Goals/Objectives for 2020

I’ve done the goal setting posts before and gone over my 2017, 2018 and 2019 goals in previous posts. For 2019, the financial goals were all accomplished, but for the non-financial goals, it was a mix> Overall I believe I made real progress on a number of them, but probably “bit off more than I could chew.” As I stated before, as the FIRE gets you, you end up with a lot of the finances on auto-pilot, and then you really start to concentrate on what really matters.

For 2020, my financial goals reflect that we are closing in on “coming in for a landing” and need to adjust for that. One of those is that we’re going to stop contributing to the Deferred account, because when I retire, that is going to come to me in a lump sum, with a huge tax hit. After discussion, we are just going to start taking that money now, paying the taxes now, and then placing it in post-tax accounts. That way, we have the flexibility both in where to place it, and when we want to pull it out (and what tax benefits we could get from that).

Officially, I’m 6 months from my FI date, but like so many others, I’m starting to rethink actually leaving at that time. No so much because I need the funds (although that would be nice) but because I still enjoy some aspects of the work, and may not be ready to jettison it. I think what is more likely is that I’ll depart at some point, but continue to work on “side hustles” off to the side for some time.

So what about 2020?

Finance:

  • Save $28K in tax-advantaged accounts (saved over $75K in 2019 – but a lot of that was in the Deferred). 401K, and Roth IRA.  
  • Save $41K in regular accounts (compared to $5K in 2019). As I noted above, we’re going to be taking about $3K per month and sticking it in regular investing, after paying taxes on it versus putting it in pre-tax with the company’s deferred. Starting to build that bucket of funds we’ll need prior to hitting age 65.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019).
  • Passive income covers 30% of base living expenses in retirement, estimated at $78K per year (previously, I was using $72K, but after meetings with our finance guy and Mrs. 39 Months, the budget ended up being $78K).  My long-term goal is to get my dividend/passive income up to where it covers over 100% of my expected retirement living expenses, so my investments can continue to grow.
  • Beat net worth growth rate of 6% (it was +20.1% in 2019 with the stock market run up). This is my historical growth rate for the last 10+ years, so I want to beat my average. As I stated earlier in January, I’m expecting the market to be flat this year, since we jumped up so much in 2019.

Business:

  • While not getting a membership, I want to attend six (6) of my local real estate investors association meetings this year. I’ll probably join permanently in2021. They hold a regular monthly meeting, a monthly meeting for new investors, and a monthly meeting for my specific county. All three could be interesting.
  • Double the number of blog visitors in 2020. Last year it was a little over 6,000. I want to get at least 12,000 this year, so I need to put myself out there more (i.e. comment) and write interesting topics. My thanks to everyone who stopped by, and I try to return the favor, and comment as well.
  • Create TKD Woodworking (my side-hustle name) with an LLC, website, finance tracking, etc. Sort of a trial method for running businesses.
  • Make $1,000 in sales (not necessarily profit) on items with TKD woodworking
  • Write/publish a book on finance.  I wrote one for new graduates in 2017, but I have identified an area of the community which hasn’t been served as well in the past. Hopefully I can assist with something here.  I’ve got the first five chapters outlined/partially done, but still have a ways togo.

Personal:

  • Increase weight lifted by 10% from 2019. Was able to exceed this in 2019, need to continue to push it.
  • Average 2 hours of cardio per week, which is about what I’m doing now.
  • Backpack over 90 miles on AT (did around 80 miles in 2019). The trail that I haven’t hiked is getting further and further away, making it impossible to do weekend trips. Going to get harder.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this.
  • Reduce weight by 20 lbs. from Jan 2019 (lost 2 lbs. in 2018). Again, I want to get in better shape as I get closer to financial independence
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading.

Travel:

  • Visit three national parks (that is the plan, right now)
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Need to get up to see my brother in Vermont.
  • Take a week at the shore and just relax with family. Currently planned for July, but we’ll see how many family members can come.
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it

So those are my somewhat ambitious goals for 2019. I am going to do my best to hit them, so wish me luck.

