Millionaire Interview Update 12

Today I have two updates for you from previous millionaire interviews.

I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉

These updates were submitted in June.

As usual, my questions are in bold italics and their responses follow…

OVERVIEW

How old are you?

I am 65 years old and my wife is 66.

She can never give me a hard time about my age because she always hits those big birthdays eleven months before I do!

We have been married 43 years and one month. Best decision ever was to marry someone with a lot of patience and the same values regarding faith, family and money.

Do you have kids?

We have three great grown kids, as of next month they will all be in their thirties. Seems impossible they are that old. When I started my career I thought thirty was being a fossil, and now my kids are that old?

They all have multiple degrees, the oldest (son) is a chemical engineer and a medical doctor. He is two years into his residency in radiation oncology.

The middle (daughter) has a BS in biological engineering and a MS in civil engineering and does environmental work for the state regulatory agency.

The youngest (daughter) is just turning 30 and she has a BA in business and a MA in adult education. She works at a university helping division one athletes succeed academically.

What area of the country do you live in (and urban or rural)?

We live near the border of Arkansas and Louisiana in the one and only house we have ever owned. It has been our home since we graduated from college and got married.

We live in an unincorporated part of the county but less than a mile from a small city/big town.

We have hundreds of acres of wooded wetlands on three sides of our house and neighbors on the other.

My commute to work was only eight minutes long!

What was your original Millionaire Interview on ESI Money?

I was Millionaire Interview #64. 

Is there anything else we should know about you?

My wife and I are totally retired now but we lead active lives.

We play tennis several times a week, tonight we’ll drive 100 miles to play a tennis team match as partners.

We also run, my wife completed a full marathon just a couple of months ago. She won the age 50 and over first place trophy at the age of 66. I have run 15 marathons but my knees don’t like that distance any more.

We also bass fish, play pickleball, hike, bushwhack (hiking where there are no trails), travel, ski, cook, read and of course I also blog.

I volunteer chairing a college board and a foundation board where I also get to help manage a $65 million portfolio.

NET WORTH

What is your current net worth and how is that different than your original interview?

It is north of $4 Million.

That’s up a million since that interview.

What happened along the way to make these changes?

It has been all good, unless you count last March when we “lost” a million dollars.

But the thing is we did not lose a penny, in fact we made some money because I rebalanced our portfolio at the bottom of the market and moved some more cash into investments. When it rebounded it made us a lot of money.

As an older investor I’ve seen several crashes. As long as you do not sell during or after a crash, then you will not lose any money. Just be patient and rebalance and smile all the way back up!

What are you currently doing to maintain/grow your net worth?

I consulted one day a week the first five years of retirement, I was doing that during the last interview. I shut that down a couple of months ago. It was pretty lucrative, making six figures a year for eight hours a week of work. But it was kind of a niche field of regulatory work that was a little bit boring.

Plus I simply don’t need to earn another penny. So why work for pay?

I decided to focus on family and volunteering. So far so good but I am still seeking at least one more area to volunteer in. I have some leads so I think that will happen soon.

EARN

What is your job?

I am a licensed professional chemical engineer.

I worked for one company for 38 years, it was my first job out of college. I started as a summer intern and ended up running the company.

During that time the ownership of the company changed twice so I had three different sets of corporate masters during my career.

After retiring I consulted for five years for entertainment and that paid 100% of our expenses.

What is your annual income?

I started work at $18,000 a year and made $430,000 my last year of work.

That question is a little harder to answer now since I’m not working anymore. My wife receives a $300 per month teacher pension and she is drawing $950 a month from her Social Security.

I won’t draw my Social Security until I hit age 70 at which time my wife will switch from her current benefit to taking a spousal benefit equal to half of my benefit. In today’s dollars we will receive $66,000 in annual Social Security payments.

That plus a one percent withdrawal rate will keep us funded for our annual living expenses of approximately $100,000.

How has this changed since your last interview?

The consulting I was doing during the last interview paid me about $100,000 a year. That covered all of our expenses, that’s one reason it is up a million since then. We never had to touch our investments and reinvested dividends and bond interest payments.

I was also able to fund ROTH’s for both of us since I had earned income. I can’t do that anymore.

I thought going from earning and building our investments to becoming a withdrawer of money to live on might prove jarring. But it hasn’t. I simply authorized a $4,000 withdrawal from Personal Capital and a $5,000 one from Vanguard and those go into our checking account every month just like a paycheck.

And with the market being so hot our net worth just keeps climbing, even though we are withdrawing nearly 3% of our investments.

The 3% will drop to a 1% withdrawal rate when I start drawing Social Security at age 70.

Have you added, grown, or lost any additional sources of income besides your career?

No, only the small Social Security my wife is drawing and her teacher pension.

Unless you count what we are withdrawing from Personal Capital and Vanguard.

SAVE

What is your annual spending and how has it changed since your interview?

Our spending is pretty steady at about $100,000 a year.

In the last year we have bought a slightly used car for me ($25,000), a brand new car for her ($40,000), a roof replacement on the house ($17,000) and a new HVAC unit ($7,000). Those were once every ten year type events that we just paid with cash. We will drive both of the cars to around 200,000 miles.

