Retired people of F80.BimmerPost - How did you save for retirement?

[GrussGott]

Originally Posted by dkhm3

my real estate holdings have almost doubled, and since it was leveraged, it is multiplied.

that's great man, no shade, just saying it's not for me due to risk and liquidity and, honestly, accounting hassle (not to mention the risk you took with the loans). But then I'm a pussy that way.

[dkhm3]

Originally Posted by GrussGott

that's great man, no shade, just saying it's not for me due to risk and liquidity and, honestly, accounting hassle (not to mention the risk you took with the loans). But then I'm a pussy that way.

managed risk. Obviously stocks, real estate are long games, if you start young and look at things every day and have an ocd mentality, you start to see patterns in the matrix.

[Invictus]

Originally Posted by Agamemnon

The key to wealth is "pay yourself first". Simply put a portion of your pay check aside towards your retirement future. Buy blue chip dividend paying stocks and specify a reinvestment of dividends into more shares. Time is your best friend so start early. Stick with your strategy, rebalance your portfolio as necessary. Don't panic in downturns, just buy more of the good stuff when it is cheap. Defer gratification but live reasonably well because you may not live to old age. So balance is important. Get professional advice from someone who has your interest at heart and not trying to meet some quotas of product. Paying for good advice is money well spent.

Words to live by.

The only thing I'd add is to get life/disability insurance when you are young and healthy (the premiums are low and stay low). Many policies start paying money back to you after 10 -15 years or so (if you make no claims). You can keep the money or use it to pay the premiums going forward. Get insurance if you have a family, especially.

When life insurance policies come due you will get a pretty big lump sum also.

No, I don't sell insurance.

Also, be careful about people who call themselves "financial advisors". They have no legal responsibility to act in your best interest (like a doctor, lawyer or engineer). They will make money from you no matter how well they do for you. I use the guys at my bank. I know them and they are paid by the bank (not on commission).

If financial advisors knew what they were doing they wouldn't need your money. Think about that for a minute.

Get a book called "The Wealthy Barber". It's a short read. It's in plain language. Great financial advice. Best book I ever read.

Good luck!

[jmg]

Originally Posted by dkhm3

my real estate holdings have almost doubled, and since it was leveraged, it is multiplied. on top of that, they are making a 8-10% return in rent (net) without me needing to sell any of them.

the holdings are diversified in multiple counties and 2 states, all of which are providing both rental income and appreciation.

irs defines the income as passive. that is the basis of the term. As far as actual work is involved, I manage all my holdings as well as other people's holdings and my average work week is about 4-6 hours a week.

https://en.wikipedia.org/wiki/Passive_income

What do you mean your real estate is leveraged?

[jmg]

Originally Posted by GrussGott

that's great man, no shade, just saying it's not for me due to risk and liquidity and, honestly, accounting hassle (not to mention the risk you took with the loans). But then I'm a pussy that way.

I think that's my concern. I'm feel like I'm too pussy to take out another mortgage to get a 2nd home and rent out my current. It is currently what I feel I should be doing. My mortgage is cheap because we bought when everything fell apart here in California. I'm up 25% on my home now. I feel like I should keep this house until I retire and either live in it when it's paid off, or sell it and live off more than half a million dollars it will generate. That plus my pension and my wife's 401k sound okay, but really I have no real idea. Passive income would be nice. I'm just not sure I have the balls to risk a business venture like that.

[dkhm3]

Originally Posted by jmg

What do you mean your real estate is leveraged?

It means for example that a house is sold for $100,000.00

Since it is an investment property, the bank will require that I put more down payment on it than a home I plan on living in. I put 25% down and the bank lends me 75%. If the property doubles in value over the course of 5 years, for example, the bank can only collect on the interest payments on the loan, but none of the appreciation. Therefore, I leveraged my 25k with the bank's money and gain from any appreciation of the property. Obviously, property values can go south, as with all investments, there is risk and benefits of timing.

The cost of my investment is the interest paid, the opportunity cost of my down payment, the property taxes, the insurance and other smaller miscellaneous expenses, assuming the property was in good rentable condition. Moreover, if the property was rented during the time, my mortgage interest, taxes, insurance, expenses, repairs, utilities, etc. are deductible against the profit from the rent.

