Retire Early Lifestyle
Retirement; like your parents, but way cooler

 
 

Retire Early Lifestyle Blog  Free Newsletter Subscribe/Contact Us

Advertise on RetireEarlyLifestyle.com info here

In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 3rd decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

An Interview with Billy Kaderli

Billy and Akaisha Kaderli

Some of our Readers would love to sit down and have a conversation with Billy, so we did an interview with him! Take a look below!

Traveling in the Ecuadorian Andes Mountains

Retire Early Lifestyle: For the benefit of our Readers who don't know your background in finance before you retired, could you give a quick synopsis?

In 1979 after traveling and working in France, we bought a restaurant, in the US, with "no money down" and that is where I earned my "business degree". Years later I was recruited by Dean Witter Reynolds a brokerage firm where I rapidly advanced and eventually became a branch manager.

REL: You and Akaisha have been retired 26 years now. To what do you attribute your success?

Flexibility would have to be high on the list. We never planned out our retirement schedule and pretty much have gone with the flow. As you know we all have had challenges in these last couple of decades including market crashes, global bird flu, personal medical emergencies and the Great Recession to name a few. Our ability to adapt to the ever changing world is key.

Riding in Northern Ecuador

REL: You mention often in your writings "If we can do it, YOU can too!" Do you honestly believe anyone can retire early?

Yes, if they have the drive, focus, and motivation I believe they can do it. We worked hard, spent little and saved a lot, always living below our means. We have met many travelers/retirees living on their social security payments which is proof you do not have to be rich to enjoy this lifestyle. All of these people including ourselves, have a sense of adventure instilled in them.

REL: What do the both of you plan to do about health insurance in regards to the requirements of the Affordable Care Act?

Billy: We have looked into the ďexpat exemptionĒ of being outside the US for 330 days or more per year and this is our current plan. Being 64 we have another yearr before Medicare applies to us and then we will not have to concern ourselves with the Affordable Care Act issue.

 

That stated, we have had numerous healthcare encounters in Thailand, Mexico and Guatemala - everything from routine annual checkups including eye care, colonoscopies, dental care, full physicals and lab work, to a very serious accident which required surgery. In each of those experiences we have had excellent treatment and care with positive outcomes at a fraction of the costs in the US.

REL: What would you say to people who will retire early and stay in the U.S.?

Billy: I would say to plan ahead and budget accordingly for healthcare expenses. For surgery procedures, they might take a look at The Surgery Center of Oklahoma. They provide domestic medical tourism and since they donít take insurance, their costs are much lower than other hospitals.

REL: Even if your mortgage is paid off, owning property can come with some high costs. Do you still have the place you purchased in Arizona? How do you figure that into finances?

Billy: Yes, we still own a humble abode in an active adult community in Arizona. We donít own the land, we lease it, and therefore our property taxes are minimal. Right now a friend of ours who is disabled is staying there covering our expenses and upkeep. This exchange helps both of us out.

REL: Do you have a permanent residence anywhere? What about taxes?

Billy: We are only residents of the US currently. We have been tempted to get residency in Thailand, Mexico and Guatemala but so far have not done so. And recently we were offered residency in the Dominican Republic. This does not mean we would give up our US citizenship, but just become a resident in a different country. Many people do this especially if they own property and want to open a local bank account. All US citizens are required to file with the IRS no matter where their residency is.

REL: Would you recommend retirees maintain a home, downsize, or move to a cheaper location?

Billy: Housing is a major expense in any budget, retired or not and a category to look for freeing up capital. Sell the house, downsize and invest the difference? Thatís a personal decision but one that worked well for us.

Another significant way we keep our housing costs down is by house sitting. We figure it has improved our housing costs by about 30%, sometimes 40% annually. Keeping housing costs low also frees you up to do some traveling or to spend the money elsewhere in your budget. 

REL: Here are a few questions on investments. How much do you think people need to diversify in today's volatile environment?

Billy: Itís always a volatile environment in the markets and none of us know the future. Therefore do some homework, make your investments and adjust your allocation as the markets evolve.

REL: Is it risky owning assets such as REITs, small-caps and foreign stocks?

