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Time to regroup
Old 02-23-2006, 01:51 AM   #1
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Time to regroup

Hi, I have been lurking here for some time, posting little. This forum is great and full of interesting and helpful people. I thought I finally ought to introduce myself.

I am a musician, husband is a software engineer. We are 37 and 38.

Husband has been getting burned out on his job, and we have been working toward a goal of early retirement for him. His income is pretty good, and since we are non-consumers, and without the expense of children, we manage to save more than half of his salary. We have been trying to hold on to this income stream as long as possible despite the burnout, since we believe that the market salary for his job has gone down and he would have to take a pay cut if he were to start over someplace else, if he even could find a position in this job market.

Our plan is that we would arrive at a workable investment sum
(Dr.Evil/One Million Dollars/Dr.Evil)
within the next 2 or 3 years. At that point we figure he could retire and we could live off my much smaller income, maybe taking a little of the investment gains to supplement, but still leaving enough so that the retirement accounts would keep growing. Then when the portfolio has grown a little bigger and we are a little closer to 50, then I could also retire and we would start drawing down.

Well, sometimes things don't go exactly as planned. He finally reached the tipping point and gave his notice today. Of course they are trying to change his mind by shifting around responsibilities to take some of the load off of him, but he has really had it with the whole org and maybe even with doing that for a job, period. He is going to take a year off, or so, work on his own programming that interests him (but has no income potential), and will probably decide that he doesn't want to look for a new job.

So that leaves us about $250000 short of our grand scheming, with not any way to make it up. We definitely cannot save any of my small income to add to the pile. While our house and cars are paid for, making our fixed expenses pretty low, we are worried about adding health insurance to the bills, as that will raise our expenses above my income.

We have been persistently slow at making investment decisions, so often we have too much, too liquid, earning too little. We need to do better there.

Here is our portfolio breakdown:
13.5% Everbank CD earning small interest, but held in foreign currency basket.
23.8% 401k w/ fidelity split btw fidelity fund, and intl equity fund, and something else I can't seem to find right now
19% TRowePrice emerging markets Europe, New Asia, Latin America funds
15% 2 individual stocks (employee stock purchase and one other)
4% s&p500 index
3.4% Roth IRA in CDs
20.8% combination of Savings bonds, CDs, Money market. Way too much to hold at those rates, we need to move it, obviously.

Appreciate suggestions. Thanks.
igsoy
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Re: Time to regroup
Old 02-23-2006, 06:45 AM   #2
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Re: Time to regroup

igsoy, it sounds like there isn't significant fat to cut, so it is time to be creative. Is there something lower stress that your hubby could do, even for less pay? How much income would he have to bring in to just leave the portfolio alone and let it grow for a while?
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Re: Time to regroup
Old 02-23-2006, 07:01 AM   #3
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Re: Time to regroup

brewer is right, what is he retiring to, daytime TV?

I can understand those who want ER to explore this planet, i don't understand those who want ER for no other reason than you don't like your job?

Why not find something that you like to do and get paid for it??
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Re: Time to regroup
Old 02-23-2006, 08:06 AM   #4
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Re: Time to regroup

Why would you keep a Roth IRA in CD's? This likely is $ you won't touch for many years (conventional wisdom is draw down taxable accounts first). You are only in your 30's. Get more aggressive with this account!

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Re: Time to regroup
Old 02-23-2006, 12:25 PM   #5
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Re: Time to regroup

Brewer and Max, thanks for your replies. Some more details:
His passion is programming, as it is now he comes home from work at 6, eats, and then programs til 11. In his early retirement he planned to have all day to work on his stuff. He will actually be working full time on his own projects, just not getting paid for it. Right now in his spare time, he is working on an app for me to use with a few students. Through this project he is learning about LISP programming, and he really loves working through new things and doing his own projects his own way. The end product will be useful to me, but will have no commercial value.

I think all the Dilbert crap, stupid spec requirements and deadlines, reorganizations,etc. that get imposed on projects from above contrary to the recommendations of everyone on the development team, really kills his love for it. He has tried to hold out and just do it for the good money, and when we realized that maybe we could do it in 2-3 years he saw light at the end of the tunnel and was able to cope a little better. But now he has actually started getting depressed about it. To me if it is adversely affecting your mental state, then you need to stop doing that.

I think it's funny that I am the musician, but he seems to have more the artists mentality than I do. It's hard to be a freelance musician without selling out and doing some really bad music sometimes. But as far as I'm concerned, even if you're embarrassed to be seen playing the gig, you're still playing your horn, so life's not all bad.

As far as budget goes, we haven't really kept a budget in years, just saved everything we didn't spend, so I'll have to do some thinking about the details of our spending and find out what the damage of the health insurance will be. The Cobra plan is gonna charge $850/mo for a high deductible plan for the 2 of us, that seems high for a HD plan for people in perfect health, so we will have to search around for something better. My income also is quite variable year to year, so it is hard to know how short that will leave us.

Grumpy: yeah we just set up those Roths at the last minute at the Credit Union on tax day, so yeah, our lack of investment planning is a bad thing.

