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Old 10-12-2008, 08:36 PM   #41
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I live about 40 miles outside St. Louis, Mo. Here is a pic of our paid for house and Porsches. My silver one is 35 years old though. And the clubs around here are begging for members. I belong to a very nice Tom Fazio designed club and it runs around $4,000 per year.

We generally don't spend alot on vacations, around $2,000 to $3,000 a year, our real estate taxes are $2,800 a year.

I rechecked my spreadsheet and last year we spent $5690 per month and that includes $5000 to the kids, a $3500 transmission for the truck, and $10,800 in medical insurance. This year we are averaging $5,400 per month. These are after tax numbers.
I live in Maine and our property taxes are three times yours and our house is smaller . Sales tax is 6% on everything except for food that isn't processed (Snack foods are taxed) and we have a huge auto excise tax annually to register our 4 year old Acura. Income tax is 8%. If I wanted to forego all travel, entertainment, clothing and eat just macaroni and cheese for my food, no health insurance . The minimum would be $2300 a month. My in-laws moved out of state and retired in Arkansas because they couldn't afford to retire here.

According to the statistics Maine has 1.5 million pop. and most are wealthy retirees..(must be movie stars 10 mil?) why they would want to move here and have their retirement savings eaten up by taxes and shovel snow is so confusing ...
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Old 10-12-2008, 09:44 PM   #42
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I live about 40 miles outside St. Louis, Mo.... This year we are averaging $5,400 per month. These are after tax numbers.
Beautiful house and location. I think this might be an example of how retirement costs and lifestyles can vary across the country. On Da Left Coast, costs are a tiny bit higher. OK, much higher. The higher fixed costs naturally cut down the discretionary spending, so just by moving here you'd probably be on your Budget #3.

At least you wouldn't have to mow the huge lawn. The next door neighbor's house would be 10 feet away. A developer here would probably put a subdivision on your lawn.
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Old 10-13-2008, 02:15 AM   #43
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I live in Maine and our property taxes are three times yours and our house is smaller . Sales tax is 6% on everything except for food that isn't processed (Snack foods are taxed) and we have a huge auto excise tax annually to register our 4 year old Acura. Income tax is 8%. If I wanted to forego all travel, entertainment, clothing and eat just macaroni and cheese for my food, no health insurance . The minimum would be $2300 a month. My in-laws moved out of state and retired in Arkansas because they couldn't afford to retire here.

According to the statistics Maine has 1.5 million pop. and most are wealthy retirees..(must be movie stars 10 mil?) why they would want to move here and have their retirement savings eaten up by taxes and shovel snow is so confusing ...
Wow taxes sound worse than Hawaii. Not sure what this snow thing is
My mom said that leaves are beautiful in Maine around this time of year though.
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Old 10-14-2008, 11:02 AM   #44
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It will be interesting to see how it works out for us. So far we are only 7 months into retirement and our expenses have not yet stabilized. I do know how much we spent on a gross level just from doing taxes each year. There is income --taxes--savings==living expenses. Oh, our younger son is still in college but his expenses are quite manageable, he is at a state school and we have saved enough in a separate account to cover most of his expenses so far. I also go over the quicken account and can see how much goes to charity, travel, utilities and a lot of categories. We did have a larger expense last year as we got a new(er) Jeep and a small travel trailer
I have allowed $6,000 to $6,200 each month for our total living expenses, after taxes. One new thing is that we are no longer saving, too bad with the market at current lows it seems like a good time to buy.
We live pretty simple; our house is modest, 1K SQ FT, 2BD 1BA, we do not have a boat, our sports car is a 1997 Miata. We did give our 1985 VW camper to older son and its nice to see the grand children camping. but that may have actually lowered our expenses.
At the end of the month there isn't much money left, it all pretty much gets spent. DW wonders where the large fund for more exotic travel is? (Without tapping the 401k/Roth.)
So its interesting to see 'how others live' on various amounts of funds, seems like we should have 'more' funds to play with (though I love(!) now having the time to play.
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Old 10-14-2008, 12:05 PM   #45
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Wow taxes sound worse than Hawaii. Not sure what this snow thing is
My mom said that leaves are beautiful in Maine around this time of year though.
I meant to say who wants to pay high taxes and shovel snow for four months in while retirement. The leaves are gorgeous but expensive to look at the summers are nice too and my DH swears that its worth living here as the quality of life in Arkansas is not the same. Since we are foodies and like to cook gourmet meals there isn't any lobster, arugula, or porcini mushrooms to cook with, but with the state taxes we pay we could be living in Arkansas and hire a personal chef for the year .
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Old 10-14-2008, 12:12 PM   #46
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Good Points DM. I think that a lot of people don't quite realize that once you have NO DEBT i.e. house, cars etc are fully paid for -the cost of living is very reasonable and manageable.
Agreed. And right now -- in a small paid-for house with low property taxes (by state standards) and a low local cost of living, we could comfortably live on about $3,000 a month today. That would include some belt-tightening but not draconian -- just reasonable frugality. Add in health insurance and maybe it's $3,500.

