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    Charting an Early Retirement: Simple Planning & Investing Strategies
    Charting an Early Retirement: Simple Planning & Investing Strategies
    Charting an Early Retirement: Simple Planning & Investing Strategies
    Ebook207 pages4 hours

    Charting an Early Retirement: Simple Planning & Investing Strategies

    By Ted Alford

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    About this ebook

    Pursue your retirement dreams while you are still young enough to enjoy them! Ted Alford, author of Charting an Early Retirement: Simple Planning and Investment Strategies, will show you how.

    Starting in their thirties, Mr. Alford and his wife developed a twenty-year plan and managed to retire in just eighteen years in their fifties. They retired without any employer-provided pension or health-care benefits and without ever hiring an investment manager to oversee their financial portfolio. They accomplished their goal the old-fashioned way, by saving funds from earned income and investing those funds in both the stock and real estate markets. These days they can be found in the Bahamas, where they live part of the year aboard their 41-foot sailboat. When not sailing, they are in the US visiting with family and friends or traveling to interesting places around the world.

    In Charting an Early Retirement, Mr. Alford provides detailed information on how to plan, save, and invest in an efficient way to make early retirement possible. Although he writes, “Starting early to allow time for savings to accumulate and investments to compound is the single most important factor to reaching one’s retirement financial goals,” his book contains information helpful to retirement planning starting at any age.

    Mr. Alford spent 25 years seeking out everything he could find related to retirement planning, the financial markets, and real estate investing that he now shares with readers. His book consolidates into one resource the most important things he learned from his study and personal investing experience.

    The concepts and strategies presented in the book are straightforward and easy to understand, providing a simple approach to reach your long-term financial goals. What are the most critical retirement planning concepts to understand? What are the best investment strategies to help reach your financial goals? Mr. Alford addresses these important questions and more.

    Readers will learn:

    •How the 2008-2009 financial crisis allowed the author to move up their retirement date by 2 years.
    •A 4-step method to calculate a ballpark figure for your required nest-egg size at retirement.
    •Whether you should use a financial or investment advisor.
    •What percentage of your income you should save each year.
    •How much of your retirement portfolio you should invest in stocks.
    •Why controlling investment risk is as important as maximizing gains.
    •How to sleep well at night in retirement regardless of equity market volatility.
    •Using real estate investments to supplement your retirement income.

    The author shares many online resources so readers can obtain more background on any particular subject to help create their own plan. The book’s many charts and graphs are clearly presented and discussed, so the information is enlightening instead of confusing.

    Finally Mr. Alford reveals many details of their own 18-year early retirement journey on how they saved, invested, and strategized to make their dream a reality including investment failures as well as their successes. Charting an Early Retirement is an empowering book for anyone who would like to retire early!

    LanguageEnglish
    PublisherTed Alford
    Release dateApr 1, 2017
    ISBN9780998665702
    Charting an Early Retirement: Simple Planning & Investing Strategies
    Author

    Ted Alford

    Ted Alford grew up in Maryland. While he and his wife had successful careers, they both had an enormous desire to leave the world of the employed as soon as possible. Starting in their thirties, they developed a twenty-year retirement plan and managed to retire in just eighteen years. They retired without any employer-provided pension or health-care benefits and without ever hiring an investment manager to oversee their financial portfolio. They accomplished their goal the old-fashioned way, by saving funds from earned income and investing those funds in both the stock and real estate markets. These days they can be found in the Bahamas, where they live part of the year aboard their 41-foot sailboat. When not sailing, they are in the US visiting with family and friends or traveling to interesting places.

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      Book preview

      Charting an Early Retirement - Ted Alford

      Preface

      In early 2011, my wife and I retired from paid employment. At that time, I was fifty-six years old, and my wife was fifty-one years old. In the ensuing months, many people asked how we were able to retire without an employer-paid pension or health-care benefits. Having spent many years studying how to plan for retirement, I decided to start a personal blog about everything I had learned on the subject and highlight what I thought was most important for people to know, regardless of when they planned to retire. The blog site name is www.retirementplanningsimplified.com.

