New retiree story and recommendation for a good brokerage/bank

[swampwiz]

Hello all. To start, let me give my life story and status. I am a freelance software developer (used to be a rocket scientist for a NASA contractor) who used to be able to command rates of $60/hr, but now seem to be hitting a wall. I believe that with outsourcing of high skill jobs to cheap places like India, that the whole cost structure of my current standard of living is gone, and I need to live on less. Since I would rather have more free time than a few extra bucks from working a stupid job at Wal-Mart, and I have enough in my retirement accounts to live fairly decently in a low cost area like Eastern Europe, I will just go into retirement, with the possibility of taking the occasional decent paying gig whenever I can get it (but living on a level that does not assume that I could continue to get such gigs.)

Anyway, I currently have a small Roth IRA and a substantial (~ $170K) 401K with my old full time employer. I have a small pension ($350/mo) coming to me when I hit 65, and if I wait until 70 to get Social Security, I will be getting about $1300/mo (even if I don't have any more FICA earnings.) I plan on keeping my income low enough to qualify for much reduced premiums under the new health care plan (in my state of Louisiana, where I plan to have a very small, cheap nominal legal home, I can get free care from the state hospital system if my income is below 200% of poverty.) I am currently a childless bachelor aged 44, and the only wife I plausibly see myself getting would be Easter European (and residing there for the most part.) I find such Eastern European women much more desirable than women in Louisiana. Oh and BTW, I am currently still displaced from my home that was flooded during Hurricane Katrina (I got 9-1/2' of water.)

I currently have about $120K in unsecured debt, and will be purchasing a small, cheap home to take advantage of the homestead exemption in bankruptcy, and then just going Chapter 7. After filing, I will start accessing my retirement accounts (or whenever it would be safe to access my retirement accounts without them being subject to the bankruptcy estate) to live on. I hope to quickly find decent employment so that I can coast a while before accessing the retirement funds, but if that would not be possible (and certainly, for the last 18 months, I have unsuccessfully been trying hard to find such work, which is the main reason I am going into Chapter 7), I will bleed off survival cash to live on.

I understand that I can withdraw retirement funds with a 10% penalty at any time, or if I withdraw the funds in equal amounts every year, I can avoid the 10% penalty, in which case I would have one opportunity to stop the withdrawls and not pay a back penalty, but I would not be able to withdraw anything again until reaching age 59-1/2. So basically, if I start to substantially withdraw funds, I have to make sure that I am withdrawing at a constant rate. As I cannot predict my ability to earn an income, nor know my expenses (e.g., if I were to start a family, obviously I would have more expenses, etc.) the calculation of the amount to withdraw must be carefully determined. Of course, if I live in Eastern Europe, even with a family, my expenses would be low, so I could always bank on being able to live there until I would be age 59-1/2. My parents have a fairly decent estate, and as I would be inheriting 1/2 of that, eventually that can be banked on, but it might be a *long* time waiting for that, and they end up having to spend down quite a bit of that.

Anyway, that's my story. I guess the main thing I need to do now is to find a good brokerage that will allow me a lot of investment opportunities, and also be a good bank for me to manage the withdrawals from my retirement accounts. I plan on doing a direct rollover from the 401K to a qualified IRA, but since I want to withdraw funds before age 59-1/2, I'm thinking that I would need to transfer it into a regular IRA.

As for the investment, I believe that the best way to go is to invest in a mutual fund that invests in good value stocks that can eke out a decent return during rough economic times. I think that the go-go times of financials and high margin entertainment and specialty retail are over. The only sectors I see doing well are computer technology (to some extent, and with the caveat of high P/E) and alternative energy and other green tech. I think that Peak Oil and Peak Everything Else is going to be the defining economic condition of the 21st Century, and any sector that is not aligned with that philosophy is going to be an eventual loser. Ironically, I also want to be in sectors that will be able to leverage the low cost labor arbitrage (ironically because it is that very arbitrage that has crammed me down.) I am thinking about going 20% in alternative energy and the rest in a fund that invests like Berkshire Hathaway (obviously, I would need much more liquidity than actually investing in Berkshire Hathaway, as I would only be able to redeem $5K at a time.)

