Retire from IBD for $40k dividends?
I'm currently an IBD Associate in a major city, I make approximately $300k total comp per year and tbh I don't like my job, I'm not even good at my role, In fact I'm pretty bad at it. I want to quit.
I've invested into a portfolio that yields me $40k in dividends per year, excluding any capital appreciation, the dividends alone would be around $30k after taxes.
I've been debating whether I could essentially retire and live off this?
Main risks:
- companies might perform badly, cut dividends etc but I think it's relatively stable for at least a few years. I can always just stay up to date on the companies in case anything changes and reallocate my capital if any bad news comes out
- how will I ever be able to afford my own home one day on only $30k after tax income a year? If I settle down and have a family, a nice 3 bedroom house in my area costs around $2-3m I could never afford this on the dividends alone
- $30k is not enough to live a comfortable life, it works out to be $80 a day, especially with inflation so high the income might end up disappearing after just food and drink expenses.. on my IBD salary, my current monthly expense is around $6k, this includes everything i.e. rent, student loans, dinners, partying, mini holidays, gym, social events like football tickets etc. so $72k a year almost triple the $30k. So I would require a very big change in my spending habits.
- I lose the opportunity cost of my current $300k a year salary which in just 3 years will probably be over $1m of earnings (given yearly pay rises / promotions etc)
Benefits:
- I retire and can do whatever I want within my financial budget
Wanted to hear everyone's thoughts on this and whether you would do it, is it worth the opportunity cost of the high IBD pay which would add up massively over the long term? Thanks
Sounds like the cons significantly outweigh the pros.
Yeah I guess that's true, but if we break down "retire" the quality of that is much larger:
- no more having to wake up early every day for work
- no more having to work late every day for work
- time (a huge benefit), able to spend time with family, friends, travel, pick up new hobbies, gym, find new passions etc.
You can just get a job with much less hours that still pays decently in a LCOL area. How would you send your kids to college and still have a good life on that income?
I can’t see how you’d travel on 30k a year unless you mean buying a van and living out of it
Chances are, after a few months off you're going to realize hobbies, time with friends & family, working out, etc. will still leave you with a lot of time. Seems like you have a solid and secure cushion which is great, but have you considered all your friends and family will be working their jobs too? Maybe take a few weeks off, dive into whatever you want to do, re-evaluate, and go from there.
I understand where you're coming from in a sense and definitely agree with you. People on this forum are delusional when it comes to valuing their lives and the fleeting nature of their existence and that anything can happen at any time. This forum also won't like to hear this but with 300k as a portfolio you can most definitely sustain yourself. I'm assuming you don't want to swing trade or anything like that. I would look into some stable coin yield farming. The safest is probably UST on anchor you can get 19% yield and buy insurance as well if you're paranoid. Very safe that way more so than your dividends for sure at least. Otherwise, if you just want to stick with equities for some arbitrary reason look into the HFEA portfolio with levered ETFs and bonds. PSLDX for the best passive income oriented version. Best of luck and let me know if you want to hear more.
What's your thoughts on SOXL? Are you all in on TQQQ or only like 40-50%?
You're speaking my language now. I love both of those funds. Personally I am largely UPRO (already has enough exposure to tech imo) but considering adding some SOXL to my HFEA port. SOXL is a damn beauty these last weeks.
Sounds like you might need to hold it out til the next bonus cycle. Dump that in the same dividend play, re-evaluate then
Stick it out for a bit longer and grow your portfolio more.
Why not just find a different job altogether? If pay isn't a priority, there's many entry-level/remote/contractor jobs where you can make $60,000+ per year. You'll make decent money, get neat benefits/perks, and have something to add on your resume all while only working 20-40 hours per week. You can easily take up hobbies, travel, be with family/friends, workout, etc. (for what it's worth, those things get old fast by the way).
Keep reinvesting that divided income.
Of course the VP wants to convince you this crap. You live a boring life and take for granted your own existence if you genuinely think this way sad.
Before becoming VP, I literally took time off to "travel, be with family/friends, workout, and take up hobbies." Was fun for the first two weeks, but within 3 months I was calling my old boss begging for my job back. Winter season during my hiatus didn't help either. He had filled the position but was able to get me on a different team, thank God. My boss actually told me not to do it, but what did I know, I was only a dumbass Analyst.
Traveling can be expensive and exhausting if you do it all at once. Especially when surviving on $40K gross.
You know what else? Your family and friends will still be working, taking care of family, going to school, etc. You'll see them marginally more and the law of diminishing returns still applies.
Not even A-list Hollywood actors workout 8 hours a day/7 days a week. And their job is to look good 24/7. You can look good physically just working out 3 days a week/1 hour sessions.
