Live aboard - advice on how to pay for it

Bill & El
You Two are very wise and good enough to still teach.
We always hope we can get many of your life lessons into our kids and Grand kids heads.
Colette & I figured out the financial part, now health is the precious commodity. Like you, we both retired early and thank God for that.
Always love your posts.
Ed
 
Thanks, Ed.

You mention the children and grandchildren. They are really the important folk when involved with investment learning. Being young, if they learn to invest, and start now with spare money from gifts or household jobs, time is on their side. Compound interest on those dividends from their investments can give them early retirement also, if they wish, or more financial security in older age.
We started an investment club for our grandkids (they named it WWTBAM - who wants to be a millionaire) and and we paid them a small gift for each class attended (if they invested that cash).
One g'kid, the oldest, discovered she made more from her investments in a week (a few weeks ago) than she did at her first full-time (post college) job that week!

All the g'kids have their own portfolios (even some still in high school) and they know how to invest. A great gift to them and something not usually taught in school or known by their peers.
 
Wish my grandparents (or parents) had taught me as you are doing with your family. Great information, and as you point out, not often taught. I didn't invest for years because I just didn't really get how to start, etc. It seemed like something for rich people who "had people" in finance (which wasn't me!).

Reading the section on your blog some years ago (which I think is what is linked above) was so helpful! Your classes/lessons with your grandkids are the deluxe version. Lucky them :thup
 
Yep, Casey -- so true.

And, to encourage young ones, sign them up for an account with Fidelity, or another mutual fund company.. You can consign with them as parents or g'parents if they are younger than 18. Head into a Fidelity office, with an appointment with a representative.

Then, gift them a sum into that account, putting it in a cash account initially until they choose the mutual fund or funds that look best (with the help of the company rep. and you). If a large sum, get a promise that the sum be returned in a year and they keep any profits, - or if you wish, simply a gift they promise you to keep for retirement and it is a graduation gift or some such for them.

Help them learn how to invest. Look over their statements with them monthly -- rebalance things with them, so they can see their investments grow differentially. Let the Fidelity rep give them some lessons on investing -- the company has free on-line classes

They soon get the hang of it and often get excited. One of our g'kids, in a classroom discussion with their teacher, was asked about questions they would ask of any new boy friend said, "What's in your portfolio?"
 
Great stuff, I should have asked a girl friend what was in her portfolio! Could be Nordhavn man.
Casey's great formula works well. This is how come we quit early too, 53 for me not rich but you don't have to be just within your means
Let time grow your dough.
George
 
It was due to my investing, and living within my means, that I too was able to retire early. Now days, especially the younger generation, they have to have everything. In our days, we didn't get new cars or buy name brand clothing. We worked as soon as we could, saving our pennies for things we wanted. And if we didn't have the money, we didn't get the thing. As parents, my generation is partially to blame for giving our kids so much. They have not had that opportunity to earn and save for what they want. Colby
 
I think this is a very important topic - particularly in today's economy.

"Retirement" (aka defined benefit retirement plans) are virtually thing's of the past. Retirements have morphed over into 401k's. IRA's and other (largely) self-funded financial plans. If one worked and SAVED diligently during their work years it was quite possible to live off the interest spun-off from that nest egg.

Now we're in a different interest rate environment. Gone are the days when you could safely put your money in 4-6% CD's and enjoy a decent lifestyle. Try doing that with a CD paying .015% ! As an alternative people are often in search for yield, and led to riskier investments. Sometime it works - sometime it doesn't.

Regardless of one's investment style, deciding what level of Life's "comfort tree" you want to occupy is crucial. The "comfort tree" is my metaphor for lifestyle. Some folks are only comfortable in the upper branches, and require massive homes, fancy cars, and affluent lifestyles. Others have learned to enjoy Life on somewhat lower branches of the "tree," and can be Very happy
with their more modest homes, cars, and Lifestyle.

I still revere the couple who retired at 50, explored the World from the comfort of their pickup and Alaskan camper ... and naturally, their C-Dory!

Examples and mentors to us All !

Best,
Casey&Mary
 
I think this is a very important topic - particularly in today's economy.