[Invictus]

Originally Posted by dkhm3

managed risk. Obviously stocks, real estate are long games, if you start young and look at things every day and have an ocd mentality, you start to see patterns in the matrix.

I heartily agree. It's a long game. Well said.

[GrussGott]

Originally Posted by dkhm3

I put 25% down
I leveraged my 25k with the bank's money
my down payment, the property taxes, the insurance and other smaller miscellaneous expenses,
my mortgage interest, taxes, insurance, expenses, repairs, utilities, etc

All that stuff is the problem for me ... I'm pretty lazy and don't want to worry about a bunch of stuff.

I'm on this forum and there's a lot of new shows coming out on Netflix so I have a lot going on right now

[GrussGott]

Here's a timely item from Ray Dalio, founder of the largest and most successful hedge fund in the World:

"People think that the way that you do best is to have the best possible bets," Dalio said. "The way that you do best is to have the best possible diversification."

"I learned that if I could have 10 or 15 uncorrelated bets, and they're all about the same return, that I could cut my risk by 75% or 85%," he added. "That would mean that I would increase my return to risk ratio by a factor of five through diversification."

[jmg]

Originally Posted by dkhm3

It means for example that a house is sold for $100,000.00

Since it is an investment property, the bank will require that I put more down payment on it than a home I plan on living in. I put 25% down and the bank lends me 75%. If the property doubles in value over the course of 5 years, for example, the bank can only collect on the interest payments on the loan, but none of the appreciation. Therefore, I leveraged my 25k with the bank's money and gain from any appreciation of the property. Obviously, property values can go south, as with all investments, there is risk and benefits of timing.

The cost of my investment is the interest paid, the opportunity cost of my down payment, the property taxes, the insurance and other smaller miscellaneous expenses, assuming the property was in good rentable condition. Moreover, if the property was rented during the time, my mortgage interest, taxes, insurance, expenses, repairs, utilities, etc. are deductible against the profit from the rent.

Would that mean that if I buy a home, move in, wait a year or so, then rent it out and buy another home, I don't have to put as much down since technically I will be living in the new home?

[dkhm3]

Originally Posted by jmg

Would that mean that if I buy a home, move in, wait a year or so, then rent it out and buy another home, I don't have to put as much down since technically I will be living in the new home?

depends on the type of loan. check with your mortgage broker.

fha loans require that you live there for a year before you can rent it out.

you need to look at the return you are making if you rent it out. unfortunately, at least for socal, the value of homes have gone up significantly so that leveraging for rental income does not make sense at this time.

[Habber]

I'm guessing that killing debt as early as you can was also key to getting there.

[RickFLM4]

Millennials: It pays to rethink the boomer approach to retirement
http://www.cnbc.com/id/104391606

[bradleym]

I agree with the below, but will add a couple comments. i'm not retired -- i'm 50 and have 8 years of college to pay for coming up real soon -- but my financial plans are built around creating options, and right now my options are shaping up nicely. here are a few things i've learned:

1. The purpose of money is to make more money. full stop.
2. High income DOES NOT mean you are rich.
3. Learning to defer gratification makes you more happy over time.
4. Don't buy an ///m (or any other frivolous thing) unless you can afford to pay cash for 10 of them.
5. Employ leverage in your interest (no pun), not someone else's.
6. Don't be a complete scrooge -- that is no way to live either.
7. Time is your friend -- but will become your enemy if you are stupid.
8. Don't pay someone else to do something that you could easily learn to do on your own.
9. 'Bucket Lists' are complete rubbish -- of use only to idiots unable to grasp reality and think for themselves.
10. Sitting down with a good book is a far better spend of 'entertainment' dollars than a cruise, cable tv or a ski holiday....
11. NOTHING insulates you completely from risk, fact of life.

I could probably think of a few more, but they are generally well summarized at the site linked below: www.mrmoneymoustache.com

If you haven't already, go to www.vanguard.com or www.fidelity.com and open an account, and buy into an S&P500 fund. Then, shape your financial life around sending $50-$100 every month to that fund, the goal being to achieve saving 20-40% minimum of your salary, whatever that is.

