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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 741824  
Subject: 12-month summary from one ERee Date: 6/13/2001 2:49 PM
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I entered early retirement one year ago at age 37. As perhaps one of the least wealthy early retirees here, I thought I would summarize what I have learned and experienced these past twelve months.

Financials.

I retired with a net worth of approximately $175,000. I squandered $7000 of accrued vacation pay during my first six months with virtually no reduction in my standard of living. But in January of this year, I was dismayed to find my first annual SEPP from my IRA in the amount of only $9000, some $2000 less than the $11,000 I had budgeted before last fall's market demise. Neverthless, I have adapted and will continue to do so. Anything but going back to work! When life gives you lemons, make lemonade.

Fast Food.

Slashing fast food from my budget saves me two hundred dollars a month. I thought for sure I would experience serious withdrawal. After all, who really knows what they put in a Big Mac? Fortunately that wasn't the case, and the fat has migrated nicely from my waistline to my wallet.

Income Taxes.

I am very pleased to report that I will owe no federal or state taxes this year. It's especially satisfying in that the bulk of my income is from tax-deferred 401(k) savings. I deferred at 28% and am paying at 0%. Not a bad deal, IMHO. No tax rebate envy here.

Diversification.

I learned the hard way that the stock market isn't exactly dependable, so for the first time in my life, I looked into bonds and found Treasury Inflation-Protected Securities, TIPS for short. So far I have been very happy with their plus-7% performance, and plan to gradually move more of my assets into TIPS.

Part-time work.

I had a brief three-week stint working at a nearby garden nursery this spring. I thought it would be a lot more fun than it was. Instead, I was expected to do twenty things at once, with minimal compensation and even less appreciation.

I now have new-found respect for those still in the working world earning minimum wage. For many such desperate individuals, the world of employment can be especially unrewarding.

Exercise.

Retiring early allowed me to pursue mountain biking on a full-time basis. In the past year, I have ridden over 6000 miles and have lost 15 pounds. My percent body fat has dropped from 32% to 22%. I never did stretches before retiring, and doing so has immensely improved my riding performance. I am in the best shape of my life and truly looking forward to breaking some personal records in a local bike race on July 4. Wish me luck!

General Health.

The typical indoor office work environment, coupled with co-workers passing germs to one another like candy, often gave me constant sniffles and occasional body aches and pains. Since retiring, they have all but gone away.

Health Insurance.

Ever since I started reading the REHP board, I have become totally disenchanted with health care in general, and health care insurance in particular. The shortage of qualified medical personnel and modern facilities, combined with the stress of being a medical professional in this day and age, paints a bleak picture of the health service industry at a time when costs and insurance premiums are going through the roof.

Television.

I like watching TV. A lot. I probably watch four or five hours of it every day. I know it rots my brain but so what. It's my brain, I can rot it if I want to.

Friends.

As you know, I have a 16-year-old neighborhood friend who continues to visit occasionally, who's fast becoming an avid mountain cyclist. I have no kids of my own, so interacting with him satisfies an primordial urge of mine to perform a pseudo-parental role. I think it's really cool that he hangs out with an old geezer like myself. His irrational youthful exuberance rubs off on me at times. It keeps me feeling young, an important component of early retirement.

I also try to have lunch with former co-workers at least twice a month, and to keep in touch with a lot of them via email at least once a week. It's great to hear how much they hate working, and how much they miss me.

The Internet.

The arrival of high-speed internet access has allowed me to participate in various online communities, like this one. I spend a lot of time researching topics of interest on the World Wide Web, which never ceases to amaze me in terms of the breadth and depth of its knowledge.

One thing I try to do every day on the internet is play a game of bridge or mahjongg. I find it keeps my mind keen---I really notice if I go several days without the game playing.

Pets.

Now that I'm around them a lot more, my cats have grown much more affectionate towards me and don't scratch the furniture nearly as much. They remain a vital, integral part of my daily existence.

House.

My mortgage payments and property taxes gobble 80% of my income. For this reason, I'm planning on selling my home within the next year. With the equity, I plan to buy a Recreational Vehicle in which I'll live full-time and travel the country. The RV lifestyle allows much better control of living expenses than a house or even an apartment, since RVers can "boondock" for next to nothing in various places for weeks or even months at a time.

Fun.

Fun often involves spending money, which is hard when you're living on just $9,000/year. Fortunately, mountain biking is both relatively inexpensive and thoroughly enjoyable. I especially like riding at night when it's cooler and the animals are more active.

