Sunday, November 21, 2010

Haven't been here in a while.

Feeling more comfortable with the portfolio these days.
Now we are  clearly at a 50/50 split between stock and cash/bonds/CD.
If the non liquid assets were in the mix it would be: 50 non liquid /25/25.

We don't plan on spending any of the above mentioned money. With our current income (which is less than I made as a teacher in the midwest) we are able to save for home improvements, taxes, insurance and trips to see the "children". Our basics are simple. It works for us.

Living expenses vs Savings 

The key is to figure out when you, basically, have enough. By doing this exercise I know that I/we will have enough if: 
1)My husband passes away. Besides missing him terribly, I will not be receiving any of his pension. Currently we live entirely on that pension.
2) The US decides not to honor its pension to retired military (I actually would not be surprised if this happened).
3) The economy collapses as we know it and savings have to sustain us for awhile.

Sustaining ourselves with no outside help would last twenty years at our current spending levels.  45% need/ 55% want. Granted wants include things that are good- travel, entertainment, presents, # of travel vehicles that live at our house.  We could do without those things. 
There is plenty to do here. Gardening, hiking, fishing are all within walking distance of the place.
If inflation took off we could simply cut to the wants  and get by quite nicely.  The only hang up would be property taxes. One never knows where those can end up!

Sometimes I wonder how long we should live this way- not touching the savings.  One thought is that we could take out what my husband would bring in for SS for the next five years. That way we would feel better about just waiting the Social Security out until his actual retirement date at 66.  In turn, if he should pass, I would receive a sum of money until I turn 66 (which is seven years later).

Nah---let it ride as long as possible.  We have saved for some pretty neat stuff already. A long anticipated trip to our honeymoon destination for our 30th anniversary next year. Well, that is, IF I decide that I can tolerate air travel at that point!

Monday, October 11, 2010

A different middle class

Jacob, on Extreme Early Retirement, wrote about the idea of the declining middle class. He argues that it is not really a decline, but a change in priorities. Many who make enough choose to spend more then they have or live on the edge making them appear to be losing their footing with income.

There is a different take that I am beginning to see.  There seems to be a growing group of boomers who make choices early on to be independent of the system.  They save their money.
Choosing to purchase a houses and pay it off in cash, in a low property tax state, is considered smart thinking.  Food is not abused and often supplements to the food supply are grown.  Self powered transportation is more important than gasoline powered. A clothes line often hangs in the back yard. Clothing is evaluated for comfort and utility. Excess is taken to give to others who need it. Public libraries and parks are cherished.

How does this tie into Jacob?
This group of boomers are "off line". Yes, we are- mostly- solidly middle class.  We really don't have to "use" much money so we let it ride. In turn the money does not show up as income or capital gains.  It is just there, making more money.

 Huffington points to our group and says, "they are slipping away into poverty." Only by our taxes are we poor. Are there more of us out there than the "surveyors" think?  Maybe some of those people who appear to be living on social security alone have plenty in the bank. When you get your own savings out of the bank- no one charts it.
 Do people who live on savings get an earned income tax credit?

I asked Jacob if he considered himself middle class.  His answer was yes - and no.  As a fifty something looking at a thirty something - with lots of degrees- my reading of his blog indicates that he feels that he is solidly middle class and not poor.

My husband and I  see ourselves as middle class, but next year we will be "deemed" poor.  A friend of mine is a wealthy widow, but she is "poor" in the eyes of the tax man.

Are we poor or  simply a different, more frugal, more prepared middle class?

Saturday, October 9, 2010


According to the "rule of thumb" our portfolio should be about 60% in bond and 40% in equities.  This is something I have worried about. We are heavily in the market right now- about 55%. Where are my bonds? I just don't understand bonds well.
David Laibson spoke at a Merrill Lynch round table on retirement.  He and others hit several things that should be taken into consideration need.

Social Security is a bond
Yes, 75% of the money that is collected by payroll taxes goes straight to the people now retired. What we don't consider is that 25% goes into a lending structure- a bond- for the US government to borrow. At this point the fund has several trillion dollars in waiting.
Thinking of the bond of social security helps me balance out my portfolio.

Is your house a RIET?
We own our home. At this point we are seriously considering lending money to our son for his home and letting him pay his "mortgage" to us.  That is a balance in a portfolio. We actually own the land instead of owning a piece of a an office building.   Yes, we have to have someplace to live. My thoughts are take the lowest price that the houses in the area are selling for and use that as a base. Check Zillow for some assessments.

Look overseas for investment
We are checking our portfolio this weekend.  What is the mix of US and overseas investments? After living in China, we are very skeptical about investing in Chinese companies. US citizens are very nieve about what other government can do.  In my childhood Mexico "reclaimed" all land as their own. That left many Arizona residents without their second home.  It was a shock. They simply said, "It is ours now."  

The same is true with companies.  China is a communist state. If the middle class gets out of alignment, will the government choose to reign them in.  This is not as far fetched as one may think. Many countries could care less about foreign investors.  

What to do? When we look at our portfolio we will be looking at companies who serve overseas.  It ends up that most of those companies are "large cap" companies.  We are heavily invested in the large cap.  We will seriously look at those large caps to make sure they are invested overseas as well as at home.

My final assessment is that our portfolio is much more diverse than we originally thought. Not considering social security or house, here is our real balance:
equities 53%
cash 35%
bonds through retirement plans 12%
With the house the mix turns more like:
 48% house, 27% stocks, 17%cash and 6% bonds. 

My real worry should be more about the cash than stocks. Thinking of our Social Security as a bond helps.

