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Message
Question on estimating retirement
Posted on 7/19/19 at 9:42 am
Posted on 7/19/19 at 9:42 am
As most, I have a specific number I feel I need to have in order to retire very comfortably. At 62 I expect to have my primary residence paid for, 2 of my commercial properties paid for, my vacation home paid (already paid off) for and plan to sell my business.
At retirement we plan to downsize our primary residence and move into something about half the value, sell the business, make the vacation home our primary and for now, sell both commercial properties.
My question is, would it be wrong to factor in the value of the properties and sale of business into the number I need to reach?
The reason I ask is because I had never factored those in and I'm currently on track to reach my number. If I can/should factor in those assets then I could put less into retirement and pay off some of those debts a lot sooner which could lead to earlier retirement and/or more discretionary cash.
At retirement we plan to downsize our primary residence and move into something about half the value, sell the business, make the vacation home our primary and for now, sell both commercial properties.
My question is, would it be wrong to factor in the value of the properties and sale of business into the number I need to reach?
The reason I ask is because I had never factored those in and I'm currently on track to reach my number. If I can/should factor in those assets then I could put less into retirement and pay off some of those debts a lot sooner which could lead to earlier retirement and/or more discretionary cash.
11
Posted on 7/19/19 at 9:44 am to SippyCup
quote:
My question is, would it be wrong to factor in the value of the properties and sale of business into the number I need to reach?
Of course not, just like any other retirement stream, be conservative
Posted on 7/19/19 at 9:49 am to SippyCup
quote:
My question is, would it be wrong to factor in the value of the properties and sale of business into the number I need to reach?
quote:
be conservative
This. Build in a 5% decline in value, even, to be safe.
I'm not sure what business you're selling, but the value of a business is typically the most difficult to estimate. So if you leave out any numbers, I might leave the business value out.
Posted on 7/19/19 at 11:34 am to Niner
If you are this established, surely you have a financial consultant. No need to come here and pretend to ask for guidance.
Posted on 7/19/19 at 1:32 pm to Popths
quote:
No need to come here and pretend to ask for guidance.
Why would I do that? This isn't the OT, I didn't give specific numbers. I'm actually a CPA and I speak with financial advisors regularly. Lately I have been getting conflicting information or perhaps a movement in the industry to a more conservative approach about valuation of assets for retirement. There are plenty of knowledgeable people on this site and its always good to hear others opinions. Perhaps my question came off a little too basic but that was the intent, I'm not looking for advice.
Posted on 7/19/19 at 1:47 pm to SippyCup
I would pick out a realistic worst case scenario of what the values could be and work from that. There are a lot of variables you won’t be able to predict with this depending on how long your timeline is
Imagine someone who had 5-6 rent houses in Detroit type scenario
Imagine someone who had 5-6 rent houses in Detroit type scenario
This post was edited on 7/19/19 at 1:52 pm
Posted on 7/19/19 at 2:10 pm to Popths
quote:
If you are this established, surely you have a financial consultant. No need to come here and pretend to ask for guidance.
This board is filled with highly successful, well-planned individuals that are happy to provide helpful perspectives. Responses like yours are not needed.
Posted on 7/19/19 at 2:12 pm to SippyCup
quote:
The reason I ask is because I had never factored those in and I'm currently on track to reach my number. If I can/should factor in those assets then I could put less into retirement and pay off some of those debts a lot sooner which could lead to earlier retirement and/or more discretionary cash.
Factor them in if you are 100% sure you will liquidate for retirement. As other say, be conservatism on the value of those assets but I'd argue it is overly conservative to plan as though they do not exist at all.
Posted on 7/19/19 at 2:26 pm to Popths
quote:X 1000
If you are this established, surely you have a financial consultant. No need to come here and pretend to ask for guidance.
Posted on 7/19/19 at 3:08 pm to SippyCup
quote:You are a CPA and you are blindly asking for financial advice from forum posters you do not know?
Why would I do that? This isn't the OT, I didn't give specific numbers. I'm actually a CPA and I speak with financial advisors regularly. Lately I have been getting conflicting information or perhaps a movement in the industry to a more conservative approach about valuation of assets for retirement. There are plenty of knowledgeable people on this site and its always good to hear others opinions. Perhaps my question came off a little too basic but that was the intent, I'm not looking for advice.
Posted on 7/19/19 at 3:19 pm to NOSHAU
quote:
You are a CPA and you are blindly asking for financial advice from forum posters you do not know?
I trust some of these posters more than I do some financial guy trying tell sell me something a lot of times. A lot of these guys have been posting here for years.
Posted on 7/19/19 at 3:44 pm to NOSHAU
quote:
You are a CPA and you are blindly asking for financial advice from forum posters you do not know?
AGAIN, not advice, but more along the lines of differing opinions. Nothing is ever wrong with that.
Posted on 7/19/19 at 3:48 pm to SippyCup
What lynxcat said. If you are certain you can / will liquidate then count them. You can value them at a lower value to hedge.