Does anyone have any suggestions for moving out of our cash holdings?
Thanks,
igsoy
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Re: Time to regroup
Old 02-23-2006, 06:29 PM   #6
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Re: Time to regroup

Quote:
Originally Posted by igsoy
As far as budget goes, we haven't really kept a budget in years, just saved everything we didn't spend, so I'll have to do some thinking about the details of our spending and find out what the damage of the health insurance will be. The Cobra plan is gonna charge $850/mo for a high deductible plan for the 2 of us, that seems high for a HD plan for people in perfect health, so we will have to search around for something better. My income also is quite variable year to year, so it is hard to know how short that will leave us.
On this forum, I've found out that health insurance plans can vary W I D E L Y based solely on where you live. My policy in Missouri (age 29, perfect health) is a scant $720/year for a $2,600 deductible. Try ehealthinsurance.com or assuranthealth.com (my policy is with Assurant, Open Access II) for some quotes.


Quote:
Originally Posted by igsoy
Grumpy: yeah we just set up those Roths at the last minute at the Credit Union on tax day, so yeah, our lack of investment planning is a bad thing.

Does anyone have any suggestions for moving out of our cash holdings?
Thanks,
igsoy
Vanguard would be a wise move. Some relatively less-volatile funds include Wellesley, Windsor, Windsor II...
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Re: Time to regroup
Old 02-23-2006, 07:02 PM   #7
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Re: Time to regroup

I guess it would be fair to say that you are entering a period of financial insecurity, which leads me to disagree with your idea to get your cash assets working harder for you. Yes you are young and the young need to be aggressive with their investments, but not right at this moment for you.* What you never want to do is invest because you have got to make some money NOW.* That is what killed many traders in the roaring 90's. Wait until you are on solid footing before you "go for it."
There are some pretty good deals out there for short term medical coverage if you think that is what you want.* I'm thinking something like $100 per month for 2 healthy adults.*
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Re: Time to regroup
Old 02-23-2006, 09:11 PM   #8
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Re: Time to regroup

Igsoy,

Dont post very often but you regrouping problem is interesting. I would consider this a "life event." Any life event will cause you to rethink your financial plan. In your case this is a good problem. You have considerable assets $750K and are young. If your not tied to a region for other reasons, you may consider moving to a city like Austin, Memphis, Nashville, etc. The cost of living is not very high in these citys and as a musician you should have some options. I'm concerned you don't have a budget. This is a must do. Keep it simple at first. You can always make a more detailed accounting as you get comfortable with following a buget. You also need to keep track of every investments. To me not knowing the name of a mutual fund you are invested in is a sin. You should make it a point to get as much detailed information about all your investment choices as possible. Educate yourself - so many good books and online contnet are availabe for free.

Like I said these are good problems. With your assests and at your age you don't need to rush into any quick decisions just take your time and keep an open mind to all the possibilities. I agree with JPatrick - Dont be afraid to be too conservitive at first. You want your investemtns to grown without having to worry about them all the time.

Elroy
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Re: Time to regroup
Old 02-23-2006, 09:13 PM   #9
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Re: Time to regroup

Igsoy,

This is a great place to plan for financial advice, FIRE, etc. But it sounds to me like you really should be focusing on more pressing issues . Maybe your husband just needs some time off to think things through, a career change, maybe some counselling to help him tolerate the corporate BS less personally, maybe meditation, who knows.

I guess my gentle suggestion is to get through this tough life transition by focusing on career and goal reassessment. There will be plenty of time to become millionaires when your situation stabilizes . A month off with no pressures might be just the thing - eat tuna and peanut butter if you must.

Meantime, keep lots of your precious cash liquid for a couple of months. You may need it to get through the storm. And you will get through it probably better than you were before.

Good luck and hang in there.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Re: Time to regroup
Old 02-24-2006, 11:27 AM   #10
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Re: Time to regroup

As a couple others said, you might not want to move away from cash in your current circumstance, unless you decide you can live indefinitely off your income + safe withdrawal.*

I can definitely relate to your husband.* I'm a little younger ( just turned 28 ) but I was at the breaking point last year... literally felt like any day could be my last.* It was very scary because I didn't know what I'd do if I left.* I truly enjoy programming (like your husband, I would do it for free just to "play around" and learn) - it's all the other corporate BS and red tape that drives me insane.* Luckily, I landed a much less stressful job that I view as a temporary stop ( I even made my intentions clear to my new boss who was ok with that ).* I'm not doing very interesting work for now, but the 8-hour low-stress days (and higher pay) are worth it for now.* Meanwhile, I'm keeping my eyes open.

After he winds down a bit, he might get a better idea of what he wants to do - whether it's another job in software engineering or not.* Maybe he'll just want a part-time no-brainer job where he can make enough to help pay the bills and continue padding your Roth IRA, leaving enough time for freelance projects.

Best wishes,

Jason
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Re: Time to regroup
Old 02-24-2006, 01:15 PM   #11
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Re: Time to regroup

Hi,

I'll disagree somewhat with the others who say keep all that cash. It looks like you have almost $250K in cash. That's too much, I think, even in your situation. I'd keep maybe $50K in cash and invest the rest. Pick a low-cost mutual fund like Vanguand Total Stock Market Index. It's a good core holding to build from.

I also agree with the others about reassessing what you want. With your husband quitting his job 2-3 years ahead of schedule, your original goal will likely not be attainable. Are you both OK with that? I really think your husband has to re-think the "year off" thing. He should at least think about a part time job or freelancing to help with the expenses, unless you are really ready to change your goals.

You should not invest because you NEED the money to grow to make ends meet. What if the next 2 years see a bear market? Needing it to grow will only keep you up at night.

Good luck, with whatever you both decide to do. Keep us posted!

Karen
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