Why Does No One Talk About 'Rich Guy' Early Retirement?

I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket. i want to invest around $250K savings.

This specific guy can retire. Any person who can save that much and has made that much, obviously knows how to control his money. Stop worrying so much about things you can't count control.

I have $270K in NVIDIA . I only got into stocks to try and make anything to help afford some medical infusion treatment that I need. I know it’s a risky game especially for someone like me who isn’t focusing hard on the market. I just don't want to make any wrong move. Do I hold or sell and buy back? Genuinely asking for any advice.

Good analysis. Early retirement probably needs to support AT LEAST the current spending. With more free time, and youth or with children, often times spending will INCREASE instead of the common assumption of decrease. This example has both youth and children. How much is enough? All we have are round number inputs, so a round number answer is $6,000,000 and be prepared to cut back.

Questions for him to answer:
* Does your spending include investing and income taxes? Or is your "spending" your income minus what you add to investments every year?
* How many weddings do you want to plan to pay for, and what is your limit per wedding?
* What are you going to do with your time after retiring, and what is your budget for that?
* How much in expenses will go away after you retire?

Unfortunately these post always attract pretend investment advisors who are scammers.

Google his name they say. Genuine advisors are not in the comments

A pretty video for those who have similar financial situation. Thank you.

Based on a 3% withdrawal rate… depending how investments are allocated, there are a lot of Dividend based ETFs and stocks that will provide this in dividends and will be taxed as long term capital gains vs. normal income. Never needing to touch the capital in your accounts allows the tree to keep growing and only taking the nuts.

If he could cut expenses down, no problem. 4% is pretty solid.

Hi Erin, I believe your are well on your way to your dream job!

Your videos are always well thought out with great points for consideration. 👍🏻

Retired at 53 with a fraction of what this guy has (but a paid off house). I feel a lot richer than folks shackled to their upscale lifestyle. Just the maintenance, taxes, and insurance on the house is ballpark 40-50K, then there is the remaining mortgage.

That’s. not “a rich guy”. He is not even close . His house is not paid off and his children are young. He needs $10+ million. You’re dreaming with any less.

Where’s the link to the video?

There is a presumption in the original question, rather antiquated, that being in the workforce is either an "on" or "off" proposition. "Retirement" per se shouldn't even be a question for an individual like this one who has a track record of achievement. You don't just turn off this drive when you quit a 9 - 5. My brother is the poster child for this, "retired" at 45 when he sold his business, drove his family crazy, and is now back in the workforce as a means to occupy his time.

While this individual is in his peak expense years, he is also in his peak earning power years. But that can also mean peak earnings on a part time or contextual basis. If he had a "side hustle" while nominally retired from a 9 - 5, he could have some inbound household income that could defray expenses until a more classic retirement age. If his career was that good in finance, that could mean contributing to a family office (private hedge fund), getting involved in a start up, or switching to corporate governance as a paid board member. Such a strategy would also give him an opportunity to actively manage his own funds, oriented towards growth and not income.

I just can’t wrap my head around having to spend $175K a year in expenses. I can’t see that as a necessity. Why? Where is their money going?

What is "retirement"?
If you feel that you add nothing to society, just quit participating.
Let's say this person enjoys his job as a brain surgeon. Should he retire because he does not have to work to support himself?
Retirement is not just about financing.

I love this channel, but I have to stop midway through the video because it’s so depressing to hear how much that wonderful family has in retirement assets. I can only dream about being in that situation. But it is great for them and I’m glad they are doing so well

He'll figure it out. He's rich

Great video, and you answered exactly what he asked - not if he could retire NOW, but WHEN he could. That could be greatly sped up if he downsizes houses now as other commenters (and you indirectly by preferring a paid off mortgage) have said. And if his decent money habits rub off on his children, there's always a chance for some scholarship money to help offset college costs.

All that said, I have a sneaky suspicion that some inheritance money helped with the house, college savings and/or house. $300k income TODAY likely isn't what they earned in the past.

