80 Years of Financial Hindsight

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80 Years of Financial Hindsight

Hey guys!

Got an interesting note from a reader of this blog who sent the following in the subject line: “A middle of the night thought.”

Of course I had to open it up to see what it was about 🙂

“Wondered if you would like a little article written by an old fart (80) about his thoughts and concerns and what he would have done differently economically? Thought it might be interesting to jump ahead approx 45 years for a different perspective.”

“Oh man, would I!!!” I responded. And below is exactly that – a mash up of what he ended up sending over, with the first half focusing on his life/career/choices over the years, and the second half getting into the numbers: his current income and expenses (broken down into “essentials” and “discretionary”), values of his current assets, and then his main financial concern now at his age.

At the end he shares a summary of all the things he considers important now with his perfect hindsight 😉

It might be a bit choppy in places when I moved things around, but hopefully you enjoy it and get some good nuggets… I was glued from the second paragraph!

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My Background

I’m a retired dentist, spoiled only child, have had two divorces, and have three kids.

My father was a pharmacist who opened his own old-fashioned drug store with a phone booth, fountain with stools and all that good stuff. He worked seven days a week. Was about to go an all-around-the-world trip with my mom, when she had a massive stroke and died one week before their departure – at age 48.

I graduated from dental school at age 23 and opened my own practice. I think most people’s perception is that great wealth is given on a silver platter as a dentist. No wonder why we have the second highest suicide rate!

The gross receipts for my first month in July, 1960 were $54. I was an excellent dentist, but never charged appropriately for my services. After a year or so I moved into a brand new office with lots of expensive equipment, and was married with two kids by then.

Then I got drafted. It was a total economic disaster, but I did spend three years in Hawaii.

I liked the people I met from California there, so I took the California board exams and went directly to Buena Park without even thinking about returning to Michigan. Bought a practice from a shyster, and ended up with a bankruptcy and then a divorce. She got the house, I kept the practice and moved it to a new location.

Things were going pretty well so I made a decision – perhaps based on what happened to my parents – that I was only going to work four days a week now, M – Th. That allowed me to play over a three day weekend every week.

Then I married a girl I met over a root canal – been with her 42 years now.

I have no desire to leave a legacy – I want my last check to go to the undertaker and have it bounce. (More on this later)

My Lifestyle

We vacationed in the Caribbean for several weeks each year for maybe 12 years, first on Barefoot Windjammer and then on charters with friends. I taught one day a week at USC and lectured around the country giving private seminars. This allowed us to travel quite a bit with Uncle Sam paying a large portion via tax deductions.

A mentor explained that the difference between tax avoidance and tax evasion was about ten years in prison so we were very careful.

We ran away from Southern California after almost 40 years due to traffic and congestion. Took a job offer in central Maine which only lasted about two years, then moved to a house we built as a rental in Central Florida.

I’m one of the oldest to have taken the Florida Dental Boards. Associated for a while, and then bought a practice and kept it for five years.

I used to do something a friend called ‘plantrolling.’ The staff and I would get together and plan how many days we were going to work in any given year.

With that in mind, we knew every day where we were in relation to the economic goal we established. My staff received the normal hourly pay for their position, but if we reached the monthly goal, there was a substantial bonus. We took the gross receipts up 500% over the previous owner in five years.

Then we decided we had enough money put away and it was time to retire.

I had no specific goals or “bucket lists” at that time. Looking back, I think I should have pursued “Economic Independence or Freedom” – not having to go to work economically. I think this is something all you “youngsters” should look at very carefully.

We managed our own investments for the most part, and being very “progressive”, lost our asses in the Dot-com Bubble around 2000. Our gains from Cisco bought one of our houses in full though, but then it went down 86%!!

I became a realtor (buyer’s agent) after retiring, and quickly learned that you could invest your retirement plan into real estate. Sounded great to me – real estate was going up and off the charts – better get a piece of that action! Think it was late 2007 when we invested $350,000 in a waterfront property with Gulf of Mexico access in the Florida Panhandle. The current assessed value? $3,500!! That’s not a typo, and we still own it.

We recovered from the first of those disasters because we were young enough for the market to recover. I don’t think I will live long enough to recover on the real estate fiasco. Wouldn’t an additional $350,000 be nice to have right now?

Our Current Finances

We live off Social Security and what we have stashed away over the years – just under $665,000. This is in one big IRA, one smaller IRA, and one annuity.