What are your goals for 2019?

Mr. 39 Months

Look out for the “End of Year” status reports – version 2020!

                           

Well, its that time of year, the end-of the old year, beginning of the new. What we can look forward to over the next 30 days is a list of the performance of various FI bloggers, and their goals for the new year. Some insights on how their investment strategies worked out, what frugal tips worked (and which ones didn’t), what travels they made, etc. Get ready for it!

While some might look down on this, or find it boring, I actually enjoy seeing the information shared by our community. I always try to take away 1-2 things from each annual review, and try to integrate some of them into my plans for the new year. I also write about my wins & losses, and what I’m planning for the next year. It could be “navel gazing” but it helps me work out my objectives and what lessons I learned. So here goes…..

We’ll start the series of blog posts off with how I did with my goals for 2019.

Financial Goals: Like most folks in 2019, we hit this “out of the park”

  • Save $80K in my tax-defered, Roth and regular investment accounts. Score A. The final total was a little over $86K, which is less than last year, but I cut back on money to my deferred account at work.  
  •  Increase dividend income to over $27K, so it covers 37% of a sample $72K/year standard of living (roughly what we are living right now). Grade A. Dividends were $29,406, or over 40%.
  • Beat new worth growth rate of 7% (I’ve averaged 6.1% over the last ten years). Grade A. Net Worth grew 20.1% to a little over $1.7M (only $300K of which is our home).

Business Goals

  • Begin attending regular meetings of my local Real Estate association. Grade F. Made decision at start of year to discontinue this.
  • Double the number of blog visitors in 2018. Grade F. Had 6,267 in 2018, and hit about the same number in 2019. Thanks to everyone who came & read, and especially those who commented. Going to (hopefully) do some more interesting writing in 2020.
  • Write/publish a book on finance. Grade F. Made almost no progress on this (only finished the outline). Need to start researching areas of the story. I’d like to make some progress on this in 2020.

Personal

  • Increase weight lifted by 10%. Grade A: Increased my weight lifted by 16.7% in 2019. I’ve hit a “wall” right now, and haven’t pushed up for several months now.
  • Average 3 hours of Cardio per week. Grade D. Life has made it difficult to hit the “3 hours per week goal” but I was able to hit about 2 hours fairly consistently.
  • Take part in one long bike ride (80+ miles). Grade F. Did not do
  • Backpack over 100 miles on AT. Grade C. Did around 80 miles. Its getting difficult to do this, because I’ve done just about all the hiking I can do in a half-day’s drive, so weekend trips are just about out. Probably will “walk down” the goal for 2020.
  • Reduce weight by 20 lbs. Grade F. Actually gained a couple of pounds from Jan 2019. Really need to work on this (like so many others New Year’s resolutions for 2020).
  • Read at least one book a month. Grade A. Again, really loving hitting this goal. The reading keeps me off the computer and from watching TV as much as I used to. Did 21 books in 2019. Already close to finishing one in Jan 2020.

Travel

  • Visit a National Park. Grade A. Hit one during trip to North Carolina (Smoky Mtn. National Park). Plans for doing three in California in 2020.
  • Visit family in Tennessee, New York and Vermont. Grade A. Saw family all over the place, though not as much in NY as I might have liked.
  • Week at the beach: Spent a week there with Mrs. 39 Months and had a great time. First time we ever really took a week off at the great New Jersey beaches. Going to repeat this with family in 2020.
  • Visit Asheville NC: Grade A. Had a good time, and Mrs. 39 Months enjoyed the Dulcimer festival while we were there.
  • Visit Ellis Island. Grade F. Did not visit
  • Go on an International Trip. Grade F. Didn’t travel internationally in 2019.

