Out of interest, are these fees pre-tax or post-tax? I had always imagined asset managers who charged a percentage would take it out of your pre-tax return (like Vanguard or Fidelity’s charges), whereas an hourly fee would be paid directly by you out of your post-tax income. But maybe I’m mistaken? Can you write the fee off as an above the line expense?
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Parents are looking at retiring in the next 10 years. They’re in their early 50s but Dad says he doesn’t want to work that much longer.
$400k in cash savings
$2.3 million in property investments
$3 million in retirement investments
$600,000 partnership stakes in their firms
Probably around $6.3 million in total.
So not the best but not the worst. They’ve managed to save a decent amount from an ordinary fairly middle-class physician household.
Dad has money just sitting in cash for the past 10 years because he’s a paranoid man.
Looks like about top 2% in wealth, from an income that was likely top 2% of income…
The key thing missing is how much spending will be in retirement. Some expenses will be lower (e.g. commuting and work related expenses), but others will be higher (paying for own medical care / insurance, spending on any additional travel and recreational activities done in retirement), but making some sort of spending estimate is necessary to determine what amount of money is “enough”.
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They’re not going to spend too much I suspect. Dad doesn’t play golf or anything like that.
Mainly vacations I suspect and maybe our educations if we want to get MBAs etc.
And once my younger brother is out of the house, they’ll have a completely empty house.
I suggest posing your question on the Bogleheads forums. You’ll get amazing feedback.
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I’m on there all the time haha.
It’s a great forum but their net worth threads put everyone to shame lol.
One guy I saw had $19 million saved but he was hoping to hit $30 million before he retired.
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My net worth is quite a bit less than your parents’ net worth. We retired at 59. We would be absolutely fine with the amount of money your parents have. However, their expenses are the missing piece. I suspect that “not going to spend too much” means something very different for your family than it does for mine.
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There’s nothing ordinary or middle class about $6.3M in assets. File this under “only on cc.”
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Mea culpa.
You’re right. Poor choice of words.
It’s comfortable for sure.
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Shaquille O’Neal said to his kids, “We ain’t rich, I am rich.”
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My parents: ‘either you get the money, your wife if you don’t marry correctly, or the government. And we’d much prefer you to get the money as long as you look after us in old age (and then a spiel about how they’ll look after my potential grandkids)’
Lol.
Nothing wrong with having a bunch of money in cash, but there’s cash at a big bank earning 0.01% in interest, and cash at a credit or bank earning over well 2% in interest safely in a high interest checking account. Vanguard and Fidelity sweep accounts are earning over 4.5%. My mom had her cash earning a couple bucks a year in an account, I talked her into diversifying it into incredibly safe, liquid options, and now she’s earning about 38K per year with it. Plus, you don’t want to have more than 250K in one bank account, for FDIC insurance.
If they’re willing to tell you all that they have already, you should be able to ensure that 400K is earning a good return in a safe place.
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My mom was able to put the proceeds of her house into CD ladders and the interest rate was 5.1%. Her financial advisor was very excited that CDs were doing so well.
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I’m not sure @DarkMatter565 should be posting on a public forum someone else’s finances.
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$6.3 million is obviously more than just an ordinary – not best/worst amount, and I doubt that it’s an ordinary middle-class household. However, net worth is probably not the critical factor. Many people choose to retire or not retire for reasons other than chance of running out of money during retirement.
For example, one common reason to delay retirement is the prospect of continuing working looks more desirable than how they perceive retirement. Many people like their job or at least do not actively dislike it. And many people perceive retirement as sitting around all day and trying to find ways to entertain themselves (I realize retirement is not at all like this for many). The former can sound more appealing.
For some, the transition from work to retirement can be a challenge. It’s easier to continue with the known path that you’ve done for decades than suddenly turn your life upside down and do something different for the majority of waking hours.
For some self perception is relevant. When a person spends decades focusing on having high income/wealth/assets compared to peers, that personality rarely suddenly go away when nearing retirement. It can damage self perception to have a sudden drop in earnings to below many peers.
Some believe in their work and want to see it succeed. They may believe that their company or clients/customers/patients benefit from their support and do not want to let them down.
I could list many other examples.
As noted above, there are numerous reasons to continue working when having a large retirement nest egg, some of which are quite valid. Instead this is the more relevant and concerning part to me. There is nothing wrong with having a conservative enough portfolio to match your risk tolerance, particularly when nearing retirement age. However, putting everything in cash during a period of relatively high inflation is just wasting money. There are numerous near zero risk options with a ~5% APY.
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I don know, you should see the Bogleheads forum, incredibly specific. And the amount of incredibly personal information about ones family members on this forum is extraordinary. There are many posts that I think are way too personal and specific, but it seems that is the way of the internet, tell it all.
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What kind of sweep accounts are they? That is an excellent return. I looked up mine and I think I am gettring 2.75% in my sweep account.
Marcus currently offers 4.15% savings accounts and 5.05 10 months CD
I use FZDXX on my Fidelity account which has a 4.81% 7-day yield. Vanguard money markets have a lower expense ratio than Fidelity, so they tend to be a bit higher. Vanguard’s default money market ( VMFXX) is currently listed as 4.93% 7-day yield.
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that’s a poor rate. As of today, Vanguard’s Federal Money Market Fund (Settlement fund) 7-day SEC yield is 4.93%
https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx
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