Couples in the fast track who earn enough to live a comfortable and luxurious lifestyle without any typical expense worries, like a mortgage or car payment, may be subject to burn-out prior to retirement age. In order to walk away, a nest-egg safety net that will generate sufficient annual income to cover their necessities and, if desired, maintain their lifestyle, needs to be established and deployed. If they are still several years away from a Social Security retirement age of 62 or higher, then there are tax and other considerations that need to be added into the equation.

Is $5 million Enough?

A childless couple in their 50’s have had successful sales careers in the same industry. They recently posted on Reddit about their feelings of burn-out and a growing desire to walk away. The couple inquired if their $5 million liquid nest-egg would be sufficient to maintain their lifestyle through retirement. In tandem, they presently earn $500,000 pre-tax, and their annual expenditures, which can likely be scaled back somewhat, are in the $120-$140,000 range. In anticipation of the need to subsequently provide their own medical insurance, they are planning to ramp-up a previously part-time photography business (which already has an LLC), which would likely generate $50,000 annually, in order to pay for healthcare. An overview of their combined financial holding estimates show the following:

Asset	Value	Account Type
Vanguard Total Stock Market Index Fund ETF (NYSE: VTI)	$1M	brokerage
Vanguard Total Int’l Stock Index Fund (NASDAQ: VXUS)	$400K	brokerage
Short Term US TSY bonds (under 5 year maturity)	$400K	brokerage
Cash	$200K	bank
Vanguard Total Stock Market Index Fund ETF (NYSE: VTI)	$1.75M	IRA
Vanguard Total Int’l Stock Index Fund (NASDAQ: VXUS)	$375K	IRA
Fidelity Total Bond ETF (NYSE: FBND)	$375K	IRA
Bitcoin (BTC)	$300K
Rental Property Income sale	$200K
Gold Coins, Collectibles	$150K
House in Miami	$1.5M

The house in Miami is near the college, so the real estate value is appreciating at a good clip. The couple also owns a 2023 BMW X7 (worth between $75K-$120K) and a 2024 Porsche Cayenne (worth between $90K-$175K). The house and cars have all been paid off.

Tightening The Budget – Holding Off The Retirement

The couple in question is in a strong financial position: they have a sizable nest egg, they have a new business they are looking to enter into, and they have no debt overhang. Therefore, they have a number of options that they can take. From my own experience, I might make the following suggestions:

1) As the photography business is clearly a passion and a foregone conclusion, pursuing it is an excellent idea. This comes with a number of benefits:

• It continues to demonstrate gainful employment to the IRS.
• It is an entrepreneur owned business that may qualify for support (tax breaks, etc.) under the incoming Trump administration, which has been historically very entrepreneur friendly. 
• It will put the couple into a lower tax bracket for the next 10-15 years. 
• The business can expense the medical insurance as well as deduct other expenses against the cumulative 1099 freelance income that may be generated annually. 

2) Deferring official retirement until over 62-65 will generate the following advantages:

• The IRA funds will grow significantly larger over the next decade – deferred tax on withdrawals is assessed on the IRA account owner’s tax bracket at the time of withdrawal, which would ostensibly be much lower.
• Social Security age qualification will be met to supplement retirement income. 

3) Passive income from real estate rental is an excellent hedge. If the property is already sold, then putting the proceeds into another real estate property for rental income would be advisable. 

4) Some diversification of the stock portfolio would be prudent. If index ETFs are the couple’s preference, rather than such a large allocation into VTI, a portion each into a precious metals ETF, a technology ETF and a Russell 2000 ETF might be a wise move for the following reasons:

• BRICS is proposing an asset-backed currency with gold, oil, and other commodities to support its value. A Trump administration will need to do likewise with the US dollar to remain competitive. 
• The Elon Musk influence on technology reinforces the appeal of the Magnificent 7 tech stocks (Alphabet/Google, Amazon, Apple, Nvidia, Meta/Facebook, Microsoft, and Tesla), and the excitement over AI cannot be understated going forward,
• The Russell 2000 tracks the top small-cap stocks trading publicly in the US. They historically have the most upside potential, and companies like Nvidia were once Russell 2000 stocks before advancing to stratospheric heights. Small companies should do better under a lower red tape regulatory climate under a Trump administration.

The above article is offered solely as opinion, and not intended to be construed as professional advice. A financial planner or similar advisor should be sought if such counsel is warranted.

 

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