Like most folks, 2019 was a great year financially, really setting us up for FI. It was a mixed bag for Personal and travel goals. We did get a lot of things done, and I have some new ideas for business goals for 2020 that excite me. I’m very happy with how the year worked out. Hopefully you can all say the same!

Mr. 39 Months

Correction Coming? Timing the Market in 2020

I have written several times about the potential of timing the market, using a variety of methods. My favorite approach would be the one Ben Stein and Phil DeMuth came up with after the dot.Com blowup in 2000. I even went back and charted how I would have done if I had followed their advice since I had graduated (back in 1986 – yep, I’m an old man).

For a lot of folks, the giant returns of 2019 were a godsend after having suffered a downturn in 2018. It helped plump back up everyone’s retirement accounts and personal savings, and better place them for retiring early. Yet now there is that nagging fear that we’ll have a correction, and we will lose all those wonderful gains that we had. This also raises the specter of “sequence of return risk,” where you retire right as the market tanks (or stays flat for a decade+). So what is a person to do?

I looked at my “market timing” stats for 2019 and 2020 and here is what they said:

  1. Price (Current price of S&P500 vs 15 year trend): Jan 2019: No to stocks, Jan 2020: No to stocks
  2. P/E Ratio (Current S&P 500 P/E ratio vs 15-year trend): Jan 2019: Yes to stocks, Jan 2020: No to stocks
  3. Dividend yield of S&P500 vs 15-year average: Jan 2019: Yes to stocks, Jan 2020: No to stocks
  4. Earnings of S&P500 vs. AAA corporate bond (stock earnings “yield” vs. yield of AAA bonds): Jan 2019: Yes to stocks, Jan 2020: Yes to stocks

So in Jan 2019, 3 of the 4 indicators said to purchase stocks, while in Jan 2020, 3 of the 4 are saying invest in bonds. Looks to me like stocks aren’t set up to do great in 2020.

Now remember, these timing stats did not say to sell your stocks/bonds, they just say that for that period, you just concentrate your new purchases on the appropriate category.

As I’ve stated before, I’m a firm believer in the “buy and hold” strategy, keeping with your market allocation, and rebalancing regularly (for me every 6 months) in order to keep your allocation within your guidelines. While some folks may have enjoyed higher returns over a set period of time, this method has met my objectives and allowed me to grow my net worth significantly.

So will there be a correction in 2020? In almost every election year, the market has done OK (with the exception of 2008, when it melted down spectacularly). However, I’ve been growing my net worth at an average of 6.1% per year for the last 14 years – and based on that I would need my investments to lose 9.5% in 2020 in order to maintain that 6.1% growth rate. Take of that, what you will.

My thought is that 2020 will be a “net 0” year, with limited gains in the market. Stocks are overpriced if you look at the metrics above, so it will take them some time for the profits to catch up with the price. My intention is to “stick with the plan” of investing regularly, keeping my allocation, and rebalancing.

What are you plans for 2020?

Mr. 39 Months

Excellent Post at the Retirement Manifesto on your beginning of the year financial moves

Pretty much parallels what I do each year in the first day or two. Excellent checklist!

Retirement Manifesto: A step-by-step guide-to-your-annual-financial-update

Steps:

  • Update Net Worth Statement
  • Update investments/capture current asset allocation
  • Determine portfolio rebalancing actions
  • If retired, update your bucket strategy (how much in cash bucket, how much in 5-8 year bucket, how much in long-term bucket)
  • Update your spending from the previous year
  • Determine your spending goals/limits for the new year
https://www.theretirementmanifesto.com/a-step-by-step-guide-to-your-annual-financial-update/

WOW! Just WOW! Investment update for Jan 2020

I think I speak for everyone when I say – Wow.