We don’t subsidize our grown kids at all, they are off the payroll and doing fine.

We went on Medicare this year and that cut our previous annual $16,000 cost for private medical insurance in half, that was nice!

What happened along the way to make these changes?

I just got bored with consulting, plus some types of engineering consulting can set you up as a target for lawsuits and I was not able to obtain an insurance policy I was comfortable with.

Frankly, work is just not as much fun when the money stops having any real significance in your life.

Earning $100K in a year seemed trivial when my net worth changes by that much in a single day in a volatile market.

INVEST

What are your current investments and how have they changed over the years?

We have our investments managed by Personal Capital, Vanguard Advisor Services and Betterment. They charge 0.75%, 0.30% and 0.25% respectively.

I know I could do it myself but its a luxury I can afford. What I can’t afford is to take a lot of risk. I’ve already won the game so I don’t need to play very hard.

My total portfolio is about 55% equities and the remainder is bonds and cash. There is a little bit that PC has in alternatives, REIT’s, commodities, etc. But it is less than 5% of the mix.

When I was accumulating and working my 9 to 5 I was just about 100% equities. A few years before retiring I went to a more balanced 60/40 equity/bond mix. Very conventional path.

What happened along the way to make these changes?

I read a lot of blogs and articles on investing and took a consensus view that when you approach retirement you probably don’t want to be all in equities.

I don’t need a huge return going forward and this way a 50% market crash only feels like a 25% drop in my portfolio.

But if you are years away then having a lot of bond exposure is too big a drag on your performance.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

I guess I’d say none.

Life has been very good and our net worth, except for the March 2020 correction, has just grown and grown.

Overall, what’s better and what’s worse since your last interview?

Certainly our net worth is a million dollars better.

Our kids are doing well, two out of three are married.

They basically both eloped so we had pretty low expenses there.

What are your plans for the future?

Keep on doing what we are doing, life is a very fun adventure!

I am looking for at least one more area to volunteer in, some kind of mentoring.

It is possible we will move at some point to get closer to the places we play tennis. This area has few players and my wife can’t find anyone to give her a competitive match. I’ve only got a couple of players good enough to challenge me as well.

But it may never happen, we’ve been in this house for over 40 years.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

There are three ways to generate wealth. You can make more money, you can spend less and you can invest well.

I’m a proponent of maximizing income. I averaged 9% raises for 38 years. Another way of saying that is my compensation went from X to 24X during my career.

So while we were frugal the real engine of our success was higher than average pay. We could afford a six figure lifestyle and still save a lot of money.

The trick is finding something the marketplace values that you can also be world class at. I was able to do that. I made my employers over a hundred million dollars with my ideas, so paying me well was automatic. They were worried I might leave and so they matched all the offers the competition made me. I never had to negotiate raises and generally felt quite overpaid.

You can certainly achieve wealth with modest income, there are hundreds of case studies. It is just easier if you can earn more.

——————————————–

How old are you?

We are both 55 years old.

We’ve will be celebrating our 15 year wedding anniversary this year.

Do you have kids?

Yes, all grown and away.

We are living “the dream.”

What area of the country do you live in (and urban or rural)?

We were residing in DFW, Texas.

We sold our home in this insane housing market in mid April and we just purchased a lakefront condominium in Arkansas. The condo is located in a gated, retirement community. It’s quiet, peaceful and devoid of little hooligans running around.

As I mentioned, we are living the dream.

What was your original Millionaire Interview on ESI Money?

I was Millionaire #49.

Is there anything else we should know about you?

I am still working (virtually) and with this current work life I have no plans for early retirement as I previously did. I had planned on leaving the workforce at age 55. Not now.

In some ways, this covid pandemic was the best thing that ever happened to us.

NET WORTH

What is your current net worth and how is that different than your original interview?

$2,001,500.

It’s up from the $1,829,000 in the first interview…which is hard to believe because I have experienced large losses (March 2020)!

Breakdown:

• $726,000. In taxable brokerage account, invested in individual stocks, preferred stocks and bond-like structured notes
• $500,000. Cash (proceeds from the sale of our primary TX residence)
• $300,000. Syndicated real estate crowdfunding (Approximate. Some of these values may not materialize if & when the properties are liquidated. Liquidation dates are as far out as an estimated 2027 so this is not at all liquid and I really don’t count this since all distributions were halted last year. In 2019 this portfolio generated over $32k in passive income.).
• $275,500. Retirement Accounts (IRA’s & 401-k)
• $115,000. (The condo we just purchased and are currently living in, we will transition this into an airbnb rental property when the housing market settles down and we’re able to find a permanent residence. It will be rural with acreage, far from any city living).
• $50,000. Checking and online savings accounts.
• $25,000. In precious metals/physical bullion (mostly silver and a collection of numismatic, mint state Morgan Silver Dollars)
• $10,000. In physical cash currency for true emergencies, kept in a bank vault

We have two automobiles paid off. Last year I paid cash for a new 2020 Acura RDX and my wife’s 2017 VW Beetle convertible is also paid off.

WE HAVE ZERO DEBT. With this we have peace of mind.

