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WB52 09-25-2008 10:58 AM

Hi. Want to FIRE in 2 or 3 years, need asset allocation advice
 
I a 48 year old worker bee at megacorp. I generally like the folks I work with, but overall, I'm tired of the rat race and want to FIRE in two or three years. My preference is to save enough to be FI before RE, as opposed to semi-RE.
First, let me say that I realize I have been blessed in many ways. Great family, like the neighborhood and local church. I'm also in the luck position to have "Great Expectations", as Charles Dickens wrote. $1.8m inheritance in trusts and probate.
Key facts and questions:
Current assets: $515k (excludes inheritances). I have 3 kids and a DW. College for kids is 75% taken care of by rich aunt.:D
Is it safe
to FIRE once assets reach $1.6m, with a reasonable expectation of $0.6m to come?Is 5% SWR doable? I've been lead to think so by Ben Stein's book "Supercharge your portfolio".Has anyone had experience with Quantext QPP asset planning? Any thoughts about validity of its estimates of return and volatility for stocks and indexes?RE income needed: $100k/year for loads of fun; $70k/year for no-frills RE.
Thanks for any advice.

Gotadimple 09-25-2008 12:09 PM

Welcome to the board, Worker Bee.

Try out Firecalc to see the survivability of your portfolio, based on your annual income needs. You may also want to enter data in ORP to see the effect of compounding and withdrawal scenarios (www.i-orp.com).

-- Rita

jIMOh 09-25-2008 12:11 PM

Welcome

What are the assets invested in? Stocks, bonds, cash or something else?

WB52 09-25-2008 12:29 PM

Thanks for the prompt responses!
- I had not seen the ORP. I am looking forward to working out scenerios with it.
- I have run various FIREcalc options. My numbers generate about 95% success rate. Of course calculation are only as good as input. The weakness that I see in my own situation is that the anticipated inheritance is not yet in hand and subject to the vagaries of the legal system, IRS raids and family politics. All considered, I still believe my original numbers are reasonable estimates.
- Current Asset allocation is 100% stock. 50% 401k. Yeah, I know I need a allocation plan... expect to get this part right as assets come available to invest, then be sure it is working before I leap. That is why I'm trying to learn as much as I can about AA.
Thanks

haha 09-25-2008 05:46 PM

Quote:

Originally Posted by Worker Bee (Post 720350)
The weakness that I see in my own situation is that the anticipated inheritance is not yet in hand and subject to the vagaries of the legal system, IRS raids and family politics.
-

I don't understand this statement. Are you sole heir to this amount? If so, the executor or attorney should be able to clear it through Internal Revenue fairly quickly and cut you a check. Is there more to this than you have told us?

Ha

W2R 09-25-2008 05:53 PM

Quote:

Originally Posted by Worker Bee (Post 720350)
The weakness that I see in my own situation is that the anticipated inheritance is not yet in hand and subject to the vagaries of the legal system, IRS raids and family politics.

In my opinion it is in your own best interest to NEVER expect an inheritance until you have it in hand. If you don't expect anything, you will never be disappointed.

I would suggest proceeding as though you will not inherit, for the time being.

travelover 09-25-2008 05:57 PM

I'd save your money on the Quantext planner and spend the money on some good investment books Like Four Pillars, Random Walk Down Main Street, Boglehead Investment Guide. Then I'd take advantage of free on- line planning tools like Firecalc, Fidelity planner, etc to get some different opinions of the survivability of your plan.

5% sounds too aggressive, especially at your age.

What is your health care plan?

Don't count on the inheritance until you have it in you account.

Oh, and welcome to the forum. ^-^

WB52 09-26-2008 07:28 AM

Quote:

Originally Posted by haha (Post 720502)
I don't understand this statement. Are you sole heir to this amount? If so, the executor or attorney should be able to clear it through Internal Revenue fairly quickly and cut you a check. Is there more to this than you have told us?