If he’s willing to sell his house & down size & shift current lifestyle, he could easily retire now vs. later. But that decision doesn’t only affect him but his spouse & kids. He should talk with them & not seek advice from a media influencer. I don’t think he loves his job because he’s been in it for 25 years & is considering early retirement. He just loves the $$ & lifestyle that finance has provided and isn’t sure he’s ready to let that go. I think he’ll stay working another 2 or 5 years.

Paying for kids in prep school, and a three million dollar house tells me this gentleman likes to spend money. The 175K annual expenses is low. He is going to be spending much more than that. Without making some changes he definitely needs to continue earning income for a while longer unless he makes some spending changes. Yes, kids are really expensive.

How many times did Erin give her opinion ?

More factual analysis would be helpful. E.g., sequence of returns risk

$175k/year in expenses bringing in $300k does not actually allow for a very aggressive savings rate. He has 3 children, that's the problem. And no, he can't retire just yet without selling the house. The issue is you don't just want to keep the lifestyle in early retirement, you get more time and you want to fill it with stuff other than working, so you want to spend more in most cases, not just as much. It is what it is. Retirement math is tough, having more money makes it harder, not easier, as SS basically gives you next to nothing at those numbers, and taxes are higher.

If their kids are smart they don't need expensive prep school and fancy ivy league colleges to be successful. They can start taking college credits in high school and graduate early. The savings can be used to help the kids with a down payment on a house instead of them being $100,000k in debt

Sell the house and move to an area you can have a modest $500k house and retire now

This guy needs to unload the $3M house. He could downsize to a nice $1M house somewhere and retire now.

Im retiring this year at 44. I believe most people can retire early if they downsize. Most people spend way more then necessary.
If he sold the $3million house and moved to a place where he can buy a house for $500,000. That would add about $1.5 million to his portfolio and gets rid of the mortgage.

My advice is 55 and then reevaluate. 60 would be better due to children ages. Need a couple of those children launched before retiring and within 5 years of accessing your IRA money without penalty. Otherwise, those resources will quickly dwindle and they may have too little on the other side of launching the children. CONTRASTING VIEW: This family already has more than most at age 65, so they could adjust their lifestyles and still make it. MY EXPERIENCE: I retired at 55 with a paid-for home, paid cars, one child out of under-grad and the other entering under-grad. Luckily, my children attended in-state schools and had scholarships. 6 years later.....I've been knocked over by inflation and unexpected medical bills, but my assets have kept me in retirement.

Does his portfolio generate dividend income? could he make more income focused?

This guy is nowhere near retirement.

Peanut just discovered what a 1% AUM does to a portfolio!

Some aspects of this scenario don't make sense. If his household income is only $300k, what is he doing in a $3M house? Even if he bought the house before it appreciated to this amount, a remaining mortgage of $1.2M would still be excessive for only $300k of income. This would be 4x his income, which is on the hairy edge of affordability. But, let's even look past that. If the house is "going to be paid off in the next 10 years" that would assume, even with a 0% interest rate, that he'd be paying down $120k/year AFTER tax, which is probably more than 50%+ of his total household income BEFORE tax. That doesn't add up. Granted, it's probably above the rate necessary (if refinancing $1.2M even at current rates), but I'm just going with what's being said.

Further, it doesn't jive with having $175k/year of expenses. $120k OF that $175k/year of expenses would need to be housing payments. That would leave only $55k/year for everything else. Considering a home that's worth $3M, even at a modest 1% tax rate (they're much higher in expensive areas of the country), his property taxes could reasonably be assumed to be at least $30k/year... now leaving $25k/year for everything else? Electricity, heat, food, transportation, healthcare, etc. The math doesn't work.

In any case, I agree with Erin's analysis that he's not ready... at least not given the expenses he's facing. A better option may be to sell the house, buy something more affordable, pocketing the difference, and retiring early. Or, wait it out until the portfolio can sustain the expenses.

Erin.thank you for your Roth conversion episodes.
I am curious why none of the analysts point out that future gains will not be subject to taxes and enter those future tax savings into the value of conversions in some way?

