Retirement thoughts/plans/dreams

[caleb]

Are any of you folks concerned with P/E ratios being at, on average, historically unprecedented highs for the past couple of decades?

I've run into no financial planners who can address that issue other than to repeat the same mantra: The stock market always wins, in the end; but that's not quite true, or really the entire point. Like most things the answer is that “it depends”.

It seems to me that the market has long been a bubble that keeps on growing simply because there are few other places to park investment $. That trend has been exacerbated in recent years bc interest rates have been in the toilet; admittedly something that doesn't seem likely to change appreciably in the foreseeable future.

I finally ran into an article that at least made a passing comment wrt high P/Es and it's comment was to simply say that investing in equities during periods of high P/Es could make sense during periods of very low interest rates! That's it, that's all it said. That begs a lot of questions to me and sounds more like justifying going to the casino. I wonder what Benjamin Graham would think? His most famous acolyte is doing well but then Warren Buffet is connected to the inside track and understands the underlying machinery and how it works. He'll sense the warnings long before the rest of us.

For many it's been a good 20 or 30 year ride but hard to believe, at least for me, that the party can continue indefinitely. To me the equities market feels more like a price bidding war, much like those that played out in the real estate market in the good times just before the object lesson on the value of the repealed Glass Steagal Act (and it's brethren regulations) arrived.

I imagine you're familiar with this economic narrative of the "long" 20th Century:




For comparison now, here's the S&P PE Ratio over roughly the same timeframe.




While they don't track perfectly, it's pretty clear that the PE ratio is highest when inequality is highest. I suspect the correlation would be even stronger and tighter if we compared a broad market index like the Russell 2000 with global inequality from 1919-present.

If we knew when the next great equalizing moment was coming, I suspect that we'd also know when the PE ratio will move below the median again for an extended period.

[Too Tall]

Yep but living there full time may be a tough call.

No kidding. Full time, never. Awesome place to land for a month here and there...absolutely. I love how quiet it is.

[htwoopup]

I have stayed away from answering this because I see it somewhat like trying to do bike fit from afar.

But so many have said so much that I agree with that I figure I should pile on with my experience that makes me think I have the right to agree with them. Perhaps my take on it will give you some either pros or cons of things you have been thinking about it.

I don't want to get into the money stuff in specific advice as others have done as I am even more incompetent in that than I am in climbing that hill on Route 117. I have been lucky in that I somehow picked the right people to help me but I know I could have done better. But as my wife says, what is done is done. And as I think you will see, there is a logic (or illogical rationalization depending on your view) into why that is okay for me if not others.

I was in an industry that I retired early although while it was by my own volition it was sort of a get out while the getting was good as there is such ageism in my career industry that it was an eventuality sooner rather than later whether I was prepared for it or not.

I had recently lost a dear friend who was 22 years my senior. And a month later lost a dear friend who was a week older than me. And then two weeks later I lost another dear friend who was 17 years younger than me.

I very quickly felt the adage of the fact that you know that you are going to die but you do not know when that will be. Which to me was a proof point that time is far more valuable than money.

Which made me think that I was just as happy when I started my career nursing a beer for hours while I inhaled mozzarella sticks and wings at happy hour at some bar because I didn't make enough to afford an apartment and food in New York City at the salary I was paid as I was when I made money where I didn't have to worry about such things.

As Houston wisely said though, fat is better than not...making 3% on a 100 is easier than 8% on 50 (or something like that). Plus as many have commented, health care is the big big concern particularly if you live in the US.

To that US health thing I will go against what I said above about financial thinking and say that the smartest thing I did when I was young as you are now was to buy a long term care health policy. I don't know if that is a fair statement because I haven't used it. But I watched in horror as my Mom lived through not only emotional hell but financial hell in her last years so having the policy in place at low rates because of the age I bought it is at least an easing of worry.

The Houston line reminded me that someone once said to me, "you can retire on x if you want to look at the Dow every day and make yourself crazy until you die and perform perfectly or you can really retire on x times 3 which allows you to go to Bali, fall in love, and return in a year and still not have to WORRY about it". Worry is the biggest thing about retirement. The more you can remove worry the happier you will be. A lot of that is money as in will I outlive it. You don't want to be the guy that tells the doctor not to do a test at the age of 80 because you don't want to know because you only have money until you are 81 and you are afraid he will tell you that you have 7 more years.

