Fender's final approach to retirement.

[fenders53]

Well three months has passed since I launched this thread and minor progress has been made.

I am down to about 20 individual stocks. I typically had 45-50 for years. I may trim it a bit further. I prefer it when I can track my holdings properly. If I truly know what I own I am less likely to get scared. That is most of the reason for some index or sector ETFs. I can just ignore them as I have many times before.

I am making lousy progress on having large positions in index ETFs. The good news is I am making a ton of income selling puts trying to get drawn in. The market isn't cooperating but it will pull back eventually.

If my port performance remains reasonable I am retiring in April 22 which is six months early. Three years at HD now and I am over it. I'd leave now if my income wasn't trapped in an IRA. It seems stupid to pay 10% penalties this close.

[ken-do-nim]

I hope you have a big retirement party in April.

[fenders53]

(11-15-2021, 11:12 PM)ken-do-nim Wrote: I hope you have a big retirement party in April.

I'll probably be getting a second part-time job at Wendy's after the market crashes in FEB. 

[bankerboy]

Wells and GS is saying the S&P will be around 5,200 end of 22. About 10% gain so hopefully your port will see similar results and you be able to eat at Wendy’s instead of working there!


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[fenders53]

I like their crystal ball. I have cash to fund my first two years of withdrawals. That bridges the gap to more pensions when I could leave my IRA alone if it needed some recovery time. It may not sound like it on our daytrader thread lol, but I may have the most conservative port on the forum. I can ride out trouble well enough. I'm confident there will be a few rough years this decade.

[ChadR]

Fenders, you can use the 72t option to get around the early 10% penalty. But I don't know if you want to lock yourself into 5 years of withdrawals from your IRA.

[fenders53]

(11-22-2021, 11:39 AM)ChadR Wrote: Fenders, you can use the 72t option to get around the early 10% penalty.  But I don't know if you want to lock yourself into 5 years of withdrawals from your IRA.

Thanks, I knew there was a way.  My plan was to not draw until I am 60 but it's getting tough and I am being stubborn so 59 1/2 is under 6 months away.  It's all getting a little silly actually because I am being stubborn.  I need a little more income, but if I work more hours at HD I can't be attentive enough to the market.  My option income game is reliable and pays 3X my HD wage in a real bad week.  My back won't do fulltime at HD and the opportunity cost makes it not worth it by a big margin.

I've always been very faithful to my financial plans, investing when I probably should have bought a newer car or took a better vacation.  Wanted to retire at 55 and that was just a number picked 30 years in advance by a 25yr old.  I enjoyed 3 full years of retirement with a modest amount of money at age 54.  Did some bucket list stuff.  Money is way too tight now.   I'll get through it but six months isn't forever.  I am paying credit card interest I shouldn't be paying with so much net worth that isn't liquid today.  You could easily do the math and I'd be better off giving up on my goal six months ago.

I can always give up but for now every month I don't keeps me out of my IRA.  In 30 months I could live MUCH more comfortably than I do now without touching my IRA because my pensions and SS will be very good. Maybe a little too personal for the internet but I helped my only child a little too much the past few years and I am suffering for it now.  For her own good I told her to make her own way for a few years and I can leave her some money to make her later years easier.  She understands as best she can and I intend to ladder in a few annuities at various ages.  (Unless I come up with a better idea because annuities are horrible at low interest rates).  She works over 40HRs a week now and trying to get a nursing degree.  I'm not optimistic that works out (because she squandered HS), but as long as she matures and keeps fighting hard to better herself, some security for her has become a big part of my financial mission.

[bankerboy]

You bring a good point for those retiring before 65 or before whenever their SSN/ IRA and/or health care kicks in. That is after tax cash.

Most folks like my wife and I save virtually all our careers in 401K or IRAs. I’m almost 58 and looking at retiring at 64 as my kids will be out of undergrad college then. With the wife being younger she will work 3 years when I retire until 62. Unless I save enough cash between now and then…..for her to go earlier.

Retiring early has a big challenge called health care. It will take quite a bit of cash to pay health care premiums for a minimum of 4 years for us both if we hit our plan, even more if we go earlier.

I’d be interested to hear updates on your journey towards these last 6 months and if you need to alter your plans after.


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[fenders53]

(11-24-2021, 08:43 AM)bankerboy Wrote: You bring a good point for those retiring before 65 or before whenever their SSN/ IRA and/or health care kicks in. That is after tax cash.

Most folks like my wife and I save virtually all our careers in 401K or IRAs. I’m almost 58 and looking at retiring at 64 as my kids will be out of undergrad college then. With the wife being younger she will work 3 years when I retire until 62. Unless I save enough cash between now and then…..for her to go earlier.

Retiring early has a big challenge called health care. It will take quite a bit of cash to pay health care premiums for a minimum of 4 years for us both if we hit our plan, even more if we go earlier.

I’d be interested to hear updates on your journey towards these last 6 months and if you need to alter your plans after.


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Heath care costs are difficult to predict decades in advance.  I have VA benefits from my military deployments.  My wife will have insurance in 11 months when I turn 60.  It's as good as I could hope for.  I believe I will be ineligible for Medicare.  I will be living on 401K only for six months, then two pensions start.  Two years later I am very likely drawing SS at age 62.  My wife's SS when I am 65.  It will work out.  I have enough of the 401K in cash to cover a few years of livings expenses so I could turn off the computer if the stock market melts down two months before I intend to retire.  I'll reach my "earnings" peak at about 65 if I include my wife's benefits.  