But what do you know? You're just a dumbass Analyst 1!
hey thanks for the reply, I think a remote/contract/part time role might be a good idea something like 20-40 hours a week or 2-3 days a week could be a good fit. Any ideas of what (decent paying) roles do this that I would be suitable for coming from IBD? The only part time ones I know of are the typical retail jobs like working as a bartender or something.
Why not just pivot to strategy/whatever and use that $40K/year as a supplement? It's a lot easier to take a $150K/year salary when you know total comp will be more like $200K...
I feel like the fact that this guy is even considering this means he is at an incredible level of burnout...
Why either all or nothing? You can quit and pick up a much less demanding job
What are you gonna do? Trust me you’ll get bored
Just switch to a less demanding job and supplement that income with your passive dividend income.
I have no idea how you plan to live on that. It leaves little room for error in both the performance of your portfolio and any lifestyle inflation
Relax, millions of Americans live on $40K per year.
And millions live without any real savings. That doesn’t make it any less desirable
How did you get a portfolio that pays out $40k in dividends a year on a IB associate salary? That's awesome.
Like others are saying here, I'd probably get a different job with good hours (and probably move to a LCOL city) and use the dividend income to supplement my lifestyle. Going from 80 hours to 40 will still seem incredible, and at least you're building some more wealth and a career. Also, if you were able to make to banking, you might have an easier time moving up there anyways - since most of corporate America is extremely slow and inefficient. You'll also retain a higher QoL. In case you just hate working period, you still have the option to go full FIRE, although I can't imagine anyone really being happy living in pseudo-poverty for 60+ years.
Probably bought into some BDCs at cheap prices during the March 2020 downturn.
Why not grind out a few more years in IB? Make that extra million and try living on a small fraction of it to see if it’s even possible. If it works, great now you have more savings and more dividend income. If not, then you know the plan isn’t feasible
Completely agree with the above, if you don't like IB just go find some strategy/corp dev role in a LCOL city.
Also, investing in such a high dividend portfolio doesn't leave much room for capital appreciation - do you have other money set aside for retirement/future house etc? Look at SPYD vs SPY over time, you are missing out on a massive amount of long term gains for current income. Unless you're like 70 years old this isn't a great strategy
Everyone apparently makes getting some 100k strat/corp dev job in a LCOL that requires you to do nothing so simple...genuinely asking if this is actually the case or is it just because he's a senior associate at this point.
More like $175k at his level - and corp dev is still a challenging job just not at the level of IB
I get 5-7 corp dev emails a day, the tight banking market is hitting them too. Assuming this guy is BB IB, no visa issues, and can interview half decently, he could have a new role Feb 1 if he wanted
What makes it challenging? Is it bad if I low key just want a data entry type job I don’t care about finance or learning anything honestly. I just want some money to invest elsewhere.
Feel like this is a shit post
Why don't you quit and just find a regular job that pays you way less but then you also have way fewer hours.
I think you would enjoy reading mr. Money mustache.
I believe he is the guy who retired super early and lives a threadbare lifestyle.
Only major con is that it’s unlikely you could marry a super desirable woman living like that, but if you truly hate work and living the high life does not interest you then go for it.
Also, just an fyi.
You’re not going to be making a million dollars in three more years.
I don't know. I think some women would be turned on by a guy that "owns his time" and doesn't report to a boss or is swayed by money.
But then again, OP should be doing neat and productive things with his time, not just mopping around being a lazy turd.
Of course any woman should be prepared to pay for her own meal (and maybe even his). 😂
What sort of things would you consider "neat and productive"?
Wait a few more years, live modestly now, let the exponential growth kick in a little more. Retire early by living frugally now, try to invest 75% + of your salary. Investing 200,000 could add another $10,000 in yearly dividends in a REIT or even more doing covered calls. Then retire early with a little more in your pocket. Live comfortably but build up the base to a comfortable place first. That's what I'd do but of course I'm not certain what's best for you.
Horrible advice. There are far too many people who say "only a few more years to get the next promotion" or "only a few more years to get that exponential growth" and keep delaying their happiness only to have spent their entire life miserable.
It’s hard to live on $40k a year. The option is to delay freedom by a few years and still retire incredibly early or to retire now and live without financial freedom. To me the choice is obvious.