Friday, October 8, 2010

Something I cannot prove

The classrooms of today are filling with autistic children. The rise is dramatic. For the last twenty five years  the numbers have climbed, but the last ten have been astonishing.

Some parents blame vaccines. Could it be something even closer to the child on a daily basis?  How about baby bottles ?  I am serious. How many mommies put their child's plastic liner or plastic bottle in the microwave- just for a second?  Do we really know what is happening when those waves heat the plastic? Now the plastic is melted and the baby drinks it down.  With a unformed immune system, the coating on cells must be interesting to watch, if it were not our grandchildren. 

Doesn't it seem strange to anyone else that autism "arrives" when the brain moves its synapsis to the language center from gross motor at about two? Could that be where the coating is most damaging?

So, grandparents, think about giving your daughter or son glass bottles to feed your grandchildren with. Best yet, encourage breastfeeding at the breast. It may be a long shot, but it is one of the only consistent things I can think of changing in the last twenty years.  

Let it ride

 Twenty years ago I made the mistake of listening to a young broker who had taken over my account from his mother.  He had a wonderful picture of a yacht on the wall in his office and wore an expensive suit.  His mother, the only female broker in the office twenty five years ago, had guided me through some great stock moves.  With baby burp shoulder and children in a  double stroller,  I stopped in to see him. I should have known that my gut was much more in tune with scandal than his.

He hemmed and hawed about the marvelous thing that WorldCom was. Not only should I keep the money in the stock, which had tripled several times over, I should give him my house savings to buy some more.
 I wasn't that foolish, but I did keep my money in.  Four days later it was gone.  We still have a lump sum of capital losses to write off almost ten years later.

Fast forward to today.  I pulled every penny out of the market about three weeks before it crashed two years ago. We have returned most of it back in- starting at 7200.  Today, as the market hit 11000, my stomach began to sour.  I believe the market will stabilize, but staying in becomes risky at this point. My husband is not convinced.  He says stay, in fact lets dump my IRA in.
Tomorrow we will look hard at numbers.

When you buy Ford at 2, do you let it ride?

Thank the Lord the market is closed on the weekends.

Is it a barn or a storage closet?

Barb at Frugal Texas discussed deciding on heirloom or clutter.
We have lived in some exotic places. Add to that my grandfather collected art in the 1930's and 40's. Together they fill part of a barn that desperately needs to be dealt with. There is little question all this stuff influenced our choice of  barn (and the home attached to it).

We probably have twenty boxes that have not been opened since they were packed between fifteen and thirty years ago. Don't laugh! The one with the description of what is inside in Chinese drives me crazy.   Maybe I should sell it as a mystery box.

 Man vs Debt put out a fabulous book on getting rid of your crap. He has loads of ideas on how to sell the stuff.  My problem is back to Barb's...what is a heirloom and what is clutter?  At this point it is all clutter to me since it lives in my barn and not my house.
Then there are my adult children. What is their heirloom?

The easy answer is to call up my children and ask what they want.  Not so simple. My son is in the military and not yet married.  Would his future wife like my grandmother's tea set? My daughter's husband just left the Marines. They have a small child. Shouldn't I be nice and just hold on to pieces while they make their next ten moves before settling?

What happens if our children become nomads like us?  Would we be doing them a favor getting rid of this stuff? Maybe my siblings should be involved in the ridding of the "grandfather" objects.

If you have collected some interesting things, what have you done with it? Please don't tell me scrap books. Those overwhelmed me about five years after my daughter was born!

Maybe I will deal with it when we move, in about ten years.

Budgeting for a fixed income

Simple, isn't it?
You have either been doing it all of your life
or not.
We have, but it has not been precise
A year before retiring we wrote down, in general,
how much we spent.
This is different than how much we thought we would spend.

Categories began to emerge.
First ones are easy:
taxes, travel, food in, food out, gasoline, electricity....
The next categories were a bit more complicated:
Car repair (is an oil change a repair?),
clothing purchases (is that a part of our individual allowances?),
pet fees (we never tracked that one- should we track their food as well?).

Slowly I saw the trends.
The taxes and insurance are far more than I expected.
20% of our budget goes to those.
That is AFTER we paid our mortgage off.
The dogs are another surprising expense.
Even though we cannot see our lives without them
there is a cost to having your furry friend at home.

We spend far more on our adult children than either of our parents ever did.
That is something to process.
Are we giving them too much- and in turn a false sense of security?

When we stopped working full time our gasoline expenses and clothing costs dropped dramatically.
I shouldn't be surprised, but I am.

It is important to continue saving for the end of retirement
so I decided to work part time for that. Substitute teaching.
We are both young.
Most likely I have 45 years and my husband 30 according to
how long our parents lived.

There is a lot to process.
Anyone have a better way of working through it?

Thursday, October 7, 2010

The pull of working

My husband and I both quit on the same day
the last day of school 
last school year.

Does anyone else miss work?
The day to day grind is not missed,
but the interaction with my students is.
My father missed "making a deal" when he retired.

Income is not the part that concerns me.
We don't have buckets, but we have plenty.

There is a pull of work for me.
My husband had huge projects lined up.
Most of mine have fizzled.
Not as exciting as I thought.

Going back full time- no way.
I think retirement will take more thought 
than I thought it would.

Fourteen years and moving forward

Wandering the country going to university ended with marrying an Army officer and wandering the world. Fourteen years ago our Army wanders ended and our "settled life" began.
I became the financial person in our house about twenty years ago.
Squirreling away enough to pay half to buy a place when we "got out".
Choosing to sell that wondrous spot just before the market tumbled.
Putting a lump down and buying our "farm".
I see this blog as a chance to view the past while getting ideas for the future.