"Retirement" (aka defined benefit retirement plans) are virtually thing's of the past. Retirements have morphed over into 401k's. IRA's and other (largely) self-funded financial plans. If one worked and SAVED diligently during their work years it was quite possible to live off the interest spun-off from that nest egg.

Now we're in a different interest rate environment. Gone are the days when you could safely put your money in 4-6% CD's and enjoy a decent lifestyle. Try doing that with a CD paying .015% ! As an alternative people are often in search for yield, and led to riskier investments. Sometime it works - sometime it doesn't.

Regardless of one's investment style, deciding what level of Life's "comfort tree" you want to occupy is crucial. The "comfort tree" is my metaphor for lifestyle. Some folks are only comfortable in the upper branches, and require massive homes, fancy cars, and affluent lifestyles. Others have learned to enjoy Life on somewhat lower branches of the "tree," and can be Very happy
with their more modest homes, cars, and Lifestyle.

I still revere the couple who retired at 50, explored the World from the comfort of their pickup and Alaskan camper ... and naturally, their C-Dory!

Examples and mentors to us All !

Best,
Casey&Mary
 
Yep, Casey. Putting investments into CD's doesn't work now, since the payout interest is very low. Best to consider low cost mutual funds, we think -- if you have time and interest to study those offered by one family of funds (like Vanguard or Fidelity) fine -- look at the risk and return of the individual funds, and select those which best fit your ability to handle your personality type ( how do you handle risk/reward?). Or, if you don't have time or interest, select a good index fund (index follows a market's up and downs, like the NASDAQ, Standard and Poor, etc) and invest in them. They generally do well and often beat a compilation of stocks by an investor).

Just save a percent of income every month and put into your investments for long term, don't carry any credit card debt, and enjoy your life!
 
There is a strong and growing movement (often referred to by the acronym FIRE: financial independence/retire early) which can be an excellent source of encouragement and education in this regard. My personal .02 on the matter goes something like this:
1. As mentioned before: invest EARLY and often, preferably within a tax deferred IRA or equivalent, taking advantage of employer matches first. There is tremendous power in the time value of compounding
2. Ditto again: for most investors, low-price equity index mutual funds are the best route. They beat a managed approach more than 75% of the time, and without all the costs. I also like Vanguard. For logical and very rational individuals, stock picking or the like may work.
3. Try to create a source of passive or semi-passive income early on. Many are impeded in leaving employment by loss of associated health care benefits, or the reality of bridging the gap between your actual retirement and age 59-1/2 when one can access one's IRA. If you have a goose regularly laying golden eggs without your being on-site, this becomes a math problem, nothing more.
4. Play good defense: Simplify, downsize, and eliminate debt. Losing a payment or an expensive-to-maintain luxury is like getting a raise of that same dollar amount. Remember that free time is a luxury in and of itself, and one you can never get back once its gone.
5. I don't like the work "retirement". Implies quitting or letting go, or disengaging. A dear and wise friend instead calls his situation "re-wirement". He believes it remains critical to stay engaged socially, with some meaningful work, to truly stay healthy. Service or volunteer work is a tonic for the soul. Start that business you always dreamed about, or take that course! Just don't plan on spending all your time golfing, fishing, traveling, etc. (as fun and important as those may be to you) once you leave the rat race or you will soon be breathing your own fumes. Note to self: nobody wants to hear the details of your latest European vacation for the entire evening together.
6. The earlier one quits conventional work, the longer the retirement period and thusly lower safe rate of withdrawl from one's retirement nest egg. It's also increasingly important to maintain a higher percentage of equity investments (vs. bonds, CD's, etc.) even in retirement. My personal plan: 3.5% SWR and 75% equities, at least until 70 y.o. It's also wise to plan ahead to avoid having to sell equities to fund early retirement in a declining market.
7. Due to the big hit incurred in reserving a % of a pension to a spouse, it can make more sense to have the vested spouse take 100%, then buy a series of level-term life insurance policies instead: say 1-10 year and 1-20 year, overlapping for 10). Get hard quotes and do the math. Don't ever buy life insurance as an investment in itself, however. Ignore this advice altogether if the vested spouse is in poor health.
8. Invest in your physical, emotional, relational, intellectual and spiritual health. We can often improve our odds of lasting happiness, health, and prosperity with a few regular disciplines, which tend to snowball in a positive way.

