Retirement Planning - Lessons Learned

[Jchonline]

No.

My path was about the same as yours with about the same outcome. But the present generation is not facing the same reality we experienced.

For one example corporations are buying up all the rental property around here (and bidding up what they pay for them) so housing costs are far higher for someone starting out. So there's no opportunity for massive savings like you and I were able to do. And no way could someone pay off any house in three years on a starter salary, that's simply impossible. Its a different reality now.

A good union job with a pension constituted the middle class 50 years ago. No such thing today.

Someone starting out would need to move to a state where the cost of living is much lower, but maintain a job that still pays really well in order to make it work. You can slowly move up over the years if you buy/sell smart.

 

[California]

There is ALWAYS opportunity. As for housing, it depends GREATLY on where one lives. Houses in my area can be had real resonable. I just sold one myself.

Saying something is impossible tells me a lot.

Let me re-phrase that. It's impossible for someone earning a starter wage to pay off a starter house in three years in the parts of the country where the majority of people want to live.

 

[California]

Probably not good advice right now, when your short term losses could exceed 50%. Buy the index fund after the crash, not before.

I agree the odds are against you if you start investing right now. But still, analysis has shown that the only way to get long term returns that match the long term averages is to stay invested regardless of what the market is doing short term. I think this is because of another fact revealed by modern analysis: All of the investment gains that push up an average return, are earned in those few days of extraordinary market increases. All the other market numbers year in and year out, are just random noise that can be ignored. So - if you're not in the market on those extraordinary days you're not going to keep up with the long term S&P or whatever other index you like.

But yes, maybe with the market so high then real estate or some other alternative less linked to the economy, might be a better choice. If you have the analytical skill to identify the better alternative.

From my early days: Nice lady at Fidelity said why do you have this one account with so much cash when the market is rising? I replied that's what's left of my first significant investment in Fidelity Magellan back when Peter Lynch was a celebrity for beating the market year after year. That's the remaining half of what I put into Magellan. "Oh."

I didn't tell her this Fidelity account was my after-tax account while my long term investing was elsewhere in a Deferred Compensation (IRA) plan that I was locked into with my employer. Previously I had accepted a Fidelity offer to assign a Personal Investment Advisor and then learned when we met him that he wouldn't even look at that other half of my savings in the employer plan. We thanked him and walked out, that wasn't retirement planning advice at all!

 

[dirttoys]

Probably not good advice right now, when your short term losses could exceed 50%. Buy the index fund after the crash, not before.

Hopefully polite disagreement. Certainly buy low and sell high. But, time in the market means more than trying to time the market. If you are investing for long term (greater than 10 years), the upside lose can be greater than the bargain you might get waiting for a crash. Dividends play a role in long term investing, and they come with time.

If you are a rock star picker/timer, skip the index funds and manage your own money. If you are in the vast majority of folks that aren't, dollar cost average, and save as much as you can without missing all the fun of being young.

Try not to look at your balance more that quarterly, keep 20% liquid so you can buy a bargain, and worry about other stuff.

Best,

ed

 

[California]

... on the market for months...$89K, $79K, etc. It sold last year for (drum roll) $50,000. ($Fifty K).
... Young people bought it. Husband had construction skills and a few months later we got a walk through. They made it nice ...They soon resold it for $186,000.
Again...opportunities are out there.

Yes. We've been talking about passive investment, no management needed. There are far better returns available actively managing something. I got my start like that young husband, I asked a Realtor to find me a starter home and he offered that duplex I described above. I was employed as a Carpenter so he soon came back and said he had a listing that was un-salable, 5 units, all vacant and un-rentable, where a new buyer had ripped out the carpets, toilets, etc for a remodel then defaulted it back to the seller. The mountain of of rotting carpets and cabinet fragments in the yard was enough to scare off anybody. But I was able to negotiate a sweat-equity down payment to that discouraged seller. First clean it up then the seller would complete a proper sale to me, and carry the financing himself. A month working alone and $5k and I had four units rentable. This carried the mortgage plus funded fixing the fifth unit. Then it paid for me to go back to school for a graduate level degree. That minimal down payment eventually made the best return of anything I've invested in. When I sold it, the mortgage I carried on it more than made the payments on the nice home we still own.

