Today I have an update for you from two 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. š
We begin with Millionaire 16 who took the feature photo for this post (used with his permission). Man, that was one big tree!
You can/should read his initial post for specifics before you read this one, but here’s a basic overview:
- His original interview was posted on August 21, 2017
- At that point, he was 53 years old (this was republished from my previous site and he was 53 when the post originally went live in 2013.)
- His net worth was $2.5 million.
This update was submitted in August 2020.
As usual, my questions are in bold italics and his responses follow…
OVERVIEW
How old are you? (and spouse if married, plus how long you’ve been married)
Iām 60, wonderful wife is 61. Sheās awesome.
28 years married, plus another three on the front end under a lease-to-own.
Do you have kids?
No kids, but if we did they would be indolent, entitled ingrates. So, we dodged a bullet!
What area of the country do you live in (and urban or rural)?
We live in Californiaās Gold Country, about an hour from Lake Tahoe. Rural, quiet, low population density, no light or noise pollution, or graffiti.
We are quiet people who make an effort to maintain our privacy. People are respectful, mostly good drivers, and mind their own business.
If one is thinking about leaving a big metro area, one could do worse than Gold Country.
NET WORTH
What is your current net worth and how is that different than your original interview?
- 2013 – $2.5mm
- 2020 – $3.2mm
Our investments are passive, requiring less than one hour per month. The passage of time is working for us.
What happened along the way to make these changes?
No changes, we have been doing the same things for three decades.
Most important to us was the āSāavings, driven by our joint āEāarnings, and eventually āIānvesting.
We learned some hard lessons on our path, took some risks that backfired, and now find ourselves in a low/no-interest rate environment.
In 1980 when CDs paid 13%, I never would have guessed that forty years later a 10-year CD paying 0.75% would be considered good.
Two quotes that I wish I had taken to heart, as they would have saved us years of tedious work.
āSeek wealth, not status. Get to the point where you make money while you sleep.ā ā Naval Ravikant
Money is a measure of freedom, not a measure of a person. We have always found the types who are trying to āone-upā or show off to be tedious. Not real friends, just people we used to share a neighborhood, classroom or workplace with. Job titles, trophy spouses, vacations, etc. Status can change quickly. Will leave it at that.
āIf you go to zero, itās game over.ā ā N.N. Taleb
Applying some basic economics concepts, like the āsunk cost fallacyā and āgame theoryā can be really useful to your life.
Nobody likes to cut a loss, because it meansā¦you lost! The Einstein-brain takes, i.e. āyou donāt lose, until you sellā or āI broke even in Vegasā or āI doubled my moneyā (neglecting to mention the 25 years it took) are stunning to see. Listening to people claim expertise, in the face of contrary evidence, can be an interesting peek into the human psyche. Anyone who has gone to a County Fair in the summer, and observed the āhalter-top/belly-ring/daisy-dukesā ratio can attest that there is a big difference between confidence and delusion. Again, will leave it at that.
What are you currently doing to maintain/grow your net worth?
We are attempting to maintain our net worth, with a conservative outlook.
We do not see a bright economic future for the U.S., or any sector with growth potential. We do see a disconnect between 1) the real economy; 2) the reported economy (i.e. unemployment, GDP, and inflation rates), and 3) the market economy (i.e. stock and real estate markets) which in times past has been used as a predictor for the 4) future economy.
This disconnect, and the unpredictable environment created by Federal Reserve actions, lack of correlated government revenue and expenditures, and unfunded entitlement promises ignored by both citizens and politicians, has stopped us from any pursuit of growth through risk. This has been true for us for the past 10 years.
EARN
What is your job?
Both happily retired.
My wife was a Director of Contracts in a university research environment, and I was a consultant in project management in many industries.
Neither of us liked our jobs or truly committed to a ācareerā as we found the business-decisions of extra hours/effort/striving not worth the uncertain reward. Not all stories end so successfully like that of our host, ESI Money. We are quite content with our choices and results.
What is your annual income?
Our best working year was 2011 at $280,000, mostly W-2 with some dividend and interest income.
A good figure for us to use now, going forward, is $167,000.
This includes dividend and interest, a small pension, my wifeās small artisan business (6 hours/week), IRA drawdown, Social Security, and additional streams.
How has this changed since your last interview?
Not much change in the static income streams, our approaching 62nd birthdays are an opportunity to realize IRA and S.S. funds over a longer duration while enjoying a lower tax rate.
