Investment update for June 2019

Only 13 Months to go! Two-thirds of the way there from where I first started the blog.

The market definitely took a downturn, with trade issues and recession discussions causing concerns with investors (can you say “Inverted Yield Curve”). Like so many of us in the FI community, I’m ignoring these issues and just continuing with the plan – investing as much as I can (around 50% of gross pay) and keeping my allocations. I’m up a decent amount for the year, even if the month of May wasn’t that good to me, so I continue to “plod along” as I close in on FIRE.

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

For the month, I’m down about -3.6% (ouch!). The big losers were the S&P 500, Small-cap and international – the same funds that have been going like gang-busters for most of 2019. The two underperformers in 2019 – Bonds and REITs, were up, which is further proof on the benefits of allocating and rebalancing.

  • S&P500: -6.4%
  • Small Cap: -7.2%
  • International: -5.5%
  • Bonds: +1.8%
  • REITs: +0.1%

My 401K/Deferred account at work is up a similar amount. Since it doesn’t have REITS, it performed a little worse (-4.5%) for May, but it also has performed better for 2019.

Dividend Income Account: Allocation:

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

This is up 0.1%, primarily because I am so heavily weighted in bonds and REITs. The dividends they throw off are nice, but at times, they just don’t grow much. My dividend stocks (Chevron, Verizon, etc.) were down more. I continue to use this to learn/experiment with dividend investing, so I’m not too disappointed.

Value Investing Account: My value investing portfolio is down around 7.0% for the month of May. Since its 100% stocks and stocks got beat up in May, I understand. Its done well for the year so far, so no major changes here.

So for the year so far, I’m still up, about 8.94%, and I have put over $42K into the accounts since the beginning of the year. On track to put about $75K for the year.

How was your May?

Mr. 39 Months

Investment update for May 2019

Only 14 Months to go!

Wow, economy continues to go chugging along, GDP growth in the US was 3.2%, and unemployment is the lowest since people were stunned by humans walking on the moon! I know at my company we continue to struggle with hiring folks, and we have had to dramatically increase our wages for hourly employees (warehouse workers, transportation, etc.) Personally, I think it’s a great sign that the wages of the hourly folks, which have been stagnant for a long time, are getting the bumps they need. In my company, the salaries of a couple just starting with the organization equals about the average salary in the US. Depending on where they live, they are already in the middle class. Stick with it a couple of years, and they’ll be earning really good money. Yay!

You’d think this might be a drag on the investments (inflation, fed raising rates, etc.) but it doesn’t seem to be slowing things much. US Markets are hitting new highs. April was another banner month, and we continued to push stuff forward. My investments were up 1.64% for the month, and are up 12.53% for the year. This with me playing it safe with 30% in bonds! Some more aggressive FIRE folks are really “burning it up” in their investments this year.

Realized that I hadn’t done an investment update for February this year. I guess when you hit a certain point on your FI journey, where everything is on “autopilot” you just don’t notice. It’s a shame, really, because February was another good month, coming off a really good January. There are reports of the economy slowing down in 2019, but the reporting of profits in 2018 has provided some positive surprises for companies, and the result has been a continued strong market. Also, the US Fed has backed off its aggressive stance on interest rates (see my previous post on that effect) so the market will hopefully do well in early 2019.

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

Another positive month, with small caps, International and S&P 500 leading the way. Again, they are making up for a poor showing in 2018. REITs and bonds (better in 2018) continue to perform poorly. Continue to show the need to rebalance, which I do every 6 months.

  • S&P500: +4.0%
  • Small Cap: -+3.7%
  • International: +2.8%
  • Bonds: -0.1%
  • REITs: +0.1%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

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

This is down -1.2%, primarily because I am so heavily weighted in bonds and REITs. The dividends they throw off are nice, but at times, they just don’t grow much. My dividend stocks (Chevron, Verizon, etc.) are also down significantly. I continue to use this to learn/experiment with dividend investing, so I’m not too disappointed.

Value Investing Account: My value investing portfolio is up around 2.9% for the month. Nice bump after getting burned in 2018. The allocation is about 50/50 between a total market fund and a value index fund.

