Seeking Semi-Retirement
Confused about dryer sheets
Hello FIRE Community,
Over the past year and a half I have been on a journey to evaluate, plan and optimize my investment strategy. My goal is for my wife and I to transition from a work-a-day world to a semi-retired, self-employed lifestyle within 5 (now 4!) years. I am 1 year into my plan and wanted to get feedback from the community “pros” on my plan so far.
My story is probably similar to many in my demographic: I am a happily married 36 year old with 2 kids ages 4 and 8. I started both IRA and unqualified mutual fund investing (American Funds) through a family friend with Lincoln Financial in 1998 immediately after college (one point for starting early, minus one point for being in managed funds)! A couple years ago, I saw the light and have now made the switch to mostly DFA portfolio with some low-cost Vanguard index funds for 529’s and cash savings with a value averaging contribution plans.
Over the past year and a half I have been on a journey to evaluate, plan and optimize my investment strategy. My goal is for my wife and I to transition from a work-a-day world to a semi-retired, self-employed lifestyle within 5 (now 4!) years. I am 1 year into my plan and wanted to get feedback from the community “pros” on my plan so far.
My story is probably similar to many in my demographic: I am a happily married 36 year old with 2 kids ages 4 and 8. I started both IRA and unqualified mutual fund investing (American Funds) through a family friend with Lincoln Financial in 1998 immediately after college (one point for starting early, minus one point for being in managed funds)! A couple years ago, I saw the light and have now made the switch to mostly DFA portfolio with some low-cost Vanguard index funds for 529’s and cash savings with a value averaging contribution plans.
From 1998-2010 I bumped along without a comprehensive plan and had accumulated the following:
1. Dollar-cost average strategy for maxing Roth IRAs for my wife and I
2. 401k and Thrift Savings (I was in the Navy) contributions
3. Meeting monthly savings goals for contributions to unqualified mutual fund portfolio – first with American Funds then with SEI funds (both actively managed) through Lincoln Financial
4. Flex-term life insurance for my wife with Lincoln Financial and whole life (I had a dangerous job in Navy) insurance with Navy Mutual Aid Association for me
5. 529 Plans with American Funds for both kids (actively managed) through Lincoln Financial
In December 2010 I had come to realize that I would be better off with lower fees in passively managed index funds all around (in IRAs, unqualified accounts, 529s, etc.) and simple, cheap, term life insurance. After many discussions with my early-retirement-focused sister-in-law, a close friend at work (with big finance brain) turned me on to William Bernstein’s “Intelligent Asset Allocator”, and I knew for sure that my investments were far from optimized. While my rational brain knew that index funds were the most efficient vehicle for investment, I was still building up the nerve to overcome the inertia of shifting everything over to index funds and “unwinding” IRAs, 401k roll-over IRAs, unqualified accounts, and life insurance plans on my own.
At that time I was out of the Navy, but also struggling with a “good” problem of what to do with some additional cash that I got from stock award sales at work. I wasn’t sure if paying down the mortgage or plowing more money into the unqualified mutual fund accounts should be the priority for the “extra” cash.
From this point of realization and inquisition, I reached out to a Bernstein acolyte financial planner for help. He seemed like the right sort of person to help me – no commissions, charged by the hour, etc. Unfortunately, after I spent considerable time prepping for our conversation, he told me “I’m not sure I can help you, your situation is very complex..” Thanks for nothing. It was then that I realized that I had to do this stuff myself, so I did the math on the returns that I had actually experienced over the past 12 years on my own. I then compared my results to returns over the same period for similar Vanguard and DFA portfolios and queried some trusted friends as well.
Armed with this data and lots of questions for my Lincoln financial advisor for how he could help me reach my early retirement goal (which I knew he did not fundamentally appreciate) I managed to break up with him – cold-turkey. Based on study of Bernstein, Michael Edelson’s “Value Averaging” book and much discussion and deliberation, I developed:
1. An aggressive quarterly funded value path investment plan to achieve an early retirement goal of $1.01 million in 5 year funding plan based on starting point of $318K in June 2011 using DFA funds and Assetbuilder’s Portfolio 14 with all IRAs and unqualified investments.
2. Aggressive quarterly funded value paths for each child’s 529 plan (starting with $21.2K and $24.9K respectively) in Vanguard with stepped targets for two years funding period and down shifted risk during remaining years (9 and 14 respectively) until college funds are required
3. A capital deployment cash kitty in Vanguard tax free bond funds to feed value average funding plans with remaining cash from liquidated life insurance and other cash – this is also where I put, on average, about $2000 cash flow savings on a monthly basis
4. Additional $1k per month going to mortgage payment
One year into the plan and I have:
· $404K in DFA Funds through Assetbuilder’s Portfolio 14 on my value path to early retirement goal
· $44.7K and $50.7K respectively in 529’s with on value paths
· $78.4K in the cash kitty
As a safety factor I am not considering both 401k plans (mine and my wife’s) in this plan. Those investments will be gravy – hopefully. The purpose of this plan is to focus on rapidly building up enough in the DFA funds in Assetbuilder’s Portfolio 14 allocation to fund an early retirement period (my wife and I plan to work part time / self-employ for additional cash flow) between the ages of 40 and 60. At 60, again, hopefully; early retirement funds will not be significantly depleted – or may have even grown, and we can continue our early retirement lifestyle with additional financial security of 401k funds that have grown untouched over that 20 year period.
I would love to get feedback on this plan – it seems to be going well, but I am a big fan of “continuous improvement” and any suggestions that folks may have!
