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Anyone re-thinking retirement

Posted by sudiepav (My Page) on
Mon, Sep 29, 08 at 12:16

While our portfolio is fairly good sized and well-balanced, it has taken a huge hit in the past weeks. I was to have retired next July 1, but I don't have 5-10 years left to make up for what the market has lost. I'm seriously thinking of working another year. This would give me a good income, a chance to continue to participate in my 403b, most health insurance costs paid. My husband retired June 1 of this year, and he'd like me to do the same next summer. I'm just not feeling all that confident that the market will turn around that fast. It helps that I love my job, although I'd like to do some more traveling and other activities that I can't do while working full time. I'm frankly worried about having to draw out funds as the market makes what we had worth much less.


Follow-Up Postings:

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RE: Anyone re-thinking retirement

You know I was thinking about staying another year and axing my goal of leaving July 1 of next year as well. And as I was reading the NewYork Times this morning there was a question-answer article where someone asked how to determine if you will be okay to retire when you want to considering all this craziness in the stock market. The writer suggested they to the web site of T.Rowe Price and take their Retirement Income Calculator test. I did this and was very pleased to see that I should be fine, in fact I could even live a little better than I thought I could.

I am 62 and I (as you have) a fairly good sized, well balanced IRA, 403b and savings accounts. But with all this turbulence in the markets, and the economic scene that we are all experiencing I have spent a few sleepless nights and a couple of calls to my financial advisor at Fidelity. But I think I will have Plan B in my hip pocket, that being if things still look shaky by next March (when I have to give notice and start the ball rolling with HR) I might decide to hang in a work another year. But I really don't want to do that, so I'm going to try and think positive, continue to save as much as possible in my 403b, stay debt free, and keep my cash in high yield savings accounts...in other words just breathe and try not to get to crazed when I read the headlines or listen to the radio (I never watch the TV news).

Have a plan, hope for the best and if things don't look or feel right for your situation have "plan B" that you can initiate. And you may want to take that quiz on the TRowePrice web site.

Susan


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RE: Anyone re-thinking retirement

The general rule of thumb touted by financial planner is that you should withdraw no more than 4% of your nest egg the first year of retirement, then give yourself a 3% raise each year to take inflation into account. If your nest egg is invested prudently -- about 40-50% in diversified stocks, 50% in diversified bonds, and a small % in cash equivalents for ready spending in case of unexpected need -- then you should be okay for the long term.

They came to this guideline after back testing hypothetical portfolios against the ebbs and flows of the markets over the past several decades. It sounds good, as far as it goes. However, a lot depends on the conditions in the market when you first retire and start dipping into your nest egg. If the market is on the upswing in the early years of retirement, that's good. However, if the market is losing ground during the early years of retirement, then you could run out of money much earlier if you follow the 4% rule.

Postponing retirement when the market is falling, therefore, makes sense unless you're in the fortunate position to need to withdraw a lot less than 4% from your nest egg. If you continue to work, even for a little while, and add to your nest egg during a market downturn, you're buying stocks a bargain prices, and your financial condition will be stronger when you quit work.


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RE: Anyone re-thinking retirement

As long as my husband's health is good, I think he will continue to work, mostly on account of the rising cost of health insurance. I have several medical conditions and don't work and never added substantially to our finances.

We recently depleted our savings to below my level of comfort by buying 2 rental properties. We are way out on margin now with mortgages totaling around 600k. We could live on my husband's retirement income, but we couldn't save anything, so I think he is planning to try and hang on until he is 70.


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RE: Anyone re-thinking retirement

With some of the different circumstances that impinge on the situation at this time, the recovery may not be as rapid as has often happened in the past.

However, often in earlier times of recovery, markets grew by 25% or so in a year, for a couple of years after recovery began.

I think that, if I held a portfolio of quality stocks, (and who wouldn't want to, as retirement nears?), I'd consider using some of the certificates as collateral for a loan, borrowing a couple of years ago/last year at 6.25%, and the last 4 months or so at 4.75%, if I thought that there were a good possibility that, within a year or so, I could pay off the loan with a stock that had grown by about 20 - 25%.