So for the year so far, I’m up 12.53%, and I have put almost $38K into the accounts since the beginning of the year (put 100% of my bonus into investments). On track to put about $75K for the year.

I did an updated analysis of my current situation, and if my wife and I got only 50% of our expected Social Security, we could consider ourselves financially independent right now. Since I still don’t have a lot of confidence my SS will not be cut, I’m planning to continue to work at least the remaining 14 months.

How was your April?

Mr. 39 Months

Spread-sheeting your way to Financial contentment…

Like most of you, I’m a spreadsheet junkie, and I love nothing better than to open one up and redo my financial calculations. I could spend hours doing “what ifs” with our finances (and I often do). What I find fascinating is that there hasn’t really been a good software packaged developed, that I know of, which covers all the variables that you now have to consider.

It used to be that the way you “drew down” your retirement money was fairly straightforward. You took out your taxable money first (investment accounts, etc.) in order to let your tax-deferred (401K/IRA) and tax-free (Roth) money compound. Then you take out your tax-deferred money, especially if you have a Required Minimum Distribution, and that money gets taxed as you are pulling it out (often driving you into a higher tax bracket). Finally, if needed, you pull out your tax-free money (Roth) last, as this money can easily be passed on to your heirs tax free.

It’s a simple, linear process, and most retirement calculators follow it (or something like it). However, with the new school of thought, the idea is to minimize taxes across the life of the retirement.

  • You would do Roth IRA conversions to shift money from taxable to tax-free accounts – up to a point (see next point)
  • Once retired, you would immediately begin drawing from your 401K up to the point where you have to pay taxes ($24K as of 2018 taxes) – so that would be still be tax free.
  • You try to withdraw from 401K earlier, so when you hit the time for RMDs (required minimum distribution) of these accounts, you still are only pulling out what is under the cap for tax-free
  • You would want some money to stay in your 401K/IRA tax-deferred accounts, as you can deduct the first $24K each year. Don’t convert it all to Roth
  • You defer or take your social security early, based again on the need to defer/reduce taxes and maximize overall income.
  • If you’ve retired early, keep your taxable income low, to take advantage of government subsidies on health insurance.
  • You can use other forms (insurance, etc.) if you want to further complicate your retirement plan

I don’t know of any software application available at this time which takes into account all of these complicated factors. Often you have to do the calculations year-by-year, due to stock market fluctuations, life changes, etc. Thus, you end up coming back to the “good old spreadsheet” to do your calculations.

I do my investment update at the beginning of each month (ex. May 1, today) and connected to that spreadsheet is my “retire now” sheet:

  • Current investment amounts for each bucket (taxable, tax-deferred, tax free)
  • Budget for retirement, including expected medical costs, expenses based on current actuals, etc.
  • Investment growth, based on inflation-adjusted numbers
  • Expected social security payments (currently I have Mrs. 39 Months pulling at age 62, and me getting ½ of the expected payout at age 67, due to issues with Social Security trust fund)
  • Annual draw down, based on budget, growth, and pulling from designated buckets.

As of now, if I assume Social Security is solvent (at least to the extent that I get half my benefits starting at age 67) then we could retire now, and still end up with about $500K (in current $) remaining at age 99. This is with paying almost no taxes for age 56 to age 67.

To get back to the original point, I think this might be an opportunity here. To create a software system which allows for all the other variables not currently being used and/or considered.

What do you think?

Mr. 39 Months

Well, my timing sucks…..

I got my first linked article on Rockstar Finance last Friday (4/25/19)! Its amazing the amount of traffic which comes to your site when you get mentioned on it. Suddenly I had a large number of folks coming in, reading, and then reading other articles that I had wrote. Hopefully that means more regular visitors and commenters, and more folks joining the conversation.

I already added several of the commenters sites to the blogroll at the right, after reading some of their writings. Always good to expand the knowledge base.

Then what happens? I get some issues with my provider, and my site gets shut down for 2 days! Major ouch. Took me till this morning to get it all ironed out and back up on the net.

I guess you have to take the bad with the good – like last December’s crushing stock market results versus what has happened over the last four months.

At lease I’m back and able to review other folks work and post my analysis. I hope everyone had a great weekend and is enjoying the week.

Mr. 39 Months.

