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Old 10-07-2007, 12:36 PM   #21
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Originally Posted by One-Zero View Post
. . . One area of particular interest to me - being inclined to stash in mutual funds instead of individual stocks - are recommendations regarding fund families. I see alot of ref to vanguard on this site, I've already made a start with Fidelity & Trowe...in Target Funds. Am I being too conservative in this area??
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Vanguard tends to offer a greater variety of funds with very low expense ratios, but Fidelity has joined the fray with some of their offerings (e.g. some of the Spartan funds have ERs lower than their Vanguard counterparts). Regardless, you've mentioned the three "most frugal" of the large MF companies, and you won't go wrong with them (at least as far as expenses go). IMO, expenses matter a lot over the long term.
Target funds: Your target funds, spread among target dates ranging from 2030 to 2040, probably all have bond/cash components ranging from 10-15%. In your situation that is probably not enough to worry about. If you agree that your military "pension" can provide the stability that bonds would normally provide in a retirement portfolio (that's my philosophy), then you might want to remember to shift into later target years to keep the bond allocation small or shift these funds into equity MFs. IMO, you can leave these things as they are for a few years while you get more fundamental stuff worked out.
Also, do some hard thinking about whether you and your wife can really stand the volatility that comes with having a high equity allocation. If you are likely to flee to bonds when stocks drop 30%, then you'd be better off with a different mix.
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Old 10-07-2007, 05:23 PM   #22
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Welcome to the board 1-0.

There is a lot of good ER info here as well as insights into many other topics like that grocery rag states "Enquiring minds want to know".

Like several others I am a vet and like Wags a lifetime member of the DAV.

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Old 10-07-2007, 07:53 PM   #23
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...You need to look at a few more numbers:
- Your annual expenses... perhaps a rock-bottom survival amount, a "comfortable living" amount, and a "cruise the world" amount. It's probably best to look at this in terms of the expenses in excess of your monthly income (pension & rental income).
- One-time expenses in retirement-- paying off the mortgage (as you've mentioned), a new roof, replacement vehicles/appliances, a fantasy vacation, or whatever big hits you might impose on your ER portfolio.
- The size of your ER portfolio, assuming you pay off all/some/none of the mortgages.
Then start running the numbers through FIRECalc.
A couple other suggestions:
- Your military pension could be considered the equivalent of a portfolio of I bonds or TIPS-- among the highest-quality bonds available, inflation-adjusted, and only taxed at the federal level. You may want to change the rest of your asset allocation to shift more toward stocks, natural resources, and real estate.
- If your income is too high to contribute to a Roth IRA, make a non-deductible contribution to a conventional IRA. Later on you can convert the conventional IRA to a Roth and continue to enjoy tax-deferred compounding without minimum distributions.
Thanks Nords: if you check by this thread again I have a ?? ref the above comments.
>>When you say my pension should be treated as bonds, are you saying when I do inputs into a financial engine to enter my pension ($24k+ after taxes) so input $600k? Or is that a standalone figure to put to the side, separate from doing calcs with the other savings going to 401k, IRA, etc?
>>With our desired outcome, paying off the house in FL is a must before FI/RE...Dolphins and manatees at my dock nearly every morning and fruit trees in the yard, it's going to be a great home base - and though East coast, the surf is doable, good enough for Kelly Slater!

On another note - while skimming the threads I saw you were wondering where all the retired MIL ERs were. I can assure you there are quite a few and many are my former team-mates, even though it would still be an incredibly small number in ratio to all MIL retirees. Some have popped out of the woodwork lately to take on contract work and give their savings a shot in the arm and I've had a chance to see how they're doing. As nearly all the guys spoke several languages and were used to operating in other cultures they tend to live abroad - Primarily Panama, Colombia, Ecuador, Peru, and Paraguay - I'd be down there with them or on a sailboat by now if we had not found a suitable basecamp in the USA. They live quite well and a big part of it is escaping the need for 'stuff', yet they can afford maids, gardeners etc. If we decide to live in our place in Guate for part of each year I'll be able to stretch my $$ considerably as well.
Starting late sucks...

have a good one,
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Old 10-07-2007, 11:54 PM   #24
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When you say my pension should be treated as bonds, are you saying when I do inputs into a financial engine to enter my pension ($24k+ after taxes) so input $600k?
Separate issues.

When you're looking at your asset allocation, consider your ER portfolio to include bonds that throw off enough COLA-adjusted income to equal your pension check. So a May-Oct 07 I bond is paying a composite rate of 3.74% free of state/local taxes, and it'd take you $24K/0.0374 = $642K in your ER portfolio to throw off that cashflow. If you have another ~$88K in your ER portfolio then you're already at least 88% bonds. Most financial advisors, let alone other members of this board, would consider this logic to be way too risky... but they don't see a lot of gilt-edge COLA pensions either.

