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Re: Measuring success
Old 02-13-2004, 10:39 AM   #21
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Re: Measuring success

Quote:
Consider using a tool such as Financial Engines. *

www.financialengines.com

There have been a couple model portfolios posted on the Fund Alarm BB that might work better for you.
Thanks. I'll take a look at the site. I am hopefully a much better investor today than I was in 1984, but I always try to get better.

By the way, I did have a typo and my annual % return over the accumulation period should have been 8.7% instead of 8.1%, but I suspect that most people's initial reaction to this number is still dissapointment. But you do have to be careful making direct comparisons to a calculated portfolio performance. The net worth figure includes things that a portfolio performance evaluation does not usually include -- house, checking/savings accounts, etc. If you look at the Shiller data and compute what a 50-50 stock/TIPS portfolio with 0.2% expense ratio would have done between 1983 and 2002, you come up with a figure of 8.84%.

Then you have to consider that my hands were tied on some of the things I invested in because of company 401K rules, etc. By the way, I considered my company's matching investment dollars as my own in these calculations. During most of the 20 years, my wife and I both maxed out our 401K's and got a 75 cent on the dollar match from the company. If you consider those funds as pure return, you would get a much higher return number with a much reduced contribution number.

Also you need to consider that I could not control the housing market in one place where I lived and did not do very well on a house I owned for 13 years.

So, I am not too dissapointed in the net worth return I got over those years. It clearly isn't stellar, but I could have done a lot worse.

Still . . . I would love to do better.
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Re: Measuring success
Old 02-13-2004, 12:50 PM   #22
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Re: Measuring success

SG, those results look pretty stellar to me. With the exposure I had to Japan, large chunks of my portfolio are about even after 20 years.

The amount of your salary you were able to stash away looks even more impressive, though. I'd guess that you socked away much more than 50% in the years after 1998. That's the secret sauce of early retirement for most people (of course, a windfall or two never hurts).
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Re:  ER is a pass/fail course
Old 02-14-2004, 08:02 AM   #23
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Re:  ER is a pass/fail course

Geez, SG, looks like fine results to me.

Being able to retire early on 7-8% returns says a lot about your ability to save and control expenses, which will serve you far better over the next few decades than hitting it big on company options or tech stocks.
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Re: Measuring success
Old 02-15-2004, 06:10 AM   #24
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Re: Measuring success

There surely are a lot of engineering types on this board. I count Dory, Salaryguru, Cut-throat, the guy who owns the retireearlyhomepage.com site, and myself. Anyone else?

I think I first got the early retirement bug when I had my first minor heartattack at 28. My left arm just went numb for 3 days. Never went to see the doctor. At that point I was running on coffee, 6 hours of sleep on nights when I don't have nightmares about work, and 55+ hours a week, and had not had a day off for 3 weeks straight because I was trying to meet a deadline before Christmas. This was toward the end of an 18-month marathon slog where every three months we would shoot for a project complete deadline without actually getting the project completed. After realizing how close I came to an actual "deadline", I finally woke up.

Also, having the work under people can sometimes make you feel literally as if you are "under" people because their problem can and will become your problem if they have authority over you but do not have the maturity and good sense to know the boundary between work and personal life. I had a woman lead engineer whose boyfriend dumped her, so I became the target of her men loathing because I was the only single guy on the team. For the first 6 months, I thought I was doing a bad job until I figured out that she just didn't know how to seperate her personal problems from her work problems. After I complained to my manager, he asked that I transfer to another group. After finishing the project, I turned in my resignation and found another job within the company. The capper was that he then started lecturing me about loyalty and staying within the lab. Ah, you failed to correct a clear sexual harassment situation, and I can't leave? And I thought the ankle chain to the desk was only metaphorical.