      Over the course of writing the blog, many readers inquired as to how it is possible to retire early. Our early retirement was especially surprising to many people because we retired in early 2011, not too long after the 2008‒2009 global financial crisis when stock and bond prices plunged dramatically. So, I decided to write this book to explain the basics of retirement and investment planning and what we did to achieve early retirement.

      Introduction

      I always had a dream to retire before the normal age of sixty-five. In my late twenties, I set out to achieve this goal without knowing anything about what it would take to make it happen. I saved and invested money sporadically, often investing in sure thing hot stock tips, to try to reach early retirement as quickly as possible. This period of flailing around, with no concrete savings plan or investing discipline, lasted until I was in my early thirties without any success. I knew there had to be a better way. It was at this time I decided to dedicate myself to studying how other people reached the goal of early retirement. I read as much information as I could find on the subject. I soon discovered that retiring early (or retiring at all) was not about getting rich quick. It was about getting rich in a slow, methodical way. I also discovered that accumulating wealth was not about hot investing tips or insider information. It was largely about financial behavior. Good financial behavior is an underlying theme in this book.

      Starting with almost zero assets, my wife and I managed to accumulate enough assets to retire early in about a twenty-year period, despite two major bear stock markets. I attribute this success to educating myself in the areas of personal finance and investment/retirement planning, in addition to disciplined financial behavior.

      Over the last twenty-five years, I have read over one hundred books and research papers on retirement as well as stock and real estate investing. However, my most important learning came from the school of hard knocks, i.e., actually being in the markets and losing money. However, the small amount of money I lost early on taught me valuable lessons about investing, and my wife and I managed to accumulate a nest egg large enough to support our lifestyle, even if Social Security were to go bankrupt tomorrow. Gaining knowledge and discipline in investing as well as developing a retirement plan are the most important building blocks for reaching your retirement goals. These building blocks are the main focus of this book.

      The information presented in this book is what I found to be the most beneficial for developing and implementing our own retirement plan. If you follow the suggested ideas and strategies, you should be able to create and execute your own retirement plan. In addition, you will learn to manage your investments without paying professional investment managers. Managing your own investments could save you a small fortune in investment management fees over your lifetime.

      The book is divided into five sections.

      •Section I, The Basics of Financial Planning, discusses a few basic but very important financial planning ideas everyone should adopt before starting any retirement plan.

      •Section II, The Basics of Retirement Planning, discusses what I believe are the most important concepts that everyone should understand.

      •Section III, The Basics of Investment Planning, examines what I have found to be the most important investment concepts and strategies to assist you in reaching your financial goals.

      •Section IV, Real Estate Investing and Retirement, is about developing investment real estate as a side business to supplement your retirement income.

      •Section V, Early Retirement, discusses what is necessary for early retirement and reviews the steps my wife and I took to reach our goal. Also, be sure to review the Appendices for more detail on important concepts presented in the book.

      The purpose of this book is to provide general information on how to plan, save, and invest in an efficient way to reach your retirement goals. I do not provide specific investment advice on stocks, bonds, or any other financial instrument. However, I will highlight different asset classes and categories when illustrating general investment concepts.

      I also have not included discussions on how to maximize federal government entitlement programs, invest in annuities, whether to make Roth IRA conversions, consider long-term care insurance, etc. No doubt, these are important areas to learn about before you retire, but these subjects are very specific to each person. As such, this book is not the complete guide to everything related to retirement planning. It focuses on the basic concepts that I believe have the greatest impact for success in this important endeavor.

      It is my hope that the information provided in this book will encourage you to take responsibility for your retirement, and motivate you to take the necessary steps to reach your retirement goals, so you can pursue your retirement dreams while you are still young enough to enjoy them.

      Chapter 1

      The Necessity of Retirement Planning

      Due to the decline of the traditional employer-defined pensions and an increasingly uncertain Social Security system, it is important for everyone to pay attention to their retirement and investment planning. In today’s turbulent employment world, whether or not you continue working at your current job may not be your choice. I cannot stress enough the importance of taking responsibility for your retirement. One thing I think we can all be sure of is that there will be no bailouts for older Americans who did not prepare for their golden years.