Even were I not able to deduct the interest cost, as I can if I borrow to invest.

My usual claim is that I won't borrow to consume, but I may borrow to invest, if the projections sound worthwhile ... but I might well be willing to change my tune, in such a situation.

By the way ... I'm within a few months of my 80th birthday, and am invested about 80% in equity based mutual funds and individual stocks: I find that growth rate and tax advantages have made such choices far better than investing in "safe" stuff - especially for the long term ... and I think long-term.

When I borrow to invest (and I haven't done a lot of it - too chicken) I figure that I could borrow a while ago at 6.25% at almost no net cost to me ...

... so surely I should be able to do so, now that the rate has dropped to 4.75%!

Good wishes for increasing skill at managing not only your income, but your assets, as well.

Learning how money works is an interesting hobby - that pays well!

ole joyful

P.S. Not currently needing to draw anything from my assets - living on my pensions, and managing to save some from them as I go, so far.

o j


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RE: Anyone re-thinking retirement

Remember the old saying in the stock market, "Sell in May ...and go away!"?? Good advice again this year, it seems.

Though October has brought bad news, on several occasions, over the years, one would have thought that to be an improbable scenario this year, what with a big election in the offing ... but it was true again this year.

Anyone game for some financial shenanigans? You should have a five to ten year time horizon for such a project as this, but it could work out in as low as three years.

Canadian dollar was at par a few months ago, now about 85 cents U.S. buys a Canadian dollar, as people whose money'd fled the U.S. earlier, returned after the recent govt. support: does "BBB" now stand for "Broke Bankers' Bailout"?

A recent survey says Canadian banks are among the solidest of the industrialized world, and much of the Canadian market is based on resource stocks, which have taken a hit lately ... but does anyone think that petroleum stocks are going to stay down for the long term? Other resources, including gold, either.

Have certificates for some of your mutual funds that you plan to hold for a long time issued, likely at no fee, or some individual stock certificates, usually at a fee here of $50. or so each.

Use your certificates, and CDs (preferable, as their value stays constant) if available, as collateral for a fully-secured loan at your favourite (i.e. low-rate) lender. If your lender is willing to lend up to 50% of the value of the underlying asset, consider borrowing up to possibly $30.00 per $100.00 of equity (which means that if the value of those assets drops by 40% to $60.00, you will still be covered 2:1). When the amount of your loan goes to over 50% of the current value of the underlying asset, the bank comes to ask you for either more collateral (stock, mutual fund certifs., CD, etc.) ... or to pay off some of the loan to restore the 50% loan level, called a "margin call" - and that's today ... tomorrow at the latest. I don't want to get one of them, and never have. If you don't have extra collateral on hand, or cash to pay down some of the loan ... don't crowd the margin level!

Such extra assets are more likely to be available to folks nearing retirement, as it's probable that they have various investments, and more of them, available to use as collateral if needed. As in gambling, the gal/guy with the good hand who has surplus assets can keep raising as s/he feels appropriate.

Maybe buy some quality U.S. stocks whose price has been beaten down recently, plus some Canadian stocks ... oil and gas, pipeline, minerals, rail, possibly a bank ... and some gold?

These are some representative Canadian stocks: I'm not saying that they're the best choice.

Suncor (SU.TO) has a substantial position in the tar sands with Syncrude, share price 59, 60, 55 at mid year, 26 in early Oct., now about 25. Putting money into development of more cost-effective ways to pull the oil out of the sand, it pays 0.20, 0.75%.

Petrocan (PCA.TO) was 54, 52, 48 at mid year ... 23.70 early Oct., now 25. Pays 0.59 - 2.29%.

Nexen (NXY.TO) was 38, 36, 34 ... 14.01 early Oct., now 16.46, 19.14 ... 18.90 last Fri - now 17.95. Pays 0.15 - 0.84%.

