Safe Haven, if possible without...

[ultrarunner]

Income Property in California has been a good inflation hedge and the property can be fully insured against loss...

Seems like it is the best of both... income and inflation hedge.

 

[Larry Caldwell]

I paid off the ranch in 2008 and didn't retire until 2014. In the interim, I just added the mortgage payments to retirement savings, so socked $2500/month into the mattress for 7 years. It resulted in over $200k in additional contributions, which is a nice little pillow. I also figured out the "sell high" part of "buy low, sell high." When gas prices bumped over $4/gallon I knew it would suck the blood out of the economy, so I moved everything to cash, then bought back in after the market had lost 50%. Sell when everybody is clapping each other on the back, buy when everybody is jumping out of windows. Don't get greedy. If you have gotten rich in the stock market, be satisfied with rich.

 

[RSKY]

Curley Dave you are right in your approach. Or we are both wrong. Something I look at when rebalancing is the 52 week high/low price. If a fund is near it's 52 week high I am inclined to reduce my investment. And when I reduce that one I am looking for a fund near it's 52 week low to buy into.

One thing I liked about J.P.Morgan's site over Fidelity's, as a matter of fact the only thing, is that there was a page where you could see what percentage of your investment was in each fund you owned and a box to put the percentage you wanted in each fund. Then one click and it is all rebalanced. I have been unable to find anything similar on the Fidelity site though I haven't looked that hard.

My one exception to the 52-week high/low rebalance is a Biotechnology Fund I have. There are several of these available. I started big on that one and let it keep climbing by not pulling anything out for five years. I also put the little outside money going into the IRA into it. It has lost a bunch this year but over the past five it has kept me way, way, way ahead of the game.

Fidelity also has the best retirement planning guide I have looked at and I looked at everything available before I retired. Just go to the Fidelity site and look and you will find it.

When I decided to retire I spent months making and saving spreadsheets. I figured every way possible as to how I could make it work without us running out of money. My wife was more level headed about it. "If we run out of money you can get a minimum wage job and we can buy beans and rice." That was her take on the deal. So I called an accountant that we know and made an appointment with him. I printed out something like twenty or thirty spreadsheets with all these different scenarios carried out until we were both 100 years old. We walked into his office and I placed the papers on his desk and he asked what they were. After I explained the man looked at a couple of the sheets then started laughing. Said he knew we would make it okay without looking at the sheets. Said most people came in and didn't know how much was in their 401Ks or how much they would draw in a pension or how much their Social Security would be. Said if I had it figured with twelve different stock market scenarios and that he was confident we would be okay without even looking.

One other thing then I've got to go. Our IRA money is less than a quarter or what we get a month. Wife and I both have pensions. I started drawing Social Security in April. After the first of the year when all Christmas bills are paid I intend to half my IRA withdrawal. And she has another untouched smaller 401K we can tap if we need to. I would not invest ALL my finances in the stock market.

I retired in 2011 at age 57 minus 5 days. I have drawn $2000/month before taxes since then from the IRA I rolled my 401K into. I have also pulled money out for various things because we want to enjoy the "fruits of our labors" now instead of when we are in our eighties and can't enjoy them. The fund is now down to about 60% of the original total due to the lump sums we have pulled out. I'm going to try and build it up to leave for our daughters and the wife's smaller one will be split among the four grandkids.

Just don't tell them that.

RSKY

 

[RSKY]

Larry Caldwell I just read your post. You are entirely right. But when people jumping off buildings. Sell when they're buying Porsches.

RSKY

 

[NorTracNY]

Income Property in California has been a good inflation hedge and the property can be fully insured against loss...

Seems like it is the best of both... income and inflation hedge.

People can do what they like with their money, but this doesn't seem like a good approach. It may have worked/be working for you now, but it's coming with significant risk. You are talking about only being invested in one very narrow sector. Not realistate, but realistate in California, but not just realistate in California, but income property in california. Should I venture that it's also only in a somewhat small area of California. Lack of diversification can result if a very sizeable risk. Remember what EVERY finacial add says at the bottom. Past performance is not an indicator of future performance.

