Wednesday, April 15, 2015


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 do 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

Saturday, February 28, 2015

The Crash that Never Came

Since the bear market of 08/09, I've been extremely cautious and kept most of our investment funds in cash or cash equivalents.  During that time, I've been expecting a significant correction of more than 20%.  Unequivocally, I've been wrong.   With the exception of an almost 20% drop in the summer of 2011, the stock market hasn't been close to another bear market since 08/09, despite many experts forecasting near term market collapses.

Going forward, I continue to be cautious.   I still think that bear market is coming soon.   However, for now, it seems the market trend is up.  In hindsight, my biggest investing mistake was to take profits too early for the stocks I did buy.   So,  I will start keeping my winning stock picks longer, instead of taking only 20, 30 or 50% profits.  My second biggest mistake was not selling losing stocks soon enough.  I need to start cutting losses sooner for my poor stock picks, before the price drops over 20%.  

Finally, I'm preparing myself to make some selective purchases, when the next bear market does occur.  

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

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

Copyright © 2015 Achievement Catalyst, LLC

Monday, January 26, 2015

Creating Steady Sources of Income in Retirement

Over the past year, I realized one of the deficiencies of my retirement finances: insufficient steady income streams.   Our retirement income is primarily dependent on the gains of our investments. While investment gain strategy works well when investment values rise, it under performs during market corrections and bear markets, as I learned and experienced in 2008.

Here are the four investments elements I am working on to create steady sources on income:

  • Fixed income -  For us, these are mainly CDs.  Over the past year, we bought several 5-10 year CDs that pay 2-3% a year.  (Alas, gone are the days of earning 5% in a money market account.)  We purchased the CDs through a brokerage, and therefore, can sell them before maturity, if we need the funds.  I am also considering investing in closed end municipal bond funds, which pay about 5% yields.  I am targeting to get 25% of our retirement income through fixed income.

  • Dividend income -  I will be increasing the number of stocks that pay dividends in our investment portfolio.   First, we have invested in a fund that focuses on dividend income and growth.  We have used this fund from 2009 to 2011 and since 2012.  I have been happy with both the dividend yield (~3.5%) and the investment gains over that time.  In addition, I plan to add dividend paying stocks on my own, using the Dividend Aristocrats and Dividend Achievers lists as a starting point.   Finally, I plan to keep, instead of sell, the remaining stock I have of the company from which I retired since it has a 3% dividend.  I am targeting to generate 25% of our retirement income through dividends.

  • Rental Income - In 2013 I became a landlord when I inherited part ownership of a commercial rental property.  The good news was that the mortgage was paid off and the property is positive cash flow.   It is also handled by a property management company, which reduces direct involvement by the owners.  Although there is consistent income, the annual net rental income varies due to vacancies and economic conditions.  I would like the rental income to cover 25% of our retirement income.   However, once this property is sold, I don't know if we will purchase another property to replace it.

  • Annuity Income -   I've looked at purchasing a lifetime annuity through an insurance company, but haven't been able to rationalize the cost.  I am interested in an immediate annuity in about 20 years, but most agents aren't interested in selling me a policy in 20 years :-)  At this point, our most likely source of lifetime annuity income will be Social Security, for which we won't be eligible to receive for about a decade.  I expect that Social Security will cover about 25% of our retirement income. 

  • For now, we will consider gains in our investments as a bonus, but also target investment gains to cover 25% of our annual retirement income.  This will provide a cushion if the four income categories fall short of their 25% target.

    I'll be working on implementing this retirement income strategy over the next few years.

    For more on Strategies and Plans, check Mondays for a other segments.

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

    Copyright © 2015 Achievement Catalyst, LLC

    Friday, January 02, 2015

    Returning from Sabbatical

    Happy New Year!

    After over a year on sabbatical from blogging, I am returning on an occasional basis, posting between one and four times a month.  I will try this posting frequency for a few months and decide whether to continue.

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

    Copyright © 2015  Achievement Catalyst, LLC

    Tuesday, December 31, 2013

    Final Post Before Sabbatical

    This is my final post before taking an indefinite sabbatical

    After more than 7 years of posting on mostly a daily basis, it is time to take time off.   I feel better prepared for retirement finances since recovering from the 40% decline in the 08/09 bear market.   For the past year, we've consistently been able to meet our financial targets known as Wealth Builder Ratios.   We will continue to use the ratios as our metrics going forward.

