Retirement; like your parents, but way cooler
In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 4th decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience.
Billy and Akaisha Kaderli
Billy at his favorite place - Beaching
it around the world!
Just because you
retire, your money
doesn’t have to.
In the words of Gordon
Gecko from the 1987 movie Wall Street, “money never sleeps.” And your money
definitely won’t once you leave your job.
Many people are shocked
to learn that since we left the conventional work force
years ago our net worth has
actually increased, significantly out-pacing inflation and spending. Reading
financial articles about what if retirees run out of money, I get the impression that the authors do not understand
that once retired, your money can - and should - continue to work for you.
Working smart not hard
Once you clock out or
walk out of the office for the last time, that doesn’t mean your investments
are frozen at that point. The stock market is still functioning and now your “job”
is to become your own personal financial manager. Actually, you should have
been doing this all along, but if not, start now.
You need to get control of your expenses
tracking your spending daily, as well as annually. This is so easy - only
taking minutes a day - and this will open your eyes as to where your money is
going. Not only that, but it will give you great confidence to manage your
financial future. Every business tracks expenses and you need to do the same. You are
the Chief Financial Officer of your retirement.
Income is important, but…
Many people structure
their investments for income knowing they need $3000 or more per month to
cover their lifestyle. Which is fine, but inflation will be eating away at
those numbers and most likely taxes will do the same. Over time your
expenses will rise and your purchasing power will drop. You need protection
to cover the increases.
Stocks provide that
protection and there is an added bonus; when you sell, capital gains are
taxed at a lower rate than ordinary income. Therefore, tilting your investments for
growth as compared to income will help protect yourself against
future inflation. Plus it will minimize your tax liability.
The day we retired the
S&P 500 index closed at 312.49. This equates to a better
than 10% annual return including dividends.
Chart of S&P Market Returns January,
1991 to March, 2021
That’s pretty good for sitting on the
beach working on my tan.
Making 10% on our
portfolio annually while spending less than
of our net worth has allowed
our finances to grow out-pacing inflation, while
we continue to run around the globe searching for unique and unusual places.
The key is to start as
young as you can with as much as you can and
the markets work in your
is the greatest asset with investing and younger people can
utilize this to their advantage.
But what if you’re fifty?
You need to take stock of
your assets and determine what your net worth is, with and without the
equity in your home.
Selling the house and downsizing may be a windfall for
you, again utilizing the tax code to your benefit.
Social Security will play
a role with your asset allocation, "like a bond." You can figure out what your annual
payments will be by checking
SocialSecurity.gov. Then through simple math,
calculate using the Vanguard Ginnie Mae fund yield (VFIIX), currently
yielding 0.53%, and figure how much you would need to place into that fund
to equal your
projected SS income.
The average social
security benefit for 2020 is about $1514.00 per month, or $18,168 per year.
Using that figure, at a 0.53% yield, you would need roughly $3,400,000
invested into the GNMA fund to give you
the same amount of monthly income.
For asset allocation
purposes, you can put the $3,400,000 figure on the bond side of your
portfolio, which allows you to increase
equity exposure for growing your nest egg and still keep a balanced portfolio.
Note: the yield on the GNMA
fund changes with interest rates therefore I check it monthly to
keep our numbers in balance.
Keeping your spending 4%
or less in the early years - as well as having a few years of cash in reserve
should allow you to ride out market downturns which absolutely will happen.
Having the cash reserves will prevent you from having to sell in a down market.
Just because you retire
from your career, hang up the work boots, put away the ties, suits and
shoes - for shorts, flip flops and Hawaiian shirts - doesn’t mean
your financial work is over. Invest early and often and let the market work
Remember, “Money never sleeps.”
What's Your Number? - How much money do you need to retire?
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About the Authors
Early Lifestyle appeals to a different
kind of person – the person who prizes their
independence, values their time, and who doesn’t
want to mindlessly follow the crowd.
Retire Early Lifestyle Blog
About Billy & Akaisha