So that's it. I'd appreciate any comments that could help me.

 

[Trek]

What Eastern European country are you considering? Do you have family there or another way to get citizenship or a long term residence visa?

It can be a pain if you don't have good connections.

 

[swampwiz]

What Eastern European country are you considering? Do you have family there or another way to get citizenship or a long term residence visa?

It can be a pain if you don't have good connections.

No, I don't any family there, but if I find a nice young woman, I can make a family with her.

I like Ukraine, but Mother Russia is also a possibility (tougher political situation there.)

 

[Coach]

Hi swampwiz, and welcome to the forum.

Considering your employment difficulties, Katrina and your planned bankruptcy, you have had your share of bad luck. I hope things turn around.

A good source of information on 72t distributions can be found here. I don't know how cheaply you can live in Eastern Europe. The 72t calculation is based on life expectancy, so the amount you could get out of your IRA will be pretty small at your age.

As for brokerages, I've been pleased with Schwab. They also offer nice affiliated checking and savings accounts. But, there are lots of folks on here who are very happy with their brokerage choices.

Coach

 

[FANOFJESUS]

For how much can you live in Eastern Europe?

 

[walkinwood]

With a portfolio of less than $200K, by conventional rules of thumb, you'll be able to safely withdraw about $8K/yr. And most studies show this to be sustainable for only 30 years.

You are making a huge assumption that the cost of living in the eastern European country of your choice will continue to be much, much lower than the US. You're only 44 - you have a long time to live and you will be in trouble if your assumption turns out to be wrong.

On the other hand, if you plan to semi-retire and work for just your low living wages, and let your portfolio grow, you may end up with a nice sum of money by the time you're ready for your pension at 65.

Given your stated penchant for 'working the system', I must point out that I am not a lawyer or a financial advisor, so This is not financial, investment or retirement advice. Please consult a professional advisor.

 

[Bestwifeever]

I currently have about $120K in unsecured debt, and will be purchasing a small, cheap home to take advantage of the homestead exemption in bankruptcy, and then just going Chapter 7.

Will you be able to get financing for a small cheap home?

 

[smjsl]

I'd be curious to know how much you think you'll be spending in Europe and based on what? Plus with dollar tanking... how do you account for that?

P.S. Isn't Moscow the most expensive city in the world? (It's probably quite different then rest of eastern europe though.)

 

[FIREd]

Walkinwood makes a good point: there are talks about Ukraine joining the European Union in a few years and this could mean higher living expenses down the road. Also, when retiring abroad, one has to worry about exchange rate issues since your pension, SS and investment income will be paid is USD and your expenses will have to be paid with UAH.

 

[swampwiz]

Will you be able to get financing for a small cheap home?

I use my liquid assets to purchase the home.

 

[swampwiz]

I'd be curious to know how much you think you'll be spending in Europe and based on what? Plus with dollar tanking... how do you account for that?

P.S. Isn't Moscow the most expensive city in the world? (It's probably quite different then rest of eastern europe though.)

The cost of living in the provincial cities is much lower than Moscow. I could probably get a decent apartment for $200/mo, and even eating out for every dinner, I don't need to spend more than $300/mo for everything that would go down my gut.

As for the dollar tanking, the Ukrainian Hrivna used to be 1 USD = 5 UAH, but now it's 1 USD = 9 UAH. Besides, all prices are generally tied to the USD (they are known as "y.e.", pronounced ooh-yeh), so if I invest in the EAFE index, I would actually be coming out ahead.

 

[swampwiz]

Walkinwood makes a good point: there are talks about Ukraine joining the European Union in a few years and this could mean higher living expenses down the road. Also, when retiring abroad, one has to worry about exchange rate issues since your pension, SS and investment income will be paid is USD and your expenses will have to be paid with UAH.