Quarterly Update – Apr 2019

Well, it’s early April, and spring is in the air! I’ve gotten a start on the goals for 2019, but many of them won’t really start manifesting till 2nd quarter (or later).

My Goals for 2019 (some financial, some not):

Finance:

  • Save $75K in tax-advantaged accounts (saved almost $81K in 2018). 401K, Roth IRA, etc. Dropped this down a bit, due to a need to plus up my savings/emergency fund. Key part of this is using my company’s deferred savings account to push money out till I hit FI. Since the deferred account money will have to be withdrawn (and taxed) when I leave, it actually is a pretty cool FIRE solution for saving. Grade A. Saved $12,875 already and on track to hit goal.
  • Save $5K in regular accounts (compared to $9K in 2017). This will go into my brokerage account. I withdrew a hunk of this to do my ROTH rollover (part of the “power of zero” philosophy). But I still have some bucks here. I have to take about $5K from my father’s IRA every year, so I just move it from there to my brokerage account instead f spending it). Grade A. Made the deposit in January
  • Increase dividend income from all accounts to $27K/year (compared to 26K in 2018). Grade B: 1st qtr was $5,752 compared to $4,868 for 1st Qtr 2018.  This appears to put me on track to hit my number.
  • Passive income covers 40% of base living expenses in retirement (it was38% in 2018). 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.  Grade D: It was 32.0% of my expected $18K/quarter (or $72K per year)
  • Beat net worth growth rate of 6% (it was -1.9% in 2018). This is my historical growth rate for the last 10+ years, so I want to beat my average. Grade A; With the stock market rally and my investments, I’m up 8.3% already.

Business:

  • Continue attending regular meetings of my local real estate investors association. 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, and it’s free for a paid member. Last year I attended, but it was spotty. Grade F: Did a cost/benefit analysis and deep look on my intentions to do real estate in the near future. Decided to drop out of REIA.
  • Double the number of blog visitors in 2019. 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. Grade D. Only have around 2,000 visitors in 1st qtr, so just a little up from 2018. Probably need to spend more time on other blogs, commenting, etc.
  • 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 to go. Grade D. Made some additional progress on outline, but still a long way from completing.

Personal:

  • Increase weight lifted by 10% from 2018. Due to my illness, I didn’t make much progress beyond that, but I’m back to full strength now, and lifting what I was in September 2018.  I want to continue to improve my strength as I get older, instead of just wasting away. Grade A. Weight increase of 10% already, but having some struggles getting it higher. We will see.
  • Average 2 hours of cardio per week (currently averaging about an hour). Again, want to improve my fitness. Based on my lifestyle, I don’t think I can push it past 2 hours per week. Grade D. Still averaging a little more than an hour. Need to work on it.
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles). Didn’t do this last year, but really want to try. Incomplete. Long bike ride scheduled for Sep 2019
  • Backpack over 100 miles on AT (did around 80 miles in 2018). Other aspects of life interfered with my ability to get on the trail. Really want to push it this year. Incomplete. Starting to backpack in late April
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Grade A: Continuing to volunteer at least once a month. This Sunday is next one
  • 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. Grade A. I have five books under my belt for 1st qtr, and I already have six lined up fr reading

Travel:

  • Visit a national park (visited two in 2018) Incomplete. Need to plan this
  • 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. Grade B: Visited family in Tennessee in March. Plan to do NY in April, and VT in August., with another TN visit in October
  • Take a week at the shore and just relax. Too many of our vacations are spent running around. I want to see if I can go somewhere (in this case the beach) and just sit and relax. Incomplete. Still on track for July
  • Visit Ellis Island. Wanted to do this in 2018, but didn’t make it. 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 Grade F. Its only 90 min north of us, but we haven’t gone yet.
  • Go on an international trip. Not sure which one (Canada, Caribbean, etc.) but I’d like to get out this year. Incomplete.
  • Visit the Asheville NC area. It’s one of the areas that we are considering retiring to (close to my old home in Tennessee, interesting crafts, shops & outdoor sports, etc.). Trying to learn more about the area (we’ve been there a couple of times). Incomplete. Still on track to go in October

Overall, I’d give myself a B. Got a lot done, but still have a lot to make progress on.  