The year 2019 will go down as one of the best years for most people in terms of their investments. The S&P 500 (everyone’s standard for judging US stock performance) went from $2,607.39 to $3,235.14 (Jan 1 to Jan 1) – a 24.0% increase. Tack on the 1.77% dividend yield and you were seriously kicking butt, as long as you just left it in the market in an Index Fund! Hopefully the readers here didn’t panic in Dec 2018 and sell their stocks.

I’ve been an index investor for most of my investing life. Whenever I have dabbled in individual stock pickings, I mostly got my head handed to me. So here I stay. My allocations tend to be broader than just your typical “dump it all into the S&P 500”

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

My company 401K/Deferred account doesn’t have a REIT option, so I’m 25% for the other 4 categories.

I set up my father’s inherited IRA to see how it would perform if it was concentrated on creating income (i.e. dividends). My allocation for that was:

Dividend Income Account: Allocation:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

Finally, my “fun money” post-tax account is primarily setup for value investing, with a mix of USAA and Vanguard index accounts.

Value Account: Allocation

  • 12% PAWZ ETF (it invests in pet related companies, a vanity play on my part)
  • 44% USAA Market Index (my brokerage is USAA)
  • 44% in Vanguard Value Index fund

So how did they perform for the year?  Here are all my portfolio items (not weighted)

Name Symbol Capital Gain % Dividend % Total Return
TRowe Price S&P 500 PREIX 28.5% 1.8% 30.2%
Extended Equity Market Index PEXMX 22.0% 1.0% 23.0%
International Equity Index PIEQX 17.7% 2.6% 20.3%
Real Estate TRREX 3.7% 2.5% 6.2%
US Bond Enhanced Index PBDIX 5.2% 2.9% 8.1%
Vanguard Bond Index Fund VBTLX 5.7% 5.24% 11.0%
Vanguard 500 Index Fund VFIAX 28.8% 1.85% 30.7%
Vanguard REIT Index Fund VGSLX 24.5% 3.31% 27.8%
Vanguard Small-Cap Index Fund VSMAX 25.5% 1.38% 26.9%
Vanguard Int’l Index Fund VGTSX 17.7% 2.98% 20.7%
Vanguad Welesley Income Fund VWINX 11.8% 0.95% 12.8%
Eagle Small Cap growth   18.7% 0.00% 18.7%
Vanguard 500 Index Fund   28.8% 1.74% 30.6%
Vanguard Total International Index   17.7% 2.08% 19.8%
Vanguard total bond Mkt   5.7% 2.52% 8.3%
Eagle Small Cap growth   18.7% 0.00% 18.7%
Vanguard 500 Index Fund   28.8% 1.74% 30.6%
Vanguard Total International Index   17.7% 2.08% 19.8%
Lord Abbot Total Return   6.2% 2.71% 8.9%
Chevron Corp CVX 10.8% 3.9% 14.7%
Cisco CSCO 10.7% 2.9% 13.6%
Healthcare Realty Trust HR 17.3% 3.6% 20.9%
Ishares Preferred PFF 9.8% 4.9% 14.7%
Realty Income Corp O 16.8% 3.7% 20.5%
Service Properties TR SVC 1.9% 8.8% 10.7%
UMH Properties Inc UMH 32.9% 4.6% 37.4%
Verizon VZ 9.2% 3.9% 13.2%
Vanguard Total Bond Index VBTLX 5.7% 2.5% 8.3%
Vanguard Int-term Bond index VBILX 7.2% 2.5% 9.7%
USAA Extended Market Index USMIX 24.0% 1.3% 25.2%
Vanguard Value Index VVIAX 22.5% 2.6% 25.1%

As you can see, no real negative items in the bunch. While the bonds and REITs didn’t light the world on fire, the other stocks really jumped off. The bonds and REITs  will help balance the portfolio out when the stocks have a correction (and we all know a correction is long overdue here).

Overall, I was up 20.1% for the year, which definitely exceeded my expectations. Even with all the bonds and REITs, the overall performance was excellent.