If we lived up to our current means in terms of income and cash flow -- say a $400K home with a big mortgage, a new $40K car being financed for five years and a few other extravagances, we couldn't live on twice that. And I'd spend my time fretting about whether I could hold onto my j*b for 20 more years to pay for it all.

It's priorities and, to some degree, risk tolerance. My priority is for economic security and less reliance on my current j*b than for more and more stuff. And to be able to take the "career cuffs" off myself MANY years sooner.
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Old 10-14-2008, 12:26 PM   #47
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I retired in 06 and traveled a lot when the market was good but it looks like the stock market will be stagnant for the next few years plus we have major repairs on the house like painting and a new furnace. I would have been able to do both on 10% annual returns. With possible 0% returns and a even a 40% loss the travel is out of the question but I don't want to work, I'd rather eat macoroni and cheese 7 times a week than going back to Mega Corp and the politics. I occasionally see my ex-co workers and they ask if I found a job yet. My job was outsourced and it was perfect timing as I was going to quit within the next year. I haven't really told them that I retired because I am 48 . So when they ask what I do I tell them watercolor, cooking and gardening.
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Old 10-14-2008, 02:24 PM   #48
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haha,

I'm not trying to be too patronizing here, but you do realize that spending the dividend from the stock or selling shares of a stock is essentially the same thing. A dividend is just a forced sale of part of the company. I always have trouble understanding why people can't get past this little mental accounting trick. I'm not saying that dividends are a good or bad thing, just that not reinvesting the dividend or selling shares is more or less the same thing.

- Alec

edited to add: After reading what I posted, that did sound pretty confrontational. Apologies in advance. It was a tough day with the kids [who are lucky they're still alive].

Dividends are earnings of the company, don't compare them to the stock or retained earnings. The majority of the return from a portfolio is made up of dividends. Dividends are life savers during bear markets. Growth stocks kill you in a bear, and during a protracted bear your portfolio will not recover near as well if at all.
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Old 10-14-2008, 02:40 PM   #49
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My idea is that auto-pilot ERs are really not possible without pensions. No matter what strategy we choose, it will have it own set of risks. I know some here follow this cash flow method, I hope people will comment on how you are feeling about it now. Some members have suggested that if you don't have a pension it is easy enough to buy one. I think the turmoil that has engulfed life insurers along with most other financial firms will put this idea to rest, at least for the thoughtful.
Ha
Ha,

I started a thread about this topic two months ago, and also argued that a 4% withdrawal rate for early retirees is not sustainable over a 40-50 year time horizon without extreme risk. I also provided a lot of factual based research.

I still think the research applies and anyone retiring with a 40-50 year time horizon is taking a huge risk. I encountered large resistance to the facts I presented. I am interested to see what transpires over the next few years.


