Critical Mass - Care and Feeding For Once Attained

Top 2. Apr 26, 1999 9:31 AM

» tele - Keep Your Housing Costs In Line

No more than 25 pct of income, and preferably below 20 pct. After all, one of the good things about critical mass is that you have the freedom to do new things (which sometimes cost money). You don't want to be spending your cash on upkeep of bricks, mortar and wood beyond what you need. Since this most likely everybody's biggest expense, following this rule (along with prudent asset allocatio) will help keep you in critical mass. BTW housing costs mean, taxes, insurance, utilities, upkeep, etc. If you're at critical mass, your house is paid for, right? (unless you're smart enough to use that cash for better returns than your mortgage interest rate like savvy Suite 101 stock pickers).

-- posted by tele

Top 3. Apr 29, 1999 6:06 AM

» tele - Kirk

You're right about where the discussion about housing costs belongs, I just haven't figured out how to move things to different threads. I was referring to a new house costing 500K not one that had appreciated a lot (unless property taxes had gone up by the same amount). Obviously 40K is a great income if your housing costs are low (below 10K a year), and it's not a bad lifestyle in most parts of the country. Sorry for the confusion.

-- posted by tele

Top 4. Apr 11, 2000 9:26 AM

» JenL_2 - Critical Mass

These posts copied from the “BB Discussion” thread:

Author: fshcop
Date: April 10, 2000 8:15 PM
Subject: Bored at 50

Finefeathers,

Retired at 50. Lived on the Oregon Coast. Had a live-aboard sailboat & condo overlooking the bay.

Fished almost daily, played hard, did everything I always thought I would want to do & got "Bored".

Took about 3 years, but I got real "Bored".

Went back to work, part-time, and still have time to do what I want to do - hobby wise.
Do I miss the days on the coast - sure! But not enough to go back & do it again.

I guess I personally require "work" to make me feel productive, & the extra $$ helps to fund my "fun" stock protfolio.

To each his own,

Larry K.

Author: PeteM
Date: April 11, 2000 4:45 AM
Subject: fshcop,

fshcop,

As someone who is striving for critical mass, your story intrigues me. I have heard others speak of getting bored and going back to work, one guy told me "well you can only eat so many donuts and coffee." I am interested in any other "words of wisdom" from the other side of critical mass.

Pete

Author: Gene
Date: April 11, 2000 6:51 AM
Subject: PeteM

PeteM, saw your request for someone who is on the other side of the "boredom" in retirement and thought I'd chime in my $.02. I retired 6/1997 at the age of 54, after 37 years in IT and I am in hog heaven as they say! For the record - I enjoyed my career in Information Technology, thoroughly liked the folks I worked with and all the challenges of the IT work. I have no problems with those who want to work nor retired as it is everyone's choice. I just consider myself very fortunate to be in the position I currently find myself.

Best way to sum it up - when I look back, first and foremost came my family BUT this is a Terrific Payoff for working, saving and investing all those years. At this stage, I can not fathom ever fitting work into my schedule, especially Corporate America. First and foremost, I have many hobbies, interests and friends (retired and working) of all ages and I am indulging in those interests with all the gusto I can muster at this stage.

For instance, the last several months, in no particular order and they represent my interests but to let one know what is "possible":

1. Went to Arizona for 10 days, a mid-winter vacation, did all the planning for wife and I, hiked 6 days throughout Tucson, visited friends in Phoenix

2. Met with friends for 4 days last and this week for lunch, visit Museums and plan for upcoming fishing and golf seasons.

3. Volunteer for Meals on Wheels Delivery to Elderly in my town.

4. Volunteer for Talking Information Center a radio station here. I prepare, read and record a weekly 1/2 hour show on computers for the blind and visually disabled.

5. Analyze, analyze and re-analyze portfolio per BB, S101 directions :>)

6. On a 70 degree day, went for 1st bike ride - 20 miles, will work up to 50 milers along the coastline to Cape Cod.

7. Met with contractors bidding to do some house work, much more pleasant in person and during the day.

8. Planning some day hikes & camping trips to New Hampshire, Maine, Vermont and Conn with friends.

9. Do # 5 until I get it right!

10. Took a "quickie" 5 day trip w/ cheapo Southwest tix to Jekyll Island, Georgia to redevousz with several friends from work who retired to there and Florida.

11. Took up a brand new hobbies in 1997 of wines and cooking - working wife relishes it, grown sons enjoy coming over for "Dad's freebies" and I'm always in a good mood:>)

12. Started planning for trip to Northwest, California or maybe Italy this fall.

Finally, one of the most enjoyable and pleasurable is that after many years of having to read all the business, technical and financial matter just to stay currrent, is the sinful pleasure of just kicking back and reading WHAT I want whenever, even at say, 2:00 / 3:00 PM in the afternoon. Then of course, go and validate my asset allocation plans in #5!!

