Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (50) | Ignore Thread Prev Thread | Next Thread
Author: TRRR Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19369  
Subject: Retiring and Nervous!!!! Date: 1/2/2000 3:38 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 10
I am planning to retire on June 1, 2000 at age 55. My current investment portfolio is as follows:

$600K - 401K
$300K - cash balance pension
Mutual Funds and Cash - $100K

I'm not certain how to best invest money in my retirement years, especially considering that I won't be 59 1/2 at retirement. Should I hire a financial guru to set up a 72T distribution plan or, is this something I can do myself???? We've met with three financial planners who each promise us that if we hand over all our investments, they guarantee us we will live happily ever after. One guy told us we would never have to work again.

While my wife (age 40) and I realize that we may have to pick up jobs during our retirement years, is it realistic for us to expect $80K in disposal, after-tax income each year? We are currently debt-free.

I'd appreciate your comments. Thanks!
Print the post Back To Top
Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1246 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/2/2000 4:02 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I am planning to retire on June 1, 2000 at age 55. My current investment portfolio is as follows:

$600K - 401K
$300K - cash balance pension
Mutual Funds and Cash - $100K

I'm not certain how to best invest money in my retirement years, especially considering that I won't be 59 1/2 at retirement. Should I hire a financial guru to set up a 72T distribution plan or, is this something I can do myself???? We've met with three financial planners who each promise us that if we hand over all our investments, they guarantee us we will live happily ever after. One guy told us we would never have to work again.

While my wife (age 40) and I realize that we may have to pick up jobs during our retirement years, is it realistic for us to expect $80K in disposal, after-tax income each year? We are currently debt-free.



Can not do it.

Maybe $40,000 to $60,000 before tax.

Read the retirement boards and info here. Look for retire early home page and discussions on safe withdrawl rates.

Sounds like your financial planners will do more harm than good to your financial health. See a CPA to discuss the 72T withdrawl rate.

Ask the planners what type of a written guarentee they will give and have them post a bond. (Ha, Ha)

A fee only planner to discuss your budget and potential investment earnings is a good idea. Pick one who does not sell anything. Some CPA's offer this service.

I hate to say this but a million dollars is not very much money in light of your desires.

Did you include health insurance at 5,000 to 7,500 in your budget? Retirement expenses can be more than preretirement if you want to be active.



Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: TheBadger Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1250 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/2/2000 5:49 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Sounds like your financial planners will do more harm than good to your financial health.

I tend to agree, paticularly if the financial planners are also in the business of selling products; insurance, stocks, bonds, etc. To me, irrespective of industry advice to the contrary, this is a clear and present conflict of interest.

See a CPA to discuss the 72T withdrawl rate.

I agree completely. IRC §72(t) is a very advantageous code section & an equally dangerous one.

Ask the planners what type of a written guarentee they will give and have them post a bond. (Ha, Ha)

If you really mean the planners, then I agree. Conversely, if you are referring to the CPA/Tax Accountant is disagree. The good CPA will provide an Opinion Letter (the equivalent of the guarantee) and will also be insured to sufficient limits against professional liability (the equivalent of a bond).


TheBadger


Print the post Back To Top
Author: QuintonJr Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1251 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/2/2000 5:58 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I recently did it at 51 and believe me I was neverous too. My wife (49) got physically sick after I tendered my resignation!! All is well now and we can honestly say that this is the best decision that we've made in a long, long time.

I would highly recommend hiring a CPA. Do your research and find one that has had the real life experiences with 72(t). You will be impressed with the legal options that you have available to you.

I don't know if i will ever find a financial advisor that I trust 100% especially since i have become a registered Fool. You are starting at a great place, here and you will be surprised at how quick this site will educate you, so put off trying to select a finacial advisor at this point. You need to become educated so you can ask intelligent questions (The real fun is watching the expressions on the faces when you start to ask questions about fees, commissions and penalties).

Don't rush into making the financial choices. It took me 2 months to implement, so if your situation is similiar you should have a target of April 1, ie, you have about 3 months.

Good luck!!!!

Print the post Back To Top
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: 1252 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/2/2000 6:09 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TheBadger wrote,

<<<Ask the planners what type of a written guarentee they will give and have them post a bond. (Ha, Ha)>>>>

If you really mean the planners, then I agree. Conversely, if you are referring to the CPA/Tax Accountant is disagree. The good CPA will provide an Opinion Letter (the equivalent of the guarantee) and will also be insured to sufficient limits against professional liability (the equivalent of a bond).


I disagree.

The Opinion Letter from a CPA isn't the same as having a written contract that says your tax advisor will pay any IRS penalties or interest charges that result from his advice. If you have to sue the CPA under a professional liability policy to recover your losses, paying your attorney will likely mean you'll get less than 100 cents on the dollar.

If you're paying for this type of advice, it makes sense to be sure the advisor will keep you whole if he screws up.

intercst




Print the post Back To Top
Author: BluesH One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1278 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/3/2000 3:37 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
TRRR writes:
While my wife (age 40) and I realize that we may have to pick up jobs during our retirement years, is it realistic for us to expect $80K in disposal, after-tax income each year? We are currently debt-free.

To achieve $80K in after-tax income, you'll need more than $90K before tax. From a $1M portfolio, that's a 9% withdrawal rate. I'm afraid that's quite a bit higher than what's considered safe. Most would consider a safe withdrawal rate to be about 4 to 5%, or about $40K to $50K before tax. See the Retire Early Home Page study on safe withdrawal rates at http://www.geocities.com/WallStreet/8257/restud1.html

Sorry to burst your bubble.

Bob H, aka BLues



Print the post Back To Top
Author: 1Vagabond One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1284 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/3/2000 6:45 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TRRR says....
We've met with three financial planners who each promise us that if we hand over all our investments, they guarantee us we will live happily ever after. One guy told us we would never have to work again.


