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Old 12-29-2011, 04:54 PM   #21
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Can you expound on why you like passive index investing?
In short, KISS (keep it sweet and simple).

When I started mutual fund investing (back around 1988 or so), I did so through a financial planner who set my IRA with a market timing strategy. Supposedly, their strategy would get computer signals and know when to get in/out of the market. Market timing, of course is a whole different topic.

Then, I investigated load vs no-load and would buy those yearly book of fund rankings thinking maybe I could pick the best mix (all the while, having a full time occupation). This then lead me to end up own having about 25 different funds.

That was when I discovered, there's gotta be a better way.

With all those funds...there's still no assurance that having them will do any better than just going with an index fund, which makes things much simpler. That was when I decided to chuck all the funds I had and just go the indexing route.

With indexing, if the index goes up (or down) my investment just follows along. I don't have to worry about if the fund manager is good? Will he/she leave the company? Are the expense ratios too much?

Instead, I focus on my asset allocations, and rebalance then done and move on, keeping it sweet and simple. Also, a big plus is index investing keeps my emotions in check as I know that I won't do worst than the index as a whole.

The analogy is if I make par each time golfing, I'm always in the game (not on the top, but not the bottom either, I'll take that).

Index Funds vs. Actively-Managed Funds
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Old 12-29-2011, 05:11 PM   #22
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Started the day I graduated with a BBA in 1964. We pretty much saved about 1/2 of our combined PRETAX income for about 30 years. Now we're concerned that we will be punished for being 'hoarders' who should pay-up to help spread the 'wealth'.
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Old 12-29-2011, 05:15 PM   #23
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Started the day I graduated with a BBA in 1964. We pretty much saved about 1/2 of our combined PRETAX income for about 30 years. Now we're concerned that we will be punished for being 'hoarders' who should pay-up to help spread the 'wealth'.
Are you aware "they" are monitoring this site to identify those who need punishing? Didn't think so...
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Old 12-29-2011, 05:22 PM   #24
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That was when I discovered, there's gotta be a better way.

With all those funds...there's still no assurance that having them will do any better than just going with an index fund, which makes things much simpler. That was when I decided to chuck all the funds I had and just go the indexing route.
I was in the same boat when I switched but your portrait is too generous. It isn't just a matter of doing as well with less hassle. The odds are great that with actively managed funds you will do worse than with comparable index funds.
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Old 12-29-2011, 05:38 PM   #25
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Are you aware "they" are monitoring this site to identify those who need punishing? Didn't think so...
"They" do not have to monitor this site simce they have privy to everybody's income tax returns .
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Old 12-29-2011, 05:45 PM   #26
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I was in the same boat when I switched but your portrait is too generous. It isn't just a matter of doing as well with less hassle. The odds are great that with actively managed funds you will do worse than with comparable index funds.
If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?
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Old 12-29-2011, 05:55 PM   #27
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If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?
Over long periods (similar to what your investment time horizon is likely to be), yes. And they do.
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Old 12-29-2011, 06:00 PM   #28
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Pure dumb luck.

Parents kicked me out when I was 17 to earn my own living (same with all other siblings). Went to work for the State in the mid-1970s and never imagined I would stay there 35 years, but did. Along the way, went to college at night and finally got a BA 20 years after graduating from high school. Hadn't had enough punishment, so went to law school at night and transferred to an attorney position, still within the State government. Paid for all schooling by continuing to work full-time -- no student loans.

Have no debt; house and car paid off, pay off credit cards every month, contributed max to employer's 457b plan while employed. While in law school, married DH, who is frugal and likes to live low-key; tiny condo instead of McMansion, Honda instead of Porsche, etc. He also maxed out contributions to his employer's 403b plan. Inherited some money from his parents.

Retired and started receiving pension of 70% of final annual salary at age 52. Now paying through the nose for health insurance because I moved out of state (cheap retiree health insurance only available in-state), but worth it to trade for a great climate and active outdoor lifestyle.

Now waiting for Medicare and SS, assuming they still exist when I'm finally eligible. When calculating whether I had enough to retire, planned on getting 75% of SS, so hope that happens.

The luck came in having good health and not falling prey to any number of catastrophes that have occurred to others through no fault of their own. Thankful for what I have and know I did nothing to deserve it.
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Old 12-29-2011, 06:24 PM   #29
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While I'm sure most stories have similarities such as pay off bad debt, LBYM, budget, max out 401k contributions, I want to know what else you all did to get to your FIRE goal. I'm still forming my plan and want to see what others have done.
Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?
Save like crazy.

