EARLY RETIREMENT

[redwood13 56]

I occasionally have a look at folks blogs and so far this guy's is the only one I found to be worth following. It's not specific to Thailand but to the idea of what's a guy who retires at age 37 with a few million dollars going to do for the next 40-50 years? First draft of an article:

 

http://philip.greenspun.com/materialism/early-retirement/

 

And his blog is here: http://blogs.law.harvard.edu/philg/

 

-redwood13

[Owen` 2]

Vaguely familiar with that guy's situation. I believe he likes to fly. Flying is pricey.

 

The rule of thumb is 4% extraction from nest egg for it to last 30 yrs. That's $80K/yr in the first year on 2 million dollars with a 3% (inflation) increase each year thereafter. Take any more than that and your odds of running out of money grow. That assumes a 50/50 mix of equities and bonds for the 2 million, btw. The equities are needed to fight inflation, but they also subject him to crash risk.

 

The real problem he faces is he needs to last more than 30 yrs. This will drop him under 4%.

 

This is a very difficult psychological barrier to get thru. A man with $2 million to his name thinks he is rich, and he is, but that doesn't mean he will have a mansion and domestic staff and limos to all the Broadway plays for the rest of his life. If he wants to stretch that money 45 yrs and live to 82, he probably should not be yanking more than 3.5% in year 1 before inflationary bumps. That's a 70K/yr lifestyle for a guy with $2 million. That's a tough concept to accept.

[Eneukman 1]

The most important point when you retire, at whatever age (in my case, 50) is to keep yourself occuppied (and I don't mean exercising your right arm sitting in a bar!

 

I'm going to try and take up lawn bowls, perhaps playing 2 or 3 afternoons a week. I seem to recall that the Pattaya Sports Club organises ten pin bowling on a Friday afternoon so I'll give that a try as well. In addition, I need to try and continue improving my language skills.

 

It is also important to live within your means over the long term. During the 2005/2006 tax year, my expenditure has been considerably higher than my income but I was always aware that this would be the case. In the 2006/2007 tax year, my income should be comfortably higher than my expenditure.

 

Alan

[Owen` 2]

Weird that there is not more talk of what goals guys commit themselves to during the day. Yes, the women are a big reason people retire or semi retire in Thailand, but there is surely more.

[Rex7777 0]

In my mind, the question is not "why retire in Thailand?" The question is, "why not?" I figure I've got to be somewhere, and can rule out most of planet earth for one reason or another.

 

Rex

[BigDUSA 71]

Weird that there is not more talk of what goals guys commit themselves to during the day. Yes, the women are a big reason people retire or semi retire in Thailand, but there is surely more.

Beer comes to mind.

[voracious 31]

Vaguely familiar with that guy's situation. I believe he likes to fly. Flying is pricey.

 

The rule of thumb is 4% extraction from nest egg for it to last 30 yrs. That's $80K/yr in the first year on 2 million dollars with a 3% (inflation) increase each year thereafter. Take any more than that and your odds of running out of money grow. That assumes a 50/50 mix of equities and bonds for the 2 million, btw. The equities are needed to fight inflation, but they also subject him to crash risk.

 

The real problem he faces is he needs to last more than 30 yrs. This will drop him under 4%.

 

This is a very difficult psychological barrier to get thru. A man with $2 million to his name thinks he is rich, and he is, but that doesn't mean he will have a mansion and domestic staff and limos to all the Broadway plays for the rest of his life. If he wants to stretch that money 45 yrs and live to 82, he probably should not be yanking more than 3.5% in year 1 before inflationary bumps. That's a 70K/yr lifestyle for a guy with $2 million. That's a tough concept to accept.

he should be able to get 8-10% cash on cash return without too much risk on his money.

 

If he can manage to spend less than that, then he can retire with a reasonable standard of living (well depends on what one considers reasonable I guess) and still have his nest egg grow.

 

:)

[The Mook 105]

You have to grow the principal moderately, using stocks. The key is to be disciplined by taking some of your profits and converting them to bonds, maintaining your asset allocation. You MUST review your account at least annually to achieve your goals. It would be better to do it twice a year, or even quarterly. That is the way you protect yourself by generating more income, locking in profit on your equity positions and giving yourself better downside protection over time.

[The Mook 105]

PS. Another key is lifestyle. Try to live comfortably and be happy at a level moderately below your guaranteed income level. This will allow you to automatically build some principal over time, and help you weather stock market fluctuations.

 

Remember, it's not getting what you want; it's wanting what you've got.

[Soi7 1]

The most important point when you retire, at whatever age (in my case, 50) is to keep yourself occuppied

 

Alan is correct and above all live within your means

[Owen` 2]

Guys, this is touched on now and again on the board and I will hit it once more because it is so very important and only a couple of years of error would screw you for life.

