Mostly Clueless in Silicon Valley

[SVHoper]

First off thanks to all the contributors and moderators. I found the forum while Googling to try and understand VGSIX (I will post a specific question in a different thread) and have been reading almost solidly for the last two weeks. I am kinda surprised that I have so many interests in common with a retirement related forum as I have always loved to work and specific thoughts about retirement have always been beyond our planning horizon, so we are about 27 years later than a lot of folks on this forum :-(

It seems that an introduction is a good idea (except perhaps for MillionaireMoms), so here goes - apologies if it is haphazard, but that is pretty much our current financial state - definitely haphazard, patchily ignorant, but well-intentioned.
We both have EE degrees - though not strictly working as engineers. DH is software management and I am currently doing financial/telecommunications modeling from home.
I'm 48, DH is 50 w 3 kids 15, 17 and 18 (freshman at second tier college $46k/year + $19k merit scholarship).
DH good salary; lucked into good stock options, but expect that these will primarily fund college.
I cycle between self employed consulting at 1/3 time and 60+ hr/week employment in a start-up on about a 5 year cycle. Currently self-employed and find it hard to put me in a neat classification. I act like "I'm retired w part-time work", I'm definitely a stay at home Mom and I sometimes earn like a full-time job.
Property tax $11k, Mortgage interest $30k.
Owned a mortgaged house since married (23 years) but only started 401k about 10 years ago and since then have been contributing to DH max and about 20% for me.
Since October 2001 (when I started measuring) - 12/2009, our "portfolio" has returned just under 9% (inc our home) or just under 6% excluding it. Difficult to exclude house ($820k estimated equity) from "investment" as it is about 60% of net worth and has been a big $$$ sink. Otherwise, all 401k and almost all stock funds and 1 investment property.
As you could imagine - all stocks - no move to cash has been v.volatile. At 12/2009 we were about 16% off all time high (inc estimated primary residence drop)... 401k balances at all time-high due to 2009 contributions.
Up to this point we never invested (except 401k) and I was operating under the mistaken? assumption that long term stocks outperformed bonds so was happy to withstand volatility for extra return. Also for past 8 years any "spare" $$$ have been spent on improving home. However, recently inherited extra $450k which almost doubles our non-house $$$ so I figured I should get a clue before I move it from a CD.

I think I understand single family homes, but I believe they have only worked for me due to high leverage, so not easy to repeat return.
Above-mentioned house 2001 bought for $365k 100% leverage, by 2004 it jumped to $550k and hasn't changed much since then but we have put in about $130k so it is does not negative cashflow.
In 2009 used LOC to buy two REOs (not yet counted above as the one house pays interest for both at the moment):
One $235k (inc new roof) rents for $1900 and I will hold, other bought for $170k + $50k fixing to sell for $300k.
I think I have learned not to hold 2001 employee tech stocks (50% discount, how could that be a bad thing) that could have been sold for $286, now a nice piece of paper could be a useful placement, but that would require further investment in lamination.
I know I should focus on reducing outgoings.
All the rest I think I have to learn

[Gumby]

Welcome aboard SVHoper. Sounds like you are "house heavy" in assets. Any thoughts of downsizing once the kids are gone?

We have been in VGSIX for probably the last 15 years, and maybe longer (I just can't remember when we started). It has done well for us over the long haul.

[mb]

Hi SVHoper,

I assume that Hoper is from "job hopper?"

I'm in the Valley too. There's also a couple of guys on the forum that retired from Intel although one of them is no longer active and a couple of other Valley types that contribute from time to time.

Financially, it sound like you're doing fine.

MB

[CuppaJoe]

Howdy, neighbor. I'm impressed, especially that you've read all the way back to MillionaireMommy.

[chinaco]

Welcome.

[ziggy29]

Hi there! We used to live in San Jose for a while. Managed to buy a house there in 1997 and sell in 2003, which is the only reason (good luck) we're able to live mortgage-free in a cheaper area today.