En Cana (ECA.TO) (one of largest suppliers of natural gas) was 89, 83, 78 ... now 55, 61, 58.15 (Fri) 56.94 (Tue). Pays 1.431 - 2.51%.
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Some companies turned into unit trusts several years ago, agreeing to pay out about 85% of earnings, and avoid tax ... but when some big cos. (e.g. Canada's largest phone co.) planned to do that ... the gov't cut them off at the pass ... said they'd all have to turn into corporations by 2011.(1)

Canadian Oil Sands (COS-un.TO) major player with Syncrude in the tar sands, containing more oil than in Saudi ... in 1st qtr. '08 was 32 - 46, in 2nd qtr. was 40 - 54, in 3rd qtr. 38 - 54, as low as intra-day 23 in early Oct., now 26.76. Pays $3.55, 12.6% ... possible revision downward?

Pengrowth (PGF-un.TO) was 18.13, 17.93, 17.70 ... 9.62 early Oct., now 12.00 ... annual payout over $2.00 per unit - but don't count on that level being maintained. I own a few units ... thinking of buying more.

Enerplus (ERF-un.TO) was 46, 44, 41 ... 25.50 in Oct. ... now 28.28 ... pays about $5 (about 18%) annually per unit - probably also due for adjustment downward, due to oil price drop. Their rep is to speak to an investment group in our city tonight, so I've been doing some checking.
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Potash (POT.TO) (potash fertilizer, in major ongoing international demand to increase agricultural yields) 213, 223, 211 in summer ... 102 in early Oct., now 95 - 97 ... payout about 0.421, about 0.43%. Check their multi-year chart.

Teck Cominco (TCK-B.TO) (base metal miner-processor) I bought at 35 early Jan, was 50 in May, 45, 41 in summer, 16.36 early Oct., 11.28 last Fri (payout 1.00 - about 8.75%), 8.75 Tues. (payout over 10%): I've been thinkig of buying more ... watching it closely.

Several of our major mining companies bought out, owned offshore, shares no longer avail. to us ... I figure that this one may be a candidate ... especially at low price per share. That usually causes share price rise of 10 - 25%, even 35% overnight.

TD Canada Trust (TD.TO) (one of our 6 national banks) was 63, 58, 58, 60 in summer, 52 early Oct., now 55.86 maintained its value about the best during the U.S. sub-prime problems ... they run a smart ship ... paying about 4%.

CN Rail, one of our two major national railroads, recently bought substantial U.S. trackage ... shares not avail. in Canada - cf. CNI on NYSE.

Enbridge (ENB.TO) (major pipeline) 44, 44, 43 ... early Oct was 35, now is about 40 (I've owned it about 14 years, turned 75 to upwards of 480 during that period). Pays some over 3%.

TransCan. Corp. (TRP.TO) (major pipeline, plus) was 38, 37, 38 ... 31 in Oct, now 35 ... payout about 4%.

Check stocks' info at Yahoo-> Finance, near top left enter symbol in small dialogue box, "Get quotes" to get much current info ... or give company name to get symbol. Chart at lower right shows price movement today and clicking on letters under the chart allows viewing charts over several days, months and years. At some below top left, clicking on "Historical prices" allows one to view daily open, high, low and close prices, plus dividend payouts, back several years for some stocks. Also daily volume ... which is often quite a lot higher when stock price near a top or a bottom.

When stocks are at bargain prices ... if I can borrow to invest, fully secured, at 4.75%, paying interest only monthy and deductible ... and earn 4% (taxed at very low rate) ... and I gain the value of inflation ... that looks like a worthwhile opportunity.

So - prices drop some more, later? If they stay down for a while, I may whimper a bit, as I could have bought later and enjoyed the substantial runup over the next few years ... but suppose the market is near bottom now?

Not much use showing up at the station after the train has pulled out!

Best to buy on several occasions as one believes the market to be nearing bottom, as it's volatile, then, making several false starts back up.

I hope that you're all enjoying fall.