Over the past year and a half I have been on a journey to evaluate, plan and optimize my investment strategy. My goal is for my wife and I to transition from a work-a-day world to a semi-retired, self-employed lifestyle within 5 (now 4!) years. I am 1 year into my plan and wanted to get feedback from the community “pros” on my plan so far.
My story is probably similar to many in my demographic: I am a happily married 36 year old with 2 kids ages 4 and 8. I started both IRA and unqualified mutual fund investing (American Funds) through a family friend with Lincoln Financial in 1998 immediately after college (one point for starting early, minus one point for being in managed funds)! A couple years ago, I saw the light and have now made the switch to mostly DFA portfolio with some low-cost Vanguard index funds for 529’s and cash savings with a value averaging contribution plans.
Over the past year and a half I have been on a journey to evaluate, plan and optimize my investment strategy. My goal is for my wife and I to transition from a work-a-day world to a semi-retired, self-employed lifestyle within 5 (now 4!) years. I am 1 year into my plan and wanted to get feedback from the community “pros” on my plan so far.
My story is probably similar to many in my demographic: I am a happily married 36 year old with 2 kids ages 4 and 8. I started both IRA and unqualified mutual fund investing (American Funds) through a family friend with Lincoln Financial in 1998 immediately after college (one point for starting early, minus one point for being in managed funds)! A couple years ago, I saw the light and have now made the switch to mostly DFA portfolio with some low-cost Vanguard index funds for 529’s and cash savings with a value averaging contribution plans.
From 1998-2010 I bumped along without a comprehensive plan and had accumulated the following:
1. Dollar-cost average strategy for maxing Roth IRAs for my wife and I
2. 401k and Thrift Savings (I was in the Navy) contributions
3. Meeting monthly savings goals for contributions to unqualified mutual fund portfolio – first with American Funds then with SEI funds (both actively managed) through Lincoln Financial
4. Flex-term life insurance for my wife with Lincoln Financial and whole life (I had a dangerous job in Navy) insurance with Navy Mutual Aid Association for me
5. 529 Plans with American Funds for both kids (actively managed) through Lincoln Financial
In December 2010 I had come to realize that I would be better off with lower fees in passively managed index funds all around (in IRAs, unqualified accounts, 529s, etc.) and simple, cheap, term life insurance. After many discussions with my early-retirement-focused sister-in-law, a close friend at work (with big finance brain) turned me on to William Bernstein’s “Intelligent Asset Allocator”, and I knew for sure that my investments were far from optimized. While my rational brain knew that index funds were the most efficient vehicle for investment, I was still building up the nerve to overcome the inertia of shifting everything over to index funds and “unwinding” IRAs, 401k roll-over IRAs, unqualified accounts, and life insurance plans on my own.
At that time I was out of the Navy, but also struggling with a “good” problem of what to do with some additional cash that I got from stock award sales at work. I wasn’t sure if paying down the mortgage or plowing more money into the unqualified mutual fund accounts should be the priority for the “extra” cash.
From this point of realization and inquisition, I reached out to a Bernstein acolyte financial planner for help. He seemed like the right sort of person to help me – no commissions, charged by the hour, etc. Unfortunately, after I spent considerable time prepping for our conversation, he told me “I’m not sure I can help you, your situation is very complex..” Thanks for nothing. It was then that I realized that I had to do this stuff myself, so I did the math on the returns that I had actually experienced over the past 12 years on my own. I then compared my results to returns over the same period for similar Vanguard and DFA portfolios and queried some trusted friends as well.
Armed with this data and lots of questions for my Lincoln financial advisor for how he could help me reach my early retirement goal (which I knew he did not fundamentally appreciate) I managed to break up with him – cold-turkey. Based on study of Bernstein, Michael Edelson’s “Value Averaging” book and much discussion and deliberation, I developed:
1. An aggressive quarterly funded value path investment plan to achieve an early retirement goal of $1.01 million in 5 year funding plan based on starting point of $318K in June 2011 using DFA funds and Assetbuilder’s Portfolio 14 with all IRAs and unqualified investments.
2. Aggressive quarterly funded value paths for each child’s 529 plan (starting with $21.2K and $24.9K respectively) in Vanguard with stepped targets for two years funding period and down shifted risk during remaining years (9 and 14 respectively) until college funds are required
3. A capital deployment cash kitty in Vanguard tax free bond funds to feed value average funding plans with remaining cash from liquidated life insurance and other cash – this is also where I put, on average, about $2000 cash flow savings on a monthly basis
4. Additional $1k per month going to mortgage payment
One year into the plan and I have:
· $404K in DFA Funds through Assetbuilder’s Portfolio 14 on my value path to early retirement goal
· $44.7K and $50.7K respectively in 529’s with on value paths
· $78.4K in the cash kitty
As a safety factor I am not considering both 401k plans (mine and my wife’s) in this plan. Those investments will be gravy – hopefully. The purpose of this plan is to focus on rapidly building up enough in the DFA funds in Assetbuilder’s Portfolio 14 allocation to fund an early retirement period (my wife and I plan to work part time / self-employ for additional cash flow) between the ages of 40 and 60. At 60, again, hopefully; early retirement funds will not be significantly depleted – or may have even grown, and we can continue our early retirement lifestyle with additional financial security of 401k funds that have grown untouched over that 20 year period.
I would love to get feedback on this plan – it seems to be going well, but I am a big fan of “continuous improvement” and any suggestions that folks may have!