      Good retirement planning starts with a customized plan. This plan is important because everyone has different financial goals, budgetary needs, and a timeline for retiring. For example, if you are thirty years old with small children, your retirement plan will be very different from someone who is in their fifties with no children at home. In addition, everyone has a different view of what his or her retirement lifestyle will look like. If you plan to retire at age fifty and have expectations of foreign travel and maintaining several homes, you will have a very different plan from someone whose goal is to retire at age seventy and prefers to stay close to home to garden or join a local bridge club. This book will provide much information about what should be considered when developing your retirement plan. However, it is not possible to give one-size-fits-all guidance on this subject.

      Many studies have shown that people who write down their goals accompanied with detailed steps on how to reach them, have a much greater chance of success. Your retirement plan should be a comprehensive strategy about how to reach your financial goals with concrete targets along the way to confirm progress. When developing a retirement plan, you will quickly realize that it is largely about determining the trade-off between your lifestyle during your working life and the lifestyle you want in retirement.

      Should You Use a Financial Advisor?

      In the financial world, there are all sorts of advisors that go by many names to indicate they are certified. There are Chartered Financial Planners (CFP), Chartered Financial Analysts (CFA), Chartered Financial Consultants (CFC), Chartered Investment Counselors (CIC), etc. In general, financial advisors fall into one of two groups: financial planners or investment advisors. The difference between the two is that a financial planner advises on all financial matters such as creating a monthly budget, advising on insurance needs, and helping to develop a retirement plan. Whereas, an investment advisor’s main role is to manage your financial investments (e.g., stocks, bonds, and mutual funds) to increase their value over time. Generally, these two types of advisors focus only on their area of expertise; however, many financial firms employ both kinds of experts so they can offer both services.

      I believe it is worthwhile for everyone to hire a financial planner as early in his or her working lives as possible. A planner will offer an objective view of your current financial situation and provide a customized guide to reach your financial goals. Engaging a financial planner is especially important if you do not have the inclination to study the unique field of personal financial planning yourself. If you do hire a financial planner, search for a fee-only financial planner. A fee-only planner is one who receives no compensation from any source other than the fee their clients pay them. This arrangement ensures that the planner only has your best interests at heart. This approach also allows you to pay for as much or as little financial planning advice as you need.

      You may discover that finding a fee-only financial planner is not easy. Financial planning services are often provided alongside investment advisor services. Financial firms prefer this arrangement because they hope to retain you as a long-term client and receive guaranteed fees from managing your investment portfolio every year.

      One way to locate a fee-only financial planner in your area is to access the Garrett Planning Network, a nationwide group of fee-only financial planners, at garrettplanningnetwork.com.

      Regardless of whether or not you hire a financial planner, it is important that you develop a written financial/retirement plan as early as possible.

      Should You Use an Investment Advisor?

      In my opinion, most people do not need to employ an investment advisor to manage their retirement assets. Investment advisors are very costly. For a portfolio below $1 million, advisors generally charge an annual fee of about one percent. This management fee is in addition to any fees charged by the investment funds that your advisor selects for your assets. Over time, a one percent annual fee will take a big bite out of your retirement assets. This is a high cost to pay for services that most people can do themselves.

      Investment advisors will tell you that managing a retirement portfolio is very complex and should be left to the professionals. I do not believe this. Although many investment advisors use complicated strategies to manage retirement portfolios, this is not necessary. The basics concepts behind these strategies are simple to understand and implement. In my opinion, managing your retirement portfolio is like most things in life, It is easy once you know how. One of the goals of this book is to show you how to manage your retirement assets. The earlier you learn to manage your own portfolio, the more you will save in investment management fees, and the sooner you will reach your retirement goals.

      Chapter 2

      The First Rule of Personal Finance

      The financial advisory guru, Dave Ramsey, once said that wealth accumulation is 90% behavior and 10% knowledge. I could not agree with him more. The more knowledge you have about personal finance and investment planning, the better your results will be. However, the most basic fundamental principles of personal finance must be practiced to accumulate the nest egg required for retirement. Much of this is behavioral.

      A good analogy is a football team preparing for a game. The coaches will develop a game plan and even draw up some special plays to use against the opponent (the 10% knowledge). However, no game planning will help a team that cannot perform the

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