You give me your $1M to invest and I will guarantee you what ever it takes as long as you pay me my FEES!!! Do I think that you could retire with the $80K draw? YES! How risk tolerant are you? How much control of your investments do you want to take? Have you studied anymore of the Fool a few posts on this board or read any of Fool books? If not read and study, because June will be here soon. The 4-6% withdrawal rate that is so often quoted on this board is for the '29 stock crash (worst case)time frame. Do you think that there will be another stock crash soon? The Foolish Four (FF) stock screen of 4 Dog on the Dow has averaged 20% return rate for the last 40-45 years. There are other screen on the Fool that have higher returns.

I believe that YOU CAN DO IT. Study, read, plan and execute. Be sure you understand what you are doing and you understand the risks before you do anything. What are your risks for doing nothing? Only you can answer these questions.

Print the post Back To Top
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: 1294 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/3/2000 8:56 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
1Vagabond writes,

You give me your $1M to invest and I will guarantee you what ever it takes as long as you pay me my FEES!!! Do I think that you could retire with the $80K draw? YES! How risk tolerant are you? How much control of your investments do you want to take? Have you studied anymore of the Fool a few posts on this board or read any of Fool books? If not read and study, because June will be here soon. The 4-6% withdrawal rate that is so often quoted on this board is for the '29 stock crash (worst case)time frame. Do you think that there will be another stock crash soon? The Foolish Four (FF) stock screen of 4 Dog on the Dow has averaged 20% return rate for the last 40-45 years. There are other screen on the Fool that have higher returns.

Actually, the you would need a 3.8% inflation adjusted withdrawal rate to survive the crash of 1929 for a retiree with a 40 year pay out period and a portfolio with 72% S&P500 index fund and 28% fixed income securities. Taking an 8% inflation adjusted withdrawal would leave you with a 76% chance of running out of money in less than 40 years with that asset allocation. Only the most risk tolerant of retirees would find that acceptable. <grin>

I'm not aware of any studies on the Foolish Four that backtest that investment strategy from 1929 to date. I believe the data series for Pixy's retirement withdrawal study begins in 1961. How the Foolish Four would perform under "Crash of 1929" conditions is anyone's guess.

Do I think that there will be another crash soon? Who knows. But I think everyone should be aware of what happened in Japan from 1990 to 1999. The Nikki 225 (the Japanese "Dow Jones" index) went from over 40,000 in 1990 to about 13,000 in 1999, a 67% decline over an extended period. One of my favorite market analysts, Harry S. Dent, sees the Dow topping at 41,000 in 2008 followed by 14 to 16 year long recession/depression that will put the Dow back to 13,000. Anyone trying to take an 8% withdrawal under those condtions will be on a "Little Friskys" diet in short order or suffer an untimely, pride swallowing return to the work force -- that's is, if there are any jobs to be had at all.

intercst



Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
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: 1302 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/4/2000 12:30 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
intercst wrote in post #1294,

Actually, the you would need a 3.8% inflation adjusted withdrawal rate to survive the crash of 1929 for a retiree with a 40 year pay out period and a portfolio with 72% S&P500 index fund and 28% fixed income securities.

I shouldn't have tried to quote that from memory.

The "100% safe" inflation adjusted withdrawal for a 30 year pay out period is 3.81%. The "100% safe" withdrawal rate for a 40 year pay out period drops to 3.54%.

intercst

Print the post Back To Top
Author: JOEL714 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1313 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:22 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
FIRST AND FOREMOST-STAY THE HELL AWAY FROM ANYONE THAT MAKES YOU A FLAT OUT GUARANTEE.YOU COULD NOT HAVE ACCUMULATED THE MONEY YOU HAVE IF YOU BELIEVED IN GUARANTEES.SEVERAL LARGE BROKERAGE FIRMS-MSDW,MERRILL,SSB, ETC. HAVE EXCELLENT FINANCIAL ADVISORS THAT WOULD WORK WITH YOU TO ACHEIVE YOUR GOAL.
I USE MSDW AND FIND THEIR ADVICE TO BE REASONABLE AND PROFESSIONAL--NO GUARANTEES-ONLY SOUND ADVICE WITH ALL REASONING AND RISKS EXPLAINED UPFRONT. THE FEES ARE BASED ON YOUR TOTAL PORTFOLIO AND AVERAGE 1% BASED ON THE AMOUNTS YOU HAVE. CHECK OUT YOUR CHOICES AND UNDERSTAND THE RISKS AND REWARDS. THERE ARE NO LEGITIMATE ADVISORS THAT GUARANTEE ANYTHING OTHER THAN SOUND, WELL THOUGHT OUT RECOMMENDATIONS.

Print the post Back To Top
Author: yccw Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1316 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:39 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
You are in a similiar position as I was when I retired at 55. Do use a good Financial Planner for most of you asset allocation investment, BUT not all of it. Do some investment your self.. Not $80K more like $60K after tax

Great that you have no bebt. You are too young to retire really, I went back to work after a 10 mths break for another 3 1/2 year before I actually retire.

Before you pick your Financial Planner get to really know his Personallity and ask him to give the names of some of his oldest clients and talk to them. Find out more about his services and commitment to managing your assets. He/She should have at least 10-15 years in the business also its good to have his profile. What did he/she doing before being a FP. How many individual clients does he/she handle and what is their average size of their portfolio and what is the total value of his/her portfolio. Talk to his/her boss to find out more about this person. How does he/she rank as the boss's team. The best , average etc. Good Luck in your forthcoming retirement. I am so pleased with my retirement. YC

Print the post Back To Top
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: 1317 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:56 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
JOEL714 shouted,

SEVERAL LARGE BROKERAGE FIRMS-MSDW,MERRILL,SSB, ETC. HAVE EXCELLENT FINANCIAL ADVISORS THAT WOULD WORK WITH YOU TO ACHEIVE YOUR GOAL.
I USE MSDW AND FIND THEIR ADVICE TO BE REASONABLE AND PROFESSIONAL--NO GUARANTEES-ONLY SOUND ADVICE WITH ALL REASONING AND RISKS EXPLAINED UPFRONT. THE FEES ARE BASED ON YOUR TOTAL PORTFOLIO AND AVERAGE 1% BASED ON THE AMOUNTS YOU HAVE.