What happened along the way to make these changes?

The Good:

• I increased my savings rate.
• Our home increased in value.
• My retirement investments increased in value along with my continued contributions and company matching (.25 for every $1 I put in).
• After losing money in the markets I paid off my mortgage and this resulted in us being 100% debt free.

The Bad:

I took heavy losses in the stock market in March, 2020 to the tune of $460,000. We were on a cruise (probably the final cruise of the year due to Covid) and prior to leaving I had placed stop losses orders on all of my positions. They were ALL executed while we were at sea.

I returned and freaked out over the extent of the damage and did not jump back in…..so I missed most of the market recovery.

A couple of my syndicated real estate crowdfunding investments also went belly up and I lost $50,000.

EARN

What is your job?

I’m a trainer & consultant in the automotive industry and have been in this role since 2002.

Prior to this I was a personal fitness trainer and later a car salesmen which later led to what I’m doing now.

I haven’t stepped in a dealership in over 16 months and I’ve adapted to virtual training via Zoom and Microsoft Teams programs.

What is your annual income?

2020: $167,000

2021: This year it will exceed $170,000.

My wife quit working full time three years ago and she piddles around with a couple of contract labor gigs per year.

Last year this bought in $17,000. Year to date in 2021 she’s only accepted one assignment that lasted a week and earned $3100.

How has this changed since your last interview?

My income has increased and the automobile business has been GREAT!

My dealer clients are selling all cars at well over window sticker prices due to the shortage of inventory.

This won’t last and they’re all running very low on inventory but it should affect me minimally.

Have you added, grown, or lost any additional sources of income besides your career?

I don’t do any side hustles at all.

I keep my life simple and I enjoy the mundane, like sitting on my porch about 50 feet from the lake, watching boaters go by, watching the geese and enjoying the nature.

SAVE

What is your annual spending and how has it changed since your interview?

I don’t keep a budget. I will someday but not at the moment.

I think we probably spent only $75,000 last year.

One thing that is changing is the savings in our property taxes. Last year I spent $11,000 in property taxes which is one major reason we decided to sell our home and move out-of-state. This condo’s annual taxes will be $570! That’s not a misprint!

What happened along the way to make these changes?

As I mentioned, I freaked out over the stock market losses and real estate losses.

For a moment in time I believed we were headed into a severe economic depression, I’m sure a lot of the readers felt that way at some point in early 2020. Due to this belief and fear we eliminated the mortgage, reduced spending and increased monthly savings….

And you know something, we don’t feel we are missing out at all and no sacrifices were made even though we spent $25,000 less than the previous year. We all have way too much STUFF!

Also, we eat out very little and cook almost every meal, this offers tremendous savings.

INVEST

What are your current investments and how have they changed over the years?

Listed above in prior question concerning net worth.

I am more conservative in my investments. I am only invested approximately 33-35% in equities. I sell covered calls for additional portfolio income and for a bit of a hedge factor.

I am heavily invested in bond-like structured notes on individual equities which are sold to me by a full service broker. These earn a coupon rate of between 10-13% and I’ve never suffered a single loss as they all offer built-in downside protection of anywhere from 20-35%.

What happened along the way to make these changes?

I am too old, too far along in years to ever suffer losses like I suffered in 2020. I have to keep a little in the markets since they always go up but I also keep a hefty fixed income and cash allocation.

I will NOT invest the half million dollars that we received from the home sale. This is in a savings account earning little but we will need this when we eventually buy another home as we will be cash buyers.

I will never, ever mortgage a property ever again. I know some readers will disagree with this. They’ll comment that I should invest this money and lock in a rock bottom rate mortgage. For me, being debt free and owning your properties outright is way better.

If I ever lose my job (if another “event” takes place that wrecks the economy), I won’t have much in the way of bills or obligations to service.

ALSO….I have no plans to reinvest any distributions into syndicated real estate ever again. They’re not liquid and at this point I need liquidity.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

Aren’t those losses of $500k+ enough? LOL.

Overall, what’s better and what’s worse since your last interview?

Our lifestyle has improved tremendously.

We have no kids at home and since I’ve been home 100% of the time since the pandemic started, my wife and I are inseparable which has made our bond much stronger.

I can’t get enough of this lovely lady of mine!

What are your plans for the future?

I plan to keep working until age 59, especially since it’s really easy. I say to myself almost daily, “and to think I get paid for this!”

At age 59 I will call it quits and begin drawing down my savings and later the IRA monies.

We both plan to collect Social Security at the earliest possible time at age 62.

We will be collecting it together in the same year since we’re the same age.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

Unless you’re very young and have time on your side, I don’t recommend being fully invested in the stock market. Black swan events take place and it’s very painful, financially and emotionally. Last year took a heavy toll of my mental state after those heavy losses. I vowed to make it all back and then some.
Also, I am no longer in favor of using stop losses. They can really work against you in a market sell-off when there’s a lack of liquidity.

When I looked back late last year at stock quotes and studied the 52-week low price, a few of my stock sales were executed at that exact price. My stop losses were executed at the bottom rock of the markets. That’s my claim to fame!