31 year old - net worth 2 million - trying to retire by 40

New / Mgmt
containerK

New Mgmt

BIO
Long Beach container terminal
containerKmore
Apr 3 48 Comments

Current TC 250k -

inherited 1.5 million 2 years ago.

Own 3 properties - total equity 1.2 million
1 is paid off and generates 2k per month
1 has a mortgage that is covered by renters
The last one I live in with about 400k equity

Investment stocks - 750k

401k - 125k

Do you think I can retire by 40?

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TOP 48 Comments
  • Accenture / Data Gachon
    Lol, yes. Are you "Blind"?
    Apr 3 0
  • Google bogleheads
    If your annual expense is around 120k, most likely yes. If it's 500k, likely not. Net worth and savings is only one part of the equation.

    Multiply your annual expenses by 25, that's roughly how much you need to retire.
    Apr 3 9
    • LinkedIn f🖕nger
      Thanks for sharing, very thorough and well researched answer and great reading material.
      Apr 3
    • eBay / IT
      manorama

      eBay IT

      BIO
      Coder
      manoramamore
      @google why does the principal last for only 30 years and not indefinitely, given you withdraw 4% and principal almost remains same given stock price average rate of return is 7% including or excluding inflation? Trying to understand why principal depletes at year 30 to 0.
      Apr 4
    • Google bogleheads
      It's probabilistic. The simulation uses every single available data point from history of stock market to compute percentage of successful outcomes. At 4%, if you retired right before the 1981 crash, then experienced 2000 and 2008 crash, there was a high possibility you'd not have enough, for example; since your market returns (adjusted for inflation) were much lower during these times even for a portfolio with 50% stocks. Similar outcomes were likely during 1929/30 depression.

      Also, you pay taxes on the withdrawal amount, so your returns adjusted for taxes and inflation can be quite low during bad times.

      Few other important things to remember:
      * for a 50/50 portfolio, while your average returns are likely over 4%, there are years it'll go down as much as 30%. Combined with a 4% withdrawal, you could lose over a third of your portfolio value in a single year. If this happens right after you retire, it becomes hard to recover.
      * The 4% withdrawal is only in first year. After that each year you withdraw more based on inflation adjustment.
      * Going from 4% to 3.5% may seem trivial, but due to the double compounding effect of the growth of extra savings as well as inflation adjustment, this is huge.
      * We are in an era with historically high CAPE valuations, so it's better to be conservative in expected returns going forward.

      In other words, 4% with >30 year does not survive the worst case scenarios from history, but 3.5% does.
      Apr 4
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      Thanks for the input ! I’m looking into the links and I’m able to get a better expectation of the future !
      Apr 4
    • Google bogleheads
      Glad it was useful. I suggest going through the entire series of posts linked from that article if you have time. Having a plan dramatically increases your chance of doing well, and that post (and bogleheads.org) can really help put a good plan in place.
      Apr 4
  • Amazon / Mgmt nVRO60
    If you need to ask this question on Blind, then either you are showing off or incredibly "blind". Nevermind the pun, I meant to say " dumb"
    Apr 3 5
    • New / Mgmt
      containerK

      New Mgmt

      BIO
      Long Beach container terminal
      containerKmore
      OP
      Stop trollin
      Apr 3
    • Cerner czhustle
      Show off
      Apr 4
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      How is inheriting money showing off ? I’m just asking advice about a future situation
      Apr 4
    • Cerner czhustle
      With that money you wouldn't ask here
      Apr 4
    • Amazon / Mgmt nVRO60
      Not trolling....conveying that we get it.
      Apr 4
  • New / Mgmt
    containerK

    New Mgmt

    BIO
    Long Beach container terminal
    containerKmore
    OP
    I forgot to mention I live in LA where expenses are high
    Apr 3 6
    • New / Mgmt
      containerK

      New Mgmt

      BIO
      Long Beach container terminal
      containerKmore
      OP
      Thanks
      Apr 3
    • Walmart.com / Eng QTFP86
      Try Bay Area up north
      Apr 3
    • Google / Eng yogi bear
      cute indeed
      Apr 3
    • Egencia / Eng
      Bobby32

