What to do with life after receiving windfall
So I’m in a bit of a (very fortunate) predicament ...
As a bit of background, I’ve spent about 8 years in REPE and am pretty content with my career situation although I wouldn’t say I love or am super passionate about my job... I see it as more of a somewhat interesting, challenging, and respectable way to pay my bills and save for retirement and occasional splurges on vacations/toys/partying. Basically, as long as I work as a corporate drone, I will most likely stay in REPE because it’s a decent enough fit for me to get paid and not hate my job even if I don’t exactly look forward to my alarm every morning.
I recently received a significant sum of money (mid 7 figures) and am now seriously starting to question what to do with my life. At a conservative ~3% withdrawal rate, I could completely replace my current income and live my current lifestyle in perpetuity without having to work again. I am starting to toy with the idea (especially given the current state of city life due to covid) of moving out of my city and just getting a low paying but easy/fun job in a mountain town where I can ski/hike/relax a ton and basically live in a sort of permanent vacation without the downsides of living paycheck to paycheck as many younger year-round residents in those sorts of towns do. Or maybe use some of this windfall to fund a business (I have a lot of experience is RE acquisitions/asset mgmt - but would explore non-RE options too) where I can be my own boss and make enough to at least fund an easy WFH life where i never have to clock in at a certain time or put in a PTO request to take a day off again. I really don't need to live a fancy lifestyle (zero interest in joining a country club, driving a luxury car, using money to impress people in any way... I've had this windfall for almost a year now and nobody has a clue) but am still a bit fearful of giving up future earnings to make a change like this. On the other hand, I am possibly even more fearful that I'll keep plugging away at an office job, be moderately happy, and then have regrets later in life that I didn't use this windfall correctly and wasted my life sitting in an office. Also FWIW, I'm married, no kids yet, and my wife feels the same as I do about all of this.
So yeah, this was a bit rambling, but I guess i just wanted to get my thoughts down in writing.
Has anybody been in a similar situation or made a similar change? Any insight or ideas would be appreciated...
This is really interesting. I would imagine @thebrofessor has better advice than I have to give though
I concur that he is probably your best source of advice on this board for this. Back when I was doing FA type work I only dealt with working stiffs. The closest person to the financial situation that it sounds like you're in was a FI PM for a DJIA component. He was nearing the end of his career, it seemed like he loved his job, and had enough flexibility to pick up the phone on the middle of a weekday and spend two hours talking with me about IDGRATs for his kids, so I don't think the emotional component is the same at all.
One thing to think about, since it sounds like your wife might not be working either or might plan to be doing the same as you are: How would you handle medical? Particularly if you consider starting a family it can be a big chunk of change, especially if you need an individual plan. Most ski patrol/bike shop type jobs don't offer medical.
.This is a good point. I'd like for at least one of us to get work with medical coverage, and ideally both still have 401ks to max out too, and other than that i think the compensation could be pretty minimal and we just live off investment income. but as you said a lot of those ski bum type jobs probably won't have those benefits... not even sure how much it would cost paying for medical for 2+ people out of pocket.
I know there's problems with notifications but it seems to be fixed now. So throwing up the @thebrofessor signal again
hey man thanks for the tag. took a WSO sabbatical and am catching up on stuff. will answer soon
I think your best bet is to start your own business. You want to keep your mind on something and business development can be a great opportunity to take an idea off the ground and maybe step back a bit when operations are running smoothly.
I'd hire some smart people and keep as much equity as possible.
train me to take over your role pls
I have art for sale - $20K per piece, abstract oil, 5 x 7 feet, 5 x 6 feet. hmu - its an 'investment' :P
Thanks for the post. When I go to bed (in a few mins) I’m going to dream about this situation.
What I would give to be able to post this....can't offer you much advice on this but good luck and use it well
So... the fact that you inherited $5,000,000 (you didn't give a hard number but, as you said "mid 7 figures" that's what I'm assuming) a year ago, and are still willing to work somewhere you don't love just because you "see it as a challenging way to pay bills and save for retirement" tells me that you're (a) risk-averse, and (b) an absolute retard. I do a lot of trolling on this forum, but in all seriousness, the fact that you want to continue working at a job that, by your own admission, you don't love, just to save for your end goal of quitting that job, which you could do right now with zero consequences, is really stupid.
If you plan on having children, that could take up a significant portion of your windfall, depending on your parenting choices (e.g. private schools vs public, tutors, sports, etc).
I'm not an investment advisor, and nothing I say here should be interpreted as investment advice. But imagine if you dumped just $100,000 into something like Apple, Tesla, Amazon, or any other up-and-coming e-commerce company... imagine where that could be in 10 years. And at what cost? You already have multiple millions... what do you have to lose?
