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On Sep 27, 3:46 pm, m...@y...com wrote:
> Self age: 41; spouse: 35; two kids, 7 and 4.
> GOAL: Retire by 45, definitely by 50.
You probably won't have enough net worth to comfortably retire without
working at age 45.
> Home: in SF Bay Area, bought 10 years back @ 360K; remodeled with
> about 100K 1 year back. Presently valued at about 650K (after the fall
> in prices; before was at about 800K).
Your house has to be worth more than that. Get a formal appraisal and
get a building inspector to find things that might need to be repaired
so that you will be able to put it on the market.
> Mortgage: 210K. 7-year fixed mortgage at 4.5%, will convert to ARM in
> April 2011 (in 2.5 years)
> HELOC: 45K, ARM, @ 4.25% presently (prime MINUS 1/8th or so)
That's good, don't pay off early unless your rate goes to 7% or more.
> Income: Self 140K; wife: 60K (works only 60% of the time, to help with
> children after school)
That's good. Remember that Social Security averages the highest 35
years of earning, so if you can stretch your working years out it will
help. (I know SS doesn't pay that much, but it helps.)
> Retirement savings: $420K total.
> Details: 400K in two 401Ks; 20K in IRAs (don't qualify for Roth).
> Retirement funds are broadly diversified in S&P 500 index, Growth
> index, and a bunch of other mutual funds. No single fund more than
> 10%; international about 25%; all stock funds. The total has been as
> high as almost 500K, before the last 1-year's downturn.
> Nonretirement savings: Total: 500K (details below)
> DRIPS (XOM: 70%, PFE: 6%, BAC: 8%, LMT: 12%, IIBK: 4%): total: 200K
> Mutual Funds: (Vanguard 500: 25%, Vanguard Growth: 25%, Wells Fargo
> Enterprise: 50%) total: 250K
> 529 funds for children: (50% for each child, CA scholarshare mutual
> funds): 40K total.
> Misc. 10K
You have a good balance between retirement and non-retirement
savings.
> LTC: NONE
As your net worth increases, you may not need LTC insurance, but you
need it now.
> WILD CARD: I have employer stock (not options) worth 350K (pre cap-
> gains tax). This is a private company stock, valued once a year in Oct
> (i.e., price remains fixed for the year), encashable once a year over
> a 2 months window; has a 3-year history of paying annual dividends at
> about 2% of the stock value. The stock has grown 7-fold over the last
> 7 years, but the future growth is expected to be more modest, say 15%
> -20% a year for next 2-3 years. What to do with it? Sell it, and pay
> off the mortgage, and live "debt free" or let it grow...
Private companies are valued conservatively, so keep the stock until
you leave your job.
Once you retire, medical insurance may be a major problem.
Rather than completely retiring, your wife and you should consider
getting other work such as new company start-ups, research, or
academic teaching.
How soon does your pension become vested, and when can you start
getting your pension?
--
Ron
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"Sandra Loosemore" <n...@f...com> wrote in message
news:m3ej34rv0z.fsf@frogsonice.com...
>
> Anyway, my point here is that telling folks they need to "invest" in a
> reliable car is 1970's Detroit thinking. Nowadays, not every working
> adult really needs to own a car -- and for those who don't, a car is
> an unnecessary expense, not any kind of investment. Moreover,
> choosing to live in an area where you need to drive 10 or 20 miles to
> get to the places where you need to go every day seems to me to be as
> pointlessly over-consumptive as buying the mini-mansion or late model
> car lot in front of it.
This is about as ignorant a comment as I've read here. Most jobs that are
really necessary to be performed cannot be done telecommuting. As a
consumer, you should really learn where those things you consume come from,
other than China. Most farmers actually need a reliable vehicle, for
instance. Just going to the hardware store might be a necessity some days.
Very few construction workers have jobs within walking distance of their
homes, and public transportation probably doesn't get you to the
construction site either. Those are two rather common jobs for whom a
reliable vehicle is a necessity. Oh, maybe a doctor should have a car, too,
just in case. Over-consumptive? Give me a break.
