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What's your age and the value of your 401k?

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54 minutes ago, Capella said:

Then you made tens of thousands the past few weeks. It’s fine. 

Yes, I agree and you're right.

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When projecting where you'll be several years from now, do you make adjustments based on recent returns? For example, let's say you're 20 years from retirement and predict 6%/year average. Well, if you're up 20% this year, do you bump that 6% down a little for future projections to account for this big year? Or, after a down year, do you bump it up to make up for the down year? Or just keep it at 6%?

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1 hour ago, dgreen said:

When projecting where you'll be several years from now, do you make adjustments based on recent returns? For example, let's say you're 20 years from retirement and predict 6%/year average. Well, if you're up 20% this year, do you bump that 6% down a little for future projections to account for this big year? Or, after a down year, do you bump it up to make up for the down year? Or just keep it at 6%?

Sounds complicated, i'd just stick with the 6%, esp over a 20 year time frame.

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2 hours ago, dgreen said:

When projecting where you'll be several years from now, do you make adjustments based on recent returns? For example, let's say you're 20 years from retirement and predict 6%/year average. Well, if you're up 20% this year, do you bump that 6% down a little for future projections to account for this big year? Or, after a down year, do you bump it up to make up for the down year? Or just keep it at 6%?

I use two.  One is the CAGR (net worth, not market return) I've achieved overall from 2007 - 11.55% as it stands right now.  The other is a conservative estimate of a return - 5.5%.  That's a reasonable spread that lets me see the possibilities..

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2 hours ago, dgreen said:

When projecting where you'll be several years from now, do you make adjustments based on recent returns? For example, let's say you're 20 years from retirement and predict 6%/year average. Well, if you're up 20% this year, do you bump that 6% down a little for future projections to account for this big year? Or, after a down year, do you bump it up to make up for the down year? Or just keep it at 6%?

This is another perfect time to recommend using a monte carlo simulator like firecalc.   It removes these type of questions because it simulates every possible market occurrence.

Once you get comfortable using it, you will no longer think in terms of "averages".  Averages are interesting spot to start but in the end they are extremely unpredictable over the long term because no market ever moves in an "average" slope year to year, it jumps around, which can create a significantly different outcome than using averages does when looking decades down the line.  

Using a simulator, you can see how your plan would factor during the best, the worst, and every other condition in between, based on the long history of the market.

Edited by NewlyRetired
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2 hours ago, NewlyRetired said:

This is another perfect time to recommend using a monte carlo simulator like firecalc.   It removes these type of questions because it simulates every possible market occurrence.

Actually Firecalc isn't a monte carlo simulator.  It's historical in nature.  And it doesn't simulate every possible market occurrence - just the ones that have happened already (not Firecalc's fault, but we only have a certain amount of reliable historical data).

I think Cfiresim has a monte carlo capability as do other programs like Pralana Gold.

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1 hour ago, Sand said:

Actually Firecalc isn't a monte carlo simulator.  It's historical in nature.  And it doesn't simulate every possible market occurrence - just the ones that have happened already (not Firecalc's fault, but we only have a certain amount of reliable historical data).

I think Cfiresim has a monte carlo capability as do other programs like Pralana Gold.

At one time Firecalc had a monte carlo mode to set as a parameter if you wanted during the investigate stage.  I used it myself many years ago when I was planning.  You can google "firecalc monte carlo" and see the developer of the calculator himself talking about the setting and many others using it.

I wonder if they removed that mode and just keep it based on history now?  I have not used the tool in a while.

Edited by NewlyRetired
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14 hours ago, Sand said:

Actually Firecalc isn't a monte carlo simulator.  It's historical in nature.  And it doesn't simulate every possible market occurrence - just the ones that have happened already (not Firecalc's fault, but we only have a certain amount of reliable historical data).

I think Cfiresim has a monte carlo capability as do other programs like Pralana Gold.

:nerdalert:

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9.9% to go. 

Next goal:  Survive Christmas.  Sadly the wife wore me down on new furniture which squeezes the male discretionary budget to 0 in order to end the year well.

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18 minutes ago, Sand said:

9.9% to go. 

Next goal:  Survive Christmas.  Sadly the wife wore me down on new furniture which squeezes the male discretionary budget to 0 in order to end the year well.

Your number, I assume?

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20 minutes ago, Bob Sacamano said:

Your number, I assume?