SAVE
What is your annual spending and how has it changed since your interview?
$60,000, up from $50,000 in 2013.
Our home and vehicles are paid off, and we have no debt. The quarantine has had no impact on our day-to-day, and it was always an effort to go out to restaurants. It is more trouble than it is worth to go out to restaurants. Once every few years weāll have a larger expense for remodeling or a vehicle.
We no longer wish to travel. Weāve been to more than 30 countries, and the experience of new places-and-people-and-cultures has really degraded. The behavior of travelers has become atrocious, and is the most memorable part of our last trips. Fold in the COVID drama, and travel holds no appeal. The only thing that might change my mind would be instituting the Con Air prisoner cages that Adam Carolla has advocated for.
Weāve been shedding possessions for 20 years, and the acquisition phase is over. We really donāt want or need anything, and are quite content to continue living as we do now.
Concern-trolls might worry that we are āsaving too much!ā and āwill die with millions!ā Oh, noes! We are watching and helping with situations very close to us, where Home Health Nursing and caregiver expenses are $10-12,000/month. We arenāt saving for that, particularly, but will be ready if it comes our way. In the meantime, simmer down concern-trolls!
ESI has noted that the best part of the ESI Money blog is the commenters, and I agree. There are a number of exceptional commenters on the ESI site, including Razorback 14, Apex (I remember him from one of ESIās previous sites), and others. Paper Tiger noted that he was moving on to a different phase in life, where he tuned out the worthless news (intended only to agitate to keep ears and eyeballs for the ads) and where he focused on the people/places/things that brought joy and value to his life. I took that years-ago comment to heart, and thank him for putting into words what I want for myself.
INVEST
What are your current investments and how have they changed over the years?
Our core net worth is held in 51 FDIC-insured Certificates of Deposit laddered over 10 years. As of this writing, our blended rate is 2.84%. The trend is down, and we donāt see risk-appropriate alternatives.
This is different from our 100% equities portfolio in the 2000s that performed great, until it didnāt. Losing 50% is quite different at 60 than at 40. The risk/reward ratio made sense then when we had jobs and could rebuild savings through work. Today, no.
MISCELLANEOUS
What other challenges or opportunities have you faced since your last interview?
Actions of corporate boards and the Federal Reserve have been unpredictable for years, and there no longer seems to be a correlation between actions and consequences. We are watching a continued financial engineering of assets. Crypto. Green energy. Corporate values.
20 years ago, an invention was introduced that promised to change the world: the Segway. My point is there is really nowhere to go for markets, as products arenāt being created. Just new ways to package them. So far, we have resisted the siren-song.
Overall, what’s better and what’s worse since your last interview?
āExpectation is the parent of anger.ā ā Kevin Kelly
What is better, is my managing of expectations. I have reduced my exposure to outside variables of all kinds. We consider ourselves āin, but not of, the world.ā Iām more content, and more importantly, so is my wife. Nothing is worse since the last interview.
Iāve made a few unexpected friends, which is always a great thing. One is a rabbi. Another is a retired hedge fund manager specializing in Emerging Markets. And Iām happy to enjoy their friendship for as long as it lasts, at whatever level is comfortable for us both.
Iām still working on improving our property, 250+ trees removed as fire hazard, with my chainsaws and stump grinder. It is a meditative experience, helps me to sleep well, and I like the visible results.
What are your plans for the future?
We are doing what we want, right now. Our future is now.
It is a nice feeling to think that tomorrow wonāt be much different than today, because today is a great day.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
āControl your narrative!ā ā The Essential Character, EC3
Yes, take charge of the story of your life. Pay attention. If there is a disconnect between words and deeds, donāt ignore it.
I wasted a lot of time complaining and hoping for fairness, when I should have been figuring out what to do in order to change my circumstance. Nonsense and gossip are a zero-value proposition.
One quality that wealthy people share, is that they are readers. Will leave it at that.
Avoid flaky people, and anyone who cannot be on time, who says “I’m not a detail person”, “I’m bad with names”, “that’s just the way I am”, āI forgotā, etc. without irony. These people are forewarning you that they are deficient by choice, and won’t change.
Nobody is a ādetail personā, āgood with namesā or āpunctualā naturally; it takes effort and practice and (most of all) respect for others. Sooner or later, you will have to pick up the flakeās slack, and they will let you down. Don’t be that flake.
