Looking for comments on my plans for FIRE

[cute fuzzy bunny]

Sure...I decided on CA as they have a prop 13; we were paying $480 a year on my wifes old house before we sold it for $240k. I'm paying ~$1600 a year for my house, currently valued at ~$400k.

Depending on where you land in the state, you will also probably have a half dozen or a dozen day trips to places people spend their 1-2 weeks of vacation time, and you dont have to pay the airfare or hotel costs. I can get to Napa, Sonoma, San Francisco, Lake Tahoe, etc within a few hours drive.

Weather is temperate. Its not hard to find an area that isnt affected by earthquakes or flooding. It *is* hard to find inexpensive real estate these days though.

Income taxes are substantial for high wager earners, and the sales tax is pretty steep.

I figure 10-15 years from now, I'll be thoroughly enjoying paying the bit of state taxes in exchange for my still sub-$2000 property tax bill.

[laurence]

CA resident, my 600k home has $2700 in property taxes. One downside of prop 13 is it provides a LARGE incentive to stay put in the same house, if I upgraded to one more bedroom my property tax would triple. But hey, never let the perfect be the enemy of the good.

[REWahoo]

Quote:

Originally Posted by Eagle43 If that's all you pay in property taxes, you have really got it made. My house is nowhere near 500k and I pay $3600+ here in Texas. I always knew our property taxes were outrageous, primarily because of no income tax. Hey, we need a prop 13.

What you need is an ag exemption. A couple of cows or a few goats will do the trick and cut those taxes to next to nothing. Just ask Ol_Rancher how it's done...

REW

[cute fuzzy bunny]

Just dont ask Wabmester how its done with regards to farm animals...

[Donner]

Other Michael--

I agree with others that you appear to be in very good shape for ER.* The key to your situation is a paid off house and good health.* *The two best assets that any potential ER can possess.* *I would recommend that you do a thorough insurance review on the house before too long, ER or no ER.* I bet you haven’t looked at your policy in a long time.* Get your agent to do a walk through and get him to explain your coverage in detail.* Be sure you tell him you want coverage on the contents as well as replacement coverage on the dwelling indexed to inflation.* Do they still cover for earthquakes in San Fran?

You should also review your life insurance needs.* *If you get hit by a San Francisco street car your wife would lose about half your annuity.* Would this cause a hardship?* At your age and apparent vigorous health you should be able to get cheap term insurance.* If you are in the Federal Employees Group Life Insurance program you need to be aware that the rates double on your 60th birthday.* Could be a nasty surprise depending on how much coverage you need or want to carry into retirement.* I agree that you should only carry the coverage you need.* Some on this Board argue you don’t need any.* But make up your own mind on how much of your lost annuity income you will need to replace to maintain your wife’s standard of living after you exit to the big bike track in the sky.

I am a big fan of the G Fund.* Right now* with a 4.5% return it is keeping us just ahead of inflation.* But more importantly, there is no risk of losing your retirement stash.* Rising interest rates will not* result in the erosion of your principal.* If you have followed any of my prior posts you know my views on the current state of market capitalization.* The market is selling at a very high—speculative—premium to its intrinsic value using any common sense personal required rate of return.* Paul Volker says that the U.S. and the world economy is skating on thin ice.* Bill Gross is praying that the status quo “kindness of strangers”* stays in play over the next 3-5 years for the sake of his $475 billion bond portfolio.* Alan Greenspan’s “conundrum” long term rate “temporary aberration” is stubbornly persistent in the face of his “measured pace” of interest rate hikes.* Real Estate continues its unabated bubbling in certain “local markets”.* *There is no inflation, except for the kind that whacks the little guy the hardest – energy, food, housing, health care, real estate taxes and college tuitions.* Greenspan and the Fed maintain that inflation is “well contained”.* Ok.* But why is he raising rates to fight inflation?* *Warren Buffet can’t find any place to park $40 billion.* We still have 13 million people in this country who are unemployed, underemployed or marginally connected to the economy.* Health benefits and pension guarantees are deteriorating at an alarming rate.* Wage growth remains weak.* Productivity gains are narrowing.* Watch the GDP growth estimates in the next few quarters.* The “street” is pricing in a 4.0% real growth rate for this year.* Any significant shortfall there will not be well received.* We consume 6% per year more than we produce in this country.* Our national debt is ballooning out of control.* We have a trade deficit and a budget deficit that will not (cannot) self correct.* Amazingly, the dollar has been strengthening against the Euro in the last few weeks.* What does that tell you about Euroland? Corporate earnings reports hitting the “consensus” is a sideshow now that gives the gurus something to talk about on MSNBC.* We have trillions of dollars of unregulated capital levered to the hilt in 8,000 off-shore hedge funds subject to heaven only knows what kind of credit and interest rate risk.* This macro economic environment is unstable and unsustainable over the long run.

