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Author: OldOne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: At sea over rollover, don't want to capsize! Date: 4/26/2004 1:50 AM
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I'm a bit overwhelmed by all the alternatives, variables, and my situations (40+, retirement assets <$100k). Any help or pointers on this rollover problem, or how to self-educate on managing my retirement better, etc. would be greatly appreciated! <P>

I was in a very similar situation about 18 years ago. 40, much less than $100k in retirement funds (or any savings at all) and little knowledge.

I did own a house and had a new job with relatively good pay, which I got after being laid off from a previous one. Home equity was my only real asset, which was about $100k. I had no rollover at all, so the issue never came up.

Current situation is over $2M net worth and early retirement by choice about 2 years out. It can be done.

How I did it was almost accidental. About 2 years into the job, I got caught in a political situation which severely limited my potential for advancement, so I decided I needed to develop financially rewarding outside interests which would compensate for no real advancement. I had bought a fixer-upper house, but hadn't really done anything with it. I spent every weekend for two years renovating the house--right down to a new foundation. This meant no extra time spent @ work, and almost no spare time, but resulted in higher home equity.

I refinanced, took out enough money to buy a rental house, and spent about a month of vacation renovating it.

Meanwhile I had maxed out my 401(k) contribution and was putting any extra money into a taxable brokerage account.

After getting the rental house in order, I started learning about stock investing. Spent 3-4 hours per week studying and reading.

Then I put $25 k into a partnership in a low end apartment building.

I have always been a do-it yourselfer, and managed my own portfolio at a deep discount brokerage.

Sold out of the apartments for a $250 k gain before taxes last year.

Bought two other rental houses along the way.

Current situation, after paying capital gains on the apartments:

401(k) $550 k
taxable portfolio: 250 k
cash & bonds: $100k
rental house equity: $700k
home equity $600k

This is far from the best story you will hear on this board, but it shows that it can be done.

Throw in my pension, my wife's pension and whatever Social Security might be left after the politicians get their chunk, and it doesn't look like too bad a retirement.

My advice would be to forget all about Vanguard and Fidelity. Instead open an IRA at Ameritrade or a similar broker and start learning about exchange traded funds. This will take 3-4 hours per week for a couple of months, but will be well worth the time. After you have made some good choices on ETFs, spend the learning time looking into investing in individual stocks. Consider devoting 3-4 hours per week to learning about investments for the rest of your life. Start with the Fool & the Retire Early Home Page. Somewhere along the line pony up for a subscription to Investor's Business Daily.

With Vanguard or Fidelity, or any other mutual; fund, you are paying someone else to look out for your interests. There is an inherent conflict here because their primary interest is to increase their own income--not to increase yours.

As with most things in life you have to work at investing to get good results.

P.S. I have done a lot better in real estate than in stocks. This may be a accident, may be because I can't look up the value of a house every 45 seconds on the internet, or may be because it is a better investment. Or, it may be because I can put "sweat equity" into the buildings.

P.P.S. The job worked out better than I could have hoped. After I had developed sufficient independent resources I could make decisions based on my own values and judgement without having to worry about what the boss thought. I wasn't obnoxious, just ethical in all areas. This has resulted in respect, significant advancement & higher pay.
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