Most Fools realize that a 1% fee is a huge, unnecessary expense. For a retiree with a $1 million portfolio and a 30 year pay out period a 1% of assets annual fee has a 50/50 chance of reducing the terminal value of the portfolio by more than $1 million. See link:

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

I retired in 1994 at age 38 and have concentrated on minimizing fees and commissions. My portfolio has grown to the point that my living expenses are just about 1% of assets.

That's right. I'm living off the 1% I'm not paying a full-service broker.

intercst



Print the post Back To Top
Author: geoegg Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1318 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 12:20 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
I am now doing a 72t. For me it will work out fine but everyone has a different picture. You can't do this by yourself. If your fund manager never heard of it find a new manager, most of the major brokerage houses know how to do this. Once you found someone ask lots of questions. Heres a few
1. If you die what happens to the distribution, are there any tax consequences, does the beneficiary have any options.
2. If the fund is running out of money can you add some to make up the difference.
3. How is the amount to be distributed calculated, there are several methods.
4. How is the distribution reported to the IRS, how does the form (1099R) show its a distribution as a 72t (otherwise the IRS is going to get you).
5. The 72t must continue for the longer period of five years or until you reach 59 1/2; i.e If you reach 59 1/2 in year four you must continue one more year. Confirm this with your tax guy or planner.
6. Remember if you don't do it right Uncle Sam is going to take back 10% on all past distributions.

If you have not found a financial planner who will help you with a preliminary plan for the future keep looking. I am studying for the Certified Financial Planner certificate and you should only work with someone who will work towards a new relationship not one who wants the money first! I speak from experience as I went to several people before I settled on a brokerage firm, most where very helpful in a general way.

$80,000 pretax sounds a little high but realize that what you want for the first 10 years may be more than you need for the remaining 30. A good planner can give you quick and dirty numbers with very little trouble. The investment strategy is another matter and is crucial. So is your own perception of what rate of return you want. Rest assured there is a strategy for you but be satisfied with the person you pick. It does sound like your closing in on your goal.

You have alot of money and you should find the financial types anxious to help, not set conditions.

For a list of Certified Financial Planners in your area call the CFP Institue in Colorado (call information)

Good luck

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: jgpasa Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1319 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 12:32 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
With only one million in assests from which to generate 80K in disposable income seems a little risky. The average return from the market is only 10% and there will be down years in your portfolio. To generate 80K regularly and be secure I would think you would need twice the present amount to sleep soundly.

Print the post Back To Top
Author: dowwhizkid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1321 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 1:09 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
a guaranteed no unless one or the other of u works or u plan to die next week

Print the post Back To Top
Author: Theotherme Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1323 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 1:47 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
While it is true that the market averages only 10% annually, it is the down years that bring us to that average.
We retired three years ago at 55 with considerably less than you have and our portfolio has doubled in that time. We long ago learned the lesson of LBYM and continue to practice it in our retirement. Since you are debt free, your income is discretionary--so if necessary, you can make occasional cut-backs when you need to. Trim the fat a little and you'll make it just fine. A word of caution--beware of those who call themselves financial planners but are commission-based. Run like mad from them. Their biggest planning is for their finances. I have always believed that nobody likes your money as much as you do--but that is not entirely true. Their are a lot of people out their who will be willing to take your money and "we'll all live happily ever after." Good luck. It's scary but you can do it.

Print the post Back To Top
Author: bdesad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1325 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 2:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
See my posting re early retirement. Whatever you do, don't believe anyone who promises you blissful retirement. Learn how to manage and invest your own money-you are the only one who will spend the necessary time to look out for yourself. I went out at 56, good luck with your early years. Stay well and prosper.

Print the post Back To Top
Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1326 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 2:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Intercst, clearly this is an area of expertise for you. Myself, I've only read a few articles here and elsewhere on the subject. However, there are some assumptions in your analysis that I'd like clarified.

Intercst wrote:

Actually, the you would need a 3.8% inflation adjusted withdrawal rate to survive the crash of 1929 for a retiree with a 40 year pay out period and a portfolio with 72% S&P500 index fund and 28% fixed income securities.

Why would a portfolio for a 40-year payout include 28% in fixed income securities? I've read several places that during all 20 year periods, stocks have outperformed fixed income securities.

I'm not particularly knocking the 3.8% withdrawal rate, by the way. Peter Lynch wrote a very convincing article a few years back that it was perfectly safe to withdraw 5% per year from a S&P 500 index fund, but he wasn't adjusting the withdrawal for inflation.

Myself, I plan on taking 5%, and not adjusting for inflation, but by how well my investments are doing. I run a risk of having lean years at the start, but I am counting on the long-term return from the stock market being higher than inflation.

Taking an 8% inflation adjusted withdrawal would leave you with a 76% chance of running out of money in less than 40 years with that asset allocation.

Where does the 8% figure come from? Is this the average historical return, like the S&P's 11% return since 1925?

Yahoo will give you the entire history of the S&P, but I haven't seen any source for inflation figures.

But I think everyone should be aware of what happened in Japan from 1990 to 1999. The Nikki 225 (the Japanese "Dow Jones" index) went from over 40,000 in 1990 to about 13,000 in 1999, a 67% decline over an extended period.

I'm assuming that this is worse than the worst period for the US stock market. However, I'm not sure it's a good example to use for planning, since the US and Japan are fundementally different in many ways - natural resources, food production, population density, etc.

For that matter, there are many countries that have done much, much worse than Japan historically. Brazil, for example. I'm sure you don't make financial plans based on the assumption our economy is going to mirror Brazil's.

That's not intended as a straw man, by the way, just a more understandable example of why comparing the markets of two different countries is much like comparing two companies in two different industries.

One of my favorite market analysts, Harry S. Dent, sees the Dow topping at 41,000 in 2008 followed by 14 to 16 year long recession/depression that will put the Dow back to 13,000.

Now that is fortune telling, and it amazes me that anyone would find anyone credible who makes such a long-term, specific statement about the future of the market. It's the long term equivalent of technical analysis.

