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First post, late bloomer, light on cash, heavy on attitude.
Old 03-18-2013, 02:15 AM   #1
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First post, late bloomer, light on cash, heavy on attitude.

I do very much enjoy reading the thoughts and plans of others on this site. We are all very similar. I also feel a kinship with the many of you who feel burned out and still have a ways to go before you can stop the grind.

I am 49 and feel completely fried most of the time. I started everything late and have a 11 year old son who has dreams of private college education that I am eager, and will be proud, to pay for. With that said, I believe I can accomplish all in 13 years when he is done with school.

I have a pension plan that will be about $3500/month at that time.
Wife and I have 401k's and 401a's worth about 220k now. Her 401k is done with contributions as she is not working. My 401'a gets about 10K in contributions a year. They grow a little bit in safe money accounts. I hate the stock market and lost everything I had in 2000. Really everything.

I am also vested in my lifetime medical plan (for the both of us) that kicks in in exactly 13 years!

I have some real estate liabilities and assets.
*Condo 10k positive cash flow/year. current value 250K. equity 100%

*Commercial property store and 2 apartments in the town in where I hope to spend 6 months a year. The store is in a great location and the apartments are nice...so I could open a 6 month business to work the warmer months...not sure yet on how that plan would develop. maybe getting rent is better and easier. I don't know yet.
12K positive cash flow/year. Current value 220K equity 100%

*Vacation home 25K negative/year with property taxes and upkeep. Value 1.2M. Equity 100% (near the commercial building)

*Primary residence current value 600K. Mortgage will be paid off in 12 years.

I have no credit card debt. I do have a couple of car payments and that will not change for the next 13 years. I also have no other cash and investments to speak of...just some emergency reserves.

The only thing that I will not ever give up is the vacation home. It is my special place and I just can't live without it. I may be able to figure out a way to generate income from the property as it is in the heart of wine country. But I just don't know how to make that happen at this time, and property taxes are a big problem.

In any case, it seems like I should be in decent shape in 13 years if I can power through the occasional agony of my job and 3 hour a day r/t commute. The hope is to live in the vacation home in the summer and then somewhere warm in the winter. Do I keep the investment properties or cash out of them? I cant figure what would make more sense.

I appreciate any comments, good, bad, or indifferent.
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Old 03-18-2013, 04:09 AM   #2
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Welcome to the forum! I also had a late start on kids (my son was born when I was almost 41) but an early start on FI.

As for comments the first thing that jumps to mind is to consider reevaluating your adversion to the stock market and keeping such a high allocation in real estate.

Like you I lost a lot (though not all) in the tech bubble. What that taught me was not to be a stock picker, and to have an asset allocation consistent with my risk tolerance.

But corporations are the main economic engines of our economy. I don't see that changing anytime soon, indeed a change would require a significant reconfiguration of our society. I strongly believe that owning a small piece of the corporate world is the best way to create and preserve personal wealth for most people.
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Old 03-18-2013, 10:09 AM   #3
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Originally Posted by jon-nyc View Post
As for comments the first thing that jumps to mind is to consider reevaluating your adversion to the stock market and keeping such a high allocation in real estate.

Like you I lost a lot (though not all) in the tech bubble. What that taught me was not to be a stock picker, and to have an asset allocation consistent with my risk tolerance.

But corporations are the main economic engines of our economy. I don't see that changing anytime soon, indeed a change would require a significant reconfiguration of our society. I strongly believe that owning a small piece of the corporate world is the best way to create and preserve personal wealth for most people.
+1. Going to be a much much harder row to plow if your investments are in money markets. Good luck with that. Inflation is going to be a big problem for you, I suspect.
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Old 03-18-2013, 10:41 AM   #4
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Originally Posted by Sarah in SC View Post
+1. Going to be a much much harder row to plow if your investments are in money markets. Good luck with that. Inflation is going to be a big problem for you, I suspect.
Don't you think his heavy real estate holdings are likely to rise with the devalued dollar? (sez someone banking on that thought) Land, to me, seems like a commodity.
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Old 03-18-2013, 10:47 AM   #5
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To add to what jon-nyc and Sarah noted, past history would suggest that avoiding stocks entirely provides a significantly lower probability of success. While 100% stocks is also too much risk for most people in retirement, a mix of stocks/bonds has provided the best results in the past 100+ years.

