Hope to ER soon.

[Thrifty1]

Hi,

I found this site today as I am considering ER soon. It looks like this site has many good posts to sort through.

I am 42, married, with 2 kids (6th and 11th grades). I have a current net worth of about $2.75mil with $2.3mil being in savings / 401K (remainder is in house equity). The house will be paid off in about 9 months.

My goal is to retire at the end of next year (2008) and I will need about $120,000 per year to retire on. I should be able to increase my $2.3mil savings to about $3mil by the end of 2008 based on my current investment strategy (25-30% return). After that, I will switch to a more conservative strategy -- expect to earn 8-10%.

From what I read, using a 4% SWR will get me my $120,000 per year. My biggest question is... What will my healthcare cost? We are all in good health. I have budgeted $1000 per month, but would hope to find it cheaper. I'm not sure if there are any guaranteed renewable policies available. The healthcare issue is my biggest concern -- would hate to retire at 43, have a serious health issue and have my insurance disappear.

Thanks in advance for any advice on healthcare. I will begin my search for a good policy early next year.

 

[thefed]

25% returns? let me in!

 

[bssc]

Welcome to the boards.

Congratulations on saving so much. There is a forum for Health and Early Retirement. I would recommend you search through the old thread since this subject is a concern for almost all of us.

 

[73ss454]

Welcome, at 42 I think you should continue to take the 30% returnes for a few more years. (heh)

 

[tlockwood]

Expect to pay $1,000/month for health insurance for a family. On top of this you will have to pay deductibles, co-pays, etc... I budgeted $1500/month for healthcare with a $120k/year budget. This is a little high for me because my daughter has orthodontics work for the next year.

You can get COBRA for 18 months which allows you to keep your current employer's health insurance. After this you need to get private insurance and cannot be turned down for pre-existing conditions as long as you keep COBRA for the full 18 months.

I retired early at 46 and healthcare was definitely one of my biggest concerns. As long as you realize that it will take up from 10% to 12% of your budget you should be OK.

 

[chinaco]

Welcome.

Why not go for a cool 5m... at 30% that will only take 3 years.

 

[Thrifty1]

Thanks for the welcomes -- I will check out the healthcare forums to learn more about the pros / cons of taking Cobra vs. getting a policy ASAP while healthy.

I guess I deserve some ribbing w/ my 25-30% return note. I started an unorthodox strategy last year that provided a 35% return in 2006 and I am up about 25% Y-T-D for 2007. I'm basically buying stocks that are upgraded and take a 2-4% short term gain over a week or 2 and then sell. During earnings months (Jan, Apr, Jul, Oct) I look for companies expected to beat earnings and buy them a week or 2 prior to earnings. 80% of the time they run up a few % prior to earnings and I can sell before the actual earnings are announced. I am not going for big gains, just a couple of 2-4% gains each month. I won't put more than 10% of assetts into any one stock and use limit orders to protect the downside to about 2-3% -- so far I have had only 4 losses and about 20 gains for the year. It has worked for about 18 months now -- not sure if it is luck, but I like the fact that much of the time my $$ is in the money market waiting for the next buy opportunity.

I will continue this strategy into next year and then look forward to returning to a more long-term investing strategy. It takes a lot of effort to research and track these short-term trades and it gets addicting.

Off to the health care forums...

 

[CybrMike]

The problem is with $2.3M, you have to find 10 stocks at once to keep it at 10% each stock.

Why don't you use options? Sounds like you could keep most of your money conservatively invested and use $200K for your strategy using options. Would be a similar gain, perhaps even more and you wouldn't have to use the entire $2.3M.

I use a similar strategy but only use like $10K worth of options once a month. More like gambling Can be fun. I'm down about $9K over the last couple months. Maybe up $10K or $20K for the year. Last year I lost maybe $75K trying my strategy (mostly on GOOG options). Last years losses caused me to adjust my strategy quite a bit and not gamble with as much. Seems to be doing okay this year.

Wouldn't want to try this in a bear market though.

 

[Thrifty1]

CybrMike,

Regarding options -- have avoided them only out of ignorance. I have never spent the time to study the use of options. If you have any good recommendation of a book or website to learn, let me know. I did start to look into covered calls as I heard you could make 2-3% monthly. It seemed more complicated.

As for 10 stocks... I limit myself to only using between 50% and 60% max assets in this strategy at any one time (usually only in 5 stocks at a time). I basicaly have the other 40% sitting in the money market making 5% and I have a couple of long-term mutual funds. When the market had some big down days recently, I would use the reserve funds to take advantage of good stocks that just followed the market down (I would be close to 100% in the market, but this does not happen often and it has paid off nicely). For the 50-60% invested in short term plays, I typically hold anywhere from 1 day to 2 weeks -- I may get a 2-4% return a couple of times w/ the same funds in one month. Overall, I have averaged 2.5%-3% monthly since I began this in 2006. It has been a pretty good market during this period, so I'm sure it would be more difficult during a long-term bear market.

I also get some of my ideas from (dare I say it) Cramer. For example, he mentioned HOLX last Thursday. I bought it Friday for just under $61 and sold today for $62.5 -- quick 2.5% return in 2 days. I see it is up further today ($64.50). While most people would be kicking themselves for selling and missing the extra $2, I add it to my "win" column of another successful 2.5% return. That was tough at first -- looking back at saying "if I would have held xyz stock". Now I just move on to the next deal.

