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Finally introducing myself. hello.
Old 02-08-2007, 10:25 AM   #1
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Finally introducing myself. hello.

After a few years of lurking i thought I'd throw my hat into the ring here.

I am for the most part pleased with our LBYM lifestyle and savings habits.

I'm 36, wife is 38. We have zero debt.

We have taxable investments of 228,000 and cash waiting to be invested (or for emergencies) of about 40,000. I know this cash amount is too high. 8k will be used to fund the 2007 IRAs, and some of the rest will be invested in index fund ETFs.

Our retirement funds (rolled over 401k, a small current 401k, Roth, SEP and trad IRAs) are at 171,000.

Our income over the last couple of years was around $105,000 - we both work full-time, though my wife gets much of the summer off by working for a TV show that goes on hiatus. Of that money, we save a lot. Last year we banked $35k. The year before that when my wife didn't take off much of the summer season we banked $55k.

That's the good news. The bad news - which isn't too bad - is that we don't own a house, and living in Los Angeles, we can't afford one (and might not want to here) . Our rent might seem high for much of the country, but it's reasonable for a 2 bedroom in a four-plex in a cool neighborhood in LA with not-too-bad commutes (25 mi. day for her, 8 for me). Rent is $1175.

So we've got about 440,000 banked right now. Neither of us have prospects of a pension, so besides the index funds, there is quite a bit in large-cap stocks with strong and rising dividends - all reinvested for now - that in 15 years will hopefully throw off $25,000 year in income. Last year our dividend income was over $7000.

Because our jobs are not things we're going to stay at from now until FIRE, we have a hard time forecasting into the future. It's quite possible our incomes could drop if one of us decides to do something different or leaves a job that is becoming too great a pain. We've always taken jobs that we think we'd enjoy, rather than for the money. In my wife's case, that has luckily still led to quite lucrative employment, though it's lacking in benefits like a 401k match or profit sharing or bonuses of any kind. In my case my salary is fairly low, 40k, but it was a new set of skills at an interesting workplace with low stress. Alas, a buy-out of the company has changed the culture and I'm considering leaving the company.

We try not to buy "things." TVs, gadgets, etc. Or we put them on birthday lists sent to our generous and well-off parents, all four of whom are alive. We do not count on getting inheritances from them, but we probably will someday. So our nebulous plan is to go another 15 years or so like this. Not necessarily in the same apt. or same jobs, but both of us working, saving, investing, and trying to keep our expenses low. By then I hope that we would have enough to possibly work part time, or take lower paying jobs that "do good." And at some point, probably buy a house ... somewhere.

I am almost always impressed with the quality of discussion and thoughtfulness here. I value the feedback and opinions.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 10:38 AM   #2
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Re: Finally introducing myself. hello.

Welcome!

Ya'll are much better off financially than we were at your age. You show a lot of common sense, and for that you will be rewarded.

There are other folks on this board that can give you better investment ideas than yours truly.

I do want to congratulate you....you are well on your way!
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Re: Finally introducing myself. hello.
Old 02-08-2007, 10:49 AM   #3
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Re: Finally introducing myself. hello.

Welcome to the group. I think the two of you are managing your resources very well!

I don't think your rent is unreasonable given the quality of life its location provides. The one risk you have is that the landlord may increase your rent significantly at some time in the future. Were I the two of you I would manage that relationship very carefully. If the property owner is local and sees the two of you as good tenants of modest means they will be less inclined to increase your rent. On the other hand, if they feel you love the place and have big pockets they will feel that a rent increase would be painless.

Keep the extent of your savings just between the two of you and invest it prudently.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 10:58 AM   #4
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Re: Finally introducing myself. hello.

Welcome to the board, Tricky. Sounds like you guys are on track.

Considering the nature of your work I can't think of a reason to buy a house in that part of the country.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 12:42 PM   #5
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Re: Finally introducing myself. hello.

Quote:
Originally Posted by tricky88

We have taxable investments of 228,000 and cash waiting to be invested (or for emergencies) of about 40,000. I know this cash amount is too high. 8k will be used to fund the 2007 IRAs, and some of the rest will be invested in index fund ETFs.

Our retirement funds (rolled over 401k, a small current 401k, Roth, SEP and trad IRAs) are at 171,000.

Our income over the last couple of years was around $105,000 - we both work full-time, though my wife gets much of the summer off by working for a TV show that goes on hiatus. Of that money, we save a lot. Last year we banked $35k. The year before that when my wife didn't take off much of the summer season we banked $55k.