I could go on for pages and pages but I think you get the drift.

Happily retired.....Gene

Author: Rande (Rande Spiegelman)
Date: April 11, 2000 7:15 AM
Subject: Awesome.

Awesome.

Rande Spiegelman

Author: Kirk (Kirk Lindstrom)
Date: April 11, 2000 7:26 AM
Subject: Choices when at Critical Mass

The nice thing about being at Critical Mass is you can CHOOSE to keep working, or switch jobs to what you really enjoy and set the terms for people that want you to do some work for them. Get too much work, raise your rates.

Lets move and record this discussion on our old Critical Mass Thread so it is easy for people to find this sort of information in the future. Gene made a good post on the topic way back then also!

Kirk Lindstrom - Editor: Investing and Personal Finance

-- posted by JenL_2

Top 5. Apr 11, 2000 8:37 PM

» JenL_2 - More Critical Mass

More posts copied from the "BB Discussion" thread:

Author: Don_W
Date: April 11, 2000 9:46 AM
Subject: GENE

WOW!!!. You deserve it.

Donald

Author: PeteM
Date: April 11, 2000 2:11 PM
Subject: Gene,

Gene,

Thanks, I guess you really don't know what it's like until you're there. Glad you are taking full advantage of your time. It seems people with a lot of interests and hobbies keep busy enough, that they don't get bored. Keep up the good work.

Pete

Author: Rande (Rande Spiegelman)
Date: April 11, 2000 2:13 PM
Subject: If you find yourself watching Oprah

If you find yourself watching Oprah and Judge Judy more than once every two years....it's time to go back to work.

Rande Spiegelman

Author: anthonyc_4
Date: April 11, 2000 3:48 PM
Subject: Critical Mass

By many standards I am probably at that point also at my mid 50's and have been there for a time. Owning rental real estate, with a manager who handles most of the everyday problems allows me quite a bit of free time. Last week a quick jaunt to Catalina took a few days, and then a stop at the Toyota dealer on Saturday put me in the drivers seat of a new Toy Spider 2-seat Silver sports convertible, and away I drove feeling like 49...Of course I had to sell 200 shares of Lam Research bought at a little over $3 adjusted for the split at $50 to help pay for it...But, heck Master Kirk, tho I hated to part with my Lam I sure am enjoying the wind thru my hair...Or what's left of it!!! Thanks Kirk, and I guess when you are in the LA area the car should be yours for the weekend...You sure helped buy it! Actually I am quite used to lots of free time, and even just sitting in the sun with an ice tea and a girl scout cookie never makes me feel guilty. I worked on learning how to enjoy my free time, and it took a couple of years after I quit education, but I learned!!! Love it!!!

anthony czarnecki

Author: Gene
Date: April 11, 2000 4:58 PM
Subject: Anthony,

Anthony, congratulations on hitting ye olde CM and hope you continue to enjoy everything. I'll give you call when I head out to the left coast for a ride along the coast!

Gene

Author: JenL_2
Date: April 11, 2000 8:31 PM
Subject: Thanks Guys!

Thanks FshCop, Gene, Kirk & Anthony for your accounts of what it's like to be living in the land of Critical Mass. Congrats to all. You earned it. Hope we all get there some day - and Watermellon Smiles all around!

Now I'm going to copy these posts over to the..

Critical Mass thread

.....Jen

-- posted by JenL_2

Top 6. Apr 12, 2000 4:39 AM

» PeteM - Congrads and thanks to all who have shared a look into the cryst

Congrads and thanks to all who have shared a look into the crystal ball for us "kids". I guess whether you are at critical mass or not it is important to enjoy every day and to make the most of it. It was also nice to be on the same page for a while on that other thread.

-- posted by PeteM

Maintaining a Generous Cash Flow Once You Have Entered Retirement

Top 7. Oct 7, 2000 10:42 PM

» JenL_2 - Maintaining a Cash Flow

This from 10/8 WSJ:

By JONATHAN CLEMENTS

Think of it as juggling for seniors.

Once you are retired and living off your savings, your goal is to generate a generous, reliable stream of income that climbs along with inflation. But unfortunately, no single investment will give you all that.

Instead, you have to muddle through with a mix of stocks, bonds, cash investments and immediate annuities. How should you divvy up your nest egg among these four investments?

Here are a few thoughts:

Comforts of Cash

When it comes to safety and stability, you can't do much better than cash investments, such as savings accounts, certificates of deposit and money-market funds. And if you shop for higher-yielding CDs and stick with low-cost money-market funds, you can earn a decent amount of income.

