Class of 2016

[Huston55]

I wanted to bump the thread. The outcome of the elections makes me feel much more certain about the fate of Obamacare and the availability of guaranteed issue health insurance at some reasonably subsidized price. If we do end up ER'ing in 2016, we will be able to look back on a couple years of how the system works so we know what to expect if we jump on it.

Or DW could call it quits between 2014 and 2016 and then all of the family get on heavily subsidized health insurance (absent obamacare, family coverage would cost us $8000 per year for crappy coverage through my government employer).

The one thing that I'm kind of puzzling over right now is how to change the portfolio to something more conservative. I'm at 100% stocks right now and ok with the volatility, but would like to move into bonds at least 10-20% before I ER. I just can't bear to pull the plug on equities in my portfolio yielding about 3% on average and trade them for a bond fund that yields less than that.

In the mean time I am enjoying the current market correction. If the market stays flat to down for a few more years that will be great, as I can deploy another few hundred thousand at lower prices. Last month I switched to paying down the mortgage some instead of investing excess cash into the stock market. This month I'll be back to dumping all I can into the market.

Here's what I did in similar circumstances. We are < 2years from retirement.

Gradually, over about a year as opportunities arose, sold individual stocks and purchased mutual funds. Simultaneously adjusted AA from 90%+ equities to 60/40/10, including significant Muni-Bonds in after tax account. I feel much more comfortable now than before the AA change. As part of this shift, I also consolidated accounts into Fidelity, where most of our $$$ already resided. I like the simplicity.

Last year, I used extra cash to pay off the mortgage on our rental property. I chose the 5%+ annual (tax deferred) return we get from the rental instead of investing the $$$ in the market.

What I'm currently evaluating is how much cash to hold and when to place it; the cash would be to ride out a bad market stretch. I'm leaning toward 3 yrs of laddered CDs, which would be ~12% of our portfolio.

 

[FUEGO]

Last year, I used extra cash to pay off the mortgage on our rental property. I chose the 5%+ annual (tax deferred) return we get from the rental instead of investing the $$$ in the market.

What I'm currently evaluating is how much cash to hold and when to place it; the cash would be to ride out a bad market stretch. I'm leaning toward 3 yrs of laddered CDs, which would be ~12% of our portfolio.

Yeah, I'm paying down the mortgage when the stock market gets overheated (per my gut admittedly, but I felt it last month within a percent of the all time recent high). I hate pre-paying the mortgage since it is fixed at a 1.99% rate, but it beats the pants off of the best after tax returns I can get from fixed income (on the low risk side of FI).

I don't have a great plan for getting the portfolio down from 100% equities. Cash looks as attractive as bonds at this point, since it would really be an emergency buffer to supplement dividends coming from the stock component if the market tanks. And if the dividends stay roughly flat to slightly down in a bad market, I wouldn't need more than 1% or so of the portfolio each year in cash to supplement the dividend payments. Even a 10% cash allocation would help me through ~8 years of rough markets with dividends remaining flat in nominal terms. I think as we get closer, maybe within a year or two of being FI we will make some sort of switch. For now paying down the mortgage seems like the best deal vs investing in fixed income at today's record low rates.

 

[FIRE2016]

I am planning to be ready for retirement in 2016 when I turn 50 (DW will be 51 by then).

My company was sold this year to a private equity, so in parallel I also prepare a emergency strategy for 2013, but this would mean several cuts in spendings and not really fun retirement.

I am a little confused about how much people need once they are retired and how much I/we will need then. I know what we spend now but I am sure there are tons of possiblilties to cut down if necessary.

I am also not a big fan of saving every penny now, only to be able to retire one year earlier. I would say we have a good quality of life, spending money but not wasting it. We are currently living in Brazil but originally from Germany, so not sure where we will enjoy our retirement and if possible we would love to live between the continents. So excuse my English if it is sometimes confusing.

Anyway, I have been tracking our spendings now for some years already, I set up future budgets and necessary spendings. I think out basic needs are coved by now and the next years I will be working to gather the fun money (travel and leasure).

Next steps will be probably a clear investment strategy focusssed on FIRED in 2016. Today I have a mix of company pensions, government payments as well as investments in stocks and funds. Furthermore we own a house with no mortgage on it.

Good to have found a forum to talk about that important planning!