But, money doesn't buy happiness.

You say you are thinking of moving to where it is warmer/ more cycling friendly (or something like that).

I hate winter, yet I moved to a place where it is very cold and the snow is higher than my head in the winter. I put the garbage out in a vest. And when I am in NY I go out in a tee shirt when it is 10 degrees. Which I would have thought was ridiculous 4 years ago. And I bought a fat bike which is a blast in the snow. Which is all to say the body and mind adapt. Of course, when it gets down to 50 here I am the first guy in down for a week or two every fall. Oh, and I also learned to ski. Which I was previously terrified of. I suck at it but I don't care because it is different and I enjoy it somehow.

Plus, Darren started another thread about your roads suck. So, remember wherever you go just remember that it can get old. I never understood golfers joining a club for the golf (the camaraderie yes but that is the next thought) because if you keep hitting the ball to the same place on the fourth hole how interesting can the next shot be? At least with cycling as David said in the DCT thread you can ride the route backwards for interest. But the third or fourth dimension you need to travel or take a random left turn.
I think part of the proof in that for me is what Lionel said in this thread about "living there full-time may be a tough call" and he is talking about one of the nicest places in the universe. I guess my thought here is that I thank my lucky stars that I have two places to live that are very different and the ability, although somewhat limited, to explore other places (I could never explore all of Quebec and Eastern Canada totally even if I had started 30 years ago).

This is also a reason to not base it on cycling...although that is why we are all here at the basest level. I realized that the cycling was so much more because of the other things I did. It is the reason why I will always need something else for perspective. And appreciation of all things. I was slapped in the face with this when my wife said "is there anything important to you other than bikes?" It took a year of finding other things (some of them again) that were important to me other than cycling to make cycling be as special as it is to me now...and importantly to get her to voluntarily without prompting ask me if I would get her a "real bike" and ride with her sometimes.

The golf club and camaraderie...and moving etc....

The biggest single problem I had when I retired was that my playmates were still working. I had to learn to enjoy it on my own. And now, thankfully, I have a wife who is willing to give it a go and I have made new friends who can ride on my schedule or lack thereof. I only point this out because for me, moving to a town where I had trouble making friends (because of language lack of fluency and totally fish out of water in their eyes) it was problematic and it is a part of life I would hope anyone thinking about moving would consider.

As I think David said, consider just staying where you are with as someone else said a refresh of home/ downsize/ whatever and using that as a base. I think there is something that should be more than loose internet wishful banter that Josh, Jon, and others have done in this thread about moving somewhere (France) together. I guess I am saying don't go too far out of your comfort zone and expand and deepen your playmate list rapidly. That is advice I wish I had lived.

Do other things. It always sounds good. But do it. It ain't so easy. You need to force yourself out of your comfort zone. And as Ron said in another thread, surround yourself with young people for the way they think and their energy. Again, it is easier said than done, particularly as you get older.

And remember time is more dear than money...donate time to good causes that you genuinely believe in and that give you the ability to see YOUR impact on another human being...even if it just a little impact. The way that will make you feel about your place in the world is immeasurable. Plus, it will but some perspective and humility into your cycling.

In a nutshell, it isn't about moving to somewhere warm and investing in 60% stocks and 40% bonds. It isn't about being bored in what pays you or not (would they pay you if it didn't suck? Would you do it if they didn't pay you?). It isn't about what is perfect for cycling (or any other singular pursuit) 12 months a year.

It is about you inside. And your partner's/ family's/ those you care about in an emotional not necessarily logical way's needs/wants/desires because you give them pleasure and support and they do the same for you.

It isn't about a plan necessarily, because the weather will change and you need to be happy even if the locusts/ pestilence and so on show up. And you have to have the courage to grab at the rainbow and follow the stars when that all shows up.

I could go on, but you folks will have to charge me for the therapy.

I hope this has been helpful in your thinking it through. And if it has only confused things, I apologize for that but merely ask that you not take it all seriously because I am not sure there really is an answer.

[Lionel]

No kidding. Full time, never. Awesome place to land for a month here and there...absolutely. I love how quiet it is.

