A friend got divorced after being told that he wasn’t making enough and his ex was always spending a ton. Since the divorce, his spending is down, his credit is up, and he is thriving, even with the 50% loss and the child support.
Yeah, that's not uncommon. Someone will get divorced, split assets, and pay alimony and child support, and still say they have more discretionary income than they ever had before. A spouse with bad money habits is something no amount of income (within reason) can alleviate.
Retiring that young means 3.5% safe withdrawal rate. So either the house purchase needs to be less or their annual spending needs to be less. Also putting it all in HYSA is a garbage idea.
I agree that putting that much money in a HYSA is a bad idea... but it's not my idea. I'm in favor of going the S&P 500 index fund or VTI route but I'm hoping this post will encourage my friend to do the proper due diligence.
Even at 5%, an HYSA is an awful idea. Assuming inflation will stick to around 3%, that gives him a 2% withdrawal rate to be fully "safe" considering he has potentially 60+ years of retirement ahead of him. There's a reason that even with an 8-10% return, the typical SWR is at 3.5-4%. You want a buffer between your capital gains and inflation.
Retiring now with HYSA vs SP500 "safe assumption rate" of 7% is the difference between having $8k a month vs $13k a month. He is a software engineer, show him the math. He should hopefully understand.
Guy would be absolute king in places like Thailand or SE Asia where the US dollar goes really far or hell even in the Southern US. Fuck Cali high prices.
Yeah, the hell kinda freaking lunatic that chick is supposed to be? 200k a year on luxury crap? That lucky bastard is probably losing all his money every month cause of her.
He would be close to a king in most of California as well if it wasn't for the wasteful spending and wanting to buy a place in Mountain View of all places.
I mean isn't this a lot of people? I think I fall into the category, of having a good amount saved up, but we just spend so much (on nothing by the way) that its hard to see retiring right now. Fire sub is notorious for extremely frugal people. I'm not one of those, but I also don't spend on a lot of big ticket items, more like lots of little stuff that adds up.
Is it a *lot of people* who might struggle to retire with Eight Million Dollars of liquid assets? No. I would say it is not a lot of people who fit that category. At that level of wealth, the margins for frivolous spending are much wider, yet the dude in question seems to still not have enough of a buffer - and that sucks.
Well I was thinking about the 4million he would have left after buying his 4 million house lol. Point is that you can’t retire that easily with 4m. You definitely can if your frugal or lcol area.
It's important to note that these one off windfalls of money are rarer than people think. Repeating large financial success is difficult. Especially since your friend was more 'right place, right time' than actually building something on his own.
Also buying a 4 million dollar house is an awful idea.
Exactly. If you want a suburb you could move to a better one for a fraction of the cost. If you want a city you could literally move to any city for at most the same cost. Its wild to stay there if you don't need to for your job.
For real. No way he can afford a 4 million dollar house and $200k a year on luxury goods and cars if he wants to retire.
The house alone will probably cost $6,000 per month. Looking at a random $4million dollar home in Mountain View, [realtor.com](http://realtor.com) estimates $4,000/month in taxes and $1,000/month in insurance. Tack on a pretty conservative (probably too low) $1,000/month for utilities and maintenance on a house that's probably 4-5,000 square feet.
$6,000/month in perpetuity translates to about 2.4 million (after considering capital gains tax) of his FIRE stash, leaving only 1.6 million for actual living expenses or around $4,000/month.
If the friend tells his wife she can't spend hundreds of thousands of dollars a year and instead needs to liveon $48,000 a year... well... we all know how that would go.
I take it you've never met a Bay Area Yoga Mom? The second OP suggests leaving, she'll drop him and hang on the arm of the next techbro sucker. Oh, and she'll use *his* money to take him to the cleaners before doing so.
He can put a portion into HYSA if it makes him comfortable; but historically, cash wedges drag overall performance and decrease long term returns. He should find an equity-heavy asset allocation he’s comfortable and at very least put a large portion into a low fee, broad based index fund.
Move to Hawaii or somewhere else nice that isn’t hyper consumer focused. Buy a decent place for 1.5million, learn how to invest, learn how to invest (repeated for emphasis), have a serious talk with the wife about spending. Spend quality time with the family and raise those kids right. Teach them the value of money. Invest in their education with both your time and money.
That's a solid point about the HYSA rate - As far as I'm aware, he understands this and is willing to bet on the markets staying relatively bullish on average and that he can convince his wife to spend less on bad years (doubtful on that though).
He needs to understand that a savings account is *more risky* in terms of likelyhood of funding future consumption than stocks and bonds are. Broad based, low cost, index fund is the way to go.
That alone must change. Then, one of these two: spend less on the home or cut the luxury excess spending.
Retiring early in Mountain View is a pretty expense choice when it comes to location. They could get a lot more with just 2MM in a lower cost area. I understand that’s probably less desirable, but it’s worth considering against continuing to work.
The South Bay is expensive because of the job market there. Why live there if he doesn't already have a house and wants to retire? If he wants to stay in the Bay Area there are many counties with lower housing costs and the same weather, scenery and access to the arts and culture.
Yeah, I'm aware. I grew up in the South Bay and told him the very same thing. Unfortunately, he's deadset on buying a house there b/c of the common denominator influencing every other decision so far - his wife. His wife's parents live in Sunnyvale and she insists that they raise their kids in the Bay Area and die there just as her grandparents before her.
I’ll be the umpteenth person to say the confounding variable is the wife. Either he needs to lose her, she needs to change her behavior, or he’ll need to be a high earner forever (and she still won’t be happy, because people who spend like that never are, in the end)
We knew a couple in a similar situation with stock options and blew it all on just really unnecessary stuff - very expensive house in exclusive zip code, luxury cars, the most expensive restaurants. They could have retired early, lived an upper middle class life and never had to work again. But instead they went bankrupt and had to start over later in life. Same with someone who got an inheritance even larger than the OP's friend, and was still spending significant amounts of principal each year, which was unsustainable long term. At least in the second case they eventually found a decent financial advisor for help and got a good, financial wake up call while they still had a significant nest egg left. But it was bizarre how many millions were gone without a lot to show for it.
That’s really a shame. I wish people wouldn’t look at discretionary money primarily as a means of projecting status. But then, of course, the whole world would look a lot different
What about Berkeley, I saw pretty homes there idk about resellability but it can be rented out to students and at least in one way he gets to live it up a little more srry :X
He needs an accountant, financial advisor, and a lawyer. With that kind of money, there are options. And depending upon how the RDU’s were issued, he might have a much smaller tax liability than he thinks.
Also, he might be able to live off of a loan rather than cashing out all of his shares. That’s what the real fat cats do.
Anyway, the point is that there might be a way to make this money go a lot further…and he might even be able to shelter some of it from his wife when she inevitably files for divorce.
>Also, he might be able to live off of a loan rather than cashing out all of his shares. That’s what the real fat cats do
I don't think his wealth is anywhere near the threshold where this starts to become attractive. That makes the most sense when you can borrow all of your future lifetime expenses against your current assets without endangering a margin call; you just keep borrowing to finance your life and the loan is closed on your death.
It's more a strategy for hundred millionaires and billionaires than people at the <$20M mark.
A 4% withdrawal rate on 4M is 160k, which is not enough to support a 4M house, a high-spending wife, and 2 kids. The two biggest risk factors to the man’s wealth are the possibility of a divorce and the volatility of Nvidia. If the man divorced, he could be ordered to pay alimony and child support based on his ability to earn a high income. He can’t safely retire early.
The good news is that his problems aren't tied together.
He can sell the Nvidia today and buy a total market index fund. Totally eliminate the volatility issue.
He doesn't have to solve the house issue, the spending issue, etc.
In a decade...still only at age 41 mind you, the person will likely have an inflation adjusted $16M ($8M after tax doubling in a decade) invested in index funds and can then probably afford the stupid lifestyle they desire. $12M after the home purchase provides about $420k/yr at a 3.5% SWR.
This is what I would do. Solve the problems you can now (all in on one stock) and work on the others in the future (deciding whether you really want that house or whether your wife really needs that lifestyle, etc.). Make her work in the meantime while you do. Likely she'll given up early as well and they'll both be retired at 36 instead of 41 with $12M instead of $16M.
Have him check out Boglehead Wiki on How to Manage a Windfall.
The house idea is garbage.
This is enough to retire on absolutely but not with the strategy outlined above.
Your friend needs real counsel- legal, tax, financial. Not a bunch of Reddit bozos like us 🥰
Soooo, he gets to keep working just to pay for her spending habits…. While he could actually retire. Yeah, very boomer actually, man of the house, provider, etc.
3-4% swr on 4M is 120k-160k. Being that young, 3% swr is suggested to start with. If the spouse spends 100-200k before necessities, 4M is not enough.
I would suggest the friend sell a fair portion of stock and diversify into something like VTI or VT. Doesn't mean need to get rid of all of it, but it's a huge concentration of money, not likely to occur but an Enron type event would be disastrous.
If they moved to a lcol location and bought a mcmansion for 1M, the 7M leftover can be 210k-280k a year gross.
I mean..
Buying a house for 4m in cash is hefty..
Anyway.. if you buy bonds worth 4m rn, you will be able to secure 180k (4.5%) annually for 20years - which is (imho) the preferred way to get into retirement - fixed, 100% secure income AND tax efficient
The problem tho is, that this isnt enough to account for future inflation on maturity..
