Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 09-30-2010, 01:11 PM   #21
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,455
I worked in Venezuela, where labor law requires companies to pay 14% (eq. to 2 months salary) as a “year end bonus” (which was really no such thing). Companies just paid out the same old yearly amount in 14 payments instead of the usual 12. Most folks spent that money during the year, ran it up in credit card bills to be paid off at year end. Others used that money to finance Xmas spending and vacation travel.

We used this as an opportunity to save. It was always just enough - to pay for 3 babies, then some major unplanned medical expenses. Then a new car.

When I reached middle level mgmt positions up to 50% of my total yearly compensation became variable – and the discipline we acquired by living only on the regular monthly salary paid off. We were able to save a significant part of my total compensation.

There was always a fair amount of peer pressure to spend, often not easy to deal with. Because I earned in a foreign currency I also had the pleasure of watching it lose value in many different ways – slowly to inflation, suddenly and dramatically to maxi-devaluation, and for many years had to use risky methods to convert it to hard currency.

There is no doubt, however, that saving is a great enabler in life, and bonuses are an excellent opportunity to save.
__________________

__________________
MichaelB is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-30-2010, 11:06 PM   #22
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,244
Quote:
Originally Posted by obgyn65 View Post
Thank you Rich for your kind words and helpful advice as always. I also have municipal bonds and money market - that's about the most diversified portfolio of investments I feel comfortable with... On average this year I am getting 3.6% return.

If you have a better idea about safe products with the same level of return over the next 10 years, please let me know. Thank you kindly.
Not to further hijack the thread, but, someday, if you don't mind, please let us other "ultra-conservative" investors know how you have maintained 3.6% return during these unusual times. Personally, I've hovered around 25% equities and that portion of my port have done some interesting gyrations like everyone else's. But long-term, my "cash-like" investments have easily exceeded 4%. Unfortunately, I've taken a big hit on return (no losses, mind you) recently as many of my old stand-by's have dropped in return. Some "guaranteed" 4.5%-return SPDA's have helped a bit, but my biggest investment - a Guaranteed Income Fund (GIF) has dropped to about 2% return - ouch!

If I could maintain about 4 to 5% return or more (during these times of 1-3% or so inflation) I'd feel fairly comfortable. (My personal way to deal with inflation in addition to my relatively small equity stake) is to take considerably less than 4% SWR. Any "tricks" you've learned to maintain relatively good returns now that cash isn't doing that well would be helpful.

edit to add: I reread your entry and wondered if you count your municipal bond's return based on the tax advantage. i.e. 3% return becomes about 4% if you are in the 25% tax bracket. Wondered how you handle this in over-all return. Thanks!
__________________

__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 09-30-2010, 11:22 PM   #23
Thinks s/he gets paid by the post
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 3,244
Quote:
Originally Posted by TomG View Post

After accumulating eight months of paychecks from Basic Training and AIT, it felt like a huge lump sum. Even at 23 the couple of trips to the stripclub were a poor choice
So, uh, Tom, where did you get the REST of the money for the 2 trips to the clubs? Heh, heh, heh.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 10-01-2010, 12:33 AM   #24
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Quote:
Originally Posted by SecondCor521 View Post
So do you handle larger lump sums differently than the money that comes in on a regular basis or smaller lump sums? How? Why? Does it depend on the size of the lump sum? The source?
When I was earning the submarine nuclear bonus in the early 1990s, every October I'd get a whompin' $7200 check. ($10K minus 28% witholding.) I'd scamper over to the credit union and deposit it, then that night I'd write the checks to Fidelity. I'd try to hold down the gleeful Montgomery-Burns cackling & hand-rubbing, but I'd be pretty happy with all that "free" money.

We saved every penny of it and lump-sum rebalanced our asset allocation.

The idea was that it was "found" money above & beyond our regular paychecks, and someday that gravy train would end. Which it inevitably did a few years later, and because we'd never spent any of it I never had to adjust our spending to account for its absence.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 10-01-2010, 07:09 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 5,182
I remember the first year I got a bonus at my current job. I had already gotten a 20% raise from my last employer, plus stock options were already looking good, and I either didn't know about bonuses or figured they'd be 5% or so. They were over 30%. I took a friend and my daughter out for ice cream, and much like Nords, gleefully dumped the rest in my investment account.

I also remember a couple of years later when someone else got their first check and talked about getting jet skis, or something like that, and asked me what I was doing with mine. I said I was investing it, and she looked very surprised, but to her credit said she admired my discipline.
__________________
RunningBum is offline   Reply With Quote
Old 10-01-2010, 08:31 AM   #26
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by obgyn65 View Post
Thank you Rich for your kind words and helpful advice as always. I also have municipal bonds and money market - that's about the most diversified portfolio of investments I feel comfortable with... On average this year I am getting 3.6% return.

If you have a better idea about safe products with the same level of return over the next 10 years, please let me know. Thank you kindly.
I always found Solin's books interesting. Click here for an example.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

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.
Rich_by_the_Bay is offline   Reply With Quote
Old 10-01-2010, 08:32 AM   #27
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,402
In my case it happens to be a work-related variable pay bonus. I wasn't really expecting it at all.

I did find out that it will probably be a little bit less than I originally stated above; probably about 8% or so, but that is still effectively a month's salary, gross.