When you're doing pension calculations, it depends on the sophistication of the calculator. I'm referring to FinancialEngines.com. Some pension calculators will handle a COLA pension and others won't. If a calculator doesn't handle a COLA pension then you'll have to (1) fiddle with the inflation rate or (2) total up your expenses and then subtract out your pension, assuming that your pension keeps your expenses from rising as fast as inflation. A kludgy third alternative: since most pension calculators handle Social Security's COLA increase, you could add your pension to your SS benefits to make sure it gets boosted by the CPI. But that may require a lot of fiddling with SS starting dates. I don't remember whether FE handles a COLA pension.

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>>With our desired outcome, paying off the house in FL is a must before FI/RE...Dolphins and manatees at my dock nearly every morning and fruit trees in the yard, it's going to be a great home base - and though East coast, the surf is doable, good enough for Kelly Slater!
I've been wondering how much time he spends there lately. I've read that it was the skateboarding that really made the difference in his surfing, but maybe that's put out by the skateboarding companies. Not that I'm suggesting you want to try that in your 40s.

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Originally Posted by One-Zero View Post
On another note - while skimming the threads I saw you were wondering where all the retired MIL ERs were. I can assure you there are quite a few and many are my former team-mates, even though it would still be an incredibly small number in ratio to all MIL retirees.
Yep, we're finding them, but it's taking a long time for that 10-15% to come out of the woodwork. You know it's hard to share knowledge when you can't even find the ERs!

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Originally Posted by One-Zero View Post
As nearly all the guys spoke several languages and were used to operating in other cultures they tend to live abroad - Primarily Panama, Colombia, Ecuador, Peru, and Paraguay - I'd be down there with them or on a sailboat by now if we had not found a suitable basecamp in the USA. They live quite well and a big part of it is escaping the need for 'stuff', yet they can afford maids, gardeners etc.
From the jargon you're using, and guessing at your MOS, I suspect you won't have any trouble achieving whatever goal you set your mind on. And it looks like you have a deep bench to consult with on your own ER projects.

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If we decide to live in our place in Guate for part of each year I'll be able to stretch my $$ considerably as well.
You might want to look at Arif's profile and read some of his posts. He's doing fine with rental real estate in the southeast U.S. and living in Panama. He should be able to help answer questions on the subject.

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Starting late sucks...
Well, considering the alternatives...
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Old 10-08-2007, 06:47 AM   #25
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One area of particular interest to me - being inclined to stash in mutual funds instead of individual stocks - are recommendations regarding fund families. I see alot of ref to vanguard on this site, I've already made a start with Fidelity & Trowe...in Target Funds. Am I being too conservative in this area?? Nords made mention of treating my mil pension as "bonds", which I've read in other articles, and to go heavy with stocks with remaining investments. It makes sense to me, but I know when starting out the right moves can sometimes be counterintuitive...

thanks for the input
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I don't think you can go wrong with Fido or T Rowe target funds. Just make sure you don't choose too conservative a mix. Something like a 2045 fund would probably be suitable, considering your pension. Ubless you have the willingness and ability to do lots of research, I would steer you away from individual stocks.
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Old 10-08-2007, 09:31 PM   #26
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I just read your original post and noticed that you said your accountant told you that the income limits for Roth contributions end next year.

Someone correct me if I'm wrong, but I think that's not quite correct. The income limits (I think these are currently at $156-166K for married filing jointly) for yearly contributions are not being abolished.

What is happening is that in 2010 (not next year), the income limits for converting a traditional IRA to a Roth will be abolished. Currently, you have to have MAGI under $100k to convert a traditional IRA to a Roth. In 2010 everyone will be eligible to convert regardless of their MAGI. This has made it advantageous to contribute non-deductible amounts to a traditional IRA now, with a plan to convert those to a Roth in 2010. At that time, you will only have to pay tax on any earnings in the account on top of your non-deductible contributions, and all earnings from then on will be tax-free (assuming the gov't doesn't decide at some later date to tax Roth withdrawals).
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Old 10-09-2007, 07:58 AM   #27
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Meridiver:
You're right, I can't find anything to substantiate her comment...I have a feeling that I misunderstood her or there is something else going on next year. She is extremely competent and has saved the bacon of quite a few folks...so the error is likely in my court.

Brewer: I just switched the TR 2030 to the 2050...and am relooking some other items in the 401k/IRAs to lean more into equities. I won't go 100%, but am comfortable with 90...

regards,
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