57, quit working, $700,000

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tonyski
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57, quit working, $700,000

Post by tonyski »

I'm 57. Quit working this year. I have $700,000 in my own profit sharing plan. (Like a 401(k), but I can invest in anything that I want to.)

My $100,000 house is paid for. No bills.

I've been playing around with stocks and etf's and have done alright but it takes up too much of my time.

I'm looking for somewhere to put $500,000 that would pull in 10% ( isn't everybody?)

I don't like dealing with people so apartments are out, as are house flipping, and anything that requires more than passing interactions.
Call_Me_Op
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Re: 57, quit working, $700,000

Post by Call_Me_Op »

Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
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BL
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Re: 57, quit working, $700,000

Post by BL »

Please go to the Wiki and look around at Getting Started and recommended books. You really don't want to take unnecessary chances with your life savings. Meanwhile, at least CDs (be sure they are FDIC guaranteed) will not lose money even though they won't give you much income. Many here like to buy mutual funds from Vanguard (or Fidelity which has low-cost Spartan funds) because the cost is very low. Look at the 3-fund portfolio to see an example of a good simple portfolio.
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Re: 57, quit working, $700,000

Post by dbr »

Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Worse than that, 10% expected return is not the same thing as "pulling in" 10%.
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Re: 57, quit working, $700,000

Post by mlewis »

An oft quoted rule of thumb is that you can withdraw an inflation adjusted 4% of your portfolio per year to use towards expenses. I think many people on this board would even agree that 4% could be a risky bet in this environment. 3% would be safer, especially if you are on the younger side, as you are.

You'll need to do some more planning for sure, and perhaps some more working. You might do better with a simple annuity, but then it's gone when you die if that matters to you. 10% is a dream, sorry.

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Re: 57, quit working, $700,000

Post by SpaceCommander »

Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Correct. Unless you're OK with exhausting your capital relatively soon. You might be able to setup something to draw 10% per year, but you're going to run out of money in 12-15 years or so. If that's OK, then go for it. But if you want to maintain your buying power indefinitely, then you need to scale back your expectations drastically.
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Re: 57, quit working, $700,000

Post by SGM »

At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
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Re: 57, quit working, $700,000

Post by RenoJay »

SGM wrote:At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
SGM: What withdrawl rate would you use if you retired much younger than 57, i.e. at age 45? Also, do you know of any reports that studied safe withdrawl rates for retirements that are much longer than the typical 30 years?
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Cautious Optimist
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Re: 57, quit working, $700,000

Post by Cautious Optimist »

tonyski wrote:I'm 57. Quit working this year. I have $700,000 in my own profit sharing plan. (Like a 401(k), but I can invest in anything that I want to.)

My $100,000 house is paid for. No bills.

I've been playing around with stocks and etf's and have done alright but it takes up too much of my time.

I'm looking for somewhere to put $500,000 that would pull in 10% ( isn't everybody?)

I don't like dealing with people so apartments are out, as are house flipping, and anything that requires more than passing interactions.
Is 10% what you'll need moving forward (if so you'll probably have to resume work or learn to LBYM) or do you just like round numbers..??
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Re: 57, quit working, $700,000

Post by VTXVX »

Delete
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Leemiller
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Re: 57, quit working, $700,000

Post by Leemiller »

Well if you weren't making money in the stock market in the past year I would be concerned. It was easy to do, right?

A couple of paid off properties might work but it doesn't sound like you're interested in that. Believe me if it was easy to get 10% I'd quit tomorrow and manage our portfolio rather then go to work myself.
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Re: 57, quit working, $700,000

Post by William4u »

SGM wrote:At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
+1 I feel the same way. At such a young age, so long before Social Security and Medicare, anything more than 3% is a significant risk (you could live to your nineties). IMHO there is no way a (normal) person can withdraw (pull) 10% from any sensible investment for such a long period of time. The only way to get to 10% annually for 30 years or more is by pure gambling (Las Vegas gambling, for example). You might get lucky and win the gamble once or twice, but the odds of winning that gamble for 30+ years is about zero.