I wouldn't use it to increase my lifestyle at all. Mainly there were a few minor house and car repairs that are wants but not needs that came to mind. I might also go out to eat or something.

As far as the majority of the rest of it, I would probably apply it to my goals in order as most here have said. I already have life insurance, an emergency fund, adequate life insurance, am on track to be FI in a few years, and have the kids' college funds in place. At this point technically my next goal is paying down my modest student loan, although at a 3.5% fixed rate with a really low payment, I'm finding that a little hard. The other options are increasing my emergency fund further (already at 5 months), dumping it into the kids' college funds (already funded through October 2022), or dumping it into the taxable account.

I appreciate all the comments. I am a little surprised that most here handle them in fundamentally the same way.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Followup
Old 10-09-2010, 12:26 PM   #28
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,402
Followup

Followup for anyone who might care:

About 1/3 went to taxes. This probably means I will see about 15% of the total back in the form of a tax refund next April.

20% went to 401(k) contributions.

I spent $5.50 at the work cafeteria to celebrate.

I paid off the balance on my credit card ($21.45).

The rest went towards my student loan, which knocked multiple years off the end of the payment plan.

Coincidentally I also got a modest raise, which moved my FI date up by a months or two.

2Cor521
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 10-09-2010, 03:53 PM   #29
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,100
The only lump sum I normally have to deal with is the annual bonus of which there was none in 2008 and 2009, and I'm now retired. I've never counted on a bonus and always put it into the retirement funds into the target AA.

This is our first year of retirement and we are about to receive our 3rd unexpected 5 figure lump sum.

1. My megacorp decided to reward it's employees for 2 years of frozen wages and lack of bonuses with it's biggest bonus pay-out ever, including retirees that had worked for the whole of 2009.

2. We completed the sale of my Dad's house after he died in December and split the estate between the 4 children.

3. FIL died in June and his house has now been sold and his estate settled and split between the 4 children.

The bonus went into the savings into the target AA but the 2 inheritances are in the UK so we haven't fully decided what to do with the monies yet. We spent some of it over the summer with our 10 weeks in England and since we plan to spend about 6 months in England / Europe next year we'll leave a big chunk of it in place for those expenses.

Interest rates are very low in the UK at present, particularly for non-residents (all the higher rates including Bank of Baroda have UK residency as a requirement). I looked at the possibility of putting some into UK mutual funds but their rates are MUCH higher than the USA plus there are hidden fees as well as the stated fees.

£7billion a year skimmed off our savings - Telegraph

If exchange rates improve greatly in our favor then I'll see about transfering a chunk of the loot over before next year otherwise I'll leave it where it is in our UK bank earning about 0.9%.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 10-09-2010, 06:25 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Quote:
Originally Posted by SecondCor521 View Post
I spent $5.50 at the work cafeteria to celebrate.
You darlin'....are out of control.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 10-09-2010, 11:53 PM   #31
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 882
Quote:
Originally Posted by Koolau View Post
Not to further hijack the thread, but, someday, if you don't mind, please let us other "ultra-conservative" investors know how you have maintained 3.6% return during these unusual times.
Stocks are up 7-12% (12% for Small Cap Value, 7% for broad market)
Bonds are up 8-14% depending on your holdings.

Unless you are sitting on a boatload of cash or energy stocks, you should have been able to get 3.6% this year easily, even with a 25/75 allocation.
__________________
jebmke is offline   Reply With Quote
Old 10-10-2010, 07:58 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,974
Quote:
Originally Posted by Rich_in_Tampa View Post
I always put about 75% of windfall earnings (after taxes) into retirement savings but used the other 25% on hedonism. It made me feel rewarded, a pat on the back as most of such earnings were intended, yet I still felt like a good saver from the 75% socked away.
I've done exactly the same, except my numbers are 15% funny money and 85% toward retirement savings.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 10-18-2010, 06:45 PM   #33
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
Hello Koolau - Well I have been buying CDs for the last few years until a few weeks ago (expiration dates up to 2020). I also have municipal bonds, up to year 2030 but my statements say "callable" before (not what that means, sorry !). Not sure either of my bonds tax status... I do not owe equities (i.e. shares) because I am financially illiterate, very little time to handle banks paperwork and very risk averse. I can confirm my overall my average return is 3.6%. I would like to explore annuities further but some participants on this website have advised against them, so I feel stuck... any advice is welcome.

Quote:
Originally Posted by Koolau View Post
please let us other "ultra-conservative" investors know how you have maintained 3.6% return during these unusual times.
__________________

__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Reply

Tags
lump sum


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Three years after ER - what I would do differently dex Young Dreamers 30 06-01-2017 09:09 PM
Firecalc lessons on drip feeding lump sums ? johng FIRECalc support 2 06-13-2009 04:33 PM
Anyone Hear This on Pension Lump Sums? RetireeRobert FIRE and Money 2 12-03-2007 05:46 PM
Why Does Everyone See This Differently? TromboneAl Other topics 24 09-21-2007 12:53 PM
Lump sum to invest, DCA in or go lump? Olav23 FIRE and Money 4 03-03-2007 04:22 PM

 

 
All times are GMT -6. The time now is 07:13 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.