Friday, July 31, 2015

Early Retirement Miscalculations

In 2007, I took early retirement at the age of 49.   Before making the decision, I worked with my financial advisor to determine if we had sufficient funds to retire.   The analysis was positive and I retired early after 27 years of service with my company.

With almost eight years of retirement behind me, I have the benefit of experience in reviewing the analysis that was done in 2007.   Here are some of the miscalculations that I made in 2007.

  • Growth of company stock.    We used the historical 7% average annual growth that my company stock had experience during my time with the company.   Unfortunately, the actual stock growth did not match the historical growth rates.  From the 2007 high, the stock has only grown about 3% in total, much less than the projected 60% expected growth.

  • A significant recession occurring immediately.  For the Monte Carlo retirement analysis, we had over a 90% chance of not running out of money.   The 10% chance were most likely due to a significant market drop during the early years of retirement.   Lucky me, the 08/09 bear market started a few months after I retired.

  • Planning to live until 90.    Our retirement analysis assumed life spans until 90, which seemed reasonable at the time.   Recently, I've been thinking that living to 100 or longer may be a better plan.   After all, running out of money at 90 is a major issue since going back to work is not likely solution.  

  • With these revised considerations, I've decided to delay taking Social Security until the latest possible date, when I'm 70. Also, I've been asked to consider an executive director position which would have me returning to work as CEO of a non-profit for a few years. Both of these actions should help extend the life of our retirement savings.

    For more on Reaping the Rewards, check back on Fridays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Tuesday, July 14, 2015

    Interesting Reads

    Just a few interesting reads:

    The $339,200 college debt example hurts more than it helps  After reading this article, I won't be giving my vote to this candidate for President.   If I don't agree with his personal financial choices, I'm sure I will disagree with his government financial choices.

    Premier of Greece, Alexis Tsipras, Accepts Creditors' Austerity Deal  A great lesson in how not to negotiate.  Not only are the terms worse than what was on the table in January 2015, but the situation has worsened due to the delay.

    Marc Faber: Recession is coming this year  For the last couple years, the best investment strategy has  been to ignore his predictions.   He has been saying the same thing since at least 2012.   Someday, he will be right, but it may not be for a while.

    For more on Ideas You Can Use, check back  Tuesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Sunday, June 28, 2015

    Looking for Extreme Market Pain

    I am convinced the Greek debt crisis will create an investing opportunity.   However, whenever I've had this mindset in the past, I started investing right away and quit before the bottom because the pain was too great.   Case in point:   The May 2013 Taper Tantrum.    I started buying right away, and kept buying into the decline.  However, it took over a month for the pullback to complete.  By the bottom, I was feeling enough market pain to stop buying.

    When the decline starts this time, I plan to only buy those stocks I was considering last week, but haven't purchased yet.  These stocks are dividend paying stocks and part of my strategy to create a steady source of retirement income.   After these purchases, I will wait until the stock market pain is very high (at least a 10% decline) and then start making the additional purchases.

    For more on  New Beginnings, check back Sundays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Saturday, June 27, 2015

    A Greek Induced Correction?

    It appears a Greek default is the most likely outcome next week.

    The current bull market is getting a bit tired, but it keeps going up.   Perhaps the impending Greek default will be the event that causes the market to have its first correction since 2011.

    Or will buyers on the dip prevent the correction from happening?  Hard to say.

    My plan is to make partial purchases of my buy list during the initial drop, and wait before making additional purchases.

    For more on Reflections and Musings, check back Saturdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Income Certainty

    Over the past year, I have developed a greater appreciation for the benefits of a pension.  First and foremost, a pension offers a high degree of income certainty.   The amount and annual increases are guaranteed for the life of the beneficiary.  

    With income certainty, there is also less financial anxiety, especially as one gets older.    Every month, the beneficiary receives a retirement paycheck.

    A retirement paycheck is a concept that I like a lot.  Since we don't have pensions, we'll need to create our own source of a "retirement paycheck."   Something that is regular, certain and available for the rest of our lives.

    For more on  Reflections and Musings, check back every Saturday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Thursday, May 21, 2015

    Be Awesome

    After a slow start, our 2 3/4 year old son's talking skills have been growing exponentially the past few months.   He surprises us with new vocabulary words every day.   Recently, he started exclaiming "Be awesome!" out of the blue.   This isn't a phrase used in our house.  And he watches very little TV.   So we don't know from where he learned it.

    He says, "Be awesome!" with so much enthusiasm that it got me thinking.  Wouldn't it be great if "be awesome" was the inspiration by which I lived.  Too often, it's too easy to get caught up in daily life demands and lose the inspirational elements.

    So the next time he said "Be awesome!," I came right back with my own, "Be awesome!"  Without hesitation, our son responded, "We are!"