Mr. 39 Months

“Blame Storming”

One of the things I am not going to miss about the corporate culture is the need to CYA (cover your “butt”) whenever a mistake is made somewhere. It seems in today’s US corporations, they’ve got almost all the “fat” out of the company, resulting is most folks doing 2X to 3X the amount of work done previously, while not receiving any extra pay. With the unemployment rate as low as it is, its very difficult to fill the holes in your department. So you end up having to do even more additional work while the HR department and upper management look for the magical unicorn that has all the skills you want, and will only be looking for low enough wages to fit into a wage “band” that was made 5 years ago and only been raised to match inflation.

At the same time, the company expects 100% perfect work, and any mistake is jumped on and used as an excuse to not provide as big a pay raise or bonus to the workers . Or to place you on some sort of disciplinary status, so you are walking around in fear, and willing to work extra hard so you don’t potentially get canned.

Just recently, I had a situation at my work where a rack project had a major problem in it. It was determined that the piece of lift equipment used to fill the top level did not reach high enough. I designed it for a new piece of equipment, the standard one that we have been buying for several years, which would work. It turns out, in order to save money, the decision was made to use older pieces of equipment that were available, instead of buying new. The result – we have to take the rack partially apart and reset it.

Let the “Blame Storming” (instead of Brainstorming) begin!

The question now is to find out when this decision was made, was it communicated (it wasn’t to me) and who is ultimately responsible for the mess.

Luckily, I’m pretty well defended – I designed it to the standard, and one of the reasons we have standards is to avoid this kind of thing. The emails between the other involved parties have been flowing fast & furious, though! It irritates me that folks will now  spend countless hours going back through old emails and trying to fashion a defense so they can shift the blame for this.

It’s a miss. We can try to put in a fix for it to prevent it from happening, but mistakes are going to be made, especially at the pace that the company has been going through (we’ve had twice as many of these projects in 4th quarter this year vs. the average). One of the reasons, I guess, that I (and so many others) are pursuing FI.

So, have you had to shift blame lately in your day time job?

Mr. 39 Months

Investment Update Dec 2019

Only 7 months to go!

US Markets continue to drive forward at an epic pace, making 2019 once of the best years on record for stocks. For those market timers who jumped out of the market at the end of December’s larger drop, they’ve probably missed out on some strong returns. It once again goes to show that the buy and hold strategy of “steady as she goes” will probably win out in the end. When the next downturn happens – and it will – make sure you keep your money in the market, keep your allocation, and keep investing!

As you know, the allocation for my retirement accounts (IRAs, 401K, etc) is pretty much index funds, spread out between the  S&P 500, small-cap, international, REITs and bonds.

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

My 401K doesn’t have REIT option, so its just 25% for each.

S&P was up about +3.6%, Small cap +4.5%, and International +1.1%. Real Estate and Bonds were down about-0.3%, so they didn’t hurt much, but also didn’t help. Still, a very strong environment, and my retirement accounts were up about 1.8% all total, for the month.

My dividend account allocation is:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

This account got smacked hard, as it is heavily invested in Bonds and REITs, the two categories that got hurt last month. Several of my dividend stocks did poorly as well (Cisco was down -4.6%). Its almost time for year-end dividends to come out as well (some are already paying out) so that may further drive down the stock and REITs.

The “fun money” account did very well, up a little over 4%, after a very strong rally for my PAWZ ETF. Its been suffering for almost six months, but picked November to rally back and almost get to even. Both the Value and Extended Market had strong gains as well.

For November, I’m up 1.62% (after 1.5% in October). For the year, even though I’m 30% Bonds for the most part, I’m up 18.56%. Time to make a few “end of year” moves before time runs out. See my previous link in reference to end of year moves.

Hope your November was good, and everyone was Thankful!

Mr. 39 Months

Financial Advisor meeting #4 – Sad Trombone….