Apologies for how busy the chart below is, but if you look at the red line which represents a 95% probability of success (a common SWR assumption) - the highest withdrawal rates (over 4%) occur at asset allocations of 20:80 to 60:40 or 70:30 stocks:bonds. Some might call this range the sweet spot for retirement income asset allocation.

On the same curve, 100% bonds restricts withdrawal/retirement income to about 3.3% withdrawal, and 100% stocks to about 3.4% withdrawal. Regards...
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Old 03-18-2013, 03:18 PM   #6
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If it were me with an 11 year old son, I would be trying hard to find a way to reduce that commute time - if you could get it down to 30 minutes (one way) you would gain 10 hours a week to be there for him. Can you parlay those real estate holdings into something closer to the office? Telecommute twice a week?

He will be an adult soon, the time goes fast.
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Old 03-18-2013, 03:32 PM   #7
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You've got a nice nest egg when you factor in all the real estate equity.
As far as late bloomers.... I'm later than you, and my husband even later still. At 51, the mom of boys, ages 10 and 12... I know what it's like to plan for early retirement, college savings, etc... all at the same time. My husband will be on SS while they're still in middle school and high school.

For us - we opted to fund to a state college level. (We're in CA so Cal State and UC systems offer a very good education for less money.). If the kids want to go private... the delta in price is on them and whatever financial aide they can muster.

I like the 30/30 plan. I've got more than 30 years in - and hope for more than 30 years of retirement... so maybe I should call my plan the 35/35 plan.
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Old 03-18-2013, 05:43 PM   #8
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So this is what I hear...
$10k from condo
$12k commercial
-$25k on vacation
$600k on current home (paid off in 12); maybe worth $900k then?
$42k annual pension
$400k in 401k in 12 years

Not bad in my book; you may think about selling your current home when you FIRE to boost your needed liquid funds. You'll be living in vacation home then anyhoo.

I have to agree on being too heavy in real estate for my personal comfort. Funny how some decide to take some risks (real estate) vs. others (stocks).
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Old 03-18-2013, 06:12 PM   #9
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The OP : what are your annual expenses ? Advice will depend on this piece of information. Welcome to the forum.
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Old 03-18-2013, 11:35 PM   #10
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Originally Posted by Sarah in SC View Post
+1. Going to be a much much harder row to plow if your investments are in money markets. Good luck with that. Inflation is going to be a big problem for you, I suspect.

Thank you for your comments. I have been thinking that being heavy in real estate, especially with rental properties, would be a good thing if inflation picks up steam. No?
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Old 03-18-2013, 11:43 PM   #11
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So this is what I hear...
$10k from condo
$12k commercial
-$25k on vacation
$600k on current home (paid off in 12); maybe worth $900k then?
$42k annual pension
$400k in 401k in 12 years

Not bad in my book; you may think about selling your current home when you FIRE to boost your needed liquid funds. You'll be living in vacation home then anyhoo.

I have to agree on being too heavy in real estate for my personal comfort. Funny how some decide to take some risks (real estate) vs. others (stocks).
Thank you. I do get everyone's thoughts on being too heavy in real estate. I am going to focus on building up some other investments and not buying any more properties for the foreseeable future. Property taxes are a wealth killer especially in NY. I do plan on selling my primary residence when I stop working...and maybe the other properties too (except the vacation home) It depends on what my cash flow will be on those other properties.
I hadn't really thought about the real estate risks vs stock risks...good thought that is worth thinking about myself a little bit.
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Old 03-18-2013, 11:49 PM   #12
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If it were me with an 11 year old son, I would be trying hard to find a way to reduce that commute time - if you could get it down to 30 minutes (one way) you would gain 10 hours a week to be there for him. Can you parlay those real estate holdings into something closer to the office? Telecommute twice a week?

He will be an adult soon, the time goes fast.