How are you going on your goals for 2019?

Mr. 39 Months

Investment update for Feb 2019

Realized that I hadn’t done an investment update for February this year. I guess when you hit a certain point on your FI journey, where everything is on “autopilot” you just don’t notice. It’s a shame, really, because February was another good month, coming off a really good January. There are reports of the economy slowing down in 2019, but the reporting of profits in 2018 has provided some positive surprises for companies, and the result has been a continued strong market. Also, the US Fed has backed off its aggressive stance on interest rates (see my previous post on that effect) so the market will hopefully do well in early 2019.

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

Another positive month, with small caps, International and S&P 500 leading the way. These were the investment areas that underperformed in 2018, so they are making up for lost ground. A perfect example of the need to rebalance your portfolio. I rebalanced at the beginning of 2019, selling off my “winners” (bonds, REITs) and buying some more “losers’ (S&P500, small cap, international) and now I’m being rewarded by those stocks shooting up. Overall, I’m up around 2.4% for the month, a gain of around $22K, and I’ve made around $90K in the first two months of 2019. Very pleasing!

  • S&P500: +3.5%
  • Small Cap: -+5.4%
  • International: +2.4%
  • Bonds: -0.1%
  • REITs: +0.8%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

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

This is up only 0.9% for the month, so  gain, but not a significant one. Again, if you look at the allocation above, the 50% bond allocation is driving down returns. My dividend stocks were up a little over 4% (in addition to the dividends they are paying. I’m satisfied.

Value Investing Account: My value investing portfolio is up around 4.3% for the month. It got hit in 2018, and is making a comeback, as value stocks are doing better. The allocation is about 50/50 between a total market fund and a value index fund.

Allocation now:

  • 51% USAA Market Index (my brokerage is USAA)
  • 49% in Vanguard Value Index fund

So for the year so far, I’m up 9.4%, in addition to having dumped almost $9K into the savings, which is close to 50% of my gross salary. I hope the success continues in the months ahead, both for me and for you!

Mr. 39 Months

Well that took a long time, but it was worth it

As many folks know, you tend to marry/get involved with people who are your opposite (outgoing folks with reclusive folks, spenders with savers, etc.) That is how it was with Mrs. 39 Months and I. I tended to “pay myself first” and then spend the remainder, up to the point where the checking account was close to zeroing out. Mrs. 39 Months was a saver from the word go – and I mean “saver”.

For our entire relationship, she has dumped any extra money she had (leftover at end of year, gifts of money, bonuses etc.) into a savings account. Period. When her company had a 401K, she pretty much put it in guaranteed income (savings, CDs & bonds). Ouch!

While I redlined it, I made sure my 401K had a large amount of stocks, especially when I was younger. When we finally had enough surplus cash to invest in an IRA on the side (and a Roth IRA shortly afterward) it ended up being my money which got put into it. Thus I could control the investments, and it was 70% -80% stocks.

Eventually her savings account has reached six-figures. All earning 0.25% in a basic savings account. Needless to say, this has caused a minor amount of stress/strain in our relationship. No matter what I said or how I reasoned, she wouldn’t budge.

Well, I finally got a small victory this week. I got her to take $10,000 and invest in two $5,000 CDs (a 2 year and a 4 year) offered by her local bank. The plan is to create a 5-year “ladder” of CDs earning more than a regular savings account. These are both earning around 2.5%, which is 5X higher than her regular savings account. We will see if this convinces her to try a little more with her savings. At least I can say that we have a healthy emergency fund, right?

I hope you are all moving forward towards your FI goals as well!

Mr. 39 Months

Well, that’s progress…..

As some of your recall, I have been working back through some health issues in 2018, and only recently got back to the level of lifting that I was at prior to those issues (huzzah!).

Well, this week I was able to finally jump to the next level on my lifting, going up in all of my exercises and increasing my weight lifted overall by about 10%! I’m now lifting more than I was when I started tracking this over 5 years ago, which is a tremendous boost for me, certainly a cause for celebration.

Health has been on the minds of many bloggers over the years, as everyone sees the benefits of FI (reduced stress, time to do the things we need to in order to improve our fitness, etc.). I typically read 1-2 posts a week from FI people that has some sort of “health focus” in it.