 

A poster above suggested the guy with the 2 million could get 8% on his money. That Doesn't Matter. This is about two things. Crashes and Inflation.

 

The 4% number comes from a study of all 30 yr periods of time from 1890 onward. During those periods the stock markets declined in some years and rose in others. That guy with the 2 million, spending maybe 120K/yr (only 6%), is likely going to run out of money long before he dies. A sequence of 3 years like 2000-2002 would reduce him to 1.4 million (from the 30% decline) minus 120K (living expenses) X 3 (even with no inflationary bump the 2nd and 3rd years) or 1.4 million - .36 million = 1.04 million.

 

Think about what you'd be feeling in 2003 if you were him. You started at 2 million, intending to last 30 yrs with it. Just three years later you're almost cut in half. You think he's gonna take 120K out again in 2003?

 

Now I amplified things to make the point, but properly he would have only had 1/2 his money in stocks and the rest in bonds. But . . . there are periods of history a lot longer than 3 years when stocks did poorly.

 

The study is clear. If you pull more than 4-5% out in year one, your odds plummet of dying before your money does.

 

End of babble.

 

Soi7 and Alan are retired there. There is more to this than money. You have to fill your time. It's an interest and a concern.

 

Are you guys still feeling out the situation or are the hobbies (like lawn bowling) becoming serious.

[torrenova 644]

Ten million is not enough if you spend like crazy. If you want to buy a new boat every week then 100 million is not enough !

 

Realistically, once your major purchases are catered for (usually car and property), you need only a few thousand dollars to have a good life. Add in some incidental (holidays, insurances etc.) and you still don't break the bank at 2 million invested. Currency risk and inflation are the greatest worries.

 

At that age, 37, starting some business may be in order as complete retirement means that you are constantly hanging out with people who have retired on age grounds.

[Soi7 1]

Soi7 and Alan are retired there. There is more to this than money. You have to fill your time. It's an interest and a concern.

 

I am plenty busy enough have a circle of friends and lots to do one thing for sure you must remain active.

[Eneukman 1]

I'm managing to keep myself occuppied as well though the idea of taking up bowling etc is to ensure that I have a variety of activities to ensure that I don't get bored in the longer term with a routine that doesn't have sufficient variety.

 

A week tonight and I'll be in Ho Chi Min City, or Saigon as I believe the locals prefer to call it.

 

Alan

[Rex7777 0]

I'm looking forward to being able to travel around Asia. Assuming I can find cheap flights and have ssome sort of multiple entry visa, then I'll be good to go.

 

Rex

[mrstein 0]

Great post so far ......

 

However with 2 million let alone 500 grand Us dollars ,,,In First trust and second trust deeds at yearly gains at 10-12% This has been done for years Esp in las vegas.

 

At 2 million thats 200 grand a year for life without ever touching the orignal principle EVER ......

 

Stock market Bonds ARE YOU NUTS ??????

 

True wealth is made thru REAL ESTATE

 

Some of you posters are a bit off ....500 grand a year will get you 50 g"s plus year before tax.

 

You cannot live on 4150.00 a month us dollars in Thailand ARE YOU Fucking kidding me.

 

I will take trust deeds any day of the week. KEEP your bonds and stock bullshit Everyone needs money for real estate THAT IS TRUE HISTORY .........

 

Mrstein

[Owen` 2]

However with 2 million let alone 500 grand Us dollars ,,,In First trust and second trust deeds at yearly gains at 10-12% This has been done for years Esp in las vegas.

 

At 2 million thats 200 grand a year for life without ever touching the orignal principle EVER ......

 

Stock market Bonds ARE YOU NUTS ??????

 

True wealth is made thru REAL ESTATE

 

Some of you posters are a bit off ....500 grand a year will get you 50 g"s plus year before tax.

 

You cannot live on 4150.00 a month us dollars in Thailand ARE YOU Fucking kidding me.

 

I will take trust deeds any day of the week. KEEP your bonds and stock bullshit Everyone needs money for real estate THAT IS TRUE HISTORY .........

 

 

Not quite sure how one trades real estate in Las Vegas from Thailand.

 

Also not quite sure how real estate will do in Las Vegas 20-25 yrs from now, given that an early retirement scenario is usually 30 yrs. The guy in the OP's article was 37. That is more like a 45 yr window over which you are asking Las Vegas real estate to perform at 10+%.

 

If someone retires at age 40 and decides to fund it by withdrawing 10% per year from their nestegg, wherever it is invested, I'm pretty sure this will not turn out to be a disaster. I say this because I am pretty sure he'll run out of money while still young enough to find a job and avoid starving.