Yep - that's the point at which I feel comfortable if employment ends.  Otherwise the end of 2021 is pretty significant as that's the time frame at which I've squeezed SS for its useful purpose (i.e. hit the second bend point at which it really isn't worth working to keep going up that curve).

Edited by Sand

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For those that are using just a simple % as a long term average for your savings return, what are you using. I've been using 5.5%. No specific reason why. I used to hear 7-8% as a long term average but that seems high.

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24 minutes ago, cap'n grunge said:

For those that are using just a simple % as a long term average for your savings return, what are you using. I've been using 5.5%. No specific reason why. I used to hear 7-8% as a long term average but that seems high.

We've been using 4% to be conservative.

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35 minutes ago, cap'n grunge said:

For those that are using just a simple % as a long term average for your savings return, what are you using. I've been using 5.5%. No specific reason why. I used to hear 7-8% as a long term average but that seems high.

I've settled on 5.25% (before inflation), so pretty close to what you are using.

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1 hour ago, Sand said:

Yep - that's the point at which I feel comfortable if employment ends.  Otherwise the end of 2021 is pretty significant as that's the time frame at which I've squeezed SS for its useful purpose (i.e. hit the second bend point at which it really isn't worth working to keep going up that curve).

What's that now?

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3 minutes ago, NutterButter said:

6 after inflation which includes 1.85 dividend yield.  Thats just currently when im 100% in s&p 500 index.   

Normally you include dividend in any calc.  

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Another vote for 6% total return, over the next 20 years when I'll go more conservative

Although that 6 is before inflation.

Edited by -OZ-

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5 minutes ago, culdeus said:

Normally you include dividend in any calc.  

I do.  I did it just to call out that part of is the dividend.   I see such low numbers from people and i wonder if theyre even taking into account the dividend. 

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15 minutes ago, SFBayDuck said:

What's that now?

I’m also curious, though I bet ~100% of the people who know what he’s talking about will retire comfortably regardless.

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15 hours ago, SFBayDuck said:

What's that now?

Look here, particularly at the graph.  Once you hit that 15 percent slope you accrue so slowly it isn't worth it to continue if you don't have other reasons to.  You've pretty much squeezed the good juice out of the fruit.

Edited by Sand
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15 hours ago, Terminalxylem said:

I’m also curious, though I bet ~100% of the people who know what he’s talking about will retire comfortably regardless.

Hitting that last bend point indicates a pretty decent earnings record, so on average you're probably right.  

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10 minutes ago, Sand said:

Hitting that last bend point indicates a pretty decent earnings record, so on average you're probably right.  

Not gonna unfreeze my credit to figure it out, but it looks like I’m roughly in the same boat as you for 2021.

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20 minutes ago, Sand said:

Look here, particularly at the graph.  Once you hit that 15 percent slope you accrue so slowly it isn't worth it to continue if you don't have other reasons to.  You've pretty much squeezed the good juice out of the fruit.

Good stuff. Apparently I'll hit the 2nd bendy point in 8 years. Good to know, although I don't plan to retire at 51, although we could. 🤔

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1 hour ago, Terminalxylem said:

Not gonna unfreeze my credit to figure it out, but it looks like I’m roughly in the same boat as you for 2021.

If you have an SSA account you can use that social security tools site in the article to see where you are.  It's a pretty cool calculator.

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4 hours ago, Sand said:

If you have an SSA account you can use that social security tools site in the article to see where you are.  It's a pretty cool calculator.

Yeah, it says you may need to unfreeze your Equifax credit to use the calculator. One of the comments gives an estimate of the time needed, if you contribute the max while working:

Quote

To max out the second $4917 bend point would have taken a little longer…420 months @ $4917 AIME was $2,065,140. At the maximum 2014 SS wage of $117k it would take around 18 years of near maximum earnings.

As footballguys, surely none of us need to work more than 18 years to retire at the second bend? I'm just hoping SS remains solvent when I turn 62.

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I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

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4 minutes ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

I would put it in a Dow or S&P tracker but you seem like you want to pay off a chunk of your mortgage and it’s your house and money so do that. 

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13 minutes ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

pay off your mortgage if makes sense for you.  You are saving whatever your rate is at.  Everyone has their own level of comfort on this issue.   I always paid extra on my mortgages. Created better, unexpected opportunities down the road.

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21 minutes ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

Paying off the mortgage isn't wrong.  Do what makes you comfortable.   

