Multimillionaire and retired by 30 AMA

VP in IB - Gen

Recently saw a post asking people what their magic number is. Wanted to share my experience with people, but I consider my situation to be extremely lucky, unique, and an outlier.

Almost 32 years old, retired for about 1.5 years. Went to a decent state school, majored in finance, so nothing fancy. I started working at 18 in sales, but I didn't start making serious dough until I was 24. I made about 280,000 that year and my income topped out at 750,000. One co-worker of mine who was much older made $2MM for context. On average, my annual comp was $400-500K.

What was I selling? Debt to private equity firms for LBOs. Basically got uncapped commission for my production. But not surprisingly,Co made my bank ungodly amounts of money. As you guys probably know, private equity has been on a tear for the past several years. I was simply at the right place at the right time. Don't get me wrong, I hustled my ass off. Haven't traveled much and still not married, but hopefully the ship hasn't sailed for me.

Began to get burned out working 14+ hours, six days a week. From what I hear from people I'm still in touch with, things are cooling down. Too many dollars chasing too few deals. Family offices adding pressure to deal flow. Some PE firms are bracing for a recession.

Retired with about $6MM, about 2/3 of it is liquid. I was able to take my commission in stock to reduce tax liability. And at the same time, the stock market has been crushing it. Lucky yet again.

I like to keep things simple, so my allocation is: $2MM high-yield CDs, MMAs, and US securities, $2MM in stocks (sold some of my bank stock for other stocks and index funds), and $2MM in real estate, including my condo ($400K). Yearly cash flow (interest, dividends, and rental income) is about $400,000 minus taxes. Big chunk of that gets reinvested. No debt, live in the Midwest, and don't have any fancy hobbies/interests, except my Aston Martin, which is a money pit. But gotta live at least a little.

Girlfriend knows I'm a high earner, but has no idea how much I'm worth. As far as she knows, the Aston is leased, the condo is rented, and I have shit ton of student/credit card debt. Maybe, (just maybe), I'll tell her on our 20th wedding anniversary, if it goes that far.

I spend most of my time monitoring investments, maintaining the real estate I own, and working out. Also taking a cooking class. And I'm signed up for a photography class at the local college next semester. School should be more interesting now without the strings attached. And I'm always networking-- if/when I get really bored, I can probably find an independent consulting position to keep me busy.

AMA or give me advice.

Comments (59)

Jan 2, 2020

How did you get involved in the private equity debt game?

Jan 2, 2020
Champagne Sipping:

How did you get involved in the private equity debt game?

x2...I know you mentioned things are slowing down a bit, but I am assuming things are in better shape than most other sales desks at banks?

How does one get into PE debt sales? I know a guy who just transitioned over from equities, seems interesting.

  • Associate 1 in S&T - FI
Jan 3, 2020

I am also curious about you job. Based on what you mentioned (working at a bank, living in the Midwest, taking comp in stock) I am guessing you worked at a bank, but the banks I'm thinking of that would be located there/would have the size to be in the business, I can't see any paying hard dollars (Key, 53, PNC. All that being said, give us some additional details

  1. Sales cycle, how long from finding someone to reach out to actually doing a deal are we talking. Were you making a lot of cold calls or was their some warmer intros.
  2. How defined is the market, is there sort of a known list of PE players or was their opportunity to reach find stuff on your own
  3. What was the asset size of the bank you worked at. I'm thinking 50bn in total assets would be the floor.
  4. What was the value prop of your bank relative to others in the space.
  5. What was the average size that you would lend?
    • 3
Jan 2, 2020

Did you get involved in RE while still working a 70-80 hr/wk job? How did you start off and get going while balancing commitments (i.e. did you have any systems in place that helped you 80/20 it) ? Also what is your strategy?

For context, I'm working as a consultant and am going into residential investing in the Midwest with a business partner I met at an alumni event. The two of us have enough capital for our first property and want to be as well versed as possible going in.