Cash investments, however, are a dud at fending off inflation. If you spend all the interest you earn each year, you will suffer a slow decline in your standard of living, as inflation eats away at your account's value and the interest it generates.

Income for Life

Immediate fixed annuities will give you more income than cash investments. Meanwhile, safety shouldn't be an issue, especially if you stick with top-rated insurance companies. To check out annuity pricing, visit sites such as

http://www.annuity.com
http://www.annuityscout.com
http://www.annuityshopper.com.

The real allure of annuities, however, is the chance to lock in a stream of income for life. No matter how long you live, the insurance company will keep cutting you a monthly check.

But there are drawbacks. When you die, the annuity usually also dies, which means there is nothing left for your heirs. Moreover, annuity payments are typically fixed, so inflation gradually destroys the spending power of those monthly checks.

An Interest in Bonds

Bonds are a fair source of income, typically kicking off more income than cash investments, but less than an immediate annuity. Meanwhile, as long as you favor high-quality short-term bonds, you shouldn't have a problem with defaults and your bonds shouldn't suffer too many wild price swings.

But once again, the big bugaboo is inflation, which will erode the value of both your principal and your interest payments. What to do? An intriguing alternative is inflation-indexed Treasury bonds.

Every year, both the value of inflation-indexed bonds and the interest they kick off climb along with inflation. That means you can lock in an inflation-protected stream of income, while ensuring that your bond's principal value doesn't get whittled away by rising consumer prices. The bonds currently yield around 4%.

Sound appealing? There are two downsides. First, you have to pay income taxes each year on both the interest and the step-up in the bond's principal value. As a result, you may want to hold the bonds in a retirement account, so that each year you have to pay income taxes on only the portion you withdraw from the account.

Second, the 4% interest may not be enough to live on. After all, if you retire with a $400,000 portfolio, that will mean only $16,000 of income in the first year of retirement. Want more income than that? To get extra cash, you will either have to sell off bonds occasionally or try your luck at earning higher returns.

Sharing in Growth

To notch higher returns, you need to buy stocks, which historically have outpaced inflation by some seven percentage points a year.

Stocks, however, score low when it comes to safety. Moreover, with dividend yields running at just over 1%, they won't give you much income, though that income should rise over time, as companies boost their dividends.

So how should you split your money among the four investments? One option is a balanced portfolio, which you create by splitting your money between stocks and bonds. The interest and dividends provide income. Every so often, you also can sell some stocks, to generate additional spending money and to replenish the bond side of the portfolio, so that you maintain a 50-50 balance.

Alternatively, you might go lighter on bonds in your balanced portfolio and use the spare money to buy an immediate annuity. That will provide a safety net in case you live a long time and ensure you get a check every month, even if you mismanage the rest of your portfolio.

Another possibility is to skip bonds in favor of cash investments, which will give you greater safety but lower yields, and then compensate by stashing a heftier portion of your portfolio into stocks. What is the appeal of that strategy? It may allow you to enjoy both higher returns and greater peace of mind.

The idea is to put, say, a quarter of your portfolio into a money-market fund, which should be sufficient to cover four or five years of living expenses. That way, you have enough money to get through the next four or five years, no matter what happens to the rest of your portfolio.

With that safety net established, you can take the rest of your portfolio and invest for growth, including stuffing a hefty chunk into stocks. Every year, you would look to sell stocks to replenish your cash reserve. What happens if the stock market tanks? You postpone all sales until the market recovers -- which shouldn't be a problem, given the size of your cash reserve.

Subscribe to WSJ Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

Top 8. Feb 26, 2001 9:06 AM

» JenL_2 - Buy and hold?

These posts copied from the "BB Discussion" thread:

Author: rich8rd
Date: February 26, 2001 8:25 AM
Subject: Buy and hold?

How long to hold is the critical question. Critical mass is cash. Someone who retired in 1929 with 50,000 cash could live a middle class life style for the next 20 years if he went to cash in time.

Author: matttheduck
Date: February 26, 2001 8:47 AM
Subject: cash is king?

and someone who retired and went to cash in 1975 would have been eaten alive by double-digit inflation.

-- posted by JenL_2

Top 9. Feb 26, 2001 8:33 PM

» R_Lewis - Re: Buy and hold?

mattteduck, I was earning double-digit interest during the inflation of the late 70s, when cash and gold were king.

-- posted by R_Lewis

Top 10. Feb 26, 2001 11:45 PM

» JenL_2 - Re: Buy and hold?

In response to message posted by rich8rd:

Yes Rich - I remember those freaky late 70s - early 80s when we got 12% on our bank CDs but had to pay 18% for a car loan. Let's hope we don't return there......Jen

-- posted by JenL_2