 

[FinanceDude]

CybrMike,

Regarding options -- have avoided them only out of ignorance. I have never spent the time to study the use of options. If you have any good recommendation of a book or website to learn, let me know. I did start to look into covered calls as I heard you could make 2-3% monthly. It seemed more complicated.

As for 10 stocks... I limit myself to only using between 50% and 60% max assets in this strategy at any one time (usually only in 5 stocks at a time). I basicaly have the other 40% sitting in the money market making 5% and I have a couple of long-term mutual funds. When the market had some big down days recently, I would use the reserve funds to take advantage of good stocks that just followed the market down (I would be close to 100% in the market, but this does not happen often and it has paid off nicely). For the 50-60% invested in short term plays, I typically hold anywhere from 1 day to 2 weeks -- I may get a 2-4% return a couple of times w/ the same funds in one month. Overall, I have averaged 2.5%-3% monthly since I began this in 2006. It has been a pretty good market during this period, so I'm sure it would be more difficult during a long-term bear market.

I also get some of my ideas from (dare I say it) Cramer. For example, he mentioned HOLX last Thursday. I bought it Friday for just under $61 and sold today for $62.5 -- quick 2.5% return in 2 days. I see it is up further today ($64.50). While most people would be kicking themselves for selling and missing the extra $2, I add it to my "win" column of another successful 2.5% return. That was tough at first -- looking back at saying "if I would have held xyz stock". Now I just move on to the next deal.

Covered call writing is easy, once you get past the fact that your stock could be called away......it's probably the easiest strategy to learn out there as far as options go...........

 

[Letj]

Hi,

I found this site today as I am considering ER soon. It looks like this site has many good posts to sort through.

I am 42, married, with 2 kids (6th and 11th grades). I have a current net worth of about $2.75mil with $2.3mil being in savings / 401K (remainder is in house equity). The house will be paid off in about 9 months.

My goal is to retire at the end of next year (2008) and I will need about $120,000 per year to retire on. I should be able to increase my $2.3mil savings to about $3mil by the end of 2008 based on my current investment strategy (25-30% return). After that, I will switch to a more conservative strategy -- expect to earn 8-10%.

From what I read, using a 4% SWR will get me my $120,000 per year. My biggest question is... What will my healthcare cost? We are all in good health. I have budgeted $1000 per month, but would hope to find it cheaper. I'm not sure if there are any guaranteed renewable policies available. The healthcare issue is my biggest concern -- would hate to retire at 43, have a serious health issue and have my insurance disappear.

Thanks in advance for any advice on healthcare. I will begin my search for a good policy early next year.

If you don't mind sharing, what do you invest in to give you this type of return and how did you amass so much so early? Any inheritance?

 

[Thrifty1]

Letj, in response to your questions...

1. How did I amass the amount? Saved up first $1,000,000 before age 40 by living off my salary and investing my spouse's salary for 15 years. Also had inheritance that kicked in some extra $$ recently.

2. Investments? Had used mutual funds for years, but now I buy individual stocks. I usually pick things I know. For example, I am a long time Apple product user. I have bought and sold Apple 6 times this year and made $5 - $10 per trade by holding for a week or 2. I could have made more by buying and holding Apple this year, but I like getting in and out to lock in my gains and keep my $$ much of the time in a money market fund.

I also look for analyst upgrades. For example, an analyst reiterated a "buy" on Apache Corp (APA) last Friday. I bought some Monday morning at $89.09. It received another upgrade Tuesday morning and I am up 4.2% in 2 days. I would have sold it today, but didn't get to it before the market closed. My purchase today was ISIS -- has had some recent upgrades, seems to have some good momentum, and was down today. Hope to get a couple % gain in the next few days. I bought it earlier in the year and made some gains.

I also play "earnings roulette". I will research companies during earnings season and buy about a week before they announce. Many will run up 2-5% by the day of earnings and I will sell before they announce -- that way I eliminate the risk of what the earnings actually are. I did this with YUM last week and made 3% over 2 days (sold the day of earnings). I could have made more if I held it after the earnings were released, but my strategy is buy and sell if it is up 2-5% within a few days. I wanted to buy RIMM last week, but did not get to it -- kicking myself for missing that one.

I mentioned earlier I also get ideas from Cramer's Mad Money. He mentions lots of stocks, so you have to do your homework. However, it is a great place to get some ideas. Just wait a day or so after he mentions it as the Cramer hype usually inflates the price the next day.

I had estimated in my earlier post that I had 4 losses and 20 gains. I just checked my spreadsheet for the actual number and Y-T-D it is 55 total trades with 5 losses.

Luckily all of the above is a fun and profitable hobby for me -- I really enjoy looking for the next purchase. I don't beat myself up when something doesn't work out. I also set up some basic rules to follow (as a result of mistakes I made):

1. Invest up to 60% at any one time -- leaves me 40% cash in case market drops significantly. I want to have $$ available to buy in when there are bargains.

2. Sell if a stock goes up more than 10% -- no need to be greedy. I may buy it back later, especially if it pulls back when the market has some down days.

3. Sell if a stock drops more than 3%. Use limit orders so this is done automatically -- otherwise my emotions take over ("it will bounce back") and I hold onto a stock as it continues to drop. I have watched a stock drop 15-20% because I was too proud to take the loss.

4. No more than 10% of assets in any one stock or industry group (got burned by overweighting in several gold stocks once).

5. Avoid stocks with negative earnings -- I want companies that are making money. Not those that hope to make money soon.

Didn't mean to write a book - sorry. Maybe you can use some part of my strategy.