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29 and hoping to retire by 50....
Old 07-26-2008, 04:39 PM   #1
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29 and hoping to retire by 50....

Long education process lead to me only being in the workforce for about 4 years.

Single Male in Socal - Have 100k+ being managed in stocks + 45k in IRA + 70k liquid cash + a house paid for.

I can save about 2-3k a month if I try but not sure where to put the money in this tough economic climate...C/D's are about 3.45% which covers inflation....wishing to earn a bit more and plan a little better. Housing market is dropping like a rock so my networth is going down the pipe....
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Old 07-26-2008, 05:44 PM   #2
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Howdy,
I too just joined today...We'll plan to trust the wisdom of this board to make us wealthy together...

I agree with your assessment of today's economy except I don't think your 3.45% will cover inflation..Real inflation is higher...much higher and will continue to rise.My suggestion is to invest as if inflation will get worse..In other times you could expect interest rates to be raised to combat inflation but not this time..The Fed will not raise rates to the extent necessary because it will not be willing to stop growth in order to stop inflation..And besides there is just too many dollars in circulation and too much debt..
Good luck..
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Old 07-26-2008, 06:16 PM   #3
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Take a deep breath, read this forum until you're cross-eyed. Rinse and repeat.

Welcome to the forum.
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Old 07-26-2008, 09:24 PM   #4
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Welcome. I also am new to the forum. I am 34 and plan to retire at 47.

I have relatives in Las Vegas who are seeing a similar decline in net worth due to the current housing market. However, here in the midwest we have not seen the run up or fall off in the housing market. Well...not yet.

As far as investing in this market I take some comfort in my 10+ year horizon. But, I am planning in the next month to add an apartment building and a duplex to the investment portfolio. The business plan for these is to pay them off prior to ER. As a professional real estate investor told me recently- "Now is when the pros buy" I am no pro but can take ones advice.

Good luck.
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Old 07-27-2008, 01:56 AM   #5
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I wish I could afford an apt or a duplex in SOCAL right now...hell...even a nice townhouse is out of reach.

btw...what does ER mean?

I'm going to be surfing around and see whether stocks or real estate is the way to go in the next decade....I wish us all luck!
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Old 07-27-2008, 05:54 AM   #6
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ER = Early Retirement. Welcome to the Board. You seem to be doing pretty well for age 29...house paid off, plus 215K. Wish I could have done that! As for investing, I would say that the market is pretty much a bargain at the moment, although not all will agree with that. It probably did swell beyond normal boundaries in October or so of last year, but with P/Es of quite a few well run companies in the 8-10x range, and with all the activity at the local mall, I think there are quite a few oversold stocks. With oil coming down, some or a lot of the cash that was taken out of stocks and put into commodities (oil) may come pouring back in...that's why I think the time is not bad to buy stocks. We may have hit bottom, we may not have. But if you find your targets and DCA into them, you'll be fine. I don't particularly agree with buying rentals, although if you have the intestinal fortitude to do it you could, over time, make a bundle. Since I am closer to ER, within a couple of years, my personal focus is to bring up my cash reserve, and to get my asset allocation to where I want it for the first few years of FIRE (financial independence, retired early). You have some time to go, so if I were in your shoes, I would probably invest a little more aggressively. I think that if your home is paid for, that 100k in cash is too much. You should move more into stocks. At 29, I would also definitely move into a Roth rather than a standard IRA, but with the amount you have accumulated at your age, I'm gonna bet you exceed some thresholds...worth a look though. If you can get in now, even for only a few years, it will be to your advantage.

...But what do I know...the only finances I plan are my own...