    "Yes, you're right," I thought.    And I need to keep remembering that we are :-)

    For more on Crossing Generations, check back Thursdays for a new segment.


    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Wednesday, April 15, 2015

    Taxes

    I usually file my taxes in the summer or later since we don't get a refund.  By managing my withholding and estimated tax payments, I usually am pretty close to owing just a little on April 15th.   This year, however, we have large refunds coming from both the federal and state returns, since I am unable to adjust the withholding from my income.

    If the past is a predictor, my state refunds will come first, in about 2-4 weeks.   My federal refund will come later, in about 6-8 weeks.

    I still do my taxes by pen and paper, with the help of an excel spreadsheet, which gives me an in depth understanding of how and why I pay the amount of tax that I do.   My conclusion is that federal taxes are going up and getting more complicated, mainly due to the Obamacare tax changes that were implemented in 2014.   Our resident state taxes are going down, and keeping the same complexity.   Our non-resident state taxes are stable, with complexity increasing slightly.  

    Although, I am still competent at doing our taxes by hand, I expect I will need to use tax software if the complexity or the amount of tax law changes continues to increase.  This has caused me to consider simplifying our retirement finances, which should simplify our income tax filing.   For example, going from 7 part time jobs to no part time jobs has already been a simplifying event.  There are probably several more that I can do over the next few years.

    For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Wednesday, April 01, 2015

    Preparing for a Market Decline

    "Buy when there's blood in the streets, even if the blood is your own." ~ Baron Rothschild

    It is very hard for me to put additional funds in the stock market during a market decline.  Instead of buying, I become conservative and worry about how much my current investments have fallen.  By the time, the market recovers, I've missed my opportunity to buy stocks at a discount.

    At this time, I've decided to prepare myself to buy into the next decline and build our core investments.  First,  I have designed  strategy using 4-6 commission free ETFs. Second, I have created a list of dividend paying stocks to buy in addition to the ETFs.  Third, I've identified cash funds that can be invested for 3-5 years without causing financial hardship if the investments decline.

    I'll learn how much this preparation helps when the next stock market decline occurs.

    For more on  The Practice of Personal Finance, check back Wednesdays for  a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Saturday, March 14, 2015

    Happy Pi Day

    Today is special Pi Day.  At 9:26:53 the date and time date/time 3/14/15 9:26:53 will be equal to first 10 digits of Pi, 3.141592653  This only happen once every 100 years.

    For more on Reflections and Musings, check back on Saturdays for a new segment.


    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC

    Sunday, March 01, 2015

    Changing Core Investments

    Before I retired, my core investments to generate income were my job and my company stock.   After I retired, my company stock continued to be a core investment, accounting for 33-50% of our net worth.  Over the past two years, I have been selling down the percentage we have in company stock toward a target of 10-15%, which will be achieved in 2017.

    As I was reducing our company stock exposure, I realized we need to replace my company stock with another core investment.   I've looked at a few options: 1) advisor managed accounts;  2) self directed stock selection; and 3) index ETF portfolios.

    I've been testing advisor managed accounts as a core investment since late 2012.  During that time, I have been happy with the results since the returns have been positive in the double digit range.  So I've been able to rationalize the 1% wrap fee as equivalent to the expenses of an actively managed mutual fund.   Of course, I realize that the 1% would have been an additional loss if the market had declined.  Also, none of the manage accounts exceeded the benchmark returns.  Thus, I am open to considering other options which may be lower cost.  For now, I will keep the managed accounts I have mainly because I like the stocks that have been selected.

    Since mid 2012,  I've been experimenting with investing in individual stocks.  I've tried a long/short strategy, a sector (biotech, energy or materials) focused strategy, and a dividend stock selection strategy.  The main issue with the long/short and sector strategies is insufficient time and expertise to continually research the hundreds of stocks that can be considered for each strategy.  Also, I have a tough time deciding when to sell a stock, either for a gain or to cut losses.  The dividend stock strategy appears to be a good approach, since the stocks tend to from good companies and the dividend will offset short term price declines.  In addition, the plan is to keep the stock in perpetuity for the dividend, and therefore would only be sold due to a catastrophic event.  I continue to slowly build a dividend stock portfolio.

    In 2013, I began to build a ETF investment portfolio based on low cost, commission free index ETFs. Unfortunately, I sold out of most of the ETFs a in the bounce shortly after October 2014 correction since I expected a further decline.   Up until now, I've been using the commission free ETFs for a trading strategy.  So the next step is to test using commission free index ETFs as a core investment portfolio.  I will be implementing the ETF strategy this month in our IRA accounts.

    At this point, the index ETF strategy feels like a good option for the main core investment strategy.   However, I will run the test to determine if I will be comfortable keeping a significant amount of our investment funds in this strategy.

    For more on  New Beginnings, check on Sundays for another segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2015 Achievement Catalyst, LLC