Welcome Young Dreamers!

[panhead]

Bushwacker, sounds like an interesting job progression ! Technical sales eh ? It's funny you say that b/c I was looking into getting into that line of work. I'm actually a pre-sales field engineer, so I work closely with sales anyway. The next logical step is into sales. I think I would enjoy it, for a while anyway. You know how stressful it can be. The only thing is, right now the jobs are very hard to come by. Our industry (primarily capital equipment, some software) has been hit hard with layoffs, and the only salespeople being hired are people with lots of experience. However, I may try to make my way into this field in the next couple of years.

A very good friend of mine, and a former roomate had an interesting career path. He used to work at a gas station thru college, 40 hours a week, 3rd shift. He put himself thru a state school and got a degree in accounting. He got a job as an accountant making good $$ but working ridiculous hours, including weekends. He did this for about 4 years while living VERY cheaply. The company decided to move and he didn't want to go with it so he resigned and joined the national guard. Did nothing but his 1 weekend a month and 2 weeks a year for a while, then learned how to weld and got a contract job with a junk yard welding steel containers. Got bored with that after a couple of years and did nothing for a while except reserve guard duty. Then he got a job as a maintenance guy for a large apartment building. He loved this job, and was at it for a few years before the iraq war came. He is now in Iraq as he got activated. Pretty interesting job sequence for a college grad though, don't you think ? Of course he's not married and he doesn't really own anything !

I am glad I can make some money at my hobbies. If I was just into motorcycles w/o fixing and selling them, it would be a very expensive hobby. I may look deeper into technical sales though. I don't think my company would be willing to give me a shot at it in the current environment, so I may have to look elsewhere first.

[bushwacker]

Panhead, it may not hurt to ask your current employer about moving into sales before jumping ship to another company. Some possible benefits:
- most co's would rather hire from within since you already know the business. Less training costs for them.
- if you don't like it, you may be able to go back to your old job.
- you get to keep all the benefits you have built up over the years like vacation, seniority, etc...
- your contacts both inside and outside your company will help when you get started in sales. People know you, and may give you more respect.
- changing jobs is stressful enough, changing co's would add another stressful element.
Just my thoughts.

Your buddy has definitely taken the less-worn path. He reminds me of a friend of a friend. I don't know all the details, but apparently for a while he lived in a camper in a state park or something. He's a normal, friendly guy who has a good job at one of the airlines. He just likes to live below his means. I don't know if I would want to do it for long. But it is an interesting concept. No mortgage, no property taxes (except ad valorem), little maintenance, and you can move whenever you want. Kind of like Dory on Wheels!

[bongo2]

Jack: Tell me something I don't know! I've accounted for it, but am hoping for some financial aid in the end.

Dennis: I don't know anything about landlording, but it sounds very difficult to me to sucessfully rent out a house in California while living in Kentucky.

[MRGALT2U]

Some good stuff here (as usual). Re. college costs,
my oldest child did not go right away (opted for trade school - different breed of cat like his dad). Now, at age 37, he is back in school working on his Bachelors, and
doing it on his nickel fortunately, although he is in a state school
and gets a lot of aid. Middle daughter graduated from
a private school, but I required her to pay half even though I was in my peak earning years back then. Youngest
daughter was the problem as she opted for the same school as her sister, but this was after my divorce and
retirement. Her mother and I are still wrestling with that
issue. BTW, re divorce. Overall it helped me financially
but the fallout lasts a lifetime. Ask anyone who has
gone through one.

Hi gang -- very cool board & discussion here. My intro: I'm 35, married, one kid, one on the way. I own my own business (with two partners) that we'll likely sell in the next 2-3 years. Currently my share is worth about $2M, but the business is growing at 40% a year, so it's getting more attractive to cash out as the days go by.

My wife and I have about 200k in our 401(k)s, own a rental home, a 1/3 share in a vacation home, and are working to pay off our primary residence as early as possible. I've also managed to pre-pay four years of college for my kids through my state's guaranteed tuition plan (very cool thing if your state offers it)

Interesting thing about me: my business and all the financial rewards that go along with it has zero to do with anything I was ever trained for.

Instead, what really got me started on the path I'm on was sucking it up and going to graduate school after I finished my four-year degree. My degree is in English, but that's beside the point -- grad school was boot camp for stepping up, taking risks, learning to work long & hard, learning to communicate well with others -- it was also an introduction to like minded people, two of whom are now my business partners.

I think I've earned an on-the-job MBA over the past 8 years are we've grown our business -- I have 75 employees and have learned countless lessons in the process, believe me.

So...I have a piece of advice for those younger than me (particularly those in school) and a question to anyone reading this who has actually retired:

My advice to those in their 20's is to challenge yourself as much as possible in the jobs you take, the education you achieve, etc. -- once you've proven to yourself that you can handle high stress, high demand situations, it becomes far easier to simply work hard and have the self-confidence required to either excel at working for someone else or to go into business for yourself. More than anything, never, ever be afraid to stand up and ask for a shot at something challenging if an opportunity arises -- oftentimes the person who gets the promotion, the chance to lead is simply the person who expresses an interest.

