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Author: WayneOwl Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5068  
Subject: Doing It .... Date: 8/8/2005 1:27 PM
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Howdy:

As an intro, my name is Wayne and I just recently came across this Discussion Board. My thanks go to GumNaam over on the Foolish Collective for the 'tip'.

I'm Canadian so my perspective may differ somewhat from most of you folks. On the other hand, Money is a Universal Language so I hope to add worthwhile input. With luck I'll gather some useful stuff as well.

Without further ado, I inform you that I have done it. I Retired early, that is, just shortly before my 58th birthday. I do pick up a little additional cash now and then from a bit of consulting. For the purpose of FIRE, I view that as a bonus ( intermittent and unpredictable ) as that money wasn't and isn't essential to my plan.

I noticed some discussion about how basic expenses change after retirement. The one major change I made was moving out of a fairly large city to a more countrified location about an hour and a half away. After what is admittedly only a short period of one full quarter, this is what I have found.

“Automotive” includes a 6 yr old sedan and a small RV and both are fully paid for.
Overall, my expenses for fuel, maintenance and insurance have decreased by 55%

“Food” includes home, 'at work' lunches, and coffee breaks that were/are not part of “Entertainment”. I find I now have sufficient time to prepare more ( and probably better ) meals at home and to shop for 'quantity discounts'. Overall, I am saving about 40%.

"Clothing" includes purchases, dry cleaning, and laundry.The saving so far has been ablut 80% since I have not had to buy much.

I spend the same on “Entertainment” and "Gifts", although some of the activities are different. After all, what's the point of it all if one is not enjoying life, eh? By the way, I am single with no dependants. I expect ( hope ? ) "travel expense" may rise if my investments do better than I can estimate 'with safety' at this time.

For about the last 5 years in the City I was renting. Last year I bought the current place with a down payment of 25% and an ARM interest rate so low at 3.65% that it is almost 'silly'. Interest rates could go up significantly and the mortgage would not become a hardship. It's an older house and while not a 'palace' it certainly is no 'dump' either. For a person like myself who has never been much for “keeping up with the Jones's” it is more than adequate. On an “all in' basis of home, insurance, utilities, phone, HS internet, satellite TV, and a bit of equity-building, the overall monthly expense is down by 55%.

Medical and Health Care Insurance no longer have an 'employer contribution' so they are up by 30%. Those are about the only items that have increased.

Income Tax should drop considerably but that won't be knowable until the end of the year when I can compute my ROI.

Overall, at this point I'd say that "basic living expense" is about 40% lower.

That's about all I can think of posting for now; as I am not even sure where to go from here.

Wayne
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Author: Rhodnius Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3494 of 5068
Subject: Re: Doing It .... Date: 8/8/2005 4:37 PM
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Thanks for the insight, Wayne. Here's one question that would help the audience even more, if you care to share: how much net worth do you have that you feel comfortable retiring on it? If you don't want to share the exact number, a rough ballpark would still be helpful (half a mil? five million?) And how much of that is in real estate rather than more liquid assets?

- Erik

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Author: WayneOwl Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3495 of 5068
Subject: Re: Doing It .... Date: 8/8/2005 8:56 PM
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Erik ........

As the British say: "Some questions are not asked in polite society"...:-). Therefore I can respond to your first one only in relative terms.

As to the second, my only Real Estate is my home and otherwise I am 100% in equities ..... about half of which could be termed 'high yield'.
75% is in tax-deferred accounts.

I view my home as an expense rather than an investment since I have to live somewhere. One of my assumptions is that both property value and cost-of-living inflation will rise at their long-term averages of 3%. At some point I suppose I may monetize the asset but I did not include that in my calculations for 'required income'. Otherwise, the equity will simply go to my heirs and for disposal of my earthly remains.

I used the same annual 3% COLA for all other expenses.

Several years ago I arrived at a target of requiring gain-generating assets of 15 times my 'living expenses' as the point at which I could retire. I used the following factors/criteria.

At age 60, a pension will kick in and pay 20% of the living expenses. Unfortunately, it is non-indexed so its impact will degrade over time. At age 65 an indexed old-age security plan will kick in and cover an additional 15%.

Obviously, the gap between retirement age and pension age is important. The longer that period of no 'wages' income, the better the average performance of this next section must be to make up for it. I formulated the plan at age 50. My initial target was age 56 but that slipped to age (almost) 58.

By the way, it was relatively simple to lay out an Excel spreadsheet for investigating various scenarios. "Life expectancy" gave rise to mixed emotions as it is really not much fun considering one's personal demise ...:-)

Considering my health and geneology, I settled on age 82.

If I can generate an average of 6.67% in pre-tax ROI, then I will go to meet my Maker leaving behind only the 'house' to which I referred previously.

If I can do 8.5% in pre-tax ROI, then I will depart with about the same number of dollars that I had on Retirement Day.

Over the last 7 years I have never generated an investment gain of less than 8%. One year I achieved over 41%. Therefore, with more time now to devote to the cause, I believe that the plan is conservative and do-able.

Wayne




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Author: Rhodnius Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3496 of 5068
Subject: Re: Doing It .... Date: 8/9/2005 12:21 AM
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Well, one of the Fool's missions is to get finance topics out in the open for discussion rather than avoiding them as a social taboo. :) Thanks for sharing.


Several years ago I arrived at a target of requiring gain-generating assets of 15 times my 'living expenses' . . . At age 60, a pension will kick in and pay 20% of the living expenses. Unfortunately, it is non-indexed so its impact will degrade over time. At age 65 an indexed old-age security plan will kick in and cover an additional 15%.

There's actually enough info there to start with some approximate numbers from the Canadian indexed old-age security plan and work backwards to the rest of them. I'll refrain from doing so and leave it as an exercise for any interested readers. :)

Thanks again for sharing; stories such as yours can only serve to inspire the rest of us. 8 years from calculating out the plan to living it, eh? Sounds like quite a challenging goal to meet.

- Erik

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Author: WayneOwl Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3498 of 5068
Subject: Re: Doing It .... Date: 8/9/2005 9:32 AM
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Erik .....

an exercise for any interested readers

The is nothing for anybody to gain from what I would regard as an undesirable intrusion of my privacy.

For comprison purposes I will simply mention that the Royal Bank of Canada, which advises on retirement planning, uses a rule-of-thumb that to be worry-free net assets should exceed 20 times living expenses on Retirement Day. Access to 'pension income' of course changes the formula accordingly.

8 years from calculating out the plan to living it, eh? Sounds like quite a challenging goal to meet.

The first 3 'stepping stones' are well-known and even accepted by the so-called experts; and the earlier in life that one gets started the less onerous is the commitment.

1. Avoid consumer debt. There is little other than a mortgage, education, or for investment purposes which I would call "good debt".
2. Pay yourself first. A portion of every dollar passing through one's hands absolutely has to be set aside for saving/investment.
3. Avoid catastrophic losses. Every investment carries some level of risk and imo requires an 'exit plan' before it is made.

Best 'o' luck
Wayne




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