Your advice please: 50 years old, $1.9M, travel

[Earl E Retyre]

Hi all,
My hopeful goal for a long time has been to retire early. I want to travel all around the world with my wife seeing new places and meeting interesting people. I want to be financially independent and have no worries at all financially. I want to do this sooner than later since I want to enjoy life traveling while I am relatively young and healthy. So, the question has always been, how much money do I need? I have been very much burnt before in the stock market and therefore would feel most comfortable in an extremely low risk portfolio. I would rather work a few more years and not have to worry about market swings.
So, here are my current thoughts about my plan. I appreciate any advice you have as to whether it makes sense or suggestions. I am 46 years old. My net worth including my house is 1.5 million. I feel that once I hit 2.3 million that I can retire. My plan would be to first set aside 400k for my two daughters leaving me with 1.9 million. I want to sell my house and invest the majority (perhaps all) in 4.8% nontaxable, AAA insured, long term municipal bonds. I know there is fear that inflation will get me. But my backup plan for inflation is, assuming I retire at around 50 years of age then in 15 years I would get $39k between my social security/my wife’s SS/ and my pension. By investing 1.9 M at 4.8% after tax that would give me $91k per year to live. I researched and found I can live just about anywhere from the Caribbean to Europe to New Zealand to the US quite nicely for $3k per month rent. So, I would like to travel all over the world and live in each place for 1 month. I assume eventually we will get sick of living like nomads and will want to settle down. So, one goal would be to find the ideal place for us to settle down. At that point, my expenses should decrease (which is also a protection against inflation). So, my monthly expense breakdown while being a nomad is:
lodging inc utilities
3,000
food
1,000
local transport avg
750
mos transportation avg
750
entertainment
400
international cell
75
health ins/med costs
1,000 ?
misc
400
monthly
7,375
annual
88,500


So, the $91k per year should cover me where I do not need to dip into principal at all. Again, within 15 years, I plan to settle down somewhere. At that point expenses should drop and I should gain an additional $39k per year in retirement benefits to cover increases due to inflation. This assumes social security is still around.
I know there are a lot of things you all can comment on including (1) my crazy idea to invest in all munis (2) my budget for traveling like a nomad - my biggest unknown is health costs?? (3) whether $1.9M is enough
So , I would appreciate comments on all three, not only the muni thing which I suspect will get lots of attention. Thanks so much in advance for your comments. And thanks for supporting such a great website.
Earl E Retyre (wannabee)

[growing_older]

With 1.5 million now, to get to 2.3 million in only 4 years you will be adding 200,000 per year to this portfolio. Since you have very conservative 5% yielding investments, most of this must come from new funds added. Are you in a position to add $125,000 per year for the next 4 years?

[Earl E Retyre]

Thanks for your quick reply. Yes, I think so. Funds would come from selling a company for which I own stock. If that does not happen, then it would take longer than 4 years. But, I would still stick with the same numbers, only retire later.

[W2R]

What fascinates me is your proposed lifestyle, spending one month in each place until you decide to stay longer. But I am curious - - would you be looking for furnished apartments with no lease (like the so-called "corporate housing"), or hotels? I wonder how you would approach the problem of locating corporate housing in a different location every month.

Your investment philosophies are completely different from my own diversified approach and yes, I am pretty horrified. But that is your own business. I would advise reading the first four books on the Bogleheads' book list and then if you still want to do it, it's your money and your life. It won't hurt to do that, to ensure making a completely informed decision.

[NW-Bound]

It seems to me you have enough to give it a try. If the lifestyle does not work out, or the expenses are higher than you thought, it would not be ruinous to you overnight. You could still come back to the States and regroup after a few years.

But don't listen to me. I often daydream about the lifestyle you describe but, being as chicken as I am, still work part-time to avoid drawing down my stash. So, if ever you decide to execute your plan, please keep us all informed. I might just follow your footsteps.

PS. We are older, have a currently larger stash and one child to finish college in 2 years. But we are chicken! Also, have not had a real discussion about this with my sweetheart. It is certain that she will resist, and since I am only daydreaming...

[Earl E Retyre]

Thanks, W2R. I will read those books. I know I have read a lot about the importance of a diversified portfolio. It just seems like all my stock related investments have been very volatile losing me money over the years. Regarding your question, yes, I am planning on living in furnished aprtments or condos that I find on the web.

[Earl E Retyre]

Thanks, NW-Bound for your reply. Hopefully I will be successful at doing this plan and can let you know all about it in the future. I would not rule out part time employment over the years as well. That is yet another safety net. If I find a location that is nice and I want to stay for 6 months, perhaps I could get a job there to bring in a little extra spending cash. I am not sure the rules regarding work visa's in other countries. So, that may or may not work. But if I am allowed to work in other countries I am not against work. I just want to be able to move from place to place and not "have to work".

[NW-Bound]

I think being allowed to work and finding employment as a foreigner are not easy, and you obviously do not count on that.

I cannot help thinking there are people out there doing the same. In this forum, I have run across stories of people wandering through less expensive countries like Thailand, Malaysia, Mexico, and those in Central and South America. Again, being chicken, I like to be in locations I perceive to be safer, i.e. Europe, Canada, and the US. My survival skills need to be honed if I were to venture like others have done.

[brewer12345]

Your plan sounds reasonable except for the investment part. Not only are you badly exposed to inflation, but you run a lot of risk related to the creditworthiness of the states and other muni obligors. I would also point out that you are unlikely to need that much of a tax shelter to drop your tax obligation to a low level.