There is a little difference between “rich guy” advice and “regular guy” advice, and Erin covered it: understand your expense run rate, and what you expect it to be going forward, understand any post retirement income (such as pension, Social Security, etc) and use a rule of thumb like the 4% rule to see if you’ve amassed enough assets to cover the gap. 4% is probably too high to retire at 50, so 3% might be a reasonable fixed withdrawal just to test the waters.

I wouldn’t retire, I would just take my foot off the gas career-wise (long hours, etc.) and coast until the kids were through school. Keep saving, get the mortgage paid off, then when the time comes, downsize and have a worry free retirement.

Send kids to public university, downsize the home to get rid of the mortgage, and suddenly, clarity. It's not all about making more or spending less, it's also about simplifying both sides, for less stress and more enjoyment. This guy's the cause of his own problems.

Wish I could talk my wife into downsizing. We are in a 3500 square foot house in So-Cal, don't get me wrong, I love it and love my life, and love the fact that she made 1/2 the money that it took to get us where we are. But what she doesn't realize she needs is a 2000 square foot house (way more than enough) and a 2000 square foot weather-tight storage out-building on the property. I mean if it were up to me, we'd actually get rid of like 80% of the crap we own.

The key (and Erin touched on it) - IF he wants to keep his living standard the same, he's not ready to retire. But if they make some adjustments, they could EASILY swing it. Simplest one to me is move from a $3MM to a $2MM paid-for home. Even if everything else remains the same in life, your risk is way lower, you still live in a very nice home, and your expenses are lower.

Love the bloopers 😅

I retired last December at 53. Paid off house. 2 in college but 529s are funded to cover them. My investment income is > 2X my expenses.

I agree not to retire from something but to something. I run a non profit and coach high net worth individuals financially.

I wake up earlier than I did when working 9-5 as everyday is exciting not having to answer to anyone.

My advice....start investing now and let time and compounding do its work. I started investing 25% of my income at age 23....after 30 years it grew into millions. Time in the market...not timing the market.

Hi Erin, Thank you so much for all your videos and the great information you provide. I recently retired at age 62 (official 1st day of retirement was Sept 1st) and I thought it might be helpful if you did a video on NUA. While I worked with my financial advisor just prior to retiring i had to make decisions about my company stock in my 401k with regards to NUA and how it works. I wasn"t familiar with NUA so I had to quickly learn how to apply it to my situation and how it would best benefit me. If you think this will help others have fun with it!! Thanks again for all that you do, Tom

And rich people getting on poor people about spending too much pn Starbucks. Get a life. This dude and hes has a million dollars left of his mortgage. But there are 5 million videos on telling people about thousands of dollars in credit card debt. Really crazy how the attitude changes vs some one who makes 50k and has a 7k in debt. Vs some one who makes 300k is over a million dollars in debt. Ridiculous

love the bloopers! 😆

This guys debts have effectively offset his high income and assets. Its not what you earn, its what you keep.

Dude should work till 53-55 or so.

Here are some ideas for future videos:
1. What time(s) of the year are best for taking RMDs?
2. I'm managing money for my 94 year old mother. What is the best asset mix for an elderly person who may live another 5 years and could require assisted living care?
3. What's your opinion on Charitable Remainder Trusts?
4. Should we adjust our asset allocations as interest rates fall?
Thanks!

I wish I could comfortably retire earlier rather than later. But I still have a house to restore

First if you are actually retired there are ways of accessing your 401K early without penalty

My first thought is that he should continue working to pay off the mortgage. Then wait until the kids are out of the house (this may be a big IF these days). If the kids are out of the house then they may be able to move to a luxurious but still less expensive location/house (i.e. downsize). Don’t wait for the kids to finish university but be realistic about what this is going to cost. Maybe target a 55 year old retirement age.

I retired at 55 with a good pension. I highly recommend retiring at 55 for the healthy time in retirement.

Erin - it’s been a while since you have talked about retiring abroad. Maybe it’s time to revisit this?

You interviewed me several years ago about Thailand.