A reasonable allocation of, say, 50/50 total stock/bond hopefully will sustain 3% withdrawal/pull (given that 2-3% will go to inflation). For $500,000, that is a $15,000 annual withdrawal/pull rate. Any more than that and you risk running out of money before the end of life. If I were you, I'd do a 50/50 stock/bond three fund portfolio... http://www.bogleheads.org/wiki/Three-fund_portfolio But a 10% withdrawal rate is only for someone who knew that he or she would be dead relatively soon (or someone who is insider trading, about to inherit a large sum, etc.). A 10% rate for a 57 year old is just too risky under remotely normal circumstances.
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Re: 57, quit working, $700,000

Post by Jim180 »

Tazdog wrote:It depends on your expenses...
+1
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William4u
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Re: 57, quit working, $700,000

Post by William4u »

Jim180 wrote:
Tazdog wrote:It depends on your expenses...
+1
Yes, it depends on a lot of things. If he is expected to die soon, it might work. If he can live off of Social Security alone for his whole life after he turns 70, it might work. If he has very low expenses, it might work (but his expenses would need to be far below his 10% withdrawal, under normal circumstances). I am guessing he wants to spend close to that 10% annually, and under most circumstances that will not work for 30+ years. Basically, under ordinary circumstances, 10% won't work, but there might be some extra-ordinary circumstances that might make 10% work.
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Re: 57, quit working, $700,000

Post by gerrym51 »

part time job
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Re: 57, quit working, $700,000

Post by mathwhiz »

Yes, it depends on a lot of things. If he is expected to die soon, it might work. If he can live off of Social Security alone for his whole life after he turns 70, it might work. If he has very low expenses, it might work (but his expenses would need to be far below his 10% withdrawal, under normal circumstances). I am guessing he wants to spend close to that 10% annually, and under most circumstances that will not work for 30+ years. Basically, under ordinary circumstances, 10% won't work, but there might be some extra-ordinary circumstances that might make 10% work.
I think he can do a 5% withdrawal rate assuming he takes social security at age 70 and then reduces the withdrawal rate. But you'd have to live within a narrow budget of around $30,000-$40,000. High equity positions would be risky as an inopportune market crash while taking large withdrawals could severely decimate the portfolio. Not sure I'd go any higher than 30% equity. And I'd also want to keep 3 years living expenses in cash so you can draw from cash instead of selling equities in case of another crash like 2008.
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Re: 57, quit working, $700,000

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.....
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Re: 57, quit working, $700,000

Post by Call_Me_Op »

SpaceCommander wrote:
Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Correct. Unless you're OK with exhausting your capital relatively soon. You might be able to setup something to draw 10% per year, but you're going to run out of money in 12-15 years or so. If that's OK, then go for it. But if you want to maintain your buying power indefinitely, then you need to scale back your expectations drastically.
What you are describing is a 10% withdrawal rate, not 10% return.
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Re: 57, quit working, $700,000

Post by YDNAL »

tonyski wrote:I'm 57. Quit working this year. I have $700,000 in my own profit sharing plan. (Like a 401(k), but I can invest in anything that I want to.)

My $100,000 house is paid for. No bills.
Welcome to the Forum, tonyski!

First, there is this little study that examines how much, how safely, and how long you take from your savings. A quick rule-of-thumb is a 4% number. So, $700K x 4% = $28K annually. Can you live with that at 57 for another 30 or 40 years ?
Link: http://www.bogleheads.org/wiki/Trinity_study_update

Second, what your savings yield is dependent on the risk you take... they are tied at the hip. You want 10% - which is not only a crazy expectation, but terribly irresponsible thinking with your life savings, considering the amount of risk one would take with the savings (assuming it was reasonably possible).

Here are some other links for you, I hope it helps.
Link: http://www.bogleheads.org/forum/viewtop ... f=1&t=6211
Link: http://www.bogleheads.org/readbooks.htm

Good luck !!
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Re: 57, quit working, $700,000

Post by ofcmetz »

Do you have a pension that pays part of your bills or are you living off of your portfolio?

I would recommend broad based index funds in maybe a 50/50 allocated account. Stop playing with individual stocks and instead spend some time on the wiki here reading and learning. That action will pay a lot higher dividends.
Never underestimate the power of the force of low cost index funds.
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Re: 57, quit working, $700,000

Post by heyyou »

How much are your current annual expenses?

Everyone here would retire early if they could get 10% annually from now forward. Your portfolio will not support your desired long term income unless you intend to die early. If you know exactly when you will die, the arithmetic is easy. If you delay taking Social Security until you are age 70, you will get more inflation protected income then, than taking SS at 62.

Due to high returns in the past, 4% withdrawals were sustainable for 30 years. Lately, it has become obvious that the portfolio returns in the early years of retirement determine the longevity of your portfolio. These are bad times to retire early with a portfolio that is undersized for 30+ years of over 4% withdrawals.