- Gus

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: casstark Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1327 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 2:34 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
I am neither a financial planner nor a CPA. I am only retired. I would suggest that you look back to the "Rule of Twenty" that was described about a year and a half ago in the Motley Fool. It will give you a feel for what your income expectations could be. I personally am more conservative and follow a "Rule of 25" as a minimum.
Is your wife currently employed? Will she stop working after you retire? If not, are you including your wife's income in the 80K after tax figure?
After going through the numbers you will be able to better define the feasibility of your retirement at 55. Maybe you will have to defer retirement to a later date and increase your assets. Maybe you will have to lower your financial expectations. Look it over. Good luck.

Print the post Back To Top
Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1328 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 2:47 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
>> Taking an 8% inflation adjusted withdrawal would leave you
>> with a 76% chance of running out of money in less than 40 years
>> with that asset allocation.

> Where does the 8% figure come from?


I think Intercst was just referring to the planned withdrawals as stated in the original post.

Phooley

Print the post Back To Top
Author: lmbnavy66 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1329 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 2:56 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
I agree with the sentiment that you can't expect $80K per year with your assets. But that is a gut feel. Your post doesn't contain nearly enough info to make a sound recommendation.

I would urge you to check out Quicken financial planning software. I also am 55 and contemplating an early retirement. I found Quicken to be excellent in predicting cash flow for as far out as I need. It takes about an hour to load your financial status, to select from a menu of assumptions and to grind out your first answer. After that it takes only a couple of minutes to run alternate scenarios.

In my case I found my net worth going down for seven years until social security kicks in. You'll probably find the same thing. I have decided to postpone to 57 because of rules regarding receiving social security disability should one become disabled after retirement. Working just two more years also lowers the amount of capital consumption prior to reaching age 62.

Good Luck



Print the post Back To Top
Author: cmungen Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1331 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 4:37 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Congradulations on saving $1m dollars. However, it is probably not enough. Using some conservative inputs and the math of Quickens Retireement planner, You are good for 46k per year with soc. sec. of 12K.

My advice, go ahead and retire if that is what you feel. Do not give your money to anyone till "you" learn a lot more. Keep improving your skills and start learning new ones. Keep your health constantly improving. Work a litttle here and there. Live beneath your financial means what ever it is.

Lastly, I would never do business with any planner that promises anything about the future. YOU can learn more than they know just by staying tuned to Motley Fool.

Good Luck and have fun.

Print the post Back To Top
Author: neverright Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1332 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 4:46 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
i'm 57 and recently retired after selling all my property, except for my residence, which left me with a cash sum of approximately $200K. i have a nice pension, thank goodness, because i invested everything in an income-growth (stocks & bonds) portforlio recommended by one of the major brokers (dare i mention names?) who, since march of last year (1999) caused 10% of my investment to disappear. the bond income is less than i'd have gotten from a good money fund.

be careful. this has been a harrowing experience for me and i'd hate to see anyone else have to go through it. by the way, my major losses occured before the recent market poop. it's gotten worse since in the past two days.

my advice would be to study on your own, not take the advice of any financial manager who assures you that he'll protect your stash or even make you more. DON'T BELIEVE IT.

'neverright'

Print the post Back To Top
Author: neverright Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1333 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 4:52 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
p.s. i forgot to mention that, of the measely bond income i'm getting, one third of it goes to the broker. i'm actually paying to have my money disapear.

Print the post Back To Top
Author: Hinners6969 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1335 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 5:33 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I've read some of the posts pro and con.
The Fool who tells you that you can do it with 20% Foolish Four returns is right if:
You start with 935,000 at retirement.
You take $120,000 income before taxes which ....



Print the post Back To Top
Author: dutchflying Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1336 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 5:43 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Find a way to work part time at something fun for you. The withdrawal of 8% per year is agressive. 6% is better.

Print the post Back To Top
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: 1338 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 8:07 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
GusSmed asks,

Intercst, clearly this is an area of expertise for you. Myself, I've only read a few articles here and elsewhere on the subject. However, there are some assumptions in your analysis that I'd like clarified.

Intercst wrote:

Actually, the you would need a 3.8% inflation adjusted withdrawal rate to survive the crash of 1929 for a retiree with a 40 year pay out period and a portfolio with 72% S&P500 index fund and 28% fixed income securities.


The addition of some fixed income securities actually improves the "100% safe" inflation adjusted withdrawal rate. The "efficient frontier" for a 40 year pay out period is actually 77% S&P500/ 23% fixed income. The 72%/28% split is optimal for a 30 year pay out period. I did a complete study of this a few years ago. See link:

http://www.geocities.com/WallStreet/8257/restud1.html

There is also an Excel spreadsheet you can download to run some scenarios on your own.

I'm not particularly knocking the 3.8% withdrawal rate, by the way. Peter Lynch wrote a very convincing article a few years back that it was perfectly safe to withdraw 5% per year from a S&P 500 index fund, but he wasn't adjusting the withdrawal for inflation.

Myself, I plan on taking 5%, and not adjusting for inflation, but by how well my investments are doing. I run a risk of having lean years at the start, but I am counting on the long-term return from the stock market being higher than inflation.


It's the inflation adjustment that reduces the "safe" withdrawal rate. A 5% non-inflation adjusted withdrawal rate (this is called an "annuity withdrawal") is is 98% safe for a 30 year pay out period according to the Trinity Study. Not "100% safe", but very little risk. Of course, inflation may erode the spending power of your 5% withdrawal (that's 5% of your first year portfolio value, by the way. Not 5% of your yearly portfolio balance.) If you are willing to let your retirement income swing wildly with the ups and downs of the stock market you can take out 10% or 15% of your year end balance.

Taking an 8% inflation adjusted withdrawal would leave you with a 76% chance of running out of money in less than 40 years with that asset allocation.

Where does the 8% figure come from? Is this the average historical return, like the S&P's 11% return since 1925?


The original post asked if an 8% withdrawal was "safe". I used the Excel spreadsheet mentioned above to determine the "survivability" of an 8% inflation-adjusted withdrawal. It was 24% survivable, which means that 76% of the time for all the 40 year pay out period between 1871 and 1998 you would have run out of money in less than 40 years. The historical average return actually tells you very little about what is safe. You have to make sure your portfolio survives the extreme cases if you have a long pay out period.

Yahoo will give you the entire history of the S&P, but I haven't seen any source for inflation figures.

