Maus' Journal

Maus · Post by **Maus** » Mon May 02, 2011 8:31 pm

Maus’ Journal
Well, now that we have all celebrated Law Day (May 1 -- http://en.wikipedia.org/wiki/Law_Day,_U.S.A.) and begun a new month, I have decided to finally put my ERE cred on the line.
First, some background. I am going to be 50 in December; so we’re not really talking “extreme” at all. More like Financial Independence/Retire Early (FIRE). By way of excuse, I didn’t really start gainful employment until I was 33. Immediately after university, I went to law school. Immediately after getting my J.D. and passing the Bar, I entered a Catholic religious order. Prior to the priory, my annual income never exceeded $7K and was often less than $2K. During my almost six years as a friar, under a vow of poverty, I had zero income. I started my first salaried job as a prosecuting attorney for $32K a year in December of 1994. I estimate that average salary for the intervening years has never been more than $50K. (I took brief sabbaticals in 1996 and 1998 to explore a return to religious life.)
I am currently employed as a staff attorney for a non-profit organization. I earn $88,200 per year, reduced by 10% through a voluntary furlough program that provides me with 26 days off in addition to my 24 vacation days and 14 holidays. So, I am not earning the huge salary that lawyers with my experience sometimes command, but neither am I slaving away for 60-70 hours a week. The work-life balance is quite satisfactory. I am, however, seeking to be free of employment so that I can be the master of my own time.
I have always been fairly frugal and reasonably debt adverse. I managed to obtain my degrees with less than $10K in federally subsidized student loans; which would be impossible today and for which I am very grateful. Among other reasons, I served about six years as a public prosecutor in order to repay the state’s support of my education. This will entitle me to a modest pension of about $6K a year starting at 55.
I currently save 40% of my gross income, which is equivalent to approximately 70% of my net income, adjusted to account for 401(k) contributions. I make the maximum annual contribution, and my employer contributes 4% of my salary.
Productive assets:
• 401(k) of $207K entirely in VTSMX (We have very poor options, this is the best of the lot. Upon separation from work, this will convert to a roll-over IRA with a mix of dividend stocks and some bonds);

• Roth IRA of $46K in sector ETFs, approx. annual ROI of 6%;

• Taxable account of $76K in 15 dividend stocks, approx. annual yield of 3.3% and yield on cost of approx. 5%;

• ING savings account of $30K at 1% per year;

• Intra-family loans of $11K at average 2.6% yield (I am the creditor, not the debtor);

• Accrued vacation hours worth $11K; and

• Average checking account balance of $3K
I also track the net present value of the pension mentioned above and my likely Social Security payment beginning at 62, using a discount rate equivalent to the 10-YR Treasury Note.
Based on the above, at April 29 valuations, I have a net worth of approximately $604K
Below is my monthly cash flow, which I plan to update each following month:
April 2011
Net Income [less taxes, 25% of health insurance, $166.67 in medical flexible spending deductions, $60 for work-related parking, and 20% deduction for 401(k)]
$3553
Expenses
Rent $1100 (currently, a 900 sq. foot 2BR, 1BA, CHA house, too big!)

Gas & Electric 81

Cell Phone 83 (Ouch, currently $1 per day of use + $0.10 cents per min.)

Auto Ins. 50 (currently, I drive a ’95 Chevy P/U w/ 150K miles)

Gasoline 74 (yeah, crap MPG, but no more depreciation)

Other Auto 59 (Mo. share of registration, smog, maintenance, etc.)

Clothing Allowance 100 (sinking fund for suits, etc. to “look like a lawyer”)

Living Allowance 1001 (Usu. $600 per month, but I took an unexpected $520 trip)*
TOTAL $2548
Savings $1005
* I don’t track food, entertainment, household items, etc. Instead, I track remaining funds from the $600 monthly cash allowance (approx. $20 per day). Because I use a credit card occasionally, I sometimes exceed the allowance. I generally adjust my cash balance to zero out the credit card use; but it can get away from me when something unanticipated happens.
Immediate goals (within six months):

1. Try to locate a studio or 1BR apartment near a light-rail station (work pays for pass). This would reduce rent and allow me to jettison the truck.

2. Try to reduce the monthly living allowance to $450, or approx. $15 per day. I’ve started batch cooking on Sundays and that has reduced food costs. But I follow a quasi-paleo diet so rice, beans, and oatmeal cannot come to the rescue.
Comparative Retirement Plan:
Monthly Expenses
Rent $600 (urban-based studio or 1BR apt.)

Gas & Electric 60

Cell Phone 60 (probably switch to unlmtd. minutes)

Internet 50 (currently have access to a T-6 at work, gonna miss it)

Transport 120 (monthly unlmtd. mass transit pass)

Clothing Allowance 30 (no more suits & ties!!!)

