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Newbie, Five Years (Hopefully) Away
Old 04-10-2017, 06:45 PM   #1
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Newbie, Five Years (Hopefully) Away

Greetings, ER crew! I'm glad I found this forum. I've already learned so much just browsing through the threads, and can't wait to learn from the collected smarts of this group.

So here's a bit of background to start with…

I'm forty-five, married (happily for almost 20 years), and it's just the two of us. No kids, just dogs. I've been self-employed for the last 10+ years, and my wife works full-time in a great retail gig that gives us fantastic health insurance. We love to travel, play golf, and work with a local dog rescue group as a foster home.

We live pretty simply, and our annual expenses run around $48K per year. That includes more or less our total spend, with fun stuff like travel included.

As far as assets go, my story may be a bit different than others. For many years before she passed, my grandmother put every extra dollar she had into stocks for her grandkids. She bought large-cap, dividend-focused stocks, mainly consumer staples and telecoms. As time went by, my father continued what she started, adding a bit here and there to the portfolio. Then when it was my turn, I did the same, contributing what I could when I could, focusing on the same kinds of stocks. Principal was added. Dividends were almost always reinvested.

Today the stock portfolio is just under $1.5m. All of it is in stocks like AT&T, Pepsi, McDonald's, Pfizer, and Exxon/Mobil. All in all the money is in around 30 total companies, mostly in the "dividend aristocrat" stocks. This year, the stock portfolio paid out almost $50K in dividends.

But here's the catch… There's an additional $100K in cash, and a small 401K from my wife's job, but the stock portfolio is where most everything we have for retirement lives. (We've got about $300K in equity in our house as well, so there's that.)

Up to now, I've really focused on growing the portfolio through dividend reinvestment and the slow march of the market. While others in my family raided their portfolios to buy stereo equipment, I just let it sit. But as we get start to get closer to retirement, the idea of balancing the portfolio is something I'm obviously considering.

As far as retirement goes, we'd like to retire in 5-7 years. Our plan is to downsize our house to a smaller condo, which we'll own free and clear (save for HOA fees). And we've budgeted ourselves $60K per year, which is a bump from where we are now, and increasing that slightly each year to account for inflation. I'd like to have most of that income coming from the dividends, and supplement that as needed with sales of assets.

We should also get around $36K per year via SS, but I've been running all my calculations without that in the mix. My thinking is hey…if we get it, great. We paid into it, we should get something out of it. But if not, or if we get a much smaller payout, I want to make sure we're not hurting.

When I run the numbers through a few different calculators, I get 97-100% success rate. I'd also like to be able to leave some "fun money" to my nieces and nephews, and that seems well within the realm of possibility.

Like a lot of folks here, the costs of healthcare/insurance are one of my main concerns. If we retire at 52, that means we'll have a number of years before Medicare is an option. So that's on my radar.

Well, that's my story. And believe me, there isn't a day that goes by that I don't say a little "thank-you" to my amazing grandmother. She read Graham's "The Intelligent Investor" back in 1950, and I'm glad she did.


Cheers!
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Old 04-10-2017, 07:56 PM   #2
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Welcome to the forum. You will learn a lot if you hang around here and check in from time to time. You are indeed fortunate to have such wise parents/grandparents who taught you well. And yes, your almost 100% exposure to stocks is something to think about if you are only five years away. I imagine you will have some sizeable capital gains if you sell though, so you will have to navigate through that and figure out what makes sense.

Good luck!
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Old 04-10-2017, 10:32 PM   #3
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Welcome McSteve,

It looks like you have done well with your investments! With the dividends currently exceeding your expenses, you may be able to retire earlier than expected!

Does your wife's work provide any coverage into retirement or post working for them? I wouldn't have been able to retire without available medical coverage through employer. There are options out there but still many unknowns to what the future hold for medical coverage.

Best wishes in your journey to early retirement
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Old 04-11-2017, 01:46 AM   #4
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Nothing to add except welcome!
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Old 04-11-2017, 02:37 AM   #5
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Welcome! My wife and I currently derive 42% of our retirement income from a portfolio of mostly blue chip dividend aristocrat stocks; the balance comes from two single payment immediate annuities--one purchased with 403(b) funds (think higher education 401k), the other from a Swiss pension from employment here in Switzerland during the last decade. I am very pleased with the performance of the dividend portfolio and have no plans to change it unless necessary on an individual stock basis.

So far the dividend increases each year have been well above inflation, so this income is increasing. Both annuities have growth opportunities as well. The two annuities serve as a proxy for the bond component in my asset allocation model. We also have some funds in Roths and a TIRA, which we see as a safety margin. Then there will be SS starting later this year.

The upshot is that we have about $1.6M in a stock portfolio whose principal should remain intact (in fact will grow) during my lifetime, leaving us some great options for end of life care and/or bequests.

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Old 04-11-2017, 09:33 AM   #6
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Welcome, McSteve!

Have you considered setting up a retirement account for yourself and funding it by transferring some of your stocks into it (to avoid the capital gains hit), then selling and re-investing into bond or balanced funds/ETFs to adjust your overall asset allocation? I'm not an expert on what self-employed folks can do in this regard, nor on dealing with individual stocks, but conceptually something like this might be useful.
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Old 04-11-2017, 10:30 AM   #7
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Welcome.

I joined the forum the same age as you, with plan to retire in 5 years too.

Then I decide to hang out in the office for 7 more years.
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Old 04-11-2017, 02:21 PM   #8
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Quote:
Originally Posted by evilanne View Post
Welcome McSteve,

It looks like you have done well with your investments! With the dividends currently exceeding your expenses, you may be able to retire earlier than expected!

Does your wife's work provide any coverage into retirement or post working for them? I wouldn't have been able to retire without available medical coverage through employer. There are options out there but still many unknowns to what the future hold for medical coverage.

Best wishes in your journey to early retirement
Since we're a few years away, I haven't looked into the options, but I'll get on it. Thanks!
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Old 04-11-2017, 02:23 PM   #9
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Those are some great ideas. I'll do a bit of research and see what my options are.

Cheers!

Quote:
Originally Posted by MBAustin View Post
Welcome, McSteve!

Have you considered setting up a retirement account for yourself and funding it by transferring some of your stocks into it (to avoid the capital gains hit), then selling and re-investing into bond or balanced funds/ETFs to adjust your overall asset allocation? I'm not an expert on what self-employed folks can do in this regard, nor on dealing with individual stocks, but conceptually something like this might be useful.
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