However, studies also show that the first 5 years of retirement is critical. Those people who retire at the bottom of this recession assuming it doesnít last too long should have a higher success rate assuming they only have a 30-40 year horizon.
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Old 10-14-2008, 02:56 PM   #50
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According to the statistics Maine has 1.5 million pop. and most are wealthy retirees..(must be movie stars 10 mil?) why they would want to move here and have their retirement savings eaten up by taxes and shovel snow is so confusing ...
Because it's still cheaper than (the people's republic of) California!
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Old 10-15-2008, 07:36 AM   #51
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Ha,

However, studies also show that the first 5 years of retirement is critical. Those people who retire at the bottom of this recession assuming it doesnít last too long should have a higher success rate assuming they only have a 30-40 year horizon.

Since I have a 40 year retirement plan.. I am at extreme risk correct? When I first started retirement two years ago I thought I had reasonable risk. I had a year of cash stashed away in FDIC insured bank. 1/3 was in cash with broker money market fund the other 1/3 was in growth stocks, 1/3 in PM stocks and the other combination dividend bearing stocks and shorts. To me at my age 48 it seemed pretty conservative and I could hunker down for a two years if the market turned bearish. However hindsight being 20/20 I should of took more cash out in Dec 2007 as the value of equities has dropped 40% since then. I think we are looking at a long bear market for the next 10 years. I have enough for minimum budget for the next 5 years in a FDIC insured bank. It is going to take some time to recover 40% loss. Are we looking at 70's type of inflation or 30's type deflation? I have been through this type of market fluctuation in 87 and 2000 but this one is going to be more severe due to the worldwide banking crisis. I have no idea how to plan for because it seems that this type of economic depression --- is not in the history books.

So how do you plan your retirement based on the 32 to 1954 scenario? Do you cut expenses to 2% annually? Or go back to work?
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Old 10-15-2008, 09:01 AM   #52
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Since I have a 40 year retirement plan.. I am at extreme risk correct? When I first started retirement two years ago I thought I had reasonable risk. I had a year of cash stashed away in FDIC insured bank. 1/3 was in cash with broker money market fund the other 1/3 was in growth stocks, 1/3 in PM stocks and the other combination dividend bearing stocks and shorts. To me at my age 48 it seemed pretty conservative and I could hunker down for a two years if the market turned bearish. However hindsight being 20/20 I should of took more cash out in Dec 2007 as the value of equities has dropped 40% since then. I think we are looking at a long bear market for the next 10 years. I have enough for minimum budget for the next 5 years in a FDIC insured bank. It is going to take some time to recover 40% loss. Are we looking at 70's type of inflation or 30's type deflation? I have been through this type of market fluctuation in 87 and 2000 but this one is going to be more severe due to the worldwide banking crisis. I have no idea how to plan for because it seems that this type of economic depression --- is not in the history books.

So how do you plan your retirement based on the 32 to 1954 scenario? Do you cut expenses to 2% annually? Or go back to work?
I can't speak to your situation. I decided to work to 55 even though I have a military pension, mostly to increase my standard of living in retirement.

I do know the math however, and the probabilities for portfolio failure increase during longer time horizons, and the time sequence before a bear market. The major problem is depletion of equity during extended bears as I discussed several months ago.

But since you are already retired you want possible solutions.


Two ways to halt the effects of portfolio dilution are as follows:

Move away from growth stocks to income producing stocks and bonds. Some of the yields available for dividend stocks are at all time highs. But donít do this at a loss.

Reduce the withdrawal rate as necessary to eliminate capital draw downs during bear markets. If necessary move to a semi-retirement lifestyle during the bear.

Personally, I would not rely on the market rebounding to make up lost capital. I would shift my investments to produce income and preserve capital at all costs. The older you get the harder it will be to replace lost capital through employment.

The issue is not that a portfolio is down 40%, what is at stake is the amount of shares available for future gains in the market. If you sell shares to live, those shares and future gains are lost during the recovery whenever that occurs. You canít expect the remaining shares to make up the loss after a protracted bear.

If this is a short bear market then the discomfort would be short lived. If the bear market turns into a Japan style 10 year recession your portfolio will not be depleted and your worst case scenario will be semi-retirement.
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