I know I'd be more nervous if more than 10% of my investments were in one boat. Most advisors warn about 5% being too much in one boat. Maybe you believe you're not so narrow and that you could consider your income properties 3-4 boats. Then more than 20% would be scary for me. I hope it works out for you.

 

[riptides]

Having to jump in here.

I just went through the monthly portfolio view and adjustment. Mine consists of the following assets equally distributed to as categories, but not via $$$ funds. They are:
Cash
IRA
401k
Real Estate
Insurance and
an Annuity

Reinvestment comes out of cash and goes into the IRA which has an aggressive growth portfolio. The IRA has an open Cash holding, which allows me to redistribute within it accordingly.
The 401k gets funding when I am employed.
Real Estate and Insurance are deadlocked and are to be used if I check off the planet.
The Annuity is my safe haven equal and probably growing in value that will shortly exceed a pension that I dropped out of.

I hope to double my monies in the IRS within the next 5 years. If the 401k does 5-10 Percent, I am a happy camper.

Full retirement, meaning I just drool and collect required distributions is less than 10 years out.

I hope to recoup my current income, that was the plan through this distribution and whatever SS is available.

I never thought any one thing was "safe" in investing.

 

[ultrarunner]

People can do what they like with their money, but this doesn't seem like a good approach. It may have worked/be working for you now, but it's coming with significant risk. You are talking about only being invested in one very narrow sector. Not realistate, but realistate in California, but not just realistate in California, but income property in california. Should I venture that it's also only in a somewhat small area of California. Lack of diversification can result if a very sizeable risk. Remember what EVERY finacial add says at the bottom. Past performance is not an indicator of future performance.

I know I'd be more nervous if more than 10% of my investments were in one boat. Most advisors warn about 5% being too much in one boat. Maybe you believe you're not so narrow and that you could consider your income properties 3-4 boats. Then more than 20% would be scary for me. I hope it works out for you.

You would be correct in that I am heavy on Income Property... about 80% which includes property in 21 States but when I write it is mostly about my Residential Property in the SF Bay Area and the company I started 35 years ago.

I realize 35 years isn't long in the scheme of things but I have never had a bad year or a year not going to plan... and this would include when some property dropped 50 to 80% 2009-12... the reason I say I was OK is because I kept fully occupied and rents increased...

Over the years I have been able to exchange and grow through diversification into commercial and hospitality in 21 States covering a wide diversity for the Sector ranging from Shopping Centers, Hotels, R&D, Public Storage and even a US Post Office all traceable to a single family home I bought at age 22 which became my first rental.

My car hobby is just that but has also performed well... never sold a car for a loss and some have proved very lucrative with a collection of 50 ranging from a 1905 Oldsmobile to early Corvettes...

Of course property is subject to loss but both cars and real estate are easily insured...

I admire those that have done well in the markets... several of my friends have done so and also avoided the downturn by selling early and then buying back when everything was in the bargain basement as he says... one told me he admired my investment approach but residential rentals are just too much work compared to managing a Wall Street investment portfolio...

My first after school and summer Real Job started at age 12 working a parts counter and stocking shelves for a restoration business... no family connection or help getting the job...

Working there put me in a place with a lot of well to do individuals more than willing to give advice to the "Kid" Almost across the board they all said Real Estate and the sooner the better... some had large construction companies, others were Judges or Doctors and most had built businesses... all said their Real Wealth came through Real Estate and this is how I came to buy my first property at age 22 much to the chagrin of my family... but at 22 I was a home owner with no mortgage and within a year it was my first rental...

I paid 11,500, my family thought I had lost my mind putting every penny I had and selling my car to pay cash for it... my step-grandfather said I was so proud he didn't have the heart to tell me he really thought I had lost my life savings down a rathole...

It's has been rented continuously for the last 35 years and started my path in investing... the home clears more in a year than I paid for it...

That green plymouth valiant is the $800 car I drove every day for 20+ years... still own it and probably always will... hauled many loads with the home made dump trailer attaced.

 

[dickfoster]

I have zero problem letting money ride in the market with a very aggresive profile, but I do have a hard time with the mortgage. I completely understand the low interest loan of today's mortgage rates, but it's tough for me to not stive to pay it off in a few years. That is one point that Edelman gives that's tough for me to swallow. I'm doing everything else right, so I'm not going to go and take out a huge mortgage just to put the money in the market. For all the excellent points that have been made here, I haven't heard the one that should stand true.

