Bob Brinker Free Discussion Site 59,820+

Top 424. Jul 24, 2005 6:41 PM

» allancoleman - Re: Critical Mass

In response to Re: Re: Critical Mass posted by bbaddict:

although you've got the numbers right according to the generic thinking of today , critical mass is different for everybody . i agree with bob brinker's definition of critical mass and that it's different for everybody . critical mass for the " donald " trump is different than critical mass for me or for yourself .

in years past before the beginning of the secular bear market losses that began in 2000 , people were advised that it was o.k. to take out 6% and some were even advised that 8% was o.k. however , IF $60K is enough for you to maintain a comfortable life style then a million and a half is probably enough critical mass for you according to today's current thinking . course , this is assuming that you don't do anything major stupid to lose your critical mass due to investment mistakes .

i think the most important asset you have toward your critical is your zero debt status . protect it , cause once you get into debt , it's a endless cycle of needing more and more returns to keep up with the payments .

another of bob's words of wisdom is FOCUS on your health once you've obtained critical mass , cause without your health , critical mass isn't worth much .

i have several friends who are retired on 1.5m , less than a million , and about $300k to $500k and we all fight for the check when we go out to lunch or dinner . so critical mass is relative .

for me , it's a condo in alaska and one in hawaii , a vehicle on both ends , surfing everyday in kona in the winter and rving in alaska in the summer is critical mass . and whatever amount of money it takes to maintain that lifestyle is enough for me . my present annual withdrawal rate is 2.5% so even if Normxxx's EOTWAWKT happens , i should be fine . i could increase my spending but i'm very happy doing what i'm doing so now so enjoy just watching the market for now . for me , my best security is my ability to do without .

-- posted by allancoleman

Top 425. Jul 24, 2005 6:55 PM

» bbaddict - Re: Re: Critical Mass

In response to Re: Critical Mass posted by allancoleman:

Thanks, Allan. I assume the friends who are retired on $300-500k have some pension, SS, or other income?

-- posted by bbaddict

Top 426. Jul 24, 2005 7:05 PM

» allancoleman - Re: Critical Mass

In response to Re: Re: Critical Mass posted by bbaddict:

actually no . he's the youngest of the bunch at 57 and has quite a bit of equity in his home and a part time job ( janitor , bathroom cleaner , handyman ) at a church . sometimes riches aren't of this world . he is presently on a annualized spend down program from his 401(k) that will end in about ten years and he may run out of money about that time . or figures he may have about $100k left about that time .

as i , and bob brinker , have said , critical mass is relative and he's happy . and it's all i can do to grab the check before any of the rest of them do . inspite of the fact that i always state before we eat that the guy with the most critical mass ( me ) should always pick up the check . ! smile ! .

-- posted by allancoleman

Top 427. Jul 24, 2005 11:17 PM

» permabear - Re: Re: Critical Mass

In response to Re: Critical Mass posted by Normxxx:

"Also, if you want to be considerate of your heirs, get some LT Care insurance."

From my own personal experience managing my grandmother's affairs (she passed away last year at age 94), I personally would not choose to purchase long term care insurance. Before I got involved, she had purchased a long term care policy. Over the years, as she aged the payments kept on growing exponentially. At age 85 I believe they went to something like $1,500 per month. At that point I stopped the policy. I saw it as a big-time ripoff. My grandmother stayed in a board and care home for over 12 years and would have never been able to utilize the policy, so I made the right decision. As I approach retirement age, I will not purchase a long term care policy for myself. It pays if someone goes into a nursing home and stays there for several years. But for most folks, I think just saving your money for the rainy day makes more sense. If you need nursing care, if you are at critical mass, you can most likely afford the nursing home payments ($50,000 to $80,000/year) with your existing savings.

-- posted by permabear

Top 428. Jul 25, 2005 5:02 AM

» BrianMcG - Re: Re: Re: Critical Mass

In response to Re: Re: Critical Mass posted by permabear:

From my own personal experience managing my grandmother's affairs (she passed away last year at age 94), I personally would not choose to purchase long term care insurance.