The stock and bond markets are living on borrowed time.* Between the invasion of Poland in Sept of 1939 and the invasion of France in May of 1940, Europe lived through what came to be known as the “Phony War”.* A period of peace that simply couldn’t last.* When the inevitable blitzkrieg hit many were caught unprepared and paid a terrible price for being unprepared.* I believe that we are now in a “Phony Market” period of stock and bond market history.* It is a period of overvaluation marked by low capitalization rates that do not adequately reflect the kinds of risks that investors are “really” facing.* *I believe when the blitzkrieg hits this time many, many investors are going to pay a terrible price, that in hindsight they will say they should have seen coming.* *My own guess is that the 1200 level on the S&P 500, perhaps a tad above,* is about the high water mark of this market cycle. I believe we will see a near 30% correction in the not too distant future.* *If I were a betting man I would bet we will see some churning around 1200 with no significant follow through higher followed by an at first steady, grinding, zig zag path lower which will intensify and eventually culminate in a very big blow-off* as the speculative froth is finally squeezed out of the market.* My advice is to take current strength in the market as an opportunity to lighten up on the C Fund.* * *

All that being said, I am truly reluctant to keep bringing this dour message to this Board.* It is sour news that is not appealing to anybody in the least.* My posts are getting fewer and further in between as there is little tolerance for this kind of talk on the E_R.org Board.* The implications are simply too ugly and potentially painful to think about.* Despite what others might think, I really don’t simply enjoy hearing myself talk and I certainly don’t want to play the role of* Chicken Little around here.* But it is what it is at the present time.* When financial assets are priced to reflect a decent reward in return for the risks associated with owning financial assets, I will return to the stock market and recommend others do so.* I think over a long period of time stocks and long term bonds certainly can and historically have yielded worthwhile returns.* No denying that.* You can look it up, as Casey Stengel used to say.* A 50/50 allocation is not a bad split for early retirees in their 50s and 60s when valuations are reasonable.* This is particularly true if you have some cushion.* In your case, Michael, it appears that your portfolio is all cushion.* You don’t need it or the income it can throw off to maintain your LBYM lifestyle.* You can certainly afford to take some risks.* But to me -- why take risks with your retirement capital if they won’t (or can’t) pay you to take them?* Do you really want to buy into somebody else’s “Animal Spirits”?* For those with little or no cushion in the portfolio, and who are going to depend on portfolio income to support their lifestyle in retirement,* a 50/50 split right now represents a vulnerability that one should think long and hard about if one is on the brink of ER or actually in it.*

Donner

[haha]

Quote:

Originally Posted by JWR1945 Have you considered moving? Half a million dollars will get you a mansion in many parts of this country.* Your annual income would allow you to live in luxury.

An early poster on this board who has since moved to Argentina lived in SF on about $1500/month, and she had to pay rent but not health insurance.

San Francisco lacks only beach to make it the world's best place. With a home and Prop 13 moving anywhere else is IMO like leaving heaven because the rents went up.

Of course, I left, years ago, for reasons that I still can't quite figure out. Maybe I wanted to see the aurora borealis ?

M

[Michael Moore]

My property taxes are based on the $157.5K purchase price 20 years ago, not the current $500K+ CMV.* Yes, California has state income taxes, unlike TX, NV and probably a few others.* But then I don't get hit with lots of weird "personal property taxes" that I've been told are used in some other states (VA I think).