 

[Huston55]

I don't have a great plan for getting the portfolio down from 100% equities. Cash looks as attractive as bonds at this point, since it would really be an emergency buffer to supplement dividends coming from the stock component if the market tanks. And if the dividends stay roughly flat to slightly down in a bad market, I wouldn't need more than 1% or so of the portfolio each year in cash to supplement the dividend payments. Even a 10% cash allocation would help me through ~8 years of rough markets with dividends remaining flat in nominal terms. I think as we get closer, maybe within a year or two of being FI we will make some sort of switch. For now paying down the mortgage seems like the best deal vs investing in fixed income at today's record low rates.

Don't know if these calcs are right or not but: S&P Yield is 2.18%, plus 10%/8=1.25%, for a total of ~3.4%. So, if you can get by on 3.4% annual withdrawal from your portfolio, seems to me you are FI or very close. Someone (Bernstein?) was quoted on this forum as saying, 'when you've won the game, stop playing.' Sounds like you've won the game and ought to consider an AA well below 100% equities. Just my thoughts.

 

[FUEGO]

Don't know if these calcs are right or not but: S&P Yield is 2.18%, plus 10%/8=1.25%, for a total of ~3.4%. So, if you can get by on 3.4% annual withdrawal from your portfolio, seems to me you are FI or very close. Someone (Bernstein?) was quoted on this forum as saying, 'when you've won the game, stop playing.' Sounds like you've won the game and ought to consider an AA well below 100% equities. Just my thoughts.

Well, I'm 32, so I'm thinking close to 100% equities is more optimal for loooong term portfolio survivability and to keep up with inflation.

I'm getting around 2.9% dividend yield now. If I had 90% equities and 10% cash paying nothing, I would have a 2.61% dividend yield on my total portfolio. As for the 10% in cash, I could take out 1% a year to supplement the dividends if the stock market crashed. That would give me a 3.61% withdrawal rate, unless dividends went down in which case it would be lower but maybe not a lot less than 3% (just a guess).

To get to a 90/10 portfolio, I could simply dump all our new investment contributions made during our last 1-1.5 years of working into cash or bonds (whatever is attractive at the time). We are still counting on stock-like market returns over the next 3-4 years to get us to FI in 2016. Of course it may not happen as we expect, but that is ok, it'll be 2017 or 2018 or whenever. I haven't quite made it yet, so I feel obligated to (mostly) still play the game, but mortgage prepayments will be made in increasing amounts if the market goes up significantly.

 

[FUEGO]

Anyway, I have been tracking our spendings now for some years already, I set up future budgets and necessary spendings. I think out basic needs are coved by now and the next years I will be working to gather the fun money (travel and leasure).

That is the point we are at too. Basic expenses covered just fine with the current portfolio size with a fairly conservative withdrawal rate (around 2.9-3%). But sitting at home for the next 60 years doesn't sound overly interesting (yet), so the next 3-4 years will be "fun money" and "extra safety" money. And I'd like to know what US health insurance will look like (in terms of price and availability) before I jump ship, so I'm in no rush to ER before 2015 or so anyway (USA specific issue!).

 

[FIRE2016]

With how much money do you guys plan to be ready for FIRE?

It is a very individual thing for sure. With the 4% rule the money lasts for about 35 years with interest/rentability about 2% higher than inflation.

Having a house without mortgage DW and I should be comfortably living with around 36K per year, not including extras like traveling.

Add another 14K for traveling and fun and I think with 50K per year in today's dollars we should be set. That is more or less what we spend today and I really do not understand what we need all that money for . It seems that every month some unplanned expenses are happening (car repair, insurance, house stuff ...)

Anyway, I think with 50K per year we should be ready and more or less comfortable (for sure not enough for all year round traveling, but I think this would be fun maybe in the first year, then it calms down automatically).

How is your planning?

 

[FUEGO]

Similar to your numbers, maybe a tad less spending. Simple math to do $50,000 divided by say 3.5% withdrawal rate to get $1.43 million required portfolio. This isn't the exact spending or portfolio size or withdrawal rate I have in my plans but roughly similar.

Some here are comfortable ER'ing on less than a million. Others don't feel comfortable with many millions, a pension and/or Social Security.

 

[UserRequested]

With how much money do you guys plan to be ready for FIRE?


Having a house without mortgage DW and I should be comfortably living with around 36K per year, not including extras like traveling.

Add another 14K for traveling and fun and I think with 50K per year in today's dollars we should be set. T
How is your planning?

I think $50k in todays money will give you a comfortable worry free lifestyle. If you're spending that much today and have all the little perks you need, then you're set IMO.

 

[RoyDornoch]

I think that my wife and I are ready for the Class of 2016. My wife retired about 10 years at 42 and I am 54 so 58 seems like a good time to get ready for Phase II of life. Our AA is 55% equities and I'm very concerned about the bond market so have moved to short-term bond funds.