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23 minutes ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

I was in a similar boat, and chose to pay off my mortgage. Obviously, it isn't the smartest financial decision, if you are investing the money in something that exceeds the mortgage interest and tax benefits from the interest deduction. But you aren't, so you might as well pay it down. I gotta say, it's pretty nice to be completely debt-free.

The more savvy answer is invest it in a balanced stock/bond index fund, maybe skewed a bit more than the typical age-10 percentage in bonds since you're risk-averse. Vanguard has something called a target-date retirement fund which may be a good option for you. It is a single index fund compromised of domestic/international stocks and bonds, the percentage allocation in which is adjusted automatically over time to reflect changing risk as you near your goal retirement date. Basically open a Vanguard account, deposit some cash and forget it until you're ready to retire.

Edited by Terminalxylem
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40 minutes ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off.

Not dumb, but you can't eat the house.  No idea how liquid you are otherwise.  At the very least you could be earning ~2.2% or so with a number of funds.  I dump extra money into ICSH for short term savings.  

17 minutes ago, Terminalxylem said:

I was in a similar boat, and chose to pay off my mortgage. Obviously, it isn't the smartest financial decision, if you are investing the money in something that exceeds the mortgage interest and tax benefits from the interest deduction. But you aren't, so you might as well pay it down. I gotta say, it's pretty nice to be completely debt-free.

In a booming bull market it's easy to conclude that carrying the mortgage is the right choice.  Psychologically it may be the right choice, though, which leads to better decisions with the rest of things and makes it the right financial choice.

I went through all my stuff hoping to scrape enough to pay mine off at the end of this year (with the new standard deduction it makes more sense than previous).  I was maybe 25k away from finding enough cash to be able to pull the trigger.  Bah humbug.  I just hope the market continues to go up - need about a 4% return for to the "right" to have held it.  I really want to be debt free, though!

Now I'm just pre-paying the charity stuff this year to drive myself well into the itemized deduction range for this year.  Hopefully way below next year.

Edited by Sand
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It's not very excellent to say something someone does is dumb, but having 500K in a checking account earning nothing is unsmart.

Paying down a mortgage that is costing you 3-4% in interest as opposed to earning nothing is not really a bad idea.

Dollar cost averaging into a raging stock market can be quite advantageous.  I earned more in the stock market this year than I did in HHI by quite a bunch and it didn't feel bad.

As always though, everyone's situation is different. To me, that's a load of money that should be working for you one way or the other.

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You might consider how liquid you are already in brokerage, savings and 401k accounts. If that already feels good, paying down on a 1.5 mil mortgage is pretty solid, although strict financial planning-wise guys may say differently and they would likely be technically/mathematically correct. There’s a lot to be said for being in an advantageous position with a primary mortgage IMO. Not just from a peace of mind perspective, but from a free cash perspective as well. 

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Thanks guys. Yeah I’m thinking I’ll probably leave 100-200k in the account for spending this year and a couple home projects we have planned; but the rest I would like to dump right into the mortgage. Sounds like that’s not necessarily a stupid thing do. Ultimately I’d love to be free of the first home mortgage in 5 years or so (maybe have a mortgage on a vacation home at that point), since we should be in a similar place or better at year end each year going forward. 

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When you have a net worth that is already in the million+, paying off the mortgage makes a ton of sense.

I rather take the guaranteed return at that point.  

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Really good stuff here guys....

Sand’s link has me re-thinking my investment strategy. Went with a fiduciary, fee only certified advisor. Of course he had the option to do a percentage of assets and access to Dimensional Advisors funds which is only through institutional. Might be 80 basis points.  No other fees, commissions or churn but it’s not like the return in 2 years (small sample size) has been killing it. Good advice with getting Roth’s set up and maxed for me and the Mrs in addition to the max 401K with catch up provision I was already doing on my own. Says he has other advantages like tax loss harvesting etc but frankly I’ve used none of that. 

Thinking of just cutting the cord and going to a 3 bucket Vanguard portfolio on my own.  Living on salary and investing Chet/Otis Lite annual bonuses the past 4 years. Paid off a several hundred thousand HELOC note with some of that cash so feel much better. No debt other than less than $175K and 7 years left on a 2.75 note. Not bad for So Cal. May just pay that off too and look at passive income options. Buy the way, maybe not surprisingly advisor was suggesting I not go into property as investments. Not for everybody, and I guess I fit the mold for “ not” in his opinion. Not handy, would have to pay labor to renovate and flip, have to pay a management company etc. 