That will not happen as Mother Russia would not allow it. Ukraine will live on as its namesake "the borderland." And don't forget that it is the recent Eastern European admissions to the European Union that are having the hardest time in the Great Recessions - e.g., Latvia, Estonia.

 

[chris2008]

The ladies in Eastern Europe can be quite tough cookies. They have learned what it takes to take care of themselves (and right they are).
I would wonder if they are looking for a foreign partner with the perspective to stay in their own country and remaining at their former standard of living.
Some German guys had to learn that the divorce rate jumps up significantly after the wife has received permanent residency.

 

[Bikerchick]

Hi swampwiz, and welcome to the forum.
As for brokerages, I've been pleased with Schwab. They also offer nice affiliated checking and savings accounts. But, there are lots of folks on here who are very happy with their brokerage choices.
Coach

Hi swampwiz. Schwab will also help you buy shares that are not on the US exchanges, although the minimum investment is $5K. Not sure this is well known.

 

[swampwiz]

The ladies in Eastern Europe can be quite tough cookies. They have learned what it takes to take care of themselves (and right they are).
I would wonder if they are looking for a foreign partner with the perspective to stay in their own country and remaining at their former standard of living.
Some German guys had to learn that the divorce rate jumps up significantly after the wife has received permanent residency.

Well, my situation would be the opposite - I would be the one looking to get permanent residency over there.

 

[Bestwifeever]

I use my liquid assets to purchase the home.

You didn't mention any liquid assets in your intro, that's why I asked, unless you're talking about using your 401(k) to purchase the home (although you talk about rolling that over to an IRA so probably not)?

Good luck to you either way.

 

[swampwiz]

You didn't mention any liquid assets in your intro, that's why I asked, unless you're talking about using your 401(k) to purchase the home (although you talk about rolling that over to an IRA so probably not)?

Good luck to you either way.

After I sell my current homesite, I will have about $63K in cash, outside of my retirement accounts. I will take $53K of that and buy the house. Then, after spending the rest on fixing up the house and buying appliances and furniture, etc., I will file Chapter 7.

 

[kyounge1956]

After I sell my current homesite, I will have about $63K in cash, outside of my retirement accounts. I will take $53K of that and buy the house. Then, after spending the rest on fixing up the house and buying appliances and furniture, etc., I will file Chapter 7.

This is probably going to get me flamed, but don't you think your creditors should get at least some of that $63K in cash?

 

[growing_older]

I believe that intentionally hiding assets or piling up debt with the intention to file bankruptcy and default are both crimes. What makes you think doing either of these would be a good idea?

 

[swampwiz]

This is probably going to get me flamed, but don't you think your creditors should get at least some of that $63K in cash?

Well, the state gave me, coincidentally, $63K to purchase a home, so you could say that money is contractually obligated for me to purchase the home.

And in any case, if the creditors should get that money, then the laws should have been written which would disallow me buying an exempt asset before bankruptcy. This is analogous to a tax loophole - if such loopholes should not be done, then the law should be written to disallow it.

 

[swampwiz]

I believe that intentionally hiding assets or piling up debt with the intention to file bankruptcy and default are both crimes. What makes you think doing either of these would be a good idea?

There will be no hiding of assets. I am going to state that I have the home, and that it was bought at a certain time. And the money that I am using to buy the home has a direct link to the state grant for me to buy it, so it's not like I went out and got a bunch of cash advances just to buy this home.

Up until I realized that I had hit the "point of no return", I had no intention to file bankruptcy. Indeed, all I needed to do was to get a gig earning only $40/hr (i.e., the gig could be a conventional W2 employee gig, or a 1099 independent contractor gig), and I could have rolled up all the debt into a super low interest, 30 year loan. I tried for 18 months to get this gig. Just a few years in the past, before I went into "sabbatical" / semi-ER mode that turned into post-disaster depression for a while, I was regularly earning $60/hr. Indeed, legally I could not spend down any more of that $63K grant as it was meant for me to buy a home - hence the "point of no return". There were virtually no luxury or "high living" purchases done during this time (although there was about a $4K/mo bleed due to my living expenses and the gigantic debt payments.)