I have a high income now, but even when i was a grad student in NYC, living on my stipend and my wife's salary of 25k (total about 32k) we saved and invested. And we had a rollicking good time in NYC while we were young.

It is all about priorities....and a healthy regard for an uncertain future.

Originally Posted by GrussGott

I've posted in other threads how you could save $2000/month for about 6-7 years and, assuming, a conservative interest rate, that will make your $1000 M-car payments for 30+ years. Nice huh? guaranteed m-car for 30 years.

Here's the situation: if you're born in the US, Canada, or Europe you've won the lottery because there's almost a guaranteed path to becoming a multi-millionaire! And the simple path to that isn't some big money job or a startup or tricky investing or a sexy insider secret; it's planning to become a millionaire and then sticking to the plan.

Here's the problem: it's not what other people are doing. It's not "normal", which is why most people don't know a lot of multi-millionaires. There's a saying, "if you want something different than what everyone else has, then you have to do something different than everyone else does". And in this case that means planning to be a millionaire and then sticking to the plan. Which means giving some things up today for future spending tomorrow. Which nobody likes to do. Which is why they don't do it.

To collect your lottery winnings and become a millionaire you need to (a.) save, and (b.) invest conservatively. No need to figure that all out, it's already been done for you.

Go here to learn how to be a savings badass.

Go here to learn how to invest that savings

If you read the newbie threads and do what they say, you're almost 100% guaranteed to become a millionaire.

CONGRATULATIONS!

[Domer88]

I'll echo much of what has already been said.

I'm 50 now, and not retired. But I have "fuck you" money in the bank, so the day I'm not enjoying work anymore, I can quit. So every day I go to work now is on my terms. That doesn't mean work is not work. Or that it's fun every day, but on balance I enjoy what I do.

I got to this point by being a saver most of my life. I went to college on an ROTC scholarship. That meant serving in the USAF after graduation. But it also meant going to a really good school, through masters degree, and graduating with a total of $3000 in debt.

I paid that debt off in a year. Lived in the shittiest apartment you could imagine, while many of my peers lived in the cool apartment complexes with pools and tennis courts.

Over my lifetime, the average age of my cars when I have gotten rid of them is 11 years old. My wife drives hers even longer.

When my kids were younger, most of our vacations were "staycations." And you know what? They didn't care. They wanted quality time as a family. Doesn't matter if it's on a beach or in the backyard.

Take advantage of compounding returns. Defer gratification and save early. I dialed back on my conservative ways over the past ten years as my goal came into sight. The money I socked away in my twenties has paid me more than any new savings ever could.

And my philosophy toward a purchase like an M3 is that it's a total luxury. A reliable new car might cost me $25k. So the extra 50K I spent on my M is discretionary spending. Which means I pay cash. Don't borrow for vacations, fast cars, or anything else you can live without. Borrow only to finance future income, the same way a business would manage debt.

[Gibson6594]

There is a lot of automatic assumption that debt is always a bad thing and that loans should always be avoided. That is not a fact. For example, I have a loan on my M3, I could quite easily pay it off today if I wanted to. I choose not to and I believe it is the economically wise choice.

Money always has a greater than or lesser than value. Sometimes taking on debt allows you to increase the value of other monies. You just have to figure how to apply your funds to put them in the position of the most applicable value.

[bradleym]

correct, which is why i said 'Employ leverage in your interest (no pun), not someone else's.'

i owe about 23k on my ///m -- i'm paying about 1.9% interest on that, and the bonds that could have been liquidated to pay cash are earning just shy of 3%.

additionally, i always value capital over income -- so i'm paying this loan down at a faster rate through extra payments from income, leaving capital where it was. the value here is mostly psychological, but real indeed.

Originally Posted by Gibson6594

There is a lot of automatic assumption that debt is always a bad thing and that loans should always be avoided. That is not a fact. For example, I have a loan on my M3, I could quite easily pay it off today if I wanted to. I choose not to and I believe it is the economically wise choice.

Money always has a greater than or lesser than value. Sometimes taking on debt allows you to increase the value of other monies. You just have to figure how to apply your funds to put them in the position of the most applicable value.

