Retirement Planning - Lessons Learned

[MossRoad]

Where is a safe 8% return? Even most CDs earn a whopping 1/100 of 1% interest these days. I have made larger returns in the stock market at times but this is not really safe investing.

I did not say safe. I said average. As I've mentioned many times, we're in it for the long haul. We've had days where we lost plenty. We've had a year with a negative 30% return (2008). We've had a couple years with 50% returns. Over the average of the past 35 years, we've averaged right around 10%. The market averages around 8%. We strictly follow dollar cost averaging. We don't try and time the market. Most people that do ending up getting out too late, locking in their losses, and getting back in too late, by not purchasing shares when the market is at it's lowest. Those little peaks and valleys missed add up tremendously over decades.

Look, I'm not giving financial advice. I'm telling what we've done over the past 35 years of marriage. We put 15% of our income into 401Ks even when our employers weren't matching. When we weren't eligible for 401Ks, we put 15% in IRA's. When IRA's were able to be converted to ROTH IRA's, we did that immediately. We invested the 401K and IRA's in very aggressive funds from day 1 for about 30 years. We are now slowly moving them to less aggressive funds as we get nearer to retirement, but about half (mine) are still very aggressive, so I see what would seem to some people as large swings on an almost daily basis.

Yesterday the market dropped a bit. That's one of many down days in the past 12,775 days of our marriage. A blip. Today, it went up almost 1%. Another up blip in the past 12,775 days. It is still down for this week. That's 1 down week out of many down weeks of the 1820 weeks of our marriage. There have been 6 down years in the past 35 years, which means there were 29 up years. Overall, it's still up for the past month, 3 months, 6 months, 1yr, 2yrs, 5 yrs, 10yrs, 35 years.

The long haul is the picture people should focus on. Not that their 401k took a hit yesterday. Yesterday was a grain of sand on a beach of investment.

From here:
What is the average annual return for the S&P 500?

 

[JethroB]

Some may be familiar with the Rule of 72:

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to double itself. The inverse of the formula works too.
69.3 is more accurate but a bit more difficult to do in your head. (at least mine)

So at 8% an investment doubles in roughly 9 years.
In 7 years you need 10% to double.

 

[MossRoad]

Some may be familiar with the Rule of 72:

The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it will take for the initial investment to double itself. The inverse of the formula works too.
69.3 is more accurate but a bit me difficult to do in your head. (at least mine)

So at 8% an investment doubles in roughly 9 years.

We've been doubling a little better than every 7 years.

 

[MAD777]

I have 6 kids. 3 of them work from home in big insurance co., accountant at an international business, and mortgage banking. They have all 3 been told that they are never going back to a building.

The other 3 do manual labor and haven't had hardly a day off since the pandemic began.

I retired from an engineering company a few years ago but keep up with them. They are all working from home.

 

[two_bit_score]

Safe Deposit Boxes Aren稚 Safe - The New York Times
You might find that your safe deposit box isn't as safe as you think.

The State of Texas may be able to help you out with that problem.

Homepage - Texas Bullion Depository

:goldmedal:

.

 

[polarred21]

 

[polarred21]

Great analogy about loading the wagon. We basically have no supervisors at work that do their job and no one's wagon is loaded. People FO on cell phones in plain site many hours per shift.

 

[mikester]

9 Reasons Why American Tech Companies Outsource Software Development to Canada - Intersog

Why Near-shoring to Canada is the New Offshore for Outsourcing Your Software Development? - BrickRed System | Information Technology | Consulting %

Hmm, Micro$oft ran into problems because Trump made it more difficult to bring in cheap overseas foreign workers. Canada gives companies like M$ subsidies to bring in Temporary Foreign Workers who work for below market rates for local workers because these companies claim they can't find or retain "skilled" local workers to do the posted jobs. After the subsidies run out, the M$ TFW can then be relocated to the US because they are already employees and can bypass Trumps ban on foreigners.
Temporary foreign worker program needs review following Microsoft deal: NDP | CBC News

Chinese companies buy out Canadian companies then employ chinese TFW to work at below market rates
Opinion: HD Mining allowed temporary foreign workers while Canadian miners are unemployed | Vancouver Sun

Heck, Tim Hortons uses TFW
Tim Hortons: The Canadian icon Canadians won't work for

Bottom line is that the overhead for doing business is so bad in Canada business are moving south and overseas. Companies that have to maintain a presence replace Canadian jobs with TFW because they claim no skilled local talent exists so let them hire TFW, get a government subsidy and reduce the overhead costs.

 

[Jstpssng]

We've been doubling a little better than every 7 years.

I understand what you're saying. However, as you get close to retiring you don't want to take that big hit just before getting done. I didn't start planning when I should have, and at 45 changed jobs with a pretty good pay hit which took me longer than I expected. I was hoping to get done working full time in about 3 years, but it looks like the federal government might push that date up by putting a large portion of the work force in the unemployment line with their plan of a "Park" where thousands have lived and recreated for centuries.