I suppose the question could be posed as to whether or not I should have given up my search earlier than the 18 months. I don't think that there is any reasonable guidance to this question.

 

[kyounge1956]

(snip)I suppose the question could be posed as to whether or not I should have given up my search earlier than the 18 months. I don't think that there is any reasonable guidance to this question.

Yes, that question could and should be posed. I think some reasonable guidance is this: keep looking until you find a job, and keep working until the debt is paid. I have been in the situation of looking and looking and finding nothing, so I know it can be extremely discouraging, but IMO, unless actually unable to work, a person who owes money should not consider retirement, and especially not early retirement, until the debt is paid back.

If I understand your situation correctly, you have a grant that can only be used for housing expenses. That gives you a way to cut your expenses while working, and pay down your debts faster than you would be able to if you had to pay rent or a mortgage payment at the same time. Even if it takes you ten years to repay the $120K, you'll still be retiring earlier than the majority of people are able to, and if your portfolio grows at 7% it will be nearly twice the size it is now, even if you don't add to it in the interim.

 

[Milton]

Well, the state gave me, coincidentally, $63K to purchase a home, so you could say that money is contractually obligated for me to purchase the home.

You might say that; but by the sounds of it there is no legal restriction and you are free to use it as you see fit. If that is not the case, I don't see why you are planning to use a $10K portion to purchase appliances and furniture.

And in any case, if the creditors should get that money, then the laws should have been written which would disallow me buying an exempt asset before bankruptcy. This is analogous to a tax loophole - if such loopholes should not be done, then the law should be written to disallow it.

You may well be correct ... very likely there is nothing illegal in your plan to evade your creditors.

That said, I don't personally approve of any able-bodied person refusing to work and sticking it to their creditors; so I for one respectfully decline to provide any advice on how best to do so.

 

[swampwiz]

Yes, that question could and should be posed. I think some reasonable guidance is this: keep looking until you find a job, and keep working until the debt is paid. I have been in the situation of looking and looking and finding nothing, so I know it can be extremely discouraging, but IMO, unless actually unable to work, a person who owes money should not consider retirement, and especially not early retirement, until the debt is paid back.

If I understand your situation correctly, you have a grant that can only be used for housing expenses. That gives you a way to cut your expenses while working, and pay down your debts faster than you would be able to if you had to pay rent or a mortgage payment at the same time. Even if it takes you ten years to repay the $120K, you'll still be retiring earlier than the majority of people are able to, and if your portfolio grows at 7% it will be nearly twice the size it is now, even if you don't add to it in the interim.

I cannot use the grant to spend on rentals, only on a house. And once I have bought the house and properly furnished it, I will have virtually nothing left.

I guess what you are saying is that I should go through Chapter 7 and then voluntarily agree to continue to pay off the debt. Since I have the opportunity to completely erase my debt in Chapter 7, what logical reason would there be for me to pay off the debt, aside from somewhat salvaging my credit score? Is a good credit score worth $100K?

Now from an ethical and moral POV , I suppose that it is good karma to pay off all creditors properly - but does that extend to such institutions that have tried to trip me up and screw me over at every turn, and that have made reckless decisions with their own capital (to enhance shareholder value and to pay obscene executive bonuses) such that the government that I help support with my taxes had to bail them out so that financial infrastructure would not completely explode? Should I feel guilty that these institutions made cold hard investment decisions on me that happened to turn out poorly at this time? I'm just a number to them. I think that it would be much better karma to take the money that I would save from paying back my creditors and put it to good use helping destitute folks in Africa or India out of their squalor, etc.