Here's another example of the process. The math works the same way whether you're in the military or not:
How many years does it take to become financially independent? | Military Retirement & Financial Independence
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If that is the case then index funds should consistently rank as one of the highest percentiles for their category, correct?
Thank Goodness for Index Funds
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A simple, low-cost 60 percent stock and 40 percent bond Core-4 index fund portfolio returned 4.5 percent annualized since 1999. A more broadly diversified index fund portfolio that included an extra allocation to small cap and value stocks performed 6.0 percent annualized over the same period. These returns beat a vast majority of comparable active money managers.
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Old 12-29-2011, 08:47 PM   #30
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Parents who gave me a both an academic and a financial education. Witnessing some personal financial disasters early in life gave me a very focused awareness of the consequences of excessive leverage and failing to LBYM.
Choosing a career (law) that offered the possibility of earning a high income, maintaining a high savings rate and having a spouse with shared values has put me in a position where I could retire in 2012 (age 46) if I wished (although I am thinking about hanging on for "just one more year" for various reasons). I have no pension, SS or similar, so have to rely 100% on my investments for the next 50 years or more - nothing is guaranteed, but I'm reasonably confident that we will go the distance without being forced to degrade our quality of life.
Although investments have done reasonably well and have brought forward my retirement by several years (even with an awful 2011), high income and high savings have been more important.
It's not rocket science.
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Old 12-29-2011, 08:55 PM   #31
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I was fortunate that the work I found interesting and wanted to do paid very well (except for the USN), and that the young wife and I never lived up to our salaries.
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Old 12-29-2011, 11:25 PM   #32
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While I'm sure most stories have similarities such as pay off bad debt, LBYM, budget, max out 401k contributions, I want to know what else you all did to get to your FIRE goal. I'm still forming my plan and want to see what others have done.

Am I too late at (almost) 30 to seriously consider retirement in my 40's? When did you start?

Retiring in your 40s is pretty hard to do. I think most people on this board have retired at age 50+. I think anyone can retire at 50+ if they are willing to work for it. Which is easier said than done. If you don't want to wait that long, then you may want to consider "early semi-retirement" (ESR) instead of full retirement in your 40s.

Its much easier to ESR as it takes a surprisingly large amount of money to replace work income. A reasonable assumption would be that for every $100k in stock investments you have, you could withdraw at most $3k per year. So, given that data, even a low-wage part-time job is equivalent to a large amount of savings. Say you make $15k per year at a relaxing part-time job. That would be equivalent to $500k in investments.

So, my advice would be that if you don't want to wait for 50+ to get out of the rat race. Then you may want to aim for ESR in your 40s, and continue to work part-time at a job you like doing.

That's my goal.
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Old 12-30-2011, 01:59 PM   #33
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We started early. We never, ever paid a dime in credit card interest. For the first few years after we were married just about all of our furniture was either hand me downs or second hand. We would never consider going into debt for something like furniture or a vacation. It just went on from there. We tend to buy higer end items and keep them for a long time.

We retired early, have a good income and travel when and where we wish. Even after a financially successful carreer I still drive a 15 year old car because I like and it is well maintained. Recently bought DW a new, low mileage car. Four year old import with a full load. Half the price of new model. We would prefer for someone else to take the depreciation-we can use the savings for a nice vacation. We are about to downsize of large family home to something that we can lock up and walk away from without worry or concern about ongoing mtce.

Four of the best pieces of personal financial advice that I have ever rec'd:
-never borrow money to buy a depreciable asset or a vacation
-spend less than you earn, live below your income level
-it is not what you earn, it is about what you keep
-keep your personal finances private
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Old 12-30-2011, 03:24 PM   #34
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It's not real hard to figure out. In order of importance in my case:

1. Married someone who shares my goals of LBYM
2. Stayed married
3. Bought as much rental property through the years as I could stomach with excess cash and bonuses.
4. Maxed out a matched 401K invested in a few good companies and index funds. (Toward the end I was stashing over 15% of my pretax megacorp income into tax deferred accounts. If you don't see it, you truly never miss it.)

