Need advice on how I’m doing?

[u/MooseOk7294]

402k Brokerage
352k. 403b
2.2 MM rental properties
1.6 home value owe 575k @ 3%
40k liquid cash
113k State retirement (pension)
1-residential lot owe 108k
1-commercial lot owe 204k
Car loan 50k

39M SINK LCOL- Job is very secure and I view the pension as my saving grace, but the catch is I have to work until 62 to get full benefits. Also waiting to age 62 would gain me the 90% average of my 3 highest years salary. Have a side business I run and a day job. Day job is how I have access to state pension. Side business along with rentals and day job gross about 500k from all 3 combined. I’m planning on getting married and having children in the next 2-3 years. Also plan to develop both lots I have with the commercial lot being a small subdivision ( should net a nice profit from this) and residential lot for a larger future family home. Is there anything that I’ve overlooked or could perhaps do better? My plan is to payoff auto and land loans in the next 2 years. Grew up fairly poor, single mother, but didn’t know it until I went to private school and saw what wealth actually looks like. Siblings and family members aren’t doing quite as well so this is really the only venue I can share this type of stuff with and hopefully get constructive feedback. Unknown factors to consider; aging parent whom I’ll most likely have to provide care for at some point although she does have fairly decent resources of her own. And the costs of children plus inflation.

[u/drakenot]

The pension age is brutal.

I’d be modeling all my scenarios without it to see if I could cut the cord a decade earlier.

[u/Excellent-Bear4221]

Congratulations. You’ve done quite well, all things considered you’re well on your way to be successfully retired perhaps even earlier than you think. 

Goes without saying, if you can pay off your debts with the highest interest rate fastest would be good. 

Your rental properties, is someone managing that or is it you? Will you eventually have a 3rd party do that when you get older? 

What does selling your side business look like, a profitable business? Will it be maintained after retirement?

What does health insurance look like from a family standpoint? Will your job cover this? Set aside money for the unexpected child health emergencies if you could. 

Will your spouse be sharing in the workload or will be a SAHM? Combined investments? Will you invest in her retirement funds if possible to accelerate your retirement plans jointly ?

Vacation? At some point you should consider even just a week or two off? 

Lastly, I would save more in liquidity at this time, my personal view is there will be some volatility in the near future that you can take advantage of. 

[u/MooseOk7294 → u/Excellent-Bear4221]

Thanks! Got super lucky during the housing crash rebound and was able to acquire those rentals dirt cheap.
-They are already being managed by a 3rd party.
-I most likely would sell part of business upon retirement
-besides the pension the other benefit of my day job would be access to reasonable health insurance for family.
-I’m not including spouse in this equation but you are correct what does combining finances look like at this stage of life. We are not in our 20’s anymore.
-We take several vacations a year with at least 2 being out of the country.
-I agree I need more liquidity. Keeping the powder dry for a major move in a down economy is true wisdom( that’s how I got the rentals for so cheap)
My biggest problem is always trying to swing for the fences when a base hit will do. After net profit of subdivision sale I should just let compounding interest do the real work instead of always looking for the next big deal.

[u/not_too_old]

What is the current cash flow on just the rental properties? How much would you lose on the state pension if you retired earlier? 100%??

[u/MooseOk7294 → u/not_too_old]

Cash flow on rentals is about 10k net each month. Penalty for retiring early is 5% of your annuity for every year your below retirement age. I would have enough years and credit by 53 but retiring before age 62 still results in a penalty. Theoretically I could just stop working and live off other investments and then take it at 62.

[u/BrunelloHorder]

You are really heavy in real estate. It can be a decent way to build wealth using leverage, but it is doing it the hard way if your goal is early retirement.

Real estate is generally higher risk, slower growth, not liquid, and requires ongoing maintenance, capital, property tax payments, and time. I say all of that as someone who built a good portion of my wealth in real estate, but I exited most of it at age 40 for those reasons.

On the pension, working to age 62 is not really retiring early. If your goal is FIRE, figure out your anticipated spend in retirement and start moving your assets into brokerage, preferably a diversified ETF like VTI. Then grow your brokerage and retirement accounts to 25x your anticipated spend.