Inflation data for the PPI from 1871 to 1998 is built into the Excel spreadsheet. Prof. Robert Shiller of Yale University has a complete list of data from 1871 to 1998 on his web site. It's one of the most useful data series I'm come across for doing this type of analysis.

But I think everyone should be aware of what happened in Japan from 1990 to 1999. The Nikki 225 (the Japanese "Dow Jones" index) went from over 40,000 in 1990 to about 13,000 in 1999, a 67% decline over an extended period.

I'm assuming that this is worse than the worst period for the US stock market. However, I'm not sure it's a good example to use for planning, since the US and Japan are fundementally different in many ways - natural resources, food production, population density, etc.

For that matter, there are many countries that have done much, much worse than Japan historically. Brazil, for example. I'm sure you don't make financial plans based on the assumption our economy is going to mirror Brazil's.

That's not intended as a straw man, by the way, just a more understandable example of why comparing the markets of two different countries is much like comparing two companies in two different industries.


I'm not sure Japan from 1990 to 1999 was worse than the US from 1929 to 1938, but it was probably close. I plan on doing a detailed comparison of the two periods sometime later in the year.

My point about Japan is that here you have a major, first world economy that had all the checks and balances in its financial markets that the US has, yet it suffered a big decline over an extended peiod of time. Folks shouldn't blindly believe "it can't happen here."

One of my favorite market analysts, Harry S. Dent, sees the Dow topping at 41,000 in 2008 followed by 14 to 16 year long recession/depression that will put the Dow back to 13,000.

Now that is fortune telling, and it amazes me that anyone would find anyone credible who makes such a long-term, specific statement about the future of the market. It's the long term equivalent of technical analysis.


Dent's analysis is based on studying demographic data. He traces much of Japan's problems to "too many old people." The US will be in the same boat in 10 to 15 years, after the baby boomers have bought all their toys and consumption dries up.

I think it's fair to point out that life insurance companies make similar "long term" bets based on demographics and make lots of money. They're called "mortality tables."

intercst





Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: Acquinas Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1339 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 9:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I am planning to retire on June 1, 2000 at age 55. My current investment portfolio is as follows:

$600K - 401K
$300K - cash balance pension
Mutual Funds and Cash - $100K

I went through a similar experience but was 59 which meant I was able to tap into SSA at 62 and had almost immediate access to my IRA account without penalty. I took half my pension in a lump sum and used that with my savings to take care of my living expenses. You are a little young to follow my example and should consider working until you are SSA eligible. Try for a job where the pension benefits are vested in 5 years.

I tried all the financial planners in town (and there are lots of them) and all impressed me the same way - they want to sell you something that generates commissions for them. They'll offer fee based services ( a percent of the amount under managment) or put you into load funds nd life insurance where they get a healthy commission up front.

All the statistics they throw at you prove one thing - you can put all your savings into a no-load S&P 500 index fund and beat them and their mutual funds in the long run. I recommend that you look for a job and before you make any financial moves study the principles expounded in the Motley Fool investment guides.

You'll get lots of good advice on this board. Meanwhile, take your time and don't get swept up in the current market hysteria. Who knows - the market may be in a steep decline when you retire and thus create a great opportunity for you.

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1342 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 9:48 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Intercst, that's a great retirement calculator. I strongly urge anyone interested in the subject to download it and experiment with it. Here's the direct link.

http://www.geocities.com/WallStreet/8257/re50.html

The stock price and PPI data begin on row 130 - I mention this because it took me a few minutes to figure out how the results matrix was being calculated.

I'm going to try tinkering with it, modifying it with the assumption that you withdraw more from the fixed income sources during years the stock market is down, and rebalance when the market is up.

I'm not sure this will make a difference, but I haven't had the data to experiment with before.

Taking an 8% inflation adjusted withdrawal would leave you with a 76% chance of running out of money in less than 40 years with that asset allocation.

Where does the 8% figure come from?


For some reason, I thought you were using 8% inflation, rather than actual inflation figures. I misread your post, obviously. Doh.

My point about Japan is that here you have a major, first world economy that had all the checks and balances in its financial markets that the US has, yet it suffered a big decline over an extended peiod of time. Folks shouldn't blindly believe "it can't happen here."

I think the '70s are adequate proof of that, though the details are different.

I assume that since you mention checks and balances, you're primarily addressing people who feel we won't have another crash of '29 - which arguably was significantly aggravated by ridiculous amounts of leverage.

Dent's analysis is based on studying demographic data. He traces much of Japan's problems to "too many old people." The US will be in the same boat in 10 to 15 years, after the baby boomers have bought all their toys and consumption dries up.

That, I have a problem with, because it's basing the performance of an entire economy on a single variable. That's too much of an oversimplification for me, particularly when you're using it to predict the future.

I'm not saying that his is an invalid concern. I'm saying that predicting a 14-16 year recession starting in 2008 is too much precision for the data.

I think it's fair to point out that life insurance companies make similar "long term" bets based on demographics and make lots of money. They're called "mortality tables."

Not a very good analogy, actually. Yes, it's reasonable to make certain assumptions about demographics 8 years from now, which is what the insurance companies do.

However, "how many people will be alive in 2008" is a much more predictable issue than "what will the stock market be like in 2008."

- Gus

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: prclem Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1344 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 10:59 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
You should take control of your own portfolio and it will sustain you if invested properly. You are more
interested in your own portfolio than any other manager of it...so take control of it. If you were
smart enough to make a million dollars and are debt
free...you are smarter than most. YOU CAN DO IT
YOURSELF BETTER THAN ANYONE ELSE....BELIEVE ME!

Print the post Back To Top
Author: bobkw2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1345 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:01 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I like the idea of at least $4M (sum of IRA, 401, one-lump retirement plan payout, and regular liquid assets) before retiring at at 55 today, to support a $60-80k pre-retirement lifestyle safely in today's dollars for the years to come. Sorry, but I think your resources are a little light to quit working just yet, imho.

The good news is that with our present economy you can be there in a few years if you put your money 100% in Foolish Stocks: forget the mutual funds and the Wise, and absolutely no Bonds!