    • 1
Jan 2, 2020

Out of curiousity....care to share where in the midwest? I'm obviously not looking to get confidential information, but I'm very curious about this space and different locations.

twitter: @CorpFin_Guy

Jan 2, 2020

you seem to have a good head on your shoulders for someone who's financially independent at an early age. couple of things I'd recommend if you were a client: umbrella coverage, periodic review of the various legal structures handling your real estate assets, and use of trusts or FLPs to protect your future self from a divorcing spouse leaving with half. while you're single now and can easily prove that you had money before any marriage, there are tricks out there that divorce attorneys use to go into pre-marital property during proceedings (if they happen). basically, just have a good attorney, and marry the right person.

outside of money, the happiest retired people I know essentially do what you do. the only thing that's missing is board seats, venture investing (at your net worth you could afford to put a few hundred grand at substantial risk, but maybe not at this point in the cycle), philanthropy, and travel. time is a scarcer resource than money. hire a property management company on standby and take a sabbatical.

    • 9
Jan 2, 2020
thebrofessor:

basically, just have a good attorney, and marry the right person.

Words to live by.

Jan 5, 2020
CuriousCharacter:
thebrofessor:

basically, just have a good attorney, and marry the right person.

Words to live by.

Or better yet, don't get married in the first place.

Jan 2, 2020

outside of money, the happiest retired people I know essentially do what you do. the only thing that's missing is board seats, venture investing (at your net worth you could afford to put a few hundred grand at substantial risk, but maybe not at this point in the cycle), philanthropy, and travel. time is a scarcer resource than money. hire a property management company on standby and take a sabbatical.

Just to add to brofessor's insights (as always wise), board seats, philanthropy and high-roller parties are fine, and often necessary since they open a lot more doors than you could otherwise. I do not suggest venture investing unless it's throwaway money, simply because of the huge volume of cash already on the market and let's admit it, most ventures, even stuff that passes through YC, are pretty shit tbh. After the million mark, it's more about preservation rather than preserving high growth returns. Burned me the last year, never again.

Think about investing your time in something intellectually satisfying also - maybe go back to uni or do a PhD to get bragging rights to call yourself a Dr. I find time lambasting the US healthcare industry and getting my work published academically.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

    • 2
Jan 2, 2020

How often do you miss having a job? I imagine real estate and fitness leave you a lot of free time...

Jan 2, 2020

That's a sweet life. I am adequately jealous.

You should probably tell whomever you marry what you're really worth though - starting a marriage with a lie is a good way for it to end with one too.

    • 14
    • 2
Jan 2, 2020

That's amazing. Congrats.

How did the taxes work on your stock comp and what type of returns were you getting / how were you investing. Ending up with 6mm post tax after 6-7 years making 300-750k seems nuts. I can barely get the numbers to pencil out except with like a 20-25% IRR.

I know a couple people that have made similar money at a young age and "retired" and I do notice some downsides. Socially, you become more isolated because you lack the office environment and its harder to relate to people. Its easy to sleep in and let the days blur so having a good routine helps. There is also the aspect of having a lack of purpose, that after a while - you're only 1.5 years in - appears to wear on people and I've notice my friends becoming weirder. Seems like you're ahead of these issues but just something to be aware of. Also, there is the aspect of being too early to walk away from your prime - so maybe find a business to build vs. just simply investing. Regardless, you're crushing it so these are all "champagne problems" if at all.

    • 4
Jan 2, 2020

Can I be your girlfriend?

In all seriousness, thanks for doing this. What advice would you give your younger self?

Most Helpful
Jan 2, 2020

So if I follow...

Current Age: 32,
Retirement Age: 30.5
Serious Dough Age: 24
= Working years: 6.5

Income at 30.5: $750k
Income at 24: $280k
Income Avg: $500k*4.5 years = $2.25M
= Total Income: $3.28M

Assume you took avg. $150k salary for 6.5 yrs = $975k (net ~$500k).
Assume you saved $400k.

Leaves $2.305M in the form of stock commissions.
Beginning to receive stock commissions circa 2011.

To retire with $6M, that bank stock would have to 3x from 2011-2018.

To be honest, at first I was skeptical, but I guess it is not unreasonable.

Nice work

    • 15
Jan 2, 2020

Yes, I did similar math - however, as far as I know, you still pay taxes when the stock comp vests at ordinary rates, whether or not you sell, and then cap gains on the growth. So at some point that $2mm of stock comp took a 30-40% haircut and then an incremental 20-30% (state specific) on any gains. The 3x isn't really accurate bc the comp is over time and back weighted and doesnt' factor in the taxes. I'm getting to an IRR of like 25-35% if you break it down year by year and factor in taxes, etc, which is nuts but I suppose possible especially if took money out and the real estate went gang busters.

I have no reason to doubt the guy - but curious how it all penciled out given that it seems on the extremely aggressive side.

