Q&A: Should We Retire in Our 40s With $4 Million and an 80% Stock Portfolio?

Paula Pant (0:00)

Joe, have you ever had a stock that has super appreciated in your portfolio?

Joe Saul-Sehy (0:05)

I have on a few occasions. Isn't that fun?

Paula Pant (0:08)

Yeah, it's great, although it puts you in a golden handcuffs scenario when it comes to taxes, if it's in a taxable brokerage account.

Joe Saul-Sehy (0:15)

Well, and not just that, also just the when do I sell it? Do I sell it? Is it too much? Do I let it ride? Like, what do I do?

Paula Pant (0:22)

I know.

So we're gonna talk to a caller at the end of today's episode, who has a question about tax gain harvesting. You've heard of tax loss. This is tax gain harvesting. Well, it's the luxury problem that we all hope to have.

Joe Saul-Sehy (0:38)

How do I separate my tax by paying a little today?

Paula Pant (0:42)

Right. In the middle of the episode, we're gonna talk to someone whose side hustle is blowing up. And she's wondering, do I quit this corporate job to go full scale into my side gig?

Joe Saul-Sehy (0:53)

You know a lot of people have dreamt about this one.

Paula Pant (0:55)

Right? Exactly. The middle caller today, her question is your dream. But before we get to that, we're going to answer, ooh, I was about to say this question, which comes from Mike, and then go straight into it. But I should introduce the show first, shouldn't I?

Joe Saul-Sehy (1:09)

Oh, that's crazy talk. You introduced the show last week and the week before that. We always do it the same.

Paula Pant (1:15)

But for the people who have never heard this before, welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. The show covers five pillars, financial psychology, increasing your income, investing, real estate, entrepreneurship, acronym, double I fire. I'm your host, Paula Pant. I train in economic reporting at Columbia. Every other episode-ish, I answer questions from you and I do so with my buddy, the former financial planner, Joe Salsie High.

What's up, Joe?

Joe Saul-Sehy (1:42)

I feel inadequate today. I'm supposed to, if you're new here, I'm supposed to have some dad joke and I dropped the ball, I don't have one.

Paula Pant (1:53)

Oh, oh, why did the dad decide to buy a boat?

Joe Saul-Sehy (1:57)

I don't know.

Paula Pant (1:58)

There was a sale.

Joe Saul-Sehy (2:00)

Oh, Mike, she's here all week. She's here for the next hour-ish.

Paula Pant (2:06)

With that said, we go to our first question, which comes from Mike.

Mike (2:11)

Hi, Paula and Joe. This is Mike from Boise and my wife and I, who are 37, are blessed to be in an incredibly great situation. We're a doctor and a nurse, and we're positioned to have gainful employment whenever we want, and we can always go back to that even if we take a break. We have some great income, and we've currently got 1.2 million in investible assets. I project that this is going to grow to close to 4 million in eight to 10 years, and that's of course depending on markets and everything like that. However, our inflated expenses around that time should be about 5% of the assets. And I bring up that because it seems like a really perfect opportunity to take a break and reassess. I've got two daughters who won't quite be in college. We'd love to travel during the summers with them extensively, do some slow travel, do some projects around the house, and see if maybe markets cooperate and we can just continue into retirement. But also we could always go back if necessary.

My question is around asset allocation during that time. I've been looking into some risk parity portfolios, but I'm honestly a little worried they're too conservative. In my situation, I could easily see myself going back to work because it might be fun, or at least a part-time amount. I'd have plenty of years to make it up if the markets tanked, being only 45

Am I crazy to do something like 80 percent stocks, mainly split between small cap value and large cap growth, 10 percent long-term treasuries, and 10 percent gold? When I do this with my $4 million potential portfolio and my inflated expenses, Portfolio Visualizer says I've got about a 90 percent success rate on a Monte Carlo, and that seems plenty good enough to me. I think as long as I have enough cash on hand to cover my travel and lifestyle, I don't necessarily need to be too scared of market volatility and sequence of returns risk.

I'd also love to get any input on what markers you would use to decide that you needed to return to work or add on part-time income. Is it a percent portfolio drop, a failure rate on Monte Carlo or something else? Can't wait to hear what you guys think. Appreciate everything you do. Have a great day.