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February 03, 2014

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This was a very interesting read, and I have to say you've had a far more interesting professional life than most -- which is probably both good and bad :) Thanks for taking the time to share your story and to provide your advice, which I think is spot on.

I do have a few suggestions:

- Have you looked at SEPP (Substantially Equal Periodic Payments) as a way to meet your early retirement hopes? As long as you meet the SEPP requirements, you can pull out retirement money penalty-free before you reach 59 1/2. You might not be able to pull out as much money as it would take to cover all your expenses, but you might, and either way it might put you at a point where you could reach semi-retirement earlier and pursue more of your interests.
- Assuming that you're already maxing out retirement accounts, you might want to investigate to see if you can do some additional tax-savings by restructuring what you earn. I don't claim to know all the rules and without knowing your company structure for certain it's hard to say whether it would be a good idea, but the SEP or SIMPLE IRA options might be something else to look into to reduce your tax burden.
- "Good alcohol," at least in terms of consumption and not using cleaning agents, seems largely like an oxymoron. Good luck clearing up your vices -- I'm sure you already realize this, and it might be a little cliche, but the more you're able to get rid of those dependencies and vices, the more you can look forward to a healthy and happy future.

Good luck on figuring out how to move on after your company's contract ends.

Hopefully you can find a way to downsize, perhaps even change the house, and reduce and change your working hours to some way where you are happier on a daily basis.

It seems like a shame to hold out on your happiness until your kids leave the house. You want them to see you happy and fulfilled. Do they want a happy dad on vacations, or a happier dad everyday?

I wish you the best.

Kman,

Thanks for the heads-up on SEPP. That is very interesting and should definitely help once there is enough stored away.

The company has a plan that allows 25% to be saved which I believe is the absolute maximum as a combination of the 401K and profit sharing. I'll recheck with my retirement advisor and lawyer.

Good alcohol means that I currently enjoy nice craft beers that end up costing me about $20/week, which adds up of course.

JV,

Good points. Regarding the decision to work in a job you dislike and have more money versus a job you like with less money, this is a difficult one. I'm continuing to pray on this one. I believe there is a better way than what I have now. The trick is discovering that way and having the courage to grasp it.

Despite the potential churn of your career moving forward, you're in the good position of having a net worth of $1.7M, with only half of it in retirement accounts.

You have alot of options here, and even at 4% withdrawal rate, would have over $68k per year as a starting point. One key thing to think about is where you'd like to live in the absence of working....this could have alot of influence on your overall budget.

There are several ideas I guess i could throw out to you. First, you could sell your two homes and then use cash to pay for a downsized home outright in a lower cost of living area of the country. This would relieve the "I need to work because my mortgage is 30k per year mentality" and it would partially solve the 4% withdrawal math problem.

So now your expenses goes go down...think no mortgage, lower property taxes, avoid association dues, etc. In essence, you'd be withdrawing less money from your nest egg and not incurring massive income, maintenance, and property taxes. Next idea would be to finish out your six months and then take a sabattical, thereby reducing anxiety felt worrying about where work will come from when the current project ends.

On your sabattical you would work on your personal health (manage your emotions?), take time to research and lower your utility bills, be able to research future career paths, and have time with your kids until they are off to college. Then back to work when the child moves away from home.

There are also ways to take from your retirement without incurring penalties such as the much discussed 72t rule on this site. The caveat is that withdrawals must be in equal payments, you must file your taxes without error to avoid penalty, and payments must continue to be withdrawn from your retirement account indefinitely until you reach retirement age.

I have had the same problem of trying to figure out how to retire early but having high expenses and having to put kids through college. After my kids are done with college in 10 years, I might sell my house and live in a low cost area, as another person suggested. I might even consider living in a foreign country where costs are very low, possibly doing some missionary work.

I would suggest that you could live on 4% of your non-retirement assets (which is 33k a year) if you supplement that with a much lower stress job, something like 50k a year. Or run your own business but only work part-time. And then as you get closer to your real retirement age, you could start drawing more than 4% since you have plenty in retirement savings and either stop working altogether or fund some other goals.

Thanks for the comments everyone. Good things to think about
--AA

Very interesting story. 4% of $1.7M will afford you an instant retiremen, a fairly lavish one at that. I just wonder if you're not better off buying a cheaper house or renting.