Lastly, be aware of the difference between ātoleranceā and āacceptanceā. If you are being ātoleratedā, try to move towards āacceptanceā. Same with your own exposure. It is okay to make some changes, as needed. Wishing all ESI readers success and acceptance!
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Lots of wisdom there! And more to come!
Our next update is from Millionaire 20.
Here’s a quick overview of his initial interview:
- His original interview was posted on September 18, 2017
- At that point, he was 51 years old.
- His net worth was $4.6 million.
This update was submitted in August 2020.
As usual, my questions are in bold italics and his responses follow…
OVERVIEW
How old are you? (and spouse if married, plus how long you’ve been married)
I am 54, about to turn 55 in December and wife is 52.
We have been married 21 years now.
Do you have kids?
No kids. One older cat we have been fostering for a few years.
What area of the country do you live in (and urban or rural)?
Houston, Texas, but not way out in the suburbs.
Is there anything else we should know about you?
I was working for the 3rd largest county in the country and was laid off in April 2019, 450 days before vesting in my County Pension (not that I was counting). Oh well.
Life has been much better in retirement. My blood pressure is down and I have learned a few things and finished a few projects around the house.
Since we love to travel, I started a travel agency. It was going well last year and I had about $50K in bookings in 2020 until COVID hit. Almost all my clients have pushed their vacations into 2021.
I went on a ‘work’ trip to Spain in early March 2020. I got back on March 10th and Spain was shut down two days later. We were in the Southern part of Spain, so there weren’t as many people like in Madrid. We had a Panama Canal Cruise cancelled in late April and our African Safari was cancelled. Various other trips have been cancelled as well.
Our next hope is a cruise from Spain to Portugal in late November. Less than 300 on the ship, so I am hoping it doesn’t get cancelled. I got a great deal on it.
Our parents are all still alive, but mine and the wife’s are all single and starting their 80’s. 3 out of 4 have long term health insurance. Wife’s mom is in memory care. More on that further down.
NET WORTH
What is your current net worth and how is that different than your original interview?
Current NW is $8M, it was $4.6M at the time of the interview. 2017 ended with our NW being $5.1M.
House is worth around $550K and has been paid off since around 2008. We paid $225K in 2001 and have put in over $200K between kitchen and bathrooms.
I ran around with the wife on some of her work trips to New York and Chicago and Los Angeles since I wasn’t working anymore and we had the Companion Pass on Southwest Airlines. We did a Caribbean Cruise and a River Cruise on the Rhine, went to Puerto Vallarta with friends over Xmas in 2019. Wine Country in May, Ireland in July. It was a great travel year. Travel spending 3 years ago was around $20K.
Cost of commuting has gone way down. Gas usage down, no dry cleaning, I used to eat out every day, wife cancelled her parking contract in May at $165 a month — she isn’t scheduled to return to the office until January. If she goes in 3x a week, I will probably drive her to work and go to the gym. If she Ubers home 3x a week, it’s probably the same as her parking contract.
What happened along the way to make these changes?
Wife is still working and I was laid off in April 2019.
We renovated both bathrooms last year and had to have the house repiped, so that was a $75K hit to the NW. 2017 and 2019 were great stock market years. That didn’t hurt.
We have been fortunate and haven’t really had any bad experiences except investing in a friend’s restaurant and lost around $30K on that venture.
What are you currently doing to maintain/grow your net worth?
Staying the course on investing.
Bought stocks in March 2020 once the market was down 25%. At this point, we don’t need to grow the NW much more, but I am still 80% stocks, 10% bonds for a bit of stability and 10% cash for the years between wife retiring in 2022 and me turning 59.5. 10 year average is about 9.5%, so not shabby. It was over 10% before March 2020.
I am going to sell one of our rent houses in Texarkana and buy a townhouse for my Dad, who got divorced at age 78. He turns 80 in August and is concerned about his rent going up each year, even though he is in a stable area. We are going to do a 1031 exchange. The rental house was getting to be a pain. Spent $7K on it last year. We had good tenants this last year, but had six months of vacancy leading up so it’s time to ditch a house. Hopefully it sells for around $210K. We paid $95K as it was a foreclosure about 10 years ago.
EARN
What is your job?
I am now retired 15 months, but I started a Travel Agency since we love to travel. Costs are low and benefits of travel are pretty good. I was at home and just learning the travel business and going to the gym so COVID didn’t change much for me except zero income right now.
I now do volunteer work 2x a week doing Meals on Wheels.