At age 70 1/2 you are required to withdraw some of your assets that have been sitting there attaining tax-free growth and pay Uncle Sam. Based on mortality tables he’ll calculate your Minimum Required Draw. You can take more than that, but not less.

Then there is that fund that we paid into for years and years called Social Security. My wife worked in the dental practice and to maximize current income, we contributed the minimal amount to Social Security.

My wife managed our investments for many years, but recently got tired of trying to keep up with the markets so we turned the assets over to Fidelity. We have a balanced portfolio – basically 50% stocks and 50% bonds. We would like to be more aggressive, but at our age we might not have time to recoup the loss of a market downturn.

Here is our current income:

  • Social Security – Me $1,536/mo (or $18,342/year)
  • Social Security – Her $712/mo (or $8,544/year)
  • Minimum Required Draw from Big IRA – $1,975/mo (or $23,700/year)
  • Additional Draw from Smaller IRA – $326/mo (or $3,912/year)
  • Annuity – $439/mo (or $5,268/year)
  • Total – $4, 988/mo (or $59,766/year)

That is a pretty meager income in today’s world, IMO.  But considering we still have $665,000 in assets – which we have basically been living off of for approximately 16 years – we’re not doing too badly.

Up until now our portfolio growth has been sufficient to cover our draw and management fees, BUT, it’s almost become a daily frustration of having all that money and not being able to spend it. We want to buy a new TV and furniture but don’t know how many years our money has to last for? We are both in good health, but that could change at any moment and there is nobody to take care of us if we run out too soon.

We don’t want to leave a legacy, so we need to figure out how to best spend every last cent without running out. How do you do that?

Our Current Expenses

I have only been keeping detailed records for the last six months, so I will give you those averages. It is pretty hard to define what is “essential” and what is “discretionary,” but I will make an attempt.

Essential – those expenses that occur every month and are somewhat basic to day to day living.
Discretionary – those where you have a choice like dining out and travel.

Our essentials per month:

  • Mortgage and HOA dues ($1,023)
  • Car payment ($387)
  • Electric and water ($266)
  • Medicare supplement ($520)
  • Long Term care ($289)
  • Lawn care ($70)
  • Phone/TV/Internet ($324)
  • Groceries ($618)
  • TOTAL: $3,497

We live in a Del Webb over 55 gated community with many, many amenities – it is golf course property but neither of us golf. We have a brand new 2017 Subaru Forester.

Doing the math, $4,988$3,497 = $1,491/mo left for all our frivolity like dining out, travel, clothing, medications, haircuts, etc…

Speaking of travel – we spent 10 days in February in Playa del Carmen, Mexico, 20 days in September in the Pacific Northwest and will be spending about two weeks in Mexico City and Oaxaca in February.

Yes, we like to travel. We would do considerably more if we could afford it – oh wait, we have over a half mil in savings! Why aren’t we spending more of it?

My Recommendations Based off 80 Years of Living

lightbulb

#1. Become familiar with the ‘future value of a dollar.’ Based on that, start funding your path to Economic Freedom to the maximum – NOW. Plan on kids education and start funding that – NOW. That may cut into your discretionary spending, so you may need some sort of side hustle but it WILL be worth it.

#2. Look at all the pros and cons before deciding where you want to live – utopia does not exist. I know, I looked for it in Southern California, in Maine, in North Carolina, in Texas, in South Carolina, and in Florida. Built a house in each of those locations, and currently in my fifth or sixth house in central Florida. I cannot believe the money I wasted spent moving around the country. It was fun living in the different areas, but very costly.

Work is becoming less geographically dependent. Find a place where you can live with the trade offs – rent for a while and make sure you love it and then settle there. Consider living outside the US – you can live in Mexico with a better lifestyle for about 50% of what it costs here. If I were 20-25 years younger, I would learn fluent Spanish and be living in Mexico.

#3. Try to find a job you really enjoy doing. Do side hustles if necessary to supplement your income, but make your primary occupation something you like to do.

#4. Figure out what you are going to do for the next 40 years if you achieve “Economic Independence” early! I read a lot about “giving up Starbucks and retiring at age 35 with the money you save” type of stuff. But let’s say you are able financially to retire at age 40. What are you going to do with your life for the next 40 years?