[mrstein 0]

With all DUE respect Owen.

 

I have to agree to Disagree with you.

 

First off we are talking about Retiring If your money is made stateside which in most cases it would have to be.

 

1st and 2nd trust deeds have made millions and millions of dollars for many investors that Get in the right way.

 

To make 10-12% returns is the norm and not the extreme at all,Not to mention lets say for argument sake you have 500 grand working all year around in US currency that would be 50 grand a year Pretax to You.

 

If you are living a VERY nice lifestyle how in the hell are you going to spend 50 g"s a year in Thailand FOR ARGUMENT Sake. ??????

 

You can live like a King in pattaya for 30 grand a year us dollars and never ever take out your full 10 % and just keep on reinvesting that orignal number for years to come in 10 years time your 500 grand would have climbed to 700 grand by pulling out 30 grand a year.

 

AND YES you can live on trust deed Money forever as many have done this for years and years.

 

Like anything in life you need to have displine with your savings and learn how to control what you REALLY need and Do not really need in life.

 

For 25k a year us dollars One could live like a King in the Philippines.

 

Once you establish Fixed costs the rest is gravy for the most part.

 

I do not think and I could be wrong on this that THAILAND doesnt increase at 4% per annum maybe with over inflated real estate yes BUT day to day living ???????

 

You are looking thru the arena of Stocks and bonds which is fine But true wealth in TODAYS world is not built upon Stocks and bonds ESP in the USA .......

 

Real estate is the ONLY true enity WE have left in the USA Besides loaning monies THATS IT ......

 

 

I would chose real estate ANYDAY of the week and twice on sundays before I would invest a nestegg in bonds and stocks.

 

 

Key in life is moderation NOT GOING APESHIT and blowing your whole wad in a year.

 

7-12% returns could keep one JUST fine over a 50 year period once Fixed costs have been established.

 

mRSTEIN

[Owen` 2]

With all DUE respect Owen.

 

I have to agree to Disagree with you.

 

Well, my compliments on resisting what must have been the temptation to lash out at my possibly provocative reply. I should have toned that down, but we all have our moods and that one was a bad one from me.

 

I don't have a feel for Thai inflation. I use a generic 3% number globally for it, for no good reason beyond it being a US historical average. There is reason to believe it will be higher in the years to come because of oil depletion, but only time will tell. Your 4% speculation for Thailand may be right, especially if you travel from Thailand now and then and get hit with the effect of fuel costs. And, of course, healthcare.

 

Without arguing the likelihood of 10%/yr on real estate, let's look at what inflation does even to that 10% number.

 

You specify 500K at 10%. That's 50K pretax. Suppose you underspend that to "live like a king" in Thailand at 30K. Don't know how your real estate deal gets taxed, but let's yank 15% of it as an estimate of taxes. So you keep 85% of 50K or 42.5K per year after taxes. Of that, in year 1, you spend 30K.

 

You therefore save 12.5K. Now in year 2 you have 512.5K at 10% and generate 51.25K pretax. Post tax (15%) you have 43.5K to spend. But we now have to increase the 30K living expenses by 4% inflation. That's $1200 more or 31200 for the year.

 

Notice how your income went up (43.5 - 42.5K) 1K but your spending went up 1.2K? You fell behind. Even at 10% pretax.

 

Over thirty years, this is not linear. It compounds and gets worse. You eat more and more of that 13.5K cushion you had in year 1 and then you start eating your principal. Don't know how bad that gets over 40 yrs. 10% is a lot to expect, but 500K isn't very much. I suspect the money, even at 10%, will expire before you do. But I haven't crunched the numbers.

 

30K is 6% of 500K. That's a high extraction rate for an early retiree.

[Rex7777 0]

Trust Deeds? So, what happens when the real estate market in Las Vegas crashes and you're second trust deed becomes worthless because even the first trust deed is more than the property is now worth, and the borrower just walks away?

 

I'd be hard pressed to imagine a worse investment than a 2nd trust deed on some bubble real estate.

 

Rex

[Gary 4,118]

I had a VERY good year in the stock market in 2005. I took my money off the table and ran with it. One day I got his feeling of gloom and doom and sold out the next day. Soo far this year I would have been up pretty good but a bird in the hand is OK with me. I put about 60 percent of the money in closed end bond funds. They are PHT which pays 9.7 percent per year, PTY at 9.5 percent and PFN at 8.3 percent. I get my interest every month. These funds are pretty safe. The other 40 percent is in a money market and I am starting to take a monthly draw from that. My monthly draw will last for 28 years and that would make me 89 years old. I doubt I'll last that long.

[Tengotodo 52]

Since I pretend to be an accountant at times, here is my 2 cents...