How I measure success is when I can tell people who are unprofessional, who knows not the boundary between what is work and what isn't to shove it. I'll be there in approximately 9 years, when I'm 42.
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Re: Measuring success
Old 02-15-2004, 07:53 AM   #25
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Re: Measuring success

Hey ! Yup, as for engineers, I'm one as well. Electrical (computer) engineer from the same school as "that retireearlyhomepage guy" who we usually refer to as intrcst. I'm still working. I just changed jobs due to a 40% salary increase and the "requirement" by the new company that I work in Europe for 6 months. Free tour of europe ? OK, I'm game ! Yes, I'm single also. As for how I measure success (to get back to the original thread) I measure it by my level of happiness at the given moment. As so many on this (and other) board have pointed out, retiring early is a great goal, but we have to enjoy ourselves along the way, tomorrow is promised to no one. Financially, I'm about 1 year away from a bare bones retirement (ala Terhorst), and a few more years away from a more traditional retirement. When will I go ? When in my mind the drawbacks of working outweigh the benefits.
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Re: Measuring success
Old 02-20-2004, 06:48 AM   #26
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Re: Measuring success

I'm not sure how on topic this is for this thread, but here goes...

One of the ideas in "The Millionaire Next Door" is the PAW/UAW concept. The author gives the guideline that your net worth should be equal to (annual salary * age / 10.)

Frankly I'm still not there yet, but part of me wonders how accurate this is if you are a 20something or even an early 30something.

What kind of metric do we, or should we, have for determining how good a saver/investor you are?
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Re: Measuring success
Old 02-20-2004, 07:43 AM   #27
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Re: Measuring success

My 2 cents - MAX every taxed deferal vehicle out there as early as possible and let time do it's thing. Learn to live on the rest.

Stanley and Danko will probably make most people under 30 feel bad.

If you are are 'hard core' frugal you may save more. 15% (of before tax income) as minimum start.
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Re: Measuring success
Old 02-20-2004, 07:55 AM   #28
 
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Re: Measuring success

Mole,

Quote:
One of the ideas in "The Millionaire Next Door" is the PAW/UAW concept. The author gives the guideline that your net worth should be equal to (annual salary * age / 10.)
The problem with formulas like these is they might work OK for the Median ages and salaries, but don't work well on the extremes.

Examples : When I was 30 I was in debt and had a negative net worth.

Today I'm 52 my annual salary is zero. So based on this, I need to have a zero net worth. Yipee I'm way over that!!
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Re: Measuring success
Old 02-20-2004, 10:58 AM   #29
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Re: Measuring success

I guess the "correct" approach to determining if you're on track is:

1) Figure out what your spending needs will be in retirement. Some say it's 30% of your current spending, some say it's 110%. I lean more towards 110% myself.

2) Multiply your spending by 25. That's your minimal nest egg goal in today's dollars.

3) Determine the year in which you want to retire.

4) Estimate the growth of your current nest egg in the year you want to retire. Use an average real rate of investment returns -- about 2.5% for bonds, and about 4.5% for stocks.

5) The difference between (2) and (4) is the additional amount you need to save between now and retirement.

6) Use a savings calculator like this one to figure out your periodic savings needs:

http://www.bankrate.com/brm/calc/savecalc.asp

Remember to use real (vs nominal) return estimates in the savings calc since the dollars are not adjusted for inflation.
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Re: Measuring success
Old 02-20-2004, 03:17 PM   #30
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Re: Measuring success

That helps a lot.

Can anyone tell me the formula for the following:

Given:
Total amount to be saved
Number of months to save
Real rate of return (%) (annual)

Calculate the monthly payment, compounding interest monthly

I'm stumped. I guess thats why I fell to the lowly position of manager, he who tells the engineers what to do and makes sure they don't screw up (too much).
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Re: Measuring success
Old 02-20-2004, 03:57 PM   #31
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Re: Measuring success

I think what you want is

F(n) = P(1 + r)n + c[((1 + r)n + 1 - (1 + r))/r]

Where F is the future value, P is present value, c is periodic contribution, n is number of contributions, and r is growth rate. * Solve for c.

Or just use the calculator link I gave above.
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