Think of your life this way. You inherited this windfall of money one year ago. You're still working at the same office job "wasting your life." Do you feel any happier now than you did then? If not, I think it's time for a change.
The “if you have kids” question is what I think about because uprooting them might have limitations on geographic flexibility. I guess there’s always boarding school (but we don’t want that not be around the kids; we think).
Actually, I answered my own question. I think moving around (aka changing schools) is ok up until 8th grade. My dad worked in Asia (Seoul, South Korea) working for the US govt for two years when I was in elementary school and it really gave me a different perspective compared to my local only hometown friends. So, might be ok to travel around when the kids are young.
so true
Damn, this really does put it in perspective. I guess I was kind of thinking another few years of work would allow me to put another ~$60k into my 401k and not withdrawal anything from the investments, which would put me up another ~$200k or so, but i guess it is a pretty marginal increase relative to the total sum (at a cost of another few years in a cube rather than doing what I want, probably my last few years pre-kids too). I probably am being overly risk averse.
deleted. double post.
This is awful advice. He's had this money for less than a year - we don't know whether that means it's been sitting in his account, or if he was told he would be receiving it but had to wait several months for the money to clear testacy nonsense.
Moreover, even if he had that money credited to his account a year ago today, it still makes perfect sense that he would spend some time thinking about what to do with it. It's like the classic advice to lottery winners to do nothing for 6 months or a year before spending a dime, because if you want to live on that money forever you better be damn careful about how you budget it.
OP, if you hate your job than don't stick around in it just for the paycheck; sounds like you could pump gas for $20k/yr and still have plenty to live on. But don't let anyone tell you that you're an idiot for being conservative with an inheritance and not YOLO quitting a job you don't like the day you get the news.
Yes, I've had full access/control over this money for a year, and have known about it for about 2 years, but have been basically following the lottery advice of not doing anything differently until I've had time to process the situation (which honestly still doesn't feel real). I actually had to buy a new car since receiving this windfall and still bought a used Toyota as if nothing had changed haha. I'm making this post now partly because the investments have grown to what i deem to be a safe "financial independence" threshold, and also because I'm getting within a couple years of probably having kids and want to make sure I maximize this last window of total freedom.
OP here, I'll also add another thing I'm kind of grappling with here is the stigma of an undeserved early retirement... Like as long as I continue working in a somewhat high paying job, I can mix in proceeds from the windfall to buy some nicer stuff / take nicer trips etc and nobody would really even notice, whereas if I just quit my "prestigious" job and buy a nice house in a ski town and bum around people will know something is up, and possibly even be resentful of me and my luck. I know its not worth sacrificing my happiness just to avoid this stigma, but I have a feeling its going to be pretty annoying to deal with... like literally everybody i meet is gonna speculate...
Dude go buy a house in Tahoe or Telluride and live the dream
I am very curious about Tahoe and its definitely towards the top of my list. I've never been, but the idea of having skiing in the winter and then a lake in the summer is very appealing, plus its touristy enough that im assuming there will still be good restaurants and shopping and concerts and stuff too. Plus houses seem to still be reasonably priced there, unlike Jackson Hole and the fancier CO towns where its like $2mm to get anything over 1,000 SF. I also think buying a small multi-unit there will be a good investment as more workers get the option to go remote. may get an extended stay airbnb to check it out.
This would be so sick. (I snowboard)
Tai Lopez is still working... and he's got millions... he LIVES FOR the stigma of people hating him, he just wants people to know his name/face, the stigma is what gets him popularity from all the haters and envyers
I think you should think less of what other people think and more along the lines of what impact you want to make in the world.
You're going to die. You're dying every day. Every day you spend doing something you don't want to do with that kind of financial independence is a day wasted.Quit your job and work like 20 hours a week doing something you love but pays shit and spend the rest of your time doing what you want when you want. These people telling you to start a company or some such ass are wrong.
Invest in NOT CASH. Get the f*ck out of cash.
$5 mill, is not as much as you think. Why not buy some real estate?
My current allocation is approximately 65% US equity index ETF, 30% int'l equity index ETF, 2.5% bond index ETF, 2.5% money market fund. I am definitely interested in using the ~5% in bonds/cash for a down payment on a property soon.
Grow some balls and allocate ~25% of that money towards going out on your own. Idc what it is, could be real estate, a small business, angel investing etc. and the remaining 75% towards traditional investments (stocks, bonds, etc.). Quit your job unless you think it is a learning experience for going out on your own/networking opportunity for future business opportunities. Otherwise, you don't need the salary.
I agree - go out on your own. But, 25% is too much. It shouldn't be that expensive to start your own business, depending on the industry.
yeah dog life is too short to chug along doing things that don't add value to your or other people's lives just because you're worried about what strangers will think. I think you'll find there's a decent amount of people in your same position out there that you can talk with. You will have challenges with some people being bitter, but those are lame people anyway. I think you'd find more fulfillment in life if you find a problem with society that you'd like to work on, then join or form a nonprofit that's aimed to solve it.