Well yes. I think the previous context for this was to retire in the south of France as some see as the eldorado. While I fully get (and agree!) the appeal I would not do it there.

[davids]

Good stuff, htwoopup!

Glad you mentioned long-term care insurance. Yep. We bought that too. It's not something that would have been on my radar when I was 40, or even 50. But watching my wife's dad and stepdad decline, and hearing story after story from friends who are caring for and nursing their parents through their final year... It is a prudent financial decision. Hell, I hope neither of us ever needs it and we each peacefully drop dead on the day after our last good day. But I know that's probably not going to happen. And it will be very nice to have the financial safeguards in place to protect our assets.

As far as jclay's questions... All I can say is that we're diversified. We own bonds, precious metals, US and international stocks... If civilization falls apart we've got bigger problems than our investments.

[NYCfixie]

Glad you mentioned long-term care insurance.

I'll add the counter-point. Move to Oregon in your twilight years: Death with Dignity Act

[ides1056]

re: your investments:

keep an eye on Mnuchin's attempt to raise the debt ceiling.

[davids]

I'll add the counter-point. Move to Oregon in your twilight years: Death with Dignity Act

You think it's that simple?

[NYCfixie]

You think it's that simple?

I hope so. I have already told my wife to put a bullet in my head before I need diapers, start drooling uncontrollably, or forget who she is. Not trying to be funny or insensitive but I want to control how I leave this world when it is time. Since she does not want to be accused of murder, moving to Oregon is the next best thing (and a well written medical directive).

[ides1056]

Not funny or insensitive. I raise cows. They have a good life, and one bad day.

A childhood friend has been in a wheelchair since nineteen, and a few years ago was T-boned by a kid in a pickup out for a last hoorah before deploying for Iraq, so he's in constant pain. Last time I saw him he was wearing several, maybe three or four, Fentanyl patches. I had wicked jet-lag and fell asleep for awhile. He told me when I awoke that had I put one of the patches on my forehead I would not have woken up.

Simple enough.

[htwoopup]

Ok folks...somehow we are talking about death and my take was that the whole idea of this thread was about retirement is life and the enjoyment/ making the best possible life kind of thinking.

There are many rabbit holes from religion to sometimes people when confronted with pain/life quality vs death changing minds one way or other about stay or go. I don't think any of us want to go down rabbit holes on a thread that is actually quite positive.

So, I just want to say that my whole thing in mentioning the LTC thing is remove as much worry as possible and that often is about money (although as I posted I think there are other worries that should be equally salved). To me the choice is don't care about the money and/or figure out a way to make the money worry be less. That is why I suggested the long-term care thing. At least to me it lessened a worry that was hampering my life enjoyment only because I had seen what not having it did to someone whom I love. Of course, that may be different for others.

And I don't mean to have grown my father's finger and I am not pointing it. Carry on. Peace love and all of that.

And I think that cow line is pretty good.

[metalheart]

I am a daily sometimes more visitor to Vsalon but seldom visit this section, but for some reason today I saw the "retirement" thread listed and decided to take a look, so here I am and here is my take on things. I am 73 and started a gradual reduction in work around 60 when I had my first heart attack. I had my own consulting business traveling mostly unaccompanied a lot to distant and often remote places. I enjoyed my work and never planned to retire, I just thought I would work until I could not. Well, my wife followed the ambulance to the ER and when they loaded me the attendant said he was not sure what my condition would be when they arrived, so it was a long drive for her and it had a profound effect on how she thought about our future. So, at that point I began to cut back on clients and work, something that hurt since I spent years building a situation where people called me rather than my having to write proposals and prepare bids. But, we both agreed that it was time to do something different.

Between 60 and 65 I cut back a lot in work, increased my gym work and did swimming and treadmill for cardio and dropped a lot of weight. Then before my 65th birthday, I had a second heart attack, not as severe as the first, but sobering nonetheless. At that point, we both decided it was time to transition to not working. I completed my ongoing projects, turned down lots of fun work --- that was painful -- and began cycling with some younger friends and neighbors. I tried to do some projects, but for me it was something I just could not do part-time: it was either all in or all out at that point. By 68 I had no ongoing projects, but my wife was still working, she is 6 years younger.

