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Couple Retires By Mid-30s

Couple Retires By Mid-30s

What’s your definition of “early” retirement? Sixty? Fifty-two?

A California couple recently retired in their mid-30s with $1 million in the bank, according to a story in Forbes magazine. 

That remarkable accomplishment would be difficult for most of us to replicate. I know I couldn’t do it — not with four kids!

The couple, Travis and Amanda, had no kids, were well-paid tech professionals, and already had $350,000 saved when they undertook this project. But their story reinforces several important lessons about building wealth for retirement.

Set a goal. When Travis lost his information systems job in 2012, he quickly realized he really didn’t like working. He preferred the freedom of not working. So, he and Amanda set a goal of amassing enough money to retire as soon as possible. They pegged that number at $1 million. The couple planned to live on 3 percent to 4 percent of their portfolio’s value every year and expected a 7 percent annual growth rate.

Get organized. You can’t map a journey unless you know the starting point. Travis and Amanda put all their financial information into the free budgeting site and did a deep dive analysis of their assets and spending. They also combined several 401(k)s from former employers.

Your job is your biggest asset. Travis went back to work purely to make the couple’s retirement dream come true. He switched jobs three times in three years to obtain salary increases. Travis told Forbes he kept his eyes on the prize, which made a great employee. Amanda, a chemical engineer, stayed in her job and racked up seniority increases. At their earnings peak, the couple was making a combined $200,000.

Prioritize saving. The couple saved as much as 65 percent of their income during the three years it took to amass $1 million. They lived in a rent-controlled $2,200-a-month Oakland, Calif., house (crazy cheap for the Bay Area) and aggressively cut costs by doing things like riding bikes instead of driving, and hanging the laundry outside to save on running the dryer. The two credit their frugal parents for teaching them how to live modestly.

Watch out for fees, penalties and taxes. High fees can be a great return-killer. You should review and question every fee you pay, even on funds inside your 401(k). Amanda and Travis put much of their retirement money in low-cost ETFs and index funds. These paid off nicely, as the couple rode a more than 60 percent increase in the S&P 500 from 2012 until 2015.

The couple planned ahead and was able to avoid the 10 percent IRA early withdrawal penalty by using a Roth IRA conversion ladder. In this forward-looking strategy, they transferred a certain amount of money each year from their traditional IRA to a Roth IRA. Once five years had passed from the initial IRA to Roth conversion, they were able to tap the amount converted to their Roth in an annual laddered sequence and avoid the early withdraw penalty.

Simplify before retirement. As they approached their goal, Amanda and Travis sold much of the stuff in their two-story house.

Watch the outflow in retirement. While most conversations about retirement planning center in saving, you need to think carefully about your post-work spending if you want your nest egg to see you through 20 or more years.

Travis and Amanda are very disciplined about this. They stuck to their plan to spend no more than 4 percent of their portfolio’s current value per year. As a result, they sometimes had to cut back their monthly spending when the market dipped. They did so even while on their long-planned retirement adventure, a driving trip from San Francisco to Costa Rica. They made that journey in their frugal fashion, driving a used Toyota 4Runner that often doubled as their nighttime accommodations. When the couple arrived in Costa Rica, they leased a house for $1,000 a month — about $30 a night. They cooked most of their own meals and weren’t interested in expensive resorts or tourist activities.

Relocate and save. When Amanda and Travis returned to the U.S., they left the super-pricey Bay Area and bought a $270,000 house in Asheville, N.C. They chose the artsy mountain town because the cost of living is relatively low. They also believe it will be easy to rent the house during their coming summer travels.

Travis and Amanda insist they are done working. But they plan to have a family in the future. Their frugality is impressive, but the cost of kids is a game changer for any couple’s finances. So, we’ll see.

Again, this is an extreme example of achieving an early retirement. But if these two 30-somethings can accumulate about $650,000 in three years, surely you can achieve your savings goals in 20 or 30 years by adopting some of these same mindsets and tactics.