For Mrs. 39 Months and I, we try to eat a lower-carb diet, get plenty of vegetables and some fruit, and eat a decent amount of protein. I work out almost every day (lifting, biking, swimming) in an attempt to stay as healthy as possible. Mrs. 39 Months has some hip/leg issues (she’s had them since she was a kid) which preclude her from running, and make long-distance bike riding an issue. Still, we try and get out an move around as we move through our 50s and head towards our 60s.

It’s a good life, especially as we approach FI and can take even more time to concentrate on our health and on being together. Hopefully, you are taking care of yourself as well.

Mr. 39 Months

Investment update for Jan 2019

Yeah, baby! Just 17 Months to go till FI! Markets are up, my investments are up, and my financial situation looks a lot better than it did at Christmas. I believed the economy was doing well, and the only thing holding the markets back was issues with the Fed (see my post from December).

Well, it appears the “fear of the Fed” has ebbed somewhat, and the good economic results (for many companies, record profits) have helped to push stock prices up. The market is up over 10% from Christmas, and continues to push upwards. If you panicked and fled the market at Christmas, you lost out big time! I’m hoping we have a good year in 2019.

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

Remember that I rebalanced at the start of the year, selling off mostly bonds and some REITs, and pumping the money into the losers for 20118, which was small cap and International. For the month of January, I’m up about 7%. The big winners have been small caps, REITs and the S&P500, while International was only coming in around +5% overall, and bonds only up 1%. So my rebalancing paid off going into small caps, but not as much as going into International. For the most part though, I sold winners and bought losers, which turned into winners in January. Very pleasing!

  • S&P500: +8.1%
  • Small Cap: -+11.4%
  • International: +5.1%
  • Bonds: +1.0%
  • REITs: +11.7%

My 401K/Deferred account at work is up a similar amount

Dividend Income Account: Allocation:

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

This is up about 7.7%, driven more by the REITs, though everyone was a winner. My bond funds were up around 6% (counting dividends), my stocks around 5.6%, and the REITs ranged from 9% to 18.5% (averaged around 13.4%).  Very good for dividend portfolio.

Value Investing Account: If you remember, I have to take money out every year from my Dividend income account (it’s a rollover IRA from my father) so I took the dividends for the last 3 months, and sold off about $3600 in bonds (my “winders” in 2018) to get to $5K. I then took that and folded it straight into my Value investing account. I used that to try and balance the two mutual funds to 50% each.

Allocation now:

  • 50.5% USAA Market Index (my brokerage is USAA)
  • 49.5% in Vanguard Value Index fund

Both of these were up in January, and if you add into the dividends paid out in Jan, they are up 10.5% for the month!

Starting off for the year, I’m up 7.09%. What is interesting is that, with the gains in price, my portfolio returned $69,198.98 for January. One month, and $69K of capital gains & dividends! Nice return. That is close to the FI number we are budgeting for our lifestyle ($72K/year). One more month of this sort of thing, and we’ll be close to the high of 2018. Let’s hope!

How did you do in January?

Mr. 39 Months

I’m back baby!

Well last week was a real cause for celebration for me. As a lot of you know, I went through some health issues with kidney stones (medicine, catheter, operation, etc.) in late summer/fall. While everything worked out OK (so far) it put a crimp in my fitness training. I wasn’t really able to do much of anything (lifting, biking, swimming, etc.) and the result was degradation in my fitness level.

Well, starting in Nov/Dec, I was able to get back to the gym/home fitness area, and got started building back up. I had fallen out of the “habit” of doing morning fitness, so it took me a while get back into the swing of things, but by late December I was “in the groove” and starting to work my way back up.

Well, last week I finally reached the lifting level of where I was before all the health issues hit, and I am getting ready this week to push beyond that. In addition, I’m continuing to swim, bike and walk (can’t run due to knee injury) and I’m planning to push that as well.

Like most folks, health is a big factor in our plans for FI and both Mrs. 39 Months and I want to do a lot even as we age. I urge all of you to keep fitness as one of the forefront items in your life. It’s a lot easier to maintain fitness than to try to get back to a level you used to be at.

Mr. 39 Months