Life Didn't Get Easier in Early Retirement

I always thought that life would get easier as I got older.   After all, I would have the benefit of more years of experience with the passing of time.  So retirement would be the easiest time in my model.

I was wrong.  Here of some of the reasons for us.

Finances -  Our early retirement if funded entirely by our savings since neither of us have a pension nor are old enough to collect Social Security yet.   The stock market volatility since 2007 has created greater uncertainty (and stress:-) on whether we have sufficient savings to fund a retirement for 30-40 years.  This has required changing the strategy of primarily depending on equity appreciation to a strategy using more equity dividends for income.  

Children -  We started late with having children, adopting just before and a few years into early retirement.   Raising children in today's world is a bit more complex than when my spouse and I were growing up.  When I was a child, there were less options, less distractions, less choices to make.  As a result, I was more focused on a few things and (I think) easier to raise as a child.

Maintenance - We have more stuff that requires periodic maintenance: house, cars, appliances, electronics.  Electronics seem to need replacement every 3-5 years  Also, many appliances shorter lives of 5-8 years, versus 15-20 years, and therefore requiring replacement several times during retirement.  Finally, many of the new items are more complex, and require more instruction effort to use.

Health - In the past three year, my health situation has changed, requiring significantly more effort on my part to maintain good health: new diet, more medication, and more intervention.   I expect the effort to continue to increase as I get older.

No complaints.   Just an observation from our 8 years of early retirement.  And  an acknowledgement of a change in one of my paradigms.

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

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

Copyright © 2016 Achievement Catalyst, LLC

Investing in a Volatile Market

This continues to be a confusing market but I want to continue putting more funds into dividend paying stocks or total market indices.   I am using an approach of buying small quantities each time to minimize the risk of the market or the stock declining further.  To minimize costs, I am buying commission free ETFs or using free stock trades from broker promotions.

First, I am buying commission free ETFs that are offered by my brokerage.   One brokerage has not holding requirement and another brokerage has a 30 day holding requirement.

Second, I am buying small stock positions in select dividend stocks with commission free trades.   That way if the stock falls further, I can add to the position at a lower price.   Several brokerages are offering commission free trades for opening a new account or adding to an existing account.

These approaches give me a bit of psychological support as I make the investment,  Of course, neither of these strategies will protect our purchases against a significant decline.

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 © 2016 Achievement Catalyst, LLC

2015 Wealth Builder Ratios

Here is our 2015 Wealth Builder Ratios update. During  2015, the Dow, Nasdaq and S&P500 indices were down 2.2%, up 5.7% and down 0.7% respectively. My company stock was down 12.8%.  Our investment portfolio decreased in value by 8.0% due mostly to my company stock.

Overall, the returns were very poor for our investment portfolio.

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

Ratio and Target	2014	2015	Comments
Retirement Income to Salary Target=0.8 2007= n/a 2008= n/a 2009= n/a 2010= n/a 2011= n/a 2012=  n/a 2013=0.84	0.88	0.79	This 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 target I'm using is a 0.8 ratio, which would be 80% of our pre-retirement pre-tax income.   With the decline in our portfolio, we fell below a 0.8 ratio.
Investment Income to Salary Target=0.8 2007=3.41 2008= -5.47 2009= -1.38 2010=1.29 2011=0.5 2012=2.02 2013=5.89	0.99	-2.07	In the transition, I will report this metric for 2015 even though I have replaced it with the Retirement Income to Salary ratio. -2.07 is the biggest decrease in this wealth ratio since the Great Recession. This was caused primarily be a decline in my company stock of 12.8%.
Savings to Salary Target >20 2007=23 2008=16.7 2009=15.3 2010=16.6 2011=17.1 2012=19.1 2013=25.0	26.0	24.0	In the transition, I will  report this metric for 2015 even tough I have  replaced it with the Retirement Income to Salary ratio. Almost all  of the loss was due to decrease of my company stock.
Debt to Salary Target=0 2007=1.51 2008=1.46 2009=0 2010=0 2011=0 2012=0 2013=0	0	0	We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment reduced our monthly expenses by 24%.

My financial goals for 2015 were:

1.  Maintain a Retirement Income to Salary ratio >  0.8.  (below target at 0.79)

2.  Maintain an Investment Income to Salary ratio > 0.8. (below target with -2.07)

3. Maintain a Savings to Salary ratio of 20. (exceeded target with 24)

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 decline of my company stock, our portfolio had a negative return worse than the indices.

2015 was a very humbling investment year.   I continue to reduce my company stock holdings to prevent a similar deviation from the indices in future years.  In addition, I am migrating towards building a portfolio of higher dividend paying stocks

I will only keep goal #1 and #4 for 2016.  I believe these will be better and less volatile measures. At this point, I am slightly optimistic about the economy and the stock market.

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

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

Copyright © 2016 Achievement Catalyst, LLC

A Confusing Market

I did not expect the market to rally Friday after the jobs report, especially since the jobs number indicated the Fed is raising rates in December.   In addition, the ECB said that they would continue monetary easing in the EU.  So I expected the stock market to decline, especially interest rate sensitive stocks, dollar to rise, and gold to fall.