I’ve included several posts about our recent meetings with a financial advisor

Financial Advisor Meeting #1

Financial Advisor Meeting #2

Financial Advisor Meeting #3

As I noted previously, Mrs. 39 Months doesn’t trust my numbers, and wants to get a second opinion. By involving a third party, I’ve been able to get Mrs. 39 Months to provide more information on how she sees our FI journey going, her spending expectations, etc. Its been well worth it in that respect. We finished our 4th meeting with the financial advisor late last week, and the results, to say the least, were very disappointing to me.

The “basic” plan we asked him to work up for us had me working for an additional 4 years (instead of “retiring” at 56, assume we continue to work till I’m 60 and Mrs. 39 Months was 62). He came back with the analysis, and it showed us running out of our liquid assets around age 95/97. We’d still have the fully paid off house to use as a reverse mortgage, but his analysis showed us just barely scraping by. Sad Trombone (wah, wha!)

Well, I didn’t really take this sitting down, as I knew the assumptions put into the analysis drove a lot of this. I’d tried to get advance copies of his analysis (at least the base one) in advance, but I wasn’t able to. So I started picking it apart there in the middle of the meeting. Some of his assumptions:

  • Spending of $90K in the first year – even though we gave him a budget of $72K (plus taxes), he had some assumptions in there that pushed the first year’s spending to $90K
  • Inflation of 3.25%. Seems a little high compared to the last ten years, but I won’t argue
  • Medical inflation of 6.5%. I think this actually is good, based on the past

Yet the big assumption that pushed this out was the return on investment of various investment classes. They got their data from Morningstar, which is reporting the following returns, by class, to be used for planning purposes. Note that these are total returns, including inflation:

  1. Large Cap Growth Equity (top 1,000 of Russel for growth): +5.02%
  2. Large Cap Value Equity (top 1,000 of Russel for value): +6.08%
  3. Mid Cap Equity (smallest 800 of Russel 1,000): +6.06%
  4. Small Cap Equity (Russel 2,000): 7.24%
  5. US REITs: 7,59%
  6. International Equity: 7.59%
  7. Emerging Markets Equity: 7.26%
  8. Long-Term Bonds: 3.4%
  9. Intermediate Term Bonds: 3.69%
  10. Short-Term Bonds: 3.48%
  11. High Yield Bonds: 6.07%
  12. International Bonds: 2.73%
  13. Cash: 2.68%

Holy cow! The S&P500 has returned roughly 10% for the last century, but I’m supposed to base my retirement on it only returning half that for the next 40 years? International Equity is going to be US equity, even though its been getting its but kicked for years now? Cash at 2.68%, even though its been trading at crap levels for over a decade? I just don’t see the sense in these numbers. Apparently the thought is that we’re about to head into a period of serious investment non-performance, like the decade long period after 1929, 1965 and 2000. I’m just not sure this is correct.

I’ve asked them to re-run the analysis based on the $72K a year in expenses. I think we are going to go round & around on the returns assumptions in the analysis. Not sure how I’ll handle this.

We are going to have some further discussions. I’ll let everyone know how that goes.

Investment Update Nov 2019

Only 8 months to go!

It looks like the US market is starting to kick back I again, after spending the summer “treading water.” While the trade issues with China haven’t been worked out entirely yet, the earnings coming back for most of the companies are good, and the general thought is that we won’t be sliding into recession any time soon. To top it off, the Fed just dropped the rates again, so they are also doing their part to keep the economy humming. Unemployment is very low, so folks have jobs, their trading up in their jobs, and they are spending. Overall, it looks like the market will sail through the year in good shape!

The allocation for my retirement accounts (IRAs, 401K, etc) is pretty much index funds, spread out between the  S&P 500, small-cap, international, REITs and bonds.

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

My 401K doesn’t have REIT option, so its just 25% for each.

International did well (+3.4%) while the S&P 500 and Small caps were up about 2% each. Even Bonds and REITs were  up (not as much as stocks, however). Second month in a row that International has beaten the pack – so further proof that it is good to diversify. Overall, my retirement accounts were up 1.7% for the month.