Billy: I am sure many of our readers hold these investments and that is great but I do not want the tax issues involved with REITís nor with individual foreign stocks. There is also the issue of currency exchange rates when dealing with foreign holdings and I donít want to expose us to currency risk. 

REL: What percentage of assets would you allocate to bonds in order to reduce volatility?

Billy: I have never been a big proponent of bonds, and I have missed probably the greatest bond market rally ever with rates peaking in the early eighties.  No doubt I blew itÖ but I was quite young then and didnít have the capital or understanding to invest. Today it is hard to see rates going lower. At least I hope they donít, therefore I would underweight bonds.

REL: What about just owning one fund, like a Vanguard Wellington with a 70-30 allocation to stocks and bonds and be done with it?

Billy: Sure, but from what you can see in the chart, Vanguard Wellington has lagged the S&P500 over the last ten years. Itís a matter of personal risk tolerance.

REL: Many people do not want to babysit investments. Do you have a sample portfolio allocation you can share?

Billy: This is a tough question because it is a matter of age, risk tolerance and what other assets someone has. I am a big believer in financial assets, whether they are stocks, bonds, metals, or cash, but there is a time to over and to underweight each of these asset classes in oneís portfolio.

REL: Should people rebalance every year?

Billy: We make trades a couple of times a year using a seasonal timing system. And this is done in our IRAís so that there are no tax consequences and it frees up cash for buying opportunities, hopefully, at lower prices.

Basically we hold four ETFís as our main holdings, DVY, (iShares Select Dividend) VTI, (Vanguard Total Stock Market) SPY (SPDR S&P 500 ETF Trust) and DIA (SPDRģ Dow Jonesģ Industrial Average ETF) and no bond funds. I figure that social security acts like a bond equivalent as it is a guaranteed source of income backed by the full faith and credit of the US government, the same as TLT or the long government bond.

At the Helm on Lake Atitlan, Guatemala

REL: You have mentioned that you used Rule 72T for a while. Would you recommend that for a hypothetical couple in their 50s with a portfolio of 50% of their money in IRA's or equivalents and 50% in regular accounts?

Billy: I can only write about what we have done. Because we were in a similar position of 50% after tax and 50% IRAís we used IRS rule 72T as a bridge until we turned sixty-two when we started taking social security. By using the IRS projections for annual payments we pulled out an amount equal to that from our retirement accounts. Then once the social security checks started arriving, we turned off that spigot and let the IRA grow once again. We started this when we were 55 so that we more than satisfied the five year requirement in rule 72T. And because of the market performance we have a higher IRA balance now than when we started taking withdrawals.

 

REL: What is your strategy on taking Social Security early?

Billy: We decided to take Social Security at age 62. We know there are as many ways to consider this decision as there are days in a year. And many experts advise against taking social security ďearlyĒ so that you get a bigger check at full retirement age. It is hard to argue against that.

We have always lived an unconventional lifestyle and the fact that so many experts agree on waiting for payment gives us pause for thought. Here is our logic:

First, the S&P 500 index has averaged over 7.8% per year, plus dividends, since we retired in 1991. If we take social security early and invest it, we won't be losing the 8% per year the experts claim is the annual increase of waiting - although one is guaranteed and the other is not. Maybe the markets will trend sideways or go down or even up, no one knows. For the last 25 years we have lived off of our investments through up and down markets, and could easily make it a few more if necessary, so investing the monthly check is definitely an option. More likely, we will just not spend our stash and look for opportunities in the markets as our cash positions grow. Plus we have control of the money at this point, adding to our net worth.

Next letís look at some numbers.

For easy math, say at 62 you are going to receive $1000 per month in benefits, but if you wait until you are 66, your payment will be $1360 ($1000 x 8% for the four years you have waited). Sounds great, right? However, you would have missed receiving $48,000 dollars in payments from the previous 48 months. How long is it before you make that money back? Using this example it would take 133 months or a little over 11 years ($48,000 divided by $360) and that would put us at 77 years of age, just to break even. In that time frame, the Social Security we will be receiving plus our investments should grow far outpacing the extra money received by waiting.

