Early Retirement & Financial Independence Community

Early Retirement & Financial Independence Community (http://www.early-retirement.org/forums/)
-   FIRE and Money (http://www.early-retirement.org/forums/f28/)
-   -   Another SWR question (http://www.early-retirement.org/forums/f28/another-swr-question-15317.html)

Kathleen 10-23-2004 05:29 PM

Another SWR question
 
Hi. I am using the FIRE calculator and trying to determine if I'm doing this right. It seems to good to be true. Here are my figures: Annual amount needed (starting next year) - 50K. Starting amount 800K - 60 % in stocks. My SSI will be 12k starting in 7 years. My spouse will get 12k staring in 4 years. Lifespan for 40 years. Annual investment expenses 1.25%. Inflation using PPI.

The results say we would have 92% chance of making it and historically have 2 million left over.

I would appreciate any feedback on if I am using the calculator correctly. Thanks in advance.

Cut-Throat 10-23-2004 05:47 PM

Re: Another SWR question
 
Kathleen,

Yes I ran your numbers and that is close and you are using it right.

The $2 Million left over is the Average (mean) amount and is not inflation adjusted.

remember that your 60% performs like the overall market. YOu can also cut your expense costs to under .5% and it will look even better! :) A lot!

cute fuzzy bunny 10-23-2004 07:10 PM

Re: Another SWR question
 
Yeah, get those investment expenses under control. I have a very diverse portfolio spread across a fairly broad number of domestic and foreign funds, and my expense average is .25!

That extra % might push you closer to 100%.

What the 92% is probably telling you is that you would not have made it through the great depression and the period following it, and the 1965-1974 period when neither stocks nor bonds did very well.

Providing we dont have a time like that in the next 30 years, you're good.

Kathleen 10-24-2004 07:18 AM

Re: Another SWR question
 
Thank you both for your answers. That's certainly encouraging. We also live in a major city, so the cost of living is high. We're paying 1k a month on our mortgage, so subtracting that out (in 5 years) we would only need 38k per year, in today's dollars, even if we stay here.

We have our accounts with Merrill Lynch. Since I lost a lot in the 1999 drop, I don't feel secure about making investment decisions. I'm trying to convince my husband that, if we keep the same allocations set out for us by Merrill, we could go with a less expensive outfit. Would you have any suggestions on how to reduce these fees?

Cut-Throat 10-24-2004 07:33 AM

Re: Another SWR question
 
A lot of folks here use Vanguard Funds. You can look at their target retirement funds, which are a combination of Stocks and Bonds.

These Funds have an expense ratio of .22 %. This will give an immediate increase of 1% over where you are currently. Some people use this one fund and nothing else. - Pretty Simple.


indymom 10-24-2004 09:46 AM

Re: Another SWR question
 
Does anyone know a rule of thumb about how much the surviving spouse benefit is with the CSRS govt. retirement program? I have heard that it is about 2/3 of the reduced monthly amount for retiree plus spouse. I know there is something on a website somewhere, but I've had trouble finding it and when I have found it in the past it was too convoluted to understand. I'm trying to figure what my SWR might be if my husband goes first as we can live more or less OK on our current monthly amount, but if I am the one left I'm fairly sure I will have to make some withdrawals sooner than I would like. :-/

yakers 10-24-2004 07:28 PM

Re: Another SWR question
 
The survivor payment IF a survivor basis was chosen (which reduces regular monthly payments to the original etiree) is 55%. See :
http://www.opm.gov/retire/html/library/csrs.asp

daystar 10-28-2004 05:25 PM

Re: Another SWR question
 
Indymom, if your husband has already retired, he should be able to call OPM at 888-767-6738 to find out what he has left you as a survivor annuity.

If he hasn't retired yet, you should know that you can make him give you the maximum 55% survivor annuity. You have to sign a consent form to allow him to give you any less than the maximum 55%.

newellcr 10-29-2004 05:33 AM

Re: Another SWR question
 
Kathleen,

FireCalc has the ability to adjust your yearly take up or down. Does your 92% number include a reduced amount in 5 years?

Cheers,

Chris

73ss454 10-29-2004 04:23 PM

Re: Another SWR question
 
I have been doing some calculations on FireCalc and think I need to work a little longer.
Can anyone tell me what they think about Tax Free mutual funds.
I have some money in Oppenheimer NY Tax Free and it has been throwing off about 5.5% for the last few years.
Commisions are 2% and expense ratio is .88
After expense ratio still produces 5.5%. Yet I haven't seen anyone talking about this type of investment. Any help would be great.
JOE

John Galt 10-29-2004 04:45 PM

Re: Another SWR question
 
Hi JOE! Sounds a little "spendy" to me to produce 5.5%.
Of course, before I retired I was very concerned with
taxes. Turned out to be a non-issue. One of many surprises I've had in ER. Really not too sure if things
would have been different in the event I had done some
serious ER planning. Anyway, some concerns became
insignificant and some (health insurance)
became huge. I just dealt with each issue as it popped up. A little like "life its own self" :)

John Galt

73ss454 10-29-2004 04:59 PM

Re: Another SWR question
 
John,
Not really concerned about taxes at this point. My concern is that some of the posters on these boards seem to be happy with 3 or 4 % taxable.
If 5.5% with no taxes is available why is no one mentioning it. Just looking for some fininancal help from some of the informed posters here. If there's something I'm missing I would like to know.
Regards,
JOE

Cut-Throat 10-29-2004 05:13 PM

Re: Another SWR question
 
Quote:

John,
Not really concerned about taxes at this point. *My concern is that some of the posters on these boards seem to be happy with 3 or 4 % taxable.
If 5.5% with no taxes is available why is no one mentioning it. *Just looking for some fininancal help from some of the informed posters here. *If there's something I'm missing I would like to know.
Regards,
JOE

We're not happy with 3 or 4 % taxable. I only seem to be getting 2.5% and I'm not happy >:(

I'm all ears. Tell us about this. But don't you think it's a bit wierd that mortage companies are willing to lend money at 5%, if they could get 5.5% like yourself ???