My dividend account allocation is:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

My individual stocks and REITs were mixed (Chevron was down -2.1% and Cisco was down -3.8%). What was interesting was that I wanted to buy another stock, and decided to follow the old “High yield Dow 30” strategy, where you rank the Dow 30 by their yield, and purchase the ones with the higher yields. The assumption there is the stock price is low and might be undervalued – so pick it up now. You can get a good dividend yield, and the stock might bounce. Well I bought Dow at the beginning of October with my dividends, about 80 shared, and its up 12.4% in just one month! Holy cow! I am assuming that it is just returning to its normal level, so I don’t plan to get too excited. I will probably buy another 20 shares to get me to 100 total (I’m anal retetentive that way). A nice little success story.

The “fun money” account is primarily Value and extended market, and was up about 1%. I continue to invest in this one regularly each month, with leftover funds. My attempt at stock/mutual fund picking – never a strong suit for me – appears to bear out again, as I have invested in the PAWZ ETF for pet stores, and its down again. Ah well, I will ride it for a while, but won’t add anything else to it.

For October, I was up 1.50% overall, and I’m up 16.55% for the year. Continuing to plow along as I approach that magical FI moment.

Hope your October was good, and not too scary!

Mr. 39 Months

Financial Advisor meeting #3

It is all about the assumptions….

Well, last night we had our third meeting with the financial advisor, and things did not go as well as I might have hoped. I was hoping that, after we gave him a ton of information before we even started, and answered all his outstanding questions in sessions #1 and sessions #2, that he would have some more concrete analysis for us to review last night. In the first session, he showed a sample binder from another client that had a wealth of data, spreadsheets, annual spending vs. income, etc. Several scenarios were explored. I really wanted that 3-ring binder!

Alas, it was not to be. He had two scenarios to show us on the computer in order to get our feedback, and to make any final “tweaks” to the income, spending and assumptions. In looking over his shoulder at the computer, I pointed out a few errors I thought I saw (For example, he continued charging us for company health insurance, once we retired early – as well as charging us for the new insurance we’d have to take out, etc.). Because I did not have anything in front of me, I could not really correct/alter some of the data he is going to be using.

In just the short review, it is obvious that a lot of the analysis is based on some of the assumptions he has put in (inflation rate, rate-of-return, etc.) and that will determine how well we do. What is funny is he started out saying that our original plan (work four more years, take Social Security at full retirement age of 67) fulfilled 95% of what we needed, but when we dug into the details, we were in the black all the way to age 97/99 (our plan). Therefore, his numbers were off somewhere.

When asked, he said, “you definitely can’t retire right now” which does not really match my numbers, when I add in Social Security. Still, I cannot refute him without the actual data/spreadsheets. He is saying all the things that Mrs. 39 Months wants to hear about being cautious, so I am afraid he might be poisoning the well in terms of achieving FI. We will see.

Still, we did make some good decisions based on our discussions:

  • Do the Roth conversion of $40K this year (probably the last year we’ll be able to do it until we retire)
  • Stop putting money into the deferred account at work. Go ahead and just take it as regular salary, pay the taxes now, and invest the money. If we continue to put it into deferred, we’ll have a major tax bite when I leave the company
  • Depending on the situation, consider beginning to withdraw from the deferred account, so you can draw it down instead of paying the big lump sum when you leave the company.
  • Look into benefits/risks of taking social security later than 67. Your SS benefits will increase, but you will need to draw down your investments more to live off for that 3 years. What is the right balance?

I think we are getting a benefit out of this, and I am glad we are doing it. I hope that I am passing good info along to folks. If you can think of something, you would like me to explore with him, please comment.

I will let folks know after we have our fourth meeting (early November) how that is going. In the meantime, I hope all your plans work out.

Mr. 39 Months.