You can adapt. "You may not get what you want, but if you try, you just might find, that you get what you need" from a Rolling Stones song.

One option is to move to a foreign location where $20K annually buys a nice lifestyle for the next 13+ years. Find some place where the climate suits you, and the health care costs suit your sustainable withdrawal rate. There are places in Mexico, Panama, and Thailand, where the altitude and latitude combine for pleasant weather all year, and you will be among American retirees who are often living on only their SS.

Another option: Scott Burns has written about how a part-time, almost minimum wage job ($1000 a month) in the USA, pays as much as an extra $300K in your portfolio.
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Re: 57, quit working, $700,000

Post by HomerJ »

heyyou wrote:Due to high returns in the past, 4% withdrawals were sustainable for 30 years.
FYI, even during years with LOW returns, 4% withdrawals were sustainable for 30 years... 4% didn't just work "due to high returns"
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Re: 57, quit working, $700,000

Post by justus »

tonyski wrote:I'm looking for somewhere to put $500,000 that would pull in 10% ( isn't everybody?)
No, I don't think everyone is looking for that, tonyski.
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Re: 57, quit working, $700,000

Post by Meg77 »

It seems like you are interested in various/alternative investment ideas, so I'll share one. I have lent some money directly to real estate investors and am currently getting 8% (market rates have gone up though so I've already told them that any future funds would be priced at 10% minimum). In return I get a first lien on the property. If they default on the loan I get a rental property which I can either keep or sell. It's a little like investing in rentals but without the landlording hassles (also without the possible upside of much larger returns over time).

This is a version of "hard money lending" except that I know the investor personally and have for years so I consider it a bit less risky than lending to a stranger I found on the internet through a hard money site, for example. Also my rate is lower than other hard money lenders charge for similar loans, mainly because the deals my borrower is investing in are not as risky as some others (many hard money loans go to borrowers who are buying a foreclosure that needs a lot of work and are for 130% of the purchase price in order to cover property plus planned improvements). The upside for my borrower is that I don't charge closing costs and am willing and able to close in a matter of days as opposed to months that he would have to spend applying through a bank. Plus banks often won't consider the smaller deals he prefers (less than $100K) and would require him to keep a ton of cash to do more than one or two loans like this.

Not sure if this helps you, but the main benefit to me of private lending is the hassle free nature of the investment. I get a check every month and that's it. Of course that assumes he continues to pay on time. Otherwise I deal with the hassle of foreclosing on him. But private lending has taken off for good reason and can even be done between family members who may be looking to get a lower rate on a student loan or buy their first house. I borrowed money to buy a rental property from my mother. I pay her 5% which is more than she can get in bonds or anywhere else, and I got a hassle free 100% loan with no other financing charges - and was able to make a cash offer on the property to win the bid and close quicker. Win-win. She considers it a risk-free loan, though if I were to default she gets the property. Plus she can always just write me out of her will to make up for it.
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Re: 57, quit working, $700,000

Post by SGM »

RenoJay wrote:
SGM wrote:At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
SGM: What withdrawl rate would you use if you retired much younger than 57, i.e. at age 45? Also, do you know of any reports that studied safe withdrawl rates for retirements that are much longer than the typical 30 years?
RenoJay: I don't know of safe withdrawal rates at a much earlier age. I was referring to the typical 30 year I am looking at a 40 year retirement, wife has extreme longevity in her family and I am thinking of 2.9% or less, delaying SS, SPIAs, pensions etc. Maybe a higher rate prior to 70, but that is not that long period for us. It is possible 2.9% maybe too high for a 40 year portfolio, but with the SS etc., might not need more.

At age 45 I might consider 2%, but I haven't done a study of this, because that was the age I started my 3rd career. With longevity we would be looking at a 55+ year portfolio. I am thinking that with really early retirement it's best not to take out more than the prevailing dividend and interest rates of someone with your AA. Of course, that plan might lead to reaching for high dividends and riskier bonds. If the portfolio goes up as you age increase the withdrawals.