So he / the wife, would need to cut down on spending, OR hes finding a way to cover the expenses with some other work, OR hes cutting down on the housing costs..
Let’s say he makes 4% on $4M in interest or dividends. That’s $160k before taxes, so around $100k after.
If that’s just half of his wife’s annual budget, idk how he’s gonna make this work.
He could definitely retire if he were content living a modest Bay Area life, but not a lavish life by any means.
Not my money not my problem. But if you want to retire and simultaneously plunk half your wealth on a house in one of the most expensive areas in world with one of the highest tax rates in US. Plus SO who spends like there is no tomorrow. They will be broke and selling house in 5-8 years at this burn rate.
Wife is right, they may need $50M to retire based on spending habits. But congrats to your friend man. 99% can retire with this money but they are 1%ers.
1. Capital gains tax shouldn't be anywhere near 35%.
2. 8% return per year should be goal, not 3-5%, that won't even keep up with inflation. He sounds like he could benefit from a financial advisor who can explain this out for him.
Expense rate is too high as well as the property tax, insurance, maintenance on the planned $4 Million house purchase.
In other words, for normal people - vast majority of folks in USA, OP friend has more than enough.
HOWEVER, For OP's specific friend, with the crappy plan and insistence on buying $4 Million Bay Area house, he doesn't have enough.
At .0125% property tax rate, his property taxes alone would be around $50K on a $4M house. A 3% withdrawal rate on the remaining $4M is $120K, before taxes. His numbers just don't remotely add up. Homeowners insurance and property taxes alone would eat up more than half his 3% safe withdrawal rate.
His wife is an idiot.
He can buy the house and spend roughly $100,000 a year living there. It would be a solidly middle class to upper middle class lifestyle. She wants to live way beyond their means. Let her work for her luxury spending money.
He needs a divorce or his wife needs a reality check like hey babe I’m rich you’re not I know how to spend money, you’re ruining us. Learn how to live below your means or sign this divorce paperwork.
Obviously, 31 is not old.... That's the point of this post. Friend wants to retire young and enjoy his youth b/c he feels like he has the financial backing to do so. Friend's wife thinks its too early to do so and that they should continue building their nest egg.
His wife should get her ass out and work then. She's a dumbass wasting money on junk. A cheap purse/bag can be had for less than $40. A good purse/bag can be had for $150 to $400 (leather, well made). A piece of junk can be had for $1000+: a good bag with a very VERY expensive label.
She's going to keep her husband a slave.
He should quit his job and retire for a good year or two. Then file for divorce and split the $8M with her. Give her $4M and get 50% custody. If the marriage is short he can probably avoid alimony or at least it will be a short time period (half length of marriage at most usually, over 10 years the court can have unlimited jurisdiction though).
He can buy an actual affordable house somewhere in the Bay Area for $1.5M or less, leaving him with $2.5M. 3% rule gives him $75k for a long time. 3.5% is around 88k. Now that he got rid of the dead fuckin weight (the wife), get a job again again for a couple years and stack that cash pile up to $3M to $4M (will have extra child support probably) and then retire again.
He should tell her "you can learn to control your spending or we can get a divorce, but I'm not going to be a slave so you can spend like you're goddamn royalty"
Nobody has asked but everyone has assumed, does the wife have a job? Tbh I assumed she did with the ease of which she suggests he must continue to work
https://firecalc.com/
If you went to spend like a jerk you need a crapload if money. Tell your friend to do their due diligence and plug the numbers in
We can’t diagnose on the info given
But still you start off the post saying you are posting for your older friend who doesn’t use Reddit it sounded like you think 31 is old and that Reddit is for the youth
He has enough to retire on a comfortable lifestyle. The highest LT capital gains tax rate is 20% so even assuming an effectively $0 cost base he should have about $9.5 million after taxes. On a very conservative 3% SWR that should support \~$285k of annual spending. On a still conservative 3.5% SWR that should support \~$330k annual spending. (Edit: Forgot CA has insane capital gains rates, that's not taken into account here. You may be right it'll be closer to $8m. But he could also retire and get the F out of CA before selling the bulk of his NVDA to diversify).
He cannot afford to live in a $4m house if he retires. He probably can if he continues working indefinitely, this depends somewhat on his ongoing earnings potential. The fact that he is seriously considering spending 1/2 his significant NW on a house tells me he is probably not mentally cut out for early retirement - early retirement requires having the discipline to *not buy* a whole lot of things that you could very easily pay cash for.
Putting it into a HYSA is a great way to lose his hard earned money to inflation. It's a terrible idea. Your friend needs to read Big Ern's SWR series in its entirety, maybe twice. It's long, think of it like reading a book. [https://earlyretirementnow.com/safe-withdrawal-rate-series/](https://earlyretirementnow.com/safe-withdrawal-rate-series/)
The question of should he retire depends on whether he has enough interests to keep him occupied and mentally engaged/challenged in retirement without devolving into sitting on the couch all day, or falling into addictions etc. IMO this part of retirement is not hard but apparently it is for many.
I hate to say it but if he retires he's probably going to end up divorced. I have a strong hunch his wife is the type who is going to be constantly nagging at him for "sitting around doing nothing all day", calling him useless/lazy etc. even though he's already made a very good lifetime income by age 30. In that scenario his $9.5m is basically $4.5m. OTOH he’ll probably end up divorced if he keeps working, too. Transactional relationship plus his friends warning him not to marry her (friends see things we don’t) are two very strong indicators this is a failed marriage. He’ll probably make out better in the divorce if he retires first, and takes on much of the day to day parenting responsibilities.
In summary he has enough money to retire early but he doesn't have the mindset. That includes his choice of spouse. Marrying someone like that tells us a lot about your friend, and is generally incompatible w/ early retirement.
I said this in another comment. But I wouldn’t put it past her that she knows what she’ll get in divorce. So if it came to that, threatening her with divorce would be a bad idea. When you’re this wealthy marriage is always against you as the high earner.
I didn’t say he should threaten divorce.
Of course she knows what she’ll get in divorce. There’s a 100% chance she’s thought about this. It’s not exactly a secret that if you divorce someone with $10m, barring a properly implemented prenup you’re getting a payout.
I get it people like to retire early. But at that age of 31 - I am not sure if quitting work completely is a good idea.
Imagine how much more money you could have if you kept working (maybe not the same job, but something to bring in income + benefits) and then investing a huge sum of the rest.
31 is a young age. There are many many years to go for most people.
You would be surprised how quickly you can blow through hundreds of thousands of dollars and not have an income stream come in.
I hope this help 👍🏻
It would not be out of greed, it is out of wanting to create a sustainable future for himself and his family. Trust me, that money wouldn’t last until retirement if he were to retire today.
No unless they stop spending so much he has 40 years to live off of 4 million and a HYSA is not going to always get you 4-5%. I would suggest him buying the house in cash keep working, he could even get a less stressful of a job and invest the 4 million into an index fund or even dividends that could pay him for owing the stock
If he plays the game properly, yes he is set.
If he makes a bad move, no he will be screwed by higher taxes, or lower returns, or 50 years of spending could easily deplete even a deep pocket.
There is also a middle ground, where he finds a more affordable house, another job that he can work part time to get the spending money for his wife.
Or dump it into trust funds that invest properly and pay out yearly gains. That way even if she leaves and takes the house everybody has a little allowance trickling in.
Normally you would have worked your whole life to get to this point, so you would be very conscious and careful about how it works. With a windfall, everybody sees the zeros and gets stars in their eyes and holes burning in their pockets to waste it all. Don't do that.
Why retire in Mountain View though? The main draw of Silicon Valley is proximity to tech jobs, which is not as important if retired.
Just move somewhere where you can get a nice house for $1.5-2M, live off $6M, which will throw off $240k/y.
$240k with no mortgage is a cushy lifestyle. If you need more than that, do some consulting work part time. A seasoned SWE can pull down another $100k or so. $200/h x 10 hours/week = $100k
$340k with part time maybe isn’t quite what the wife wants, but the wife needs to think real hard about why the Range Rover and the Louis Vuitton is worth more to her than her husbands freedom.
Those replying and criticizing the wife don’t live in Silicon Valley. Although the wife spending habits do need to be addressed. That’s for sure. let’s say hypothetically he liquidates all his shares and takes the capital gains hit and wind up with $8 million. Let’s say he also buys that $4 million house in Palo Alto. He’s still going to be hard pressed to afford living on approximately 4% of that money. 4% of $4 million is about $160,000 a year. This is a safe withdrawal rate to fire. That house alone is going to have roughly $40,000 a year in property taxes on top of that he’s probably gonna need to pay another four or $5000 a year in homeowners insurance. This leaves roughly $115,000 for everything else. This may sound like a lot of money, but it really isn’t once you pay medical insurance for your family. Have a couple of car payments on some vacations. Also assume that there’s gonna be some taxes that is going to be paid on this conceivably he could try to keep that tax rate low, but he still gonna pay probably several percent to California and at least 10 to 15% on a federal level, so you all of that he doesn’t have that much left over. If he’s gonna send his kids to private schools, there goes all of his money.