 

[photoguy]

With how much money do you guys plan to be ready for FIRE?

Roughly 40-50k at 3%. The nice thing about this level of spending is that SS payments will be a huge chunk of this. The bad things is if you ER early enough, SS is so far away you can't really count on it.

 

[HFWR]

Think I'll tentatively join the class of 2016. Will be 62 that year, so plan A will be doable. Of course, all of this depends on some factors of which I have little to no control, but that's my story, and I'm sticking with it.

 

[UserRequested]

Anyone out there taking some risks in today's equities market in the hope of fastracking RE ?

 

[Lisa99]

Nope. AA is within its bands, so nothing to do.

 

[wrichards58]

we are looking at being in this class for retirement

 

[photoguy]

Anyone out there taking some risks in today's equities market in the hope of fastracking RE ?

Depends what you mean by taking risks. I've always pursued a high equity allocation in the hope of better returns.

 

[UserRequested]

Nope. AA is within its bands, so nothing to do.

Is that S&P rating AA ?

Aren't they the same mob being sued by the US government for rating subprime mortgages AAA+

 

[Lisa99]

Is that S&P rating AA ?

Aren't they the same mob being sued by the US government for rating subprime mortgages AAA+

In this case AA = asset allocation

 

[UserRequested]

In this case AA = asset allocation

Duh Silly me

 

[FUEGO]

Anyone out there taking some risks in today's equities market in the hope of fastracking RE ?

We are hopeful members of c/o 2016, and are still at 100% equities. The idea has always been to get good returns over the long term, and if the market takes a big dip in the next few years we can always work a few more years. In the mean time, our portfolio shoots up big time when we have years like 2012 with 20+% returns. If we end up fast-tracking our ER, great, and we won't feel too stupid if it ends up meaning we work a few more years.

I would like to move into some bonds but don't have a good strategy right now given what I perceive as limited upside in bonds right now. Hard to give up an average 2.75% div yield on equities for some short term bonds that yield less.

 

[Diver]

We hope to make the Class of 2016, when we will be 54 and 55. We are hopeful we will be FI by then, but want to do alot of travel up front, so we may stay on our gerbil wheels at megacorps for a year (or two?) extra to save up some play money to use for travel, and then RE. Time and the markets will tell.

We think we will need to pull about $50k after taxes from the portfolio (funny how many people have similar numbers), but this may be above the 3% withdrawal rate some of you are planning. How comfortable would you be to pull 5% from the portfolio starting at 54 & 55 until SS kicks in for us both at 62, and then reduce the portfolio withdrawal by the SS amount? We should each get about $20k/year from SS at 62 based on current projections.

This is such a fabulous forum full of great stories and great wisdom, and I am truly inspired by you all. I have been reading here and drawing inspiration for several years.

 

[padlin00]

Got room for another? Looking at Dec of 16 when I turn 60. Like Diver We'd like to stash away some extra for travel which for us adds a year. No pensions so we're on our own till SS @ 66 when my wife will start spousal, hopefully I can hold out till 70. SS @ 70 should cover about 60% of our expenses although I can't say I'm real comfortable with it being that big of a percentage. Firecalc and others say were 100% this route, keeping spending at our current working level. Going the bucket route, 1 to equal SS for 60 - 70, and another to cover the over SS spending (3.3% withdrawal rate).

That's the plan anyway...

 

[AllChoptUp]

Oh sign me up! I will retire in summer 2016 after 20 years in the Navy...will be in my mid-40s. Between retirement pay and savings we should be well positioned to enjoy it.

Spouse retired from the military 3 years ago, took 2 years off and now teleworks because he enjoys the work. Whether or not he'll continue after I retire is unknown...as long as his schedule remains flexible, if he's happy I am too.

We have a two year old and would like another...we're much older than the norm but it's tough having kids when you're dual military and someone is always deployed. I imagine the kids will keep us busy, so not many "what to do with our time?" worries.

It's exciting to be so close...the waiting is tough! Good luck to everyone!

 

[Al in Ohio]

Add me to the class

I have a target of mid Sept 2016, probably 9/16/16 which is a Friday and just after my yearly profit sharing distribution and getting paid for the Labor Day holiday. I will have recently turned 55 beforehand.

 

[Al in Ohio]

Sept 1 2016 is the plan for us. I'll be 55 DH 51. Holding out for Corp subsidized healthcare. It could disappear at any time but if it still exists we'll be outa here. Days in retirement will be filled to overflowing.

Why not work another few days and get paid for Labor Day?