    • 2
Jan 2, 2020

Touche, my friend.

Agree. Still think it is aggressive, but probably not out of the realm of possibility.

Jan 24, 2020

What bulge bracket bank (assuming this given debt syndicate capability) has 3x'ed b/w 2011 and 2018? Not to mention, OP's stock rewards were given every year, not accumulated all in 2011.

Jan 2, 2020
VP in IB - Gen:

Retired with about $6MM, about 2/3 of it is liquid. I was able to take my commission in stock to reduce tax liability. And at the same time, the stock market has been crushing it. Lucky yet again.

Congratulations, you magnificent bastard. Someday I hope to join you in the FI/RE ranks, but for now I'm still headed to the office every day.

VP in IB - Gen:

I like to keep things simple, so my allocation is: $2MM high-yield CDs, MMAs, and US securities, $2MM in stocks (sold some of my bank stock for other stocks and index funds), and $2MM in real estate, including my condo ($400K). Yearly cash flow (interest, dividends, and rental income) is about $400,000 minus taxes. Big chunk of that gets reinvested.

I'm surprised at the conservatism in allocation here. You don't specify a burn rate, but you say a "big chunk" of the annual cash flow doesn't get spent. I would think that some combination of rental income / fixed income payments would satisfy your spending on a "risk-free" basis, leaving you free to put the rest in index funds or into illiquid investments. Maybe that's exactly what you're doing, but the $2M in CDs / money-market / treasury bonds seems high for someone in their early 30s.

VP in IB - Gen:

Girlfriend knows I'm a high earner, but has no idea how much I'm worth. As far as she knows, the Aston is leased, the condo is rented, and I have shit ton of student/credit card debt. Maybe, (just maybe), I'll tell her on our 20th wedding anniversary, if it goes that far.

This will be complicated for you. I lucked out - I met my wife before either of us realized any of our earning potential, so we never had to consider how money would change the equation. I have a hard time envisioning a healthy relationship where all things financial are kept behind a curtain, but that doesn't mean my experience is representative.

So what does she think you do?

VP in IB - Gen:

I spend most of my time monitoring investments, maintaining the real estate I own, and working out.

This is my dream. It's not actually all that different than my life now, except I have to go to staff meetings and we have a dress code.

So what made you say enough is enough and pull the plug completely when you did? I get the being burned out and wanting to do something different, but was it a specific number that you reached, or did you wake up after a bonus check cleared and go "ya know what, I'm good"?

Any regrets about leaving the workforce when you did? Or did you wish you left even earlier?

    • 4
  • Analyst 1 in IB - Gen
Jan 2, 2020

.

Jan 2, 2020

Honest question, do you think $6,000,000+ is enough for the rest of your life around 32?

"It's okay, I'll see you on the other side"

    • 2
    • 1
Jan 2, 2020

Not the right question IMO - is $400K / year enough for the rest of your life? That's what his ~$6M is grossing him in ordinary income. And at least for me, that would be plenty.

    • 3
Jan 8, 2020
EnergyHOU:

Not the right question IMO - is $400K / year enough for the rest of your life? That's what his ~$6M is grossing him in ordinary income. And at least for me, that would be plenty.

Except in reality it's more like 250k, and that's being generous. Taxes will take a huge bite out of that, even in a low tax Midwest state and with depreciation on his rental properties. The real question is what his expenses are.

His condo is 400k. Is that of equity, or total value? A 400k mortgage is easily supportable, but that's ~25k off the top in annual payments. Make it 35/yr to keep up his home, pay common charges, etc. Lets say monthly expenses are $1,000, it's low cost of living and OP is frugal.

All of a sudden you're free cash flow looks a lot less livable. 200k free and clear of taxes is great, of course. But I doubt the expenses are 12k a year. Moreover, one day there will be kids in the picture. A bigger house. A rainy day expense. Supporting a wife, potentially. None of this is to say that 200-250k year of income is low (it's not, it's amazing!) but in that context, it's not exactly living the high life. Market goes sour and rental income dries up, or equities start cutting dividends? Not great news.

This is the kind of situation where if I'm the OP, I retire for a few years and then find something that I love to do with the rest of my time. An additional 50k a year is a massive difference maker in terms helping with compounding the existing asset base.