The Wife is a Tax Director at a Big Four Accounting firm. This has been her only job since college. She is ex Arthur Andersen. Would have made Partner if it wasn’t for Enron. She is happier as a Director now.
What is your annual income?
Wife has a base of $513K and for the first time, she won’t get even a COLA raise due to COVID. They laid off a bunch of staff, gave Partners early retirement etc.
One of the Partners in the DC office took the package and he was a bit higher up than my wife. I think she is now #1 in knowledge of her specialty, which is taxes on Securities like Collateralized Debt Obligations, Mortgage Back Securities and stuff like that.
2019 we made $613K total. Rental Income was $24K of the total.
How has this changed since your last interview?
My income was right around $90K, so not a huge loss. I was already scheduled to retire on July 2nd, 2020, so being let go before I vested in my pension might cost me $20K a year. I get the money that was taken out at a 7% rate, but the County would have put in 225% of my balance once I hit 70. So if my part had grown to $100K, the County would have added $225K.
People that have been with the County a long time have a great pension. Many retired once the pension was more than their salary. I was only there 6.5 years, so mine wasn’t going to be huge, but hey, free money is free money. We will be just fine.
Have you added, grown, or lost any additional sources of income besides your career?
Wife’s salary went up a few times since 2017. She got a large bonus in 2018 and an OK one last year.
Rental income has been steady.
Dividends are going up a few thousand each year.
SAVE
What is your annual spending and how has it changed since your interview?
We spend between $80K and $100K a year.
2019 spending breaks down into:
- $8K in utilities
- Charity was around $30K
- Entertainment was about $12K
- $4K in groceries
- $3K in restaurants/bars
- Home/Car Insurance $5K
- Travel was an all time high at $50K
There have been renovation and maintenance projects every couple of years. This fall we are going to replace the air conditioning ducts and that will run about $7K.
Travel was on the uptick, but everything has grinded to a halt. We have received refunds for our Panama Canal cruise, her trip to Switzerland/France with a friend and our airfare to Africa. So that saved us $10K right there.
We have upped our charity giving each year. We are up to around $50K a year now and support several organizations. We hit $100K in giving with an organization we are heavily involved with one last June.
What happened along the way to make these changes?
As I said before, my wife is not a shopper and now she needs even less for work clothes.
We spend more on food at Farmer’s Markets than at the grocery store, we don’t have a 2nd house or a boat or a Country Club membership.
I have lightened up the purse strings on travel. We were going to be business class going to Africa and in 2018, we had a suite on a River Cruise in Portugal. That was our most expensive vacation at around $15K all in. We have a suite booked on a cruise for a 14 day trip to Japan in April of 2022. It’s going to be about $20K and airfare will be another $6K. A friend is turning 50 and that is her dream trip, so I am booking it for her and a few others.
We are still saving about $10K a month outside of retirement in our brokerage account.
INVEST
What are your current investments and how have they changed over the years?
I have almost all ETFs in various funds. VTI, VB, VUG, VXUS and a few others. I recently decided to dump my REITs on the thought that most office buildings are going to suffer in the coming years if many people work from home.
I still buy on dips in the market and buy here or there.
I am still building up the cash and will probably stop at $500K and start to invest a bit more.
Wife’s 401K is in a dividend mutual fund and a growth fund. All the 401K money currently goes into the Dividend Fund.
With her profit sharing of $32K a year and her annual $5K bonus, she puts away $67K a year. I was maxing out for the last 10 years.
What happened along the way to make these changes?
I listen to the Ric Edelman show weekly and I was convinced about 12 years ago to move into ETFs instead of mutual funds. I like the tax efficiency aspect and low costs.
I have kept my asset allocation pretty consistent over the years. I have re-balanced a few times, but not every year. I am fine with an 85%-90% allocation in stocks. There was one year I re-balanced in my brokerage account and caused about $16K worth of taxes.
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
So my wife’s mother moved down to Houston from Texarkana in August of 2018 and we put her into an independent living facility near us. She had mild dementia at the time, but last year she sort of wandered out of her apartment building and ended up 2 miles away on a very busy road and really had no idea where she was.
So at that point, we started to scramble for a memory care facility and she has been there for a year now. Thank god we were paying for her Long Term Health Insurance for 20 years. It paid back in about 8 months.
I had been managing her money in a conservative manner, but now that she has everything paid for by insurance, I have put her portfolio into a bit more stocks to grow it, since it will become the wife’s money at some point.