Elizabeth Richardson
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"Elizabeth Richardson" <e...@w...att.net> writes:
> This is about as ignorant a comment as I've read here. Most jobs that are
> really necessary to be performed cannot be done telecommuting.
If you go back to my post, I did say that some people do have jobs
where having a car is a necessary part of it.
> Most farmers actually need a reliable vehicle, for instance.
Indeed, this is one example of a person who not only needs a vehicle
in the course of actually doing their work, but is also most likely
constrained to living in a rural area.
> Very few construction workers have jobs within walking distance of their
> homes, and public transportation probably doesn't get you to the
> construction site either.
Here in the Boston area, construction workers are usually driven to
the job site in a truck owned by the contractor. I'll bet a very
large fraction of them don't have cars of their own.
FWIW, I'm an engineer, and in the almost 30 years I've been in this
business I've literally *never* lived where I couldn't walk or take
public transportation to work and to shopping and other places I
need/want to go on a regular basis. This includes having lived in the
Seattle, St. Louis, Salt Lake City and New Haven in addition to
Boston. (You mentioned hardware stores -- there are two within a
10-minute walk of where I live now, plus a Home Depot a few miles away
on a direct bus line.) I contrast that to how I grew up; my dad was
also an engineer, but we lived in such deep outer suburbia that he
drove about 40 miles each way to work every day. Living like that was
my dad's choice, not a necessity of his job. It was a luxury, as much
as the mini-mansion and parking lot full of late-model cars that he kept.
1970's Detroit thinking, as I said, when gas was cheap and the economy
ran on the automotive industry. Nowadays the economy runs on the
Internet, and the Internet has made it possible for a lot of people
not to have to "go" to work at all.
Since I'm not tied to working in any particular location, I'm not sure
I want to stay in Boston indefinitely, but there are plenty of other
walkable cities with decent public transportation out there, as
previously noted. The car-sharing services have really been catching
on in many cities as well. Zipcar is super-convenient for the cases
where I do need a car -- to get somewhere that public transportation
doesn't go, to take the cats to the vet, to bring landscaping supplies
home from the aforementioned Home Depot, etc. While I did own a car
for many years even when I didn't need one on a daily basis, after
having used a car-sharing service instead for several years now I
don't really ever want to go back to being a car-owner again.
Anyway.... I'm not claiming that nobody needs to own a car -- only that
it's not a given that *everybody* needs to own one. And if you don't
need a car, it's not an "investment".
-Sandra the cynic
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On Sep 28, 12:51 pm, Ron Peterson <r...@s...core.com> wrote:
>
> > WILD CARD: I have employer stock (not options) worth 350K (pre cap-
> > gains tax). This is a private company stock, valued once a year in Oct
> > (i.e., price remains fixed for the year), encashable once a year over
> > a 2 months window; has a 3-year history of paying annual dividends at
> > about 2% of the stock value. The stock has grown 7-fold over the last
> > 7 years, but the future growth is expected to be more modest, say 15%
> > -20% a year for next 2-3 years. What to do with it? Sell it, and pay
> > off the mortgage, and live "debt free" or let it grow...
>
> Private companies are valued conservatively, so keep the stock until
> you leave your job.
>
> Once you retire, medical insurance may be a major problem.
>
> Rather than completely retiring, your wife and you should consider
> getting other work such as new company start-ups, research, or
> academic teaching.
>
> How soon does your pension become vested, and when can you start
> getting your pension?
PENSION? Surely you are kidding. Not only my company does not have any
pension, none of my friends' companies have any pension. In fact, I
don't know anyone younger than 45 whose job has pension (I know there
are such jobs, such as postman, bus driver, etc.) But certainly none
in the professional areas, in silicon valley.
>
> --
> Ron
>
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On Sep 29, 5:12 am, m...@y...com wrote:
> On Sep 28, 12:51 pm, Ron Peterson <r...@s...core.com> wrote:
> > How soon does your pension become vested, and when can you start
> > getting your pension?
> PENSION? Surely you are kidding. Not only my company does not have any
> pension, none of my friends' companies have any pension. In fact, I
> don't know anyone younger than 45 whose job has pension (I know there
> are such jobs, such as postman, bus driver, etc.) But certainly none
> in the professional areas, in silicon valley.