Sorry for the very long post, and for including so much personal opinion. I surely don't have life all figured out but I've been working on this area for a while and my wife and I are now beginning the process of leaving the rat race at 55 y.o. One of the nudges has been the brand-new 2014 boat I own that barely has 100 hours cause I'm working all the time and never get a chance to use it. Last year we used our Summer home less than 20 days total. And it regularly breaks my heart to see patients of mine having their lives turned upside down in their 60's, or 50's, or even earlier, with a grim cancer diagnosis. I would love to hear input from others on this topic.

Cheers! Mike
 
Mike,
El and Bill made it work for them, and thanks for your thoughtful post on what might work for you guys and others.
We agree on all your points. Good job!

As you have no doubt already figured out, there is scant reliable financial planning literature on planning for a 40 or 50-year 'retirement' (age 55-105) as opposed to the standard 30 years (age 65-95). Does your 'safe withdrawal rate' drop from 4% to 3% or 2% , or even lower? Who knows what the future holds?

Always the outliers, we find that paying our financial planner 1.55% is well worth it for us...a 25 year relationship (including his mentor) in which we know our email or phone call will be answered right away. They've made us more money than we need to spend, what's to complain about? There is a credible argument that once 'too many' are in algorithm machine funds that bad unexpected outcomes could happen. I'm again an outlier in wanting a human at our financial helm. We're willing to pay him (mostly hers). Your mileage may differ.

I'm a Family Practice MD who worked as a contractor at Keesler AFB, MS for 11 years before retiring in March. 4 years ago, I saw a long-term patient (an RN) who came in with widespread bone pain that turned out to be metastatic cancer, and she was dead in less than 6 weeks. An FP gets to know the family, and I knew this one had planned to buy an RV and tour the country, plans interupped by a father in law with dementia they had to care for, but she died first.
That night I said to Eileen, 'after this, we should tell Thom we want to retire at age 62 rather than 65, 'cause we might not be able to manage a Tom Cat at age 75 and we want 10 good years on it.' So that's what we did.

I don't think you give enough weight to the question of medical insurance for the crowd under 65 (when Medicare kicks in for most). Our dentist is 'rich' at 60 in the 'top 3%' sense but says he can't retire because a family policy is $15,000 a year with a $7,000 deductible, and one teenage son blew through that with a broken bone skateboarding.

We are blessed with Tricare medical insurance as retired military (and a gold-plated pharmacy benefit). And also with a military retirement with COLA and a Civil Service retirement with COLA. But these are very rare to non-existant these days.

We saved/invested 12-20% every year of everything we earned since being married in 1985, and it has paid off in spades in allowing us a retirement above and beyond our expectations.

El and Bill set down a very nice baseline on how a couple of teachers can make the retired C-Dory lifestyle work for them (Thanks, guys!!! We read your book!).

Thanks Mike for adding to it, some very well-thought out comments!
Cheers!

John
 
Having been retired for 25 years, I have lots of thoughts. First, be sure you have adequate health care! We don't know where the health care system in the USA is going, but even with medicare, I see many of my friends who are out thousands a year and don't get good medical care. I spent half of my working life in private practice, and half under a system which gave me a modest pension and excellent health benefits--basically no costs for my and my brides lifespans. That is worth thousands of dollars a year.

I have also seen several friends who took the 100% retirement in a pension with no survival rights, and did not adequately prepare to care for their spouses--a spouse who finds she is impoverished at the same time her husband dies is very tragic.!

IRA's alone give adequate investment income for old age, even with maximum contributions and employee match.

Don't assume that tax laws will always be the same. Make your investments flexible enough that they will endure both changes in tax laws and ups and downs of the economy.

Be sure that both of you know all about the finances! Discuss goals, and how the investments are doing, plus what the future holds. Be sure your spouse knows all about all of your accounts. I had a friend who apparently had some executive dementia, and had lost an enormous sum of money in the stock market. He had been a economics professor in a college, so his wife assumed that all was well. When he died, they had $30,000. and only social security, a small pension--and an undisclosed mortgage on the house in Newport Beach...Fortunately a daughter gave up her inheritance from a grandparent to take care of her mother..

Prepare for old age and infirmity. I see many who don't--and all of a sudden they can no longer live in their home, because it is not handicapped equipped. They cannot care for themselves; they need caregivers, or they need nursing home care. Prepare ahead of time.