Sailing on an Outrigger in Boracay, Phillipines

For some people deferring until their full retirement age could make sense, especially if they do not have the assets to support themselves, are poor at handling money or if they are still working. However this is not our situation and therefore we have decided to take the money and run.

Itís really a question of who you think can handle your money better; you or Uncle Sam?

REL: Are both of you taking it, or just one of you?

Billy: We both are taking social security.

REL: Are you taking it early so that your investments can grow untouched?

Billy: At this point Social Security and dividends easily cover our expenses and our assets can grow without tapping them.

REL: What about dipping into one's principal? Is that a good idea?

Billy: This is a tough question as there are many variables. Oneís time left on the planet is something to consider, your cash flow, and your net worth. But you canít take it with you and those who die with a large balance donít come out any better than someone with a smaller one. Perhaps one wants to leave a large inheritance to their heirs, or to charity. Itís a personal decision.

All of our books lead to adventure. Don't miss out on yours!

REL: When considering the 4% withdrawal rule, are you figuring 4% of your entire portfolio?

Billy: Yes, it is one's total liquid net worth. I look at the 4% rule as a guide and not set in stone.

We use a track spending spreadsheet that includes what percentage of our portfolio we are spending each day and this spread sheet can be found in our book, Your Retirement Dream IS Possible. This way if we get wild and spend too much or the markets head south we can make adjustments immediately. Flexibility is the key.

REL: What you would advise for people who want to keep their investments simple? Index funds? All-in-one funds?

Billy: The S&P 500 closed at 312.49 on our retirement date in January 1991 and, like I mentioned earlier, has produced a better than 7.8% annual growth rate plus dividends since then. Therefore I would suggest a portion of your assets invested in SPY or VOO (Vanguard S&P 500 ETF) for the long run.

Let's Go Places! Panajachel, Guatemala

REL: What has surprised you the most in the 25 years you've been retired?

Billy: How much we have been able to travel, see the world, live in unique cultures and have a higher net worth including inflation than when we started. Also, how much technology has improved our lives.

REL: What is the biggest mistake you see other early retirees making from a financial viewpoint?

Billy: Not retiring earlier when they had the means to do so and were more mobile and daring.

REL: How do you see your future? Will you travel as long as you can?

Billy: Financially, no one knows the future of the markets, nor have they ever, so all we can do is stay flexible and take opportunities as they present themselves. We intend to continue traveling, but we are moving more slowly and donít feel the push to always be on the road. We have been traveling for 26 years now and have seen a lot! At some point we will probably be more ensconced in a community and travel from there, but we arenít quite ready for that yet.

REL: What can people do that is more important than anything else to move themselves toward early retirement?

Billy: Get out of debtÖ all debt including mortgage debt. Otherwise you are a wage slave to it.

REL: Once they retire, is there one financial piece of advice that you could give them?

Billy: Continue to track your spending and know what percentage of your net worth you are spending. Remember, itís a lifestyle, not a vacation and that housing is your largest expense. Reduce that, and you can free up resources for anything else.

REL: Is there anything else you'd like to add?

Billy: If people want our up-to-date perspectives and insights or have questions about financial independence, medical tourism or world travel, they should visit our website and sign up for our free newsletter!

Thank you, Billy, for taking the time to answer these questions!

 For more information on retirement issues, click here

Free Newsletter, Subscribe here

About the Authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurerís Guide to Early Retirement and Your Retirement Dream IS Possible.

For more information about financial independence and travel, visit our book store

Sign up for great stories, interesting tales, and superb retirement information.

Contact Billy & Akaisha  TheGuide@RetireEarlyLifestyle.com

Advertise on RetireEarlyLifestyle.com contact Ad-Info@retireearlylifestyle.com
Over 1,400,000 visitors annually.

Billy and Akaisha continue to journal and photograph their world travels.

HOME   Book Store

 

Retire Early Lifestyle Blog      About Billy & Akaisha Kaderli      Press     Contact     20 Questions     Preferred Links     Retirement     Country Info    
Retiree Interviews
      Commentary     REL Videos