Ha

Haha,
Your are correct. There is more than I've told you. I was just trying to be concise. There are two separate inheritances that are in probate now. Equal shares to DW and siblings for one (in probate for 4 years now); equal shares for me and my siblings for the other (will be distributed by year end). Additionally, living aunt (87) has put $ in an irrevocable trust that executes at a later date and 529 plans for kids college. (God bless her).

DW and I greatful for all of this, but we do not count on it yet. As you can see, these funds make the difference between go/no go on FIRE in the next few years. If the funds become a reality, I want to plan for good stewardship through proper asset allocation and LBYM.

We will FIRE at some point. Now that DW has finished school, we should be able to save more/faster. However, the funds above will accelerate the timetable.

Thanks.

Coach 09-26-2008 08:36 AM

Worker Bee, I'd be pretty comfortable with a 95% success rate in FIRECalc, but you are right -- it all depends on the accuracy of your inputs.

Health insurance and medical costs are enormous issues for early retirees. Do you have plans for that?

I think most people would consider a 5% withdrawal rate on the risky side for an early retiree. Sometimes though people are referring to their initial withdrawal rate, which will go down in the future with SS or a pension.

Coach

WB52 09-26-2008 08:55 AM

Quote:

Originally Posted by Coach (Post 720728)
Worker Bee, I'd be pretty comfortable with a 95% success rate in FIRECalc, but you are right -- it all depends on the accuracy of your inputs.

Health insurance and medical costs are enormous issues for early retirees. Do you have plans for that?

I think most people would consider a 5% withdrawal rate on the risky side for an early retiree. Sometimes though people are referring to their initial withdrawal rate, which will go down in the future with SS or a pension.

Coach

Thanks Coach.
I have not made firm plans for health insurance and medical yet. My initial expecation is that my monthly premiums would be $1,000/month with the family of 5 (unitl all are through college). I've built this into expected consumption. My 5% rate does not include SS or pension, but those are quite a ways off. They will combine to $45k/year or so, when they kick-in.
Cheers.

JohnF 09-30-2008 09:35 PM

Worker Bee,

I assume there is at least a 10yr window to your retirement. I am not sure what your thoughts are on annuities but there are some products that allow for 4-8% withdrawals (with an income rider) that is guaranteed for life. I do not know what state you are in, but there are a few companies that may suit your needs as well to ensure your funds don't run out.

73ss454 09-30-2008 09:37 PM

Yup, one can never have enough annuities.

Your broker will love you for it. You may even get pictures of his/her kids at christmas.

travelover 10-01-2008 07:09 AM

Quote:

Originally Posted by JohnF (Post 723638)
Worker Bee,

I assume there is at least a 10yr window to your retirement. I am not sure what your thoughts are on annuities but there are some products that allow for 4-8% withdrawals (with an income rider) that is guaranteed for life. I do not know what state you are in, but there are a few companies that may suit your needs as well to ensure your funds don't run out.

5 posts and 2 pitches for annuities. :p

JohnF 10-01-2008 07:31 AM

Travelover...i just finished answering some other comments regarding mine. I am more than willing to learn about other solutions that people have in mind...do share.

travelover 10-01-2008 07:58 AM

Quote:

Originally Posted by JohnF (Post 723756)
Travelover...i just finished answering some other comments regarding mine. I am more than willing to learn about other solutions that people have in mind...do share.

John, it is all about conflict of interest. You make money selling annuities and you come here to promote them. You are not the first and will not be the last.

I'd suggest at least pretending to be interested in the conversation for a while before you start pushing product.

Bestwifeever 10-01-2008 09:10 AM

Agree, travelover--I looked to find JohnF's "Hi, I am..." post (most people start with this, a la WorkerBee on this thread!), but there's none. It's pretty obvious to me that there's only one reason JohnF is posting here if he doesn't introduce himself as something other than someone who wants to be helpful with annuity information.


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