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By Billy and Akaisha Kaderli, Retireearlylifestyle.com
Special to the Financial Independence Hub
In January, 2022 we began our 32nd year of Financial Independence. Few people can say they have 30 years of self-funded retirement by the age of 68 and have a higher net worth after spending and inflation than when they started. This is something of which we are quite proud.
As we have aged, one thing we have learned is that long term is getting shorter every day. Life is to be enjoyed now, not someday: the older we get the more we appreciate that view. Life is continuously full of opportunities and we want to take them.
Opportunities abound
For example, a couple of years ago we were approached by a startup company which sponsored us for several months in Saigon, Vietnam in exchange for sharing our past experience in the restaurant and service industry and for exposure to our readers through our popular website and blog. That was a fabulous trip, and it got us back over to Asia again.
Then we were approached for a partnership, offering tours to Europe and South America. Can you imagine? There are always opportunities!
These are just two examples of why we say that life is full of chances to grow and learn something new if you want to take them. And neither of these recent options could have been presented to us if we were still working.
Portfolio getting stronger
Since the 2008 financial meltdown the markets certainly have performed well, thereby increasing our portfolio. And for a longer term view the S&P 500 closed at 312.49 when we retired in 1991, producing a better than 8% annual ride plus dividends. So, our advice is to get invested now and in a couple of decades looking back you will have wished you had invested more. Probably a lot more.
We suggest people track their spending now, then multiply that number by 25 to get a rough estimate of the portfolio amount they need to retire. Once you know that amount, in simple terms, assuming the same 8% growth in the future and you withdraw 4% for living expenses, this leaves you 4% to cover inflation and growth so you are all set.
The 4% rule is a guide not set in stone and ours bounces around depending on the markets and our expenses, but on average we have been able to maintain it easily below 4%. Our data over 30 years gives us security knowing that if one year it is higher we can make adjustments the following year to correct it. Then again, the markets could move higher helping us out as well, which is usually the case. Plus, we now are receiving Social Security, so payments and dividends cover our expenses. You can read our reasoning behind this decision here.
Practical considerations
Another note is that because we have a good percentage of assets in retirement accounts, when we turned 56 years old we used IRS rule 72T to withdrawal an annual amount close to our estimated Social Security payments, thus creating a bridge until we actually qualified. Now that we are receiving benefits we have turned off that spigot and are letting the IRAs grow once again.
The age of 72 is now coming into our sight and RMD, required minimum distributions, are the next issue to deal with, but we still have time and no one knows what the tax laws will be then.
With that stated, we still maintain a core holding of buy and hold (DVY, SPY, VTI) which sends us a steady stream of dividends in our taxable accounts as well as tracking the market. But in our IRAs, where we have no tax issues regarding trading, we have been more active using market seasonality with the idea of side-stepping larger declines. Some years have been better than others but we have been taking about half of the market risk than being all in all the time and that is comforting.
Where to retire, cost of living and healthcare
We are not alone anymore, with Boomers retiring at 10,000 a day, we see more retirees everywhere! But in terms of the foreign locations that we visit, the retirement community of Chapala, Mexico is growing at a fast pace. The Colonial town of Antigua, Guatemala has also attracted its share of Expats, and there is a solid and active retirement community in Chiang Mai, Thailand and Panama.
We would recommend Mexico, Panama and Guatemala for their proximity to the US and Canada as well as being on similar time zones as family and financial markets in the States. We would say that Thailand is attractive for its excellent medical care, warmer weather and uniqueness. All of these locations offer excellent lifestyle for cost of living. Continue Reading…