It sounds like you have a good plan.  I think retiring at 65 is not going to be something most enjoy 20 years from now.  SS certainly won't do it alone and most don't fund their 401K enough to retire early.

[cemanuel]

This thread is near and dear to my heart. I am retiring at the end of this year and as we get the week between Christmas and New Years off guess what - two weeks from tomorrow is IT! I have given a lot of thought to funding my retirement. Here's how I plan to do it.

I have a little bit of income outside of stocks from three partnerships I am in. It isn't much and not the same year-to-year so I'm not using it in my retirement budgeting. Calling it bonus money. Could fund a trip, could bank it.

For stocks I have three accounts These are, with the % of my total:

Taxable Account - over 60%

403b, to roll over to an IRA in spring, 2022 (I'm 59,5 on February 19 but have two months' vacation, may as well wait until the last employer contribution) - about 35%

Roth, just started when I got into stocks in March, 2017 - 2.3%

The following bullet list is copied from an SA post: https://seekingalpha.com/instablog/48196...o-not-work

Here's my plan for funding my retirement:

• My retirement will be 100% funded from my taxable account
  
  
• Dividends will give me about 80% of what I have budgeted; this % should gradually rise through ongoing dividend growth
  
  
• The 20% gap or shortfall will be made up by periodic sales of AAPL and GOOGL, supplemented by saved cash
  
  
• Other than those two companies I will do little trading in this account; I'll pretty much hold unless the dividend investment scenario changes for a company, negatively
  
  
• This account likely will not beat the market. Its main purpose is dividend income. And I'll gradually be selling two of the best companies, from a potential growth standpoint, in it.
  
  
• I haven't set a firm number but I will be looking for a 6-8% increase annually from dividend income. AAPL is such a low payer that it won't have much effect and right now the account has a 9.30% "organic" projected DGR (no dividends reinvested, based on 5-year DGRs for companies held).
  

I had this idea until this spring that I would fund my retirement 100% from dividends and that I'd make up my 20% taxable account shortfall once I did the IRA rollover. 

The idea was that I would have income-generating assets and I'd never need to sell a single bit of an asset. Makes sense, right?

In May I took the IRS 1040 ES form and worksheets and started figuring. From a tax standpoint it makes far more sense to tale LT cap gains on some stocks in the taxable account. They're only taxed at 15%. In the IRA, the IRS doesn't care that what I withdraw is from dividends; it's taxed as income. So the change.

Why GOOGL and AAPL?

GOOGL doesn't pay a dividend.
AAPL doesn't pay much of a dividend AND the last 3 raises have been very disappointing. I can take low yield if the company is giving my good raises. MSFT is the perfect contrast. It also yields very low but it has consistently raised it over 10%.

AAPL could easily raise it that much if it wanted - look at the cash flows and all the buybacks. After three years this seems to me to be a new established policy. So it's saleable.

At 62 I could take SS which would make up for my "dividend gap." I don't know if I will but it's an option.

I get two more "raises" in retirement:
65 - Medicare
67 - Mortgage paid off

Until June I had been using dividends received to buy more stocks in my taxable account. I have stopped doing that as well as adding new money to my accounts. If the market - at least GOOGL and AAPL - are trading soft, I could use more cash.

I look at cash flows quarterly as all my companies pay 4 times a year. First time I should need to take cash out will be late March. Right now I'm thinking of taking the amount I need to live on for a quarter but I could change my mind and go monthly.

I shouldn't need to use either IRA at all, ever, thought the IRS will make me starting in 2034. Roth conversions are a possibility, if allowed, to try to keep the RMDs down a little.

I have a lot more - 9 retirement planning posts on SA but this should be for a conversation, not an info-dump. I'll be posting my Taxable Account portfolio shortly.

I am happy to answer any questions. I'm pretty much an open book with one exception - I don't tell strangers on the internet dollar figures even though I'm sure you're all fine people. But there are bots and such that look for people to go after.

[ken-do-nim]

The 2.3% you have in the ROTH, have you thought about putting that towards high dividend payers? You'd just take the dividends out, tax-free.

[cemanuel]

(12-07-2021, 05:17 PM)ken-do-nim Wrote: The 2.3% you have in the ROTH, have you thought about putting that towards high dividend payers?  You'd just take the dividends out, tax-free.

I initially used it as my RIC account. I wanted to try those and did just REITs and BDCs in it. That worked out, not horribly but not great as a lot of the ones I owned cut last year. I started to switch to what I have always called sluggards - things that pay hefty dividends, then ran my numbers this spring and have switched again.

In the end it's just so darn small that even going all-in and shooting for 10% wouldn't gain me much. I've decided that it and the IRA will be TR accounts. Now I expect to lean towards dividend-payers. I like them, it gives me a stream of cash to make buys with and it's one more metric to measure a company by. But money in either of those accounts will stay in there unless I do some conversions. 

When I do the initial IRA rollover I'll also buy some funds - SPY, IVV, QQQ, VTI. Those will be about 20% of the account and if after 3 years or so they're beating my stock picks I may sell all the stocks and go with index funds to save time. But so far I've been able to beat the S&P - not spectacularly but a little - each year since I've been in stocks. If that's the case I'll sell the funds. Why pay fees when you don't have to?

I joke that if my Roth was a person it would be in therapy. It's small enough that I experimented with it a lot but I've also changed it up completely 3 times in the last 2 years. Poor thing must be confused.