Fortunately, we had saved and I applied my research skills for investing and we did well in the market, but it became almost a part-time job for me and it had its own stressors. We looked for about 6-8 months and finally found a financial/advisor planner, a fellow cyclist and fly fisher, and young enough to be around for awhile. We invested with him and met regularly to discuss current and future strategies, but most importantly I did not watch the market every day or worry about the market ups and downs that both hurt and helped us. We are comfortable, our house is paid off, and our only debt is a no-interest car loan that we can pay off anytime we want, but it makes to financial sense to do so. We are probably 60/40 stocks to bonds at this point and while that may sound aggressive for our point in life, there isn't much return in bonds and we need an inflation hedge. And, we bought long term care insurance when I was about 55 and we still have it.

Others have mentioned health care and here is our experience. As self-employed folks, we paid for our own insurance, which cost about 900-1000 a month before medicare kicked in for each of us. We both had 5k deductibles and my wife usually had at least 5k of lab and other test costs because of some cancer issues. So, we were putting out 20k or so a year just for her. A couple of times we wanted to move, once to Montana another time to Wisconsin, but her preexisting condition meant that our health care costs would have been too high for us and so we stayed put where we are. Sorting out and paying for health care before you reach 65 is a big part of a retirement decision and I see my younger (55-65) friends trying to solve that problem all the time.

We have friends and acquaintances who are moving to a retirement destination and when I hear them talk, it is more push factors than pull: lots of dissatisfaction with California costs and politics, but......... We have talked about moving to be closer to family in Wisconsin, but the winters, taxes, and other stuff keep us from doing that. We have talked about the RV thing, but it is a big chunk of money to tie up, but it is still not off the table. There are lots of good things about where we live and until we can come up with a reason to move or we are forced to moved for family/health reasons, we are where we are for awhile. Because it is California, our house has appreciated over the past 28 years and although it has never been part of our investment decisions, I hope we can find a way to use the equity we have in the house.

I ride a reasonable amount, about 6K or so a year and I get no push back from my wife about the amount of time and money that goes into cycling. She calls it my heart-lung machine that keeps me alive. Anyway, between cycling, keeping up our 7 acres of weeds and rocks, a couple other hobbies, and volunteering for a rescue organization, I am never bored and seldom end the day without todo items left in the inbox. Life is busy and that is a good thing.

The only issue that keeps me awake these days, besides what jersey to buy or when to change my chain, is the awareness that you never know what health event for me or my wife might change everything. We have seen it happen to us, our parents, and other family members and it is a constant reminder to not put off doing the things that will bring enjoyment and enrichment to our lives. So, retirement is an opportunity, a gift, a time to ride.





The first two heart attacks took a big hit out of our savings/investments

[summilux]

bigbill's quitting thread is morphing into a retirement one so I thought I'd revive this one

My wife retired today at 53. She has several months of unused holidays so won’t officially retire until September but she’s done with work, at least for now. She’s working on her glider pilot license but other than that, her immediate retirement goals are surprisingly banal: get 7 good sleeps a week, work out more and declutter the house.

Wife and I both did grad school so we didn’t get real jobs until we were thirty. After that, we put as much money as we could into retirement saving. In Canada, if you have a job you must buy into a government retirement plan. We were also compelled to buy into our respective employers’ pension plans and we put as much as possible in tax-sheltered retirement savings. When we were young this seemed like a huge burden but it paid off in the end. Other than that, the smartest thing we did was to buy a house. We didn’t have any savings when we did this and needed to borrow down payment money from family. We lived like paupers for two years to pay that back. We’ve moved cities twice since but each time we resisted the urge to buy a substantially pricier home even as our incomes grew and we’d made decent money on each house. The mortgage should be gone before my wife’s first pension check arrives. Not having a mortgage is how my wife can retire young.

The stupidest thing we ever did was borrowing money to invest in the stock market. My wife was a stockbroker during the dotcom years and she believed the advice that every brokerage in the country was giving: put 30% down, borrow the rest on margin and buy stocks. When it worked we thought we were geniuses. When the crash happened, we came within a hair of bankruptcy. Don’t put money in the stock market that you can’t afford to lose.

We also caught a few lucky breaks. Our youngest enrolled in the Canadian military and got her university paid for. She didn’t do it for the money but it was a financial blessing for us.