I was picking some mature peas and beans yesterday plus radish pods for seed, moving some squash into the barn, lifting some beets ... and my fingers were doing some complaining, as it was a few degrees above freezing. More beets, turnips and carrots to lift today. Broccoli seems to be minimally affected by frosts, still producing (mainly small sized) florets - but that'll soon be through.

ole joyful

P.S. Want a real gamble? Our major phone co., Bell Canada, covering 2/3 of total Canadian population in Ontario and Quebec, more or less widows' and orphans' stock, wanted to go unit trust, then gov't. changed rules to block them.

Then BCE (BCE.TO) made a deal with a major pension plan and buyout artist, backed by billions of loans from several banks, to buy out shareholders at $42.75 and go private ... when stock price in low 30s ... stock price went to about $39., but somewhat below the offering price, and usually price jumps to right up near the offer price.

That was just before the U.S. subprime mortgage barnyard byproduct hit the fan, which problem led to this issue's huffing and puffing, lawsuits by current bondholders, etc., and several delays in the time for the deal to be consummated.

Stock price continued around 39 - 40 through the end of '07. I'd bought some at about 28 a couple of years ago,and felt that, with the deal to go through in a few months, to buy some more about 38 last Christmas looked like a good idea. Early in this year the stock price began slipping, and the date of completion was postponed ... plus the company decided to suspend paying dividends. Stock was just over 35 at the end of June, recovered to 40s in August, then down again to 33 in early Oct., recovered to about 37 now ... with deal to have been completed in early Nov. ... that's ... of this year.

One of the backers is the Royal Bank of Scotland, which recently received an infusion of credits from the Bank of England ... so are they going to be willing/able/allowed to complete a substantial deal ... in the (former) colony ... any time soon?

Price closed at 37.90 Tuesday Nov. 11 ... want to take a chance on the deal completing, at the originally agreed price of $42.75, any time soon?

o j


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RE: Anyone re-thinking retirement

Another backer of the phone co. deal that I referred to in the post just above this is ... Citibank!

Who just got an infusion of cash from the gov't.

Phone co. shares up from last Fri. close at CA$34.55, just over 10% to CA$38.35, today's close!

ole joyful

P.S. I retired about 10 years ago, living on less than current pension income, as long as they remain intact, I extect to be doing well, as long as I'm healthy.

However ... I expect interest rates to grow substantially ... our govts. owe huge debts, much of it held abroad, the U.S. gov't. is digging the debt hole much deeper every year ... and the people have lower savings than earlier, plus many are carrying major debt, as well.

Soon we'll have to offer higher rates of interest, or our lenders will refuse to pick up any more of our debt instruments. Our economy is shrinking and many are and likely will be getting layoff ... however, with rising interest rates, we'll likely get more, inflation, as well.

There's a rather depressing-sounding name for that situation - stagflation. Not pleasant for many of us ... but especially for those who've been unemployed for a time.

Good wishes for being able to keep your head comfortably above water!

ole joyful


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RE: Anyone re-thinking retirement

Latest on the phone co. offer.

Due to complete in early Dec. ... part of the deal was that their auditors had to pass on the deal as viable ...

... they referred it to their auditors: not viable - unbearable debt needed to finance the deal, reported last Tuesday.

Stock opened at about 25 on Wed. (after close $38.35 Tues) ... at monthly meeting of our investment group Wed. night, some long faces ... but one guy smiling: he'd sold a substantial holding a couple of days earlier ... bought back on Wed. at much lower price.

Closed Tues 38.35, Wed. 25.25, Thurs. 25.23, Fri 24.95.

Some of the group members think that the deal will go through ... but at a lower price - maybe in the low 30s.
I'm thinking of buying some more ... but there's a problem.

I'd figured on their original deal going through within a few weeks, giving me an infusion of cash, mostly for investments periodically over the next few months... but it is now on hold.

And I have a car to fix, rent to pay and some year end charitable and political contributions for which I need money soon ... but I have cash to cover them ... and if I borrow to invest, the interest is deductible. Oh, and I forgot - a trip to Arizona in late January (but daughter's picking up the $275 or so plane fare).

