Out of the ER Closet

[MJ]

Hi Folks ,

I thought it was time to come out of the dark. I am thrilled to have discovered this great ER site several weeks ago. I have enjoyed reading many ot the past and current correspondences. The knowledge and common sense that is been expressed here is awesome. I have already learned a great deal and I thank the contributors for that.

Now, a little about moi.
I am 54 yo, single and I would love to retire today but I "unscientifically" believe I will need about 1050K to be FI, which means I have another 12 months to go.
I own (all paid up) and live in a 2 family house in a large East coast city which is giving me a nice additional rental income.
Given my healthy lifestyle (no fast foods, no smoking etc.) I anticipate living into my 90's. My father is over 90 yo and still lives alone.
I also may decide to sell my house and leave the area but don't know when or where I would want to live.
My current assets includes
50K in MM
280K in stocks
340K in 2 to 10 year CDs
275K in various retirement plans 401K and IRA CDs

I am a little worried as I have not been a very successful investor in the past. I have been able to build my assets primarily because of a well paying job and an extremely frugal lifestyle. I continue to save the bulk of my take home.
Unlike many of you, because of my ongoing frugal lifestyle, I expect my essential ER expenses to increase primarily due to the health expenses (health insurance, LTC, dental). And unlike some of you, I would not have the guts to go without health insurance as I only have my nest egg to rely on before I choose to collect SS at 66.
Optionally but as part of my ER quality of life plans, I want to travel internationally 3 to 6 months a year for 5 to 7 years and then RV travel domestically another 5 + years. That would increase my expenses by 16K to 18K for about 10 to 12 years.
I have played with the FIRECalc tool and when using the most conservative settings (5 % stock, TIPS @ 2%), I get 100% success rate. Hope I am using it correctly. I also created my own financial multi sheet spreadsheet with anticipated expenses and asset growth that can be adjusted yearly due to increased inflation and interest. Looking at my murky crystal ball, my incremental general inflation over the next 35 year averages 5.09%. I also have factored in a yearly 10% inflation rate for my medical expenses. Am I on the mark or overly cautious?
I have begun to read some of the books that some of you have recommended, to educate myself. Being somewhat lazy, my challenge is finding a method of investing that won't take too much of my time and will return at least 4% + inflation.

My final wish is to spend most of my money and leave what's left to charity.

Anyway, I look forward to continue reading and hopefully contributing to this group.

I welcome any helpful comments or suggestions.

Thanks

MJ ;-)

 

[dex]

MJ
Have you factored that paid up 2 family house into your retirement nest egg?

There are three ways to look at it.
1. Sell it and rent for those times you are not traveling
2. Sell it and purchase another less expensive home and invest the balance.
3. Keep it and rent out both parts of the house for income and future appreciation.

I am in very much the same financial situation as you at age 49.
My current net worth is about 1,080 and I'm hoping to have about 1,150 by this time next year with a paid up home. I consider my current home and its value the cost of my housing needs. I may be able to sell and pull out $40K but, I'm not planning on it.

 

[MJ]

Thanks.
I wish I had more confidence in the current numbers.:-/
Regarding the selling of the house, I have not included it in my analysis. But were I to leave this area in the next 2 to 3 years. I probably could net over 400K conservatively for the house.
That of course, would make me feel extemly confortable.
If I wind up travelling 6 months ayear, I don't think I would want to own it any longer as who needs the headache of home maintenance and rent collection.

MJ

 

[Nords]

Re:  Another ER calculator

Back before I discovered FIREcalc, I used Financial Engines (http://www.financialengines.com/). They used to hand out free memberships but now they charge $40 minimum for the privilege.

If that's worth your peace of mind, the calculator is extremely robust. You'll easily be able to spend ten hours tweaking on pre-retirement & post-retirement portfolio compositions & rates of return, tax scenarios, inflation projections, and multiple streams of income (pensions, salary, etc). You'll enter your actual investments and FE will use their data to assess volatility & allocation. The software uses either a historical rate of return (like FIREcalc) or a Monte Carlo simulator, and you can tweak to your heart's content.

Your 401(k) custodian may also offer free access to FE or other good calculators.

 

[unclemick]

Duh - Doesn't Vanguard now have some kind of connection/relationship with financial engines? I need to root though my vg stuff and see if I can find it. What mention I've run across has been favorable.

 

[cute fuzzy bunny]

Yeah I think if you're a voyager or flagship customer you get financial engines for free. Not sure about the base account type.

I tried it and liked it, but if I remember right there were some rigidities about it that prevented me from using it as an ER tool...perhaps something that didnt jibe well with a retirement age of 39. My recollection is that it was tightly geared to an "accumulate until you're 60-something and then start withdrawing" scenario.

Of course that was six months ago.

But it wasnt painful to use and it spit out a nice collection of vanguard funds to allocate assets into them. Wasnt close to what I had been thinking or what I ended up doing, and I also recall it had a fondness for the actively managed funds rather than indexes, but that again is a six month old recollection.

 

[Nords]

Re:  The biggest problem I've had with FE...

... is that it won't let you analyze a goal you've already "reached".

When it detects that my current age is older than my retirement goal's age, it refuses to go further. I have to keep changing my retirement age to "next year" before I can proceed with changes to other parameters. And then of course it whines at me that I don't have any income and that I'm not saving any money. Sounds a lot like many people I'm acquainted with!