I would highly suggest that you live a bit as you strive for economic independence. How about – “Yea, I don’t have to go to work anymore BUT I WANT TO.” That way you continue to do something you love, but also make money without the stress.

#5. Seriously prepare for the future, but also LIVE each day. Want the thrill of driving a NASCAR race car, DO IT! I did!! Want to fly in an antique biplane – DO IT! It was fun being the Red Baron.

#6. Develop some type of passive income. Real estate, e-books or something that does not require your constant involvement. One can make decent living professionally, but most occupations require that you be there. In my case, if I was not there, there was no income but all the expenses continued.

Develop some type of passive income whether it is real estate like Paula from AffordAnything.com has done so admirably, or some other source of income. This will do two things: give you some inflation adjusted income, and take some of the pressure off the “required performance” of your assets.

#7. When you are young, you can be much more aggressive in your investments because you have time to recoup any losses from a downturn. Stay in the market during a downturn, you really lose out when it recovers if you are sitting on the sidelines.

#8. Become familiar with the “Plantrolling” concept of planning – it was used on the Manhattan Project and is a great tool. Basically, if you want $1,000 dollars saved at the end of one year, you need 1/12 of that or $83.33 at the end of the first month, $500 at the end of six months, etc. This allows you to see where you are and make mid-course corrections if necessary. Consider it goal setting with a time line.

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Thanks Larry!

A couple things I took away from all this myself:

  1. Life changes sooooo much over the years! For the good AND bad!
  2. You never have to be stuck doing *one thing*. Larry got up and changed whenever he got bored or found something better, and it’s important we all know that no matter what our current stage
  3. It’s good to know when you have “enough!” So you don’t continue working forever! (unless it’s the “retired-type” of work that comes with financial freedom 😉 Not unlike a blog or passion project.)
  4. Apparently you can retire even though you have a house AND car payment!  Haha… Perhaps one or both of those things came *after* retiring?
  5. And lastly, you should figure out what you want to leave behind (or not) when it’s your time to pass. I hear a lot about “wanting the last check to bounce,” but it has its set of pros and cons. As much as I personally would have a BLAST doing that, I’d rather leave my small fortune to my kids and/or their kids and/or THEIR kids. But maybe I’ll change my mind as I get older?

Anyways, hope you liked reading this as much as I did 🙂 I’m gonna try and feature more “this is my life” type stories here because I find them absolutely fascinating. We all lead such different lives, and I think it helps to form our OWN decisions better too as we continue to live out our own…

But remember the most important takeaway of all here: WE ARE ALWAYS IN CHARGE!! It’s up to US to do the things we feel is best for us no matter what’s going on around us or what others are saying… It’s not always easy, but it’s incredibly important unless you like living with regrets.

Have a safe and wonderful weekend, everyone 🙂

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[This post was previously published in 2016, but stumbled across it again and thought it was worth re-sharing 🙂 Big shout to Larry again for always sending in his thoughts!]

UPDATE: Here’s an update from Larry on how his money’s currently now looking, 3 years later 🙂 Thanks for coming back, brother!

The market’s performed pretty well overall since the original post (except for last year), so our total is still a rather comfortable $604k.

We discussed things with our financial advisor and decided to kick up our monthly draw from the IRAs to a total of $4,400/mo now. We also took 3 years RMD out of the managed account and put it in a high yield money market – about the same as a CD right now. The thought being that we would never have to sell in a down market (for the next three years) to meet the RMD.

Part of the rationale for this was we actually lost money last year. Our risk/reward profile was about 50/50 stocks and bonds in order to have some downside protection. Well, that sucked last year because bonds did poorly and we did not have enough in stocks (or the right ones) to get the increase. So we’ve since opted for the relative safety of a good money market for a portion to help improve our comfort levels.

We set a “benchmark” of keeping $400k in the managed account. Anytime there is a substantial increase, we could take some of that off the table as well (about +$7K this morning). If it goes below the $400k, we don’t touch it.

We also increased the draw so we have more to spend on travel while we still can do it comfortably. We are off to a couple of weeks in Portugal in May. I will be 83 in September so really don’t know how much longer I will be able to travel.

So, we seem to be “holding our own” in making it last as long as we do!!

Total of all accounts now = $604k: $194K in the money market (the 3 year RMD mentioned + some), $407k in the managed account, and $3K just sitting there in an old account.

 

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