Investing 102

[GregWeld]

OH YEAH MIKE!!

We can all burn through the dough!

Some of us are pretty lucky. I MAKE more than I can spend... well -- I can spend it with the best of 'em... but most people would be damn lucky if they retired with 500K --- and even luckier if they had 1MM... and trying to live off the interest - and Social Security if you only have 500K is going to be a long tough haul. Even 1MM is only going to earn 50 or 60K -- and that's GROSS so you've got 20% taxes out of that... So then most folks are going to be dipping into that capital for little things like the roof on the house - or the 50th Wedding anniversary -- or the loan to the kids for a house downstroke...

With INFLATION - property taxes go up almost every year - auto insurance - medical insurance - just STUFF.... and suddenly what seemed like a massive amount of dough - isn't.

My buddy lived off his union pension - and SS.... and it was TIGHT! He had to watch every nickel if he wanted to be able to do anything other than just pay his bills. BUT == BIG BUTT == he'd invested in land many years ago -- and just sold it. That was his piggy bank. Now -- he's a comfortable guy and invested for dividends he can now sport an extra 7 or 8K per month gross... pretty dang nice for a guy that was just getting by. The point is -- I don't car how you do it - land - rentals - stocks - savings - whatever.... ya got to have some for down the road. Ya don't have to be Charlie or Greg. We're the exception. But ya gotta get busy and do SOMETHING. There's no magic bullet.

[glassman]

Greg, I do agree with you. I have a saying I've sead since my twenties that I'm kinda tweaking today, basically " It's either be here making it, or out there spending it...". But I m finally beginning to see the light of some investing advice I received a while back, is to have your money making money while your sleeping, which is totally contrary to my bisness.

So at 8% and I have 1.2, does that translate to 96,000 before taxes? Less 15% for taxes (probably 20% of that 1.2 will be from my Roth)...bout 6800 a month. Or bout 1700 a week. You can see where it starts to get thin...

Mike

[GregWeld]

Originally Posted by glassman

Greg, I do agree with you. I have a saying I've sead since my twenties that I'm kinda tweaking today, basically " It's either be here making it, or out there spending it...". But I m finally beginning to see the light of some investing advice I received a while back, is to have your money making money while your sleeping, which is totally contrary to my bisness.

So at 8% and I have 1.2, does that translate to 96,000 before taxes? Less 15% for taxes (probably 20% of that 1.2 will be from my Roth)...bout 6800 a month. Or bout 1700 a week. You can see where it starts to get thin...

Mike

Yes -- if you can SAFELY make an 8% cash flow off your investments. I've yet to be able to make that kind of return. You can get that in TOTAL return - capital growth and dividends -- but to consistently, safely earn 8% you'd have to be seeing mortgage rates in the 9's and 10's -- and treasuries would be yielding 6% or more.

Of course that's the issue isn't it.... we don't really know what the future holds for rates etc.

A more conservative estimate would be to earn a steady 5%.... if you get more --- then we're in a highly inflationary period... which of course ALL retirees hope for!!

[glassman]

So basically tread lightly and pay attention (or you won't be paying anything...hahaha)

[GregWeld]

Originally Posted by glassman

So basically tread lightly and pay attention (or you won't be paying anything...hahaha)

Well...... once you start living off the cash-flow -- and you're "older".... it's not the time to be risking what took you years to achieve. So MOST people take a step back and invest a bit more conservatively. At retirement you're goal is to have a steady rock solid cash flow you can count on for many years. You don't want to be gambling - suddenly loose a quarter mill - and then have the market be down too.... and all of a sudden you're in hot water.

Now -- if you have 5 or 10 or 20 million.... then you can take a bit more risk because if you have 10 million -- and it's spinning off 500 to 600K in cash... (5 or 6%) -- you're probably okay regardless.

[Bucketlist2012]

Originally Posted by GregWeld

A more conservative estimate would be to earn a steady 5%.... if you get more --- then we're in a highly inflationary period... which of course ALL retirees hope for!!