Living Allowance 400 ( approx. $13 per day)

Health Insurance 485 (based on PCIP plan)**

Medical 125 (co-pays for Dr., labs and Rx)
TOTAL $1870
** As many of you will recollect, I have diabetes. This essentially precludes me from obtaining HDHI + HSA in the private market unless and until the exclusion of pre-existing conditions is eliminated by the federal health care legislation. The best I can hope for at present is the California PCIP, which has a current premium of $481 a month for my age and zip code. [ http://www.pcip.ca.gov/Home/default.aspx ] This would require that I exhaust the 18 months of COBRA coverage from my current work-based group plan [$460/month for a PPO with a $4K deductible] and forgo coverage for a minimum of six months after that to qualify for the PCIP. It is unquestionably the case that health insurance is the biggest bet noir of my retirement plans.
At 4% SWR, I need $561K. So I could theoretically pull the trigger today.
At 3% SWR, which makes me feel most comfortable, I need $748K. At my current savings rate, that will take 4 years and 8 months. If I meet my two immediate goals, I can shorten that to 3 years and 5 months.
Or, if I use a 3.3% SWR, which is basically the 10-YR T-note rate, I’d need only $680K. That can be managed in 1 year and 11 months.
I look forward to your comments, criticisms and suggestions…

Freedom_2018 · Post by **Freedom_2018** » Mon May 02, 2011 8:51 pm

Not sure if you had mentioned previously..but do you have Type 1 or Type 2 diabetes?

Maus · Post by **Maus** » Mon May 02, 2011 9:01 pm

@Freedom_2018

Type II. I am paying the price for earlier bad habits. I went from a fairly active college student to an almost completely sedentary law student/friar(Friar Tuck has some basis in reality after all)/lawyer. For years, I relied on the "miracle" of oral anti-diabetic medications without addressing the underlying causes. About two years ago, I finally got serious and started dieting and trying to exercise more vigorously. I've had much better success with the former -- having lost about 100 pounds -- than the latter. At 50, the joints won't take much more than brisk walking or swimming for aerobic activity. I need to add some light weighlifting to improve muscle mass and metabolism, but I am leery of adding the monthly cost of a gym. I've also heard discouraging information about the increased likelihood of injury from home use of kettlebells and such; so I've tended to avoid that option. But at some point I've just got to act. A Jedi does not try...

Freedom_2018 · Post by **Freedom_2018** » Mon May 02, 2011 9:34 pm

Hi,
I hear you.
My closest friend, who I share a house with, has a story very similar to yours:
- Slightly older than you.
- More than 200 pounds overweight (we are talking 350 pound range here)
- Can't walk more than 2 blocks without back seizing up and having joint pains especially in the knees and ankle. Very hard time climbing up stairs.
- On Bayetta and Metmorfin for 10 years. Also taking blood pressure medication. Fasting blood sugars in the 140+ range. A1C as high as 9 and once even 11! Taking a total of 9 types of different medication.
- Suffered acute neuropathy in eye (bleeding retina, needed laser surgery) and shooting nerve pain in legs.
But ultimately this is a happy story. Because today she is:
- 180 pounds

- hiked up Mission Peak

- Bicycled 60 miles in a day

- plays soccer with me some evenings

- leads an active life with significant outdoor activity
Best of all: No Diabetes! A1C of 4.8! not having taken any diabetes medication, blood pressure medication or any of the above mentioned 9 pills for over 3 years now! She totally beat her type 2 Diabetes.
Similarly my mom (who has been type 2 diabetic for like 35 years now) was able to reduce her insulin dependence from 48 units per day to just 10 for the past 1.5 years. I bet it could go down to 0 but she is not yet ready to make the mental "leap of faith".
Anyways, the reason I mention both the stories above is:
a) that I believe that type 2 can really be reversed/eradicated by change in diet. I was able to do that for my friend and for my mom (she was very hard to convince and try a new approach..but I can be persistent)
b) a lot of the nutrition advice for Diabetics by the ADA, doctors, etc is really not helpful and sometimes harmful.
If you don't mind sharing, what kind of A1C and blood glucose levels are we talking about?
Thanks

Maus · Post by **Maus** » Mon May 02, 2011 10:33 pm

@Freedom_2018

I recall this in an exchange from the earliest days of the forum. I believe we exchanged emails in July of 2010 about the diet specifics. I don't want to curtail your line of questions, but I'd prefer to keep my journal focused on the economics rather than on my disease. My last A1C was 6.1 and blood sugar has been well under control for the past year, albeit with meds. I believe I've got a handle on it and look forward to eventually being med-free. But, from the perspective of insurance providers, my condition has been cast in stone and it will always exert a drag on underwriting any given policy.