That's the good news. The bad news - which isn't too bad - is that we don't own a house, and living in Los Angeles, we can't afford one (and might not want to here) . Our rent might seem high for much of the country, but it's reasonable for a 2 bedroom in a four-plex in a cool neighborhood in LA with not-too-bad commutes (25 mi. day for her, 8 for me). Rent is $1175.

So we've got about 440,000 banked right now. Neither of us have prospects of a pension, so besides the index funds, there is quite a bit in large-cap stocks with strong and rising dividends - all reinvested for now - that in 15 years will hopefully throw off $25,000 year in income. Last year our dividend income was over $7000.

Because our jobs are not things we're going to stay at from now until FIRE, we have a hard time forecasting into the future. It's quite possible our incomes could drop if one of us decides to do something different or leaves a job that is becoming too great a pain. We've always taken jobs that we think we'd enjoy, rather than for the money. In my wife's case, that has luckily still led to quite lucrative employment, though it's lacking in benefits like a 401k match or profit sharing or bonuses of any kind. In my case my salary is fairly low, 40k, but it was a new set of skills at an interesting workplace with low stress. Alas, a buy-out of the company has changed the culture and I'm considering leaving the company.

We try not to buy "things." TVs, gadgets, etc. Or we put them on birthday lists sent to our generous and well-off parents, all four of whom are alive. We do not count on getting inheritances from them, but we probably will someday. So our nebulous plan is to go another 15 years or so like this. Not necessarily in the same apt. or same jobs, but both of us working, saving, investing, and trying to keep our expenses low. By then I hope that we would have enough to possibly work part time, or take lower paying jobs that "do good." And at some point, probably buy a house ... somewhere.

I am almost always impressed with the quality of discussion and thoughtfulness here. I value the feedback and opinions.
1) Idle cash - do you have it in a no-interest checking account? MM account paying 5%? I'd recommend the tax-free Vanguard MM account (paying over 3% at the moment) or their taxable MM fund...unless you have a bank/credit union paying more.

2) Good to hear you're making your 2007 ROTH contribution soon. Did you already make your 2006? You have until April 15 to make 2006, if you haven't already.

3) You mentioned you have a SEP IRA(s). Do you have self-employment currently, or is it a past job? If currently, are you maxing out all of your available retirement account options?

4) Health insurance - is it provided by your employer? Does your employer reimburse you for it? If you're both in good health, I'd strongly suggest an HSA coupled with a high deductible insurance policy, since an HSA is the single best savings vehicle out there - it's contributions are not only tax deductible, but its earnings and withdrawals are tax-free as well (if used for healthcare - if not, and you're over 65, you simply pay the individual income tax rates).

5) What are your fund choices in your 401(k)s? Even if you don't get a match, it's still worthwhile to max out your 401(k)s....and then when you change jobs, you can roll them over to your own IRA directed by yourself.

Sounds like you have a good handle on the large cap stocks with DRIP dividends.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 03:17 PM   #6
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Re: Finally introducing myself. hello.

No plan for kids, right?

I would hold off on buying a house if I were you, too. Why don't you put up a breakdown of what you have your money invested in so we can tear it apart offer some advice on allocation. You allude to heavy investement in large cap, perhaps you might want to diversify into some small cap/value/international.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 04:41 PM   #7
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Re: Finally introducing myself. hello.

Quote:
Originally Posted by Laurence
I would hold off on buying a house if I were you, too.
Here is a handy-dandy rent vs buy calculator. Often it is cheaper to rent unless you intend to stay in the neighborhood for over 5 years. http://www.dinkytown.net/java/MortgageRentvsBuy.html
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Re: Finally introducing myself. hello.
Old 02-08-2007, 08:00 PM   #8
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Re: Finally introducing myself. hello.

Hey there tricky,

Welcome to this mess.

Don't be a stranger...

BTW, Is tricky your real name?
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Re: Finally introducing myself. hello.
Old 02-08-2007, 09:16 PM   #9
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Re: Finally introducing myself. hello.

Ha! No, Tricky's not my real name. And thanks for all of the replies/ questions / welcomes.
No kids, and no desire for them. It was a decision we made long ago, and we're still sticking to it. The fact that many of our friends now have kids really hasn't made us want to change our minds. Just the opposite really.

I'll happily address some other questions you've all kindly asked. For smaller cap exposure I have about 11% currently in MDY (mid-cap ETF) and 5% in IWM (Russel 2000 index). Going forward, I'd like to devote more of this year's investments towards the smaller cap stuff.