Jan 2, 2020

Congrats; and a word of caution as well: you'll likely want / need a prenuptial agreement prior to getting married which necessitates telling your gf your net worth well in advance of your wedding. If you wait until on or around wedding day to spring a prenup on her the judge may not take kindly to a "sign this or the wedding is off" type situation as she wouldn't have time to acquire legal counsel.

Of course this is moot if you don't plan on having a prenup in place or never get divorced.

    • 3
Jan 4, 2020

That's a tricky one. I think most gals will punch you in the face if you try to strong-arm them into a prenup. Also in some states (at least, in Cali) once you're living together for more than 7 years it's considered common law marriage anyway, and any prenup is nullified. I'm lucky. My wife refused to sign a prenup, and we went ahead anyway. I don't regret it, but I've no doubt it was a gamble. At first, I resented that I was working and she was lounging around. But now she's learned to invest wisely in real estate and makes more money doing that than I do in the day job, plus she takes good care of the kid. So we have found a good pace for ourselves. Still it would be nice to have a pre-nup just in case, you know?

    • 1
Jan 2, 2020

Jordan? Is that you!

Jan 3, 2020
VP in IB - Gen:

Recently saw a post asking people what their magic number is. Wanted to share my experience with people, but I consider my situation to be extremely lucky, unique, and an outlier.

Almost 32 years old, retired for about 1.5 years. Went to a decent state school, majored in finance, so nothing fancy. I started working at 18 in sales, but I didn't start making serious dough until I was 24. I made about 280,000 that year and my income topped out at 750,000. One co-worker of mine who was much older made $2MM for context. On average, my annual comp was $400-500K.

What was I selling? Debt to private equity firms for LBOs. Basically got uncapped commission for my production. But not surprisingly,Co made my bank ungodly amounts of money. As you guys probably know, private equity has been on a tear for the past several years. I was simply at the right place at the right time. Don't get me wrong, I hustled my ass off. Haven't traveled much and still not married, but hopefully the ship hasn't sailed for me.

Began to get burned out working 14+ hours, six days a week. From what I hear from people I'm still in touch with, things are cooling down. Too many dollars chasing too few deals. Family offices adding pressure to deal flow. Some PE firms are bracing for a recession.

Retired with about $6MM, about 2/3 of it is liquid. I was able to take my commission in stock to reduce tax liability. And at the same time, the stock market has been crushing it. Lucky yet again.

I like to keep things simple, so my allocation is: $2MM high-yield CDs, MMAs, and US securities, $2MM in stocks (sold some of my bank stock for other stocks and index funds), and $2MM in real estate, including my condo ($400K). Yearly cash flow (interest, dividends, and rental income) is about $400,000 minus taxes. Big chunk of that gets reinvested. No debt, live in the Midwest, and don't have any fancy hobbies/interests, except my Aston Martin, which is a money pit. But gotta live at least a little.

Girlfriend knows I'm a high earner, but has no idea how much I'm worth. As far as she knows, the Aston is leased, the condo is rented, and I have shit ton of student/credit card debt. Maybe, (just maybe), I'll tell her on our 20th wedding anniversary, if it goes that far.

I spend most of my time monitoring investments, maintaining the real estate I own, and working out. Also taking a cooking class. And I'm signed up for a photography class at the local college next semester. School should be more interesting now without the strings attached. And I'm always networking-- if/when I get really bored, I can probably find an independent consulting position to keep me busy.

AMA or give me advice.

Jan 3, 2020

What have been the more difficult parts of an early retirement that most people might not have considered?

Jan 3, 2020

Congrats man, really cool stuff.

have you thought about trying to get the Qualified Real Estate Professional tax benefits? Curious how much benefit this provides to an early retiree that owns/manages a small portfolio of RE investments.

Array

Jan 3, 2020

This guy's awesome.

Jan 5, 2020

Honestly warms my grinch heart to see this reply haha. Most in this industry would try to cut someone like OP down.

Jan 3, 2020

This is seriously awesome, congrats OP.

My question for you is a dive into your asset allocation, something I have been researching heavily lately (for personal investing, not work). If I'm understanding correctly, you have;

  • 33% in real estate
  • 33% in a combination of fixed income / domestic equities
  • 33% in equities (are these domestic? Individual companies or an index?)

Assuming I got this correct (please correct if not) what made you decide upon this allocation? Also, you said reinvesting a portion of the income that your investments generate you - is this not disadvantageous from a tax perspective as you're incurring capital gains before reinvesting?