Hey, wait. We just learned a financial lesson from two millennials! Will wonders never cease?

Read the original AJC article here.


Money Matters with Wes Moss | March 20, 2016

Wes Moss covers important deadlines for major changes coming into law for social security and other updates on oil prices, minimum wage rates, and more.

March 20, 2016 Hour 1

March 20, 2016 Hour 2

Wes Moss, Chief Investment Strategist, at Capital Investment Advisors is the host of “Money Matters,” a weekly radio show offering financial advice to callers and listeners. The show’s producer, Ryan Ely, is a fellow investment advisor. Listen live on Sundays at 9am on or subscribe to our iTunes Money Matters podcast updated weekly.


CIA Success Story: Couple Creates Income Streams Before Retirement

In today’s CIA Success Story, we share a story about a couple that was concerned they wouldn’t have enough money to live comfortably during retirement. After working their entire adult lives, and regularly receiving paychecks from their employers, there was a significant amount of anxiety surrounding the amount of money they would be receiving during their retirement.

The Question:

How can we be sure that we’ll have enough in retirement to be comfortable without receiving our regular paychecks?

The Scenario:

The husband worked as a manager for a large industrial company and the wife worked as a nurse for her entire career to become Chief Nurse. Their children were in their twenties and mostly independent from their parents, aside from one wedding. Both the husband and wife worked their entire lives, but the wife was starting to have some anxiety about not receiving a regular paycheck, which became her biggest obstacle regarding retirement.

How We Helped:

When consulting with our clients who are approaching retirement, it’s important to look at everything in their portfolio, including any investments, liquid assets, pensions, 401(k)s and Social Security benefit packages. If you find yourself in a similar situation, ask yourself these questions when considering your retirement:

  1. Have I been contributing to my 401(k) with every employer?
  2. Have I worked for any employers who offered a pension plan for my retirement?
  3. What investments have I made and how profitable have those been?
  4. Do I have any liquid assets that will generate income during my retirement?

Preparation for Retirement:

You aren’t alone when it comes to planning your retirement. Our trusted advisors at Capital Investment Advisors are trained to examine all funds to help our clients enjoy their retirement. We understand that making the transition into retirement often brings anxiety, and we are here to advise on the best investment strategies.

The Takeaway:

While working with this couple, we discovered that they have several assets which would allow them to enjoy a comfortable retirement. The husband had a pension from a former employer, both husband and wife had a significant amount of Social Security benefits, and they had liquid assets. When we put this together, it amounted to approximately 4 paychecks every month. We also explained that those funds are taxed significantly lower during retirement, and that they wouldn’t be putting money into their 401(k) savings plans.


Financial Market Fear: 2016 Isn’t Off To As Rough A Start As You May Think

Just a week into 2016, and the market is off to a difficult start. If it feels like déjà vu, it is. Chinese market volatility has once again reared its ugly head and is causing anxiety in the U.S. markets. As of Thursday’s close, the S&P 500 is down 10% from its May highs. While we don’t want to dismiss the turmoil, it is worth noting not much has changed from August. Meaning the economy continues to chug along and stock valuations are fair.

What’s different this time? First, oil continues to make new lows. Second, the Federal Reserve raised rates 0.25% in December. Let’s address both.

Oil prices are still low. Lower oil prices provide a tailwind for consumer spending, which accounts for 70% of U.S. GDP, and very rarely (arguably never) lead to recessions. The other piece of good news is oil’s decline has stemmed from oversupply and not lack of demand. Lack of demand sends worrying economic signs, not too much supply.

The Fed’s rate hike. Federal Reserve inaction/action over the past few years has produced market volatility. We expect this to continue, unfortunately. On the plus side, we also expect the Fed to move very slowly compared to prior cycles. This means while rates could rise over the next 12-24 months, our base case calls for a slow ascent and that the overall environment will remain accommodative.  

