On Wed, 26 Apr 2006 14:31:48 -0500, BRH <BRH[at]giganews.com> wrote:


- quote -

If you have done well on your own for many years, there is no reason
you cannot continue to do so after retirement. When my wife and I
retired in the 90's, we received "advice" from several sources, one
common piece of advice being: Sell your rental properties so you do
not have the hassle and risk of managing them any longer, and put the
money into mutual funds. If we had followed that advice, we would be
far worse off today than we are. If we had invested in mutual funds at
the time of our retirement, we would have lost much money. As I see
it, there are two different kinds of risks at retirement, or before
retirement for that matter. The first is the unavoidable risk in any
financial product. The second is the risk of getting bad advice from
the advisor you are listening to, as you found out with the American
Express experience you mentioned. If you are able to avoid this second
type of risk altogether by being a "do it yourself" investor, you are
way ahead.

Good point John, but Medical bills shouldn't be a huge problem, as long
as a retiree is getting Medicare parts a&b, plus a good supplement,
such as sup C or sup F. This would cover almost, if not all medical
expenses (but all of this does not apply until age 65, so keep that in
mind, especially for the purposes of this post).
And you are right, a retiree and/or senior, is not the "average"
person. In most cases they actually have less expenses, depending on
their life-styles. For a small example, not driving back and forth from
work every day saves not only gas money, but wear and tear on the car.
That can add up to significant savings. And that is just one example.
As we age (and retire), we tend not to "run and gun" as much as when we
are younger. We find hobbies that (sometimes) end up saving us money.
Taking trips to Vegas 10 times a year would not be one of those
hobbies, however!

But anyway, BRH, trust your instincts, but definately have a good plan
set up. As you retire, you might want to think about shifting your nest
egg into less/no risk investments. What's important is perserving the
retirement fund that you have worked so hard to make. You want you
money somewhere safe, and getting a competitive rate of return. Some
investments to consider would be fixed, and index annuities. They allow
you to pull money out each year (most do, at least), usually around
10%, and have a historical record of around 7% (index annuity) returns
on your investment. A lot offer up front bonuses of anywhere from
4-10%, instantly credited to you account. And, they grow tax defered.

Another thing to consider for down the road, would be long term care
(nursing home) insurance, to protect your assets, if (god forbid) you
or your wife ever had to be in a home, or have assisted living. Either
one can wipe out a nest egg in a matter of years.

These are all things you should keep in mind when planning to retire, I
hope at least some of this helps!

Good Luck, and Good Retirement!!

Bret Vanderplough
Senior Solutions Advisor
Vanbret[at]gmail.com

Bret Vanderplough
Senior Solutions Advior

<<That spending down is seriously depleting your principle as your cost
of living keeps going up. If you are really unlucky and live 40 years,
the last five years will cost you $615,000.>
Cost of living and inflation are both based on a theoretical "basket"
of things that the average person spends money on. However, retired
people are not average people - would that factor increase or decrease
the cost of living and inflation for retired people? For non-retired
people, the mortgage and car payments are often the 2 biggest bills,
but a retired person might not even have those 2 bills. On the other
hand, a retired person might be spending a much larger amount on
medical care than they did before they retired.

John Cowart

BRH,

Getting another opinion is fine. More than one extra could be good.

Watch out for where the bias is when you speak to someone. They may not
think like you and they may have a focus on specific product solutions.

If you believe the theory that a large mass of people can do as well as
the experts then you could get 'opinions' from places like this (have
you checked the Motley Fool?). You would need to share more of the
details

As the two posts about the merits of spending 4% of the principal each
year shows there are differences of opinion around the edges. Both
people might be right depending on specific assumptions.

If you are retiring early you also might choose to do some consulting
or take a position at Walmart. Anything that produces extra income so
you tap into the retirement funds less in the early years can produce a
large change in the future possibilities.

I support the view that if you have confidently managed things up to
now this is not the moment to switch horses. It might be a good time to
ramp up your reading of other investments and put more time into
tracking specific details concerning your investments. You will be
shifting the mix I expect so there could be some extra study or
research required.

Feel good about what you have accomplished. If you leave work earlier
than planned look at what that means to the retirement plan and if you
will earn outside income for a period. The biggest unknown is the
decision to retire early. Early retirement does means to retire earlier
than planned. What assumptions are in the plan that are now going to be
false?

John B. Corey Jr.
Chelsea Private Equity, LLC
+1 (503) 906 7840 x1108
+1 (503) 210 0227 (efax)
john.corey[at]ChelseaPrivateEquity.com

Looking for hard money for you latest real estate deal?
Visit www.ChelseaPrivateEquity.com

The conventional wisdom is that you can spend about 4% of
- quote -

This advice is OK if you are willing to live off Social Security if you
go broke a few years before you die. You may have an inflation
adjusted pension that wasn't mentioned as well. As a lover of
spreadsheets I've looked at the principle of spending down inherent in
this theory on a year by year basis. It's not comforting.

Inflation is the real evil.

Let's say you retire with $1 million and a $40,000 a year standard of
living. This is the infamous 4% example. The first five years of
retirement cost you $212,000, using 3% inflation. Inflations seems
quite reasonable. The last 5 years, if you live 30 years, will cost
you $458,000.

That spending down is seriously depleting your principle as your cost
of living keeps going up. If you are really unlucky and live 40 years,
the last five years will cost you $615,000. 4% inflation is even
uglier.

It's the last five years of retirement that are really, really tough,
not the first five. It's nearly impossible to save today for spending
40 years from now. Remember compound interest doesn't work so well
when you are spending down. Once you have determined how long you will
live, please carefully calculate the numbers for the last five years of
your life.

Enjoy your retirement

You've done it yourself so far, and I don't see any reason to doubt
yourself now.

I think one of the first things to do is to work up a retirement budget
so that you can figure out how much income you need from your
investments. The conventional wisdom is that you can spend about 4% of
your retirement investments during your first year of retirement, and
take an increase every year of about 3% to combat inflation. If you
will have to take substantially more than 4%, then you are not ready to
dispense with the paycheck.

If you are a Fidelity customer, you can use their Retirement Income
Planner, which will help you with the budget and your asset allocation.
I suppose other investment companies have something similar.

Dave

Yesterday, I learned that the chances are extremely high that I will be
offered early retirement by the end of 2006. (Yippee!)

I've been investing and planning financially for this over many years,
and am pretty confident that I will be fine financially. However,
there's that little voice in the back of my head that keeps saying
"Maybe you should get a second opinion....".

I know that most here do their own financial planning, as I have done.
However, now that I'm near the "moment of truth", I'm wondering whether
to get a "sanity check" from a professional advisor or some other way.
Let me make clear that I'm a cheapskate when it comes to paying for
financial services. (I had a very poor experience a few years ago with
an American Express Financial Advisor). So, I'm seeking advice here on
how you would proceed if you were me.

I'm sure that some of you have gone through this pre-imminent-retirement
stage already, while the rest of you will go thru it someday. How did
you address any nagging doubts you may have had about whether your
planning was really panning out? Did you go to an advisor?; refer to
online calculators?; use a particular software product? etc.

Any thoughts on this would be greatly appreciated.