocks and retirement accounts have decent returns. With kid and family obligations taking up time, lately we have reduced our non-retirement stock portfolio significantly. Will venture back to actively managing the stocks in a year or two, but have to see what happens then.

I am aware this is not the typical situation. Was not ‘lucky’ to land a job in established companies to just settle in and ride the wave into management. It will be difficult to change jobs in 50’s and will have to forget about finding one at 60’s. Paranoid perhaps… but probably not too far from reality.

Our idea of retirement is to buy time. In the sense do what you want to do and not because you have to do it. Like one of the suggestions, we plan to start a business that will keep us engaged and hopefully contribute towards the 3-5x cash flow.

Couple of things I would like feedback on are – 50s is too early to traditionally retire. What should one do in terms of health insurance? Are there products/insurance to consider? In our assumptions 401k/roth/ss/medicare/etc are mostly supplemental… I guess my question becomes what are the available tools to replace the traditional retirement funds?

ty[/quote]

I frankly don’t think you’re ready to retire. It’s not because I think there’s issues with your current financial shape…It’s because based on your post, you seem to have not have quite yet your self-conditions for retirement yet…And until you do, i think it poses a significant risk to your future until there is more clarity.

1. “Working to achieve 3-5x” in passive income. Ok, to me that sounds like you’re in the process of doing there, not there yet.

2. “Mortage paid of in 7 years”. Great…How big is your mortgage? Also, does your goal of 3-5x in passive income include covering your mortgage.

3. “Stock and retirement account have decent returns”… What would you consider decent? Let’s just say for discussion you have been doing 10-15% consistently annually….Consider this…In order to achieve this, you most likely need to take on a higher risk/aggressive portfolio. And right now, that makes sense, because worse comes to worse, you and your spouse are still working, so even it your portfolio tanks being in the higher risk category, it doesn’t matter as much, because you’re still earning income elsewhere…Now, fast forward and consider you and spouse are retired and have no W2 income. It would be extremely risky to be in the more aggressive portfolio…In a bad year, you’re portfolio tanks bigtime, and all the sudden you have a major income/cash crunch…So, really when folks are in retirement and counting on passive income, their portfolio should really be more closer to a safe “liquid” asset that won’t fluctuate as much… But that almost entirely means, lower returns…Have you factored in your 401k/retirement account’s if you move it into lower yield/less risk portfolio say 3-5% (and even that might still be too high risk)?

4. “Starting a business and contribute to passive income”

Ok… I think it’s a great idea to do this. Ideally ,that’s what I want to do. BUT, if you’re counting on this as part of your retirement, I’d say do it why you still have your w2 income versus retiring first and trying it. As the saying goes, it takes money to make more money (usually). A new biz is gonna cost money, and it might fail, and you might have to start over and do something else…Personally, I’d do this while I still have a w2 income backup versus trying this when I don’t.

5. Kids expenses. Sounds like you have kids. Do you already have your kid’s expenses factored in. Also, these days, have you factored the case of emergency, in which your kids have to move back with you after college? I know, sounds impossible…But seriously, just in case…

6. Health insurance…
What are you plans for you and your spouses health insurance? Also, if your kids are still dependents, what are your plans for your kids’ insurance… Medical expenses, especially unexpected ones are one of the major factors that can wreck havoc one’s financials…And if you’re on your own, and you have your own health insurance, consider the risk that if you our one of your family conditions suddenly develop a major issue, your expenses are going to go up….significantly…
Medical insurance is one of the major reasons why I still work at my w2 despite everything else I do off to the side. And that’s even that I have my own supplemental, paid health insurance.

With that said, if you can address 1-6, I’d say you’re ready for early retirement….

[Coronita]

Just curious though… Why do you feel you need to retire early? I mean, reality is that once you leave a w2 workforce, you’re going to have a tougher time getting back in. Is you and your spouse’s “job” that dreadful and that high pressure or that time consuming to consider quitting? Rather that quiting, have you simply considered either reducing your hours/efforts (“unofficially”) or transferring to a position of lesser pressure/work? It seems like that would be a better option… Because it seems like you’d get to keep most of benefits of being a salaried W2 wager (and there are benefits despite the sucky parts too). while at the same time freeing up some free time for what reasons…

I ask, because just this weekend I had a interesting conversation with a friend. I have a friend that’s been at a big company for some time. Not in major management position/etc….. Friend said over the weekend he wants to retire because he’s tired of the grind…When I asked, he was complaining about how much he works, how crappy his raise is, on and on and on… My response..

“Well, you work at a big company, and you’re not a director/senior manager..So let’s face it, whether your a steller employee or not, you’re looking at probably a 0.5% pay difference between being a “top employee” in your group/dept versus being a “mediocre employee”…
You chose to work your ass of on the most cutting edge/high profile/sexy projects because that’s how you are…You didn’t want to be like your coworkers that chose to be in the those lower profile/”boring”/maintenance projects…. So as a result, you get to stay working 70+hrs each week, arguably working on some of the sexist projects, to be paid 0.5% more than your coworkers who get to come in at 9am, leave at 5:45pm, and take 1.5 hr lunch breaks, call in sick or “work from home” when their personal life requires them to…..with probably very minute amount of decreased job security versus you
…I’m sure Dr. Jacobs thanks you for your efforts, because I’m sure you helped him collect a few tens to hundreds of millions more of stock options……

If you want to have a life, why don’t you just switch your role and do that less stellar project, cut your hours, and spend more time doing something else…It just costs you 0.5% pay difference, and it’s really closer to 0.25% difference after taxes…And hell, if you’re thinking about quiting and retiring, why must you do the company a favor and leave yourself. Why don’t you just drag it out, work less, collect your vacation accumulation, your benefits, your health insurance, and meanwhile just wait to be laidoff when/if it comes to that? On top of that, you’d get a severance package, being RIF’ed”

……Dead silence…

[Author]

Posts