My question for those already retired or about to be is this: do you recommend using a financial services company over doing your own investing (and if so, who have you found to be worth the cost)? Certainly the former has some advantages, but more cost, and the risk of running into unscrupulous (or just bad) financial advisors, while the latter requires a lot of attention to research and study, even if only to best judge when and how to allocate your investments across bond funds, stock funds, etc.

Thanks!

[cute fuzzy bunny]

re: the financial services/management companies.

I'll be pleased to tell you exactly where to invest your money for half of what any financial planner will. And the advice will probably be better.

Or you can just ask and we'll all tell you for free.

I prefer the first method, but I dont think your results will be very different

[Nords]

3degrees,

If you could figure out how to put together a $2M share, you can probably figure out how to invest it.

The biggest challenge is finding the time to learn, and the next-biggest is finding the time to do the work. The first takes a book or two, and the second probably takes a day or two of paperwork spread over several weeks.

At your worth, it's your choice. If you choose to be blissful, then give your money to someone like Vanguard or Fidelity or Tweedy, Browne and tell them you want them to manage it for you. It'll cost you about 1-2% per year and they're big enough for you to reasonably expect them to adhere to some sort of ethical standard. Of course you'll also have to fend off weekly requests to buy this annuity, that charitable remainder trust, the other living trust, etc.

I just finished reading William Bernstein's "The Four Pillars of Investment". It's the best explanation of the process that I've EVER read, as evidenced by the fact that I had already seen most of the books in his bibliography. If you don't finish it before your last day at work, then park all your money in a money-market account until you have read it. Bernstein favors passive investments using index funds and rebalancing every year or two. Once it's set up you can spend about an hour a quarter on it.

I wouldn't recommend Schwab. I weaseled my way into a "Private Client" dinner of theirs last week and it was an amazing marketing performance. You can read about it here-- http://www.fundalarm.com/wwwboard/messages/91333.html

[BigMoneyJim]

Nords, great writeup on the Schwab dinner! Thanks!

3degrees, congratulations on your accomplishments. I agree you are a far better financial planner for you than anyone else is. It's scary at first because you can be overwhelmed by the investment options, but there are a few simple "no brainer" (but occasionally challenged) plans to begin with, then as you expand your knowledge you can diversify and try other investments. My no brainer investment is a mix of Vanguard stock index funds (Index 500 and total market) and a Vanguard bond fund. I'm quite confident I'm not being fleeced by Vanguard, and I understand what my money is doing and why it's there.

I'm not claiming my mix is The One True Investment Plan (imagine a chorus of angels singing while reading that), but I think most everyone will agree it's much better than what either the mattress or your average financial planner will get you. Hang around these boards for a couple of weeks and you'll be confident about beating the mattresses and CFP's, too.

[TheFIREman]

Nords, thanks for the writeup on Schwab. I used to be a Schwab customer until they sold out their UK ops to Barclays. Their execution only brokerage used to be fairly cheap here, but competition has put paid to that. I do wonder what a bunch of over 70's are doing looking at stock pickers for their savings. If they were giving fair advice they should tell the audiance to put 20 or 30% in a Vanguard equity fund and buy bonds with the rest. But then we all know who really paid for that dinner.

I wouldn't listen to an AMEX pitch for $50.00. I sat
through one for free, years ago. It was like having
root canal work with no anesthetic.

John Galt

[cute fuzzy bunny]

Super. I signed up with them for free years ago because they had some deal with my credit union to link my account there with amex for trading. In other words, I could buy stock and have the money vacuumed out of my checking account, and transfer money easily between accounts...I know thats de rigeur these days but it wasnt then.

They screwed up every transaction I did. Mostly I believe on purpose because every time I did a transaction I got the highest fee from their fee table, and had to call them to adjust it. I bought some stock once and they bought it four times for me. I guess it felt good the first time they did it...

Later when I sold the same stock I got the transaction paperwork, but the stock still sat in my account. Fortunately when it actually DID sell the price was a buck a share higher.

The piece de resistance, and as Dave Barry says, I am not making this up, was when I bailed out on them and had them transfer some Janus funds I had with them directly over to Janus. They transferred AMEX's entire holdings of Janus funds for all of their customers into my account. I still have the monthly statement from Janus showing something like 30 million bucks in my account. I had to authorize AMEX to withdraw all their customers money back out of my account.

Little b@stards didnt even let me keep the couple of days interest on the funds.

[zbwmy]

Hi everyone,

I am also new here and want to become active in this Forum. *I am a 39 yr old civil servant who is elible to retire at age 47 but must retire by age 56. *So, I have a nine year window to retire *starting in 2012.
My employer is giving me health insurance when I retire (I pay 25%) and a pension of 50% of my pay. I will also get a social security supplement from the day I retire till age 62 when SSA starts. I estimate this supplement to be about $850.00/mo. in todays dollars. I have $250,000 in my 401K invested in stock funds. *I contribute $13000/yr (the max), and my company does a 50% match. According to my calculations assuming 10% compound interest rate my 401k balance will be $938,000 at age 47, and $2,519,000 at age 56.
What kind of questions should I be asking myself? *How far off are my calculations/assumptions? *I appreciate any help I can get.