    Here are some posts that I particularly enjoyed writing for this blog:

    Achieving early retirement:

    Achieving Financial Freedom - I've Retired In My Forties

    The Our Journey to Financial Freedom series:
    1. Our Childhood Preparation
    2. The Value Of Higher Education
    3. Making The Most Of My Job
    4. Lifestyle and Spending Choices
    5. Setting Goals, Developing Plans and Tracking Process
    6. Staying The Course
    7. How Luck Played A Role
    8. My Personal Finance Mind Tricks
    9. The Professionals We Used
    10. When Preparation Met Opportunity

    I wish everyone a great 2014 and good luck on their journey to financial freedom.


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

    Copyright © 2013 Achievement Catalyst, LLC

    The Wealth Builder Carnival #157 - Final Edition

    Welcome to the one hundred fifty-seventh edition and final edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

    And now on to the Carnival.


    Bryan presents How To Make A Career Change posted at, saying, "The end and beginning of each new year brings about many changes. If you are planning a career change or possibly considering starting your own business, here is a guide with steps on how to manage your finances and prepare for success."


    John Schmoll presents Betterment Review: A New Investing Option to Consider posted at Frugal Rules, saying, "Investing in the stock market is vital to building wealth and with the variety of options available of where to invest it can be confusing. Choosing a good brokerage that has good offering and low fees can be a great way to help grow your retirement portfolio and get your investing on the right foot."


    Justin @ Root of Good presents Running Out Of Money In Early Retirement posted at Root of Good, saying, "Depleting all your assets during early retirement is a common fear for those seeking financial independence. Here are five reasons why it's unlikely you'll run out of money and four tips to avoid depleting your investment portfolio in early retirement."

    That concludes this edition. Past posts can be found on our blog carnival index page.

    Technorati tags: , .

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

    This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Monday, December 30, 2013

    Wealth Builder Ratios - Q4 2013

    Here is our Q4 2013 Wealth Builder Ratios update. This will be the last update before my sabbatical from this blog.   During the fourth quarter of 2013, the Dow, Nasdaq and S&P500 indices were up 8.5%, 10.2% and 9.5% respectively. My company stock was up 8.5%.  Our investment portfolio increased in value 7.6% due mostly to my company stock.

    For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.

    Ratio and Target
    Q3 2013
    Q4 2013

    Retirement Income to Salary
    2007= n/a
    2008= n/a
    2009= n/a
    2010= n/a
    2011= n/a
    2012=  n/a
    0.790.84This is the new metric that I'm using which is based on a 4% withdrawal rate of the liquid assets in our retirement and savings accounts.

    The initial target I'm using is a 0.8 ratio, which would be 80% of our pre-retirement pre-tax income.   We were very close in Q3 and passed the target in Q4, due to the advance of my company stock. 
    Income to Salary
    2008= -5.47
    2009= -1.38
    2012= 2.02
    4.445.89I will use this metric through the end of 2013 and then replace it with the Retirement Income to Salary ratio.

    5.89 is the highest increase in our wealth ratio ever. The increase in Q4 was due to the increase of my company stock.

    I plan to sell some additional shares of company stock in my retirement plan, keeping only the low basis shares in my company retirement for a future NUA execution.  At this point, I have sold 85% of the stock options with a  2014 expiration date.  I will sell the balance in 2014.  
    Savings to Salary
    Target >20
    2007=23 2008=16.7 2009=15.3
    23.525.0I will use this metric through the end of 2013 and then replace it with the Retirement Income to Salary ratio.

    Most of the gain in Q4 was due to increase of my company stock.

    During Q4, I slightly increase the amount of funds invested in equities.    I plan to add more funds into stocks and ETFs during 2014, especially if there is a correction.
    Debt to Salary
    2007=1.51 2008=1.46 2009=0


    We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment has reduced our expenses by 24%.

    My financial goals for 2013 were:

    1.  Maintain a Retirement Income to Salary ratio >  0.8.  (met target at 0.84)

    2.  Continue to maintain an Investment Income to Salary ratio > 0.8. (exceeded target with 5.89)

    3. Maintain a Savings to Salary ratio of 20. (exceeded target with 25)

    4. Maintain Debt to Salary Ratio at 0. (met target of 0)

    (For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)

     #1,  #2 and #3 were directly correlated with how well our stock, bond, and CD investments returns. With the advance of my company stock and the high proportion of cash, our portfolio was up less than the indices.

    Although I am pleased with our portfolio results, I am not confident the gains are sustainable. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. I continue to be concerned about volatility of our investment portfolio, and there are equal downside and upside potential going forward due to EU issues and the US debt ceiling crisis.  So I continue to add funds to the stock market during dips, and sell off my company stock and stock options in a tax efficient manner.

    I continue to have the same financial goals for 2014. At this point, I am slightly optimistic about the economy and the stock market.

    For more on Strategies and Plans, check back every Monday for a new segment.

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

    Copyright © 2013 Achievement Catalyst, LLC