Investing should be boring! If it's not boring, you're likely not focusing long-term and you will let your emotions make HORRIBLE mistakes. Remember that the majority of the upturn in the market occurs in just a few days. If you EVER think you can or should try to time a market, you're a fool. You should believe in your plan and follow it. I track once a quarter and even then, I don't care about ups and downs. I only need to look for rebalancing opportunities which are part of the plan. Sell things that have done well and buy things that have done poorly. If you don't understand this, you should either pick up some good books or find a trusted fiduciary.

How missing out on 25 days in the stock market over 45 years costs you dearly - MarketWatch
What痴 the worst part about saving for retirement? Retirement Rocket Science

You're right never ever borrow to invest. You're way ahead to pay off any debts first. Never ever invest with money that you can't afford to lose and never invest with money that you owe or will owe in taxes. Back when the tech bubble popped I saw a lot of people make that mistake and it ruined them. It's not the fall that kills you, it's the sudden stop at the end. Not being over leveraged and having some patience along with realistic goals will generally yield rewards. Same thing happens when you get involved with short selling. Shorting is a very very risky proposition. Even the so called full time experts often lose their shirts shorting stocks. A general rule don't go jumping on any bandwagons either because if it was easy anyone can do it and everyone simply can't.

 

[dickfoster]

Income Property in California has been a good inflation hedge and the property can be fully insured against loss...

Seems like it is the best of both... income and inflation hedge.

I've seen a lot of people lose big doing that too. When the housing bubble popped in 2008 and that was not long ago. Here again patience along with fundamental financial strength are your friends.

 

[dickfoster]

I paid off the ranch in 2008 and didn't retire until 2014. In the interim, I just added the mortgage payments to retirement savings, so socked $2500/month into the mattress for 7 years. It resulted in over $200k in additional contributions, which is a nice little pillow. I also figured out the "sell high" part of "buy low, sell high." When gas prices bumped over $4/gallon I knew it would suck the blood out of the economy, so I moved everything to cash, then bought back in after the market had lost 50%. Sell when everybody is clapping each other on the back, buy when everybody is jumping out of windows. Don't get greedy. If you have gotten rich in the stock market, be satisfied with rich.

This is known as being a market contrarian and is when basic financial strength really pays off by allowing you to be in a position to scoop up some real bargains.

 

[ultrarunner]

I've seen a lot of people lose big doing that too. When the housing bubble popped in 2008 and that was not long ago. Here again patience along with fundamental financial strength are your friends.

It would seem hard to lose if you buy right and the property cash flows...

My plan was simple... buy a distressed property I could afford, move in and renovate... when complete place a first mortgage on the place with payment the rent could easily cover, move and repeat... did this for 10 years moving about every 18 months... mostly Oakland but also Pleasant Hill, Castro Valley and Pittsburg...

If you buy right your equity should start from day one.

I did exchange out of some property in 2005-2007 because the courtesy clerk at my local Safeway had just bought 4 homes with no income verification or qualifying... nice kid but he was buying a home every 6 months with teaser rates which were unsustainable to me... when the rates reset and no equity, all were lost... still trying to get back on his feet 6 years later...

The property I sold was used to exchange into a post office with a long term lease and other commercial in Washington and even Oklahoma...

The biggest downside to income property the way I do it is it is still a job...

One of my dear friends who passed away at age 97 and widow most of her life owned a Queen Anne in Alameda that she and her husband added two basement units during WWII... she owned her home outright and just having the income from those two units assured her 40 years of comfortable retirement... in other words money didn't keep her from doing the things she wanted...

 

[dickfoster]

It would seem hard to lose if you buy right and the property cash flows...

My plan was simple... buy a distressed property I could afford, move in and renovate... when complete place a first mortgage on the place, move and repeat... did this for 10 years moving about every 18 months... mostly Oakland but also Pleasant Hill, Castro Valley and Pittsburg...

If you buy right your equity should start from day one.