[backagain]

Originally Posted by dkhm3

my real estate holdings have almost doubled, and since it was leveraged, it is multiplied. on top of that, they are making a 8-10% return in rent (net) without me needing to sell any of them.

the holdings are diversified in multiple counties and 2 states, all of which are providing both rental income and appreciation.

irs defines the income as passive. that is the basis of the term. As far as actual work is involved, I manage all my holdings as well as other people's holdings and my average work week is about 4-6 hours a week.

https://en.wikipedia.org/wiki/Passive_income

One can also trade stocks with leverage or in margin account. But it is a double edge sword.

Subprime mortgage showed people can get burned, even wiped out by investing in the real estate market.

Not saying it is a bad idea as I have rental properties, but I hate dealing with tenant or maintenance issues, even though I have someone else managing them.

So know what you are getting yourself into and choose wisely.

[backagain]

Originally Posted by Gibson6594

There is a lot of automatic assumption that debt is always a bad thing and that loans should always be avoided. That is not a fact. For example, I have a loan on my M3, I could quite easily pay it off today if I wanted to. I choose not to and I believe it is the economically wise choice.

Money always has a greater than or lesser than value. Sometimes taking on debt allows you to increase the value of other monies. You just have to figure how to apply your funds to put them in the position of the most applicable value.

Totally. Debt is not a bad thing by itself.

• Mortgage is a great debt, as the interest rate generally is low, and interest payments can be tax deductible.
• Car loan with interest rates like 0.9% is almost like free money.
• My margin account only charges 3%, much lower than the average stock market return of 7%. So why not?

It is the debt to asset ratio that one should be worried about.

[GrussGott]

Originally Posted by RickFLM4

Millennials: It pays to rethink the boomer approach to retirement http://www.cnbc.com/id/104391606

Pro Tip: Anybody who's in the market for an M car that ever thought social security would be enough for retirement is fucking nuts.

Originally Posted by bradleym

I
4. Don't buy an ///m (or any other frivolous thing) unless you can afford to pay cash for 10 of them.

If you haven't already, go to www.vanguard.com or www.fidelity.com and open an account, and buy into an S&P500 fund. Then, shape your financial life around sending $50-$100 every month to that fund, the goal being to achieve saving 20-40% minimum of your salary, whatever that is.

I have a high income now, but even when i was a grad student in NYC, living on my stipend and my wife's salary of 25k (total about 32k) we saved and invested. And we had a rollicking good time in NYC while we were young.

Originally Posted by Domer88

The money I socked away in my twenties has paid me more than any new savings ever could.

I'm not gay but if you guys insisted on a threesome I'm not saying I totally wouldn't. Anyway, think about it.

Originally Posted by Gibson6594

There is a lot of automatic assumption that debt is always a bad thing and that loans should always be avoided.

Debt is fine if used properly and most people don't, that's all.

We can debate about using 'leverage' to buy appreciating assets, but there's really only one proper reason to use debt to buy a depreciating hunk of metal powered by explosions that sits on your driveway 90% of the time: minimize risk and free up capital for investing.

But there's a big caveat to that:

Building on what bradleym said, if you can't pay cash for 10 M cars, but have a loan out for one anyway, then you're not behaving properly.

[aX3Man]

Great thread and great info.

For those that mentioned real estate that is rented out, did you buy those properties purely based on a current positive cash flow every month or were other factors considered?

Also, as a landlord, do you do work/maintenance yourself or do you have a guy? (Sorry, I'm from NJ and everyone has "a guy")

[jmg]

Originally Posted by bradleym

4. Don't buy an ///m (or any other frivolous thing) unless you can afford to pay cash for 10 of them.

I see the threads like "what do you do for a living" and "how much of your income do you spend on you car" and even this very own thread explores this idea. The idea of being able to "afford" something is very vague. Even if you can afford something, should you still buy it? How important is this to me compared to other things? If I held myself to this statement, then I needed to have $800,000 in the bank at the time I got my F80? I didn't have $800,000 laying around. Granted, I'm leasing. Maybe I shouldn't be?

Originally Posted by bradleym

If you haven't already, go to www.vanguard.com or www.fidelity.com and open an account, and buy into an S&P500 fund. Then, shape your financial life around sending $50-$100 every month to that fund, the goal being to achieve saving 20-40% minimum of your salary, whatever that is.

Thanks, I think I will look into this.