Bob

Print the post Back To Top
Author: TODDOC Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1346 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:17 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Before you decide on rate of withdrawal- read Scott Burns' rebutal to Peter Lynchs' article. Scottburns.com

It was good enough to get him a job with WORTH, which was then owned by Fidelity

Good Luck!

Print the post Back To Top
Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1347 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/5/2000 11:35 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Before you decide on rate of withdrawal- read Scott Burns' rebutal to Peter Lynchs' article. Scottburns.com

I'm not sure -- there's a lot of stuff on that site -- but maybe this is the article in question: www.scottburns.com/951001su.htm

Phooley

Print the post Back To Top
Author: ckbenner Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1352 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 8:46 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
You should be nervous!

I've read a number of the posts and i think it would be helpful to provide some clarification about roles here to help you decide what to do.

First, a Certified Financial Planner is a person who can help you construct a mathematical model projecting just how long your income can support your lifestyle using some assumptions and planning in advanced for any changes in the straight line numbers like when SS payments begin and how much they will be, vacations or automobile purchases, etc. The good ones take time (20-40 hours) and you should be prepared to pay for this service. The "free" ones are worth exactly what you pay for them because they are too simplified to give you much of a real picture of what may happen going forward.

Also, Certified Financial Planners have all of the tools to do all of the calculations regarding withdrawls from qualified plans, tax-sheltered vs. taxable investing, accumulation rates, and every other question you may wish to have answered. CPA's are NOT the only source of such important information.

Be sure to speak to someone who is a CFP, not just anyone calling themselves a planner, please.

Second, a Certified Public Accountant is a person who can help you to keep records of your financial transactions and health and can also help you with strategies to reduce income taxes and perhaps estate taxes. MOST CPA's are NOT qualified to render investment advice. (OK some are, but it's not what a CPA's education trains them for). If you're going to get investment advice, in most cases you're better served to speak with an investment professional.

Third, Fee-only, Commission-only, and a combination. Three is a widely held mythical perception that if you have the ability to recommend and manage investments that you have a crooked streak and will rape and pillage your clients. That's bunk! Yes, there are crooks and snakes in every profession, but don't assume your're dealing with one .... check them out. Also, you should know that if you deal with someone who is affiliated with a large brokerage house, they are encouraged to sell the house's proprietary funds. Not many of them are very good, so be sure they can offer you a wide range of products and services no matter who they are affiliated with. You may want to deal with someone who is "independent" meaning they do not sell any proprietary products at all.

Fourth, Stock Brokers calling themselves "investment advisors"..... this is tricky, because there are some really good ones out there, so let's just talk philisophy and forget the other stuff for now. Brokers are psychologically attuned to trading and they are required (yes, required!) by their brokerage to recommend only those stocks (ONLY) on the "buy list"... so, they are not only not paid to think for themselves. they can be held liable by their Broker/Dealer if they do! Planners, at least the real ones, are psychologically attuned to PLAN.... (broker=sell something.... planner = do planning ..... see the difference).

And a really good planner can be either commission or fee only and can usually fall somewhere in between. Just like not all no-load funds are good and all funds with sales charges are bad.... (and by the way, while Im on the subject, no-load is a misnomer ... there ARE internal fees)

As a Registered Investment Advisor, I am required BY LAW not only to disclose all of this stuff, including training, background, method and amount of compensation, conflicts of interest if any, etc., but also to tell my clients, in writing, that if I do a plan for them they are fee to implement the plan with any one of their choosing. That's the LAW. That's why I charge a fee to do the plan, because I invest a lot of time and the client is under absolutely no obligation to invest with me. It's also why I tell clients that if they choose to work with me we can do it on a commission, percentage of assets under menagement, and I can even offset part of the fee for the plan from the income I'll receive under EITHER scenario.

Before you choose any securities licensed professional you should also know that the NASD maintains a website where you can check the CRD (regulatory history and background) of any licensed professional..... broker, planner who is licensed, etc. Ask for references and then speak to them. The references should be from people who are of similar background, age, financial profile and risk tolerence as you are. Don't be ashamed.... this is important stuff!

Now, you can get references on any CFP's from the Financial Planning Association in Denver, CO. They also have a website and an 900 number.

finally, my personal opinion...... your funds are probably insufficient to provide the lifestyle you seek. The average lifespan for a male is age 83 and 3-4 years longer for a female. If you have longevity in your family you should be planning even further out. And in terms of all that stuff about withdrawl rates, etc. let's make it really simple ...... all of those calculations are on straight line projections. If, by a twist of fate, and we never know what will happen in any given year, if the first year of two of your retirement results in a very lackluster return for your portfolio, or if you have some large, unanticipated expense like an accident or a medical emergency, or a flood (I could go on and on), it blows the whole planning scenario totally out of the water and you'll "never" catch up.

So, my suggestion is that you look for someone who has specialized training in whatever service(s) you want to purchase. Don't look for cheap here .. you get what you pay for. Then that you check out that individual thoroughly to assure there are no skeletons in the closet which might make you uncomfortable. Then that you do a high quality, financial plan which is flexible enough to include the contingency planning you need.

I hope this is helpful

ckb

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: Redberet Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1358 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 12:08 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Can I just say to all you (Brains) who commented so well on the subject.
That as a new fool on the block who is also nearing the retirement question,that i was Amazed/Delighted
Enthralled/Fascinated by the comments.
And am now an confirmed, Retired fool notice board
reader
THANKS A LOT
Redberet

Print the post Back To Top
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: 1359 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 12:50 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
ckbrenner wrote,

You should be nervous!

I've read a number of the posts and i think it would be helpful to provide some clarification about roles here to help you decide what to do.

First, a Certified Financial Planner is a person who can help you construct a mathematical model projecting just how long your income can support your lifestyle using some assumptions and planning in advanced for any changes in the straight line numbers like when SS payments begin and how much they will be, vacations or automobile purchases, etc. The good ones take time (20-40 hours) and you should be prepared to pay for this service. The "free" ones are worth exactly what you pay for them because they are too simplified to give you much of a real picture of what may happen going forward.


Interesting. I'd be nervous if I turned everything over to a financial planner.