      Egencia Eng

      BIO
      We all think we overwork underpaid
      Bobby32more
      Move to Montana
      Apr 3
    • Amazon / Mgmt nVRO60
      Or move to Guam
      Apr 4
  • Palo Alto Networks KTkC88
    You could retire now if you managed your expenses a bit.
    Apr 3 0
  • Dropbox rawhide
    Yeah
    Apr 3 0
  • BlackRock xis
    Depends on the lifestyle you want after 40.
    You will live 40 more years, so you can retire if you burn upto 50K a year. A lot of financial advisors will tell you can assume 5% value appreciation per year, but I will suggest consider it 0. The long financial cycle is 30 years, every 30 years the market craters and comes to par after 30 years.
    If you consider 5% appreciation of capital and 10% expenses, even then the value would be significantly higher (.95 ^ 40) *2mil goes to 257K in 40 years but you can spend upto 200K per year.
    Consider 50K because its close to 3 times average target for people who were pensioners that got mowed by the crisis (was 18K). Entitlements were Defined Benefit mostly managed as LDI (Liability Driven Investment)
    So if medical insurance is 10K , you have 40 K per year or 3.3K per month. So you can rent upto 1100 per month.
    If you have no children and you want to die with zero balance take it. I will take it - also not buy insurance.
    Apr 3 3
    • eBay / IT
      manorama

      eBay IT

      BIO
      Coder
      manoramamore
      Medical insurance is 10k per quarter ?
      Apr 4
    • Intel DonaldDD's
      Without an employer, Americans are dragged through the gutter. This is why healthcare is hyped
      Apr 4
    • BlackRock xis
      Avg individual self sponsored medical was 440 per month in US, whatever average means to you.
      For the big firms both your and employers contribution is 10K a year, check 1095s .
      Apr 4
  • Dropbox systest
    How about health insurance?
    Apr 3 4
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      Have it free with the company now, but by 40 we should have free healthcare for all when Bernie get elected right? So I should be good.
      Apr 4
    • Tesla bICb68
      😂
      Apr 4
    • Splunk gdetes
      Bernie would probably want to retroactively tax your inheritance at 90%
      Apr 4
    • Uber xxvegas
      You are 31 now. By 40 Bernie has long gone 6 feet under.
      Apr 4
  • Intel / R&D seabay
    Humble brag
    Apr 3 4
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      Inheriting money is a humble brag ? It’s just my situation...
      Apr 4
    • Intel / R&D seabay
      Situation? Hmmm
      Apr 4
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      What’s the point of wasting your time ? Sad.
      Apr 4
    • Intel / R&D seabay
      No hard feelings. Happy to know that you are one of the lucky few. Good luck 👍
      Apr 4
  • Microsoft yiqing
    You should borrow against the paid-off rental and invest that money in something (another rental,stocks,etc). The interest will be tax deductible and low interest rates are good for leverage.
    Apr 3 1
    • New
      containerK

      New

      BIO
      LBCT
      containerKmore
      OP
      Looking into this and sounds like a good idea !
      Apr 4
  • T. Rowe Price HAvq83
    No. I'm assuming by retirement you mean live off your assets and not alternative definitions. With that view and for retirement at 65 a rule of thumb is the 4% rule. This means your withdrawals should start at 4% of your retirement assets then you adjust that number every year for inflation. This isn't arbitrary: see wiki entry:

    https://en.m.wikipedia.org/wiki/William_Bengen#CITEREFBengen1994

    and original research paper here:
    http://www.retailinvestor.org/pdf/Bengen1.pdf for details.

    This research is for a 30 year retirement. If you want to retire at 40 you need to plan for a 55 year retirement. To do this with any reasonable chance of not running out of money you would need to live on a pretty small percentage of your assets. To make that withdrawal amount a good income replacement you need quite a bit more.
    Apr 3 1
    • New / Mgmt
      containerK

      New Mgmt

      BIO
      Long Beach container terminal
      containerKmore
      OP
      Good point.
      Apr 3
  • Microsoft gfba68
    No, probably not. Your net worth is too low.
    Apr 3 0
  • Tesla bICb68
    You can retire right away.
    Apr 3 0
  • Wish
    ¥*-*¥

    Wish

    BIO
    I clean toilets. Pee Hach Tea 🍵
    ¥*-*¥more
    No. Understand self sustainable cash flow and that will answer by itself young one. #•_•#
    Apr 3 0
  • eBay gcpd
    Man...go to Vegas and retire
    Apr 3 0

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