 

[MikePA]

From what have seen those numbers have shifted considerably since June.

Please see my response to JethroB - The article also said 42% are working from home. While not stated, I'd think common sense would dictate they are also essential. Otherwise, why would they be working from home?

Also, if someone has more recent figures, please post a link.

Here's a link to a January, 2021 survey from PwC.

 

[Bocephous]

We've been doubling a little better than every 7 years.

Anyone else here a federal employee with a TSP retirement account? I started in 2005, got more serious about putting a higher percentage in around 2010 or so (I have 17% going in now), and it has doubled since August of 2017. I'm curious to see how it keeps going in the future, as I plan to retire in October of 2025.

 

[KennyG]

I've taken a little different approach to establishing an investment mix in retirement. I have made some assumptions for basic cost of living for the rest of my life. I've established relatively safe resources for that (social security, a pension, and fixed return investments). The rest goes into stock market index funds. Because I've been fortunate so far, "experts" would say my investment portfolio is way overbalanced to stocks for my age. But I don't "need" all that money, it's for vacations, toys, charity and inheritances.

Don't blindly follow rules of thumb. Look at your own situation.

 

[MoKelly]

I've taken a little different approach to establishing an investment mix in retirement. I have made some assumptions for basic cost of living for the rest of my life. I've established relatively safe resources for that (social security, a pension, and fixed return investments). The rest goes into stock market index funds. Because I've been fortunate so far, "experts" would say my investment portfolio is way overbalanced to stocks for my age. But I don't "need" all that money, it's for vacations, toys, charity and inheritances.

Don't blindly follow rules of thumb. Look at your own situation.

I think this is very smart. If you can fund your best estimate of expenses with fixed sources of cash flow, you are in great shape.

You absolutely can be more aggressive with anything extra.

Congrats!

MoKelly

 

[MossRoad]

I understand what you're saying. However, as you get close to retiring you don't want to take that big hit just before getting done. I didn't start planning when I should have, and at 45 changed jobs with a pretty good pay hit which took me longer than I expected. I was hoping to get done working full time in about 3 years, but it looks like the federal government might push that date up by putting a large portion of the work force in the unemployment line with their plan of a "Park" where thousands have lived and recreated for centuries.

Yes. As you get nearer to retirement age, you should consider moving things towards less risky investments.

 

[Hay Dude]

Yes. As you get nearer to retirement age, you should consider moving things towards less risky investments.

Yep! Gold is a great for that, but Dave Ramsey doesnt like gold :laughing:

 

[MoKelly]

Yep! Gold is a great for that, but Dave Ramsey doesnt like gold :laughing:

Gold does not pay dividends. I won’t buy any investment that doesn’t pay dividends.

It’s been a good strategy to me - except for Amazon stock! I should have bought Amazon when I wanted years ago - but - they didn’t pay a dividend.

Oh well.

MoKelly

 

[fruitcakesa]

Gold does not pay dividends. I won’t buy any investment that doesn’t pay dividends.

It’s been a good strategy to me - except for Amazon stock! I should have bought Amazon when I wanted years ago - but - they didn’t pay a dividend.

Oh well.

MoKelly

I have split my portfolio between dividend stocks and growth funds.
Even with a roller coaster market, the dividends keep coming in and those companies that cut or drop their dividend get sold and then reinvested.

 

[MossRoad]

Yep! Gold is a great for that, but Dave Ramsey doesnt like gold :laughing:

If you bought gold in 2011 hoping to be safe, and wanting to retire in 5 years, you'd have lost 45% of it's value. It's still not back to 2011 level today.

 

[Snobdds]

My best investments the last 15 years, when I hit the workforce, has been real estate. Rentals.

The capital appreciation and ability to use refinancing to pay down the principle faster has really provided a real cash flow that is not tied to anything. Free cash flows.

Real estate has some great tax hedges and overall it's a hedge on the stock market assets.

My parents have around 20 rentals that allow them a great retirement now. I now pay my father and his company to remodel the houses I buy. He is a retired contractor, but he can't stop working. He has a few older guys that work a few days a week and they go in and fix stuff. It's a win for everyone. It keeps him out of my moms hair and her out of his.

 

[jjp8182]

While not yet retired (won't until I hit my min retirement age in 2039), I'd definitely echo the statement of having something to retire to -- have seen/heard of many friend/former coworkers who retired with no hobbies/plans and died within a few years. Also, have a friend/former coworker (now working elsewhere) who may very well be on his way to that end as he always had a hard time using his vacation time as he said he never had anything to use it for unless his wife and kids were also free.... bit sad to see, as he also had/has some workaholic tendencies.

So from what I've seen not having something to do with your time (beyond working for an employer) isn't a good thing when it comes to retiring - the more you have to do the better it would seem (as long as it stays within the budget).

Granted the "work until dead" retirement plan is also a viable option (much of my life that has been my expectation) ... though even now I figure after I "retire" I'll probably keep "working" but for myself on my own projects.