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Hello, I am NOT a financial advisor!
Old 09-09-2007, 03:22 PM   #1
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Hello, I am NOT a financial advisor!

I just want to get that straight up front! Trying to muster up the courage to introduce myself to such an esteemed group, I read the intro thread by Andy H. While I thoroughly enjoyed the thread, couldn't help but feel sorry a little sorry for the guy. But next came an extreme state of paranoia that I couldn't possibly jump into the pool of intellect represented by the group on this board. That said, I've never been one to hestitate to appear foolish when need be.

I'm 53, DH of 31 years, 58. Felt fairly prepared for retirement when DH reaches the age of 60. Decided to confirm by consulting with fee only financial planner. Whoa! What a shock when he didn't agree with our self-confidence. Here's the numbers. $927,000 not including mortgage free home ($240,000). Been doing our own finances so everything is pretty simple (neither my DH or I have financial background). About 1/3 in retirement accounts; $100,00 in CD's and Money Market; rest in brokerage accounts. Retirement and brokerage primarily invested in funds 70/30 stocks/bonds. Comfortable ER budget would be 80-90 a year. We also have a little shaved iced business that brings in about $25,000 a year that we plan to continue into retirement.

We've been wondering if Financial Planner burst our balloon in initial consultation just to make us feel like his $3000 services were critical to our financial future or if we're really living in lala land thinking we are FI. Sorry for the length of initial post. We'd really appreciate your responses.

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Old 09-09-2007, 04:06 PM   #2
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Originally Posted by kidfriend54 View Post
But next came an extreme state of paranoia that I couldn't possibly jump into the pool of intellect represented by the group on this board.
Heh, heh. Come on in, the water is fine...and the pool isn't very deep in some spots.

First question: Have you run your numbers through FIRECalc to see what it says about your chances of your plan working? That would be the very first place I'd start to answer your questions.

BTW...welcome to the forum.

Numbers is hard.

Retired in 2005 at age 58, no pension

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Old 09-09-2007, 04:09 PM   #3
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Welcome to the board, KF.

Originally Posted by kidfriend54 View Post
We've been wondering if Financial Planner burst our balloon in initial consultation just to make us feel like his $3000 services were critical to our financial future or if we're really living in lala land thinking we are FI.
The difference here isn't necessarily the quality of the advice, it's the cost!

You've listed your assets but you haven't talked about all your income & expenses. Is $80K-$90K/year a detailed budget (including healthcare) or a guesstimate? It'd be comfortable for a lot of people, but how much of that spending would have to come from the shave ice business? Is that $25K net? Or is it $25K gross and $1.5K net after expenses & taxes?

Even if you're netting $25K, on an $80K budget you'd be drawing your portfolio down by $55K every year. That's almost a 6% withdrawal rate on a $927K portfolio. It might work, especially depending on your but history and Monte Carlo are not on your side.

You might want to tweak the details on your budget, add in Social Security and whatever healthcare expenses you haven't already factored in, and run some more FIRECalc scenarios.

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Old 09-09-2007, 04:23 PM   #4
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Would also be good if we knew if your ER budget of $80-90k per year is before, or after, income taxes and whether you will have any pension income to contribute to the income line.
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Old 09-09-2007, 05:12 PM   #5
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Hi, and welcome.

All rules of thumb (which are only a starting point) suggest that your advisor is correct. Example: estimate your annual expenses when you start retirement (using pretax dollars) and multiply by 25 to see how much you need to have in your nest egg. Expenses can be reduced by SS, pensions, etc. but be sure the estimate accounts for taxes which need to be paid and for health insurance. A million bucks will keep you in the $40,000 per year, including inflation adjustments. Not as much as most of us thought when we started studying this stuff.

You may have to go back hat in hand and do a little more planning about this. Things like part-time jobs can make a big difference.

If you otherwise like your advisor, the $3K in fees may have been well worth it for you - he may have saved you from running out of money before you ran out of time years down the road.

Good luck. In any event, you are well on your way.
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Old 09-09-2007, 06:21 PM   #6
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Welcome to the board. Found this board only 3 months ago and it has been very informative and helpful.

A few years before retiring I did a detailed survey of past expenses and projected future expenses to see what it cost to live. From there a rough budget was determined for the bare basics (needs) and mild "wants". Then we verified living expenses over the next year.

After retirement you will not be able to have significant control over increasing your income but you can greatly control your spending. If you go into retirement with no (or low) debt and LBYM, you should be in good shape.
Pigs get fat, hogs get slaughtered. That's my story and I am sticking to it.
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Old 09-12-2007, 07:20 AM   #7
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Hi & Welcome!

I'm new here too, & good thing I read Andy H.'s thread only AFTER I jumped in anyway!! /giggle/

Anyway, CONGRATULATIONS for having so much 'stashed away'!! (From my end, your numbers sound AWESOME, but it's good that there are people here who actually know more to advise you properly!)

I would say it also depends which part of the world you live in - stay where you are or move somewhere cheaper (with possibly cheaper healthcare or less taxes). Just my tiny 2c.
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Old 09-12-2007, 12:17 PM   #8
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Welcome and I second all the advice above.

Yes, it sounds like the FA was right but you seem you have reservations about their services. I would read a lot of the threads and educate yourself by looking at people who retired successfully.
Angels danced on the day that you were born.
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Old 09-12-2007, 12:34 PM   #9
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$927k is a lot of money... you have done well to save to get to this point.

90k of expenses is 10% of the portfolio... this withdraw rate would not be maintained for more than 10-12 years, IMO. Meaning in 12 years it's possible you'd have nothing left except your house.

If the 25k of shaved ice is income, the $927k nest egg would last longer, but it is still around a 6 or 7% withdraw rate, and conventional wisdom suggests a 3-5% withdraw rate is a better place to be.
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Old 09-12-2007, 05:55 PM   #10
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Welcome to the forum. I lurked for almost 2 years before a topic drove my to start a new thread. I too was intimidated and had other issues I won't go into.

You are very borderline. I reassert Nords advice to run FIRECalc. I suspect that even with SS you will not be able to support your spending plan.

BTW, you can save $3000 by discussing your issues with us freebees.

You are dealing with a fee only planner which is all most the best way to go (hourly would probably be cheaper) but it is an expense you can avoid if you are willing to do some reading, thinking, asking here and thinking some more.

If you've been doing your own expense tracking and investing, you are probably capable of going the next step and totally getting a firm grasp of your situation.

BTW, my experience with financial planners is that you will never have enough money to retire. However, to retire you must be open to alternatives and be flexible. $80-90K is a lot of expenses. You can have a great retirement on half of that although the big house will have to go.
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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Old 09-12-2007, 06:06 PM   #11
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Welcome kidfriend54.

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