I had to ask to cover all the possibilities.
Do you want to continue working after you retire either in a part-time
basis or in a different job?
I think that your investment earnings need to exceed your current
expenses by a comfortable factor to make retirement feasible.
--
Ron
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You need to analyze for expected expenses
and have at least 20 - 25 times that before
social security age and 12 - 16 times after.
I'm guessing you are spending about $10K
a month based on your income and fairly
agressive savings.
The largest overlooked expense is health insurance.
People age 60-65 pay about $600 a month apiece now,
but rates are doubling about every 5-7 years.
I'd budget at least $3000 a month in your case
for you and your spouse in your 60s.
So with $13K a month in expenses, you'd
need 3-4 million in the bank. You are
about a third the way there which is good for your age.
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"joetaxpayer" <j...@n...com> wrote in message
news:JISdnTrSwobETELVnZ2dnUVZ_qXinZ2d@comcast.com...
>> I really enjoy your posts, but it has been many moons since we could
>> earn 4.5% risk-free "elsewhere". ..
>
> Not more than a year or so ago ...
Moons ==> Months.
"a year or so ago" ==> 12 months.
12 months ==> 12 moons ==> "many moons".
Q.E.D.
BTW -- the single last year equates to (depending
on when you're reading this) about a negative 25%,
wiping out much more than your last year's worth
of growth.
.
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dapperdobbs wrote:
> Also keep in mind that every 10k of pension or retirement benefits
> implies an underlying net worth of about 143k, assuming a 7% rate of
> return.
>
This is interesting. Can you give me a cite or URL where this is
spelled out? I have heard of a 12X mult of the yearly pension, but this
exact figure is new to me.
Chip
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"joetaxpayer" <j...@n...com> wrote in message
news:JISdnTrSwobETELVnZ2dnUVZ_qXinZ2d@comcast.com...
>> I really enjoy your posts, but it has been many moons since we could
>> earn 4.5% risk-free "elsewhere". ..
>
> Not more than a year or so ago ...
Moons ==> Months.
"a year or so ago" ==> 12 months.
12 months ==> 12 moons ==> "many moons".
Q.E.D.
BTW -- the single last year equates to (depending
on when you're reading this) about a negative 25%,
wiping out much more than your last year's worth
of growth.
.
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m...@y...com writes:
> On Sep 27, 2:53 pm, "John A. Weeks III" <j...@j...com> wrote:
> > m...@y...com wrote:
> I am not keeping my mortgage for tax savings, but more for the
> reason that the rate on it is pretty good (only 4.5% from April 2004
> through April 2011), and even after the current severe loss in the
If you're comfortable with that risk - I see no reason to hurry
to pay down a mortgage on which you are paying 4.5% -- as long
as you are still saving otherwise. If that mortgage rate
resets to a rate you don't like, make sure that if you want
to, at that point, you can pay it off in cash. You may still
be able to refinance when that time comes, but while a low mortgage
rate may be an incentive to save in higher-yielding instruments,
in order for that to work, you still have to be doing that saving.
(which, it sounds like, you are doing plenty of)
> > Second is dump the life insurance. Why pay for that when you have
> > more than that much sitting in the bank?
>
> John, can you elaborate a bit more on this?
I wouldn't dump it.
> Our reasoning is that, should I die, wife should be able to pay off
> mortgage, immediate-fund the college savings for kids, without
> touching our investments for retirements (the 401Ks and outside
> investments), and, fo wife to be able to go from 60% work to 25% work,
> or so. For 500K term I am paying about $350 per year (current one is
Until you have nobody dependent on your *income* - ie. if
you are fully retired and have stopped saving and have
enough assets to live off of and for your dependents to
live off of - you need insurance. You're asking the
right question - if I die, then what happens to the
wife and kids? If you die tomorrow, and your plan is
for you to work for another 5 to 10 years to save for
your retirement, until you've finished saving, you
have folks whose well-being depends on your ongoing
income. And, frankly, even if the plan is to have
saved enough in 5-10 years, your insurance coverage
should last longer than that - it's entirely possible,
even likely, that it'll take you longer than you
originally planned. And $350/yr for half a million
in coverage is a pretty good deal. You should certainly
do some up-to-date comparison shopping, but that's
certainly not a lot of money for your coverage.