Same boat bro. Wife and I have saved $1mm and I just got that senior associate promote. Thinking when we hit $1.5 I duck out and do one of the million fun things in this world. I worked corporate before and can assure that 40 hour weeks are lit … so are long periods of time off if you take a break in between.
there’s lots of people that spend less than $100k / year of course .. just not many posh bankers. Be creative and take time to thing about it. No need for black and white. Maybe you consult with smaller business part time, maybe you work corporate, maybe you work at Starbucks and live on the dividends or become a high school teacher. Do what’s best for you .. just one life
Pre-pandemic it might have been easier to live on that type of salary. Post-pandemic with the increasing WFH environment and inflation, rents have soared in many secondary markets. It is still possible to make it on that type of salary though and live in a city but you're going to have search in non-traditional locations. You can get a solid 1BR for $700-$800 in cities like Cleveland and Mobile, AL and like $500 in Wichita.
Sounds like you're burnt out and it's taking a toll on you. Unlikely to result in huge promotions either, not like it matters if you're just going to be miserable. I'm also not sure if "retiring" is the answer or it just seems like the easiest answer. I'm with others that you might be bored. Also keep in mind your portfolio is at risk in the markets and it's tight as is - what happens if there's a 20% correction? Not saying you can't find a job then, just something to think about.
I know it's difficult given where you are mentally - you probably feel like all jobs are meaningless, but my advice would be to put your foot on the brakes at work (both physically and mentally) and try to network with people doing totally different things to give yourself an idea of what you might want your future to look like. Teachers, people who work in start-ups, entrepreneurs, artists, a friend trying to start a business, etc.
Could you live on 30-40k per year? Sure, people do it all the time. But with that kind of money, you'll never have luxuries (except time, which is a luxury), family finances will always be tight unless you have a partner supporting you, etc.
Also maybe see a therapist or life coach for guidance
How diverse is your portfolio? Not just in quantity of names but also sectors? What are some of your investments?
You should determine what level of compensation you need for finances to not be a constraint on your happiness then work backwards. Also, you'll probably want to find a job that you're passionate about as the anonymous VP said above... One of my friends took a buy-out during COVID, and what started off as an endless spring break quickly turned into boredom / monotony. A year later, he's back on the interview grind, but is only targeting roles that offer value to him beyond pay.
You probably burned out, which is probably why the other extreme sounds so desirable. Going from working 80+ hours to nothing at all will be amazing at first but then I have a feeling that you'll get the itch to start something else. Instead of figuring out if you want to retire the 'the rest of your career', why not take a few months off then re-evaluate? You'll be in a different frame of mind at the end.
If you do decide to retire early, it'll be helpful to seek out others in the same situation who have the time / money to spend the way you do. Otherwise all your friends / family will be at work and it's surprisingly boring when others are busy.
Does taking a few months off imply quitting? I would think most firms wouldn't be open to the idea of a relatively junior employee taking a months-long sabbatical.
Yup you're right, I was referring to quitting since most firms probably wouldn't be open to that idea. It doesn't sound like OP want to stay where he's at anyways which is the reason I brought this up. By the end of his break, he can evaluate what new direction he's interested in.
Retire and do what? You're too young to just give up. What are you gonna do retire so you can watch netflix all day? I don't understand you millenials.
Ea porro temporibus totam vero molestias. Aut eum voluptatibus fuga. Vero cum rerum sit quasi qui occaecati.
A autem dolor ipsa recusandae laudantium. Odit ut et illo hic. Et aut quos id molestiae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ipsam expedita id nisi sed. Libero ab nihil qui et vitae saepe id. Est odio neque ratione expedita ex molestias numquam. Ullam et corrupti a et.
Aut laudantium id non temporibus eum illo quia. Reiciendis ut tempora et voluptatem qui dolor. Tempore recusandae impedit aspernatur saepe et aut. Provident nostrum illum occaecati dolores sit nisi ut amet.
Qui rerum molestias tenetur a facere eos itaque fugiat. Repudiandae et at ea labore consequatur. Non suscipit voluptatibus aperiam numquam. Adipisci tempore exercitationem et unde. Pariatur et asperiores quos cumque commodi quibusdam quia.
Labore dolor enim tenetur odit maiores. Amet in cupiditate praesentium numquam culpa quo delectus. Vel in voluptas voluptatem sapiente ut iste eos. Voluptas et sit eaque eligendi corrupti blanditiis qui. Aperiam tempore qui tenetur omnis quia molestiae minus.
Repellat non eius voluptas id. Minus quia blanditiis aut ut omnis quam.
Nesciunt ad sunt quibusdam laborum consequatur. Dolore optio quidem ratione numquam est. Sequi ut consectetur et voluptatem excepturi aliquam earum omnis. Id qui sit voluptatum modi earum laboriosam. Fuga eaque quis in sunt laborum. Expedita blanditiis culpa enim ut occaecati atque.