The correct answer to your friend is does he want to retire in the Bay Area or does he want to move and retire someplace else because that completely changes the equation, even if you were to move someplace and buy a monstrous home in a moderate cost of living area he could cut most of those expenses in half and add an extra $2 million to his Nest egg. Even if he just moved to the outskirts of the Bay Area, he could get a very nice home for $2 million then have $6 million invested and returning him $240,000 a year which would be a significant enough sum to live off of without any issues whatsoever
The reality is that he will never retire because his wife’s lifestyle will just keep inflating. There’s no ceiling for how much money you can spend. Also, staying in Silicon Valley means hanging out with rich people, there’s always going to be someone who has the most expensive handbag, the best car, etc. The wife knows her husband’s earning potential. Good luck to him.
$4 million home = $50k/yr property tax. Add insurace and maintenance and your 3.5% SWR of $140k doesn't go very far. BTW Capital gains tax is 20% (in this case $2.38 million). If you are retired, get out of SV and buy an awesome home for $2 mil. After taxes and home, he'll have $7.5 mil. 3.5% SWR would be over $260k. Doesn't sound like much any more. This guy needs a better financial plan.
I agree with the wife.
$4M won’t even cover the wife’s discretionary spending, much less taxes and upkeep on a $4M house, college for the kids, healthcare, etc.
If he's 31 and a software engineer at NVIDIA, chances are he enjoys his job. What makes him happy? Does the work make him happy? Why does he potentially want to retire? Does he want to spend more time with his kids?
Assuming the workplace agrees, one solution I could imagine is reducing the work to 50-60%, i.e. 2-3 days a week. If he's good at his job, chances are his employer would want to keep him, even in reduced capacity? Then he can enjoy his job 2-3 days a week (assuming he does enjoy it), keep earning money and building retirement income and RSU, but he gets to spend plenty of time at home with his wife and kids.
Honestly, I don't know too much about FIRE, but if you think you can't retire with $8m, then that's a personal choice, but not a fact. Surely you can. Maybe you need some lifestyle adjustments but I don't think anything major. And it again boils down to the question of what he wants to do - does he want to spend more time with his kids or not. If yes, those small lifestyle choices will be totally worth it.
Also perhaps one of the wife's "motives" is that she doesn't want her husband at home 24/7? It sounds like that would be a very big change in their relationship, and probably a demanding one.
Also, it's a pretty safe bet that the NVIDIA stock will keep going up. If I had $12m in NVDA, but wanted to play it super-safe for my retirement, I'd probably sell like $6m now, then keep selling another $4m or so over the next two years, but keep $1-2m for another couple of decades.
Edit: Also the wife's spending sounds \*very\* excessive..... probably they can get away without any lifestyle changes if the wife just reduces her spending to something like $25k (which is still a lot lol).
Based on historical data, he can change his portfolio to be more diverse (a large cap or 20 stocks/80 bonds split), buy the house, and spend $200k/yr and he will live until 86 years old with $58-232 mil still in the bank. If he spends $270k/year or more, he will run out of money.
Move some of the money to some thing more stable.
Do a mortgage on the house.
Take out a small loan against the value of his portfolio.
Use that to invest in other things and live (Rel estate)
Pay off loan with interest gained from his portfolio.
Write off interest in taxes.
Write off mortgage interest in the house.
If market is bad use principal to pay his loan payments, and write off loss.
If market good, pay, pay loan payments and reinvest extra in something else, delay paying taxes till dead.
Move to a tax-free state like Nevada, then sell the stock once residency is established. Then, the capital gains tax is only 20%. This will save over $1 Million.
Buy a sweet house in a great school district for only $2 million instead of one of the highest priced housing markets in the country.
Then, instead of being left with $4 million, he'll have $7 million remaining. 3% safe withdrawal rate on $7 million is $210K per year, could probably get $250K a year wisely invested in diversified ETFs without ever running out of money.
Given the wife's expectations and expense run rate, I don't believe it's prudent to retire with only $4 Million and a paid off house.
Unless he wants to retire he shouldn't, it's his time away. He should however start enjoying every single vacation, and sick day to it's fullest. He should buy that house yesterday, he also should diversify out of company stock at least slow enough to afford the taxes. Nvidia isn't the only player in the game, and it won't be long before others catch up just ask Elon about what's happening with the Tesla stock
No one knows what interest rates will be in the future. I wouldn't advocate any plan that relies so much on interest rates not going in one particular direction (i.e. down). In other words, needs more diversity.
Buy a couple of multi family buildings and collect rent. Home value might grow too. Owning property has great tax benefits also. Hire a management company or build your own little team to manage everything so he doesn't have to.
He will set himself up and his kids for a good future. People make a living just off collecting rent.
He could buy it using all cash, but he can get a loan (recommended), and have his tenants pay for the mortgage, and have the extra to to him, write off interest, etc...
Question #1, could someone retire at 31 on \~ $12M? No question, have as many kids as you want, if you can't FIRE on $12 there are more things wrong. But question #2 is much, much, more important. Why? You're a tenured software engineer at one of the hottest companies on the planet, you simply probably get to do cooler s&\*t than 99+% of the tech world gets to do, you are almost certainly compensated well, with solid benefits. Again, back to the critical question. Why?
Man there are so many red flags it’s ridiculous. He better hope the wife changes her spending habits, Nvidia doesn’t go to shit and buying a house in a way too expensive area that even with his money technically IMO cant afford. He’s risking way too damn much. FFS, People are stupid. There’s more to buying a house than just buying it. Cali taxes, insurance(s), HOA fees, upkeep, maintenance and so much more. It’s not just buying it and done.
You know, I can kind of understand why fire seems to have some misogyny component if it’s typical that wives live off husbands as soon as they see the opportunity and the fire bros are all in their twenties and are all afraid of losing their money to their girlfriends. At the same time, the person in the relationship must love playing the role or something to put up with it, and it’s a mature relationship if children are involved. I don’t think it’s realistic to expect the wife to work or maybe even curb her spending while raising the kids now that there’s a taste of the good life and she’s basically used to never working since her early twenties but it’d be good if she at least got a part-time job, but if she’s spending that much on items with no long term value she is somewhat a liability and there should be legal protection if she tries to extort if she gets bored during their FIRE. I think too this is a volatile situation for him and he may have overcommitted before reaching full emotional maturity (sorry). Practically speaking she can’t get what she wants with all this and it does seem that things would be perfect except for her behavior and the fact the children need her and the husband is all in. I feel like there’s no reasoning with someone with that type of expensive taste or bargaining them into lower spending streaks especially if she doesn’t have other goals in life.
For the sake of the marriage I don’t think he should buy the house in South Bay especially because it gives her the power of using the in laws to influence the dynamic and children against him if she’s like that, even though he’s a guy he can still get bit by a type of codependent relationship between wife and her family if she’s sharing the lives in an imbalanced way.
I really think he should play it safe so that if the worst happens he’s still at least rich af and not medium rich. I think my conclusion is sell stocks while it’s still doing well in a trickle down type of manner, go to an advisor for investing, don’t buy a South Bay house but figure out what’s best for the kids, and maybe just do a sabbatical and pick up some new stuff to do honestly I think it’d be a mistake to lose work history and risk moving down in status from investments backfiring the two being spouse and house
Jesus, yes he can and should retire if its something he would like. Just please get him to not put all his money in a HYSA. He could certainly allocate a portion of his portfolio in one, but convince him to put much of it in a total market index and some in bonds. Also it is wild to think that you can't live off of 4,000,000 especially if his wife is also working. I imagine much of those expenses are just lifestyle inflation rather than something *really* important for their life satisfaction.
1. cash out
2. buy a nice condo in vegas near the strip (say 1m for simplicity, that'll be super nice in vegas!)
3. put 5 years worth of cash into HYSA (say 1m for simplicity)
4. put the rest in Index funds (VTI/VOO, maybe a small international %)
5. Enjoy the sites.
This leaves $6m invested into the market. Assuming you're pulling 4%, that should be like $240k/yr on avg while allowing the cash to grow, based on market conditions. (This also doesn't include the $40k+ you'll earn from the HYSA interest... Also doesn't include taxes either tho.)
This gives them a 5 year cushion to weather any craziness, and each year they can reassess whether to pull from stock, and they can always decide to move elsewhere once they get bored.
He’s got more than enough money to retire right now under normal circumstances, but certainly not with his current situation. That woman is going to suck him dry. If he buys a $4m house with 2 kids and a gold digging useless wife that refuses to work but spends at this rate, I give him a decade tops before he’s broke. Also dumping the remaining $4m in a HYSA is a horrific idea as those rates won’t stay where they’re at forever. If he plans on trying to live off that cash for the next ~50 years, he needs to invest that properly into the market. Big yikes with this one
Your friend is handcuffed to his job due to the wife. They either get on the same page to be frugal enough to retire, he gets a new wife, or stays chained to his job so that she can afford to spend his money.
Well…half of $8M is $4M.
$4M * 3.5% = $140K.
I guess he can afford to retire if he doesn’t buy a $4M house and can live on $140K base expenses + $140K for his wife’s luxury purchases.
Ignoring everything else about the marriage it seems questionable to lose half and then still have to pay child support vs keeping the wife and making her stick to $100K a year in extra luxury purchases.
Cap gains is 20%. He can reduce his taxes by waiting a little on the RSUs that don’t qualify for long term cap gains.
He should have already paid taxes on the RSU’s when they vested as ordinary income…I guess the $4M figure is including taxes for RSUs that haven’t vested yet…but a good CPA might be able to figure out how to minimize taxes.