I like the flexible adjustments plan that Taylor had used. Safe withdrawal rates are a moving target. Certainly as other have mentioned, curbing spending is an option. I
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Re: 57, quit working, $700,000

Post by JW-Retired »

SGM wrote:
RenoJay wrote:
SGM wrote:At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
SGM: What withdrawl rate would you use if you retired much younger than 57, i.e. at age 45? Also, do you know of any reports that studied safe withdrawl rates for retirements that are much longer than the typical 30 years?
RenoJay: I don't know of safe withdrawal rates at a much earlier age. I was referring to the typical 30 year I am looking at a 40 year retirement, wife has extreme longevity in her family and I am thinking of 2.9% or less, delaying SS, SPIAs, pensions etc. Maybe a higher rate prior to 70, but that is not that long period for us. It is possible 2.9% maybe too high for a 40 year portfolio, but with the SS etc., might not need more.

At age 45 I might consider 2%, but I haven't done a study of this, because that was the age I started my 3rd career. With longevity we would be looking at a 55+ year portfolio. I am thinking that with really early retirement it's best not to take out more than the prevailing dividend and interest rates of someone with your AA. Of course, that plan might lead to reaching for high dividends and riskier bonds. If the portfolio goes up as you age increase the withdrawals.

I like the flexible adjustments plan that Taylor had used. Safe withdrawal rates are a moving target. Certainly as other have mentioned, curbing spending is an option. I
RenoJay,
You can also look at long retirement spans with one or more of the free retirement calculators. Here is one very simple one I have used.
https://retirementplans.vanguard.com/VG ... ggCalc.jsf

Other folks here have mentioned firecalc: http://www.firecalc.com/
JW
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Re: 57, quit working, $700,000

Post by SpaceCommander »

Call_Me_Op wrote:
SpaceCommander wrote:
Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Correct. Unless you're OK with exhausting your capital relatively soon. You might be able to setup something to draw 10% per year, but you're going to run out of money in 12-15 years or so. If that's OK, then go for it. But if you want to maintain your buying power indefinitely, then you need to scale back your expectations drastically.
What you are describing is a 10% withdrawal rate, not 10% return.
What do you think the OP is talking about when he says he wants to "pull in" 10%? Of course, he's talking about a withdrawal rate...
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Re: 57, quit working, $700,000

Post by Valuethinker »

SGM wrote:At 57 I would not be comfortable pulling out more than about 3% yearly from a portfolio, assuming any kind of longevity. Maybe you could find a hobby that you could parlay into a source of additional income? There are lots of threads on safe withdrawal rates.
Less than that. Best guess of SWR now for a 65 year old is around 2.5%. That's why SPIA annuities make so much sense-- you get a much higher effective rate of withdrawal, whilst hedged on longevity risk (but not, normally, inflation risk).

With inflation, value of assets is falling by c. 2% pa.

3%, when safe US government bonds are yielding a bit over 2%, means that even in nominal terms you are going to be shrinking the portfolio by c. 1% pa (3% - 2% say) then with inflation, in real terms -3% pa. In 24 years time, the portfolio will have halved in value.

Other posters are right, a portfolio of rental properties might give a 5-8% return pa. I cannot think of anything else that would, that would not entail a high level of risk.

Of course once US Social Security and Medicare kick in, then you don't *need* so much from your own savings, so you could plan for that 8 year or so gap.
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Re: 57, quit working, $700,000

Post by richard »

The popular 4% safe withdrawal rate was based on 30 year periods, not longer periods.

We only have about 3 or 4 reliable independent 30 year data points. That's not a very strong basis for predicting the future. It's like rolling a six-sided die 4 times, never seeing a 2 and feeling safe betting it all that a 2 is impossible.

The idea that a 57 year can find an investment that will allow spending 10% of a portfolio for the rest on his life is, I'm afraid, insane, unless he knows he won't live very long.
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Re: 57, quit working, $700,000

Post by Call_Me_Op »

SpaceCommander wrote:
Call_Me_Op wrote:
SpaceCommander wrote:
Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Correct. Unless you're OK with exhausting your capital relatively soon. You might be able to setup something to draw 10% per year, but you're going to run out of money in 12-15 years or so. If that's OK, then go for it. But if you want to maintain your buying power indefinitely, then you need to scale back your expectations drastically.
What you are describing is a 10% withdrawal rate, not 10% return.
What do you think the OP is talking about when he says he wants to "pull in" 10%? Of course, he's talking about a withdrawal rate...
That was not clear to me. For some people, that might mean income from investments.
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Re: 57, quit working, $700,000

Post by HomerJ »

Valuethinker wrote:Best guess of SWR now for a 65 year old is around 2.5%.
Et tu, Valuethinker?