Idle cash is mostly in a Schwab money market fund earning 4.7%.
2006 IRAs are way behind us - funded last Jan. We'd normally already have our '07 IRAs funded by now, but want to wait until we meet with our tax accountant and the weigh the pros and cons of Roth (higher taxes now), or trad. (taxed returns later).

The SEP IRA is a remnant from my wife's freelancing days. She's currently on staff somewhere so we can't use it to shelter income, but someday it will likely come in handy again.

Health insurance is an interesting one. We each had good coverage from employers several years ago. We each left those jobs and deccided to buy our own health insurance with a big deducitble to get a low premiums (We're both healthy, eat well, don't smoke, aren't overweight, etc. Our typical use of doctors is very low.) Since neither of us plan to stay with our employers for a very long time we like this idea and are willing to pay out of pocket for it. We've heard horror stories from friends who've lost their jobs and try to work for themselves, only to have a horrible time getting their own insurance. By getting ours fairly early, hopefully it will be less of a concern. We'd never want to stay in a job we hated just for health insurance, and I know some people have done just that.

My employer pays me a quarterly reimbursement of a few hundred dollars for NOT being on their plan, which is a nice gesture. And we started the HSA last year. it's a great deal and should save us several hundred bucks.

My current 401k is a little disappointing in set up if not in options. (Split between an international index fund, S&P500 index fund, and a small-cap index fund) The vesting schedule is five years (1 year before you start, then vest 25% per year). They match 100% of the contributions, but only up to $1300/yr. So last year I maxed it out after a few months, and then opted-out of the plan at six months. I'll do the same next year.

38% of our money is in retirement accts already. While i'll always try to max out our IRAs, I don't see much advantage to my company's 401k beyond the $1300 match (which I'll def. always take.)

As for rent, we have a decent realtionship with our landlord. We always pay the rent early so hopefully it's in their interest we stay. Also,our part of LA is rent controlled (!!). They can - and do - raise the rent about 3% per year, but not more without kicking everyone out and doing major renovations. It's another reason we're staying put for now.
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Re: Finally introducing myself. hello.
Old 02-08-2007, 10:15 PM   #10
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Re: Finally introducing myself. hello.

Quote:
Originally Posted by tricky88
Health insurance is an interesting one. We each had good coverage from employers several years ago. We each left those jobs and deccided to buy our own health insurance with a big deducitble to get a low premiums (We're both healthy, eat well, don't smoke, aren't overweight, etc. Our typical use of doctors is very low.) Since neither of us plan to stay with our employers for a very long time we like this idea and are willing to pay out of pocket for it. We've heard horror stories from friends who've lost their jobs and try to work for themselves, only to have a horrible time getting their own insurance. By getting ours fairly early, hopefully it will be less of a concern. We'd never want to stay in a job we hated just for health insurance, and I know some people have done just that.
Are your deductables high enough that you can start up HSAs? If so the amount you can contribute has gone up quite a bit this year and it is said that an HSA is better than an IRA for retirement.
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Re: Finally introducing myself. hello.
Old 02-09-2007, 01:24 AM   #11
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Re: Finally introducing myself. hello.

Quote:
Originally Posted by tricky88
Idle cash is mostly in a Schwab money market fund earning 4.7%.
2006 IRAs are way behind us - funded last Jan. We'd normally already have our '07 IRAs funded by now, but want to wait until we meet with our tax accountant and the weigh the pros and cons of Roth (higher taxes now), or trad. (taxed returns later).
FWIW either taxes will be increased over the next couple decades or the US will end up bankrupt. Nothing is for certain but eventually we will need cash to pay for the late-retirees over-consuming social security and medicare. For this reason, my vote is to hit the roth accounts hard, especially if you or SO don't plan to stay home with the kids for more than a year or two (which seems like the norm in LA).
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Re: Finally introducing myself. hello.
Old 02-10-2007, 12:00 PM   #12
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Re: Finally introducing myself. hello.

Quote:
Originally Posted by jdw_fire
Are your deductables high enough that you can start up HSAs? If so the amount you can contribute has gone up quite a bit this year and it is said that an HSA is better than an IRA for retirement.
Thank you jdw - I misspoke about having an HSA. I have an FSA at wife's work - flexible spending account. use it or lose it. I've just looked into the whole HSA thing, and it does look like a very good deal. I'll research further, and will look into how beneficial it might be.
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