When I was employed, I used to do the typical bar and dance club scene all the time, but I hardly miss it at all now. It was a toxic lifestyle I used to deal with the stress of work, but now there's little need for it.

Volunteering.

They are building a new junior high school right down the street from me and stocking it with computers. I have already emailed the principal and she is delighted that I am willing to help set them up this summer. I am really looking forward to it.

I am also considering working with Habitat for Humanity and the local no-kill cat shelter, although I am somewhat apprehensive. I don't want to develop a psychological need to perform such work, simply to fill a void. And the last thing I want is to become attached to more cats! Two is enough, especially in an RV! Still, I'm considering it...

TMF REHP Board.

I can't say enough good things about this board. I've been here for two years now and I've learned so much it isn't funny. I know that without it, I never would have imagined it was even possible to retire on as little as what I have. Early retirement has opened up a new, exciting chapter in my life, and it's only the beginning.

The support offered by the board members has been invaluable. Posting here has also helped me develop a better and hopefully more mature writing style, which I dedicate to my dad, a newspaper writer and editor. I think he would have been proud if he hadn't died at the young age of 56---one of the reasons I chose to retire now, rather than wait.

My Future.

I remain a prisoner of the stock market. Although I have some cash assets outside my IRA, my annual SEPP, the bulk of my income, is tightly tied to the value of the S&P 500 index. I would very much like to see VFINX above $130 or even $120 at the end of the year. I am pleased with the aggressive stance of the Fed, and it is my fervent hope that the economy makes a healthy recovery. The sooner the better.

Other than that, I have virtually no regrets about winning the rat race. I cannot adequately express in words what it means to not have to wake up early to perform the same mindless bidding of my employer and spend every weekend in decompression, and then repeat this whole process week after week, year after year.
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Author: John3haha Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42070 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 5:09 PM
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Great Post,

One quick question from a lurker who does not remember it answered elsewhere...do you still pay for some form of health insurance despite your disenchantment? If so, do you expect to hold onto this long term as it may become more important in time?

John

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Author: andrew61 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42081 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 5:45 PM
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Great post!

I'm a bit puzzled, however....

Let's see -- your annual living allotment is $9000, 80% of which is gobbled up by mortgage payments and property taxes, leaving $1800 for all your other expenses. That comes out to $150 a month, or roughly $5 a day, which I'm assuming has to cover utilities, food, transportation, and other miscellaneous expenses.

Wow! I thought I was good at LBMM, but I can't live on anything near $5 a day. How do you do it???


Andrew61


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Author: sjmins One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42085 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 5:48 PM
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Duggg:

Thanks for the post. This is really useful stuff for the rest of us.

If you ever feel like you need a change from the desert, and want to visit The Big Apple, look me up. We can go to a game (Yankees, Mets, Rangers, Devils, Knicks, Nets?) or just hang out at my place in Suburban NJ. The change of scenery might be refreshing.

The RV sounds like a cool idea.

Steve (living in a house in New Jersey that was built in 1902)

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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42089 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 6:14 PM
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John3haha asks,

do you still pay for some form of health insurance despite your disenchantment? If so, do you expect to hold onto this long term as it may become more important in time?

I currently pay no health insurance.

I'm convinced that if I did, and if I needed medical care, the insurance company would deny all but the most modest claims.

And even if my claims were approved, I still would question the quality of the medical care I would receive.

I know that's a horrible way to look at things. I truly wish things were different.

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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42090 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 6:19 PM
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Andrew61 writes,

your annual living allotment is $9000

Correction, that was the amount of my SEPP. Sorry if I said $9000 in my post. My living allotment is actually $11,000 a year. I'm dipping into $2000 of savings this year (offset slightly by my part-time employment) to make up the difference.

That comes out to $150 a month, or roughly $5 a day, which I'm assuming has to cover utilities, food, transportation, and other miscellaneous expenses.

Well it actually comes to about $250 a month or $8 a day. Utilities consume about $75 of that on average. The remaining $175 has managed to cover food and the other expenses, knock on wood.


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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42091 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 6:24 PM
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sjmins writes,

If you ever feel like you need a change from the desert, and want to visit The Big Apple, look me up. We can go to a game (Yankees, Mets, Rangers, Devils, Knicks, Nets?) or just hang out at my place in Suburban NJ. The change of scenery might be refreshing.

Well, thanks, Steve, I appreciate it! I may just take you up on your offer, though it'll probably be a while til I make it out east.


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Author: aacoh One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42104 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 7:10 PM
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I enjoyed your post very much. It really goes to show there are different strokes for....