As I said before, my Dad got divorced at age 78 (she wanted out after 26 years) so it hasn’t really created a burden on us, but we are going to make his life lower stress by finding a townhouse for him so we can control his rent payments. If we break even in the future, that is fine. Not trying to make money on this deal.
Overall, what’s better and what’s worse since your last interview?
Things aren’t worse. Wife has been working from home and she loves it. Coffee on the patio during the spring and does yoga twice a week during lunch and has lost 15 pounds.
We have been to Spain, Portugal, London, Ireland, N Ireland, did a Rhine River cruise last November and South America for the first time a few years ago, went to Mt Rushmore and the Badlands in July.
Hoping to get out of the heat and go to Lake Tahoe for a week in September.
What are your plans for the future?
Travel Travel Travel.
Once we can do some last minute traveling or being gone for more than a month, we are going to be all over the place. We might spend summers in Colorado. We have friends in Denver and love hiking and the mountains. Spend a month or more in Europe bouncing around the area.
The wife is going to have about a $75K a year pension, so that is nice.
Honestly, we are going to have trouble spending what we could at 4%. With a $10M portfolio, that is $400K a year that we could potentially spend. Most will go to charities since we have a goal of spending X and if we don’t, the balance goes to charity, but our travel budget will just increase. Nicer cabins on cruises, or business class flights or smaller customized tours that might cost more due to size of group.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
Start to find out what you like to do now before you retire. I love doing the travel agent thing at my own pace. I have organized several group trips over the years, so to me it was a no brainer. I don’t have to make money at it, but I am just doing it for friends and family. I ‘lost’ money last year and was on pace to make around $5k this year, so much of that is pushed into 2021, but I don’t spend much on the business either.
A few trips are tax deductible, but with the wife being a CPA, she cracks down on some of my travel expenses.
I am hoping to lead a tour of 14 friends around Kentucky doing the Bourbon Trail in September if things calm down.
Go find some volunteer work. There are hundreds of opportunities out there to help out. You are retired, you have plenty of time.
For the savings, save early and as much as you can.
Stay the course. We were down $2M in May with the COVID dip. Pretty much back to early February 2020 levels now.
Give up the new car every 5 or 6 years. Go for a new ‘used’ car every 12-14 years and you save a ton. We are fortunate to make a good chunk of money, but we haven’t wasted it by buying everything in sight.
Try not to buy a large house. Our property taxes are around $8K a year right now, but taxes are going to go up to make up for the loss in revenue caused by COVID.
Write down the goals in a spreadsheet and keep track each year or use Quicken to help keep track of your money. Have fun with your money.
ESI,
This is such a great post into the millionaire’s mind.
What I thought was fascinating was to see that at age 50+, your millionaire interviewee still was at an 80/20 stock portfolio. In my days of coaching clients, most are at a 60/40 or 50/50 and honestly, I think that because they are able to stick with their higher risk portfolio, their net worth has grown so much.
Moreover, seeing that your millionaire interviewee understands the markets – and how to conquer your emotions when it comes to investing in the market – by investing in the March 2020 lows, was really impressive.
I am really sorry to hear though that he lost his job 450 days before vesting in the County Pension.
Life doesn’t always play in our favor, unfortunately.
What a great post – and thank you for sharing!
The Millennial Money Woman
I think the key to Millionaire 20’s 80/20 portfolio is the cash he has/will have. With $80k to $100k in annual expenses and $500k in cash, 5-6 years worth of buffer provides a safety net to ride down market conditions.
My plan while on early retirement is actually very similar to his — 100% in equities + cash equivalent to 5 years of annual expenses. Then switch to 40-60 equity-fixed income split at retirement. Will get to do it for real very soon. š
Good statements MMW & PB. Now I’m curious if it makes sense to hold more cash yet have a higher-risk portfolio and I think it depends on net worth.
Is a 40/60 equity-FI portfolio for someone who has $10MM really the best approach? There’s many factors that go into being able to answer this but that’s a lot of cash that may not be necessary.
Of course there’s always the mantra of if you’ve won the game then stop playing. Something to ponder on a rainy Friday!
Thanks for the comments. Until Bonds get back into the 5%-6% range, which could be a long time, I am fine being 90% in equities. Wife is going to have a good pension so we can do quite well living on it, so I can be more aggressive. I do have about $250K as part of my EF in short term PIMCO fund getting about $7,000 in interest. Not great, but better than the Money Market Funds.
