RedOscar here

[RedOscar]

Greetings,

I made my move to early retirement at the ripe age of 48. That was 2 years ago and even today, I have no regrets. I am married with two young adults in college.

An early savings plan, living within our means, and a little luck allowed me to take advantage of a company offer for early retirement.

Naturally, there are going to be issues, and I hope this forum will offer an opportunity to see how others are dealing with similar circumstances. I look forward to the exchange of ideas.

Regards,

Red Oscar

 

[intercst]

Greetings Red Oscar,

If you retired two years ago, that was just about at the stock market top. How are you weathering the decline, or does the market even matter in your planning?

Regards,

intercst

 

[RedOscar]

intercst,

Glad to see a quick reply to my first post. Your question about how I am doing with the market change is a great area to discuss. In some regards, I feel my early retirement was a blessing in disguise.

After leaving my job, I began doing a lot of study about investment strategies. I had estimated that we could live quite comfortably if I could achieve an average 7-8% return. During the later part of 2000, I resturctured a significant portion of my portfolio to reduce risk. This definitely reduced my exposure to the falling market.

Since retirement, my overall portfolio is down about 8%. The portion that has taken the biggest hit is in my 401(k) account. Thankfully, I most likely won't need to begin taking distributions until around age 70. Of course I don't relish the idea of being down the 8%, but considering the fall in the market over the past 2 years, I feel it is still manageable.

One of my concerns is the ability to achieve that average return of 7-8% annually. It is impossible to predict how likely that will be in the future. But over the next 40-50 years, I am hopeful that historical averages might be possible.

So what about you, how are you weathering the storm?

Red

 

[intercst]

RedOscar asks,

One of my concerns is the ability to achieve that average return of 7-8% annually. It is impossible to predict how likely that will be in the future. But over the next 40-50 years, I am hopeful that historical averages might be possible.

So what about you, how are you weathering the storm?

---------------------------------------------------------

My portfolio is a bit more aggressive than most retirees. I'm down about 33% from my April 2000 high, but it's no tragedy. I retired in 1994 and saw significant growth in my assets after I retired. My annual withdrawal was a bit less than 1% of assets in 2000. Now it's a bit less than 1.5%.

What asset allocation allowed you to keep your portfolio losses to only 8%?

intercst

 

[RedOscar]

intercst,

My current allocation is 70% equity, 20% bond funds, and 10% cash. At the time of my retirement, I was about 85% equity and 15% cash.

Two things helped to control my losses the past 2 years. The first was my shift to some bond exposure. These assets have given me above average positive return due to lucky timing. The second thing that helped me reduce my losses were the equity holdings that were value oriented. These assets have realized nice capital gains since the collapse of growth stocks.

Had I not retired at the time I did, my losses would have been greater. A case in point. I had UTMA accounts set up for the kids college funds. These accounts were both invested in growth funds which had appreciated nicely. However, everything I was reading said that assets you intend on using the next few years should NOT be invested in stocks.

So in July 2000 I called the financial planner with whom I had the accounts and told him I wanted to sell my positions. He tried to talk me out of the sale, but I had made up my mind. Since that time, those mutual funds have decrease in value by 45%. The kids college savings were spared significant losses, and I learned something about financial planners!

To reduce losses, I believe in diversification. I have become a big fan of Paul Merriman at FundAdvice.com. I value the insight of people such as Scott Burns, William Bernstein, and John Greaney. I believe the internet is a great asset in the sharing of information so that I can best manage my financial future.

Red

 

[OrcasIslandBound]

Hello RedOscar,

It has been 8 years since this thread was updated. How has the retirement plan been holding up all this time. You would be about 58 if I did the math right. Can you share any details about totals, expenses over the years, %withdrawal rates, etc?

Thanks

 

[REWahoo]

Doubt you'll get a response - RedOscar hasn't been seen on the forum for two years.

 

[FUEGO]

Doubt you'll get a response - RedOscar hasn't been seen on the forum for two years.

Maybe the retirement plan didn't hold up so well...

 

[Ed_The_Gypsy]

Maybe the retirement plan didn't hold up so well...

Jeeze, I hope it did! My approach is very similar to his.

 

[dex]

Doubt you'll get a response - RedOscar hasn't been seen on the forum for two years.

I think the longer you plan for retirement the lower annual return projection you should use. The 7-8% annual return expectation is high for a person of 48 and living for another 35 years. The 7-8% per year was in a bull market.

I estimate using two methods - the lower being 4% annual return.

 

[Ed_The_Gypsy]

dex,

I agree that 7-8% annual return on a balanced portfolio is too optimistic an expectation in the long-term, if you include downdrafts. Of course, anything in excess of the famous safe withdrawal rate of 3.5% is gravy to me. On a good day, I dream of a SWR of 4%. On a good day, I dream of 35 years of retirement, too, but 30 will be a miracle.