A few thoughts arise regarding taking financial advice:
1. Don't ever let anyone do your thinking for you.
2. A wise man receives counsel from many, but then makes his own decisions.
3. No one is more inclined to get it right than the person who is affected.
I feel sorry for people who I know are intelligent and talented but who allow others to make their financial decisions for them. I see the thousands of dollars they just give away because they are too afraid to manage their own money. "Safety" sells for retirement, but I've found the quickest way there is by taking educated risk and not paying for advice or managed funds. Such a small price to pay for something that pays tremendous dividends.
A few thoughts arise regarding taking financial advice:
1. Don't ever let anyone do your thinking for you.
2. A wise man receives counsel from many, but then makes his own decisions.
3. No one is more inclined to get it right than the person who is affected.
I feel sorry for people who I know are intelligent and talented but who allow others to make their financial decisions for them. I see the thousands of dollars they just give away because they are too afraid to manage their own money. "Safety" sells for retirement, but I've found the quickest way there is by taking educated risk and not paying for advice or managed funds. Such a small price to pay for something that pays tremendous dividends.
Posted on 7/19/19 at 5:20 pm to SippyCup
I would press on with the retirement savings, especially if you can take advantage of tax free growth. There’s probably (though not guaranteed) a better chance of increasing your value in the market than a commercial building.
I would also not factor in the sale of the business, or factor it very conservatively. It’s likely the least liquid asset and no telling if you will find a buyer. Not to be too much of a downer, but if it’s a CPA firm you are selling you may want to also consider the timeframe. You selling it in 10 years, 30 years? I would think there will always be a need but that also depends on your clientele. As they age, they may need your services less. There’s also the potential for technology to the business trend towards towards the antiquated category. This is worse case scenario, which is why I would consider it lagniappe.
I would also not factor in the sale of the business, or factor it very conservatively. It’s likely the least liquid asset and no telling if you will find a buyer. Not to be too much of a downer, but if it’s a CPA firm you are selling you may want to also consider the timeframe. You selling it in 10 years, 30 years? I would think there will always be a need but that also depends on your clientele. As they age, they may need your services less. There’s also the potential for technology to the business trend towards towards the antiquated category. This is worse case scenario, which is why I would consider it lagniappe.
Posted on 7/20/19 at 8:09 am to TigerDeBaiter
IMO, the business should be considered as an asset and he could get a business valuation done professionally or estimate using the EBITDA method x the multiple commonly used for CPA firms, (just looked up and it’s 3-6). Several CPA’s I know bought out their former boss or partner when they retired and I think this is a common practice.
I would also keep the commercial buildings as they are bringing in rental income during retirement which will be nice as long as they are paid off and don’t require a lot of time and energy in upkeep.
I would also keep the commercial buildings as they are bringing in rental income during retirement which will be nice as long as they are paid off and don’t require a lot of time and energy in upkeep.
Posted on 7/21/19 at 9:43 am to SippyCup
quote:
As most, I have a specific number I feel I need to have in order to retire very comfortably.
I have a question relating to that. Is that specific number that you feel you need based on the estimated income that can be generated from that asset base?
I don't know how old you are. But in the earlier years, growth is key, right? You're trying to build up to some grand number, whatever it may be. The income that you see now comes from working... or a business. But as you approach retirement, the key concern is income replacement - especially if you're selling a business (which had been an income source).
All I'm saying is, the grand number, or specific valuations (how and when you value various assets), certainly feeds into the equation, but more important is what types of income streams you're constructing. What risk is involved in those streams, how reliable/steady are they, etc.?
Posted on 7/21/19 at 9:14 pm to SippyCup
I would not factor in the business. Too many variables and too much room for changes in valuation. Once you get closer to retirement, you could then use the business' current value but even then, I would discount it.
Posted on 7/21/19 at 9:41 pm to Jag_Warrior
The usual thought is "I'm building wealth so when I retire I can spend it down and hopefully not get to zero before I die." Those who plan ahead should shift their thinking to "I'm going to generate enough income with this money to live on and also grow it to at least hedge inflation." How you invest the money to achieve both of those things is key. I have a plan based on investing half of the assets in a bond fund and half in an equity index using value cost averaging. Should produce 6% or more with bond yield on said assets over time. I'll live on 3% and reinvest the other 3%.
Posted on 7/22/19 at 5:27 pm to RoyalWe
I like and agree with your thoughts on this topic.
Posted on 7/24/19 at 10:51 am to SippyCup
I am also a CPA and have experienced both firm acquisition and buying out a retiring partner. Which are you considering?
Our partner buyouts have very defined deferred comp numbers so I would think you would know that.
When we have acquired a firm, there is always a required work period for the sellers to ensure successful client transition. Usually 2-5 years.
You will have a good idea of business value several years before retirement.
Our partner buyouts have very defined deferred comp numbers so I would think you would know that.
When we have acquired a firm, there is always a required work period for the sellers to ensure successful client transition. Usually 2-5 years.
You will have a good idea of business value several years before retirement.
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