I did exchange out of some property in 2005-2007 because the courtesy clerk at my local Safeway had just bought 4 homes with no income verification and qualifying... nice kid but he was buying a home every 6 months with teaser rates which was unstainable to me... when the rates reset and no equity all were lost... still trying to get back on his feet 6 years later...

The property I sold was used to buy a post office with a long term lease and other commercial in Washington and even Oklahoma...

You're putting sweat equity into it so that helps a lot just as long as there are normal market conditions and things don't get crazy stupid like they did pre 2008. That was an artificial bubble that anyone with any common sense could see coming a mile off. When they started throwing up all those cracker boxes all over the place and giving anyone with a pulse a mortgage I knew something was off. Trouble is with stuff like this when the correction comes it takes the good along with the bad. Same sort of thing happened when the tech bubble popped. Common sense goes a long way toward having a successful investment strategy.

 

[oldballs]

The best "Safe Haven".....work for an income as long as possible.....enjoy what you do as an occupation....

I worked till 74 when wife's cancer demanded my full time and was laid off (with many others) anyway. Took SS at 65....don't understand Supplemental Health Insurance or no risk investing and don't worry much about it. "Lady Luck" and good sense with good health has served me well. Am 84 now and happy....spend some time physically helping others and thinking/praying about eternal salvation for myself and others.

Plus, having lived a rather simple life without dreams of playing out my life in retirement has kept me in a lifestyle that I (We) was accustomed.

Hope this helps.

Cheers,
Mike

 

[ultrarunner]

Yep... when everyone and their mother jumped on the Real Estate Band Wagon I sold the properties I no longer wanted to own and exchanged into out of state commercial.

I had paid 15k for a little house in Oakland in 1985 and sold it for 255k in 2005 and it sold again in 2007 for 350k and and in 2009 the Bank sold it for 80k... in 2016 my guess is it is a 400k property?

The interesting twist is the rents never dropped... in fact as the turmoil increased, rents increased and there was a real shortage of rentals.

I realize not everywhere is comparable to the SF Bay Area and this is why what works for one may not work elsewhere.

 

[RedNeckGeek]

Lots of good advise here, but more valuable is the experience being shared. I've done OK, but mostly by luck because when I was coming up there was no Internet and very few books were available that explained how money worked. That's not the case today, and in fact there is so much info out there it's hard to know what to believe. But here's what's worked for me.

I worked my way through college, then changed jobs to work for an employer that would pay for me to get an advanced degree. I chose both majors in areas with good job security and good salaries. I didn't always have fun at my job, but I just figured that's why they call it work.

I've always been a saver, and always lived well within my means.

I've had car loans and mortgages, but always paid them off as fast as possible to avoid losing money to interest.

Every home I've purchased was a fixer upper. The home I live in now was purchased in 2010 near the bottom of the real estate bust. But the home I sold at the time was purchased at another market low, and with the sweat equity and overall gain in the San Francisco real estate market, I still ended up selling it for twice what it cost me. I didn't plan any of this, other than the last home purchase. Took me that long to realize what was going on: buy low, sell high.

I've always lived a conservative life style, fixing instead of replacing, cooking instead of eating out, camping instead of motelling, buying used instead of new. Financial independence is far more important to me than shiny new things or traveling the world, though I have enjoyed a little bit of both.

When I was working I put enough money into the company savings plan to get 100% of their matching contribution. Anything more I could save went into an IRA. As soon as I could I rolled as much as I could out of the company 401K into an IRA because there were more investment options available.

In '08 I listened when Jim Cramer said pull any money you'll need in the next 5 years out of the stock market and reduced my stock holdings to 25% of my portfolio. I still lost money during that correction but not nearly what I would have when, blindly following the advise of an advisor working out of our credit union, I was 100% in the stock market. I read Cramer's books and learned about the fundamentals at work in the stock market, and after trying a few years to make money with individual stocks, realized that there are just too many factors at work to reliably beat the market averages. I'm still at about 25% in the market, but now it's almost all in a low fee S&P 500 index fund. The S&P 500 index is broad enough to provide a level of diversity adequate to insulate against the vagaries inherent with individual stocks. The rest is in the money market. I don't think bonds are a safe investment in a rising interest rate economy, and with government spending about to take off again, I think inflation will become more of a factor in the future. With that in mind I'll likely increase the investment in the index fund, but not by more than 15%, and then only gradually.