Want to get this right. Don’t think I’ve been overly smart having my money with my brother in law at Morgan Stanley/Wells before this for 2 decades. But maybe I expect too much with returns. Seem to always underperform the market and fees the likely culprit. (Though they show me all sorts of graphs supposedly proving otherwise)

I haven’t made the time to be more self sufficient with financial knowledge. I know I’m doing the right things - it’s just a matter of optimum execution. Cut the cord?
 

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3 hours ago, Capella said:

I would put it in a Dow or S&P tracker but you seem like you want to pay off a chunk of your mortgage and it’s your house and money so do that. 

We max the ira/401/403 contributions but I really like taking the extra available cash beyond that and knocking down mortgage balance. I hate owning money and it makes me feel better 

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1 hour ago, ghostguy123 said:

When you have a net worth that is already in the million+, paying off the mortgage makes a ton of sense.

I rather take the guaranteed return at that point.  

Follow up to my previous post: this is where I’m coming from 

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1 hour ago, Judge Smails said:

Really good stuff here guys....

Sand’s link has me re-thinking my investment strategy. Went with a fiduciary, fee only certified advisor. Of course he had the option to do a percentage of assets and access to Dimensional Advisors funds which is only through institutional. Might be 80 basis points.  No other fees, commissions or churn but it’s not like the return in 2 years (small sample size) has been killing it. Good advice with getting Roth’s set up and maxed for me and the Mrs in addition to the max 401K with catch up provision I was already doing on my own. Says he has other advantages like tax loss harvesting etc but frankly I’ve used none of that. 

Thinking of just cutting the cord and going to a 3 bucket Vanguard portfolio on my own.  Living on salary and investing Chet/Otis Lite annual bonuses the past 4 years. Paid off a several hundred thousand HELOC note with some of that cash so feel much better. No debt other than less than $175K and 7 years left on a 2.75 note. Not bad for So Cal. May just pay that off too and look at passive income options. Buy the way, maybe not surprisingly advisor was suggesting I not go into property as investments. Not for everybody, and I guess I fit the mold for “ not” in his opinion. Not handy, would have to pay labor to renovate and flip, have to pay a management company etc. 

Want to get this right. Don’t think I’ve been overly smart having my money with my brother in law at Morgan Stanley/Wells before this for 2 decades. But maybe I expect too much with returns. Seem to always underperform the market and fees the likely culprit. (Though they show me all sorts of graphs supposedly proving otherwise)

I haven’t made the time to be more self sufficient with financial knowledge. I know I’m doing the right things - it’s just a matter of optimum execution. Cut the cord?
 

FYI, your post is hard to decipher

 

Here's what I interpret:

-You took $300K+ HELOC.  That is usually not advised, though there are situations you might do it.  Sounds like you are paying it down, which is good.  I take it you have $175K left on it?

-You have 7 years left on your original 30 year note (or maybe 15 year?).  2.75% interest?  If so, no reason to accelerate payment

-You are paying a fee only advisor on where to invest, and are considering losing him.  I would say yes, lose him.  Simplify, 3 fund index, pay off debt, figure out a retire-only-number and go for it.  

 

 

Good luck

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9 hours ago, ghostguy123 said:

When you have a net worth that is already in the million+, paying off the mortgage makes a ton of sense.

I rather take the guaranteed return at that point.  

This is a really good point. Some of you all are rolling in it.  Some of us have relatively low balances, but also low expenses and moderate income.  Heck, my wife's Roth IRA made more this week than my take home from my job in a month. 

I don't care if I ever pay off my mortgage. And I'd much rather invest. But if I had an extra half million sitting in checking and nervous about the market (which I do think is justified when you're talking about dumping the money in at once), paying down the mortgage makes sense. 

Edited by -OZ-

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11 hours ago, Otis said:

I’ll have half a mil sitting in my checking account at year end. I’m assuming a smart thing to do would be to throw a chunk of that at my 1.5M mortgage, and do the same for the next 5 years or so until it’s paid off. But probably someone will tell me that’s dumb, and I’m better off dumping it all into stocks or something.  I’m a worrier and the mortgage feels smart—my work world feels safe at least for the next 4 or 5 years, and that way if it goes to hell and I have to take a much lower paying job at that point, we can stay in our home and in our town. It’ll just help me sleep a whole lot better at night. 
 

What to do here?  This is after maxing out all the retirement stuff. 

What I did to offset the lower returns when I paid off my house, was to reduce my bond holdings to  0% in my retirement accounts.  