smileyriles · Post by **smileyriles** » Mon May 02, 2011 11:05 pm

Although you may have passed the ERE mark, I still think that you have probably lived a very fascinating life by taking up a religious vocation and then practicing law. A life full of rich experiences.
I have always been tempted to go to law school, but ERE has changed my point of view in so many ways that I don't think it's something I should do anymore. However I've always thought that it would be pretty cool to be a lawyer.

dragoncar · Post by **dragoncar** » Mon May 02, 2011 11:27 pm

The SWR numbers don't usually include taxes, right? So with monthly expenses of $1870, you'd need more than $1870*300=561000 (at 4%). This probably factors into why you'd prefer to use a 3% SWR. For those with Jacob-level expenses, taxes don't really matter much, but I think many of us need to build in a buffer.
Any idea how health care reform will affect your medical expenses?

Freedom_2018 · Post by **Freedom_2018** » Tue May 03, 2011 12:00 am

@ Maus:
Oops I do remember now. Thanks for jogging my memory. I now recall that I did exchange emails with you and a couple of other folks also...somehow didn't realize that it was you..guess I am finally losing my mind!
Because Diabetes runs in my family and impacted people so close to me, I get very passionate about the subject as you can see

Maus · Post by **Maus** » Tue May 03, 2011 1:15 am

@dragoncar

You raise a good point. I hope to mitigate the tax consequences by drawing first from my taxable accounts in the immediate aftermath of retirement. Those first five or so years won't have enought passive income to trigger liability at current marginal rates. The real challenge will be to drawn from the 401(k) in such a way that it doesn't render the Social Security taxable. But I suppose I should add a cushion to account for some tax at the lowest bracket.

mikeBOS · Post by **mikeBOS** » Tue May 03, 2011 2:40 am

Hey Maus,
I look forward to seeing your progress in the coming years.
I spent about 18 months seriously inquiring into joining a monastery when I was about 22 and 23, after working on my bachelor's in classics. Ultimately decided that I liked a lot about it, but not everything. So I figured I could try to do it on my own instead of in a community by trying to keep the good aspects and leaving the disagreeable ones behind. - So much as that is possible.
And now I'm in law school too.
Incidental coincidence? Or have you run into a lot of monastic lawyers?

Maus · Post by **Maus** » Tue May 03, 2011 7:20 pm

@mikeBOS

WRT monastic lawyers: I know more than a few lawyers who entered religious life and at least two friars that studied law after their solemn profession. I suspect that for Dominicans (my former ilk) the years of Thomistic philosophy and theology resonate well with the logic-style underlying successful legal training. Then again, I know a few lawyers who became monks because they'd plumbed the depths of human greed and depravity and were done with the "world." Sometimes a hot shower isn't enough to sluff off the dirt into which one must plunge one's hands.
WRT the "disagreeable" aspects: many are shocked to find that a community of men (or women) who are ostensibly striving to grow in charity and holiness can be just as subject to crankiness, laziness, bureaucracy and all the other human foibles of organizational man. Or perhaps you mean the vows. Thomas More, the lawyer who was martyred for his conscience in 16th century England, was said to have contemplated becoming a Carthusain monk, but instead took Paul's advice that it is better to marry than to burn. I know that despite years of theology telling me that chastity was a positive gift and the truest expression of human nature for those called to it, I always found it a painful sacrifice. In my view, it was like the Yakuza sometimes requiring a member to sacrifice his pinkie finger to atone for failure. So, this is probably one of the good reasons for my leaving before solemn vows (which as the formula states, last "usque ad mortem," until death). The irony is that, despite some efforts, I never married and am unlikely to do so now.
WRT classics: Teneo Latinitatem bene sed non linguam Graecam.
@smileyriles

If all we're talking about is thinking about issues and solving problems, for those with a certain way of thinking about the world (logical, but non-mathematical), being a lawyer just makes sense. I definitely have that thinking process. But I did what thousands of liberal arts graduates do when confronted with a working world that doesn't particularly value the interests underlying degrees in classics, philosophy, history, or literature: take the LSATs and apply to law school. I never had a thought of being a lawyer until I realized how much I enjoyed the Socratic dialogue in 1L. But therein lies the bittersweet condundrum. Law school, and thinking like a lawyer, bear little resemblance to the practice of law.
The problem, as I see it in hindsight, is that law has been transformed from a profession uniquely devoted to resolving disputes without bloodshed and managing certain transactional risks to a business ruled by market forces and the imperatives of cost accounting. As it is practiced today, law does not reward those who are not absolutely passionate about either making or saving money for their clients (usually for huge fees) or advancing some societal interest (e.g. civil rights) no matter what the economic self-sacrifice. I tell young people today to explore what the actual, real-world practice of law is like by talking to every lawyer they know. If they cannot see themselves enjoying the work as it truly is, the expense (now routinely six figures) and sacrifice of law school is a terrible waste.

tjt · Post by **tjt** » Tue May 03, 2011 10:16 pm

@Maus:
"At 50, the joints won't take much more than brisk walking or swimming for aerobic activity."
Don't underestimate yourself. While I'm not yet 50 (actually, I'm only 33) I am an ultra-marathon runner. A sport that consists of more runners over 50 than under. Several of the guys I know were severely overweight and suffered from diabetes at one point in their life.
I'm not trivializing your diabetes, a problem I know sparingly about, but my experience is that if you continue to lose weight and take your exercise increase slowly, the human body is still very capable at 50 (far more than most realize).