Do make sure you have *disability* insurance, though.
You're more likely to be disabled in the next 5-10 years
than you are to die. I just went back and checked your
original note and it looks like you have decent coverage
from work - make sure that the policies are portable
if possible (ie. if you leave that employer, you may
be able to take them with you), and that they cover
you the way you think they do (ie. own-occupation, etc).
> > Third, I wouldn't mess with drips. I don't see the value of any
> > investment that makes one have to jump through those kinds of hoops.
>
> You are right, some DRIPS have put in a lot of hoops. Fortunately,
I wouldn't bother with them, either. Consolidate to a low-cost
brokerage. You should be able to have the custodians of the
various drips transfer the shares to a Fidelity or similar
low-cost brokerage, and if you still want the dividends
reinvested, most of them will do that for you for no additional
cost, too.
> mine are XOM, LMT, BAC, PFE, IIBK, and all of these are eitehr fee-
> free, or miniscule fee, and it's all on auto-pilot. I have not had to
> fill any forms, or make any call in years; each month just there's an
> auto-withdrawal from my credit union a/c, and I get monthly statement.
Depending on how big a part of your portfolio they are,
maybe it's easier just to leave them as they are, especially
if you intend to keep buying into them automatically like
that. But I'd rather see you buy into a high-quality, low-cost
*diversified* fund automatically instead. DRIP or not, you
are managing a portfolio of individual stocks by hand, and
in a manner which makes it very cumbersome to rebalance or
adjust.
> > Fourth, I'd consolidate this stuff at a brokerage house or a
>
> Thinking about this, but still not decided about paying someone to
As I said above.
> > Fifth, visit a family lawyer and get a will set up. You don't
> Yeah, this is one area where we have been very lazy. We tried once or
> twice, read all Nolo press books, started getting some references for
> family lawyers, but never got to the point of completing selection,
> making appointments and moving ahead.
Let me repeat for you, then: GET A WILL!
You do NOT want the state deciding what happens to your kids
if you and your wife both unfortunately die. You have enough
assets that you should be considering a family trust to
hold them in the event of both of your deaths and for the
benefit of the kids. And you want to be sure that they go
to the guardian of your choice. You should be able to get
a competent lawyer to draw up the appropriate documents -
you and your wife *both* needs wills, and likely, at least
a trust or two (especially if you expect your family assets
to increase enough that you'll be retiring at 45-50), and
while you're at it, probably a couple of durable powers of
attorney, health-care proxies and HIPAA release forms.
The whole collection of things shouldn't cost more than
a thousand or two, depending on what trusts you set up.
Even if you aren't doing any trusts and just do simple
wills, POAs, etc, it's worth a few hundred bucks to have
a lawyer draw it up (and likely, notarize when witnesses
sign it and all). Do get and read the Nolo books as
appropriate - their "Plan Your Estate" book is quite good.
But you'll likely still want to get a lawyer. Do not
wait. Start to think about guardians and possible trustees,
discuss with your wife (and with the potential guardians, etc),
and get moving on this.
> I know my previous post was long, as is this one, but you skipped over
> the wild card. What do you think of the employer stocks I have, which
> is becoming 25% to 30% of total. Time to sell, just to keep
> percentages in check (hey, history is full of Enron, Merryl Lynch,
> Wamu, Bear Sterns,...), or keep it, since it is a private equity,
> valued just once, and not subject to market volatility.
If it's possible to diversify them out, do so. If it's not
(ie. you may not be able to sell), see if you can hedge it
out somehow. This is not the sort of thing it's easy to
give advice about here or without a whole lot more information
and it's probably worth seeing someone at a brokerage with
more expertise for this. In many cases, if one has a heap
of a single stock, it's just best off to bite the bullet,
pay the cap gains and sell off to diversify. There are
some other strategies which may be possible with publicly
trade stocks (ie. an exchange fund (note - NOT an ETF), for
example, but you'll need to see a specialist for this sort
of things and you will pay for it!)
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
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