For an audio version of this post, please click on the speaker icon (top left).
Welcome to this episode of The Doctor’s Bill (Can You Afford It?).
Wonder if you should buy that big ticket item or not?
Well here’s your chance to have a wealth management expert, Johanna Fox Turner, of Fox & Company Wealth Management analyze your overall finances and make a final verdict on whether or not you can indeed swing for the fences and splurge on yourself or whether you should just walk away.
[Johanna and I have no current financial relationship]
Disclaimer: This is not meant to be a substitute for paid professional advice but only meant to serve as a suggestion/guideline.
The following are the details from our submission form:
Item/Experience Desired:
Ski Boat
What Is Your Time frame?
90 days
Approximate Cost:
$40,000
How do you plan on paying for this item/experience?
Cash (from savings)
On A Happiness Scale of 1-10 (10 Being Happiest), rate what this item/experience will do for you A) Short Term and B) Long Term:
Short Term: 8
Long Term: 6 (empty nest in 4 years)
Age:
47
Gender:
Male
Occupation:
Hospital CEO
Marital Status:
Married
Any Children (If so please provide ages)?
3 (17, 16, 14)
How Many Years Till Planned Retirement?
4
What is your total household income?
$175,000
State Income Tax (if Any)
$6k
What is your % Annual Savings Rate? (savings/gross income)
48%
Estimated Annual Living Expenses (Current):
$75k
Estimated/Desired Annual Living Expenses (In Retirement):
$64k
Market Value of Primary Home [For Renter =$ 0]
$350k
Additional Real Estate Holdings Equity (Market Value-Debt):
$0
Current Liquid Asset Value (Savings, Checking, Etc.):
$120k
Retirement Assets (401k/IRA/HSA):
$910k
Brokerage Account (Taxable):
$5k (just started and contributing monthly)
Miscellaneous Asset Value (Please elaborate):
$70k (10k cars, 40k collectibles, 5k boat, 5k PM, 10k misc)
Mortgage Balance:
$0
Student Loan Balance:
$0
Additional Liabilities:
$0
Unfunded Future College Costs & Years Left Till Needed:
$10k for my 17 year old. My 16 and 14 year olds are set.
Other Unfunded Goals and Years Remaining (Today’s Dollars):
$0
Any other pertinent information not addressed?
Based on where we currently live we will only have about 4 months per year of enjoyable boating/lake time.
Will withdraw from Roth’s (current value $645k), if necessary for living expenses.
Not sure where will live in retirement (depends on where the kids end up; Colorado is a strong possibility)
- This is the reason for the long-term happiness factor of only 6.
Don’t have a list of exciting things to do after retirement (are homebodies).
In addition, Johanna calculated additional projected final amounts added between now and retirement based on information exchanged through follow-up emails: Retirement Accounts $187k, Brokerage $120k, Cash $82k.
So does this captain of the hospital get the go ahead to be captain of the ship?
Or by overextending his finances, does this CEO jump the financial shark?
Click on the Doctor’s Bill Image and find out the verdict:
Click on the Bill (image) and find out if can afford it or not
After you see the verdict please come back to this page and comment whether you agree or not with the decision (and no cheating by looking at comments first!)
If you would like to submit your own Doctor’s Bill request please fill out the submission form.
Note:
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Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
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With kids those ages, making boat memories now would be perfect. Might I suggest a gently used boat. Way better price than $40k.
A used boat would definitely be preferable as it could significantly decrease the purchase price.
I do think he has to temper expectations to retire as early as he would like just to build a better financial buffer
You have a good point and I like your idea but I’m mainly nervous about the early retirement, I think. The boat is almost like a diversion tactic.
I started a thread about this in the WCI forum (here: https://bit.ly/2JWZtiC ) and @Anne also had a good suggestion, to find a “boat club”. Members pay a monthly fee and can use boats in member boat clubs throughout the country. Of course, you wouldn’t have a boat to sell when you’re ready to move on – but that may be a blessing in disguise!
Johanna, “… almost like a diversion tactic.” Fair enough. I’ve never really been a big spender and this is certainly out of character. Kinda getting caught up in the moment of being an empty nester in 5 years.
I’ve always been an owner kinda guy, but I am intrigued by the ability to “time share” a boat. Due to the flooding, I’m not making any decisions this year. I’ll keep your idea in mind.
Mr. WRW
I definitely considered this purchase a splurge, so I appreciate the feedback. The lake where we would be using the boat is currently flooded so I’ll be delaying any new boat purchase until next year.
This one is interesting. Not the least of which because the writers financial position is not far from my own. In this financial position I wouldn’t think twice about such a purchase… but it comes back to I don’t plan to retire in 5 years. Life is about choices. Boat or retirement. You can have anything just not everything.
That IS interesting. S0, given that you wouldn’t think twice about the purchase, how much longer do you plan to work?
Well unlike the subject I’m 37 almost 38. My retirement age goal is 55. So 17 years give or take.
Sounds quite reasonable.
I agree that you can’t have it all in this scenario. The boat purchase is reasonable if it was not for the early retirement stipulation which added up some stressors that I couldn’t overlook for my judgement.
I think he could buy the boat but not retire at 51. Even if he forgoes the boat he will not have my retirement blessing.
I agree Hatton1md. That goal of retiring at age 51 is tenuous at best even without a boat purchase. If it was my financials, I would play it much safer and have to work a bit longer to make it work.
FullTimeFinance, Your comment, and suggestions are duly noted. Considering the fact that we already have a decent used boat I would definitely go with the retirement options vs. a new boat. Good luck with your future retirement plans as well!
Mr. WRW
I’d concur on the thumbs down. Too little margin for error if SORR showed up.
Better go with Hatton1 – you can get the boat or retire early, but not both.
Thanks CD for stopping by and expressing concerns especially when potential sequence of risk can derail portfolios even stronger then this one
I truly appreciate all your feedback. As “luck” would have it, the house and lake where we would be using the boat are currently flooded. It will be well past the end of boating season before things are back in order, so I’ve postponed any boat purchase decisions until next year. You have all given me much to think about. Please keep the comments coming.
Mr. WRW aka. Cytoman
I appreciate you stopping by and commenting. It is tough to tell someone not to do something they want to do as was the case here but hopefully seeing it from other perspectives gives you a better picture to make your ultimate decision. Best of luck no matter what you choose
I’m not surprised by the comments/recommendations. I get it, don’t ask the question unless you want an answer/opinion. Thanks for lending me the platform.
If 40K blows up your retirement, the problem isn’t with the boat, it’s with the retirement. His kids are heading into the most expensive part of child rearing and you don’t have it all covered. The problem is thinking you have enough to RE. You can RE if you can live on 35K/yr after taxes, dubious for someone used to 90K/yr. If you can buy a 40K boat you can sell it for 15K -20K minus upkeep and there will be upkeep, so you net out at 5K/yr cost of fun + upkeep and the cost of some kind of… Read more »
I’m on board with the recommendation for lengthening the time before retiring as well. As you pointed out the purchase of the boat only extends the work period by 3 months in your scenario.
Thumbs down for me. The boat is a depreciating asset with on-going carrying costs. Unless the purchase price is immaterial for the buyer, then I don’t think he should go for it given his retirement time frame. If his retirement time frame is flexible, then that would change my analysis. But the fact that he is asking for advice on the purchase, this leads me to believe the $40,000 is not an immaterial amount for the buyer. Can’t financially keep afloat with the boat.
Love the last line Sport of Money. I am fully on your side with the analysis. The projected window of retirement was the ultimate financial anchor in this ask.