When I look at the traditional way of being able to retire, (4% safe withdrawal on $1 mill savings), it will never happen in my life. And I don't want to save for a million anyway.

But when I look at my situation: a few rental income properties, low cost living expenses, vegetarian, it just doesn't require a lot to live.

I'm happy with the life I live. I can only sleep in one bed, enjoy the same sun, and it doesn't cost too much to go run. I also have a cabin in the mountains and share that with friends and family.

It seems to me, the more we look at early retirement, we realize it might not take as much to retire as we really thought. Just think about the money saved on not having to buy clothes for the office, the cost of gas to and from work, etc.



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Author: arrete Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42115 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 8:59 PM
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I currently pay no health insurance.

Please look into at least catastrophic insurance. Otherwise, I'll worry about you - on that bike! In an RV! Whatever! Be careful!

arrete - who has enough to wory about

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Author: drnonlinear Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42143 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/13/2001 11:59 PM
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Duggg,

Great post! Just 2 points:

1. You have a nice writing style. I'd suggest keeping detailed records etc. like this report. Over the next few years you'll have quite a stack and you might be able to get it published as a book (or at least a web-book). Do keep writing!

2. When you make it out east, do come & look us up in Mass.

-dr.nonlinear-

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42175 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 9:49 AM
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2. When you make it out east, do come & look us up in Mass.

Duggg, with all these invitations to come visit, I would say that your expenses just got smaller! We were on the migration path in PA when my parents would drive their RV from FL, where they live, to MA where most of my siblings live. Their preferred mode of visting was to pull up in the yard in the RV, where we would run an electrical cord and hose to set up the mini-campground. They of course being from the school of though shalt not impose tried to pay for their hook-ups, which we did not accept. I'm sure they also appreciated getting away from the grandchildren from time to time.

I will say though that I am a little concerned with your choice of full time RVing given your recent lonly post. It can be an isolating lifestyle.

Best of luck,

InParadise

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Author: readyteddy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42196 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 11:28 AM
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Thanks for the post.

I am curious. You say you contemplated SEPP from your IRA at the rate of $11,000 a year. You say your net worth is $175,000. You say you are 37.

I am 55...my life expectancy is 28.5 years. Therefor, using the simplist (and, with interest rates being what they are, probably the most generous) available method of doing SEPP, the permitted withdrawal would be 1/28.5 times the amount of the IRA. If your entire net worth of $175,000 was in the IRA, the straight line method would produce an annual withdrawal of $6140 (175K/28.5)......if you are 55!

But you say you are 37. Have to think the life expectancy is approaching 50 years...let's say it's 45. That would make your permitted withdrawal of $3,889.

Now, there are other ways to calculate SEPP, but they are driven primarily by interest rate assumptions with the lower the rate, the lower the withdrawal. What the heck interest rate assumption are you using that gets $11,000 out of $175,000 for a person with a life expectancy of 45-50 years, when thirty year treasuries yield less than 6%?

Not picking on you, just trying to debug my own assumptions about SEPP.

Any insights would be appreciated, and if my assumptions are right, I hope the IRS doesn't audit you.

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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42200 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 11:54 AM
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readyteddy writes,

I am 55...my life expectancy is 28.5 years. Therefor, using the simplist (and, with interest rates being what they are, probably the most generous) available method of doing SEPP, the permitted withdrawal would be 1/28.5 times the amount of the IRA.

You are describing the minimum distribution method for SEPPs, which is usually the least generous of the three "approved" methods.

Now, there are other ways to calculate SEPP, but they are driven primarily by interest rate assumptions with the lower the rate, the lower the withdrawal. What the heck interest rate assumption are you using that gets $11,000 out of $175,000 for a person with a life expectancy of 45-50 years, when thirty year treasuries yield less than 6%?

I'm using the annuity method with annual recalculation, so my first SEPP was based on an interest rate of approximately 7%. Note though that my $175,000 net worth includes home equity and other assets outside my IRA, which are not part of the SEPP calculation.

The "unsafe" 7% withdrawal rate is somewhat justified by my anticipated move to the less expensive RV lifestyle and the fact that I'll have a Roth IRA to fall back upon after age 59½.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42201 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 11:57 AM
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readyteddy asks,

Thanks for the post.

I am curious. You say you contemplated SEPP from your IRA at the rate of $11,000 a year. You say your net worth is $175,000. You say you are 37.