Edited by Random
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On 11/27/2019 at 9:04 PM, wilked said:

FYI, your post is hard to decipher

 

Here's what I interpret:

-You took $300K+ HELOC.  That is usually not advised, though there are situations you might do it.  Sounds like you are paying it down, which is good.  I take it you have $175K left on it?

-You have 7 years left on your original 30 year note (or maybe 15 year?).  2.75% interest?  If so, no reason to accelerate payment

-You are paying a fee only advisor on where to invest, and are considering losing him.  I would say yes, lose him.  Simplify, 3 fund index, pay off debt, figure out a retire-only-number and go for it.  

 

 

Good luck

Thanks. Sorry - it was late so maybe I wasn’t firing on all cylinders. The HELOC was about $200K. For property tax reasons a lot of us here in CA are better off taking a house down to the studs and remodeling vs selling and buying a new house with a much higher tax basis.  So it was that, room addition, backyard/pool remodel, etc.  Anyway, I paid that off in full the last few years.  Zero balance now. Correct on what I have on the first - $175K, which has 7 years left on a 15 year 2.75% note.  Only debt I have. No car notes, no credit card balances, 3 college educations paid for + a car each and 1 of 3 weddings done. Have $900K-1m in equity now so I’m OK with where I’m at with housing.

With my advisor I have my number, done Monte Carlo simulations and have a plan. I will sit down with him after the first of the year and compare his returns vs what I would have had the last few years with 3 bucket simplified approach. Leaning towards losing him unless he proves otherwise. 

2024 is the year I’m targeting to have the choice to work or not. 
 

 

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22 hours ago, Random said:

What I did to offset the lower returns when I paid off my house, was to reduce my bond holdings to  0% in my retirement accounts.  

Makes sense, as paying off the house is basically buying a bond. Of course, some would argue you shouldn't have bonds until you're close to retirement anyway. 

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3 hours ago, Judge Smails said:

Thanks. Sorry - it was late so maybe I wasn’t firing on all cylinders. The HELOC was about $200K. For property tax reasons a lot of us here in CA are better off taking a house down to the studs and remodeling vs selling and buying a new house with a much higher tax basis.  So it was that, room addition, backyard/pool remodel, etc.  Anyway, I paid that off in full the last few years.  Zero balance now. Correct on what I have on the first - $175K, which has 7 years left on a 15 year 2.75% note.  Only debt I have. No car notes, no credit card balances, 3 college educations paid for + a car each and 1 of 3 weddings done. Have $900K-1m in equity now so I’m OK with where I’m at with housing.

With my advisor I have my number, done Monte Carlo simulations and have a plan. I will sit down with him after the first of the year and compare his returns vs what I would have had the last few years with 3 bucket simplified approach. Leaning towards losing him unless he proves otherwise. 

2024 is the year I’m targeting to have the choice to work or not. 
 

 

He'll probably argue that his value isn't in beating the market but in helping you stay the course in down markets. Maybe some tax and estate planning. 

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58 minutes ago, -OZ- said:

He'll probably argue that his value isn't in beating the market but in helping you stay the course in down markets. Maybe some tax and estate planning. 

Completely agree. The value of a Financial Advisor isn’t them beating the returns of a low cost index fund basket. It’s for the second set of eyes, reminders of what planning needs you have and helping you stay the course in your long term plan. If you don’t need those things, you shouldn’t be paying for an advisor. 

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4 hours ago, ConstruxBoy said:

Completely agree. The value of a Financial Advisor isn’t them beating the returns of a low cost index fund basket. It’s for the second set of eyes, reminders of what planning needs you have and helping you stay the course in your long term plan. If you don’t need those things, you shouldn’t be paying for an advisor. 

Yeah that’s exactly what he’s saying.  I dunno

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On 11/27/2019 at 8:58 AM, Sand said:

Look here, particularly at the graph.  Once you hit that 15 percent slope you accrue so slowly it isn't worth it to continue if you don't have other reasons to.  You've pretty much squeezed the good juice out of the fruit.

Thanks, I had no idea about this whole concept.  Finally had a chance to run through this just now, and I'm just on the other side of that 2nd bend.  It's cool to be able to play with how many more years of work and at what income to see (what little) impact it will have on my monthly benefits.

Obviously the "other reasons to" continue working are much more important than SS when you combine continuing to contribute with not taking withdrawals.  But still an interesting data point to have.

 

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