Death of a friend has me thinking

[huskerblue]

My friend died very suddenly with no warning a couple weeks ago. He was 52...I will turn 50 later this year. Parents died young from freak illnesses. Lots to think about.

Background:

I watched my parents skrimp and save and it rubbed off on me. Someday, they would be rid of all these kids and start enjoying life together more. Unfortunately, they contracted illnesses in their mid-50's and lived somewhat debilitated lives for the next decade+ with my mom dying at 66 and my dad a couple years later, his age was 71.

Nebraska boy with midlands conservative {cheapskate?} mentality. Raised in an upper-middle class family and was afforded excellent educational opportunities which were taken advantage of. After getting an advanced degree, took some business chances that did not pan out but were excellent opportunities to learn and grow. My parents didn't take any chances and I wasn't going to be like that. However, the bottom line of that was I was 30 and didn't have two dimes to rub together.

Went to work in the corporate world and started socking away money. During this time my parents died and inherited about $200K. Kept socking away with no real goals. Finally met the woman of my dreams and married at 40 she's a few years younger and also a first marriage. No kids. She is far less frugal than I and brought few assets but a high paying job into the marriage. She is very much a type A about her career.

We have gotten used to each other's fiscal habits and live a nice lifestyle but few financial goals. Max out 401(K)'s along with other investing {about $50K per year including company matches?} and took the rest and feaverishly paid down the $300K house CAUSE I HATE DEBT! Finished paying off the debt last year and found that we got killed on taxes so we bought a downtown townhouse in our old hometown of Omaha 50 miles away and love it. I could see us selling here and moving there permanently someday and so can DW. {I promised her that we wouldn't feverishly pay it down but we just made our first payment and it almost killed me to make the normal payment-HA!} Money for a nice downpayment was available as I recareered after nearly 20 years and I had a forced cash out of the piece of the company where I worked and owned {a small piece}. I make less now but I believe it will be more satisfying {I think, it's only been 10 months but so far, so good}.

Well, all this is fine and dandy and then my friend up and dies. And now all the crud in my brain from when my folks died are flooding forth again and I am wondering what is best, do I really want to just work and work with no goals and save and save with no goals?!?!

I'm very happy I found this site and hope that I will learn a lot here because frankly, the answer I'm starting to come up with is I don't want to just work and work and save and save, I NEED A PLAN!!!

For the numbers types, we have $1.3+ mill assets and now a new $140K loan on the second house {less the $150 I chopped off with this first mortgage payment, WHOOPY}, no other debt. The "liquid funds" are $670,000 {was a lot more not long ago} with a large amount of this in tax DEFERRED accounts, next to nothing in Roths and $120,000'ish in taxable accounts. The real estate and other "stuff" has a $660,000 value and that's maybe a bit conservative. It is relatively inexpensive to live in Nebraska {even with a high tax structure - the rest is fairly cheap}.

The portfolio makeup has been about 85% stocks, 15% bonds for years but after doing some reading and not liking the way our economy is headed {and I believe is headed for a LONG TIME = look at the Japanese economy in the same time scale of their baby boom versus our baby boom} at the beginning of the year, scaled back to about 65-70% equities, 20% bonds and 10+% alternative strategies. As of Friday June 27th, the portfolio is off 5.6% versus VFINX which is off 12.08%. I know it's good relative performance but it still feels crappy which probably says something about this new mentality I have since market losses when I was younger were just an opportunity to buy more shares cheaper. I am a total do it yourselfer with mostly funds. Used to have few but have recently diversified into a bunch of little niches.

BOTTOM LINE:

Plan needed. I hope I will learn a lot here. DW is agreeable in word to being done in about 9 or 10 years but I'll believe it when I see it. I think now that I would like to be done sooner but how the heck do you know what you can and can't do?! Plan needed.

[Want2retire]

Welcome to the forum!!! Sounds like you are doing better than many, financially speaking. Hopefully through your discussions here, you will develop and shape a plan that will meet your needs.

[Moemg]

I'm so sorry to hear about your losses`. I lost my brother , my husband and my son within seven years . That really made me realize life is too short and unpredictable . Try tracking your expenses ( everything ) for several months . That will help you see what you need for the plan to suceed and welcome !

[headingout]

Welcome. Ditto on tracking expenses. I think it all starts there. Once you have a handle on your annual expenses (including the big wildcard: health insurance), then the plan can start simply: expenses = 4% x portfolio. (Don't forget to include in that portfolio the present value of social security and any pensions.)

And I agree that life is too short to work and consume forever. There is nothing like unexpected loss to give us perspective. And, even while it is necessary to work and save before ER, I try to remind myself to enjoy the passing days -- because the length of our life is unknown.

[shotgunner]

How does one calculate the present value of Social Security income? I have not factored that in but know at present it is there in the future. Basically I have kept the SS income and the possibility of a reverse mortgage as cushions.

Death is the finish line for all of us ER'd or not. Be a snap cinch to plan an early retirement if we knew how long we are going to live.

I know I COULD run out of money, but I am SURE I am going to run out of time. RIght now I have my health to do and enjoy life, that will not be mine forever. If you have a reasonable shot at ER and you want to be ER'd the longer you work the more you gamble with the time side of the equation. The philosphy is if healthy and alive I can go get more money, I can never go get more time. As a type A workaholic I have to remind myself of this all the time, relaxing, enjoying does not come naturally to me. Death of people I know is the strongest reminder that time is marching on and it is relentless.

Question this, what would your life be like if your DW got sick and or died? You are both here and healthy now. The time to enjoy what life has to offer with each other is right now. With each passing day the amount of right now decreases.