Instead the market rallied, dollar went down, and gold rose.   The market not only rallied, but it went up over 2% and recovering the losses from the previous day.   The main negative sector was energy, due to the OPEC deciding to continue their policy of not reducing oil shipments.

While confused, I am very happy with the outcome.   Our accounts were up and my company stocked (uncharacteristically) gained a little more than the market indices.

However, the market reaction has me questioning the sustainability of this rally. The market can't keep rising if interest rates are going to rise.     If I'm right, the next few weeks/months should be the beginning of a market correction.

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

Tough to be Positive

With a month left in 2015, I find it hard to be positive about the stock market.  I expect the market to continue to be ambiguous and directionless.  I also believe that the downside risk is higher than the upside potential.

Given my poor track record of anticipating short term stock market direction, I'm maintaining hold on our current investments.  I like my current investments, my level of cash, and can still sleep at night if the market falls.   So I'm bracing myself for a decline, and ready to make some additional purchases should the stock market go lower.

If my psychological preparation is wasted, I will be happy to be wrong.

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

My Watching Paint Dry Investments

Tracking my investments in 2015 has been lot like watching paint dry.   A lot of time goes by and very little seems to happen.   With 2015 almost over, most of my accounts within a couple percent of the beginning of the year.   One managed account is down about 7% and one is up about 10%.    So overall, everything is about the same.

One reason is that I have chosen to invest in stocks that pay above average dividends to build a more dependable source of retirement income.  These stocks usually don't see significant short term price appreciation, and thus have a smaller impact on the account value.  In fact, several of my purchases have fallen with the expectation of Fed raising rates.   So most of my account growth will come from dividend payments, which will be about  1- 1.5% of the invested value per quarter.

Another reason is that we chose to be conservative in 2014 and put significant amounts in 5-10 year CDs paying 2-3%.   While better that the 0.01% of money market accounts, 2-3% still feels like very little annual growth.   But it's steady.

Finally, I don't get any immediate benefit from income,  since the investments are in IRA accounts and I am still below the age for penalty free withdrawals.    In about 2 years, I will be eligible for penalty free withdrawals and hopefully will benefit from "watching paint dry" during this time.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Seeking Higher Interest Savings Accounts

Yesterday, my bank informed me that I am now eligible for 0.7% on our money market savings accounts.  Historically speaking, that may not be much, but it is significantly higher than the 0.01% we are getting today.

This info caused me to check with our other financial institutions on similar interest rate increases.  Unfortunately, there were no matching hikes by other institutions.   However, most had 5-6  month CDs paying 0.5%, which seemed like a reasonable alternative to me.

So in the next month, I'll be moving our 0.01% money market funds into higher paying money market funds or CDs, especially if the Fed raises interest rate in December.

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

A Frustrating Investing Year

2015 has been a very frustrating year for my investing.  The markets have been ambiguous and directionless. The indices have been seesawing all year, neither breaking out to new highs or falling o new lows. In addition, my company stock has fallen about 18% after hitting new highs in 2014.

My strategy of buying beaten down dividend paying stocks has lead to the purchase of several energy stocks, which unfortunately have fallen further.   The only highlight is the 4-8% dividend these stocks pay, if the dividend is maintained.   A dividend cut would only add to my frustration.

My last frustrating year was 2012, which was followed by a significant market advance in 2013.   However, my previous frustrating year was 2008, which was followed by a further large drop in early 2009.  It's not clear to me which will follow 2015, but right now I feel a negative outcome is more likely.

If there is a significant year end rally, I may take the opportunity to sell off some positions for a profit.  Otherwise, I will wait for a significant drop in the market to put more funds back into equities.
More than likely, the market will continue to be frustrating and not allow me to do either.

For more on Reflections and Musings, check back Saturdays.

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

Copyright © 2015 Achievement Catalyst, LLC

Cautious and Waiting

I believe that many individual stocks will test the August and September lows again before end of this year.   Until then, I am only making a few small purchases of 3-6% dividend paying stocks and a total market ETF that I plan to hold for 3-5 years.

That way, if I'm wrong and the market rises, I can participate in the gains.  If the market declines as I expect, I wlll be able to buy at lower prices.

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 © 2015 Achievement Catalyst, LLC

Patience

Since July, whenever I purchase a stock, I could have gotten a cheaper price if I had waited a month, a week or even a couple of days.  It seems that stock prices keep going lower.   Either it's time to start shorting stocks, or I should be more patient.

For now, I will choose patience.  So I've added two rules to my purchase strategy.   First, wait until the dividend yield crosses into the next higher whole number, e.g. transition from 4% to 5% yield.  Second, I will only make one stock purchase each day.  This way I will limit the number of stocks that fall after I make a new purchase.

However, if the market continues to fall, I may choose to also short some stocks.

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

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

Copyright © 2015 Achievement Catalyst, LLC