RE 55, great question on the over $10 million. I am 55 and over $10 and I manage my momās money that she is 81 and is over $3 million. I look at when the money will be spent to determine appropriate stock to bond split and downside risk of losing the money to determine what risk level is acceptable. My momās spending is significantly more than covered by pension and teachers retirement income without touching IRAās and she has an outstanding long term care insurance policy. At 81, what gives her the greatest joy in life besides visiting family is playing cards at her community center and taking a walk in her neighborhood for exercise. Her desire for travel for pleasure stopped after her spouse with Alzheimerās could no longer enjoy travel. They are so grateful they retired at 55 and had years of travel and happy retirement prior to health issues. My sister with no kids will need my momās money for retirement and recently retired at 58, so half the portfolio is really conservatively managed with about 50/50 stock to bond mix and well diversified. The other half of the portfolio will likely be never spent or at the earliest will be for my kids retirement and they are 18, 21, and 24 or be given to charity or some combination of that. That half of the portfolio is aggressively invested in stocks with a goal of substantial gains over time and a willingness to take concentration risk for the right opportunity. If that half was all lost, no ones quality of life would change in any way.
Also have similar thinking. I think those with $100k in “essential” spend that have a $2-3M portfolio should have a different investment profile than those with a $6M+ portfolio. The risk tolerance of the $6M+ household is higher, provided they keep a cash cushion of, say $500k (which is still less than 10% of the portfolio). A $500k cash cushion on $2M NW household with an all stock portfolio in retirement, I think, is subject to too much sequence of return risk and a bad portfolio balance. But at $6M, the ability to pull back on “luxury” spending and/or selling during market lows to fund living expenses during prolonged down markets is much easier (less impactful to long term wealth) if you’re forced to sell equities when your dry powder cash starts running low. If I ever hit the $6M mark, I don’t plan on a 40-60 split at retirement myself and plan to maintain a much higher equity stake in retirement.
So the one caveat is that most people with a $6M net worth spend more than those with a $2M net worth. I know thatās not true for every case and those with $6M may have a side hustle or other source of income that balances out their higher expenses.
Maybe itās not a linear relationship so the concept is still valid, but itās still worth considering, right?
RE 55, if you read most of the millionaire interviews the spending levels between those with $1, $5 or $10 million net worth is not that much different. The biggest category difference is likely travel. I donāt think grocery, health care, or housing expense varies more than 10 or 20 percent total and is certainly not linear. Most people that save and invest to achieve substantial net worth donāt change their spending level much when itās achieved other than donations, taxes, and travel. When the money really gets spent is when its inherited by someone that has the habit to spend whatever money they have.
So when I originally setup our current portfolio allocation, for early retirement, and once we hit 67 years ago, there were a few things that struck me:
1. The worst consecutive years of negative returns was during the great depression which had 4 years of double digit negative returns following by almost 50% gain.
2. It was 3 years during WWII and the dot-com bust.
This is why I set my buffer to 5 years worth our annual budget.
Also, my wife and I agreed that if the market had 2 consecutive negative returns, we’d switch to our tight/frugal budget that’s 60% of the regular annual budget.
I’ve written code to test the above hypothesis by running multiple Monte Carlo simulations with the below portfolio:
* Early Retirement (50 years old): 100% equities with a 5-year buffer
* Annual budget of $9,000/month (real money; 2020 value)
* At 67 years old: 40% equities, 60% fixed income
* Annual budget of $5,000/month (real money; 2020 value), and retired in the country where we grew up (low cost of living compared cities in the US)
With 95% confident interval at $250K confidence level (~2,300 iterations) and with a little over $3.0M in the stock market + 5 years worth of budget in cash, the simulations produced a 0% chance of going bankrupt at age 100 years old. Of course, I used a lot of assumptions including using Black Rock’s forward looking asset class returns, historical inflation rate from FRED, our budget, and adjustments based on market returns, etc. etc.
However, I’m sticking with my plan and I’m willing to bet our retirement on it. š
I like it!
So have you considered a doomsday scenario in which our market tanks and stays there for a decade (1990ās Japan)…then what? Does the adjustment philosophy to 60% after 2 down years just become the norm and you continue life that way?
Iāve enjoyed your approach PB!
Yes, I have and that’s exactly how we’re thinking about it.