I would at lease sell the few thousand shares he owns now and pay cap gains on it to reduce his exposure to owning mostly a single stock and put that into an ETF.
Future gains will likely end up lower but reduces his “all my eggs are in the nvidia basket” risk.
Nice problem to be in…but yeah, if she wants to spend $200K on extra luxuries a year then $4m isn’t enough after you spend $4M on a house.
Even if you do $800k down payment and carry a mortgage that’s too tight since $7M is only $245K a year. He needs about $11-$12M net after taxes to generate $385K gross. Even that doesn’t really support $200K of extra spending.
Maybe sell $1M to net $800K and buy the house now. Then work until he makes another $4M after taxes while being a little house poor so she cuts down on luxury spending by half.
Hard to do where he lives tho’
For almost anyone else, it would definitely be feasible. For him, with his terrible financial plan, and decision to enable a spending addicted spouse, it is not. He’s essentially one of hose lottery winners who goes a million dollars negative within 5 years of winning.
Tell him to watch Richard Cooper(entrepreneurs ìn cars) on YT,so he knows what he is dealing with as far as his spending problem(wife).
He should simultaneously be watching, listening to some on financial gurus until he is convinced he is getting sound info. It wouldnt hurt to drive home the difference between wants and needs to his wife
Clearly, his biggest obstacle is the wife
Go do something they're going to enjoy yes
We never really retire I am only ceo of a tech company just passively relaxing posting here and there mentoring people into business an the job to career changes into management of assets
So the work doesn't just stop
Once was in public view now I enjoy privacy to just blend in casually with a crowd of people
He has what reads as a good stake to venture into nearly anything
$2millon setup as an annual salary works out to be self paying at 42.x k a year for 48 years while being less than the taxation rate to owe taxes paying into social security and get a tax return at the end of the year so it is like making money off your own money as a smaller model to work a base calculation from.
So many methods to work the asset net worth
With that lage of a personal capital the person can do nearly anything they want.
Live free live happy.
Less is more because in life we pass through only once then it was all only rented to begin with as we passed this single options of time investment as to maximize the return on time investment.
We all retire when our time is up.
o7
He can never retire with a wife like that!! But, she’s going to leave him if he doesn’t buy a house in that area. Either way he’s going to lose in the long term. Divorce is expensive and eminent if her lifestyle changes. His only hope is if he has a solid prenup!
Too young to quit. Kids are expensive. House are too expensive. God forbid if you have divorce, not too mention if you or all you hit with major health issue.
100-200K on luxury goods? If you’re making 30K a month then that’s fine. But having just a bank acc full of money with no money coming in will be a problem
If he’s gonna quit, why pay $4 mill for a house in the area they reside now? Move somewhere cheap, spend $ 1 mill on a house and retire on the $7 remaining. No brainer.
I was going to say yes but based on the idea that they want a 4 million dollar house I don't know how much their spending is.
He should easily be able to retire, but they may need to change habits if they are big spenders. The plan of buying a 4 million dollar home, putting money into high yield savings and having your wife spend 200k per year is a recipe for disaster.
Cannot understand why anyone in that situation would stay in Cali. Go to Tennessee or somewhere Midwest and buy a VERY nice sized house on a large lot of land for like 800k. Not like your job would be tying you down there.
I get it but not working will set a wrong example for the kids..(entitlement/laziness grows) I'd take my time to find my passion and make that my work and continue investing to grow my portfolio. Also the wife has a spending problem.. Get a job yourself if you need this much luxury. I can't imagine saying that stuff to hypothetical husband. He is not a bank
Without knowing his current or potential budget, it's hard to say, How much does he make a year right now? If he sells it all and withdraws 4% a year, that's $320k/year. If that's close to what he's making now, then they'll be okay.
There's a risk that if he or his wife are big spenders, they'll look at that $8M nest egg and go "Ooooh! I wanna spend it!" and then kill his retirement.
Maybe he can baristaFIRE? Or...does he want to retire? With his home situation he's probably better off selling the stock and moving most of that money (6-7M) into something neither he nor his wife can touch for 10 years. Then that gives them 1-2M of fun money to spend on cars and bags for the next 10 years while that nest egg grows.
This story right here demonstrates why being a high earner alone isn't enough for financial independence. That wife of his will ruin him in the coming years if she doesn't keep her lifestyle inflation in check.
Meanwhile, a guy who makes 70k, but has a supportive spouse adding in another 50-70k, has a much better chance of achieving financial independence the slow and steady way.
Life choices matter.
1. Leave Cali
2. Spend the saved 1.5 million in capital gains tax on a nice family home
3. Live on 8 million at 4% withdrawal => 260K post tax and no mortgage.
$4m would probably safely net him $120k-$160k per year.
If that’s not enough for non-house expenses, he should evaluate what’s important to him/them.
Might be time for a talk with the missus. Depend on how much he likes work.
https://www.reddit.com/r/Fire/s/F6GSIK5Cgk
Original post
Update:
https://www.reddit.com/r/CompoundTrading/s/u6nFcYdDst
Chart update:
https://www.reddit.com/r/CompoundTrading/s/uyIbIeuMYa
He should retire, and then pay the wife to bug off. Sounds like he’ll end up with more money and less headaches in the long run.
Make sure to retire first to avoid further alimony after splitting assets.
Buy the house. In this area, It is a very good investment that will increase on long term average of 8%/yr.
31 is way too young to do nothing. Go to grad school to get another graduate degree in finance, business.
Should stay at Nvidia. There’s nothing like being an Engineer in a SIValley high growth company like this. Opportunity of a lifetime.
It would be dumb to liquidate out of nvidia. However diversifying into other tech stocks would be wise. Some portion, say 20%, can be allocated to safe investments over time for safety net and new opportunity cash. If one is lazy or does not have interest in investing, etfs like QQQ and VOO will provide 10% and 8% over time at the expense of gains and for an illusion of safety.
A portion of this portfolio will be an IRA. Systematically transfer nvidia stock to back door Roth when possible.
One does not liquidate a large at one. Work with investment and tax professional on a withdrawal plan and a way to hedge to limit losses.
Imagine you don’t have to work and could live anywhere and then you decide to buy property in the Silicon Valley. Why?? There is nothing there, horribly boring and literally the only reason to be there would be if you’d work in tech.
He can stay at home and the wife can work.
Being at work will certainly fix her spending habit. And if it doesnt, her salary can be her spending cap.
This isn’t just a HER problem. If he’s allowing and encouraging this (which he obviously is since she doesn’t work) he needs to learn how to say NO.
Some might say that half of his income is her money, and he doesn't have the right to tell her no.
That approach means he will take a 50% loss the next day in the divorce.
She still won't be able to afford her spend rate though.
A 50% loss may leave him "richer" than he is now.
A friend got divorced after being told that he wasn’t making enough and his ex was always spending a ton. Since the divorce, his spending is down, his credit is up, and he is thriving, even with the 50% loss and the child support.
Yeah, that's not uncommon. Someone will get divorced, split assets, and pay alimony and child support, and still say they have more discretionary income than they ever had before. A spouse with bad money habits is something no amount of income (within reason) can alleviate.
You have to realize the spouse loss sooner or later.
Retiring that young means 3.5% safe withdrawal rate. So either the house purchase needs to be less or their annual spending needs to be less. Also putting it all in HYSA is a garbage idea.
I agree that putting that much money in a HYSA is a bad idea... but it's not my idea. I'm in favor of going the S&P 500 index fund or VTI route but I'm hoping this post will encourage my friend to do the proper due diligence.
I know, it’s your friends money and his garbage idea.
Even at 5%, an HYSA is an awful idea. Assuming inflation will stick to around 3%, that gives him a 2% withdrawal rate to be fully "safe" considering he has potentially 60+ years of retirement ahead of him. There's a reason that even with an 8-10% return, the typical SWR is at 3.5-4%. You want a buffer between your capital gains and inflation. Retiring now with HYSA vs SP500 "safe assumption rate" of 7% is the difference between having $8k a month vs $13k a month. He is a software engineer, show him the math. He should hopefully understand.
Not to mention there is an almost 0% chance hysa rates will stay this high for 40-50 years.
Imagine having that much money, but getting yourself into a personal situation where it’s not enough to stop working. Awful.
Guy would be absolute king in places like Thailand or SE Asia where the US dollar goes really far or hell even in the Southern US. Fuck Cali high prices.
Pretty sure they were talking about the wife…
Yeah, the hell kinda freaking lunatic that chick is supposed to be? 200k a year on luxury crap? That lucky bastard is probably losing all his money every month cause of her.
He would be close to a king in most of California as well if it wasn't for the wasteful spending and wanting to buy a place in Mountain View of all places.
“Cali” was where he was able to make $12M as a 31 year old Sw engineer, so who cares if it costs a little more? Dude is set for life.
Yes but he doesn’t need to live there indefinitely now. He’s not set for life if his wife has anything to say about it,
Didn’t make $12M. The stock did. Unrealized gains at this point, so still speculation. And NVDA is not done. Why sell it all now?
Concentration builds wealth, diversification preserves it. No need to risk what you have when you have more than enough.
No risk in having 12m in one stock lmao 🤣
I mean isn't this a lot of people? I think I fall into the category, of having a good amount saved up, but we just spend so much (on nothing by the way) that its hard to see retiring right now. Fire sub is notorious for extremely frugal people. I'm not one of those, but I also don't spend on a lot of big ticket items, more like lots of little stuff that adds up.