You are so right about this!
BUT, I can't telecommute (company security issues) and I wouldn't think of moving my son away from his friends and happy neighborhood. The commute is a real killer. Been doing it for 17 years now.
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Old 03-18-2013, 11:53 PM   #13
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For us - we opted to fund to a state college level. (We're in CA so Cal State and UC systems offer a very good education for less money.). If the kids want to go private... the delta in price is on them and whatever financial aide they can muster.


Hmm...we are in California also. I know there are good options here that could save me a ton. We have a few years to see how his plan develops. Thanks.
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Old 03-18-2013, 11:55 PM   #14
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Thank you for your comments. I have been thinking that being heavy in real estate, especially with rental properties, would be a good thing if inflation picks up steam. No?
You are probably right that if inflation comes on strong the real estate would appreciate quicker and the rents could be increased but at the same time the expenses on the real estate would increase. You would probaby come out ahead but maybe not. If I owned as much real estate as you do I would be more worried about future tax policy than anything else.

As was mentioned earlier you look to be in pretty good shape for ER in 13 years but it depends on your expenses. Just based on the vacation house which seems pretty expensive to me I would guess that you make and also spend quite a bit of money. You need to determine how much you will need in retirement to know whether the pension and income from the rentals and draw from your savings will be enough. Social Security might also help later on in retirement?
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Old 03-18-2013, 11:57 PM   #15
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To add to what jon-nyc and Sarah noted, past history would suggest that avoiding stocks entirely provides a significantly lower probability of success.
Yeah, that does make sense.
I just checked on my 401a. It is a fairly well balanced allocation with 65% equities. Current value is a little more than I thought at 170K. So I guess I do have some stocks. AAAAHHHHHHHH I own stocks...AAAAHHHHHHHH.

Thank you for the breakdown!!!
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Old 03-19-2013, 12:08 AM   #16
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The OP : what are your annual expenses ? Advice will depend on this piece of information. Welcome to the forum.

Thanks for the welcome.

My expenses have been out of control for the past few years as I have put everything in real estate. But no more buying!
It is going to take me a few months to figure this one out and get my wife on board with a goal oriented budget.
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Old 03-19-2013, 12:11 AM   #17
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Just curious about one thing. In your OP you wrote that you lost everything in 2000. Many of us who were well diversified lost 10 to 20 percent back then. I have heard stories of stock pickers who lost quite a lot more than that but have never heard of anyone who lost everything. My first guess would be that you had everything in one stock of a company that went belly up. So, what happened? I would fully understand if you choose to not answer.
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Old 03-19-2013, 12:14 AM   #18
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If I owned as much real estate as you do I would be more worried about future tax policy than anything else.

As was mentioned earlier you look to be in pretty good shape for ER in 13 years but it depends on your expenses. Just based on the vacation house which seems pretty expensive to me I would guess that you make and also spend quite a bit of money. You need to determine how much you will need in retirement to know whether the pension and income from the rentals and draw from your savings will be enough. Social Security might also help later on in retirement?
Thank you for this.

Your assumptions are correct on all counts, and I do worry about tax issues now more than anything else.

I can live on very little, it is supporting the stuff and a travel baseball player that takes all the cash.

Yes, I will get SS as will my wife. I usually don't think about that as in the "bank", but there will probably be something there.
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Old 03-19-2013, 12:26 AM   #19
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Just curious about one thing. In your OP you wrote that you lost everything in 2000. Many of us who were well diversified lost 10 to 20 percent back then. I have heard stories of stock pickers who lost quite a lot more than that but have never heard of anyone who lost everything. My first guess would be that you had everything in one stock of a company that went belly up. So, what happened? I would fully understand if you choose to not answer.

This has all been very helpful...I don't mind answering at all.

I was making great money on a handful of stocks...then it all started to fall and I would make even more by doubling up as it bounced back. MetromediaFiber Networks was a favorite of mine. Things started getting worse, but I was in full gambling mode and determined to get it all back. Double down, double down...margin call...empty savings to double down again and it kept dropping. Before I knew it there was nothing left. I remember finally coming clean with my wife and she said one thing: "Are we going to lose our house?" I said no. Then she said, "no problem, we will get through this."
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Old 03-19-2013, 12:30 AM   #20
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You have got a keeper there. My DW would have shot me.
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