2.5% is crazy low. SWR hasn't changed... Historically speaking, 4% is the WORST case... If you're lucky, and started your retirement before the boom years, you get to take 5% or even 6% later on... But even if you're unlucky and start your retirement at the beginning of a prolonged bear market, 4% (assuming a conservative AA like 40/60) still works. 4% worked during the GREAT DEPRESSION... It worked during 1966-1982 (16 years of stocks going nowhere, and at the same time, bonds were finishing up 30 years of NEGATIVE real returns, and super high inflation in the 70s)...

And STILL 4% worked...

What is with all of you and this recency basis? Are you guys really saying "This time it's different"?
3%, when safe US government bonds are yielding a bit over 2%, means that even in nominal terms you are going to be shrinking the portfolio by c. 1% pa (3% - 2% say) then with inflation, in real terms -3% pa. In 24 years time, the portfolio will have halved in value.
You guys really think bonds and CDs are going to be paying 2% for the next 30 years? And even if they do, you just showed above that a 100% treasury portfolio will work at 3% withdrawal... Halving your money in 24 years means you're going to make it to year 30. So where is the 2.5% recommendation coming from? That is a silly low number.

Start with 4% and don't take inflation adjustments for a while if you want to play it safe....
Leemiller
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Re: 57, quit working, $700,000

Post by Leemiller »

Meg77 wrote:It seems like you are interested in various/alternative investment ideas, so I'll share one. I have lent some money directly to real estate investors and am currently getting 8% (market rates have gone up though so I've already told them that any future funds would be priced at 10% minimum). In return I get a first lien on the property. If they default on the loan I get a rental property which I can either keep or sell. It's a little like investing in rentals but without the landlording hassles (also without the possible upside of much larger returns over time).

This is a version of "hard money lending" except that I know the investor personally and have for years so I consider it a bit less risky than lending to a stranger I found on the internet through a hard money site, for example. Also my rate is lower than other hard money lenders charge for similar loans, mainly because the deals my borrower is investing in are not as risky as some others (many hard money loans go to borrowers who are buying a foreclosure that needs a lot of work and are for 130% of the purchase price in order to cover property plus planned improvements). The upside for my borrower is that I don't charge closing costs and am willing and able to close in a matter of days as opposed to months that he would have to spend applying through a bank. Plus banks often won't consider the smaller deals he prefers (less than $100K) and would require him to keep a ton of cash to do more than one or two loans like this.

Not sure if this helps you, but the main benefit to me of private lending is the hassle free nature of the investment. I get a check every month and that's it. Of course that assumes he continues to pay on time. Otherwise I deal with the hassle of foreclosing on him. But private lending has taken off for good reason and can even be done between family members who may be looking to get a lower rate on a student loan or buy their first house. I borrowed money to buy a rental property from my mother. I pay her 5% which is more than she can get in bonds or anywhere else, and I got a hassle free 100% loan with no other financing charges - and was able to make a cash offer on the property to win the bid and close quicker. Win-win. She considers it a risk-free loan, though if I were to default she gets the property. Plus she can always just write me out of her will to make up for it.
This is pretty high risk if something goes wrong. I hope you've had the documents reviewed by an attorney and understand the time and expense involved in foreclosing on someone.
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Re: 57, quit working, $700,000

Post by Default User BR »

Meg77 wrote:It seems like you are interested in various/alternative investment ideas, so I'll share one. I have lent some money directly to real estate investors and am currently getting 8% (market rates have gone up though so I've already told them that any future funds would be priced at 10% minimum). In return I get a first lien on the property. If they default on the loan I get a rental property which I can either keep or sell.
Or, they default and you get a half-completed flip with serious problems, sale of which won't cover the loan amount. After all, why are they defaulting? At some point they decided that it was better to walk away than own or sell the property. In fact, why are they borrowing at twice the usual rate? With reward comes risk.


Brian
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Re: 57, quit working, $700,000

Post by Valuethinker »

HomerJ wrote:
Valuethinker wrote:Best guess of SWR now for a 65 year old is around 2.5%.
Et tu, Valuethinker?
I am not aware I have stabbed Julius Caesar in the back, nor is it the Ides of March.
2.5% is crazy low. SWR hasn't changed... Historically speaking, 4% is the WORST case... If you're lucky, and started your retirement before the boom years, you get to take 5% or even 6% later on... But even if you're unlucky and start your retirement at the beginning of a prolonged bear market, 4% (assuming a conservative AA like 40/60) still works. 4% worked during the GREAT DEPRESSION... It worked during 1966-1982 (16 years of stocks going nowhere, and at the same time, bonds were finishing up 30 years of NEGATIVE real returns, and super high inflation in the 70s)...