First piece of advice out of the way here - go get a financial advisor. Someone you trust and offers more than just investment management. Work with them and get the financial X's and O's out of the way. That will help you get realistic spending, return, etc. numbers that you can use to work from. If nothing else, it will help give you some peace of mind financially and help you make the decision about your job.
Second - throw that stigma out. Kill it. Immediately. Assuming that this is an inheritance type situation - you aren't exactly landed gentry with an estate, twelve butlers and five houses including a summer home. You were fortunate enough to have someone plan, however so, and work enough to give you the financial flexibility and security we all fight for on this forum. Don't spit on it - embrace it. It's not a death sentence or something people will judge you for - no one worth caring about will begrudge you for taking this opportunity to maximize your life and your wife's life. The worst thing you could do is let other people's perceived judgement stop you from living. And by the way, if you do move to that ski town - once you exchange some pleasantries, no one cares. Especially in a well off community - you will be the least of the gossip mill, that's for sure. If you don't make a big deal about it, doubtful anyone else ever will.
Last thing here - don't talk yourself down on this. This is awesome. Period. Take advantage of it. Stop worrying about stigmas, other peoples opinions, etc. Find what makes you happy and go for it.
Thanks for this
As an aside to this, you probably want the FA to be "fee only." Yes, you'll probably pay what feels like a lot, but if you do the math you're almost certain to save a ton compared to someone who makes an annual amount based on the AUM.
Like others said, this is an incredible opportunity. If you don’t love what you are currently doing for work, and spending time there is preventing you from chasing your passions, then I would start planning your exit immediately. Based on the details you’ve provided, here’s what I would do.
I would not touch the principal. Put it in a diversified portfolio and in ~20 years you will have $20M and then can really, really coast. In the meantime, I would begin thinking long and hard about what you want out of your one shot at life, and shape an occupation that gives you the funds and the time to do just that. You are one of the rare few who can do anything (barring some extravagant lifestyle, which you say you don’t want anyways) that they would want with your life at a young enough age to take advantage of that opportunity.
Do you want to try living in Australia, Portugal, etc? I’d find remote based jobs for you and your wife that will require the smallest amount of time and pay at least $XK per year, which would fund all of your expenses for your desired lifestyle. I have friends just out of college clipping 60K who realistically do 15-20 hours of remote work per week. You could take these kinds of jobs and live in various places at the best time of year to live in them and explore everything they have to offer. Take this as just an example, but I’d think long and hard about what you would like to look back on your life and have experienced, and do exactly that. Fuck man I would do anything to be in your shoes. Congratulations. Don’t spoil this on a grind that you aren’t passionate about.
good ideas, appreciate it
My only piece of advice for you is to take steps to protect yourself and your assets from your wife by putting them into a irrevocable trust. Money has the unfortunate tendency to change people and even if you two love each other and everything is great right now, things can change in a heartbeat and you don't want her to take over half your windfall away in the event that they do. Take action sooner rather than later because it will only get worse in the future (e.g. kids come into the picture, your wife stops working, etc.)
Good call. fortunately its already been placed in an irrevocable trust for me, which i am sole trustee and beneficiary. My plan is to keep everything in that account and only withdrawal as needed. I'd also like to purchase property via and LLC I am sole owner of and not commingle any personal funds with that either.
How was your wife's reaction when you told her?
I know some chicks that would be jumping on the couch and doing crazy shit to celebrate. Interested to hear her reaction. It sounds like you kept in the same standard of living - so she must be super chill about it.
or when you say you just got $5mil, she gives you a swift ass slap and says "that's what I'm talking about." - very many possibilities here
She's been very chill about it. We've been together since way before either of us had a clue this would happen which is nice, so i know theres no golddigger element to our relationship.. She's a bit scared about giving up her career (although she doesn't like her job either) and also about the stigma (her parents both had to grind for decades so she will feel guilty if she gets to just coast by) but is also excited about the freedom this will afford us. She doesn't really understand much about finance or investing, and I haven't told her a specific dollar amount or anything, but I've basically explained it as being enough to buy a nice house and live an upper-middle class lifestyle off of the investment income, but we'd still need to keep our spending in check (not nearly enough for yachts and private jets and shit).
Wow ok - she doesn't know the number ... only worth a nice house ... a $5 million dollar house - lol
I've never been in your situation, but worked for 4 years for a family that was in this EXACT same position (the kids' grandfather was a billionaire but lived such a modest, middle-class lifestyle that they didn't even know there was wealth in the family. My boss went to college--state university--graduated and became a public school teacher, only to be informed that, oh by the way, here is $500,000 a year for life).