Update on other stocks mentioned in earlier post:

Oil and gas:

Suncor (SU.TO) has a substantial position in the tar sands with Syncrude, share price 59, 60, 55 at mid year, 26 in early Oct., Nov. 7 $25.50, 14 $23.34, 21 $20.62, 28 $28.60. Putting money into development of more cost-effective ways to pull the oil out of the sand, it pays $0.20, 0.69%.

Petrocan (PCA.TO) was 54, 52, 48 at mid year ... Oct. 3 $32.25, 10 $23.70, 17 $25.74, 24 $26.89, 31 $30.14, Nov. 7 $25.98, 14 $25.78, 21 $22.49, 28 $33.73. Pays $0.59 - 1.75%.

Nexen (NXY.TO) in July was 38, 36, 34, 31, in Aug. low 30s, in Sept. 28, 27, 24, in Oct., 21.10, 14.01, 16.20, 16.46, 19.14, in Nov. $18.90, $18.30, $16.91 and on 28 rose to $25.50. Pays 0.15 - 0.588%.

En Cana (ECA.TO) (one of largest suppliers of natural gas) in July was 89, 83, 78, 75, in Aug. 74, 70, 70, 75, 79, in Sept. 71, 71, 75, 71, in Oct. 59, 43, 49, 55, 61, in Nov. $58.15, $54.75, $48.66, $60.00. Pays 1.431 - 2.385%.
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Potash (POT.TO) (potash fertilizer, in major ongoing international demand to increase agricultural yields) in Jul. $213.00, 223, 211, 205, in Aug. 206, 182, 179, 188, 184, in Sept. 172, 172, 182, 152, in Oct. 102, 102, 88, 87, 102, in Nov. $95.82 $86.12, $77.76, $80.20. Payout about $0.421, about 0.525%. Check their multi-year chart.

Several of our major mining companies bought out, owned offshore, shares no longer avail. to us ... I figured earlier that this one might be a candidate ... especially at low price per share. That usually causes share price rise of 10 - 25%, even 35% overnight.

Teck Cominco (TCK-B.TO) (base metal miner-processor) I bought at 35 early Jan, in May was mid 40s, 51, through summer 45, 41 down to 38, in Sep. 39, 38 to 33.57, in Oct. 23.08, 16.06, 16.39, 13.00, 12.00, in Nov. $11.28, $6.35, $4.52, $6.00. Payout 1.00 - 16.67%.

I'd been thinkig of buying more ... watching it closely.
I bought three times the original number of shares early aft. of second Fri. Nov. at $6.99 ... it was down almost 10%, a couple of hours later: $6.35 at the close. I paid about 40% less for that lot than I'd paid for 1/3 as many shares, early in the year!

Current value of the whole thing about 2/3 what I paid for 1/4 of the number in Jan. Try to avoid such choices!

Now - considering buying more ... I think they're undervalued, and will wiggle out of their current bind (bought a big coal co. for a fairly high price ... with only short-term financing arranged).

TD Canada Trust (TD.TO) (one of our 6 national banks) was 63, 58, 58, 60 in summer, 52 early Oct. later 56, in Nov. $57.25, $53.57, $41.30, $46.00 - the recent drop due to pre-announcing expected earnings drop ... but maintained its value about the best during the U.S. sub-prime problems ... they run a smart ship ... paying about 5.13%.

Enbridge (ENB.TO) (major pipeline) 44, 44, 43 ... in Oct. was 39, 35, 37, 38, 41, in Nov. $40.48, $39.68, $36.27, $38.10. I've owned it about 14 years, turned 78 to upwards of 457 during that period. Pays slightly over 3.5%.