I retired at age 54 in 2010, downsized my home, and moved to a lower cost of living part of California. I can pay my bills with the proceeds I get from a pension, which is actually an annuity purchased by the company I retired from after 28 years. The benefit was reduced by 33% by retiring early, but I knew what my expenses were going to be in retirement with a fair amount of confidence and figured "enough was enough".

I plan to start Social Security as soon as I'm eligible. I don't trust the gummint to keep it solvent, and figure the safe bet is to get what I can for as long as I can, and that means starting withdrawals ASAP. And when I say withdrawals I mean withdrawals: That is MY money I put into the SS system over the last 35 years. It's not an entitlement because I've earned every penny of it. Besides, I want the extra income NOW while I'm still healthy enough to enjoy it.

I don't take regular draws from my savings, instead choosing to take them when the portfolio is up and I have a specific need. Just yesterday I pruned back some of the remaining individual stock holdings, taking profits and rolling them back into the S&P index fund. Next year I'll pull some of that money back out and build a shop and barn for the tractor.

The current issue of Consumer Reports magazine has a large article devoted to retirement planning, and more importantly to folks like me, how to manage money while in retirement. Most of what I've read so far makes a lot of sense, and I'm glad to see I'm already following most of the recommendations. The article also said that new laws are requiring most financial advisors to behave like fiduciaries in that they have to put the best interests of their clients first. That's not to say you shouldn't check the background of anyone you're planning to use for financial advise, but it does improve the odds you'll find someone that won't take you for a ride.

I don't claim to be any sort of financial genius, and I've had a fair amount of luck to help me along the way. But I learned early on that no one cares as much about my financial welfare as I do, and tried to learn as much as I could about financial decisions before I had to make them. That still meant a fair amount of trial and error, but by taking small steps with new directions the errors were manageable and I learned more than I lost from them. Everybody's different and what worked for me may not be right for you. But by keeping your head in the game and getting good advise from reliable sources, I think you can still come out ahead.

 

[ultrarunner]

Thanks for sharing...

Outside of Health... lifestyle is the determining factor.

We all know people that live pay check to pay check and that wouldn't change no matter how much they earn.

We also know people of very modest means that are financially sound... many of my neighbors live on Social Security and are not denied anything... they have no debt and property taxes on a million dollar home might be $2500...

Always think of my neighbor one house up who turned 100 this year... she bought one new car in her life... it was in 1964 and 260 V8 mustang... it has been her only car for 50+ years and a joy to her... people can be happy driving a 50 year old car and living on Social Security of $2300 and comfortable in a home pushing a million dollars!

Her hobby is gardening and what a beautiful job she does...

 

[dickfoster]

Yep... when everyone and their mother jumped on the Real Estate Band Wagon I sold the properties I no longer wanted to own and exchanged into out of state commercial.

I had paid 15k for a little house in Oakland in 1985 and sold it for 255k in 2005 and it sold again in 2007 for 350k and and in 2009 the Bank sold it for 80k... in 2016 my guess is it is a 400k property?

The interesting twist is the rents never dropped... in fact as the turmoil increased, rents increased and there was a real shortage of rentals.

I realize not everywhere is comparable to the SF Bay Area and this is why what works for one may not work elsewhere.

Yep one thing you can always count on is the law of supply and demand. The less there is of something the more it's worth so that's why rents went way up. There were fewer rentals as those properties became owner occupied, rather owned by the bank, then all of a sudden all of those people were booted out and dumped on the street and needed to find someplace to rent inorder to get in out of the rain. Funny when you consider there were so many bank owned properties sitting empty with no buyers in sight. Then the sudden reversal and were off to the races again. A common sense and a good sense of timing sure does help a lot.

Oh yeah don't forget to figure inflation into the picture so you can't go by just price tags alone. Inflation is the gubberments way of stealing your wealth and future wealth while trying to make you believe they are helping you. They call it all sorts of nonsensical euphemistic things like quantitative easing to compound their crime. If it sounds too good to be true then it most likely is just that.