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44 looking to retire at 50
Old 10-16-2016, 11:09 AM   #1
Confused about dryer sheets
 
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44 looking to retire at 50

Hello All,
I really enjoy reading this forum, thank you for all the great posts. They have inspired me to start a plan for partial retirement when I turn 50.

Currenty, I have an engineering job paying a good salary with 401k, bonus, & medical. I max my 401K and now trying to save more for ER

I started a small wine business that my wife runs, it doesn't make much money, but it's a fun hobby and has good perks. I really would like to "retire" to it in 5 years, working there full time, but travelling regularly.

I currently have 750k in retirement accts, and two income properties that break even and have some good equity. All houses have mortgages.

I think I need to grow my accts to 1.5MM before leaving engineering job for a 4% SWR. Would like to be at 2MM for more comfort.

I'm having trouble investing in the market... My returns have not been great, but I'm reading more and trying to get 10%. I would like to find a good financial planner, but have trust issues and can't let go of my money.

I welcome investment education books, websites, etc..

Any suggestions that can help me reach my goals?
What are others doing to meet their goals?

Thanks
Robert
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Old 10-16-2016, 11:59 AM   #2
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Quote:
Originally Posted by RobH View Post
Hello All,
......I'm having trouble investing in the market... My returns have not been great, but I'm reading more and trying to get 10%. I would like to find a good financial planner, but have trust issues and can't let go of my money.

I welcome investment education books, websites, etc..

Any suggestions that can help me reach my goals?
What are others doing to meet their goals?

Thanks
Robert
(1) You are in a good position to run several Firecalc scenarios if you haven't already. That will give you a good idea of your probability for success.

(2) When running these calcs, it is critical to understand your current expenses and be able to make a reasonable estimate of retirement expenses. If you don't have a good handle on this yet, probably this is a good place to start. Most track expenses using some tool...Quicken, Moneydance, Mint, etc...

(3) Financial planners - I found that many were willing to give a free "Retirement PLan" based on input I provided on my finances. They do this in hopes that you will allow them to manage your money. I had 4 of these done by various companies and realized that I could do it on my own...though it was worth the discussion because I learned a bit each time we reviewed what they offered. BTW - if you have funds in Vanguard (or probably any other major investment firm), they will do this for little to no cost.

(4) Trying to get 10% in today's market is probably an unrealistic target. You'll see other threads talking about what folks assume for rates of return and it's typically much lower....maybe 5% nominal (3% after inflation) may be a more realistic target. Can also see what others are getting in the ongoing thread about 2016 YTD returns. Several folks post an update quarterly on what they are getting.
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Old 10-16-2016, 12:06 PM   #3
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Welcome!

Investopedia is, imo, a great place to learn about investing. For more in depth understanding of markets and finance, many colleges offer free classes online you can also take (MIT's open-courseware for instance) though not for credit, just knowledge. Keep in mind, the "best" investors won't get 10% every year, some years the market just doesn't cooperate, but other years you can see more than twice that return.

The first thing I'll recommend, if you aren't already doing it, is to accurately track your spending. It's imperative to know where you're spending is now if you're to accurately project it into the future.

As far as your last question, I've made a number of strategic decisions over the years to help me meet my ER goals, most notably being "not keeping up with the Jones'". Instead of taking a job where COL was double the national average, I chose to work where COL is about average. Thus I bought my retirement house (2,200 sq ft 3/2 on 1/2 acre) for $167k instead of California prices. I chose to take mostly "stay at home" vacations now (1 out of the area every other year or so) so that the savings can be invested and afford me a lot more vacations once I finally reach FIRE. My current spending level is just under 37% of my gross pay allowing my base savings rate to be about 33% of my gross pay. Extra income goes towards getting out of debt (mortgage) or investments (smarter, but I hate debt so I'm splitting where the extra goes for now). I keep my cars until they seem like they will soon need a major repair (last one was 9 years old when I got rid of it, current car is 7 years old) and I NEVER buy new. 1-2 year old cars for me.

I also studied finance extensively (a couple years self study, eventually got a degree in business management with a finance concentration) so I'd understand investments etc. Thus my investments avoid high fee funds etc that eat away at people's portfolios if they aren't careful.

I like to cook, so I save quite a bit of money by making my own meals (this week's lunches at work include Brunswick stew, smoked chicken noodle soup, tri-tip and veggies, and pot roast) and eating them instead of some overpriced frozen meal or going out to eat every day. I also make my breakfast at the office (start work at 6 am or I'd make it at home) which costs me less than buying McDonald's and tastes a lot better to boot!

Chest freezer in the garage was a one-time expense that has more than paid for itself by giving me room to buy meat, seafood, etc on sale and/or in bulk to similarly cut down on food expenses.
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Old 10-16-2016, 12:13 PM   #4
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Going to be tough getting 10% going forward, but what do I know. My return trails many because I'm so conservative. I'm sure you will get good advice from many here.