TransCan. Corp. (TRP.TO) (major pipeline, plus) was 38, 37, 38, 39 and 40 in summer, in Sep. 38, 37, in Oct, 37.67, 31.00, 33.68, 35.75, 36.42, in Nov. $35.35, $35.63, $31.95, $32.70 ... payout about 4.4%.
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Some companies turned into unit trusts several years ago, agreeing to pay out about 85% of earnings, and avoid tax ... but when some big cos. (e.g. Canada's largest phone co.) planned to do that ... the gov't cut them off at the pass ... said they'd all have to turn into corporations by 2011.

Canadian Oil Sands (COS-un.TO) major player with Syncrude in the tar sands, containing more oil than in Saudi ... 52 week range $18.18 - $55.25, in 1st qtr. '08 was 32 - 46, in 2nd qtr. was 40 - 54, in 3rd qtr. 38 - 54, as low as intra-day 23 in early Oct., now 25.75. Pays $3.75, 14.56%.

Pengrowth (PGF-un.TO) was 18.13, 17.93, 17.70 in summer, in Oct. 14.40, 9.62, 12.92, 13.67, 13.01, in Nov. $12.30, 11.78, $10.44 and $11.24. Annual payout over $2.00 per unit - but don't count on that level being maintained. I own a few units ... thinking of buying more.

Enerplus (ERF-un.TO) was 46, 44, 41, 42, 46 in summer, in Sep. 43.86, 40.00, 40.24, 39.08, in Oct. 36.16, 25.50, 28.65, 28.50, 32.45, in Nov. $28.88, $27.37, 23.66, $30.25 ... was paying $5.64, (18.64%) annually per unit - adjusted down to $4.56 (15.07%), due to oil price drop. Their rep spoke to an investment group in our city recently and several members consider their program a good one ... and they've downsized their payout rate, but still at a good rate.
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CN Rail, one of our two major national railroads, recently bought substantial U.S. trackage ... shares not avail. in Canada - cf. CNI on NYSE, currently $35.22, paying $0.899, 2.59%.

Maybe consider Berkshire Hathaway B (NYSE - BRK.B), whose price per share was around $3,800., $3,900. through the summer, in Sept. $3,900., $4,500., $4,400, in Oct. $4,650., $3,780., $3,976., $3,713., $3,840., in Nov. $3,686., 3,389., $2,914. and $3,499.00 each.

Mr. Buffet has not made a payout on the senior shares, purchasable at about $12.00 each in 1965, since paying a dime in 1967 ... and one needed $101,000. to buy one share on Nov. 14, $90,000. on Nov. 21 and $104,000.00 on Friday, No. 28. He's made no payout on the junior shares since they were issued, about 6 years ago: I bought for about $1,800., about 4 years ago.
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I hope that you're having a great weekend, after the holiday ... and my good wishes for the time as you look forward to Christmas, if that celebration is important to you.

I'll probably retread the same old Christmas gift for everyone this year that I've offered for the past five years or so, I expect. I'll have to figure out a new wrinkle to jazz it up at least a tiny bit.

ole joyful


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RE: Anyone re-thinking retirement

Hi again, folks.

Share price of the phone co. where the pension fund backed out of the offer is sitting around $21. and change.

Share price of Teck Cominco, that bought the coal co. and whose shares took a heavy hit down to around $4.00 have recovered some to about $6.00.

I'd thought to have funds on hand from the sale of the telco. to do some more investing during the next few months, perhaps a year or so, but that is not going to happen.

I'm collecting some share certicates of stocks and mutual funds to lodge with the lender of my Line of Credit, not currently in use, to give me greater collateral.

I think that I may exercise more patience, however, than I'd planned earlier, for I feel that our financial system is in more serious condition than appeared a month or so ago.

Which means that I'll probably space out the investment actions over a longer period, in case the recovery takes longer to get started and established than we'd exected.

Good wishes for the coming holidays ... and hopes that the New Year may bring the fulfillment of several of your dreams ... and the envisioning of some new,worthwhile ones.

ole joyful


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RE: Anyone re-thinking retirement

Happy New Year ole joyful.

I have a feeling this year will so unpredictable! Slow and careful in any decision making.


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