Anyone considering this course of action should read Forbes Magazine's classic article on the subject “Bedlam in professional financial planning”, by William P. Barnett, see link:

http://www.forbes.com/forbes/98/0615/6112156a.htm

Also, while I agree it might take 20 to 40 hours to put together a spreadsheet the first time, if you've been in the financial planning business a while, you should have a spreadsheet template to start with. In most cases little or no modifications to the spreadsheet are required. If someone is charging you 40 hours for this service they are either “re-inventing the wheel” or learning how to use Excel on your dime.

Third, Fee-only, Commission-only, and a combination. Three is a widely held mythical perception that if you have the ability to recommend and manage investments that you have a crooked streak and will rape and pillage your clients. That's bunk! Yes, there are crooks and snakes in every profession, but don't assume your're dealing with one .... check them out.

While I agree that only a small percentage of these guys actually cross the line and do something illegal, there's lots of things a Financial Planner/Investment Advisor can do that are legal and ethical (well, at least “ethical” by the standards of the profession) that are not in the client's interest. For instance, many planners/advisors recommend “loaded” mutual funds. Anything with an expense ratio in excess of the Vanguard S&P500 Index fund (0.17% of assets) is unlikely to benefit the client. Some 85% to 95% of actively managed mutual funds under perform the index, depending on who's doing the counting, yet “professional planners” recommend these things all the time.

I suggest you read one of the many fine books on investments and retirement planning and decide how much of this you're prepared to do on your own. I did a cost/benefit analysis on hiring a CFP 10 years ago and decided against it. (That's not to say they are all bad people, but like soothsayers, tarot card readers, and faith healers, I didn't see where they'd do anything to improve my investment returns that would be worth their fees.) I've been rewarded for this decision beyond all imagination or expectation. I retired five years ago at age 38 and my retirement portfolio has grown to the point that my annual living expenses are about 1% of assets. I think it's fair to point out that 1% is what many “professionals” would charge to “manage” a retirement portfolio. In effect, I'm living comfortably on the money I'm not paying an advisor.

intercst


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: AncienGO One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1363 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 4:15 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
My wife and I are in virtually identical circumstances -- respective ages, available funds, no debt are the same (although we're currently just talking about retiring in the next year or so; no projected date yet) -- so I found this discussion very interesting. Thanks to all who participated for an excellent thread!

Bob

Print the post Back To Top
Author: 1Vagabond One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1367 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 6:08 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I can't believe that we have this many Fools on this board that still quote the Wise. And I also can't believe that there are Fools that read this board that think a return average of 10% is not doable. The F4 screen has an average return of 20% for 40 years. Will this continue? I don't know, but if a 20% return was what I wanted that is where I would put my money. I don't use the F4 screen. I want a better return then the 20%. I have done many times better then 20% for the last year. If anyone didn't better 20% for the last year, I would suggest you rethink your investment strategy.

TRRR started this thread wanting to know if a portfolio of $1M could support a withdrawal of $80K. I believe that I am the lonely voice in Foolsland that has said, “YES!” The thing about the constant $80K draw is that the rest of the portfolio also grows. Using the F4 20% return, in 5 years, he would have almost $2M and a withdrawal rate of 4.10%.

OOOOPPPPPPS....Just reread TRRR's post. I missed the most important thing about his message. TRRR wants $80K AFTER TAX MONEY. Sorry, I missed this. After seeing the light, I now believe that you will have a very tough time making this requirement. But, if Harry S. Dent is correct with 41000 Dow in 2008, your portfolio should double or triple this year so you will have to wait until next year to retire.<grin>

If I had your position, I would read and study the Fool. Get some of their books as well as others. Plan to move that $100K mutual funds and cash to a discount broker and start to invest FOOLISHLY.

TRRR – Hope all this helps.

Feeling somewhat Foolishly Stupid
Vagabond

PS: I hope that everyone is buying the Stock Market Fire Sale!!


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1369 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/6/2000 6:34 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
And I also can't believe that there are Fools that read this board that think a return average of 10% is not doable.

It's a little scary to think that someone might come along, read a few posts like the above, and possibly act on a statement like that...

Be careful, look around, and read what's available.

It's not a question of what "averages are available" -- the question is: "What's a safe withdrawal rate?"

The two are not at all the same.

Phooley

Print the post Back To Top
Author: rlstern Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1377 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/7/2000 9:35 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TRRR asks if it is possible to retire at 55 with 1 M generating 80 K per year. I am 63, and I just retired with one million in April. Since then, I have made over $100,000 on my portfolio. My mix of assets is fairly conservative: 30 % is in the Foolish Four, on which I write covered call options. Another 30 % is invested in income generating stocks (preferred and utility stocks that average about 9.5 %. The remaining 40 % is in a highly regarded junk bond fund (Kemperer High Yield). While only time will tell, I think that my mix is pretty safe from anything except for Armegedon.

Print the post Back To Top
Author: UnitL Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1389 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/7/2000 8:41 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
To Retiring and Nervous

We were in a similar situation. Paid $1200 to a financial planner to tell us how to place our funds so my husband could retire in 2 years at age 55. There was to be $1200 from his company pension, $1,000 from our mutual funds, and $3,000 a month using the 72T on the 401K, WRONG! When we went to the planner to set everything up, he contacted a CPA and we were told because of our ages,life expectancy, and amount in the 401K (approx. $500,000) we would only be allowed to take out about $1,100 a month until my husband reached 59-1/2. Needless to say, we are no longer working with that financial planner.

Print the post Back To Top
Author: abboke Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1390 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/7/2000 8:42 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
your remarks as to contact with financial planners suggests that the review/exchange was somewhat superficial. you may want to identify and hire a financial planner that has no long term interest in giving you advice other than to earn his/her fee. i would have retired at 55 if i had had your financial assets but retired at 61 and am secure in my conclusion that my net income will at least be 80K. but with 60% in a 401k you need to evaluate your decision for reinvestment of this large amount extremely carefully. perhaps this is obvious but some 401K plans create good benefits but probably less than stock investments. eliminate your concerns before retiring.

