Retirement

[kf4uda]

I think what did it for us was fighting the urge to pull everything out when things started tanking and sticking with our plan. We kept putting money into our investments when they were tanking, which allowed us to buy more shares at lower prices. When those prices came back up, we had lots of shares. A lot if people pulled their money out at or near the bottom and didn't put it back soon enough. You can't time the market, as the old saying goes. Come up with a plan, stick to it, evaluate it every year and adjust as necessary.

You are right with your methods. It took me a few years to figure this out myself, but I am making it work for me now. It feels like you are putting your money in a sinking ship but when the market comes back up you have a lot more ammo to make it back up with and move forward.

I think the real sinking ship is social security but I don't have a choice of putting money in it or not. I will just have to do the best I can with 401K.

 

[RSKY]

Speaking of 401K's, stocks, and mutual funds. That is what we were discussing, isn't it?

Back in the nineties I was working at the old plant. There were a couple of electricians who spent all their breaks and lunches talking about money and how they had theirs invested. They were so tight they would bring Mason jars of water with Kool-Aid to drink. Would not spend a quarter for a Coke. If all their assets were counted both were probably millionairs. The stock market took a big hit one day and I couldn't wait to get to work to hear them b**ch and grip. When I got there the two cheepskates had bought several boxes of donuts and brought them in for everybody. They were CELEBRATING the big drop in stock prices. I didn't understand why they were happy. From what they had said earlier in the year I knew both had probly lost at least a hundred thousand and maybe more. I finally got one of them to talk to me.

The way they looked at things was that it would be at least ten years before they retired. The drop in stock values allowed them to buy more shares with the same amount of money and "the market will always come back". When it came back up the cheap shares they had bought would give them more money.

Does this make sense? Am I explaining their ideas correctly?

The inverse (hope that is correct) way of thinking is what most people do. EVERYBODY is talking about how well widgets are selling and EVERYBODY is buying stock in the widget company because the stock price has quadrupled in three months. Of course the price drops back to where it should be after EVERYBODY buys the stock and EVERYBODY looses their....mules.

I did this with a small tech fund in our 401K. It had doubled twice in one year and everybody was talking about it. I bought 1000 shares at $60. More than half my 401K at that time. It quickly climbed to $65, then $70. Then...., well I sold bits and pieces all the way down. Got $6 for the last 10 shares.

Learned a valuable lesson.

Took me years to recover.

Coulda been retired a couple of years ago if I had stuck to my original plan.

About 401Ks.

I figure my own taxes. Old company matched dollar for dollar on the first 3% you contributed. Then $.50 on the dollar for second 3% contribution. They did this for years. So if you put in 6% of your pay they put in 4.5%. But, when I figured my taxes as if I hadn't contributed, 2% of the 6% went to Uncle Sam. So in reality I was putting 4% of my money and 2% Uncle Sam's money into my fund and the company was putting 4.5% in. Clear as mud.

Check prices on Goodyear stock last couple of years (oops, shouldn't have said that). It got way down below $4. I wasn't paying attention like I should have. But others were. One fellow changed all his 401K to Goodyear stock at $3.90. It got up to around $18, but he chickened out and sold back to bonds before it got to $13. He tripled his 401K in a few months. I didn't get in until it was back up to $6, still have it around $15.

Rambled enough for one night.

I have enjoyed this discussion greatly. And I have learned quite a bit too.

Seems like a tractor person's opinions are worth just a little bit more to me. Could it be because their 'enjoyment ?, entertainment ?, comes from playing with working machines instead of 'recreational items.

Hmmmmm, interesting thought.

 

[MossRoad]

That's exactly what I did Moss...have about 22 years to retirement, but have been putting 12% of my income away since age 23. Aside from the mess over the last couple of years (which I've recovered and then some) the more in the investment account, the faster it grows...Kinda fun to watch now, most of the time anyway.

2% would be a CD type investment...Those haven't paid much of anything since the 80's. Good bond funds with a mix of blue chips works pretty good close to retirement..that's what my mom has and she's getting ready to hang it up any day now. Based on the calculations and the returns, she can easily pull 4% out of the fund and have no money issues.

You are right with your methods. It took me a few years to figure this out myself, but I am making it work for me now. It feels like you are putting your money in a sinking ship but when the market comes back up you have a lot more ammo to make it back up with and move forward.

I think the real sinking ship is social security but I don't have a choice of putting money in it or not. I will just have to do the best I can with 401K.

I guess I should have mentioned that as everything was tanking, I was quite sick to my stomach, trying not to vomit for a year and a half. :confused2: I do not have nerves of steel. :laughing: But we took the advice of our planners and stuck it out. We have 17 more years until retirement.

I feel for anyone that was close to retirement and lost 30% of the value of their savings in just a year. Many folks were forced to put off retirement, go back to work, etc...

Hopefully, just like we live well below our means now, we will retire well below our means and will be able to weather these financial storms in the future.

 

[Travelover]

For those reading this thread that wonder how to get professional management with out paying big bucks, I have the following suggestion:

Vanguard Target Retirement Funds. These invest in a mixture of stock and bond index funds. They automatically keep the immediate ratio of stocks to bonds constant and increase the bond holdings gradually over time as you age. Cost are very low (about 0.2%) There is a fund designed for all ages. https://personal.vanguard.com/us/whatweoffer/ira/retirementfundchoices?Link=facetWT.srch=1

There is even a target fund for those already retired. Another excellent choice in retirement is the 40 year old Wellesley fund which invests in bonds and dividend stocks to provide income.

I have no financial interest in Vanguard, but do have about half my portfolio there. It kills me to see people paying the fees at a place like Edward Jones or Ameriprise.

