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Hello from the great white north
Old 01-04-2014, 08:50 AM   #1
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Hello from the great white north

Seeing that we are going to have a daytime high temp of -17 degrees below 0 today I thought it would be a good time to chime in here and introduce myself. My wife and I are both 41 years old with no kids and I am a complete newbie here. I/we have been investing for a number of years with no direct plan but I have always followed the advice of my dad who taught me to go to bed with more money than I woke up with everyday. It appears that most of you people are very well versed and educated on the subject and I am a little embarassed about the lack of my own knowledge in this area. I wont even try to pretend that I can speak at your level. With that being said I need a little help, or ideas, advice, opinions on how I am doing on a potential early retirement. I thought we were doing pretty well but after a meeting with two different financial planners and getting simular feed back I was dissapointed to say the least. They both had us slated to work full time for at least another 20 years. I thought that the outlook was a little better than that. Or perhaps they both just want me to keep funding their lifestyles.

We run a small contracting business together that we run out of our homeplace so it is hard to determine a personal budget that we currently live on. It seems that no matter how we try to seperate business cost from personal cost they somehow overlap slightly. But I believe that we would spend about $4,000.00 a month without business expenses. It is impossible to set a percentage of income to invest too. This all depends on what happens throughout the course of the year and what equipment we need to replace and so forth. We invest as much as we can as often as we can. However with that being said we always max out our IRA contributions plus a little extra which always equals $40,000- $50,000 annually.

Our total net worth is $2,500,000. Hopefully I calculated this correctly, I included in that number my own home, a couple of investment properties and 2 pieces of raw/recreational land, a lake cabin, my collector cars, equipment etc. deducting any debt of course. In march of 2015 we will be debt free as we owe a little on one of the investment properties yet. We have $1,360,000 invested in various Municipal Bonds, Roths, Traditional IRA's, Simple IRA's, and cash. We have been averaging about 7-8% returns on our money.

At this point I am looking to see if I can get opinions to see if the financial planners are correct and I need to plan on setting myself up to work for twenty more years (I certainly hope not!!!) or what sort of changes I need to be making now to prevent that. If you need other information please ask.

Another thing to think about is if I am able to quit working I will have a business to sell or at the very least have an equipment auction. This money would be able to be put to work rather than being tied up in depreciating assets.

Looking forward to inteligent responses, thanks in advance!
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Old 01-04-2014, 09:33 AM   #2
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I don't have any advice for you but welcome aboard.
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Old 01-04-2014, 09:35 AM   #3
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Welcome! Also live in the Great White North, in fact about to clean my driveway after I put this down. I will let the more experienced comment on your post, but will say I am in a similar position and have reduced my hours to about 30 a week. As a business owner that is not always easy. I will be slowly easing into full retirement over next 3-5 years, around 50 years old.
Once again welcome, you have found a great community at this site.
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Old 01-04-2014, 09:52 AM   #4
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Welcome to the forum. You sound like you are both doing very well for your age. Congratulations for that!

Your net worth is quite high for a couple your age, but it seems to be tied up in a variety of assets which are not as liquid as investments like CDs, stocks, bonds, etc. If I'm reading your notes correctly, your investable assets are $1.36M. If you were to withdraw 3% of those assets each year, you would have about $41K to live on, so you're a bit short on your goal of having $48K per year to live on. However, it certainly should not take you 20 years to make up the difference!

Most financial planners use cookie cutter formulas and tell everyone to retire around 65. That's what they know, and the safe withdrawal rate formulas are based on a 30 year time span, so the planners don't know what to do when such a young couple wants to talk about early retirement.

I would imagine your business has some value to it should you decide to sell it. And some of the other stuff you own could also be sold and converted to liquid investments should you decide to do that. You will have to cover your health care expenses for quite a long time at your age. Whether you can do that and still live on $48K per year is something you will need to explore.

Run your numbers through the FIRECALC web site and see how things look. I think you will find you are closer than you think, and you can build a goal from here to get you where you want to be.

Good luck with it!
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Old 01-05-2014, 03:19 AM   #5
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Quote:
Your net worth is quite high for a couple your age, but it seems to be tied up in a variety of assets which are not as liquid as investments like CDs, stocks, bonds, etc.
You are correct some of my money is tied up in assets that do not provide a return unless I were to sell them. In my own defense I like a lot of people had some investments that were not doing well for years at a time. I got sick of getting a statement every month showing me how much money I lost. So, I decided that I would rather have some things that I could use and enjoy rather than deal with the frustrations of losing money monthly. I am sure the day is coming where I will begin to scale back and part with some of my toys and hopefully put the money to work where it will gain interest.

I kind of thought that the financial planners must have used a "cookie cutter" type of planning guide. One of them had me going to the grave with upwards of 12 million dollars! Perhaps he thinks the guy who dies with the most money wins or something. I want to spend my last dollar the day before I die!

Thanks for the referrance to the firecalc site. I can see how that is a good tool to have.

Thanks for the comments thus far!!!
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Old 01-05-2014, 06:19 AM   #6
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Originally Posted by deadshort52 View Post
... My wife and I are both 41 years old .... I/we have been investing for a number of years with no direct plan.... the lack of my own knowledge in this area.... I need a little help, or ideas, advice,... after a meeting with two different financial planners...At this point I am looking to see if I can get opinions...
Hi dead,
Your concerns about financial planners are 'dead' on! I think the first thing to invest in is some self-education. Here's a link to a list of books I like: Category:Books and authors - Bogleheads
Reading and learning from experts (who aren't charging you fees!) will help you better understand the various opinions you'll receive from us.