Personally I'm accumulating in a passive portfolio comprised of Vanguard indexes (basically 5 index tracking ETFs that are diversified into 10,000+ companies in 45+ countries) because I wanted to address home bias, currency risk, diversification etc (both upsides and downsides). Basically tried to recreate the global economy in a handful of ETFs (with a domestic gov bond ETF acting as a volatility dial).

What Aston did you get? Congrats again OP.

Jan 3, 2020

This is a great post.

How do you generate ~400K a year from a 6M base?

Without knowing the exact allocation of your portfolio, for simple math that's 6.7% in annual return based off the 6M.

    • 1
Jan 25, 2020

The guy is trolling.

  • Associate 3 in PE - Growth
Jan 3, 2020

Great achievement! Kudos to you. I know it is a horrible thing to ask but I am going to ask anyway: does becoming a multimillionaire change your mentality of dating or marriage? You have more free time and resources to approach whoever you want at wherever you want.

Jan 3, 2020

What kind of phone would a guy like you have?

    • 2
Jan 7, 2020

do you actually think the rich have different phones? they don't. look at your phone, is it an iphone or a brand new samsung/google? yup, that's what the rich have too.

unless you're some cuck like steve schwarzmann with a flip phone

Jan 3, 2020

First: Congrats. Very well done.

Got to love sponsor-backed lending and the never-ending CLO appetite for these loans. 10x clean EBITDA anyone?

400k in interest, dividends, and rent seems high off a 6mm relatively conservatively allocated base though. What do you have the 1.6mm in RE invested in to juice the income? CMBS/RMBS B-pieces?

Jan 3, 2020

Is what you did similar to what they do in the Private Fund Group at Credit Suisse/PJT where they do private equity fundraising?

    • 1
Jan 6, 2020

No, those groups are placement agents. His work and compensation sound much more in line with a LevFin group.

Funniest
Jan 6, 2020

Thanks. Side note I like how this guy does an AMA and doesn't answer a single questikn

    • 7
Jan 3, 2020

Thanks for sharing - really impressive stuff. Can you share some more of your background for example, what fields your parents are in? Wondering if and how that may have impacted your path

  • Intern in IB-M&A
Jan 3, 2020

Wait - you started working in sales at 18?

1) How'd you manage that?
2) How did you balance the work with school?

  • Senior VP in HF - Other
Jan 4, 2020

I'm starting to think this post is a troll - aside from numbers that could be real but also seem bullshit and other items outlined both making sense while also having potential to be bullshit there is zero responses to any of the questions despite being an AMA. Weird. Is this a real post?

    • 5
Jan 4, 2020

I would say so.. or just the ultimate flex so he can read all the comments patting him on the back and not respond to anyone

Jan 4, 2020

Wow. Sounds like a James Bond life. Would you consider at a distance mentoring anonymously for someone wanted to learn basic primer investment strategies for an adult learner. I'm putting "deals" together without formal training. Considering going back to school to do finance stuff. I am in the research medical space. As a minority , I see NO people that look me in your industry. Don't think it's a colour thing, think it's an exposure thing. Big fan of Robert Smith of Vesta Equity. Love what he is doing for kids . Your an inspiration! Keep up the good work. Be Well!

Jan 4, 2020

Is this a leveraged finance position?

Jan 6, 2020

Can you expand on the Aston / what exactly causes it to be a money pit? More concerned whether it's because of insurance etc or maintenance and general upkeep

Jan 8, 2020

It's an English car so I'm guessing maintenance

Gun rights activist
Jan 6, 2020

Is this a troll?

Array

Jan 25, 2020

Yes this is trolling. Come on everyone, you actually think it's possible for someone fresh out of college to get uncapped commissions working a debt job in the Midwest? They don't even give mid-level people that type of comp structure on Wall St, let alone someone just out of college. If it sounds too good to be true, especially on an anonymous Internet forum, it probably is.

Jan 6, 2020

Is it technically an AMA if the OP never responds?

Jan 7, 2020

I mean he never said he'd answer

  • Intern in IB - Gen
Jan 6, 2020

Call me crazy but driving an Ashton Martin doesn't seem to scream financial discretion (leased or otherwise), especially not in the midwest. Shorty probably knows you got $$$.

This does sound trollish.

Also "AMA or give me advice" smh

Jan 24, 2020
Comment
Jan 24, 2020
Jan 25, 2020