I am a saver and an investor for 25 years. Saving, from my earnings as an employee of various Fortune 500 companies. Investing, mostly in the stock market with some real-estate and derivatives. Today, I am an accredited investor and manage a high seven-figure investment portfolio.
I am a patient long-term-minded investor. Patient investing requires discipline and knowledge. Discipline in controlling our investing behavior and making rational decisions. Knowledge in understanding the market’s historical patterns and evaluating business opportunities.
How did I do it? What lessons I learned over the years? This blog is a compilation of my lessons-learned and ideas/thoughts on investing. I will attempt to take you on a journey through my 25 years of investing—surviving two major market crashes and everything else that came in the midst. I will also take you along as I reason through today’s market conditions and make investment decisions for tomorrow.
If you are new to saving and investing—perhaps just starting your earning career—I hope to inspire you to start early. Time is your friend! If you are already an accomplished saver looking for better ways to invest, here I chronicle my investing best practices.
Check out my guide for a young investor here.
My blog is meant to be a two-way dialog of sorts. I will share my experiences and I also hope to learn from your wisdom. I am no market guru—just a humble student of it.
—emcee
Good Day Emcee,
Just found your blog today and have enjoyed your 401k and the lost decade posts….very helpful!!
I’d like to ask your opinion on whether or not to take a lump sum or my government pension. I’m 56 and can tap either now or whenever I’m ready. I’m debt free and can go to work helping my wife build her business allowing the lump sum to grow until she wants to retire ie 10 years from now.
The pension is a nice option and I would chose joint survivor so that she’s covered for life. However, our estate gets nothing if we expire earlier than expected. It would take about 20 years of pension payments to break even. The pension would be from a very strong state retirement plan, so no worries about solvency issues.
So, pros and cons to both, but I would appreciate your advice or opinion.
I plan to continue reading your blog and shared it with my son in law who is reading lots of stuff from the FIRE community.
Regards,
Joel
Hi Joel,
With the caveat that I am not a professional financial advisor, here are a few things you may want to consider before you make a decision:
By breaking even in 20 years, I assume you meant that your annual pension would be about 5% (1/20) of the lump sum amount. In other words, the lump sum amount would be 20x the annual pension.
If I were you, I would go with the lump sum amount today and roll it over into an IRA to defer taxes. 5% pension payment is not very generous, in my opinion. Just the other day, Barron’s posted its annual review of annuities (https://www.barrons.com/articles/the-top-100-annuitiesand-how-to-choose-the-best-for-you-51563580708). A simple joint life annuity is about 6% today.
If I were confident that I have 10 years before I need this cash, I’d invest this lump sum into common stocks. And may be some bonds, if I want to be conservative. I shared some data from JP Morgan in a previous blog post (Yes, stocks are volatile: http://www.investingparexc.com/2018/02/03/yes-stocks-volatile/). Take a look at the first chart. Average annual return of a 50/50 portfolio has been 8.9% since 1950. It has returned anywhere from 2% to 16% over any 10-year period since 1950. So there’s a good chance I’d do better than 5% in the next 10 years. And have more control over the money (unlike an annuity) and could defer taxes as long as I want.
Good luck with your decision. It is after all a good problem to have 🙂
I will review all your suggestions.
It’s scary taking a lump sum. Most of my coworkers choose the pension but many expire w/in 10 yrs (law enforcement).
However, self-reliance appeals to me and I like the challenge of learning about investing.
One last variable I didn’t mention was that my wife and I have tax deferred accounts currently totaling the size of my lump sum. So, I could take the pension and continue to invest/allow those accounts to grow until we want to tap them for income.
As you said, good problems to have.
Best in your own endeavors and thanks again for sharing your story. I’m grateful.
Regards,
Joel