At age 41 it's time to put together an investment plan that will meet your goals. Knowing more precisely what your expenses are will be essential, too.

Lastly, I personally don't put too much stock in my net worth. I focus more on my investment portfolio.

Good luck!
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Old 01-05-2014, 08:40 AM   #7
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If I understand your OP correctly, you have $1.36m of investments plus some investment real estate (both income producing and not) and you think you need $48k a year to live on.

If the above is correct you are probably there or quite close, especially if you added in any proceeds from the sale of your business or equipment and land.

As Ready observes, the $1.36m of investments should be able to generate ~$41k a year of inflation adjusted income at a conservative 3% WR, and presumably your investment real estate produces income as well which might put you over $48k.

I would be careful though as your $48k sounds low to me for someone with a lake cabin, collector cars, etc. You should do a through analysis to assess what you would need to live on if you were retired.

Quicken has a Lifetime Planner bundled in its Deluxe and higher versions that is a good tool in thinking through a retirement plan. Also, Firecalc is another good tool.

I'm struggling to see why these FPs are giving you discouraging feedback given your assets and needs.
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Old 01-05-2014, 09:12 AM   #8
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Originally Posted by racy View Post
Hi dead,

Lastly, I personally don't put too much stock in my net worth. I focus more on my investment portfolio.

Good luck!
Now I am a little embarassed that I even included any net worth information. I too dont think much of it because it really does nothing for making any financial gain unless of course I would sell. The only reason I included it was because I read in the sticky on how to introduce myself and it stated to include as much information as I felt comfortable with. Getting back to what I said earlier about not being very savvy in this area I looked at several other peoples post and they included net worth information so I did too.

I have researched the books you recomended and am going to order some today. Thank you!
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Old 01-05-2014, 09:46 AM   #9
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Quicken has a Lifetime Planner bundled in its Deluxe and higher versions that is a good tool in thinking through a retirement plan. Also, Firecalc is another good tool.

I'm struggling to see why these FPs are giving you discouraging feedback given your assets and needs.

I will look into Quicken Lifetime Planner.

I think what happened with the FPs is that they both asked us to fill out a budget analysis of what we are spending today. Like I mentioned earlier this is incredibly difficult when we have a business ran out of our home/buildings. They wanted us to include all of our expenses as we operate today. This number will dramatically decrease if I were to stop working. We heat and cool a huge shop, spend $2000.00 a month in fuel, replace one of our six $40,000.00 work vehicles annually, pay for licsensing renewals, continuing education, office expenses, equipment upgrades, etc,etc. I think they are more used to someone who comes in with a very simple plan and a W-2 from their employer and a statement from their bank so they can just plug in the numbers into the equation and spit out a generalized plan. It is hard for me to determine how much these expenses will go down if I were to quit working at the capacity that i do now.

As far as our 48K budget we took a brief look at our expenses and included the obvious groceries, property taxes, telephone-internet, entertainment, fuel, electricity, spending money etc. We also did a little research to make sure that our budget numbers looked right for a couple with no kids and no debt living in the upper midwest to see if we were in the ballpark. Everything looked doable so I added 15% and went with it. What do you think?

I will spend a little more time with Quicken program and see what I can come up with.

Thanks again everyone for the responses. This is exactly what I was looking for.
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Old 01-05-2014, 10:06 AM   #10
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You might look at your total spending for expenses and then subtract your Schedule C and Schedule E expenses from it as a starting point for evaluating what your personal expenses are. You may then need to add some for business and real estate expenses that you get a benefit from.

I know when we had two homes that our expenses were not anywhere near $48k a year - in fact now even with one home they are more than that and I don't think we live large, but the only way to tell for sure is to track it for a reasonably long period.
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Old 01-05-2014, 04:52 PM   #11
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Years ago when I first started tracking our expenses, I was shocked at how much we were spending on those non-essentials... Fifty bucks here, a hundred there, twenty over there. That stuff adds up fast, especially when you're not paying attention to it.

It's tedious, but if you want a concrete answer on how much you need as income each year, you need to track your non fixed spending in addition to your fixed household expenses.... Because you need twice as much income producing assets for a $96,000 lifestyle as you do for a $48,000 lifestyle.

Me though, I'd just try to get ALL my spending to what your assets are already producing. A test run. And see if it fits the bill.

Welcome!
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Hello from the great white north
Old 01-06-2014, 09:23 AM   #12
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Hello from the great white north

Frank Armstrong wrote a a book entitled "investment Strategies for the 21st Century" - available free online as a .pdf. It explains how financial planners work and make their money in the orthodox brokerage system. An enjoyable and educational read, which I read as an investment newbie. It prevented me from making several expensive mistakes. It's not a technical book, and will help you understand how the costs of investments can reduce your long term returns significantly for the express purpose of supporting your planners. Lol. Obviously, I'm a Boglehead...

Seriously, I consider it a mandatory first read for investment newbies, or not so newbies who need to understand their own investments and the costs thereof...

http://investorsolutions.com/media/b...-21st-century/

Welcome and good luck.
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