What’s the same this time? The U.S. economy remains on solid footing. Though we readily admit it’s acting more like the tortoise than the hare. GDP is growing in the 2.0%-2.5% range and is likely to do so again in 2016, disposable income has accelerated to near 4%, unemployment remains low fueled by solid job growth and the housing market is improving. These factors all pointing in the right direction lead us to the same conclusion from last time: a recession looks unlikely over the next 12-18 months.

The start to 2016 is not a welcome one, to be sure, but we think it has more elements of fear than fundamental merits. As always, we believe strongly that a balanced portfolio is key and are here to help.


Social Security: Maximum Benefits

Q: I am 73 years old and retired. I have been receiving Social Security benefits since I was 65. My wife turned 66 last March and started getting spousal benefits under the restricted plan. With the new Social Security laws changing by next April, are we grandfathered at our age? Specifically, will my wife get her maximum benefit of the 8% credit each year until age 70? If so, do we need to go to a Social Security office or just assume we are grandfathered in the plan?

A: Yes, because you and your wife will both have reached age 66 by April 30, 2016 neither of you will be impacted by the changes to Social Security.

Based on your questions:

  • Your wife filed a restricted application for her spousal benefit only in March of 2015
  • She will collect her spousal benefit only until she reaches age 70
  • She will switch to her higher lifetime benefit at age 70

So your wife is grandfathered in. There is no need to contact social security until she is ready to change to her higher lifetime benefit at age 70.


Social Security: Disabled Benefits

Q: I have heard about the changes to Social Security benefits. Currently, I am 62 and drawing Social Security on my husband who passed away in 2005. I am able to do that because my son is disabled and has a rare syndrome that is not curable. I worked for 37 years with the same company but felt I would draw more on my husband. When I went to a Social Security office some years ago, they did tell me that they would automatically roll me over to his full benefit at age 66. What would be your ideas on my situation and what questions should I ask them?

A: You and your disabled child are entitled to your late husband’s survivor benefits as long as:

  • Your child is unmarried and was permanently disabled before age 22
  • You were at least 50 years old (which you would have been if you are currently 62 and he passed away in 2005)
  • If you start your survivor benefit before your full retirement age, it is reduced, in this case by about 28.5%

When you and your child started receiving survivor benefits, you were not “deemed” to be applying for your lifetime benefits as well.

Since you have worked for 37 years and you have not filed for your lifetime benefit, there is a chance that your lifetime benefit could be greater than your survivor benefit.

Before you go into a Social Security office, I would recommend that you:

  • Go to
  • Sign in and review your personal Social Security Statement
  • If you don’t have a username and password, click “Create An Account” and follow the steps

Once you have your statement, look and see what lifetime benefits you are eligible for on your earnings at:

  • Full Retirement Age (66-67 depending on your year of birth)
  • Age 70
  • Age 62

It may be to your and your child’s benefit to continue to receive your survivor benefits until age 70 and then step up to higher lifetime benefits based on your earnings record.


CIA Advisor Comments on 3 Mistakes Unhappy Retirees Make

In a recent Dynamic Wealth Report articles, Wes Moss gave 3 examples that unhappy retirees make that can truly separate them from having an early and happy retirement.

The mistakes Moss found were commonly reported when he conducted a study on the habits and traits of happy versus unhappy retirees for the book, You Can Retire Sooner Than You Think – The 5 Money Secrets Of The Happiest Retirees. Moss had 1,350 retirees across 46 states participate in my study, and learned a multitude of factors that unhappy retirees all have in common. The three most mistakes to avoid were:

  1. Unhappy Retirees Have 10 Or More Years Left On Their Mortgage

Through my research I found a correlation between happiness and retirees who had either paid off their mortgage or they are within five years of having it paid off when they retired. Unhappy retirees generally had 10 or more years until their house will be completely paid off. Removing a monthly mortgage payment from your budget is not only liberating, but also allows you to direct more of your retirement income towards your core pursuits.