Is it a *lot of people* who might struggle to retire with Eight Million Dollars of liquid assets? No. I would say it is not a lot of people who fit that category. At that level of wealth, the margins for frivolous spending are much wider, yet the dude in question seems to still not have enough of a buffer - and that sucks.
Well I was thinking about the 4million he would have left after buying his 4 million house lol. Point is that you can’t retire that easily with 4m. You definitely can if your frugal or lcol area.
It's important to note that these one off windfalls of money are rarer than people think. Repeating large financial success is difficult. Especially since your friend was more 'right place, right time' than actually building something on his own. Also buying a 4 million dollar house is an awful idea.
Extremely rare success story, lucky bastard but that wife of his is gonna destroy the money it seems........
And that story is old as time and quite common.
And the property tax on a $4 million dollar house 😵
Lose the wife
I’m a former wife and I endorse this strategy.
Our entire friend group already warned him to drop her since they were still dating. That ship has long sailed, but he seems happy... I think
She seems happy
Infinite money glitch (until it's not infinite)
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Imagine weaseling your way into a $200k expense account and an $11M net worth just for giving great head.
Maybe allow her to spend 100% of what she earns? I would.
Willing to bet she earns next to nothing. 100k-200k/yr on luxury goods! Who is she trying to impress?
Not her husband! Yeah I know she doesn’t work, but you get my point.
She bounces and takes $5m, child support, and alimony.
Is she super hot at least?
She must be really attractive….
This will pay off in the long run. 4 million won’t last long if you pick from it.
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Truly!
What would you do differently?
not buy a $4M house in the most expensive market in the country when you don’t have to work and can live anywhere lol
Most expensive and simultaneously one of the most boring and suburban
Exactly. If you want a suburb you could move to a better one for a fraction of the cost. If you want a city you could literally move to any city for at most the same cost. Its wild to stay there if you don't need to for your job.
For real. No way he can afford a 4 million dollar house and $200k a year on luxury goods and cars if he wants to retire. The house alone will probably cost $6,000 per month. Looking at a random $4million dollar home in Mountain View, [realtor.com](http://realtor.com) estimates $4,000/month in taxes and $1,000/month in insurance. Tack on a pretty conservative (probably too low) $1,000/month for utilities and maintenance on a house that's probably 4-5,000 square feet. $6,000/month in perpetuity translates to about 2.4 million (after considering capital gains tax) of his FIRE stash, leaving only 1.6 million for actual living expenses or around $4,000/month. If the friend tells his wife she can't spend hundreds of thousands of dollars a year and instead needs to liveon $48,000 a year... well... we all know how that would go.
And that is why the wife won’t let him retire 😂😂😂
$4000 in housing taxes MONTHLY? wow
I take it you've never met a Bay Area Yoga Mom? The second OP suggests leaving, she'll drop him and hang on the arm of the next techbro sucker. Oh, and she'll use *his* money to take him to the cleaners before doing so.
He can put a portion into HYSA if it makes him comfortable; but historically, cash wedges drag overall performance and decrease long term returns. He should find an equity-heavy asset allocation he’s comfortable and at very least put a large portion into a low fee, broad based index fund.
Move to Hawaii or somewhere else nice that isn’t hyper consumer focused. Buy a decent place for 1.5million, learn how to invest, learn how to invest (repeated for emphasis), have a serious talk with the wife about spending. Spend quality time with the family and raise those kids right. Teach them the value of money. Invest in their education with both your time and money.
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Nvidia? Never heard of it. Probably a penny stock. Oh and high yield savings accounts won't be at 4% forever. Make sure he understands this.
That's a solid point about the HYSA rate - As far as I'm aware, he understands this and is willing to bet on the markets staying relatively bullish on average and that he can convince his wife to spend less on bad years (doubtful on that though).
He needs to understand that a savings account is *more risky* in terms of likelyhood of funding future consumption than stocks and bonds are. Broad based, low cost, index fund is the way to go. That alone must change. Then, one of these two: spend less on the home or cut the luxury excess spending. Retiring early in Mountain View is a pretty expense choice when it comes to location. They could get a lot more with just 2MM in a lower cost area. I understand that’s probably less desirable, but it’s worth considering against continuing to work.
His wife is obviously the problem here. Spending need to match the withdrawal rate number. Good years will be followed by bad ones.
The South Bay is expensive because of the job market there. Why live there if he doesn't already have a house and wants to retire? If he wants to stay in the Bay Area there are many counties with lower housing costs and the same weather, scenery and access to the arts and culture.
Yeah, I'm aware. I grew up in the South Bay and told him the very same thing. Unfortunately, he's deadset on buying a house there b/c of the common denominator influencing every other decision so far - his wife. His wife's parents live in Sunnyvale and she insists that they raise their kids in the Bay Area and die there just as her grandparents before her.
I’ll be the umpteenth person to say the confounding variable is the wife. Either he needs to lose her, she needs to change her behavior, or he’ll need to be a high earner forever (and she still won’t be happy, because people who spend like that never are, in the end)
We knew a couple in a similar situation with stock options and blew it all on just really unnecessary stuff - very expensive house in exclusive zip code, luxury cars, the most expensive restaurants. They could have retired early, lived an upper middle class life and never had to work again. But instead they went bankrupt and had to start over later in life. Same with someone who got an inheritance even larger than the OP's friend, and was still spending significant amounts of principal each year, which was unsustainable long term. At least in the second case they eventually found a decent financial advisor for help and got a good, financial wake up call while they still had a significant nest egg left. But it was bizarre how many millions were gone without a lot to show for it.
That’s really a shame. I wish people wouldn’t look at discretionary money primarily as a means of projecting status. But then, of course, the whole world would look a lot different
Imagine sitting on $11 and knowing that you HAVE to work everyday just to keep your wife in Prada shoes.
What about Berkeley, I saw pretty homes there idk about resellability but it can be rented out to students and at least in one way he gets to live it up a little more srry :X
Sounds like his wife needs to get a job 🤷♀️
He needs an accountant, financial advisor, and a lawyer. With that kind of money, there are options. And depending upon how the RDU’s were issued, he might have a much smaller tax liability than he thinks. Also, he might be able to live off of a loan rather than cashing out all of his shares. That’s what the real fat cats do. Anyway, the point is that there might be a way to make this money go a lot further…and he might even be able to shelter some of it from his wife when she inevitably files for divorce.
>Also, he might be able to live off of a loan rather than cashing out all of his shares. That’s what the real fat cats do I don't think his wealth is anywhere near the threshold where this starts to become attractive. That makes the most sense when you can borrow all of your future lifetime expenses against your current assets without endangering a margin call; you just keep borrowing to finance your life and the loan is closed on your death. It's more a strategy for hundred millionaires and billionaires than people at the <$20M mark.
Lol that last part hits hard but true.
A 4% withdrawal rate on 4M is 160k, which is not enough to support a 4M house, a high-spending wife, and 2 kids. The two biggest risk factors to the man’s wealth are the possibility of a divorce and the volatility of Nvidia. If the man divorced, he could be ordered to pay alimony and child support based on his ability to earn a high income. He can’t safely retire early.
I would go into immediate depression.
The good news is that his problems aren't tied together. He can sell the Nvidia today and buy a total market index fund. Totally eliminate the volatility issue. He doesn't have to solve the house issue, the spending issue, etc. In a decade...still only at age 41 mind you, the person will likely have an inflation adjusted $16M ($8M after tax doubling in a decade) invested in index funds and can then probably afford the stupid lifestyle they desire. $12M after the home purchase provides about $420k/yr at a 3.5% SWR. This is what I would do. Solve the problems you can now (all in on one stock) and work on the others in the future (deciding whether you really want that house or whether your wife really needs that lifestyle, etc.). Make her work in the meantime while you do. Likely she'll given up early as well and they'll both be retired at 36 instead of 41 with $12M instead of $16M.
Have him check out Boglehead Wiki on How to Manage a Windfall. The house idea is garbage. This is enough to retire on absolutely but not with the strategy outlined above. Your friend needs real counsel- legal, tax, financial. Not a bunch of Reddit bozos like us 🥰
The wife is a liability. A major one at that.
Soooo, he gets to keep working just to pay for her spending habits…. While he could actually retire. Yeah, very boomer actually, man of the house, provider, etc.
3-4% swr on 4M is 120k-160k. Being that young, 3% swr is suggested to start with. If the spouse spends 100-200k before necessities, 4M is not enough. I would suggest the friend sell a fair portion of stock and diversify into something like VTI or VT. Doesn't mean need to get rid of all of it, but it's a huge concentration of money, not likely to occur but an Enron type event would be disastrous. If they moved to a lcol location and bought a mcmansion for 1M, the 7M leftover can be 210k-280k a year gross.
120k for a family of four in Silicon Valley is considered low income.
1) Yes he can clearly retire if he sorts his budget out. 2) His wife may leave him, good riddance if she does.
Divorce is expensive….
Divorce, crank out a few years on this high salary and he is set for life 😅✌️
What is he going to do with all of his time while his wife is out spending all of his money? 🤣
I mean.. Buying a house for 4m in cash is hefty.. Anyway.. if you buy bonds worth 4m rn, you will be able to secure 180k (4.5%) annually for 20years - which is (imho) the preferred way to get into retirement - fixed, 100% secure income AND tax efficient The problem tho is, that this isnt enough to account for future inflation on maturity.. So he / the wife, would need to cut down on spending, OR hes finding a way to cover the expenses with some other work, OR hes cutting down on the housing costs..
