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Ready, Willing and... Scared!
Old 04-22-2012, 09:03 PM   #1
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Ready, Willing and... Scared!

Hello everyone. I cannot tell you how happy I am to discover this blog and to find like minded individuals seeking early retirement. I too discovered this site as a Bogelhead. I am 53 and the wife is 52. I have 3 years left on a concluding contract with a company that pays me 600k as an independent contractor in the franchise industry.
Although I embrace the lifestyle philosophy of the Bogelheads, I do not follow the investment strategies. I have been a self directed investor for 30 years and have managed to limp through the market downturns in addition to 2008-09 mini depression. The wife and I have lived below our means throughout our married life and are now seriously considering ER.
The house has been paid off since 1996 during a brief but very successful albeit lucky brush with the commodity market. We have managed to accumulate about 725k in our SEP as well as 2 mil in stocks and 1 mil in bonds. Total NW less the home is about 3.25 M. Living expenses are about 75k. I am in the process of feathering the nest and reducing expenses in our only home. I have installed a solar electric system which essentially eliminates a $2,500 annual bill as well as installing a high efficiency gas heating system replacing a 20 year old oil system anticipating another 2k in savings.
We have one college bound boy that wants to go away to school but seems to lack the motivation to improve his chances to attend a good school. I don’t think that he knows that his family has a few scheckles as we have told him that his college endeavor will be financed through student loans which will be paid by us based upon his performance.
I hope that I am not coming across as bragging as it is not my intention. Nobody knows my financial situation but I want to be as forthcoming could be. I have always had a fear of poverty as I watched my father who earned a good buck throughout his life, die broke.
I have worked a portfolio based on appreciation and dividend reinvestment but need to understand the nuances of drawing an income off of my portfolio. This scares me. I have been paying into this thing for so many years but I do not know how to take it out. I feel like a deer in the headlights and I need to educate myself. I welcome opinions and advice. My apologies for the length of this post.
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Old 04-22-2012, 10:03 PM   #2
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Welcome to the forum.

I still have a number of years to reach FIRE (currently 35), but I will (as well as several in this forum have experienced or will at some point) also feel that 'scared' feeling of saving diligently all these years...and then suddenly being solely dependent upon that income from your investments. Because the portfolios give us a sense of financial security knowing that we're in a strong position, anything that threatens to draw down that balance (such as living off of it) gives us fear that it will dwindle faster than we can imagine.

But fear not, for your situation should enable you to enjoy that $75k annual budget without worry. It wouldn't be difficult to find a broadly diversified portfolio of that size that can yield an easy 2.5% overall, and enable you to live simply off of the dividends, without having to touch your principal.
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Old 04-23-2012, 05:38 AM   #3
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Hi islandtraveler, welcome to the forum. Sounds like you have the finances to retire. Here's an old thread on withdrawal strategies you may find interesting Withdrawal Rate Mechanics
You will find other helpful threads by using the search function, and members here are willing to help, so feel free to ask questions.
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Old 04-23-2012, 06:29 AM   #4
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Quote:
Originally Posted by Islandtraveler View Post
..........
We have one college bound boy that wants to go away to school but seems to lack the motivation to improve his chances to attend a good school. I don’t think that he knows that his family has a few scheckles as we have told him that his college endeavor will be financed through student loans which will be paid by us based upon his performance.
...........
Welcome and smart move on the college financing. The most valuable things that I have learned in life were not in college.
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Old 04-23-2012, 07:47 AM   #5
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Quote:
Originally Posted by Islandtraveler View Post
.....We have one college bound boy that wants to go away to school but seems to lack the motivation to improve his chances to attend a good school. I don’t think that he knows that his family has a few scheckles as we have told him that his college endeavor will be financed through student loans which will be paid by us based upon his performance. ......

I have worked a portfolio based on appreciation and dividend reinvestment but need to understand the nuances of drawing an income off of my portfolio. This scares me. I have been paying into this thing for so many years but I do not know how to take it out. I feel like a deer in the headlights and I need to educate myself. I welcome opinions and advice. My apologies for the length of this post.
DS was/is similarly unmotivated, much to my chagrin. When he initially went to college I had him pay 20% to have skin in the game and the deal was that if he got B's or better then I would pay him back his 20% and he could flip it into his next semester and would ultimately get it back when he finished school (assuming B's or better). I thought that would give him some incentive to focus on his studies as 20% was a lot of money to him. Unfortunately it didn't work out, and he is not college-bound at this point, but I have told him if he wants to return that he can have the same "deal" but at 50% until he proves to me that he is serious. Time will tell.

You have plenty to ER given your resources in relation to your living expenses. I will tell you it is scary, but like many things once you start withdrawals and the world doesn't collapse it becomes easier.
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Old 04-23-2012, 08:03 AM   #6
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Quote:
Originally Posted by Islandtraveler View Post
This scares me. I have been paying into this thing for so many years but I do not know how to take it out. I feel like a deer in the headlights and I need to educate myself.
That's perfectly normal as you probably know. While working, most of us focus on accumulation & investing and pay (much) less attention to the other side, distribution/decumulation/income sources. There are big, big differences. As I got closer to actually retiring, I started to educate myself on the latter, and it continues. You're right, you need to educate yourself (good link above) so you don't feel like the proverbial deer in the headlights. With your track record, you won't have any trouble picking it up, you just need to learn about another facet of managing your money...
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Old 04-23-2012, 09:09 AM   #7
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Thanks to all that have replied. Great insight as I expected. I will continue to enjoy and learn from this forum.
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How to create financial security in retirement. Article
Old 04-23-2012, 10:45 AM   #8
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How to create financial security in retirement. Article

This article popped up a while back and it may help you.

How to create financial security in retirement - MarketWatch

It points out that most people do not take the trouble to visualize their retirement.

People should list their worries, pick the realistic ones and develop what-if scenarios for each.

Also, 'what do you want to do?' You can be as general or specific as you like. Write it all down, I suggest.

An interesting quote within the article:
“Remember that savings and the accumulation of wealth is not an end, but rather the means to accomplish your lifetime goals,” said Rhoades. “You have to know your desired destinations or goals in order to develop an ‘interactive road map’ for where you are headed, what side trips or adventures are planned along the way, and how will you experience the joys which can be found in the close relationships you have fostered with family and friends.”
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Old 04-23-2012, 11:31 AM   #9
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Let's see. total asset 3.25M, Living expenses is about 75K, that's about
2.3%, I think you can make it, if you stay within the budget.

The son can cost you some money, if you pay for his college completely
or a big chunk of it.
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Old 04-24-2012, 06:07 AM   #10
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You may try this free online tool : Merrill Edge| See Where You Stand

Firecalc is advised by many here.
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Old 04-25-2012, 07:45 AM   #11
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Originally Posted by Birchwood View Post
Let's see. total asset 3.25M, Living expenses is about 75K, that's about
2.3%, I think you can make it, if you stay within the budget.

The son can cost you some money, if you pay for his college completely
or a big chunk of it.
+1.

Does $75k include health insurance?...not that there's anything to worry if not thanks to the size of your savings.
Don't forget to make lists of your plans when you retire so you don't get bored.
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Old 04-27-2012, 11:14 AM   #12
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Congratulations on your success. I suggest that you also look at the Bogleheads wiki at: Category:Main Page - Bogleheads

They have a section on withdrawal strategies that might interest you.

Based on my retirement about 2 years ago. If you have financial security, the most important thing is to find some interests to spend your time doing. I really missed the social aspect of going to work until I found a couple of areas that I could volunteer at.

Now, I'm trying to balance time spent on my interests so I don't burn out on any of them.

Lorne
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