I do believe we will see that Inflation at some point in the future..

That is why locking in on the present rates is critical..

Having a long term fixed loan at sub 4% and Investments that will yield double or more ?

[glassman]

Well put.

[GregWeld]

People get mad at me when I say I'm hoping for raging inflation... and that I'd love to see 10% CD rates. Actually if truth be known - anyone that is living off their money would love to see a return to these kinds of rates. In retirement you're most likely (key statement - MOST LIKELY) not buying as much "stuff"... Your mortgage is most likely locked in or non-existent. Even if you have one - like Mike pointed out - paying 4% and making double that - is a good thing.

While nobody really actually wants inflation, it's good for retirees. It's just a no brainer for folks to be able to put money into super safe bonds or CD's or Treasuries and make acceptable returns. High return rates actually RAISE the buying power for these folks... but, of course, at the expense of those that are still working and trying to raise families and buy homes and cars etc. That's why inflation and high rates are "bad". But the historic low rates on these same investments have been really bad for the retiree for several years now. This is particularly true for those with the lowest amounts to retire on. The difference between making 7% on 300K and making 3 or 4% on that same amount is just huge to that family.

[Bucketlist2012]

Originally Posted by GregWeld

People get mad at me when I say I'm hoping for raging inflation... and that I'd love to see 10% CD rates. Actually if truth be known - anyone that is living off their money would love to see a return to these kinds of rates. In retirement you're most likely (key statement - MOST LIKELY) not buying as much "stuff"... Your mortgage is most likely locked in or non-existent. Even if you have one - like Mike pointed out - paying 4% and making double that - is a good thing.

While nobody really actually wants inflation, it's good for retirees. It's just a no brainer for folks to be able to put money into super safe bonds or CD's or Treasuries and make acceptable returns. High return rates actually RAISE the buying power for these folks... but, of course, at the expense of those that are still working and trying to raise families and buy homes and cars etc. That's why inflation and high rates are "bad". But the historic low rates on these same investments have been really bad for the retiree for several years now. This is particularly true for those with the lowest amounts to retire on. The difference between making 7% on 300K and making 3 or 4% on that same amount is just huge to that family.

Greg, I almost blew coffee all over my Monitor laughing so hard.. I know, it doesn't sound good saying we welcome High Inflation... But in all honesty, I think it is inevitable and not our fault..

The fact that it will benefit me the most is just part of life...I won't be the one causing it and neither will you..

I just see it coming and I am getting ready..I will benefit greatly from it...

Holy poo, If I can get double digits on CD's again, I will lock in those too and take some out of Stocks to diversify even more...

[Tony_SS]

Originally Posted by GregWeld

People get mad at me when I say I'm hoping for raging inflation... and that I'd love to see 10% CD rates. Actually if truth be known - anyone that is living off their money would love to see a return to these kinds of rates. In retirement you're most likely (key statement - MOST LIKELY) not buying as much "stuff"... Your mortgage is most likely locked in or non-existent. Even if you have one - like Mike pointed out - paying 4% and making double that - is a good thing.

While nobody really actually wants inflation, it's good for retirees. It's just a no brainer for folks to be able to put money into super safe bonds or CD's or Treasuries and make acceptable returns. High return rates actually RAISE the buying power for these folks... but, of course, at the expense of those that are still working and trying to raise families and buy homes and cars etc. That's why inflation and high rates are "bad". But the historic low rates on these same investments have been really bad for the retiree for several years now. This is particularly true for those with the lowest amounts to retire on. The difference between making 7% on 300K and making 3 or 4% on that same amount is just huge to that family.

Right now we are seeing a lot inflation, but rates are being held way too low. So the while the cost of living is going way up, the SS checks are not reflecting that and rates are way too low for investments to keep up for the average retiree.

I was listening to this guy on the radio and to me, he knew exactly what game was being played and how to win it..

http://www.amazon.com/The-Boomers-Gu.../dp/1599322935