Another way to think of it, many of us are seeing our financial portfolios decline, but over the long haul they increase. Our "Life Force" portfolio is always in decline and never increases, what do you want to do with it before it's exhausted?

[jambo101]

My father in law had that save everything attitude,he never went on vacations,never bought anything that he thought was more than he needed,well he ended up dying a rich man,unfortunately the apple doesnt fall far from the tree i'm married to his daughter and she has the same affliction,Fortunately i dont need her inheritance as i have my own bank full of money but we do have a difference of opinion when it comes time to buy stuff,she just doesnt get sportscars,motorcycles,fishing boats,campers,and spur of the moment trips to where ever. I've always viewed money as just a means to an end,granted you need to put some aside for retirement but the money is kinda useless just sitting in the bank.

[Ronstar]

Yes you need a plan. I started roughing one out about 5 years ago. Now its in its final stages. I agree with the others - Start with current tracking expenses. You'll need some time to develop your projected retirement expenses. Also work on the income side and plan your retirement investment re-allocation and employment exit strategy. You'll learn a lot from this board. There's also a lot of good retirement planning books out there.

Good luck!

[huskerblue]

Actually, I do track expenses in Microsoft Money and have done so for many years. However, I am a bit sloppy in that I do it to track tax matters to make tax prep easier come tax season and it's a bit of hodge-podge for other expenses since we use credit cards as convenience cards {NEVER carry a balance} and I simply enter "credit card" as the expense category for the transaction. Thus, I can tell you that in 2007, we charged $37,825.46 on credit cards but I have no idea on what. I guess I could go back to the card company websites and get old copies of statements.

PS - I pay my bills online. Make sure you don't fat-finger an entry in paying your credit card!! I did this for the first time a few months ago and underpaid the total balance {around $1,400} by a hundred bucks or so and you end up owing interest on the entire balance!! Man, was I mad. I now round up to the nearest hundred to avoid this issue {Owe $1,267, enter $1,300}.

[Midpack]

Originally Posted by shotgunner

How does one calculate the present value of Social Security income? I have not factored that in but know at present it is there in the future.

I did it in Excel, PM if you want to see it. Can't vouch for the validity of this, but looks about right http://www.opti-stat.net/~alex/cgph/finance/access/SSPv.html
Or you can treat it as an annuity and use this (choosing inflation adjusted) Vanguard Lifetime Income Program -- Request a Quote

[headingout]

Originally Posted by shotgunner

How does one calculate the present value of Social Security income?

Here are some academic treatments of the issue:

WRSS
FJK

As others mention, you can approximate it by getting a quote on an inflation-adjusted annuity.

[Milton]

YouTube - ESILY - "Enjoy Yourself" (It's Later Than You Think)

[Ronstar]

Humorous! but puts RE in proper perspective.

[happy2bretired]

Hi fellow Nebraskan.... I lost my husband, age 58, two and a half years ago, so I understand the wake-up call that you are going thru. It really makes a person re-evaluate their life and what they consider important.

[Lagniappe]

Originally Posted by huskerblue

Actually, I do track expenses in Microsoft Money and have done so for many years. However, I am a bit sloppy in that I do it to track tax matters to make tax prep easier come tax season and it's a bit of hodge-podge for other expenses since we use credit cards as convenience cards {NEVER carry a balance} and I simply enter "credit card" as the expense category for the transaction. Thus, I can tell you that in 2007, we charged $37,825.46 on credit cards but I have no idea on what. I guess I could go back to the card company websites and get old copies of statements.

You can automatically download the transactions from your credit card statement into Microsoft Money or Quicken. Then you just have to classify them (or agree/ modify to auto-classification). Makes keeping track of credit card spending a breeze.

[ziggy29]

This thread is a reminder to me that in my quest for FIRE, I nevertheless want to do some living and enjoying of the fruits of my labors now.

Getting out of the w*rk world is a priority, as is saving and investing a lot for it. But I've known too many people who sacrificed their present for a future they either never saw or became too ill or incapacitated to enjoy. And because of them, I'm not going to live a deprivation/maximum LBYM lifestyle to maximize the security of a future we may not even have.

[socca]

Your financial plans are subordinate to your 'personal' plans. I saved like hell for 20 years to meet my personal goals (have fun, intellectual freedom, an entrepreneurial lifestyle). So far, so good. What do you want to be doing at age 45, 50, 55, etc?

[huskerblue]

Wow, I sat down with my credit card statements and Microsoft Money printouts over the last couple weeks and I now know pretty much where every dollar went in 2007!

Queries: What kind of fudge factor does everyone build into their plan? Also, how do you account for the ABSOLUTELY unknowable like health care insurance costs in the future, tax rates in the future and the like? Also, what kind of fudge factor is built in for unexpected expenses {house repairs, et al}?

Thanks!

[Westernskies]

Welcome to the forum. We we separated at birth?

[Milton]

Originally Posted by huskerblue

What kind of fudge factor does everyone build into their plan? Also, how do you account for the ABSOLUTELY unknowable like health care insurance costs in the future, tax rates in the future and the like? Also, what kind of fudge factor is built in for unexpected expenses {house repairs, et al}?

I could easy provide some facile suggestion like "allow an extra 10% / 20% / 30% / etc. for contingencies like health care and house repairs". But a much more accurate (if less helpful) answer would be "it depends".

Everyone's circumstances are different. People live in different countries, in various types of accomodation, have individual risk factors for serious health problems, and so forth. You know your own circumstances best, and as such are presumably better qualified than anyone else to gauge your own future needs.