Another principle I learned in my MBA long ago - much of the population is scared of risk and will pay good money to not have to think for themselves. People who rent instead of facing the unknowns of buying a home, is one example. Optional car extended warranties are a good example, overall you are paying both the average cost of repairs for your model but you are also paying the nice man or lady who sold you the policy, a very nice commission. And you're paying your share of the marble floor in the elevator lobby of the corporation that employs the sales agent. Skip your marble floor contribution and your share of the agent's Hawaii annual bonus vacation, carry the risk yourself, and long term on average you will be money ahead.

 

[MossRoad]

Probably not good advice right now, when your short term losses could exceed 50%. Buy the index fund after the crash, not before.

I disagree. Get in. Stay in. Invest a fixed percentage of your income every paycheck whether the market is up or down. When you start approaching retirement age, start moving towards safer investments.

 

[cdaigle430]

I am now forced into retirement because my job let me go due to COVID and lack of work after 23 years of loyal dedicated and hardworking service as a senior IT tech.

I am almost deaf so I its virtually impossible to get back to work because most want someone with excellent communication "skills" and on call work-I cant hear pager go off in middle of night without bed shaker and I am burned out from it because of my former job.

So now I am tapping into retirement but...underestimated the fact they will not only take 10% penalty fee but also state and federal withholdings before I get the check.. I am also worried about stock crash so and moving funds to less volatile investments.

Most PA wants a percentage of what you have so good advice is also expensive.

 

[goeduck]

I disagree. Get in. Stay in. Invest a fixed percentage of your income every paycheck whether the market is up or down. When you start approaching retirement age, start moving towards safer investments.

I have been trying to figure out what is safe.

 

[Fuddy1952]

Let me re-phrase that. It's impossible for someone earning a starter wage to pay off a starter house in three years in the parts of the country where the majority of people want to live.

That certainly may be true. Personally I want to live where it's safe, not heavily populated yet close enough for necessities and good medical care. Nice restaurants not far.
This is my idea of heaven. We can saddle our horses and ride for miles and miles over the distant mountains.
That would terrify some. I'm more terrified of big cities. Everyone is different.

 

[Fuddy1952]

I agree the odds are against you if you start investing right now. But still, analysis has shown that the only way to get long term returns that match the long term averages is to stay invested regardless of what the market is doing short term. I think this is because of another fact revealed by modern analysis: All of the investment gains that push up an average return, are earned in those few days of extraordinary market increases. All the other market numbers year in and year out, are just random noise that can be ignored. So - if you're not in the market on those extraordinary days you're not going to keep up with the long term S&P or whatever other index you like.

But yes, maybe with the market so high then real estate or some other alternative less linked to the economy, might be a better choice. If you have the analytical skill to identify the better alternative.

From my early days: Nice lady at Fidelity said why do you have this one account with so much cash when the market is rising? I replied that's what's left of my first significant investment in Fidelity Magellan back when Peter Lynch was a celebrity for beating the market year after year. That's the remaining half of what I put into Magellan. "Oh."

I didn't tell her this Fidelity account was my after-tax account while my long term investing was elsewhere in a Deferred Compensation (IRA) plan that I was locked into with my employer. Previously I had accepted a Fidelity offer to assign a Personal Investment Advisor and then learned when we met him that he wouldn't even look at that other half of my savings in the employer plan. We thanked him and walked out, that wasn't retirement planning advice at all!

My grandfather next door had a visit from Edward C. Johnson II right after WWII. Grandfather liked him, investing in the Puritan Fund. He did well...very well.