[Bob_Smith]

Hi zbwmy,

I'd probably ratchet that 10% compounded return down a ways. In Quicken Financial Planner I use a 2.5% real return (4% inflation and 6.5% return). I'd rather err on the conservative side.

[BigMoneyJim]

Quote:

What kind of questions should I be asking myself? How far off are my calculations/assumptions? I appreciate any help I can get.

You'll probably get more flak for 10% annualized returns, but don't let it discourage you. (I felt discouraged at first when my own ballpark figuring turned out to be vastly overoptimistic.) You are in a very good and strong position financially, well above the average American. Keep reading around here and you'll see what current-day early retirees are living off of and you'll gradually become more comfortable with your outlook.

[zbwmy]

Quote:

Hi zbwmy, I'd probably ratchet that 10% compounded return down a ways. In Quicken Financial Planner I use a 2.5% real return (4% inflation and 6.5% return). I'd rather err on the conservative side.

My 10% rate is not adjusted for inflation. I am using the 10% as a goal for earnings in my 401k. I understand that the balances I mentioned having at retirement are in todays dollars and are not adjusted for inflation. When I look at stock funds and such, should I not be thinking 8 or 10% and always factoring in inflation? Am I mixing apples and oranges? I use 3% for my inflation rate and 2% for a COLA.

[Bob_Smith]

Quote:

When I look at stock funds and such, should I not be thinking 8 or 10% and always factoring in inflation?

In my opinion, no. There is a range of potential outcomes, and 10% is certainly one of them, but I don't believe the next decade or so is likely to produce an annualized 10% (or even 8%) nominal return from these levels.

One more thing - I would not be comfortable with a 100% stock allocation. That being said, you appear to have such an incredible package of retirement benefits that you will likely do just fine whether the return is 2% or 10%, depending on your expenses.

[cute fuzzy bunny]

Yep, in most analyses I've seen, more than 70% stock simply buys you more risk/volatillity, and less then 40% stock buys you less return without much less risk/volatility.

"Real" rates of return (minus expenses and inflation) by most experts ranking should be 3-6% for a balanced portfolio. Bernstein says 3-3.5% "real", Bogle says 6-9% before expenses and inflation, or about 3.5-6 "real".

The "shoot the moon" stocks like small cap value, foreign and emerging markets are all up a LOT in the past year, so I doubt those have a lot of leg left in them.

Spread the money around, hope for something closer to that 6% "real", and dont take on any more risk than you need to in order to squeeze an extra half percentage point out.

[zbwmy]

I will probably not retire until I'm 56, thats 17 years away. My choices of investment in our 401k are limited to 5 indexed funds: govt securities, s&p500, whilshire 4500, bond fund, and a Europe and east Asia stock fund.
I was planning on staying all stock until I get a little closer to retirement, then diversify.
Ideas?

[newellcr]

Hello zbwmy,

I have about 14 years to ER at 50. The real market return (adjusted for inflation) is about 7% (11% market - 4% inflation). 17 years is a long time in the market. My advise is to stay in the market and hopefully reap the better (historical) returns, provided you have the stomach for it. Sounds like you do if you have a quarter mil in the 401k already. Using 7% real returns, your 401 should be ball parked at about 710k in 9 years in today's dollars and 1.45 mil in 17 years in today's dollars. Why make it confusing by working in future dollar years? BTW, your figures were correct as far as I could tell.

The 5% number might be just a little high for a safe withdrawal rate. The numbers I had run on FIRE calc for 90% safe with a 40 year payout gave me a 4.8% withdrawal rate. This depends on your circumstances and investment choices though. You need to add in your own SS and such. Use this number multiplied by your savings and add in your $850 supplemental, which is worth about a quarter mil in a lump, and there you are. I think you'll find the advise in the other posts to be on the conservative side which I tend to agree with. I now use a 6% real return rate for my ER finance projections. Previously, I was using 7% for the return calculations. These numbers are just used for projections anyway. Don't sweat using the "correct" numbers, your portfolio is going to deliver what it does based on how the market performs. The only things you really have control over (meaning the stuff you should be concerned/worried about) is the investment rate and the investment types.

You asked about the types of questions you should be asking yourself. My suggestion is ask yourself if you want to or need to work until your 56. You can't buy back years of your life, but you might be able to do fine with a little less than $1.5 mil (in today's dollars) plus SS. You might want to look at other aspects of your lifestyle and see if you want to tweak something to see if you can/want to save a bit more outside your 401k.

Cheers,

Chris

[BigMoneyJim]

Quote:

Spread the money around, hope for something closer to that 6% "real", and dont take on any more risk than you need to in order to squeeze an extra half percentage point out.

For now, I agree with you, but to check us both I'll pick at it a bit: Is your asset allocation advice the same for someone who's withdrawing and someone who's 15+ years from withdrawals? You say don't increase risk to get an extra half percent, but if we're not taking withdrawals then where's the risk? And a half point annual return compounded over 15+ years adds up to something, although I'm too lazy to calculate what it adds up to.