$3.3 million is not enough to retire in San Fernando Valley, CA

I have <br><br>* $1.3M in rental property at 8% net yield, so $100k/year<br>* $800k in Vanguard VOO index funds yielding 4.5% at historical highs, so $36k per year<br>* $850k in stable value pension yielding 1.5% so $12k/year<br>* $200k in 5.25% savings account, so $10.5k/year<br>* $150k in normal brokerage account with Airbnb, Uber and shopify stock, yielding about 5%. We will use at most $7.5k from this, and hope it continues to grow.<br><br>So $165.5k per year after tax income, per pay stub. We'll assume 4% inflation forever, ignoring the 50% chance of a 10 year crash in stocks and home prices.<br><br>I am 45, and my wife is 43. Our kids are 5 and 10. We live in the San Fernando Valley. Our only debt is a 4% mortgage (so $10k/year, younger mortgage of 10 years), and the rental property mortgage, which is 5% ($8k/year). We also have to pay $10k/year property tax on our home, which is roughly market. We pay $2k/year property tax on the rental property.<br><br>So retirement home property tax is $12k/year, retirement rental property tax is $2k/year. We can't refinance these mortgages until they're in their 60s.<br><br>Crazy enough, with $3.3M at 5% yield, we still only have $165.5k/year income. It is just not enough for me to quit my $300k/year job. I still don't feel rich.<br><br>Sure we can cut back on some stuff. But we already live modestly. We only have two story, 2400 square foot, 4 bed 2.5 bath home in a not very good school district, for a family of four. We don't go on vacation, or buy expensive electronics or jewelry. We have two older SUVs. <br><br>The only things we splurge on are<br><br>* a part time nanny for the kids<br>* an expensive private school for the kids (we spend $30k/year on this)<br>* a home gym with a couple treadmills and free weights<br>* We hire someone to do our accounting/taxes for $2.5k/quarter<br>* We pay for airbnb while we do construction on our primary home. We've lived in an Airbnb for 18 months now, and have spent $75k on it. We still have 6 months of construction to do.<br><br>In 6 months, we'll probably have spent $90k on airbnb, and then no longer have this expense. So we'll be able to cut back on expenses and have retirement income of $165k per year and expenses of $215k per year, which is okay as we can just use some of the principal.<br><br>The problem with this is once the money runs out in 5-10 years, my kids won't be grown and self sufficient. They'll only be 15 and 20. I'll be 55, and my wife will be 53. We don't have any other money set aside to pay for college for the kids. 529 plans are not very relevant with home prices so high.<br><br>I only have $200k in liquid non-retirement brokerage account money and $200k in 401k that we can use for college at that point. But college will cost us $250k per kid, per degree, in 15 years. That's $500k for 2 kids, or $750k if they go for medical or law degrees. <br><br>So despite having $3.3M today, we'll probably have to work until the kids are through college, 20+ years from now. We'll be 65 and 62, and then we can finally retire.<br><br>But what I've described only covers our essential expenses, not our discretionary spending. Sure we can limit our entertainment budget, but are we going to cut back enough to actually retire? After we cut back on everything, we still need to spend $100k/year normal living expenses: groceries, food delivery, utilities, phone and internet, car insurance, health insurance, medical copays, home owner's association fees, gym and pool membership, wine, and eating at restaurants. <br><br>So only $65.5k/year now for home improvement and travel and fun. And we *still* only have that money until the money runs out 5-10 years later, when we still have 2 kids in high school.<br><br>Sure we can work forever, but I don't think our kids will ever grow up and move out. We'll never be empty nesters. Our kids will live with us forever.<br><br>And I'm rich. Our next door neighbor is a hard working immigrant and construction worker. He works 60 hours per week and has no savings. What are *his* chances of ever retiring? We should all just give up now.<br><br>Edit: some people pointed out that I didn't correctly calculate the income tax on the 401k money. I actually have $600k in 401k money, and not $200k. It's a good point, but makes little difference.<br><br>Edit: Airbnb has been terrible and we've decided not to do it anymore. We are going to refinance the home loan at 6% and put an ADU on the property. We will rent the ADU to a teacher. This will net an additional $3k/month, or $36k/year, and increase the property tax by $2k/year. This will net us an additional $34k/year. Now we just have to figure out how to pay 34k/year in property tax on the rental property, which is currently valued at $1.2M. And figure out how to pay $8k/year interest on the loan and $2k/year property tax on the ADU loan of $330k. But still, it should all work out okay.