Account for inflation--it is real, and it may be severe. Also remember that there can be recessions, and even catastrophic events in life. Prepare for these.

Ladder and protect investments, but be sure to keep up with inflation.

There are always going to be opportunities to make extra investments--such as rental properties. Start on these when young.

Even if you are "young" have a will, durable power of attorney for both health care and finance, an estate planner/attorney, and advanced directives.

Enjoy life to the fullest when you can!
 
Yes, the health care system in this country is broken. I had a Colles fracture of my wrist that required pins in a closed reduction. It has cost me close to $9K so far.

In the ER it cost over $1K just for x-rays ($900+ to use the machine, $100+ for someone to look at the images). The same series of x-rays cost me $29 at another location. Another place it was $226, and the Dr. who did the pins charged me $75. These are the self pay prices, not the insurance company rates. As far as I could tell the $29 images were exactly the same as the $1k images, they came off the same model of machine.

I know someone with cancer whose insurance company pays ~$89K/month for just one medication.

If you get sick in this country and don't have (very) robust insurance or are a 1%er, you're pretty much screwed.

Sorry. Rant over.
 
I think both Bob and John have added some excellent points to Mikes. In my case, I retired early from the airlines. But it was driven, 1. Because I was about to lose part of my pension due to bankruptcy and merging, 2. Burned out, 3. Life is short. (I lost my first wife to cancer at the age of 48.) I am very fortunate to have retired with my reduced pension (early retirement at 55), and also the fact that I had saved/invested all of my working life. BTW, I'm quite happy with paying my investment managers 1% to take care of my money. My expertise was in flying, not investing. My wife is 10 years younger, enjoys her job, will also have a pension, and while I hope she too decides to retire early, she still has some time to go. Our biggest concern is with health care. (As I'm sure is the concern of many others.) My airline retirement did not provide a retiree health plan, nor will my wife's when she retires. So that becomes a rather serious bump in the road for both of us to be retired early. Who knows what the future holds for health insurance or health care costs. But this is the one stumbling block that we need to figure out how to get over, if my wife is to retire early. I'm 60 now, so will be qualified for Medicare about the time my wife would be able to retire early. That solves some of the problem, but not all. I would be interested in hearing how others have gotten over this obstacle in this current economic time.
BTW, I still stay quite busy in "retirement". I love traveling all over the country with my C-Dory during the extended boating season. Sometimes my wife can join me, sometimes sadly not. (She's still working, remember?) I also stay quite busy during the down winter months volunteering for Habitat for Humanity and driving school bus as a substitute. Also while rather infrequent, became a chief inspector for elections. All things to keep my sanity and stay involved with (along with giving back to,) my community and for socializing with others. BTW, these three "jobs" are excellent suggestions for others looking to do something in "retirement". Colby
 
Thank you guys for the thoughtful observations. And Colby I'm truly sorry for your loss of your first wife. A big theme mentioned is post-retirement health care, which is a major issue for almost everyone I talk with about this subject. My wife and I can purchase the same insurance we have at the hospital for the group rate: currently $1,300/month or $15,600/year. This is for excellent coverage and we have plugged it into our retirement budget with an inflation buffer. I realize everyone has a different situation but nothing can burn through money quite like medical bills, so everyone needs a plan, even if that means continuing to work. We will make provisions for additional skilled care from our IRA, which I hope to largely leave alone to grow until mandatory withdrawls are required. Like some others we started saving early, and we tried to max out our contributions every year. We never really missed that money because we "paid ourselves first" by contributing pre-tax rather than investing what was "left over" (which might have been very little). 30 years goes by quickly whether you invest or do not! We've also been fortunate to have parents and mentors who modeled frugality, restraint, delayed gratification, avoiding debt, and hard work. And neither of us has had a major health issue. So we feel very blessed. With the particulars of our situation our CPA advises we can proceed but we've decided to begin with semi-retirement to ease into the new chapter and still maintain our professional licenses. That way we can "stress-test" our budgetary assumptions and develop other activities, including more boating, while hedging our bets somewhat. Ultimately, though, we will need to make a leap of faith. Please keep the ideas and suggestions coming as this is uncharted territory for us!

Best, Mike
 
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