  1. Unhappy Retirees don’t define the purpose of their money

After saving year after year, unhappy retirees seem to believe that the money from their retirement fund alone will create a happy retirement for them. Money itself, though, will not give you happiness; instead, it’s how that money is used that ultimately creates a happy retirement. Happy retirees go into retirement with plans to travel, volunteer, etc. and generally put their retirement fund towards following their passions.

In fact, I found that happy retirees have at least 3.5 core pursuits. These are essentially hobbies on steroids, and often what directs the purpose of happy retirees’ money. My unhappy retiree group only averaged 1.9 core pursuits, so if you find yourself with limited interests I suggest that you go out today and find a new sport, nonprofit or social club to join and enjoy.

  1. Unhappy Retirees Have A “Rich Ratio” That Is Under 1

I created the Rich Ratio formula several years ago, and have found it helps individuals and families easily understand their money. This formula is very simple: the amount of income you receive divided by the amount of money that you need. (This calculation should be done with after-tax amounts.)

To calculate your Rich Ratio in retirement, simply take the amount of monthly income you should or do have in retirement (Social Security + pension + any additional steady income streams) including what your nest egg should produce, and divide it by what you expect to spend each month to live the retirement lifestyle that you want: Have / Need = Rich Ratio.

Read the original article here.


Retirement Planning: Getting Advice

Q: How can I get my spouse interested in saving for retirement? My spouse isn’t a planner and feels as though we have enough assets. Are assets include a home valued just under $1 million. We have a rental property, about $75,000 in an emergency fund, and he makes $110,000 per year. We also have about 30 to 40 motorcycles valued from $5,000 to $70,000. We don’t have major credit card debt and we are insurance poor with all vehicles and motorcycles. We do not have a pension or 401k. So how can I get my spouse interested in planning for retirement and income investing?

A: Well, for not planning you two have managed to accumulate a vast pool of valuable assets. That is very good news. What you need to do is have a plan to “monetize” them if either your husband decides to retire or if an unforeseen accident or medical issue were to occur. With that being said, the way you could approach your husband is to say: “Honey, I know we have all this valuable “stuff” but I wouldn’t know what to do with it to generate the income I would need on a monthly basis if something happened to you…and I would feel more comfortable having a plan in place.”

Now, to put your mind at ease, while savings is absolutely very important, upon review of your assets it appears you would be able to liquidate some assets you do not necessary need (e.g. 30 – 40 motorcycles valued between $5,000 and $70,000) and invest the money to provide monthly income. After having that conversation with your husband I would suggest making an appointment with a financial advisor so that you have a plan on what to do with your existing assets and any additional savings to live on when your husband retires at some point, or if an accident were to happen to him.


Retirement Planning: 6% Rule

Q: In 2008 I choose a annual pension of $55,000 with 50% survivor over a $789,000 lump sum. Was this a good decision as it met your 6% threshold? Using your method of evaluation, I calculate a 6.99% return.

A: There are so many factors that go into giving you’re the “right” advice such as other income sources, risk tolerance, legacy decisions, time horizon, family longevity, etc. However, as a rule of thumb, we use 6% as our benchmark. Nevertheless, there are many times that individuals with different circumstances choose other options.


Retirement Planning Questions: Retirement Fund Options

Q: I am almost 62 and about 5-8 years away from retirement. About half of my retirement funds are in my employer-sponsored 401(k) with limited investment options. The other half is in IRAs with Fidelity. As I get closer to retirement, what kinds of mutual funds should I be moving my investments into? Do you have any specific fund recommendations, especially those available through Fidelity?

A: Please be advised we are regulated by the SEC which strongly prohibits advisors from providing specific recommendations to individuals without fully engaging in a due diligence process to determine suitability and appropriateness of a recommendation. 

However, as our clients are nearing retirement we try to recommend the appropriate mix of income generating investments including a balance of fixed income, equity and alternative investments.  This will include bonds, dividend paying stocks, REITs, MLPs, closed end funds etc. so you can create an income stream to live on.

I recommend speaking with your Fidelity advisor to see if they can offer you some advice.  Alternatively, you can schedule an appointment to come in to our office and speak with me for some guidance.


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