The 60% wasn’t a guess but something I estimated after reviewing the worst outcomes of my simulations. By the time we get to switch to 60% of annual budget, we will have used up 40% (2 of 5 years) of the buffer. Switching to 60% of original annual budget will stretch the remaining buffer for another 5 years which will give us a total of 7 years of buffer to ride the down market and wait for the recovery to happen.
The budget would switch back to inflation-adjusted annual budget once the market recovered.
If we got all unlucky to have a financial crisis worse that the great depression, from then on we would start pulling from our invested assets but still live off 60% of annual budget which by then would be our new normal budget. š
Thanks for elaborating – I’ve really enjoyed learning from you!
Best of luck!
Great approach and really good analysis. What are your thoughts about hyper inflation of all fiat currencies or a civil war.
Very interesting juxtaposition of two different views of the world and of the future. My takeaway here are the following:
1. There’s more than one way to get to and be in retirement, so education/reading and reflection gets one to formulate their own path — “One quality that wealthy people share, is that they are readers.”
2. Retirement life is not static and continues to change — after the enjoying-the-travel phase, what’s next? “Start to find out what you like to do now before you retire.”
Thanks for publishing.
To Millionaire 16 living in Californiaās Gold Country, I love the following and laughed when I saw it. Well said. One of the best things Iāve come across in many years.
āAvoid flaky people, and anyone who cannot be on time, who says āIām not a detail personā, āIām bad with namesā, āthatās just the way I amā, āI forgotā, etc. without irony. These people are forewarning you that they are deficient by choice, and wonāt change.
Nobody is a ādetail personā, āgood with namesā or āpunctualā naturally; it takes effort and practice and (most of all) respect for others. Sooner or later, you will have to pick up the flakeās slack, and they will let you down. Donāt be that flake. ā
Thanks! Always funny when somebody “says the quiet part out loud.” People get b*tthurt when they see themselves, here.
I really enjoyed the perspective of MI-16 but this update was disappointing. I felt you had the opportunity to convey an impactful message with your candid demeanor. Blatant honesty is hard to find and it’s always nice when you stumble across it, but your disdain for others completely taints the message. It’s too difficult to to appreciate the wisdom you’ve shared when it’s buried beneath this much cynicism and negativity. I truly hope you’re able to move beyond whatever’s made you this jaded and find peace in your retirement.
MI-20 – great way to maintain positivity and success post-layoff!
I agree – such a negative post I couldn’t make it all the way through. Must be hard going through life with such disdain. Or maybe it’s easier? Who knows…
Thanks for partially reading!
Folks. He was being tongue in cheek.
Thanks! I have never felt so seen!
I agree. MI16 is too negative. I wonder how he finds joy in his life with so much disdain for having children and other people. Truly reminds me of Scrooge….probably happy being holed up in his house counting his money. Not my way of seeing joy in life…
It was the belly-ring thing, touched a nerve and was maybe a little much. No worries, stay body-positive!
I try not to criticize because who am I….nobody of consequence. But here’s another way to think about it. The whole update was talking about things NOT doing. Don’t want to travel….travelers are atrocious. Don’t want to be around people….they’re flakes. Don’t want to go restaurants….more trouble than it’s worth. Why not spend time talking about the things you ARE doing? What are you doing for yourself, family, the rest of the world? This is still America so it’s cool if people want to isolate themselves. If that’s what works for you.
MI20, great update and agree on the optimism. Thanks for spending the time to update us.
Okay Michelle Foucalt.
I, too, was turned off by this interview. Negativity is usually an indication of inward dissatisfaction. I respect their decision to not have children, but to think if they had, they would be āindolent, entitled ingratesā is sad. Weāve raised two happy, professional young men who will contribute great good to our world. I wish both interviewees a happy holiday season and hereās to a fantastic 2021.
So insightful! Nailed it! And yet you, and none of the Mean Girls, catch on to the fact my Imaginary Children have also dodged a bullet by avoiding my Imaginary Parenting Skills.
Congratulations on your superstar kids, and try not to get triggered by imaginary things this holiday season!
Your performative concern for the taint is noted! And why do the Mean Girls always find each other, and gaggle smoking under the bleachers?
“When a true genius appears in this world, you may know him by this sign, that the dunces are all in confederacy against him.” ~Jonathan Swift
Great interviews. So much wisdom captured in M#16ās interview. Best read of the day!
My cup runneth over! Thank you for actually reading my words, and enjoying the meaning behind them!