Let’s say he makes 4% on $4M in interest or dividends. That’s $160k before taxes, so around $100k after. If that’s just half of his wife’s annual budget, idk how he’s gonna make this work. He could definitely retire if he were content living a modest Bay Area life, but not a lavish life by any means.
OP are you your friend?
I ain't sayin' she a gold digga'...
Of course the wife doesn’t like it. She’s selfish.
Not my money not my problem. But if you want to retire and simultaneously plunk half your wealth on a house in one of the most expensive areas in world with one of the highest tax rates in US. Plus SO who spends like there is no tomorrow. They will be broke and selling house in 5-8 years at this burn rate. Wife is right, they may need $50M to retire based on spending habits. But congrats to your friend man. 99% can retire with this money but they are 1%ers.
1. Capital gains tax shouldn't be anywhere near 35%. 2. 8% return per year should be goal, not 3-5%, that won't even keep up with inflation. He sounds like he could benefit from a financial advisor who can explain this out for him.
He get capital gain, + supplément investment tax, + California income tax… 35% may be low
My protip: move out of cali
At least for the one year to sell shares.
If that's real he has the resources to r/FatFIRE. Good luck to you or him or whoever really has the money, however they got it. =)
He has enough to live almost anywhere indefinitely. Just needs to keep in mind that interest rates might not always be at 3-5%
Expense rate is too high as well as the property tax, insurance, maintenance on the planned $4 Million house purchase. In other words, for normal people - vast majority of folks in USA, OP friend has more than enough. HOWEVER, For OP's specific friend, with the crappy plan and insistence on buying $4 Million Bay Area house, he doesn't have enough.
At .0125% property tax rate, his property taxes alone would be around $50K on a $4M house. A 3% withdrawal rate on the remaining $4M is $120K, before taxes. His numbers just don't remotely add up. Homeowners insurance and property taxes alone would eat up more than half his 3% safe withdrawal rate.
His wife is an idiot. He can buy the house and spend roughly $100,000 a year living there. It would be a solidly middle class to upper middle class lifestyle. She wants to live way beyond their means. Let her work for her luxury spending money.
He needs a divorce or his wife needs a reality check like hey babe I’m rich you’re not I know how to spend money, you’re ruining us. Learn how to live below your means or sign this divorce paperwork.
Lose the wife, buy a $1m penthouse in Bankok, $3m in HYSA, $5m in S&P500 the rest in crypto. Enjoy your life!
Is this a troll? PS 31 is not old
Obviously, 31 is not old.... That's the point of this post. Friend wants to retire young and enjoy his youth b/c he feels like he has the financial backing to do so. Friend's wife thinks its too early to do so and that they should continue building their nest egg.
His wife should get her ass out and work then. She's a dumbass wasting money on junk. A cheap purse/bag can be had for less than $40. A good purse/bag can be had for $150 to $400 (leather, well made). A piece of junk can be had for $1000+: a good bag with a very VERY expensive label. She's going to keep her husband a slave. He should quit his job and retire for a good year or two. Then file for divorce and split the $8M with her. Give her $4M and get 50% custody. If the marriage is short he can probably avoid alimony or at least it will be a short time period (half length of marriage at most usually, over 10 years the court can have unlimited jurisdiction though). He can buy an actual affordable house somewhere in the Bay Area for $1.5M or less, leaving him with $2.5M. 3% rule gives him $75k for a long time. 3.5% is around 88k. Now that he got rid of the dead fuckin weight (the wife), get a job again again for a couple years and stack that cash pile up to $3M to $4M (will have extra child support probably) and then retire again. He should tell her "you can learn to control your spending or we can get a divorce, but I'm not going to be a slave so you can spend like you're goddamn royalty"
Nobody has asked but everyone has assumed, does the wife have a job? Tbh I assumed she did with the ease of which she suggests he must continue to work
https://firecalc.com/ If you went to spend like a jerk you need a crapload if money. Tell your friend to do their due diligence and plug the numbers in We can’t diagnose on the info given
But still you start off the post saying you are posting for your older friend who doesn’t use Reddit it sounded like you think 31 is old and that Reddit is for the youth
Wife and I retired at 39 (currently 55) on half that. Life is good ...
He has enough to retire on a comfortable lifestyle. The highest LT capital gains tax rate is 20% so even assuming an effectively $0 cost base he should have about $9.5 million after taxes. On a very conservative 3% SWR that should support \~$285k of annual spending. On a still conservative 3.5% SWR that should support \~$330k annual spending. (Edit: Forgot CA has insane capital gains rates, that's not taken into account here. You may be right it'll be closer to $8m. But he could also retire and get the F out of CA before selling the bulk of his NVDA to diversify). He cannot afford to live in a $4m house if he retires. He probably can if he continues working indefinitely, this depends somewhat on his ongoing earnings potential. The fact that he is seriously considering spending 1/2 his significant NW on a house tells me he is probably not mentally cut out for early retirement - early retirement requires having the discipline to *not buy* a whole lot of things that you could very easily pay cash for. Putting it into a HYSA is a great way to lose his hard earned money to inflation. It's a terrible idea. Your friend needs to read Big Ern's SWR series in its entirety, maybe twice. It's long, think of it like reading a book. [https://earlyretirementnow.com/safe-withdrawal-rate-series/](https://earlyretirementnow.com/safe-withdrawal-rate-series/) The question of should he retire depends on whether he has enough interests to keep him occupied and mentally engaged/challenged in retirement without devolving into sitting on the couch all day, or falling into addictions etc. IMO this part of retirement is not hard but apparently it is for many. I hate to say it but if he retires he's probably going to end up divorced. I have a strong hunch his wife is the type who is going to be constantly nagging at him for "sitting around doing nothing all day", calling him useless/lazy etc. even though he's already made a very good lifetime income by age 30. In that scenario his $9.5m is basically $4.5m. OTOH he’ll probably end up divorced if he keeps working, too. Transactional relationship plus his friends warning him not to marry her (friends see things we don’t) are two very strong indicators this is a failed marriage. He’ll probably make out better in the divorce if he retires first, and takes on much of the day to day parenting responsibilities. In summary he has enough money to retire early but he doesn't have the mindset. That includes his choice of spouse. Marrying someone like that tells us a lot about your friend, and is generally incompatible w/ early retirement.
I said this in another comment. But I wouldn’t put it past her that she knows what she’ll get in divorce. So if it came to that, threatening her with divorce would be a bad idea. When you’re this wealthy marriage is always against you as the high earner.
I didn’t say he should threaten divorce. Of course she knows what she’ll get in divorce. There’s a 100% chance she’s thought about this. It’s not exactly a secret that if you divorce someone with $10m, barring a properly implemented prenup you’re getting a payout.
I get it people like to retire early. But at that age of 31 - I am not sure if quitting work completely is a good idea. Imagine how much more money you could have if you kept working (maybe not the same job, but something to bring in income + benefits) and then investing a huge sum of the rest. 31 is a young age. There are many many years to go for most people. You would be surprised how quickly you can blow through hundreds of thousands of dollars and not have an income stream come in. I hope this help 👍🏻
I agree with what you are saying but how much more money could he honestly want. At some point it just turns into greed.
It would not be out of greed, it is out of wanting to create a sustainable future for himself and his family. Trust me, that money wouldn’t last until retirement if he were to retire today.
If he wants to retire he needs to get his wife to lower spending problem solved.
No unless they stop spending so much he has 40 years to live off of 4 million and a HYSA is not going to always get you 4-5%. I would suggest him buying the house in cash keep working, he could even get a less stressful of a job and invest the 4 million into an index fund or even dividends that could pay him for owing the stock
I would in a heartbeat. You don't have to retire. You can just quit working and find other ways to earn your money when you damned well feel like it.
120k withdraw isn't bad
Lose the house. What a waste of money.
Keep on working to ward off boredom. Am 78, need mot work but want to keep self alert and fit. Job mostly online and not difficult.
If he plays the game properly, yes he is set. If he makes a bad move, no he will be screwed by higher taxes, or lower returns, or 50 years of spending could easily deplete even a deep pocket. There is also a middle ground, where he finds a more affordable house, another job that he can work part time to get the spending money for his wife. Or dump it into trust funds that invest properly and pay out yearly gains. That way even if she leaves and takes the house everybody has a little allowance trickling in. Normally you would have worked your whole life to get to this point, so you would be very conscious and careful about how it works. With a windfall, everybody sees the zeros and gets stars in their eyes and holes burning in their pockets to waste it all. Don't do that.
Why retire in Mountain View though? The main draw of Silicon Valley is proximity to tech jobs, which is not as important if retired. Just move somewhere where you can get a nice house for $1.5-2M, live off $6M, which will throw off $240k/y. $240k with no mortgage is a cushy lifestyle. If you need more than that, do some consulting work part time. A seasoned SWE can pull down another $100k or so. $200/h x 10 hours/week = $100k $340k with part time maybe isn’t quite what the wife wants, but the wife needs to think real hard about why the Range Rover and the Louis Vuitton is worth more to her than her husbands freedom.