HaHa, I'm three blocks from Ocean Beach at the end of Golden Gate Park, so I guess SF must be the "world's best place".* ** *But the surfers wear wetsuits the year around - that's cold water!

Mister Bill, I was born in OK (but really only been there for visits with relatives), lived for a short time in Baja Oklahoma (in Houston), and spent about 18 months in northern Lousiana, and I'm very willing to cede my spot in the SE to anyone who wants it.* I mostly grew up in Albuquerque, and feel more at home "out West".

Hi Donner, thanks for the long post.* Feel free to drop "The Other" - I generally use just my name when registering at a forum, but "Michael" was already taken here as it was at the other place where I picked this screen name.

We've looked at the home insurance periodically, though we haven't analyzed it in depth.* We do carry the state earthquake insurance and both run us about $2400 a year.* If/when there's another major earthquake that causes significant damage we've got some expectation that the insurers will find a way to default on paying out much money.* But for $1200 a year, we figure we'll hope on recovering something to make it worthwhile.* If I had my druthers, we'd just keep paying the insurance and never get the quake.

We're not married, and after almost 27 years that doesn't seem too likely to change.* We've both got FEGLI.* *We're taking the full CSRS annuity - no survivor's reduction.* With similar incomes and the house paid off the survivor shouldn't have a problem getting by on his/her full annuity, savings, and the savings of the dear departed.* The FEGLI is just for a bit of a parting financial boost. 60 is still a ways away, and we'll have to evaluate the life insurance situation when we get closer to it.* We share the joint expenses (whether for fixed costs or for fun), but other than that we don't commingle finances.* This isn't to say that we wouldn't watch out for each other, we just don't throw all the money into a pot.* This is probably why she's got significantly more savings than I, while I have significantly more motorcycles and machine tools than she does.* *

I don't see you as a gloom and doomer, probably because I'm not too optimistic about the outlook either.* That old saw about stocks always outperforming anything else for any given long term period has never rung true to me.* It may be true in a macroeconomic analysis when performance is looked at for long enough periods, and with a big enough aggregation of stocks.* But even in boom times people lose their money with wrong choices.* And if you deal yourself in at the beginning of a long term drop when your life expectancy is starting to look more short term, and then compound that with some ill-advised choices, well . . . .

I've got a friend who put all of her TSP into the C fund and decided she just wasn't going to watch it any more.* That's too much of a crap shoot for my peace of mind.* The extent of gambling for me is emptying the loose change from my pockets into the slot machines before boarding the airplane out of Vegas.* Nothing ventured nothing gained, but then again nothing lost too.

cheers,
Michael

[cute fuzzy bunny]

Quote:

Originally Posted by The Other Michael HaHa, I'm three blocks from Ocean Beach at the end of Golden Gate Park, so I guess SF must be the "world's best place". But the surfers wear wetsuits the year around - that's cold water!

I think the sharks the size of small school busses swimming around offshore negate some of the beach benefits, along with the 50 degree water. However the clothing optional beach located between the sutro baths and the south base tower of the golden gate bridge improves the situation. That the clothing optional beach is inhabited by people that greenpeace volunteers regularly try to push back into the water where they will be eaten by sharks neutralizes things yet again.

[haha]

Quote:

Originally Posted by You dont know me I think the sharks the size of small school busses swimming around offshore negate some of the beach benefits, along with the 50 degree water.* However the clothing optional beach located between the sutro baths and the south base tower of the golden gate bridge improves the situation.* That the clothing optional beach is inhabited by people that greenpeace volunteers regularly try to push back into the water where they will be eaten by sharks neutralizes things yet again.

I was thinking the same, about cold and sharks. But what is Greenpeace's issue? Are these anti-environmentalist nudists?

[cute fuzzy bunny]

Sorry, I was too obscure on that joke. Greenpeace was mistaking some of the nudists for whales that had washed up on shore and was trying to 'save' them by pushing them back in the water.