Its fine if you want a conservative portfolio, but I think all munis is a bad idea. I would suggest something like 60% bonds (including munis, TIPS, corporates and foreign sovereigns), 20% global equity (very widely diversified), and 20% other (commodities, merger arb, perhaps real estate, cash, etc.).

[pixelville]

We are in the process of experimenting with a lifestyle similar to what you described. 42 yrs, no house, no kids. Been hurt severely by the stock market in the past decade, but still staying put. We are used to living frugally and plan to spend 30-60K annually. Had traveled extensively across the world before trying this out. We plan to stay in lower-cost countries in years when we need to reduce expenses. We donated most possessions to charity, stored a few things in Storage, moved all finances online, etc. Loving it so far. Some observations from our less than 2 year experience so far.
- Traveling and staying 1-3 months in a place/country (furnished apartments) involves a lot of logistical planning and I found that a good part of my time goes in planning (which city, how to get there, finding an apartment, getting secure internet access, local cell phone, etc) and not as much in enjoying/experiencing as I would have liked.
- Corporate housing is easy in some countries, but doesn't exist in others. If someone knows of sites where I can get temporary furnished apartments (reasonable rates), let me know.
- Since we move so often and don't have a permanent home base, we are essentially living out of suitcases - wear same clothes/shoes; can't make new permanent friends or keep in close contact with friends/family
- I miss access to public library and other such perks of having a home base

We are considering how to most economically establish a semi-permanent base that we can return to, from time to time and spend 3-4 months per year at "home". And maybe do some contract project work from time to time (to stay intellectually challenged and earn some after seeing the impact a downmarket can have on your networth). Also likely we will stay for longer than 1-2 months in a place to appreciate it better.

[W2R]

Quote:

Originally Posted by pixelville - Corporate housing is easy in some countries, but doesn't exist in others. If someone knows of sites where I can get temporary furnished apartments (reasonable rates), let me know.

I would be interested in finding sites that list temporary furnished apartments at reasonable rates too, especially in small towns. I have found three apartment complexes in Springfield that offer corporate housing, but it took me hours and hours to do it. Surely there is an easier way.

[ziggy29]

Quote:

Originally Posted by W2R I would be interested in finding sites that list temporary furnished apartments at reasonable rates too, especially in small towns.

Same here, as in "two months every summer in cooler climates."

[NW-Bound]

Can you say "RV"?

[LOL!]

I see some problems. I see no reason to use 100% munis because you can make more money and pay taxes sometimes.

Did you say how much your house was worth? I don't count my house as part of my retirement portfolio.

It reads like BOTH you and your spouse need to collect SS to make this work. What happens when one of you dies and the income stream of the deceased goes away?

I would try to have more concrete plan. You can get some more knowledge by reading Jim C. Otar's "Unveiling the Retirement Myth" and also that recent thread: http://www.early-retirement.org/foru...bob-47984.html

Anyways, it's better to start with 25% to 50% more than you need than to attempt to cut it close. That's what folks have learned in the last year.

[W2R]

Quote:

Originally Posted by NW-Bound Can you say "RV"?

Nope, just can't seem to get my mouth to say that, somehow. I can try and try, and all that comes out is "apartment....apartment".

[Earl E Retyre]

First, thanks again for all the replies. I love this website.

I am very happy to see Pixelville's reply since he is doing something similar to me and he is even younger. Good points you make. I am curious if your financial situation is similar to mine or better off.

I appreciate Brewer's email. I am going to have to figure out what to do. I looked into TIPs since I read about them on this site. It is safer than muni's but pays half as much interest so it does not allow me to meet my goal. I will need to look into foreign sovereigns and merger arb since I never heard of those. And I still need to read the books that was advised by W2R.

Regarding your question on how to find places to stay there are good websites you can find that lists places all over the world if you google.

[LOL!]

And there is no reason to wait until you are retired to do that traveling and living abroad. Most people can spend 2 weeks abroad now on vacation. So why wait? You can make friends abroad now which will be rewarding and useful later in retirement.

[Earl E Retyre]

LOL, I agree that I could just travel 2 weeks per year and that would satsify some of my needs. But I really look forward to doing more than that and getting out of the rat race of work. So, if $1.9M is not enough to conservatively retire without needing to rely on SS/pension later in life, how much is?

[LOL!]

The exact number will depend on your ages when you stop work. I thought I needed $2.5MM at age 50 plus maximum SS benefits. Health care costs* past age 50 are an unknown which may require more assets to fund. No single thread on a forum will give you an answer that you can be confident with. You MUST get some books and you MUST practice what you want to do.

*If I had to pay health care via COBRA after quitting my job, it would cost my family $24K a year.

[Rich_by_the_Bay]

It seems to me you are taking on a very drastic lifestyle change before you have had a chance to test it.

Why not retire in a modest, easily "zipped up" house or condo in a place you enjoy. Then plan, say, a 3 month trip. If that goes well, do it again in a few months. At least you'll have a base to return to, have a doctor/dentist, make a few friends and create a nontravelling lifestyle you enjoy. Many people get road-weary after a few months, but are good to go a few months off the road.

I think you have the total assets to pull it off if you are careful. You health insurance estimate may be a bit low and this has increased 11% annually for long periods of time. Also, not all policies cover costs incurred out of country (except true emergencies, possibly) -- be careful with that one.

FWIW, I agree with the advice about more diversification - even with your conservative leanings, 30-40% equities in a broadly diversified portfolio will probably protect you best long-term.

Welcome to the board, and don't get discouraged by the cautious replies - you may decide to make a few compromises but you can certainly move the plan forward.