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Old 07-27-2008, 11:25 AM   #7
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1. Welcome
2. What Rambler said
3. You have 21 years to go till FIRE date, so think long term. Historically, equities have outperformed all other investment classes over the long term so the only way you should not go there is if you are pretty certain that economic fundamentals are changing. Do, however, diversify internationally.
4. Asset allocation is key. (refer to many threads about this)
5. Be patient. You are already way ahead of most people your age, unless there's a big debt you haven't mentioned. If I look back to when I was your age I was mobile, renting, owned maybe $20K in cash and didn't know much about finance. . Now I'm 50 with net worth of ~$2.5m. How I got here: LBYM (living below your means), managing a high income tax efficiently, time in the markets and an inheritance. If there is anything else I would have done in retrospect, it would be to add some investment real estate in my 30s, preferably in a down market. Seems to me you have that opportunity now. In your position I might be taking $25 - $30K of the cash and putting 25% down on a good rental property. I would put another $25K into a low fee balanced equity fund. Keep the remaining cash as an emergency fund. Then DCA into equities over time as savings permit.
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Old 07-27-2008, 02:21 PM   #8
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Quote:
Originally Posted by dorikin_86 View Post
Long education process lead to me only being in the workforce for about 4 years.

Single Male in Socal - Have 100k+ being managed in stocks + 45k in IRA + 70k liquid cash + a house paid for.

I can save about 2-3k a month if I try but not sure where to put the money in this tough economic climate...C/D's are about 3.45% which covers inflation....wishing to earn a bit more and plan a little better. Housing market is dropping like a rock so my networth is going down the pipe....
Sounds like you are in great shape and should be able to be FIRE'd by 50.

see acronymns used on this forum


For someone being in the work force for about 4 years how did you amass 45k in your IRA? Unless there is an inheritance there that's quite a return on investment starting from scratch over 4 years.

Unless you plan to move anytime soon I shouldn't worry about your house since it is paid for.
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Old 07-27-2008, 10:21 PM   #9
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Sounds like you are in great shape and should be able to be FIRE'd by 50.

see acronymns used on this forum


For someone being in the work force for about 4 years how did you amass 45k in your IRA? Unless there is an inheritance there that's quite a return on investment starting from scratch over 4 years.

Unless you plan to move anytime soon I shouldn't worry about your house since it is paid for.
Maxed out my 401k whenever I could in the past 4 years =) Family did give me some money to start out so I can live on my 401k program.

I am going to do some research on this website for the money I can save...C/D's are a waste of time it seems...3.45% doesn't even cover inflation =(

Some properties in SD seem to have opened up and is going for a good deal - Anybody have rental property out there? what are some things I shoudl watch out for? I really enjoy SD so if my rental property goes up in value in the future then I certainly don't mind trading it in for a holiday house/condo when I'm older.

I don't think I qualify for ROTH IRA at my position ....I'm def. gonna go take a closer look at it.
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Old 07-28-2008, 03:05 PM   #10
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Long education process lead to ...
Oh, the irony!
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Old 07-29-2008, 10:24 AM   #11
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1. Welcome
2. What Rambler said
3. You have 21 years to go till FIRE date, so think long term. Historically, equities have outperformed all other investment classes over the long term so the only way you should not go there is if you are pretty certain that economic fundamentals are changing. Do, however, diversify internationally.
4. Asset allocation is key. (refer to many threads about this)
5. Be patient. You are already way ahead of most people your age, unless there's a big debt you haven't mentioned. If I look back to when I was your age I was mobile, renting, owned maybe $20K in cash and didn't know much about finance. . Now I'm 50 with net worth of ~$2.5m. How I got here: LBYM (living below your means), managing a high income tax efficiently, time in the markets and an inheritance. If there is anything else I would have done in retrospect, it would be to add some investment real estate in my 30s, preferably in a down market. Seems to me you have that opportunity now. In your position I might be taking $25 - $30K of the cash and putting 25% down on a good rental property. I would put another $25K into a low fee balanced equity fund. Keep the remaining cash as an emergency fund. Then DCA into equities over time as savings permit.
Thanks for the input!
question - how do i get into these equity funds you're talking about?

I do want to put some money in Aussie/NZ dollars when the currency rate is more favourable..is that waht you mean by international diversification?