And STILL 4% worked...

What is with all of you and this recency basis? Are you guys really saying "This time it's different"?
3%, when safe US government bonds are yielding a bit over 2%, means that even in nominal terms you are going to be shrinking the portfolio by c. 1% pa (3% - 2% say) then with inflation, in real terms -3% pa. In 24 years time, the portfolio will have halved in value.
You guys really think bonds and CDs are going to be paying 2% for the next 30 years? And even if they do, you just showed above that a 100% treasury portfolio will work at 3% withdrawal... Halving your money in 24 years means you're going to make it to year 30. So where is the 2.5% recommendation coming from? That is a silly low number.

Start with 4% and don't take inflation adjustments for a while if you want to play it safe....
If you draw 4% now you are depleting *nominal* capital at a rate of c. 1-2% pa, and thus you are depleting real capital by c. 4% pa. 18 years time, your capital has halved (assuming no inflation increase in your income).

If interest rates rise, then there is a valuation adjustment on your starting portfolio to get there. That's true whether you hold bonds or stocks.

For rates of return to return to historic levels in fixed income, there has to be a significant fall in bond markets. Ditto for stock markets (to achieve historic rates of return).

Note 100% TIPS you are barely getting a positive real return.

So the problem with using historic rates is you can't start where the historic data started in terms of bond yields and market PEs. Yields are a lot lower, PEs are a lot higher. Therefore the expected returns of those assets are significantly lower than they were. That's assuming historic growth in earnings (return on equities is governed by 3 factors: current dividend yield, future dividend growth (equal to earnings growth if dividend payout ratio is held constant), speculative return (increase or decrease in PE ratio).

The only safe thing to do is to annuitize, thus hedging longevity risk. But you still have inflation risk (unless you buy inflation linked annuities). At age 57 the age credit on an annuity is quite small, btw. (you also take on the credit risk of the insurer, of course).
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EternalOptimist
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Re: 57, quit working, $700,000

Post by EternalOptimist »

I think OP wants 10% growth per year not withdrawal.....high risk might get you that.
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Re: 57, quit working, $700,000

Post by YDNAL »

SpaceCommander wrote:
Call_Me_Op wrote:
SpaceCommander wrote:
Call_Me_Op wrote:Friend, there is no way to obtain 10% expected return without accepting a relatively high risk.
Correct. Unless you're OK with exhausting your capital relatively soon. You might be able to setup something to draw 10% per year, but you're going to run out of money in 12-15 years or so. If that's OK, then go for it. But if you want to maintain your buying power indefinitely, then you need to scale back your expectations drastically.
What you are describing is a 10% withdrawal rate, not 10% return.
What do you think the OP is talking about when he says he wants to "pull in" 10%? Of course, he's talking about a withdrawal rate...
The OP has been very quiet and should provide clarification.
tonyski [OP] wrote:I'm looking for somewhere to put $500,000 that would pull in 10% ( isn't everybody?)
My guess was "pull IN 10%" means generate return [not pull OUT]. Then again, OP stopped working this year so needs money from savings.... this is a weird thread.
tonyski [OP] wrote:I'm 57. Quit working this year. I have $700,000 in my own profit sharing plan.
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BL
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Re: 57, quit working, $700,000

Post by BL »

According to immediateannuities.com , a 57 year old could buy a SPIA with 700,000 that would last for his life only and pay out $3,315 per month, an annual payout of 5.68%. Adjusting for SS would improve that total income somewhat. I am certainly not advising this, but it could be an option with no provisions for extra expenses such as autos and medical/long term care expenses.
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Re: 57, quit working, $700,000

Post by HomerJ »

Valuethinker wrote:Note 100% TIPS you are barely getting a positive real return.
Then 3.33% withdrawal is the bottom, not 2.5%... 2.5% is silly low. Interest rates will not remain this low for the next 30 years. We've seen bond yields this low before. We've had 30 years of poor bond returns before. This time is not different. And 4% worked even during those times.

Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
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Re: 57, quit working, $700,000

Post by Retread »

Does it bother anyone else that it's been three days since we've heard from the OP?
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Retread
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Re: 57, quit working, $700,000

Post by Retread »

HomerJ wrote:Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
You can put cash under the mattress and pull out 2.5% for 40 years guaranteed.
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Re: 57, quit working, $700,000

Post by Jim180 »

Retread wrote:Does it bother anyone else that it's been three days since we've heard from the OP?
Bruce
Yes, if the OP wants some serious feedback it would be nice if he would answer some of the many questions people have asked.
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Re: 57, quit working, $700,000

Post by richard »

Retread wrote:
HomerJ wrote:Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
You can put cash under the mattress and pull out 2.5% for 40 years guaranteed.
Bruce
That's not adjusted for inflation.
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Re: 57, quit working, $700,000

Post by Retread »

richard wrote:
Retread wrote:
HomerJ wrote:Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
You can put cash under the mattress and pull out 2.5% for 40 years guaranteed.
Bruce
That's not adjusted for inflation.
Yes, I know. Didn't say it was...
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Re: 57, quit working, $700,000

Post by ofcmetz »

Retread wrote:
HomerJ wrote:Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
You can put cash under the mattress and pull out 2.5% for 40 years guaranteed.
Bruce

Yes, it always is annoying when people join and start a good thread and then disappear.
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Re: 57, quit working, $700,000

Post by JW-Retired »

ofcmetz wrote:
Yes, it always is annoying when people join and start a good thread and then disappear.
Perhaps we didn't tell OP what he wanted to hear so he's gone looking for happier answers elsewhere.

Or maybe he took it to heart and has already gone back to work. :)
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Paul78
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Re: 57, quit working, $700,000

Post by Paul78 »

yeah sorry 700k at 57 does not add up to me.

Sure I want to retire in 32 years but my goal is at least 4 mil in my retirement account (guessing that is more then 700k in today's money). Plus I also have a pension (and hopefully SS) to cover some of the burden.
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Re: 57, quit working, $700,000

Post by Valuethinker »

HomerJ wrote:
Valuethinker wrote:Note 100% TIPS you are barely getting a positive real return.
Then 3.33% withdrawal is the bottom, not 2.5%... 2.5% is silly low. Interest rates will not remain this low for the next 30 years. We've seen bond yields this low before. We've had 30 years of poor bond returns before. This time is not different. And 4% worked even during those times.

Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
Put $700k into 10 year US Treasuries. Say duration 6 years?

Bond yields move to 4.5%, you lose c. 12% of the portfolio.

That's your problem at *current* rates you can't do it. And for rates to return to 'normal' then you take the valuation hit.

You can sit in cash until 'normal' returns but then you are eating 4% say of your portfolio every year.

Not sure where 3.33% came from? But at age 57, say 40 years life expectancy, you can afford to take out 2.5% pa, but you will suffer a negative real return (or just about break even at current TIPS yields).

The real test is easy: go to an annuity website and see what the 700k buys you, straight annuity and inflation linked. From the UK numbers, i'd guess for the inflation linked case ie around $15k pa. Straight annuity around 30k?

EDIT: from above, closer to 40k straight. So doable but sacrificing inflation protection (except for Social Security)
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Re: 57, quit working, $700,000

Post by market timer »

Valuethinker wrote:
HomerJ wrote:
Valuethinker wrote:Note 100% TIPS you are barely getting a positive real return.
Then 3.33% withdrawal is the bottom, not 2.5%... 2.5% is silly low. Interest rates will not remain this low for the next 30 years. We've seen bond yields this low before. We've had 30 years of poor bond returns before. This time is not different. And 4% worked even during those times.

Yes, one needs to be careful retiring at this time... But 2.5% is way too low.
Not sure where 3.33% came from? But at age 57, say 40 years life expectancy, you can afford to take out 2.5% pa, but you will suffer a negative real return (or just about break even at current TIPS yields).
Male life expectancy at age 57 is 26 years. Homer was likely making a ballpark assumption of a 30-year life expectancy. Anyone who thinks he'll live another 40 years from age 57 should be 100% annuities.
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Re: 57, quit working, $700,000

Post by livesoft »

tonyski wrote:I don't like dealing with people so apartments [responses] are out, as are house flipping, and anything that requires more than passing interactions.
For those expecting more interaction with the OP, give the guy a break. He already wrote he doesn't like dealing with people.
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segfault
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Re: 57, quit working, $700,000

Post by segfault »

I know the OP said he doesn't like dealing with people, so how about this--buy rental property and get it ready to rent, then hand it off to a property management company.
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