But it doesn't matter. I have learned that this is a dog eat dog world, and I need to take care of #1, since no one knows how to care of him like I do. With this debt out the way, I can start the last leg of my working life with no burden, to work and save enough to give me a decent retirement.

 

[kyounge1956]

(snip)I guess what you are saying is that I should go through Chapter 7 and then voluntarily agree to continue to pay off the debt. Since I have the opportunity to completely erase my debt in Chapter 7, what logical reason would there be for me to pay off the debt, aside from somewhat salvaging my credit score? Is a good credit score worth $100K?

What I am saying is that you should repay what you borrowed, whether or not you declare bankruptcy. I've never been as deep in debt as you are, so I don't know the best way to get out again, but I bet there are people on this forum who can make extremely practical suggetions on how it could be done. If your library has a copy of a book called The Richest Man in Babylon, you might find the stories "The Camel Trader" and "The Clay Tablets" of interest. There are probably reputable credit counseling services that could assist too.

The logical reason to do this is that when you borrowed the money, you promised to pay it back. If repaying improves your credit score, that's frosting on the cake.

Now from an ethical and moral POV , I suppose that it is good karma to pay off all creditors properly - but does that extend to such institutions that have tried to trip me up and screw me over at every turn, and that have made reckless decisions with their own capital (to enhance shareholder value and to pay obscene executive bonuses) such that the government that I help support with my taxes had to bail them out so that financial infrastructure would not completely explode?

YES. Nobody forced you to borrow the money. The fact that you disagree with the use your creditors plan to make of the profits isn't a valid reason not to repay them.

Should I feel guilty that these institutions made cold hard investment decisions on me that happened to turn out poorly at this time? I'm just a number to them. I think that it would be much better karma to take the money that I would save from paying back my creditors and put it to good use helping destitute folks in Africa or India out of their squalor, etc.

But it doesn't matter. I have learned that this is a dog eat dog world, and I need to take care of #1, since no one knows how to care of him like I do. With this debt out the way, I can start the last leg of my working life with no burden, to work and save enough to give me a decent retirement.

I'm not a Hindu, so I don't know whether it's better karma or not, and it may be a moot point anyway. If I understand what you've written earlier in the thread, you will be living at near poverty level so as to be eligible for state medical coverage. At that income, you won't be in a position to help anyone out of their squalor.

What you've written sounds to me as if you have already decided not to repay. If you will excuse me for saying so, I think that would be cutting off your nose to spite your own face. It sounds as if you are willing to live near the poverty level for the rest of your life, to avoid paying off these debts, when the same or even a lesser degree of deprivation would enable you to pay them off in much less time. That ten years I mentioned in my previous comment wasn't just a number I pulled out of a hat—I did a rough estimate earlier today of what it would take to pay off $120K. I make a bit less than the $40 an hour you mentioned earlier in the thread as a threshold at which you would feel able to repay. Like you, I'm single, so let's assume our basic expenses—food, utilities, transportation, etc—are similar. If I had somewhere to live with neither mortgage nor rent, I could redirect the principal and interest I'm currently paying on my mortgage toward debt reduction. At present, I'm making the maximum contribution (including over-50 catchup) to my tax-deferred retirement plan at work, and I could also use that money. Altogether, that's about $2385 a month that could go toward paying down debt, and at 10% interest, that monthly payment would get rid of a $120,000 debt in under six years. Unless the interest rate is over 21%, the $120K could be paid back in less than ten years. You could also, during that time, be putting $500 a month into a Roth IRA (I do). I tithe to my local church, but if you don't, you could put that money into your retirement account.

In ten years or less, you could be debt free, you'd have a nest egg that's much more likely to support you during a lengthy retirement than the one you have now, you would no longer be facing a future of enforced quasi-poverty, and you'd still only be 54, which is early retirement in anyone's book.

I encourage you as strongly as I can to stop trying to think of reasons not to repay, and instead start thinking of ways that you can.