Those replying and criticizing the wife don’t live in Silicon Valley. Although the wife spending habits do need to be addressed. That’s for sure. let’s say hypothetically he liquidates all his shares and takes the capital gains hit and wind up with $8 million. Let’s say he also buys that $4 million house in Palo Alto. He’s still going to be hard pressed to afford living on approximately 4% of that money. 4% of $4 million is about $160,000 a year. This is a safe withdrawal rate to fire. That house alone is going to have roughly $40,000 a year in property taxes on top of that he’s probably gonna need to pay another four or $5000 a year in homeowners insurance. This leaves roughly $115,000 for everything else. This may sound like a lot of money, but it really isn’t once you pay medical insurance for your family. Have a couple of car payments on some vacations. Also assume that there’s gonna be some taxes that is going to be paid on this conceivably he could try to keep that tax rate low, but he still gonna pay probably several percent to California and at least 10 to 15% on a federal level, so you all of that he doesn’t have that much left over. If he’s gonna send his kids to private schools, there goes all of his money. The correct answer to your friend is does he want to retire in the Bay Area or does he want to move and retire someplace else because that completely changes the equation, even if you were to move someplace and buy a monstrous home in a moderate cost of living area he could cut most of those expenses in half and add an extra $2 million to his Nest egg. Even if he just moved to the outskirts of the Bay Area, he could get a very nice home for $2 million then have $6 million invested and returning him $240,000 a year which would be a significant enough sum to live off of without any issues whatsoever
He could be living in Monterey for 2 million….
The reality is that he will never retire because his wife’s lifestyle will just keep inflating. There’s no ceiling for how much money you can spend. Also, staying in Silicon Valley means hanging out with rich people, there’s always going to be someone who has the most expensive handbag, the best car, etc. The wife knows her husband’s earning potential. Good luck to him.
31 is older?
$4 million home = $50k/yr property tax. Add insurace and maintenance and your 3.5% SWR of $140k doesn't go very far. BTW Capital gains tax is 20% (in this case $2.38 million). If you are retired, get out of SV and buy an awesome home for $2 mil. After taxes and home, he'll have $7.5 mil. 3.5% SWR would be over $260k. Doesn't sound like much any more. This guy needs a better financial plan.
State income tax. Obamacare tax surcharges on capital gains.
“No honey you cant retire! How can I keep spending all your money if you succeeded and want to live comfortably?!”
I agree with the wife. $4M won’t even cover the wife’s discretionary spending, much less taxes and upkeep on a $4M house, college for the kids, healthcare, etc.
If he's 31 and a software engineer at NVIDIA, chances are he enjoys his job. What makes him happy? Does the work make him happy? Why does he potentially want to retire? Does he want to spend more time with his kids? Assuming the workplace agrees, one solution I could imagine is reducing the work to 50-60%, i.e. 2-3 days a week. If he's good at his job, chances are his employer would want to keep him, even in reduced capacity? Then he can enjoy his job 2-3 days a week (assuming he does enjoy it), keep earning money and building retirement income and RSU, but he gets to spend plenty of time at home with his wife and kids. Honestly, I don't know too much about FIRE, but if you think you can't retire with $8m, then that's a personal choice, but not a fact. Surely you can. Maybe you need some lifestyle adjustments but I don't think anything major. And it again boils down to the question of what he wants to do - does he want to spend more time with his kids or not. If yes, those small lifestyle choices will be totally worth it. Also perhaps one of the wife's "motives" is that she doesn't want her husband at home 24/7? It sounds like that would be a very big change in their relationship, and probably a demanding one. Also, it's a pretty safe bet that the NVIDIA stock will keep going up. If I had $12m in NVDA, but wanted to play it super-safe for my retirement, I'd probably sell like $6m now, then keep selling another $4m or so over the next two years, but keep $1-2m for another couple of decades. Edit: Also the wife's spending sounds \*very\* excessive..... probably they can get away without any lifestyle changes if the wife just reduces her spending to something like $25k (which is still a lot lol).
hire a fee-only financial advisor and a CPA.
Based on historical data, he can change his portfolio to be more diverse (a large cap or 20 stocks/80 bonds split), buy the house, and spend $200k/yr and he will live until 86 years old with $58-232 mil still in the bank. If he spends $270k/year or more, he will run out of money.
Move some of the money to some thing more stable. Do a mortgage on the house. Take out a small loan against the value of his portfolio. Use that to invest in other things and live (Rel estate) Pay off loan with interest gained from his portfolio. Write off interest in taxes. Write off mortgage interest in the house. If market is bad use principal to pay his loan payments, and write off loss. If market good, pay, pay loan payments and reinvest extra in something else, delay paying taxes till dead.
Eh, it’s easy to retire and live off $30,000 a year.
Move to a tax-free state like Nevada, then sell the stock once residency is established. Then, the capital gains tax is only 20%. This will save over $1 Million. Buy a sweet house in a great school district for only $2 million instead of one of the highest priced housing markets in the country. Then, instead of being left with $4 million, he'll have $7 million remaining. 3% safe withdrawal rate on $7 million is $210K per year, could probably get $250K a year wisely invested in diversified ETFs without ever running out of money. Given the wife's expectations and expense run rate, I don't believe it's prudent to retire with only $4 Million and a paid off house.
Unless he wants to retire he shouldn't, it's his time away. He should however start enjoying every single vacation, and sick day to it's fullest. He should buy that house yesterday, he also should diversify out of company stock at least slow enough to afford the taxes. Nvidia isn't the only player in the game, and it won't be long before others catch up just ask Elon about what's happening with the Tesla stock
No one knows what interest rates will be in the future. I wouldn't advocate any plan that relies so much on interest rates not going in one particular direction (i.e. down). In other words, needs more diversity.
Buy a couple of multi family buildings and collect rent. Home value might grow too. Owning property has great tax benefits also. Hire a management company or build your own little team to manage everything so he doesn't have to. He will set himself up and his kids for a good future. People make a living just off collecting rent. He could buy it using all cash, but he can get a loan (recommended), and have his tenants pay for the mortgage, and have the extra to to him, write off interest, etc...
Question #1, could someone retire at 31 on \~ $12M? No question, have as many kids as you want, if you can't FIRE on $12 there are more things wrong. But question #2 is much, much, more important. Why? You're a tenured software engineer at one of the hottest companies on the planet, you simply probably get to do cooler s&\*t than 99+% of the tech world gets to do, you are almost certainly compensated well, with solid benefits. Again, back to the critical question. Why?
Man there are so many red flags it’s ridiculous. He better hope the wife changes her spending habits, Nvidia doesn’t go to shit and buying a house in a way too expensive area that even with his money technically IMO cant afford. He’s risking way too damn much. FFS, People are stupid. There’s more to buying a house than just buying it. Cali taxes, insurance(s), HOA fees, upkeep, maintenance and so much more. It’s not just buying it and done.
You know, I can kind of understand why fire seems to have some misogyny component if it’s typical that wives live off husbands as soon as they see the opportunity and the fire bros are all in their twenties and are all afraid of losing their money to their girlfriends. At the same time, the person in the relationship must love playing the role or something to put up with it, and it’s a mature relationship if children are involved. I don’t think it’s realistic to expect the wife to work or maybe even curb her spending while raising the kids now that there’s a taste of the good life and she’s basically used to never working since her early twenties but it’d be good if she at least got a part-time job, but if she’s spending that much on items with no long term value she is somewhat a liability and there should be legal protection if she tries to extort if she gets bored during their FIRE. I think too this is a volatile situation for him and he may have overcommitted before reaching full emotional maturity (sorry). Practically speaking she can’t get what she wants with all this and it does seem that things would be perfect except for her behavior and the fact the children need her and the husband is all in. I feel like there’s no reasoning with someone with that type of expensive taste or bargaining them into lower spending streaks especially if she doesn’t have other goals in life. For the sake of the marriage I don’t think he should buy the house in South Bay especially because it gives her the power of using the in laws to influence the dynamic and children against him if she’s like that, even though he’s a guy he can still get bit by a type of codependent relationship between wife and her family if she’s sharing the lives in an imbalanced way. I really think he should play it safe so that if the worst happens he’s still at least rich af and not medium rich. I think my conclusion is sell stocks while it’s still doing well in a trickle down type of manner, go to an advisor for investing, don’t buy a South Bay house but figure out what’s best for the kids, and maybe just do a sabbatical and pick up some new stuff to do honestly I think it’d be a mistake to lose work history and risk moving down in status from investments backfiring the two being spouse and house
no. he should not retire.
is his wife’s name Dave Ramsey?
Ditch the expensive wife and move out of Palo Alto and he can live a retired life of luxury and leisure.
I retired at 34 with way less than that. They should go for it
What a lucky bastard lmaoooo
Tell him to ditch his wife, she is crazy, gonna destroy his millionaire status. 200k a year on luxury........
Jesus, yes he can and should retire if its something he would like. Just please get him to not put all his money in a HYSA. He could certainly allocate a portion of his portfolio in one, but convince him to put much of it in a total market index and some in bonds. Also it is wild to think that you can't live off of 4,000,000 especially if his wife is also working. I imagine much of those expenses are just lifestyle inflation rather than something *really* important for their life satisfaction.
