Originally Posted by audreyh1
OK - We're looking for your essay next!
With a prod like that... well here it goes GULP!
My working career spanned a 26 year period from the time I finished Graduate school (MBA) in the Fall of 1976 to FIRE on December 2002. During the early part (to 1990) I worked on three overseas assignments totaling 7 years in the Middle East and South America on large engineering projects in remote locations. Those overseas assignments are what got me started on the path to ER.
I only accepted assignments that would allow my family to travel with me (married status assignments) because I had heard of and seen too many instances of compromised family life if wife and kids stayed home in the US while hubby went on these overseas assignments.
Although keeping the family together was my primary motivator, I quickly realized that extreme LBYM is a given when you are living in a construction camp (albeit a large one with all the comforts of home) far away from shops etc. Although shopping (even extreme shopping) is available in the large cities of third world countries, the difficulty of getting there means one doesn't do it very often.
During my first two overseas assignments (to 1986) my "investing" consisted exclusively of CD's as I was concerned that being so remote I would not be able to track my investments very easily and not be able to react if needed ( Don't forget this all took place long before the internet).
At this time, I had not done much reading at all on investment, asset allocation or any such and my idea of "investing" was you buy a stock, it goes up like a rocket and you quickly sell it before it crashes. (Yeah right)
When I got back to the US in 1986 I spent that year doing a lot of reading on investment and general strategies since my savings from those years overseas now amounted to a princely sum in the low 6 digits and I didn't want to do anything rash or stupid . My reading led me to Vanguard and Bogle and Mutual Funds and the concept of asset allocation. By the time 1987 came I started implementing my investment plan and started buying into a basket of Mutual Funds (Welleslley, Wellington, Mutual Shares, Selected American Shares and such). I also started buying individual stocks just to test how I would do against "professional" management (about a 10% play fund).
Of course, I started investing in the market just before the crash of October 87. During that crash, I was so paralyzed with fear (it happened so quickly !) that I did nothing and after some months, when the market started recovering I looked back and said hey- that wasn't so bad.
My goal during the working years was to have 75% in stock mutual funds but always at least one year worth of expenses in cash.
In 1992 after 5 years, I compared the returns from my individual stocks to the mutual fund basket. After all my study and buying and selling my net return, taking all commissions, dividends etc on my individual stock picks was exactly zero! The total return on the stock funds was 9.7% No Warren Buffet here. I sold all my stocks and haven't bought any since.
I maxed out on all available tax advantaged retirement vehicles during the years I worked as did my wife once she started working after my last OS assignment in 1990.
The bug for FI/RE got in my bonnet when I took a sabbatical for the year 1990 upon returning from that last OS assignment with the intention of discovering what I really wanted to do for the rest of my working career ( which I assumed at that time would run to normal retirement at 65).
What I discovered during my sabbatical year is that I really really enjoyed being on a sabbatical! I then started thinking and calculating what it would really take to live like I was then doing and based on some crude calculators available at that time ( Monte Carlo simulations and Firecalc not being available then, everyone did the simple well - the market goes up on average 10% a year so if you take out 7-8 % a year you'll be OK).
So, based on that I calculated that I could retire at about 55 if I could achieve three things: Pay off the house, have no debt at all and achieve a 10% or so rate of return on my investments.
Since I lived near San Francisco, housing prices were monumental and I quickly realized that even with good jobs ( I'm talking low six figures here not CEO salaries or anything like that - my highest position was Division controller)
retiring in the San Francisco area would be very difficult so in 1999 we started looking for a rural - semi rural area to move to which we found in SW Oregon. We moved there at the end of 99 and the megacorp I worked for was kind enough to let me telecommute for the next three years (2000-2002)
which neatly allowed me to survive the crash of 2000-2002 without having to draw from my retirements funds. The sale of the House in the Bay area in 1999 bought the house where I live now (much more modest but comfortable and on 5+ acres) free and clear.
As I approached ER, I shifted my investments to bring down the stock portion to a band of 55-65%, with rest in bonds and cash, the cash portion including 4 years of living expenses. This approach came in very handy as in early 2007 I was forced to rebalance back to a 55% stock portion since the market was shooting up so quickly then.
Unlike Audrey, I take all of my dividends as well as CG from the taxable portion of my investments and find that between that and a small hobby goat milk soap business that my wife started we live quite comfortably. I will have a very small pension ($5 k year starting in 2015) no other pensions or benefits. The soap feeds the critters and gives us a little extra so DW is very happy and I mostly get to do the sabbatical thing so...
As to numbers (all per Quicken):
Net worth 12/31/2002 = 100%
Net worth 8/27/2009 =134%
Net worth at peak Oct 2007 = 158%
Net worth near bottom 3/15/09 = 116%
All the firecalc runs as well as the montecarlo simulations on Financial engines website (thru Vanguard) indicate that we s/b OK with a 95% success rate and the NW numbers so far anyway seem to agree but who knows?
I fully realize that luck played an incredible part. For example, If I had not had megacorp income during the 2000-2002 period so that I didn't have to take distributions from my investments, I don't think I would have been able to survive the 2000-2002 debacle with sufficient funds to then recover enough to again face the 2008-early 2009 even worse debacle.