Post by **jacob** » Tue May 03, 2011 10:29 pm

http://www.guardian.co.uk/lifeandstyle/ ... odybuilder

JohnnyH · Post by **JohnnyH** » Wed May 04, 2011 12:20 am

@jacob: I saw his 61 chin-ups in 45 seconds and just couldn't believe it... It must be a an error:

http://www.extremepullups.com/world-records/
Still, impressive and inspiring.

B · Post by B » Wed May 04, 2011 3:18 am

Glad to hear from you again Maus! I look forward to hearing more about your past and what your future holds.
Regarding the 90 year old bodybuilder, I admire his stubbornness and refusal to "go with the flow". When I was in school and during my freelancing phase, I was very active. I've almost hit the year mark at my corporate 9to5. This one year on the job has done more to destroy my physique at a rate I could not have anticipated.

Surio · Post by **Surio** » Wed May 04, 2011 5:27 am

@Maus,

My mental image is not so far off

, but the diabetes discussion put a damper on it

, and also made me sit up. My father suffers from Type II and whatever @Freedom_2018 mentioned holds true for him.
Will either of you be kind enough to share the information from the earlier post/discussion on Type II with me? Many thanks in advance. No more from me on this topic from now on.
As to fitness, I remembered about a discussion on bodyweight exercises a while back. They are parkour themed, but you are welcome to pick and choose your level of strenousness.
Nice discussion with @mikeBOS. As to the Latin quips, My mind instantly flew back to Asterix the Gaul....

http://www.wattpad.com/117374-list-of-l ... in-asterix
"Alea Jacta est" was my favourite, for it frequently ended with the pirates "being framed, by Jericho
@B,

I know what you mean. If only all office dweebs realised it.

Maus · Post by **Maus** » Wed Jun 01, 2011 10:13 pm

May 2011 Numbers
ERE Capital $617,950 (2.3% MoM increase from $604,000), equivalent to $18,538 at 3% SWR.
Net Income [less taxes, 25% of health insurance, $166.67 in medical flexible spending deductions, $60 for work-related parking, and 20% deduction for 401(k)]
$3,573
Expenses:
Rent $1100

Gas & Electric 47

Cell Phone 48*

Auto Ins. 49

Gasoline 78

Other Auto 59

Clothing 100

Living Allo 612**

1-time Gifts 140***
TOTAL $2233
*(switched to $2/day used unlimited talk & text)

**($12 over budget, $162 over aspiration goal of $450/mo.)

***(Mother’s Day & two unplanned social gatherings)
Savings: $1340
Combined savings rate [with 401(k) contribution] of 40.25% of gross.
Comments:

1. It is proving more difficult than I first imagined reducing my living allowance. In June I am going to reduce my alcohol purchases and refrain from mid-week drinks.

2. No luck yet in finding an ideally situated studio apartment. This will probably have to be deferred to July because of travel obligations in June.

3. I am increasing my 401(k) contribution to take advantage of the >50 top off. June 1 also marks the beginning of the new work-based PPO health insurance, so premiums and flexible spending account contributions increase slightly. There will be a corresponding decrease in monthly net income.

George the original one · Wed Jun 01, 2011 11:07 pm

Maus - I don't think you've spoken about the option of a roommate(s). Seems to me that makes as much financial sense as going through the disruption of moving (in your case).

Maus · Post by **Maus** » Wed Jun 01, 2011 11:50 pm

@GeorgetOO

I've considered it. I can probably set aside my preferance for the solitary life. I am, afterall, an extrovert. But a threshold issue is convincing the landlord to allow me to sublet the second bedroom. Then I have to find a compatible housemate, from music choices to sympatico in the cleaning/chores department.
On the upside, it would allow me to remain in a house with a large backyard for gardening and in a quiet neighborhood with groceries, library and church all less than mile radius.
But I keep coming back to the earlier posts of one of original forum members (name escapes me), who went through a series of problematic housemates before finally renting solo. It comes down to the incredible difficulty of assessing suitability in a half-hour encounter.
I won't rule out this solution; so I'll give it some more thought in June. Thanks.

George the original one · Wed Jun 01, 2011 11:55 pm

akratic's journal has his comments about how poor he is at selecting roomates.