To millionaire 16, have you looked into MYGA’s (Multi-year guaranteed annuities) as an alternative to CDs?
Yes, I have. They are just right for a particular person, but didn’t pencil out for us. When we calculate against a 2.84% return, add in the fees for marketing, distribution, and operations, the payout (even without life insurance) winds up less than our current portfolio. Thank you for the suggestion, nice to see a positive solution offered!
MI-16, it was great to read your update and I am thrilled to hear how well you and your wife are doing. You are a man with the right priorities and living life on your own terms, which is awesome!
I was humbled by your words attributed to me from comments I previously made, and the impact they had on you. I am glad you found them helpful and put them to good use. It meant a lot to me knowing that they helped shape your attitude in a positive way. Thank you for letting me know!
I’ve recently completed my own update interview which will be published in late January so be on the lookout for it. Take care and all the best to you and your wife and I hope you have a long, happy, and healthy future together.
Sir! I stand on the shoulders of the Kings and Warriors that came before me. *looking at you*
Those old-school postings/posters were the best, fun and funny. Always enjoy your posts, you might be surprised at how your words have been passed along to others and the influence you share. You never know who is reading! Looking forward to your update. Be well!
Thoroughly enjoyed MI-16 updated interview. Lots of words of wisdom there. A great reminder to be careful of who we surround ourselves with. I do hope he is on the Millionaire Mentors site for I would love to hear more from him.
Thanks! “Tolerance and dispassion are the last virtues of a dying society” – Aristotle
Acceptance, joy, and enthusiasm are the three keys to happiness according to Eckhart Tolle. Consciousness has to flow through these three paths. Appreciate you reading with consciousness!
I really enjoyed MI-16 interview. You had some great words and I thought they were wonderful no matter what the negative people said. Thanks for being honest and sharing.
Thank you! Nothing p*sses people off more than telling them to take responsibility for their actions.
MI-16, enjoyed your interview and your thought-provoking comment about flakes.
MI-20 , growth from 4.7 million to 8 million in 3+ years is amazing. Wondering how much was due to contributions vs investing growth?
$250K a year more or less into the market in 401K/Profit sharing/Brokerage contributions and 90% equities helps with the growth.
By the end of 2017 We were at $5.1M, 2018 was flat and 2019 ended at $6.8M. I picked up over $400K in the wife 401K holdings with $62K in contributions and $600K in the Brokerage Account, $60K in contributions, $518K in market growth and $51K in dividends. So 2018 ended like crap, but 2019 was pretty good. I also added $100K to the EF in a different Brokerage account that isn’t at Vanguard.
On a side note, we are planning on spending about $50K a year in travel. A good chunk of that is going to be in 2022 when we spend 6-8 weeks in/around Japan and cruising back to Alaska in March/April of 2022 and a River Cruise in Egypt in December of 2022.
$4.6 to 8M in that window…AMAZING. 90-10 portfolio, got it. Very solid annual contributions- check. Are you an indexer? Or more of a mesh of different/diverse types of funds? Or were/are you in stocks? How do/did you think about your investment strategy in terms of WHAT you invested in? I want to replicate that kind of growth! IMPRESSIVE! Thank you
100% ETFs in all of our accounts except wifes 401K/Profit sharing. Because of wifeās job at Big 4 accounting firm and her position I own 1 individual stock and the rest is at Vaguard in 3-5 different funds like VTI, VB, a foreign ETF a bond ETF, Divided ETF. I should probably eliminate the small cap and dividend since I have VTI, but the taxes to sell at this point are high. I will wait til wife retires. 12% return in the last 10 years. Part of it is buying during the major dips like M09, D18 and this year in March and April. I just believe the market goes up much more than it goes down.
Thank you so kindly for the detail. Great to see. I am aligned on most of this same approach…so very good to know. Appreciate it- and again- WELL DONE!
Finished 2020 with $9.15M NW. November was a good month.
April 2021 Update, just crossed $10M in Net Worth. $950K in Property (Our house $600K and two rentals $300K, two SUVs) and Investments just crossed $9.01M dollars. Investments finished 2020 at $8.2M. This is really sort of crazy. End of 2016 I just crossed $4.0M in investments. To double investments in 4.5 years is just crazy to me.
Impressive and outstanding! I hope I can grow my money at that rate!
To be fair, we have been adding to the portfolio every year about $300K, but the rates of return have been way above average. 90% stocks/5% Bonds/5% Cash