Print the post Back To Top
Author: khath5548 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1391 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/7/2000 9:52 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Last night I read about the fella who had a mil & wanted to retire, drawing 8% a year off the interest. Everybody said thaere was no way. Guys at IBM say that taking half in an annuity and the other half in a fixed bank acct (at something like 8% for sure) would make 80k a year a cake walk.
Me, I'm gullible. But, it sure sounds sure to me that even if you did it the Foolish way, you'd probably be okay, not touching the principal. Letting it grow, either the whole mil, or taking the 500k annuity from 57 or so, and working with the other half a mil and not touching it.
This whole thing has me confused. I'm glad I'm only 51& a half, a working stiff, and just getting to where I can affort to dabble, in addition to my 401K, and still have a few years left at Big Blue. Fool on 1

Print the post Back To Top
Author: khath5548 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1392 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/7/2000 9:53 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Last night I read about the fella who had a mil & wanted to retire, drawing 8% a year off the interest. Everybody said thaere was no way. Guys at IBM say that taking half in an annuity and the other half in a fixed bank acct (at something like 8% for sure) would make 80k a year a cake walk.
Me, I'm gullible. But, it sure sounds sure to me that even if you did it the Foolish way, you'd probably be okay, not touching the principal. Letting it grow, either the whole mil, or taking the 500k annuity from 57 or so, and working with the other half a mil and not touching it.
This whole thing has me confused. I'm glad I'm only 51& a half, a working stiff, and just getting to where I can affort to dabble, in addition to my 401K, and still have a few years left at Big Blue. Fool on !

Print the post Back To Top
Author: JEA99 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1395 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/8/2000 1:04 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TRRR; Interesting position, so similar to ours. U might contact Bogles house ( vanguard ), then let us know ur thoughts.

Print the post Back To Top
Author: AaronBurr Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1397 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/8/2000 9:34 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Meet with some more financial planners. I met with two planners from"Worth" magazine's list of planners(found out that they applied to be published)They had very different fee structures. Didn't care for either-plan to meet with more. Create your own plan,then pay a planner that you like to go over your plan for a one time fee of about $300 to $500.When you retire you will have time to manage your own money,so you don't have to just "hand over your money".

Print the post Back To Top
Author: leelyter Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1437 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/10/2000 8:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
To TRRR: Don't hand your money over to anyone. The only person who will live happily ever after is that someone. You must be a fairly intelligent person to have accumulated so much thus far. Find yourself an NAIC (Individual Investors) and learn the basics of investing. No one will take care of your money like you will. If you handle your money wisely you should have enough to keep you going past 100. Good luck. LEE3

Print the post Back To Top
Author: kookla1960 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 1693 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 1/22/2000 4:11 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TRRR:
If you need 80K a year after tax then you need about $125,000 gross income to be generated from your nest egg. Assuming a 10% return on it, you will need at least $1,250,000 and much of it would have to stay in the equities market(yipes). At a 7% return in laddered bonds A or better you will still need about $1,800,000 to retire. The latter figure is more conservative it seems, but you may have to stay in equities anyway with about 1/3 just to kkep up with inflation and the risk that you can't work at later date. I would work five more years to make 80K a year to live and allow my nest egg to grow during that time to be 1,500,000 before I could count on 80K thereafter worry-free.
I do this for a living, and anyone who promises more either hasn't worked through the math or a bear market that could surely occur within the next 40(!) years of your lives.
Good luck and be careful

Print the post Back To Top
Author: Radster1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2888 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 3/14/2000 6:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TRRR: Don't get advice from a bulletin board. Retirement planning involves much more than just picking investments. There are special tax rules just for people about to retire and you're not going to learn about them from some small time stock picker that thinks they know more about financial matters than Alan Greenspan. Find a reputable financial advisor that specializes in retirement planning. Don't give total control to them but use them for their expertise.

As far as joining an investment club, go ahead but keep in mind that most are mostly social clubs and not gonna teach you much about financial planning.

If you're not gonna learn any more than the basics of investing hire a pro.

Just as you might have some basic knowledge about building a house. Would you try it alone? Even tho you could save a TON of money doing it yourself, the house might fall down someday. I wonder if LEE3 will take resposibility for trying to steer you away from a financial advisor after if you happen to make a mistake?

Print the post Back To Top
Author: zzyp Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7115 of 19369
Subject: Re: Retiring and Nervous!!!! Date: 7/13/2001 7:04 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
To TRRR, and interested Fools,

Quick Answer, You would have to either be very lucky or a MUCH better than average investor to safely anticipate receiving $80K yearly (even before taxes) from $1,000K in a fluctuating market, even if the overall trend is upward.

1. Forget the fool comparisons with 1929, look at today's situation! A typical investor this last year lost 20% (some Fools do better, some worse), so if you started a year ago you would now be trying to get $100K next year (for $80K return after taxes) out of an $720K investment $200K loss - $.8K income). Luck to be like one "fool" reply, to double value in the first few years would solve this problem. Perhaps you would be smarter than my "typical" investor.

2. Remember how you were told dollar-cost-averaging produced better than average results. The reason is that you buy more shares when the market is down, and less when market is up, thus your percentage gain is better than average. TRUE during accumulation! However, not mentioned is dollar-withdrawal-averaging produces the opposite effect. Right now you would be withdrawing big hunks from the market to maintain your income, so unless turnaround is quick, your situation, if you started a year ago, would be rapidly getting worse. That is why knowedgeable investor advice has lower projected returns for withdrawal plans than you might otherwise think.

So, unless you can with high probability stay within the income, and not be forced to sell on market drops, a period of poor performance, even as slight as this last year spells disaster for your proposed income stream.

A solution, live on the after tax $30K of $500K safe investment + dividend on the other half until you have a few good years in a row with the remaining $500K. If you can just double that portion you will be on your way to your goal of $80K income per year, that is without any adjustment for inflation.

Otherwise you need the luck to retire just before a market spurt, or obtain returns better than the average Fool, if one assumes that the market goes both up and down. For sure you would not wish to start retirement just before a year worse than the current one, and this one historically is not so bad.

Fools are welcome to reply with any corrections or adjustments for my figures.

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (50) | Ignore Thread Prev Thread | Next Thread
Advertisement