73ss454 10-29-2004 05:28 PM

Re: Another SWR question
 
I have not done very well with stock market and I was going over a few of my funds the other day. I know that it goes against the grain with most posters here to pay commissions and expense ratios but I have been with Oppenheimer for many years. The NY tax free fund has been paying over 5% for as long as I can see. Questioning my broker about this he said that now is not the best time to add to the position. Yet he feels that in the next year or so it may be a good time to add as he feels the share price will come down. Which will allow me to buy more shares for the buck. Not being a great investor I thought I would bring it up on this board and get some feed back. I plan on putting a large sum into this fund next year when I ER.
Any feedback would help greatly.
JOE

BigMoneyJim 10-29-2004 06:27 PM

NY Tax Free?
 
Quote:

The NY tax free fund has been paying over 5% for as long as I can see.
I did a search for "oppenheimer ny tax tree" and found ONYCX and ONYBX, but they are described as "AMT Free NY Municipal". I'm not sure what that means, but the expense ratio is 1.71% with a 12b-1 up to 1% and deferred commission maxing at 1% or 5% depending on the fund. Oppenheimer's page on the group--which I can't figure out how to link to because it has a session ID in the URL--says that up to 25% can be junk bonds.

It's been a while, so I'm fuzzy on whether you subtract the expense ratio and 12b-1 to get your real earnings, plus I'm not familiar with muni funds, so I'll leave it to the others...

EDIT: (Edited after I read the next four posts.) OPNYX has an expense ratio of 0.93%, a max 0.25% 12b-1 fee and max 4.75% front-end commission. These three funds are on the same Oppenheimer page and are A shares, B shares and C shares...with munis I don't know if that's 3 separate funds or three types of shares in the same fund.

Bob_Smith 10-29-2004 06:35 PM

Re: Another SWR question
 
Joe,

You're paying a broker to invest in a bond fund? You don't want to be doing that. It's a waste of money, but more importantly, dealing with brokers places you in harms way. These characters aren't on your side, and worse, they usually don't know what they are doing.

The fund you're in (I think I have the right one - OPNYX) has a 5 year annualized total return of 5.93%. Vanguard's NY Tax Free fund has a 5 year annualized return of 7.15%. That doesn't even count the load you paid - that would reduce the Oppenheimer return even more. The Oppenheimer returns aren't all that stellar.

You can save yourself a great deal of money and pain if you take the time to read a few good books on investing. I'd suggest The Four Pillars... by Wm. Bernstein. If that book doesn't change your view of brokers, nothing will. Brokers are poison when it comes to investment advice.

73ss454 10-29-2004 06:37 PM

Re: Another SWR question
 
Jim
Thanks for the reply.
I am sure that my commissions are 2% based on the amount of money that I have in various funds.
My broker told me that the expense ration was .88 but may not be according to your post.
I have about 50K in this one fund and every month on my statement it shows between $235 to $245.

73ss454 10-29-2004 06:46 PM

Re: Another SWR question
 
Bob,
Sounds like I need to do some reading this week!
VanGuards fund sounds like the better choice. Please let me know if it's advisable to put a good portion of my money into a tax free bond fund. If it is paying 7% tax free with no loads why isn't everyone just pouring everything in. On 1M 70K tax free sounds good to me.

BigMoneyJim 10-29-2004 06:55 PM

Re: Another SWR question
 
OPNYX appears to be another share type of the same fund or type of fund as the other two I found, but it has a front end load--up to 4.75%--and lower yearly fees: 0.93% expense ratio and 0.25% max 12b-1. I edited my earlier post to add the OPNYX numbers.

EDIT: Here is the link to Oppenheimer's page about these funds.

cute fuzzy bunny 10-29-2004 07:04 PM

Re: Another SWR question
 
Ah the spectre of past performance spooks us again.

The last few years have been good for bonds, with interest rates falling sharply. Hence some of that 7% gain.

You wont see a lot of NAV increases for a little while. Maybe a long while.

Chasing yields is usually a bad idea. Muni bonds have risks of default, and the higher yielding ones tend to invest in riskier munis.

Tax free is great, as long as the tax savings exceed the reduced yield you're getting. For example, tax free intermediate CA muni funds are paying around 3.5% while regular plain old intermediate bonds are paying 4. I dont pay any taxes, so I'm giving up half a percent for nothing by going with munis.

I would rather eat my own buttocks than pay a front or back end load, or more than a quarter percent on management fees...unless the investments are a little exotic...new york muni's are about as far from exotic as you can get.


All times are GMT -6. The time now is 12:39 AM.

Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.