We’ve had our financial ups and downs but it is possible to retire at a young age if that is what you want. I’m still working though. I could start collecting my pension in two years and we’ll see how the finances look at that point. Admittedly, wife and I have/had good jobs with defined pensions. Moreover, as Canadians we don’t have to worry about health care costs. But we don’t come from wealthy families nor have we made huge sums of money investing. We lived within our means, never kept a credit card balance and put as much as we could into retirement savings.

[NYCfixie]

We’ve had our financial ups and downs but it is possible to retire at a young age if that is what you want. I’m still working though. I could start collecting my pension in two years and we’ll see how the finances look at that point. Admittedly, wife and I have/had good jobs with defined pensions. Moreover, as Canadians we don’t have to worry about health care costs. But we don’t come from wealthy families nor have we made huge sums of money investing. We lived within our means, never kept a credit card balance and put as much as we could into retirement savings.

Ding, ding.
Winner, Winner, chicken dinner.

Still waiting on that healthcare thing to work south of the border. It seem neither the dems or GOP can make it work except for themselves.

The second point is the important one; live below your means and invest so it will lead to financial security (and hopefully early retirement).

[guido]

It seem neither the dems or GOP can make it work except for themselves.

Please keep the political rat hole out of this...

[Too Tall]

I've got lots to add on this if anyone really wants to hear it.

There are no secrets.

[Bob Ross]

We’ve had our financial ups and downs but it is possible to retire at a young age if you start planning for it at an even younger age.

Fixed that for you.


But congratulations to both of you! That glider pilot's license sounds like an awesome way to spend one's time!

[Saab2000]

I've got lots to add on this if anyone really wants to hear it.

There are no secrets.

Let's hear it!

I got religion on the finances of retirement by grabbing an issue of Money magazine someone left behind on an airplane about ten or eleven years ago. The publishers of this mag seem to rarely change their themes of saving early and saving often and saving a lot and living within one's means. As you say, there aren't really any secrets.

If we all take a close look at our finances I bet most of us can do a better job by avoiding things that ultimately vanish into thin air as they eat our money.

[NYCfixie]

I read everything I could about personal finances and investing during my last year of college and all the books/magazines/journals/websites said the same thing as mentioned below. All the information is out there. There is no secret. I started investing the day after I got my first job.

One book I found especially interesting is:
The Millionaire Next Door: The Surprising Secrets of America's Wealthy.

No matter your current age, go buy a copy and read it. It speaks to the average American millionaire/millionairess and not the get rich quick schemes you see on late night TV or the dot.com millionaires, and the like. I do not remember the exact wording but it states that it is better to be financial statement wealthy (investments) rather than income statement rich (paycheck) because those who tend to be income statement rich live paycheck to paycheck no matter how high the paycheck.

I got religion on the finances of retirement by grabbing an issue of Money magazine someone left behind on an airplane about ten or eleven years ago. The publishers of this mag seem to rarely change their themes of saving early and saving often and saving a lot and living within one's means. As you say, there aren't really any secrets.

If we all take a close look at our finances I bet most of us can do a better job by avoiding things that ultimately vanish into thin air as they eat our money.

[summilux]

Here's one tip that I don't think I've ever read: When you buy something that wears, spend the money on high quality. I've got multiple pairs of shoes that are 15 years old. My TravelPro luggage is a decade old. We drive a 13-year old Volvo (XC90) and an 11-year old BMW (328i). All of those were very expensive when new but the shoes and cars were both repairable and worth repairing. The luggage hasn't needed any work. I haven't done the math but I'm sure that spending money upfront was an ultimately money saver. Bike lesson: buy Veloflex tubulars.

Another tip, and this is not directed at anyone in particular and is not meant to be condescending, but try to stay married if possible. Based on what I've seen my friends go through, divorce is hard on you and your kids and will also empty the bank account. I've been married for a long time with two children so I've run the gamut of emotions between believing that I was drowning in happiness and putting my fist through the drywall. I'm not a touchy-feely guy but it is possible to work on your marriage in the same way you work on your fitness. Some marriage counseling was eye rolling bad but others were quite effective. YMMV. I don't think it can solve all issues put professional assistance is an option. I'm fairly certain that I would be divorced (and much poorer) without it.