Got laid off today ...... opportunity to RE?

I got laid off today - full pay and benefits for 6 months. Best thing that could happen to me.

I have been reading posts here for about 3 months now and am going to do 3 things for sure:

- allocate assets according to Four Pillars of Investing
- tweak the budget, calculate SWR and run the numbers to see if I can do it
- read earlier posts to learn more from this forum

How do I turn this down time into an ER reality for me now?

- Dante

Quote:

How do I turn this down time into an ER reality for me now?

Get a cup of coffee and sit on your deck and enjoy the birds and relax.

[unclemick]

Yep

Relax. And don't a year like I did in 1993 to figure out ER is good. No forum and never even heard of ER back then. My idea was age 63 instead of 66 constituted early retirement.

I agree with unclemick. Get thee to ER post haste.

I told this once before. From germination of the idea
in my fertile brain to actually starting down that
yellow brick road was a very short interval. A friend at
the country club heard I was closing my business and was shocked. I said "I told you I was thinking about it."
He said, "Yes, but I didn't think you meant right away!"
It's partly a Type A thing. Once I have made a
decision I want it done right now! Been that way all my life.

John Galt

[cute fuzzy bunny]

Thats how I started. Company offered a "separation package" hoping to get rid of some dead wood. A years pay, benefits, bonuses and even a free computer thrown in.

They couldnt just offer it to specific people, so after a weeks consideration I took it. It included a clause that you couldnt come back to work for a year. I figured, hey, a free years paid vacation and if I hate sitting around I can go back.

Four years later...

Run! Run away!

[mickeyd]

May be a good time to experiment with reducing your expenses (don't forget you can always increase them) and see what your level of tolerance is.

You'll not only save money for future use but you'll see what you can live on while making lower expendetures.

Also, I especially like Cut-throat's coffee..birds...relax idea.

[Nords]

... re-read a library copy of Po Bronson's "What Should I DO With My Life"?

http://www.pobronson.com

And hopefully you won't be doing it at work!

Excellent suggestions. Love them.

Here is a question I am wrestling with:

Is there a way to get 4%-5% income stream today from a $1 Million portfolio?

Today it is in 70% cash, 27% stock mutual funds and 3% bonds but I can reallocate any which way that can get me to the 4-5% annual cash flow. 80%taxable/20% nontaxable mix.

Thanks.

Dante

[Telly]

Hey Dante, sorry to hear that. Or, congratulations. I don't know which will really be appropriate. That's how I entered into ER. 'course, I didn't know at the time that I would actually be ABLE to ER right then. At the time it happened, I had no idea that there was an ER community, bulletin boards, websites, FIRECalc and other calculators.

I went through a lot of changes the first year, the first 6 months in particular. Sort of cold turkey. Had no guiding light nor knew anyone of my age doing it (age<50 then).

This comment here may say it all:

Quote:

* *- *tweak the budget, calculate SWR and run the numbers to see if I can do it

Into that is if you are getting any sort of pension, either defined benefit, when it starts, or if it is being converted to a lump sum that they haven't told you exactly what it will be yet. And health insurance, does it end at the 6 mos. point? I would allot at least 2 mos. to acquire health insurance if you will have to do it on your own. It ain't cheap, even high deductible plans.

And all the other stuff, like if you have any children still at home, college expenses, insurance for them, all that kind of stuff that complicates the financials.

If your financials won't cut it, then back to work ASAP may be the ticket. The longer you are out, the harder and harder it is to even contemplate doing it again.

Wish ya luck!

[mickeyd]

Dante,

Your age may dictate this, but you seem to be extremely heavy in cash, especially if it is taxable.

You might consider placing 60% of your funds in a tax efficient fund like Vanguard Total Stock Market index.

There are all sorts of way of withdrawing 4%. I agree with Telly that you give FireCalc a try.

[unclemick]

I really, really,REALLY hate to say this being a self confessed Boglehead - But abandoning principle (like a self deflowering virgin) in todays market I would take a real hard look at the 4.2% SEC yield of Vanguard Wellesley and make my comparisons accordingly to Four Pillars, Coffeehouse, Target Retirement, etc.

Quote:

Dante, Your age may dictate this, but you seem to be extremely heavy in cash, especially if it is taxable. I am 47. You might consider placing 60% of your funds in a tax efficient fund like Vanguard Total Stock Market index. Agreed. But can I expect capital appreciation in the next 5 years or so? There are all sorts of way of withdrawing 4%. *I agree with Telly that you * give FireCalc a try. I most definitely will now.

[cute fuzzy bunny]

Its possible you'll see capital appreciation in something like a TSM or S&P500 index, but I personally am not counting on it.

Unclemicks idea is the way I went. Take a good yield in a conservative position and try not to lose.

Quote:

Its possible you'll see capital appreciation in something like a TSM or S&P500 index, but I personally am not counting on it. Unclemicks idea is the way I went. *Take a good yield in a conservative position and try not to lose.

TH,

If you were in my shoes, how much would you put in the Vanguard Wellesley Income Fund?

All in one shot or dollar cost averaging in (how many times)?

Really appreciate your candid opinion.

Dante

Quote:

I really, really,REALLY hate to say this being a self confessed Boglehead - But abandoning principle (like a self deflowering virgin) in todays market I would take a real hard look at the 4.2% SEC yield of Vanguard Wellesley and make my comparisons accordingly to Four Pillars, Coffeehouse, Target Retirement, etc.