The reality is, there is no universal way to approach unearned wealth windfalls. This is a huge family (with extended family, dozens of people are beneficiaries of the wealth). Some of the beneficiaries chose to continue to work, others became bums, contributing virtually nothing to society. It really depends on your personality. I would personally be miserable moving to a ski resort and applying my efforts to a life of leisure--to me that would be a more empty life than working in REPE in a dreary office. On the other hand, REPE wouldn't be the pinnacle of my life's goals. It really just depends on your personality. No one can advise you other than you.
thanks for the comment. I received mine through a similarly unexpected "stealth wealth" benefactor. Was expecting to receive maybe 5% as much as I actually did, if that.
I have a feeling I won't be able to sustain the bum life style for very long without having any real purpose to my life, but I could definitely eventually find something more purposeful than working in REPE to basically just help rich dudes get richer while being paid more than social workers, teachers, etc.. I'm thinking I might bum around for 2-3 months or so then start trying to find some work involving community service, helping kids, charity, etc.. or at least just do RE investing on my own terms and maybe create some employment opportunities for others while doing so.
congratulations. mid-7 figures is plenty to retire on indefinitely, but not enough to live high on the hog indefinitely. first question - are you happy? if you're happy, don't change much, just invest what you've got, payoff some debts, have some fun trips, and just work with a smirk on your face knowing you can tell your boss to fuck off because you're financially independent. if you're unhappy, I would make sure your network is in good shape, write out some personal goals, and take a 6 month sabbatical. at the end of it, you'll determine if you can live that way forever or if you're restless. I see it both ways, sometimes people go on that bucket list trip, do the entire Camino Del Santiago Spanish route, climb Kilimanjaro, learn a language, play St Andrews, dive with sharks, whatever, and then they're content. Other times, I see them get bored, like they left something on the table at work and so want to go back. usually this means they go work for a startup where they can lend expertise for lower pay (and maybe some ISOs in case the company does well).
I can't tell you what to do, you'll have to do some soul searching on that. I can, however, tell you what NOT to do based upon experience
1. forget the 3% rule, the 4% rule was written when rates were higher and now look at the 10y. I'd say 2% rule, you're young and inflation is a real concern of mine, so be conservative
2. don't get cute with your investments. don't try to go all in and all out like some folks I see, just because you have money doesn't make you any smarter or improve your cognitive biases. develop a strategy, whether its 50% stocks 50% tax free bonds + some RE investments, 50% bonds 50% rental RE, whatever, but STICK TO IT. most people underperform because of cognitive reasons and poor allocation decisions rather than because they bought FB instead of AMZN in March.
3. get your legal work done. I'm sure you love your wife but the moment you put that money in a joint account it becomes marital property and 50% hers. write a trust, involve her in the planning, and set up the account in your name/your trust's name alone.
4. realize that as wealthy as you currently are, you can still feel small depending upon the circles you run in, so be aware of that. you are who you surround yourself with, so if you use these funds as inspiration to spend winters in south beach and summers in Nantucket you will be tempted to spend beyond your means. eschew those desires and don't forget where you came from.
5. resist the urge to level up. some people I meet that have gotten $5mm are unhappy with that (yes, seriously) and they're constantly working towards the next milestone ($10mm, $20mm, etc.) in an urge to become happy. resist that. do some introspection first, and see what it is you really want out of life, and hopefully that will help.
happy to answer more questions. congratulations, and best of luck to you
Couple quick questions for you brofessor. Respect the hell out of your responses on this site & given your extensive WM exp you'd be the guy to ask:
1. You mention 2% expected RoR (via I assume an investment-grade bond fund at a place like PIMCO - correct me if I'm wrong) on a go-forward basis due to inflation. How do you think of RE in this mix to boost the RoR, esp. REITs vs. individual residential homes? Are REITs in general better than bonds given low rates / high inflation? Is there more risk associated with them?
2. What are the top 2-3 best bond fund manager platforms? I hear PIMCO is always in that mix but are there others? How do you guage quality aside from track record? Guess being in equity research I'm always obsessed over assessing 'process' as well but not sure how to do that
3. I've heard you mention that the dynamics of bonds is that avg active manager outperforms avg passive fund (unlike equities). Why exactly is this? Any papers / articles you could reference that would go into depth on this stuff?
4. Any books you recommend on bonds? How about any books on WM / asset allocation at a net worth of $5ml+ that goes in good depth on asset classes of RE (homes and REITs) / bonds? I work in equity research so I'm well informed on stocks but absurdly ill-informed on bonds / RE. Would be nice to have recs that aren't too technical into mechanics of bonds but also not too basic as I have a rudimentary understanding
5. Lastly, my parents for retirement are fortunate enough to have MSD ml. In terms of asset allocation for them, who should we talk to? Very clueless on this, any platforms you'd recommend and persons we should speak to?
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