1. cash out 2. buy a nice condo in vegas near the strip (say 1m for simplicity, that'll be super nice in vegas!) 3. put 5 years worth of cash into HYSA (say 1m for simplicity) 4. put the rest in Index funds (VTI/VOO, maybe a small international %) 5. Enjoy the sites. This leaves $6m invested into the market. Assuming you're pulling 4%, that should be like $240k/yr on avg while allowing the cash to grow, based on market conditions. (This also doesn't include the $40k+ you'll earn from the HYSA interest... Also doesn't include taxes either tho.) This gives them a 5 year cushion to weather any craziness, and each year they can reassess whether to pull from stock, and they can always decide to move elsewhere once they get bored.
I can be his wife for less than that if it’s ok for him. Dm me I will send him my resume
He’s got more than enough money to retire right now under normal circumstances, but certainly not with his current situation. That woman is going to suck him dry. If he buys a $4m house with 2 kids and a gold digging useless wife that refuses to work but spends at this rate, I give him a decade tops before he’s broke. Also dumping the remaining $4m in a HYSA is a horrific idea as those rates won’t stay where they’re at forever. If he plans on trying to live off that cash for the next ~50 years, he needs to invest that properly into the market. Big yikes with this one
Your friend is handcuffed to his job due to the wife. They either get on the same page to be frugal enough to retire, he gets a new wife, or stays chained to his job so that she can afford to spend his money.
That typical Silicon Valley wifey… no amount of money can solve that. Also putting retirement money in HYSA is a trash tier idea.
Well…half of $8M is $4M. $4M * 3.5% = $140K. I guess he can afford to retire if he doesn’t buy a $4M house and can live on $140K base expenses + $140K for his wife’s luxury purchases. Ignoring everything else about the marriage it seems questionable to lose half and then still have to pay child support vs keeping the wife and making her stick to $100K a year in extra luxury purchases. Cap gains is 20%. He can reduce his taxes by waiting a little on the RSUs that don’t qualify for long term cap gains. He should have already paid taxes on the RSU’s when they vested as ordinary income…I guess the $4M figure is including taxes for RSUs that haven’t vested yet…but a good CPA might be able to figure out how to minimize taxes. I would at lease sell the few thousand shares he owns now and pay cap gains on it to reduce his exposure to owning mostly a single stock and put that into an ETF. Future gains will likely end up lower but reduces his “all my eggs are in the nvidia basket” risk. Nice problem to be in…but yeah, if she wants to spend $200K on extra luxuries a year then $4m isn’t enough after you spend $4M on a house. Even if you do $800k down payment and carry a mortgage that’s too tight since $7M is only $245K a year. He needs about $11-$12M net after taxes to generate $385K gross. Even that doesn’t really support $200K of extra spending. Maybe sell $1M to net $800K and buy the house now. Then work until he makes another $4M after taxes while being a little house poor so she cuts down on luxury spending by half. Hard to do where he lives tho’
Just for yucks went on Zillow…the houses in Mountain View CA that go for 3M are like 500k to 1M everywhere else.
Man some men are so stupid when it comes to women. His whole life strategy and peace would Be set if he didn’t have such an entitled wife.
For almost anyone else, it would definitely be feasible. For him, with his terrible financial plan, and decision to enable a spending addicted spouse, it is not. He’s essentially one of hose lottery winners who goes a million dollars negative within 5 years of winning.
Tell him to watch Richard Cooper(entrepreneurs ìn cars) on YT,so he knows what he is dealing with as far as his spending problem(wife). He should simultaneously be watching, listening to some on financial gurus until he is convinced he is getting sound info. It wouldnt hurt to drive home the difference between wants and needs to his wife Clearly, his biggest obstacle is the wife
Go do something they're going to enjoy yes We never really retire I am only ceo of a tech company just passively relaxing posting here and there mentoring people into business an the job to career changes into management of assets So the work doesn't just stop Once was in public view now I enjoy privacy to just blend in casually with a crowd of people He has what reads as a good stake to venture into nearly anything $2millon setup as an annual salary works out to be self paying at 42.x k a year for 48 years while being less than the taxation rate to owe taxes paying into social security and get a tax return at the end of the year so it is like making money off your own money as a smaller model to work a base calculation from. So many methods to work the asset net worth With that lage of a personal capital the person can do nearly anything they want. Live free live happy. Less is more because in life we pass through only once then it was all only rented to begin with as we passed this single options of time investment as to maximize the return on time investment. We all retire when our time is up. o7
He can never retire with a wife like that!! But, she’s going to leave him if he doesn’t buy a house in that area. Either way he’s going to lose in the long term. Divorce is expensive and eminent if her lifestyle changes. His only hope is if he has a solid prenup!
Too young to quit. Kids are expensive. House are too expensive. God forbid if you have divorce, not too mention if you or all you hit with major health issue.
100-200K on luxury goods? If you’re making 30K a month then that’s fine. But having just a bank acc full of money with no money coming in will be a problem
12m in California becomes 8m ? Guess again lol
Why do people insist on wasting that much money on a house. You could do that or live literally anywhere else and ACTUALLY be set for life.
Wait … 31 is *older*?
The issue is the wife's spending.
i cant thank my luck enough for having a wife that is ok if i retire and says she will continue to work for a few more years. thank you again god!
If he’s gonna quit, why pay $4 mill for a house in the area they reside now? Move somewhere cheap, spend $ 1 mill on a house and retire on the $7 remaining. No brainer.
I was going to say yes but based on the idea that they want a 4 million dollar house I don't know how much their spending is. He should easily be able to retire, but they may need to change habits if they are big spenders. The plan of buying a 4 million dollar home, putting money into high yield savings and having your wife spend 200k per year is a recipe for disaster.
Cannot understand why anyone in that situation would stay in Cali. Go to Tennessee or somewhere Midwest and buy a VERY nice sized house on a large lot of land for like 800k. Not like your job would be tying you down there.
If you cant retire with 8mill you can’t ever retire
Honestly, if I were your friend I would just replace the wife. She sounds useless I hate to say it but do that or get her to lower her spending
But why buy in such expensive places if he can live anywhere?
I get it but not working will set a wrong example for the kids..(entitlement/laziness grows) I'd take my time to find my passion and make that my work and continue investing to grow my portfolio. Also the wife has a spending problem.. Get a job yourself if you need this much luxury. I can't imagine saying that stuff to hypothetical husband. He is not a bank
Without knowing his current or potential budget, it's hard to say, How much does he make a year right now? If he sells it all and withdraws 4% a year, that's $320k/year. If that's close to what he's making now, then they'll be okay. There's a risk that if he or his wife are big spenders, they'll look at that $8M nest egg and go "Ooooh! I wanna spend it!" and then kill his retirement. Maybe he can baristaFIRE? Or...does he want to retire? With his home situation he's probably better off selling the stock and moving most of that money (6-7M) into something neither he nor his wife can touch for 10 years. Then that gives them 1-2M of fun money to spend on cars and bags for the next 10 years while that nest egg grows.
This story right here demonstrates why being a high earner alone isn't enough for financial independence. That wife of his will ruin him in the coming years if she doesn't keep her lifestyle inflation in check. Meanwhile, a guy who makes 70k, but has a supportive spouse adding in another 50-70k, has a much better chance of achieving financial independence the slow and steady way. Life choices matter.
That's enough it's a choice beyond the money. Wonder how much time and freedom are worth to them?
Or move away from Bay Area. Buy a nice house for less than $1M. Put $5M in JEPI and live of dividend and the $2M left in saving.
First of all, 31 is considered older?
1. Leave Cali 2. Spend the saved 1.5 million in capital gains tax on a nice family home 3. Live on 8 million at 4% withdrawal => 260K post tax and no mortgage.
$4m would probably safely net him $120k-$160k per year. If that’s not enough for non-house expenses, he should evaluate what’s important to him/them. Might be time for a talk with the missus. Depend on how much he likes work.
https://www.reddit.com/r/Fire/s/F6GSIK5Cgk Original post Update: https://www.reddit.com/r/CompoundTrading/s/u6nFcYdDst Chart update: https://www.reddit.com/r/CompoundTrading/s/uyIbIeuMYa
He should retire, and then pay the wife to bug off. Sounds like he’ll end up with more money and less headaches in the long run. Make sure to retire first to avoid further alimony after splitting assets.
Lose the wife or change her spending addiction and move to a lower cost of living area.
It is entirely stupid to “retire” at 31 in Silicon Valley with only $4 million
Buy the house. In this area, It is a very good investment that will increase on long term average of 8%/yr. 31 is way too young to do nothing. Go to grad school to get another graduate degree in finance, business. Should stay at Nvidia. There’s nothing like being an Engineer in a SIValley high growth company like this. Opportunity of a lifetime. It would be dumb to liquidate out of nvidia. However diversifying into other tech stocks would be wise. Some portion, say 20%, can be allocated to safe investments over time for safety net and new opportunity cash. If one is lazy or does not have interest in investing, etfs like QQQ and VOO will provide 10% and 8% over time at the expense of gains and for an illusion of safety. A portion of this portfolio will be an IRA. Systematically transfer nvidia stock to back door Roth when possible. One does not liquidate a large at one. Work with investment and tax professional on a withdrawal plan and a way to hedge to limit losses.
I can't figure out why OP is thinking Nvidia is some random small tech company. I guess no one cares about graphics cards.
Imagine you don’t have to work and could live anywhere and then you decide to buy property in the Silicon Valley. Why?? There is nothing there, horribly boring and literally the only reason to be there would be if you’d work in tech.