I am 55...my life expectancy is 28.5 years. Therefor, using the simplist (and, with interest rates being what they are, probably the most generous) available method of doing SEPP, the permitted withdrawal would be 1/28.5 times the amount of the IRA. If your entire net worth of $175,000 was in the IRA, the straight line method would produce an annual withdrawal of $6140 (175K/28.5)......if you are 55!

But you say you are 37. Have to think the life expectancy is approaching 50 years...let's say it's 45. That would make your permitted withdrawal of $3,889.

Now, there are other ways to calculate SEPP, but they are driven primarily by interest rate assumptions with the lower the rate, the lower the withdrawal. What the heck interest rate assumption are you using that gets $11,000 out of $175,000 for a person with a life expectancy of 45-50 years, when thirty year treasuries yield less than 6%?

Not picking on you, just trying to debug my own assumptions about SEPP.

Any insights would be appreciated, and if my assumptions are right, I hope the IRS doesn't audit you.


Using the amortization or annuity method to calculate your SEPP with an interest rate of 120% of the applicable Federal long-term rate (5.75% for June 2001 - 120% of that is 6.90%), yields an annual withdrawal of over $12,000 for a 37-year-old with a $175,000 IRA balance. See link:

http://www.geocities.com/WallStreet/8257/wdraw59.html

intercst

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Author: duggg Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42203 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 12:08 PM
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InParadise writes,

I will say though that I am a little concerned with your choice of full time RVing given your recent lonly post. It can be an isolating lifestyle.

I'm a loner at heart, so I just have to avoid attachment, and keep my friends just far enough away that I can leave for several months without feeling withdrawal pains.

I believe I can do that already with most of my friends. Ryan was an exception, because he was always around, then suddenly wasn't. I just have to avoid that kind of situation in the future.

My experience with other RVers is that they're generally very outgoing, even to the point of arranging group activities with other RVers. I would be happy, for example, once a week playing bridge, or doing a 4WD adventure, or a rafting trip, or a hike somewhere.

But at the same time, these people understand the lack of permanency, and keep enough distance that it's easy to leave when one wants to or needs to.

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Author: readyteddy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42206 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 12:17 PM
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duggg:

Thanks..I am going to have to go back and restudy this.

As for the "safe" verses "unsafe", my feeling is play it like you feel it. Personally, I think they have greatly overstated my life expectancy...especially if I keep working :)

Good luck to you.

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Author: readyteddy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42232 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 12:59 PM
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intercst:

Thanks a bunch for the link. I knew it had to be online somewhere.

I plan on retiring before age sixty and taking SEPP withdrawals from my IRA for five years...I am still going to stick with the conservative method. from what I read, the odds of outliving my money are about 10% under that method. Using the more agressive method, well.....you're toast if you are withdrawing principle in the early years and in this market I would say the odds of that would be pretty good.

Speaking of which, any fools out there decide to roll the dice on real estate and load up the old IRA with REITs. Been working for a couple years here but the wheels could come off.






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Author: bamboo7431 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42299 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/14/2001 4:22 PM
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When I look at the traditional way of being able to retire, (4% safe withdrawal on $1 mill savings), it will never happen in my life. And I don't want to save for a million anyway.
Well, it should be 4% safe withdrawal on 25 times your yearly expenses.

But when I look at my situation: a few rental income properties, low cost living expenses, vegetarian, it just doesn't require a lot to live.
In which case it just doesn't require a lot to retire.

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Author: 4037plan Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 42665 of 741824
Subject: Re: 12-month summary from one ERee Date: 6/18/2001 10:01 AM
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Great post! I'll probably spend the rest of my working day reevaluating how much we need to retire.....$250 per month after housing, very impressive!

There was an episode of "The Good Life" (HGTV - Sunday night) a few months ago in which the host profiled a couple that ditched their high-stress jobs and cruised around the country in an RV.

http://www.hgtv.com/HGTV/project/0,1158,FOLI_project_15102,FF.html

They even wrote a book about it called "First We Quit Our Jobs: How One Work-Driven Couple Got on the Road to a New Life." You might want to check it out.

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Author: Buoy Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 49780 of 741824
Subject: Re: 12-month summary from one ERee Date: 9/8/2001 11:51 AM
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Ummm.

What happens when your RV breaks down? How are you possibly going to afford another?

What happens when you get sick? You have no insurance and no way of paying bills without drastically cutting into your savings.

What happens when the market goes through a five year bear, and you have to draw off of your base rather than off of gains for that long?

What happens when all sorts of things.

More power to you, and good luck, but man, you sure seem crazy.

Bob Vesterman.

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