Fifty is a nice goal. Just keep investing. Take a look at Vanguard's balanced funds. Funds like Wellesley and Wellington have good track records. You just need to decide what AA you can sleep well with when the markets correct.
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Old 10-16-2016, 05:02 PM   #5
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Welcome Rob! If you haven't seen them yet, there are two excellent resources here that are helpful to many.

Some Important Questions to Answer Before Asking - Can I Retire?

and

Early Retirement FAQs - Early Retirement & Financial Independence Community

You'll find most folks here prefer "DIY" investing, with possibly consulting occasionally with a fee-only planner as a double-check on strategies. The books most frequently recommended here include anything by William Bernstein and A Random Walk Down Wall Street by Burton Malkiel, among others.

Also many folks enjoy the Bogleheads website https://www.bogleheads.org
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Old 10-16-2016, 05:16 PM   #6
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Hey, Robert.

Sounds like you're on a nice trajectory. Just a couple of quick thoughts based on your summary:

1) 4% draw rate might be a bit aggressive with an age 50 retirement. The 4% rule was designed to make your money last for 30 years assuming you maintain a moderate allocation portfolio. Might have to use a lower withdraw rate, but running your plan through Firecalc or similar program will help answer that.

2) Using a 10% investment return is really aggressive and maybe not realistic.

3) Have you taken into account variation in health insurance and expenses with early retirement?

4) What am I doing to meet my goals? Saving as much as possible, maintaining a diversified portfolio and rebalancing whenever the market says I should. Other than that we just need to decide what kind of retirement lifestyle we want and that will dictate when I can retire.
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Old 10-16-2016, 07:20 PM   #7
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45 aiming for 50 or 51 here...so kindred spirits.

Like others I homed in on 4% SWR and aiming for 10% returns. Former feels risky and the latter feels unlikely given rates, risks, etc. FWIW, I'm aiming for a 2.5% SWR and only expecting a 3% real rate of return on my investments.

I'd crank down on expenses or give yourself another 1-2 years to feather that nest. Either way, you're FI at a young age and RE before most of the planet.

Good luck!
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Old 10-16-2016, 08:00 PM   #8
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Your biggest asset right now is your job. Maximize your income, minimize your expenses and have realistic expectations on your investment returns.
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Old 10-17-2016, 08:36 AM   #9
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Quote:
Originally Posted by RobH View Post
I'm having trouble investing in the market... My returns have not been great, but I'm reading more and trying to get 10%. I would like to find a good financial planner, but have trust issues and can't let go of my money.
....
Any suggestions that can help me reach my goals?
1) if you can't invest in the market, it is not likely you can retire early. Maybe using real estate alone you can generate the returns needed to fund a long retirement, but the odds are more against it being better than long term market returns.

2) the way to maximize your market returns is diversify, keep expenses low, and don't try to time the market. Regular inputs into a few low cost index funds is the way to go. Check out Oblivious Investor's website and his 8 simple portfolios as an example.

3)A fee only (based on a reasonable per hour charge) one time only financial planner could be a great investment for you to give you a clear-eyed perspective. Avoid anyone selling investments or trying to get a percent of assets fee. As mentioned, Vanguard investors can get this for free.

4)10% return is simply not realistic. Reaching for it is likely to lead to worse than average outcomes.




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Old 10-17-2016, 09:54 AM   #10
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Second vote for reading "A Random Walk Down Wall Street" by Burton Malkiel. A key thing with investing is confidence from data. It helps weather the stock market storms, which can do the most damage. People who sold their stocks in 2008 missed the rebound in 2009, for example.
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Old 10-17-2016, 03:33 PM   #11
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45 aiming for 50 or 51 here...so kindred spirits.

Like others I homed in on 4% SWR and aiming for 10% returns. Former feels risky and the latter feels unlikely given rates, risks, etc. FWIW, I'm aiming for a 2.5% SWR and only expecting a 3% real rate of return on my investments.

I'd crank down on expenses or give yourself another 1-2 years to feather that nest. Either way, you're FI at a young age and RE before most of the planet.

Good luck!

Another kindred spirit here....46 and aiming for around 50 as well and targeting at or slightly above your upper number for funding. I'm also in the same camp as krotoole above, targeting a 2.5% withdrawal rate. I am about 50/50 for asset allocation so I figure my returns will be in the 3-5% range which will get me to my goals. Hit the bogleheads site and check out their wiki for book recommendations and such, lots of good information there as well as here. Good luck!
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Old 10-17-2016, 04:46 PM   #12
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Nice to here someone is on the same path. I'll definitely hit the bogleheads site.
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Old 10-17-2016, 04:50 PM   #13
Confused about dryer sheets
 
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Thank you all for the kind advice and the sobering advice regarding return from the market.
I was under the impression that the 4% rule would make it all the way. 2.5%-3.0 really changes things.
As for unexpected medical expenses, I did not take that into account. How do you plan for something like that?

Thanks again,
Robert
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Old 10-17-2016, 05:12 PM   #14
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As for unexpected medical expenses, I did not take that into account. How do you plan for something like that?
Simple. Keep yourself well insured and have the deductible (if any) in ready cash.
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