Recency - Unclemick Recency.

[cute fuzzy bunny]

Quote:

If you were in my shoes, how much would you put in the Vanguard Wellesley Income Fund? Really appreciate your candid opinion.

Shoot...I'm never candid

Its a good question. In early january I put about 75-80% of my taxable into the fund. That enabled me to buy 'admiral shares' which have a cost of only .20%...very competitive with most indexes. I thought about DCAing in, but decided just to take the jump. Facing the same decision today, I'd probably do the same.

A few months ago with the spectre of rising interest rates, I pulled a chunk...probably 40% of that out into the short term corporate bond fund, figuring its very short bonds would take the rises better and I'd avoid some of the rising rate downdraft. It appears most of this was already priced into the fund, as it did drop down only about 1% and has as of this writing almost fully recovered. In other words, its doing exactly what I wanted it to do...throw off some cash and preserve my principal.

I'm a little undecided whether to plunge the short term corp money back into wellesley, keep it in the short term corp fund, or take some out and buy some 5 year cd's at 4.5%. I'm undecided because I'm not sure if the fed will in fact continue to raise rates because it appears the economy may be slowing and some fairly reliable indicators show that we could be heading back down into a weak economic posture.

All that having been said, the strategy to avoid losing isnt a bad one, nor is such a strategy terribly lonely. A lot of fund managers and serious investors are holding a lot of cash, cd's and short bonds...many 50% and more...and thats unheard of for fund managers to be sitting on huge piles of cash.

But what are your alternatives? Real estate in my area is hideously expensive and overpriced. I dont feel like starting or buying a small business or store. I feel like most equities, in particular broad based indexes, are overpriced...although this is extremely debatable. Money market returns stink. CD's will pay you a little more than inflation takes away. Bonds are largely paying a real return of under 2%. I feel the fed is drastically understating inflation, which makes those 1% ibond and 2% tips returns unappealing to me.

At least you get a 4+% yield out of this fund, the stocks it holds are relatively cheap at ~14.5 P/E, and the bonds are not too long and very creditworthy. Historically it will keep your principal ahead of inflation while producing a 4% or better yield. If after taxes you can live on that, then I think you're good to go.

But thats just my opinion, I could be wrong. We'll all know in 3-5 years. Then again in 7-10... Rinse and repeat.

[dex]

Other funds to look into are
Dodge & Cox Balanced (DODBX)
Oakmark Equity & Income I (OAKBX)
American Funds Inc Fund of Amer A (AMECX)
I don't own these but have been watching.
I'm still working and waiting to allocate my$ for early retirement.
My current allocation is:
%
US & Int'l Bond 14.1%
Commodity 0.9%
US Small Stocks 1.8%
US Mid Stocks 0.9%
US Large Stocks 0.9%
Growth & Income
International Stocks 0.0%
Euro/Aus 51.0%
Cash 30.3%
Total 100.0%

Quote:

Dante, If they gave me 6 months I would think that was just great. *You got a million bucks, time to think, and 6 *months income. *Nice. I am also looking at the Wellesley Fund with similar goals in mind I think.

BabyApe,

I calculated our expenditure for 2003 and it is $45,627 actual - let's say $50K total for a family of 3 (two of us and third grader son) for 2004. We have $600K equity in the house and a mortgage that is less than $200K.

I'd feel more confident about RE if I could get the portfolio to produce the $40K-$45K in dividends. That way we could maintain our lifestyle and also do our own thing.

Are you in a similar situation?

Dante

[unclemick]

Recency? - ouch! - Cut_Throat you caught me. O.k. O.k. - here's my left handed way of thinking:

1. six month's to establish a budget and determine how much now dollars need to be coming in to cover that.
2. Recency - heh, heh - now how do I cover the long term stretch and stay up with inflation.

1. and 2. can be blended. Take your time and research. Getting 4% div/interest is tough in todays market.

I cheat:

1. defined non cola pension 60% of dollars plus 40% dividend stocks.
2. Vanguard Lifestrategy mod(2.2% SEC yield) with a 10% Vanguard REIT INDEX kicker - untouched so far held as inflation fighter in the stretch.

The struggle is to find the balance and it has to be an investment philosopy you understand the why and it fits you. No rush heh, heh but start. A single balanced fund to an elegant mutli - class Four Pillars or Coffeehouse or somewhere in between.

Quote:

Other funds to look into are Dodge & Cox Balanced (DODBX) Oakmark Equity & Income I (OAKBX) American Funds Inc Fund of Amer A (AMECX) I don't own these but have been watching. I'm still working and waiting to allocate my$ for early retirement. My current allocation is: * * *% US & Int'l Bond * * *14.1% Commodity * * *0.9% US Small Stocks * * *1.8% US Mid Stocks * * *0.9% US Large Stocks * * *0.9% Growth & Income * * * International Stocks * * *0.0% Euro/Aus * * * * * * * * * *51.0% Cash * * * * * * * * * *30.3% Total * * * * * * * * *100.0%

Dex,

Is your current portfolio producing a pretty good return?

Have you found any of the above 3 funds to be better than the other two in terms of return/volatility?

Would you choose them over the Vanguard Wellesley as the primary cash generator in ER?

Dante