Any particular way to manage those taxes on higher incomes? =) I am using turbotax and trying to get as many deductions as I can...
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Old 07-29-2008, 03:22 PM   #12
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Any particular way to manage those taxes on higher incomes? =) I am using turbotax and trying to get as many deductions as I can...

I'm also looking for an answer to this. Any help will be appreciated. DH and I are teetering on tipping over into the 33% tax bracket this or next year, and I would like to make sure that we stay as low as possible. Thanks!
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Old 07-29-2008, 03:39 PM   #13
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I do want to put some money in Aussie/NZ dollars when the currency rate is more favourable..is that waht you mean by international diversification?
Meadbh can provide her own answer in due course. For present purposes, I infer from her previous post that she meant to suggest the purchase of an international ETF or index fund, rather than holding cash in one or two non-U.S. currencies.

Why do you assume that the exchange rate will become more favourable in the future?
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Old 07-29-2008, 06:19 PM   #14
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Meadbh can provide her own answer in due course. For present purposes, I infer from her previous post that she meant to suggest the purchase of an international ETF or index fund, rather than holding cash in one or two non-U.S. currencies.

Why do you assume that the exchange rate will become more favourable in the future?
Ohhhh I see - I'll have to do some research =) hehe I'm such a newbie at this stuff.

Exchange rate-wise: This is what I've heard/seen

1. Drop of oil - US dollar 'should' gain in value
2. As a big Agri. exporter + tourism, a strong NZ dollar isn't really helping matters - I anticipate the NZ govt to do something about this.
3. Flock of Chinese/Taiwanese/HK'nese real estate investors has stabilized - I feel like the market has peaked so a down-trend could be coming. NZ govt could lower interest rates to combat this and bring down the value of the NZ dollar...although..inflation problems could limit how much the rate is lowered...tough call though
4. Once interest rates go south - Japanese investor that took out money in Japan and investing in NZ C/D's could start pulling money back to Japan and could spike a drop in the NZ dollar
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Old 07-29-2008, 07:20 PM   #15
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Thanks for the input!
question - how do i get into these equity funds you're talking about?

I do want to put some money in Aussie/NZ dollars when the currency rate is more favourable..is that waht you mean by international diversification?

Any particular way to manage those taxes on higher incomes? =) I am using turbotax and trying to get as many deductions as I can...
I wasn't suggesting you invest in foreign currencies. An equity fund is a mutual fund that invests in a collection of equities, or stocks. Equities are called equities because you own (i.e. have equity in) a little piece of the company; bonds are debt (the company owes you money).

Equity Fund

Within an equity fund, there will be a variety of companies, which the fund managers choose (less work for you). Each fund will have its own profile (e.g. "small cap" means mostly young, growing but riskier companies with less capital; large cap means larger, well established companies with higher earnings and maybe dividends; US equity means just that; emerging markets could include mines in Uzbekistan, engineering firms in India, etc, etc) and each fund has a different goal (growth, income or preservation of capital). Of course, you pay for the privilege of having a professional do the background research and manage the funds for you. The fees charged will come out of your funds. Some funds charge much more than others, but the cheapest are index funds, which include all the stocks in a category. Since there is little evidence that costly "managed" funds have a higher return than index funds over time, the most cost effective type of funds to buy are index funds.

I see you are in California. I am outside the US, but on this forum all the USians seem to worship Vanguard........

I hope that helps!
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Old 07-29-2008, 08:54 PM   #16
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The RBNZ just lowered rates by 25 bps (this week) and the "Kiwi" is dropping against the USD. It has gone from about 0.77 to 0.73 and is expected to go lower as more rate cuts are expected.
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Old 07-29-2008, 09:07 PM   #17
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Thanks for all the input guys.

I guess RBNZ is moving in 'my' direction....I gotta get ready =)
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Old 07-29-2008, 09:20 PM   #18
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I do want to put some money in Aussie/NZ dollars when the currency rate is more favourable...
Everbank is a US bank that lets you have accounts and buy CDs in different currencies. I have some money parked there in CHF now.

Be careful as exchange rate fluctuations are hard to predict even for the pros.
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