 

[beppington]

I feel for anyone that was close to retirement and lost 30% of the value of their savings in just a year.

I've read that folks nearing retirement, & in retirement, should hold less & less stocks, and more & more bonds, to help avoid such drastic drops. I think the idea is that the older you get the less you can afford a huge portfolio drop since you're less & less able to go back to work.

 

[dmccarty]

Thinking about retirement has me thinking about my extended family and how long they lived or are still living.
.....
Now about the money that we have stashed away. Should we hoard it, keep it safe for worse times. Or should we spend it while we are able to.

I would hate to live on white beans and rice for the last twenty years of my life because I did not save enough.

But even worse would be to turn eighty, be in bad health, and think "****, wish we had gone to Aruba scuba diving when we were younger", as I sit in my wheelchair and count my money.

...

Any thoughts on this depressing topic?

Not really depressing but necessary. Both sides of my family are long lived. All of my grandparents and great grandparents lived into thier 80's and some into their 90's with one exception. The exception was my grandfather who was in USMC in WWII and Korea. We are not real sure what he did in WWII but he seemed to have a somewhat easy time of it guarding Nimitz. Though he might have done some "things" early in the war that we cannot track down. In any going for the long winter walk at Chosin did not help his health.

Now I have to disagree about eating white beans and rice. :laughing: We love rice and beans.:licking: But we have had to leave out the rice because of the carbs and calories. :laughing: We at ALOT of black and white beans this time of year. :thumbsup: But of course it is one thing to like to do compared with have to do...

Until we bought land and built our house we lived VERY much below our income. Now it is somewhat below our income. When we bought the land it cost twice as much as our city house but we did not have much of a city house. :laughing: And that was planned since we wanted to buy land. We were saving up to buy the land, pay off the land, and to build/buy the new house...

Along came kids so there goes the money. Then the economy tanks and offshoring goes full throttle and the wifey looses her job to India. Since we lived on one pay check we were ok.

By now we wanted to have paid off the land. And we are close even with all of the bumps in the road. We had the kids and there were certain things we wanted to do with the kids that cost some money. Enough money over the last couple of years that would have paid off the land. We want the kids to have certain memories with us and the grandparents which requires us to spend some money on vacations that the wifey and I would not be doing as we are with the kids. As it is now we will still be paying off the land MUCH earlier than the end of the loan.

But here is the rub. If I am lucky enough to have a death bed that allows me to think back on my life, I will not be wishing that I had paid off the land a couple of years earlier than planned. Instead I can think of the good times we had with the kids and the grandparents. That is FAR more important than my time of "owning" the land.

Life is short even if you have a healthy life and make it to 100. And you do not know if you will have a healthy life and how long you will live. You can drive off in the car today and not get home to work. Only a fraction of a second can change or end your live. That is a depressing fact.

If someone has the dream of going on a Cruise, <YUCK> , and if they can afford to get on the ship even if it means eating white beans and rice for a while, take the Cruise. :thumbsup::laughing:

My two cents is to enjoy today as much as you can. Spend as much time with family as one can. Spend the money reasonably to have that family time. Time is finite and priceless since it cannot be bought so use it wisely.

Later,
Dan

 

[smstonypoint]

Vanguard Target Retirement Funds. These invest in a mixture of stock and bond index funds. They automatically keep the immediate ratio of stocks to bonds constant and increase the bond holdings gradually over time as you age.

I've read that folks nearing retirement, & in retirement, should hold less & less stocks, and more & more bonds, to help avoid such drastic drops. I think the idea is that the older you get the less you can afford a huge portfolio drop since you're less & less able to go back to work.

To follow up on Travelover's post, Vanguard's Target Retirement Income Fund has 30% stocks, 65% bonds, and 5% short-term reserves, while the Target Retirement 2055 Fund has 89% stocks, 10% bonds, and 1% short-term reserves.

Fidelity and T. Rowe Price and perhaps other companies have similar funds, but I seem to recall reading that some companies are more conservative (i.e., lower allocation to bonds) than others for a given target retirement date.

Steve

 

[Rod in Forfar]

To answer the original question, 60%, if you have no debt. In Ontario there are very good tax breaks for pensioners and no exorbitant medical costs, so there you go. Today I turned 60, and have been retired for 6 years. I find much of my disposable income goes to energy, especially at this time of year when living in an old stone house. But I've been able to buy tractors, a Lexus, a Toyota truck, Polaris Ranger, and build and equip a pretty good workshop on my pension. I just shop carefully and buy used.

 

[Travelover]

........... I seem to recall reading that some companies are more conservative (i.e., lower allocation to bonds) than others for a given target retirement date.

Steve

Right. Instead of looking at just the retirement year, you should look at the ratio of stocks to bonds and choose the one that you feel most comfortable with. A rough guide is the fund should have approximately your age as a percentage in bonds.

 

[RSKY]

As dmccarty said he has done so did we.

We spent the money every year to take the kids somewhere. They made friends and had pen-pals from the UK, Ireland, and several US states. Looked at this as an investment in their, and our future. Travel is the greatest educational experience that you can give your children as long as you don't do just the tourist trap things.

Just made an appointment with a tax accountant for Friday. If all works out as I plan I will give notice at work on Monday. We are short handed on supervision anyway and I don't know how they are going to replace me. Guess they should have thought of that before they put me doing two peoples jobs.

If things work out as planned I will take a month off then start looking for another, low stress, job in April. Just in time for Lowes or Home Depot to need seasonal help in the lawn and garden section.

My wife is very happy with my decision. She feels that I have missed out on a lot of things working the night shifts. She wants me home and enjoying life with her.

After all these years she is still my biggest asset.

Well, she doesn't like the way I worded that last line.

Anyway, I have to go to work now.

Good day.

RSKY