$1.7M being your current net worth.

I retired at age 58 and am now 79. We spent a great deal on vacations to exotic places all over the world both prior to retirement and then during retirement, even paying a lot more to fly business class in 2009 and 2010. However at age 77 my wife's mobility started to become an issue for her so we decided that 2010 would be our final big trip. The point being that, in our case, it has turned out that in the latter years of our retirement we aren't spending anything like the money that we used to spend when we were jet setters. We have noticed that we aren't sad about it and actually have grown to really enjoy being homebodies. We are fortunate that in addition to receiving a very large amount of tax deferred and tax exempt income from our bond investments we also receive pension and SS checks every month. We also don't put many miles on our cars these days and have been debt free since retiring so money is never going to be an issue for us. Our health insurance is also only $326/month because we are able to stay in my former employer's group insurance plan

I can't imagine the expenses that younger families have to deal with now days when every child has to have a computer, a smart phone, and possibly even a car. If our kids needed money they got a job and earned it, they even paid for their own college tuition and books at local colleges.
How times change, we had it easy!

-AA,

Congrats on your success. Got a few questions for you:
Can you tell me the challenges of being a CEO of a government contractor company and getting (gov't) contracts? As a civilian (hence, CIV), I have seen contractors get away with millions of the governments money for doing little to no work. No offense to you, I'm sure you do a good job. You touched something when you said, "I work for my government customer and when they make decisions I don't like, I still have to march to that path". At our office, the government contractor seemed...no DID...run our office in the ground to the point where we had to recompete the contract. That said, I figure if my management is not going to listen to me, I might as well be a government contractor and get paid a heck of a lot more. Your thoughts on this are greatly appreciated.

Congrats on what can only be considered an awesome journey. And I completely agree with you that money is just a way to afford more options. You already seem to be living life the way you want/need to in order to reach your own goals. That's the definition of contentment, right?

Concojones, We could only do 4% of non-retirement funds for the next 20 years and only once we sell our rental so it is much, much lower. I'm looking into 72t and SEPP from Luis and Kman above.

Old Limey, good perspective. I figure my wife and I will also have a much simpler life (than we have now - not as simple as minimalist ERE folks) as well. Glad you're doing well financially. May you live as long as you want and enjoy every minute.

CIV, Getting govt contracts these days is very difficult for our industry, but it obviously depends on the skill set you're carrying. Large govt contractors do have a reputation for waste and non-performance. Small companies like mine however must constantly prove ourselves not only to the govt, but also to other contractors so that we can be considered the go-to folks for our particular skill set. CEOs and high level managers of big companies are worrying about the bottom line across all contracts whereas CEOs of small companies are more motivated to perform well on each and every opportunity.

There are DCAA/FAR rules for how much you can work so going above and beyond to prove yourself is actually frowned upon (so companies don't kill their employees) so it is ironic that the govt complains about contractors and then throttles their possibilities. Cash flow is the biggest issue for small companies like mine after a contract is awarded. You have to pay expenses well before you get money from the government (or from your prime). Delays are normal and you have no control. It is the wild west of money when congress is playing with budgets and sequestration. I wouldn't recommend taking on starting a govt contracting company in this climate, but joining an established company with a nice long term contract...great. Higher pay comes with risk. As soon as the contract is up, you're unemployed unless you're talented enough and in need enough for another contract. Government employees are virtually guaranteed jobs forever unless you get really unlucky or are incompetent (although it is hard for government to fire anybody so incompetent may not be enough to get fired in most cases).

I am biased of course, but I think although I make a lot of money, I've earned every bit for having to get through all the red tape, and gaining such a wide breadth of government regulations knowledge/execution in addition to remaining at the top of my trade/niche and being known for a top technical 'expert'.

Funny story. When the first company was shut down, I told my wife to never let me start another company. The hours were too long and the stress WAY too high. In addition, the IRS was a pain in the arse. Now, I ask my wife where she was when I filed the paperwork for the second company. She let me down :)

Crystal, Thanks! I'm happy with what we've accomplished and I'm living the life I want...affording the kids and wife a nice life without much worry. Content - good choice of words.

God Bless!

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