Personal Finance

We're in our 40s and have built a $5 million nest egg - here's exactly how it's invested

Joey Frenette

Published: February 18, 2025 10:53 pm

A $5 million nest egg is incredibly impressive, especially for someone who’s still in their 40s. Undoubtedly, one not only needs the financial savvy to get to such a spot but also the right mix of investments to deliver solid risk-adjusted returns.

In this piece, we’ll explore the case of a fortunate Reddit couple in their mid-40s who posted on r/ChubbyFIRE to seek praise for their accomplishments as well as thoughts, second opinions, and tips on their investment allocation. Indeed, Reddit can be a great place to have one’s cake (praise) and eat it, too.

Though they’re already at an enviable amount to fund a rather lofty, early retirement, they’re not quite at their FIRE (short for financial independence, retire early) number. They’re going for $7 million in invested assets (not including their home) before leaving the workforce, and they seem well on track to hit their goals at some point in the near future.

Let’s have a closer look at how the couple invests their money and if there’s anything remarkable that stands out.

A look inside the $5-million portfolio of prospective early retirees

The couple’s home accounts for a very modest $500,000, around 10% of total assets, which, I believe, is commendable, especially given how many Americans have most, if not all, of their net worth tied up in their primary residence. Still, their real estate exposure doesn’t just stop at their home.

They’ve got a $200,000 rental property that they’re renting out to a loved one at a discounted rate (a kind thing to do!), a $675,000 rental property (6% yield), $3.43 million spread between the Vanguard Total Stock Market ETF (NYSEARCA:VTI), international stocks, and an assortment of bond funds, with 75%, 7%, and 18% weightings, respectively. And with $100,000 each put on venture capital and business equity, they’ve got some high-risk, high-reward types of “growthy” investments as well.

Undoubtedly, it’s a pretty well-balanced portfolio that’s quite heavy on stocks and real estate with a bit of bond exposure and spice in the form of higher-risk VC and business ventures. With such an asset allocation, the couple seems well on their way to hitting the $7 million nest egg level, perhaps in short order if the U.S. stock market continues its ascent.

Indeed, the couple’s investment portfolios resemble a balance between a Boglehead (a follower of Vanguard founder John C. Bogle) and that of a landlord.

With such a massive equity portfolio, though, a potential bear market or market meltdown could set them back a great deal. Undoubtedly, repositioning towards higher-yielding securities could make sense so that they’ll have more passive income in retirement and won’t be in a position to start drawing down funds in a manner that leads them to sell shares of the VTI after a nasty downturn.

That’s a lot of market risk.

While exposure to equities in retirement is always wise, I do think that the couple needs to ask themselves if they’re comfortable taking on such a magnitude of market risk. Indeed, a 38% drawdown in the stock market could wipe out $1 million off the net worth.

If the couple isn’t comfortable with such a risk/reward in their retirement years, perhaps diversifying into gold and real estate (via real estate investment trusts rather than rental property, which can be a pain to manage in one’s older years) could be worth exploring.

Defensive dividend stocks with 3-4% dividend yields may also be worth consideration, especially given the VTI isn’t all too bountiful of an ETF with a yield of 1.23%. Either way, a financial-planning pro could help the couple make the right moves and communicate whether they’re taking on more risk than they can handle given where the couple’s at in their journey.

The bottom line

Of course, a financial planner can help the couple reposition as they look to put the finishing touches on their nest egg. Rather than racing to $7 million by taking on more risk, I’d argue that a slower, more cautious approach could be the better move.