Early Retirement Extreme Forums

Early Retirement Extreme Forums » Money Questions

1. 

   J_
   

   Master
   Joined: Nov '11
   Posts: 353

   I see many here struggling with stocks to gamble for profit or to get dividends; better get both!
   I am not happy with gambling and I am not a Stoic. I don't want to be allways alert on my monetary investments. For me FI is not equel to constant searching and changing positions. And as the whole financial world is focusing on dividend the results will automaticly delute. Quant traders (Quant raiders?) are perfecting the system they say, but what they really do is skimming the milk. A new cable between Europe and US is projected to get an advantage of 0,25 sec in stocktrading time!
   We simple persons will lose our money to them....
   I found another aproach (for 13 years now) which works for me. I do only interest deposito's spread over more than one not related bank in three different countries in and outside Europe in the one currency I spend: the Euro.
   I accept that now I go into a period with no or very little yield. I have had period of 6 or 7 % yield. Perhaps will that happen again perhaps not.
   In last resort (but I would find it an adventure) I can become an Autark (my word for money (coins) independence), and buy a little homestead somewhere, free from the grid.

   How does that suit you?

   Posted 1 year ago #
2. 

   ktn
   

   Journeyman
   Joined: Jul '10
   Posts: 116

   Hi,

   That's an interesting strategy. Thank you for sharing it here. I live in the Eurozone too and having to watch over my nest eggs on a daily basis would not quite feel like retirement for me either.

   Some people here have mentioned Harry Browne's Permanent Portfolio and John Bogle's Index Fund approaches as being easier alternatives. They both have the advantage of needing to re-balance only on quarterly or annual basis. I have not decided which way to go, so I am definitely interested in hearing other approaches.

   Have you been putting 100% of your funds in only fixed terms? Do you try to distribute them evenly across these three countries? What criteria do you use to select these countries? Do you re-balance allocation or list of destination countries to balance out risk?

   Most importantly how has your method been comparing to inflation? Since you have been doing it for a number of years, perhaps you could share the average yield you have been getting versus inflation where you live.

   Also, is it possible for EU citizens to open accounts in any Eurozone country without needing a local address?

   What about taxes - where does one have to pay these?

   Oh no, so many questions. Thanks in any case!

   Posted 1 year ago #
3. 

   J_
   

   Master
   Joined: Nov '11
   Posts: 353

   @ktn. Thanks, I am happy to share, I get so much in return of Jacobs ERE (blog book fora)

   On inflation see my post in this ERE category in the Tread of "30 years of inflation". The CPI is for Unions and Governments. By living the ERE way, inflation hardly hurts me even now after 19 years when I started to reach FI. The less you buy (in things and in money) the less influence of inflation.
   To keep it simple I choose outlandish banks who have a branch in the Netherlands (most of the year I live there). I pay taxes in the Netherlands.
   More then 90 percent on my savings are on fixed terms. When an amount falls free, I choose simply the best interest rate I can get on that moment.

   Posted 1 year ago #
4. 

   George the original one
   

   Expert
   Joined: Jul '10
   Posts: 1,941

   I would think the easiest approach is to purchase several annuities?

   Anyhow, I fully expect that my investing will take the form laddered certificates of deposit when I'm about 80 and not as sharp.

   Posted 1 year ago #
5. 

   J_
   

   Master
   Joined: Nov '11
   Posts: 353

   George, thanks for advice, will ask for an offer for anuities and check if they are value for money.
   I am not yet 80, but not so sharp as you.
   Are there other suggestions for yield without risking (too much) of the investment? I am happy with a yield of about 4%, as my withdrawal rate is hovering between 2 and 2.2%

   Posted 1 year ago #
6. 

   Mo
   

   Master
   Joined: Jul '10
   Posts: 442

   In the US, it seems that many annuities will pay out over 4% annually. If you're only spending 2%, then half of your payout could be reinvested in one way or another.

   Alternatively, you could put 1/2 of your capital into an annuity yielding 4%-- giving you cash flow equal to 2% of your capital, and invest the remaining 1/2 in another manner.

   I read your previous comments about inflation. I fear inflation more than you it seems. As you have noted, the personal impact of inflation may be very different from the CPI. Using 1993-2012 as a reference would not expose you to a significant period of above average inflation, even if you compared like-to-like expenses, which you admittedly did not.

   The thought of simple living on a small homestead brings a very appealing mental image. The wealthy people of ancient Rome often wrote about dreaming of such a life. Perhaps one can do such a thing with success in your area. In some places though, the seemingly simple life of a small homestead can be more difficult than it seems on the surface. Still, it is a nice dream. Best of luck.

   Posted 1 year ago #
7. 

   george
   

   Journeyman
   Joined: Mar '11
   Posts: 211

   Re Inflation

   The things we can't control seem to increase at a greater rate than inflation. Local taxes, insurance (basic) electricity (basic) seem to increase faster than the inflation rate.

   And these costs make up more than half my expenses.

   But food and clothing, its just amazing how we can live on next to nothing.

   Personally I would struggle with annuities. if you take them out in your 80s you won't get the value out of them.

   Posted 1 year ago #
8. 

   J_
   

   Master
   Joined: Nov '11
   Posts: 353

   Thanks for comments,
   comparing annuities against laddered deposits:
   I have got some offers of annuities, results: they are only better if I get a methusalem age. My laddered certificates system (nice named by George T.O., for my way of investing only in fixed deposito's roling over) the interest I could get on my deposits differs between 7 (ten years ago) and 4%, but now a period with lesser interest will start, I have still recent bought some 10 year deposits of 4,5% and 5%) so the decline will be softened). Because I have only a withdrawal rate of about 2 % I get compound interest on the part I dont withdraw: eg compound interest over 19 years with a continual yearly interest of 4,5% is about 7 % annualy)

   At Mo and George: In the 19 years I record my expenses e.g. on electricity and heating (natural gaz) bill went down to 10% of what I paid in 1993, due to ERE principes (smaller living, insulation my walls and roof and much better glazing called HR++), lower temperatur in house etc), local tax is higher, but is easily compensated by using no or (hardly no) car and cloth use and the smaller house. After 19 years I live (very) comfortable on less than 60% of 1993.

   Living FI is not static, you change things during life and see surpises: See Jacob: moving from more or less rural to a big city: cheaper food, lower car insurance, less use of car. See Bigato: changing his desktop to a modern laptop: it lowerd significant his electra bill to 1/3.

   So I think that (for me) my laddered certificates are much more easy to handle (and gives my more peace of mind) than stocks. (You have never a loss, and the bonus you get is in the compound part)
   But I look allways for suggestions and advice to improve and simplify.

   Posted 1 year ago #

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