A few years ago, I was very aggressively solicited for LT care insurance by multiple salesmen. I did some reading on the subject and gave it serious thought, while stalling the aggressive salesmen. I never could come to a definitive conclusion, but the aggressiveness with which the salesman tried to sell me raised serious doubts in my mind. One persistently asked to come to my home. I consented and was given a slick pitch; when I demurred, the salesman showed his anger. It was pretty obviously a good deal for the salesman. I hope, of course, that I made the right decision. Now several years later, I am still in good health; I have several thousand dollars more in my investment account. Part of my thinking was my own family experience. None of my parents or grandparents ever needed LT care and thus would not have benefited from such a policy.

-- posted by BrianMcG

Top 429. Jul 25, 2005 6:36 AM

» allancoleman - Re: Critical Mass

In response to Re: Re: Critical Mass posted by permabear:

my own study of the long term care situation agrees with Normxxx AND permabear & BrianMcG .

the truely wealthy can afford to " self pay " for long term care . the poor will get it through Medicare and Medicaid , although they probably won't like the quality . it's the people in the middle who should consider it , not only for their heirs , but also for themselves .

the stories i've heard aren't good about the insurance companies being there to back up the policies . like most investment decisions , it's a personal call .

-- posted by allancoleman

Top 430. Jul 25, 2005 11:53 AM

» Normxxx - Re: Re: Re: Critical Mass

In response to Re: Re: Critical Mass posted by permabear:

You got a bad policy. You need to very carefully compare policies-- most cannot raise premiums based on age (or policy cohort)-- obviously, your grandmother's was of the latter type (probably some kind of ST policy, not for life). Also, you need a large insurer, so premiums are less likely to rise and so that the insurance company is less likely to go broke (GE, or one of the companies now used by the Federal Employees' Beneficiary System, is fine). But you are right; if you are at CM, you can easily afford to self-insure. And, it should be obtained only if there is some reasonable chance of using it.

-- posted by Normxxx

Top 431. Jul 25, 2005 1:45 PM

» Normxxx - Re: Re:Old Age Insurance

In response to Re:Old Age Insurance posted by Kirk:

What you are advocating is much like some form of the "private medical accounts" which are coupled with catastrophic (big deductable) insurance. This is a good idea, because very few people tend to get catastrophic diseases before midlife at least and, if the worst occurs, have the catastrophe insurance, after they pay down the deductable.

I don't think it works as well with LT insurance. Although, you can "self insure" as you propose, but get a "minimal" LT insurance policy, so that you have something if worst comes to worst and you get hit young. You can always drop it if you build up enough of a "nest egg."

-- posted by Normxxx

Top 432. Jul 25, 2005 3:34 PM

» iamacamera - Re: Re: Re: Critical Mass

In response to Re: Re: Critical Mass posted by bbaddict:

Hey bbaddict, I don't think life has to be too simple. We drink champagne every weekend, eat at excellent restaurants - limited in frequency by calories, not $. We always fly 1st class which makes a huge difference on overnight trips.

The last time I (truthfully) said this and attributed much of it to Brinker, I generated a lot of hostile mail from the BB haters. But you have to give credit where it is due. I have a clear view of BB - warts and all. Nevertheless I was wandering in the wilderness when I stumbled across him and he changed my life.

I lost a chunk on the Qs debacle but I sidestepped the bear market and got back in the "cyclical" bull. Overall I'm a mile ahead and I long ago forgave - if that's the right word - Bob for the Qs.

I strongly suggest that you record your spending for a couple of years before retirement so that you have a clear idea of your fixed costs. My biggest surprise was Fed Tax but that is way down now thanks to W.

I looked at my capital differently. I looked at a conservative rate of return and treated it as a mortgage (or really a sinking fund)with our lives as the term. E.g. at 60, if you believe you'll live to 95, enter 420 as the number of payments and your capital say 1.5 million as the PV, if you think 6% is reasonable return enter 0.5%/month as the interest rate. This will give you a payment of $8552 per month and you die broke. If you take less then of course it will last longer or you'll have a fund for extras if you need them. What do other people think of this sinking fund approach? Am I missing something. It seems much better than annuitising to me. Did you hear the guy yesterday who thought he was getting a 7.5% return on his money? Flanagan certainly didn't explain the situation to him very well.

If you already get $40k or $50k from other sources eg company retirement and SS, you probably need much less. I have found I can live fairly extravagently on between $90 and $100k p.a. We don't buy many tangibles any more. If you have a fairly small house you won't have room for a lot of stuff.

Also looking at my own parents, spending goes down after 75 and is very low after 80. As Bob once said "It is not how many years you have left, it is how many GOOD years."

-- posted by iamacamera