(I put #3 before #4 only because it allowed me to stop working (not my choice) for megacorp at 55 and take a far less stressful job for fun. In truth, could have stopped working for a salary far sooner than I did. But working, DW is 7 years younger, and still gorgeous , so I worked on a little longer. Plus DD was still in college out of state. Yes, I started late with the daddy thing.)
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Old 12-31-2011, 03:55 PM   #35
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1. I have had a good paying job

2. never married

3. no kids

4. no debt, no mortgage

5. I have lived frugally most of my life

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I want to know what else you all did to get to your FIRE goal.
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Old 12-31-2011, 06:47 PM   #36
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Lots of good input and plans here. As a simple plodder in the investment world I offer my own story, part planning, part good luck:

1. Marry the best girl around and have a family young. Enjoy all of it.
2. Save and invest something substantial out of each paycheck.
3. Do something that you really like. I can not imagine toiling at a job for even 10 years that I did not enjoy. The trade off is not worth it.
4. Contrary to popular opinion 401k plans are not less desirable than pensions. In full disclosure- I have small pension that was frozen in '94. However the assets in the 30+ year 401k and other plans far exceed and give a legacy and flexibility I would not have otherwise.

Establish your priorities and work a plan to accomplish them. Have fun.
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Old 01-01-2012, 07:31 AM   #37
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I just turned 48 and have been in the FIRE zone for some time now. Looking back I'd have to say there were a number of important factors that allowed me to get to where I am today.

1- I was fortunate to know what I wanted to do (dentistry) and worked very hard as a young man to get there as quickly as possible.

2- I owned my own practice at a relatively young age (25)

3- I was born into a very middle class family and married a girl who came from poor circumstances so we were accustomed to living simply. We continued to live like poor college students until we were around 30 yrs old so we could pay off all our student and business debts as quickly as possible.

4- from the age of 30 on, we started putting money away as much as possible, and have consistently done so year after year.

5- we gradually raised our living standard, slowly adding the comfort and luxury items over time, but still shopped practically (e.g.- buy cars that are 2 years old)

While I've reached the FIRE zone, I continue to work mostly because I still have a child in middle school and one in high school, so that continues to anchor me in this phase of life at least for the next 5 years. Besides, I really enjoy what I do and can't see myself not having to do anything.
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Old 01-01-2012, 10:49 AM   #38
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In my case, I guess it must be our LBYM philosophy.

Surely, I have had decent paying jobs, but while the pay was good, it was not outrageous plus there are people whom I worked with at megacorps who are the same age or older and still stuck there toiling.

I was about to say that we also enjoyed continuous income, meaning having suffered no layoffs, when I remembered that I had a few years of no income, due to my voluntary action of quitting a cushy job to chase the end of the rainbow with a couple of start-ups.

Oh, and we have children too! And even supported them through college.

And I did not even know that much about investing (and still learning and fumbling as I speak). Being so busy with work and raising a family, I spent most of the 1980s and 1990s decades ignorant of the market, and had a lot, and I mean a lot, of my 401 contribution in lousy investment choices. And with my after-tax accounts, in 2000 when I made a decision to learn more about my financial situation, I spent a day opening up account statements that were unopened for several years (while I was working days and nights with the start-ups).

So how do I end up with two houses, a 7-figure portfolio, and also more travel experiences than most people? Did our consumption habits of not buying Starbucks coffee or spending time at the shopping malls or trading in our cars every 2-3 years really add up to that much? I truly do not know.
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Old 01-01-2012, 02:23 PM   #39
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I reread the OP's question, then was able to answer my own question above.

Yes, my financial situation is better than that of many people, but I am in my mid-50s. My wife and I had been working for many years. I am still working part-time now, and have not been making contributions to my stash, but the income kept me from drawing it down during the recent bad years.

Now, if one wants to retire in his 40s, as the OP asked, then it would be harder. One would need a very well-paid job, or lots of luck in the market, or stock options with a start-up, a successful one that is. Or one has to set his living standards quite a bit lower than his peers, so that he has a higher saving rate while working, and also to retire early without pensions and prior to SS eligibility.
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Old 01-01-2012, 02:53 PM   #40
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1- I was fortunate to know what I wanted to do (dentistry) and worked very hard as a young man to get there as quickly as possible.
2- I owned my own practice at a relatively young age (25)
While I've reached the FIRE zone, I continue to work mostly because I still have a child in middle school and one in high school, so that continues to anchor me in this phase of life at least for the next 5 years. Besides, I really enjoy what I do and can't see myself not having to do anything.
When our daughter was about 10 years old, her pediatric dentist broke off from his group practice and went independent. I couldn't figure out why he'd want to burden himself with the huge hassle of running the overhead.

Our daughter's now 19 years old. Last year her pediatric dentist turned his practice over to his twin daughters, who just earned their own DDSs. Talk about a great graduation present and a self-sustaining estate plan!
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