 

[Bob_Smith]

Yes, Financial Engines is free for Voyager and Flagship clients, but not others. I don't really trust it. For me it always spits out an annual income that is about 15%-20% higher than FIRECalc. Also, it assumes you will sell all of your investments at retirement and buy an annuity with the proceeds. They presume that this annuity (plus pension, SS, etc.) will provide an inflation protected income for one's life expectancy. They don't recommend the purchase of an annuity, they just assume that you could conceivably go out and lock in an inflation protected income by buying one, so they stop projecting at that point. That's why they say it's designed for those a ways away from retirement and they force you to keep your retirement date later than your age. I don't think it's possible, in the real world, to buy an annuity that pays as much as they assume in their calculations. Also, it chokes on TIPS - has no clue what they are and forces you to manually project a return as if it is a regular bond. Nevertheless, I do like to play with it and it always gives me a "feel-good" projected income, but I sure wouldn't pay to use it.

 

[Nords]

Re:  Every calculator is handicapped.

If we could just do a better job of predicting the future, we'd make great strides in retirement calculators.

I went through a "Somebody reassure me that I'm not making a mistake" period where I queried just about every advisor on the island. I was finally drawn to AXA (despite all their other problems) for the quality of their number-crunching simulators.

It was a reassuring yet ultimately futile experience. Their net-worth spreadsheets certainly would have uncovered any omissions, and the followup interview with their consultant would have taken care of any confusion. But as we came closer to writing a $2500 check for that advice, it became clear to me that the best advice is to keep your unfunded expenses below your SWR. (Whatever those may be.)

How about Bud Hebeler's "Analyze Now!" method? http://www.analyzenow.com/free_programs.htm

 

[MJ]

I've also used Fidelity's Retirement Income Planner which seems to be very flexible. It allows expense & asset itemization. Since it asks for an Id and password I guess you need to have an account.

MJ

 

[cute fuzzy bunny]

Funny side story. Some web site offered in depth analysis of your investment choices/portfolio and subsequently suggest tweaks.

It was an interesting site, so I read around a few pages.

I found a bunch of spelling, grammatical, and typo problems.

Sent them an email "hi...interested in your work...noted the following problems that might reduce the appearance of professionalism...(list of stuff)...so...since I've gone out of my way to be helpful, would this qualify me for a free analysis?"

The response (somewhat paraphrased as I couldnt be bothered to go find it: "Thanks for the help, we just went and fixed those glitches. Unfortunately our service is performed by professionals and is of great value, so we cant comp an analysis at this time".

Hmm...so their expert analysis is very valuable, but not valuable enough to use a spell checker, have someone read their site materials for coherency, and not equalled by someone taking their time to help them not look like idiots.

Snork.

 

[MJ]

Nords:
I went through a "Somebody reassure me that I'm not making a mistake" period

You took the thoughts right out of my mind. I would love to quit my job soon, but I don't have enough confidence with my numbers yet.
I want some guru expert to tell me I am financially ready with all the proper guarantees, right!
Also if I retire now I'll have 1 less year of earnings that would go towards my SS. I just sent away for 2 SSA reports, one for this year and another for next year. Maybe my annual SS pension as of this year will be encouraging.

MJ

 

[sgeeeee]

. . . I want some guru expert to tell me I am financially ready with all the proper guarantees, right!
. . .

Hi MJ,

Beware of gurus. :

 

[John Galt]

A guru can be funny,
or sometimes even a jerk.
You might end up with no money,
and have to go back to work.

John Galt

 

[MJ]

I hear you John. If I quit now I certainly DON'T want to go back to work.
Wanting a guru was just wishful thinking. No harm in that.
I have always been a bit leary of people recommending free or inexpensive financial advise. I have never bought any books on how to get rich quick.

My biggest fear is not being able to manage my investments successfully. I get the impression that most of you have been savy investors for a long time. I have not done very well with the stock market since I got in 5 years ago. Before that, I was a treasury note buyer. In fact, had I remained in treasuries and not invested in the stock market, I probably would have been retired 1 year or 2 ago. As I mentioned in my earlier post, I am looking for a relatively easy way to grow my nest egg without feeling like I am working or under financial pressure. Maybe it's just not possible.

MJ

 

[MJ]

GDER:
You betcha my life I vant a fool(ish) proof guarantee. I got to make sure that I can afford the 10,000 acre California vineyard as well as the few mid-size chateaux's in Europe I'm planning to buy.

Any helpful suggestions would be appreciated.

MJ

 

[John Galt]

Speaking of vineyards, one of my former partners
left the business we were in (manufacturing) at about
age 61, and immediately bought land and started a
vineyard from scratch. This was in the late 70s. Apparently it was a life long
dream. Now, starting from scratch is tough in most
businesses, but a vineyard especially. Anyway, he got
it going and built a house on the property, eventually
producing some great wines. As far as I can tell the
business never made a dime. But, he was a happy man.

John Galt

 

[cute fuzzy bunny]

Ah, one of my two favorite sayings.

Producing a foolproof system causes nature to automatically produce a better fool.

And

Sometimes a vacuum is better than the things nature decides to fill it with.

The latter generally used when someone asked me how I felt about someone I thought was an asshat.