 

ASSUMPTION

$450,000 in the bank today at 10% (before tax). Spend $2,500 every month (30K per year) and EXPECT 3% inflation every year for the next 30 years? Question..How long before I go broke?

 

If I'm taxed at 25% rate, I can go 27 years without working.

 

at 15% tax rate, I will still have $222,000 in the bank after 30 years

 

If these are "tax free" distributions I will have over $1.4 million left in bank after 30 years.

 

All this assumes no additional work or investments. (not likely). At any rate, $450K is doable!

 

Just plug any numbers into this wesite for immediate results!

 

http://www.fincalc.com/

[mrstein 0]

No problem Owen Your insight is well inlighting by many .......

 

Rex7777

 

My friend First off just for the Record

 

A second trust deed can take position over a First if the deal is written correctly and the Second trust deed party knows before hand that the borrower is going to defualt on the second loan as The second trust player would foreclose before the First position player or mortage bank even knew what hit them.

 

Thats for starters

 

Secondly

First trust deeds in Vegas are Not based all on vegas properties as a lot of money is now going to AZ as many counties there are on the verge of Booming beyond anyone"s Dreams

 

You can never and I mean Never in the long run go wrong with real estate its a proven commidity.

 

No such thing as a bubble yes corrections will come in time But not like so many think.

 

Homes that have value of 100 and 200 % are NOT going to suddenly drop to nothing or even loose 50 % No way .

 

The entire western prtion of the USA is on Fire now for real estate .

 

in New mexico alone Home prices have went up 100 % over 3 years.

 

If the economy was to collapase Your stocks and bonds would be worth Shit as real estate would still hold value and have a chance to spin upwards again.

 

Any paper wrriten on a fortune 500 company wouldnt even make the pink sheets as a company in BK usually doesnt come back with flying colors.

 

Any investments in which you have over 500k You can and WOULD FOREVER live like a King if you control and have displine with your monies.

 

If you had 1 million dollars You would never have to work agian and live like A Prince for 1000 years at 10 % returns and living on half of that money earned.

 

Esp if you earn it in the USA OR UK and live in Asia You wouldnt be able to spend the intrest unless you were just a Jackass with money.

 

Inflation is a skewed number How do so many folks live on a Pension or even social security ????????

 

They do it every month Why Because it s called living within a Budget.

 

 

Nothing in mankind"s History has ever made the monies that real estate can make You. NOTHING ............

 

Like anything else thu You need to know HOW TO DO IT

 

THATS THE TRICK ...............Only a handfull of guys can Work First and second trust deed paper.

 

Regards

 

Mrstein

[Owen` 2]

Inflation is a skewed number How do so many folks live on a Pension or even social security ????????

 

The answer to this question is

 

1) Trailer parks and

 

2) Medicare

 

Florida has been called "God's waiting room" because of how it attracts elderly retirees. Next time you drive through there, count the trailer parks. That's what a Social Security check pays for.

 

FYI within about 20 yrs private pensions will be rare to non-existant. Government pensions will have been scaled back, even for current retirees, to almost zero. This will be global and the result of demographics worldwide. Too many old folks and not enough young folks to pay for them.

 

Take care of yourself for the years to come. No one else will.

 

As for getting 10% guaranteed every year for the next 30-40 years . . . in any investment at all . . . I'm not smart enough to do that.

[UncleSam 0]

It's true that private pension plans are having difficult time to survive these days. Many companies are closing or freezing their pension plans due to high cost. Even more companies will close their plans when "Pension Funding Reform" passes the House in this year. ("Pension Funding Reform" already passed the Senate, which will require additional funding requirement for the private pension plans)

 

However, many people are now realizing that pension plan is better than its alternatives such as 401(k), other defined contribution plans. IMHO, pension plans in private sector will survive because pension plan will be new attraction to recruit better employees.

 

I also think that assuming 10% guaranteed return on your retirement portfolio is insane. If you are rich enough to take risks, then it doesn't matter what you do with your money. I also think real estate is very profitable investment option, but, when you become closer to your retirement, you have to avoid any risks. After you retire, you should invest your money on low risk portfolio which will give you 4-5% return.

 

Here is the easy way to calculate the effect of future inflation if you didn't know. If your expected future asset return is 5% and your expected inflation is 3% then, your actual return is 1.05/1.03 = 1.0194 (1.94% actual return). IRS is looking at 2% or less for the future 10 year outlook on the US inflation. Personally I am not worrying about inflation except medical inflation which have been double degit for a few years.

 

I think ideal retirement income should come from more than one source, such as pension, 401(k) for those in private sector, IRA, 403b for those in public sector, SEP, personal savings, your properties, etc

 

Good luck to you all on your retirement planning. It's never too early to start your retirement planning.