[wolf]

OP:

Also live in Silicon Valley, Lockheed, HP. retired 8 yrs. now.

Just be careful. There seems to be a trend here, once you get near 55, you are suddenly "obsolete" and get offered a package you "can't refuse".

As you watch the "news", look at all of the highly "experienced" people looking for jobs. They all have one common feature in common, "age".

As far as investing in real estate, it's pretty good, but I invested many years ago.....be careful....don't over leverage...

Also, don't get "overconfident".....I'v seen many co-workers get in trouble and get in over their heads when they start investing....

Because you are successful in your profession, and your house has appreciated....be careful... when exploring the investment field.

Also, if husband lost his job, how would that affect the real estate investments, ie cash flow... , college education, etc.....

AS, I said before, lived here all my life.....when jobs are plentiful, life is great here....but we do have these cycles...seen many...families suffer when the economy turns...



Just my 2 cents.....welcome

[SVHoper]

Thanks for the welcomes :-)

Gumby: We are v.house heavy - we paid a conscious premium to live in a "better" school district and luck of the timing meant that it has not hurt... so far. I expect to move in retirement, but would like a place by the beach possibly LA or San Diego to attract visiting children and grandchildren - this may not be cheaper.
CuppaJoe: Afraid I did not read all threads back to MillionaireMommy - just sorted by number of replies :-)
Wolf: We have only been in the Valley for 9 years, but Hubby worked for Nortel through bubble, then startup 2001-2006, now big Techy. Hubby losing job would be catastrophic in terms of anticipated cashflow... Our outgoings have steadily ramped up since move to Valley - they would contract instantly. Thanks for the warning about overconfidence - I think my problem is more a combination of ignorance and optimism. That is why I put inheritance in CD... it is a very new position for us to have any $$$ to have to make an investment decision. ie > 60 year old house fixing and 401k. Huge mortgage is an obvious target but I am kinda comfortable with 4.5% 30 year.
I am still trying to wrap my head around moving from 100% stocks... as I have a lot of trouble equating volatility and risk. I guess I see that one is generally rewarded for accepting volatility - so that is what I seek - obviously in combination with higher long term (10 year) return.

[ziggy29]

Quote:

Originally Posted by wolf Just be careful. There seems to be a trend here, once you get near 55, you are suddenly "obsolete" and get offered a package you "can't refuse".

My dad got one of those packages at 57 and was thrilled to get it. I could only dream of getting one-third of the package he got when I'm 57...

I guess it depends on whether or not you are already prepared, financially and psychologically, to retire. He was, and did. Of course, these days there are far fewer "early retirement incentive" packages these days because you usually need to sweeten the pension and retiree health insurance deals to get people to take them -- and those things are going the way of the dodo...

[wolf]

Hello ziggy29:

Let me clarify, a "package you cannot refuse". Which some of my friends were offered.

Certain divisions were downsizing. You were offered a package based on years of service. You did not have to accept the package. It was said to be voluntary. The more years you worked, the larger the package.

Here's the kicker. If you did not accept the package. You may or may not have a job. If you did not take the package and your job went away. You had a specific amount of time to try and find another position within the company. If you could not, you would be laid off. No package.

That is what I meant by a " package you cannot refuse". Also, as a footnote. The packages offered were no where as good as the ones offered the employees at "Numii", ( The toyota/GM plant in fremont).

OP:

Be very conservative with the inheritance. Take your time. Alliant credit union, (I think in San Mateo), is pretty good holding place. Savings acct. is paying 1.5%.

BE very careful when talking to a Financial Advisor. If they know you have $$$ and are not sure what to do.....they will take advantage of you.

The " experts" all say, invest in equities. But if you look back 10 years. A person who invested in equities had a returen that was terrible. I forget the exact percentage, but I think a person would have done better in CD's with no risk.

Sorry for adding my 2 cents again.