Not many of us can resist playing the game of "what if?" from time to time, perhaps even more so at the beginning of a new year. Those of you who follow my blog might remember my interview with Billy and Akaisha Kaderli, who retired in 1991 at the ripe old age of 38. Recently I caught up with them again after they sent me a document they also posted on their website titled "Was it Worth It?" that re-examines their choice to retire well before most people have considered the possibility.
Since we last touched base, the Kaderlis, now age 58, have continued their nomadic global journeys. In April, they finished a 105-day adventure through the Pacific Coast of Mexico, Guatemala, Belize and parts of the Yucatan. Today they are on the shores of Lake Chapala, Mexico, preparing to travel back to the Mexican Yucatan in late January. Then they'll slowly make their way south into Guatemala and beyond. A few years ago, they purchased a home in Arizona, which has become their U.S. base.
The quest for new places and adventures may not be in everyone's blood, but the Kaderlis have pertinent advice about living within their means, investing, and living life to its fullest as they define what wealth means to them. They haven't always been right in their investment assumptions, as you'll read, but they are flexible with their financial plan, making necessary adjustments along the way. In case you haven't guessed, the Kaderlis answer a resounding "yes" to their question of whether early retirement was worth it. Below are some partial responses to my questions about how they're maintaining their retirement as they truly move into the golden years.
Q. When we communicated in April of 2010, you had this to say about your portfolio:
"Our portfolio has always been heavily-weighted in equities, and it still is. We did raise some cash during the decline and went from a 5-percent cash position to 15 percent. In hindsight, this was not a good investment decision, that is, unless the market drops again to levels where we see major opportunities. However, if the market continues to rise, we will simply spend the cash down over the next few years and not have to liquidate any holdings."
What, if anything, has changed in your portfolio since then?
A. We did have a large cash position and were outperforming the S&P 500 until last September, when Ben Bernanke announced QE2 (round two of the Federal Reserve's quantitative easing). I figured his scheme was a sign that things were worse off than we all expected (remember we just had the worst August in years) and after a short euphoria, the markets would continue their downward bias. I was wrong. However we have used this opportunity for tax planning and to increase our equity exposure by buying ETFs (exchange traded funds) instead of open-ended mutual funds. We are now investing in slightly conservative DVY (Dow Jones Select Dividend Index) and SDY (S&P Dividend ETF), along with our holdings in SPY (S&P 500 Index) and VTI (Vanguard Total Stock Market ETF), as well as cash.
Since our retirement in 1991, through all of its ups and downs, including the "lost decade," the S&P 500 has returned approximately 7.2 percent annually. Not bad, considering what we have been through the last 20 years.
Regarding our age of 58 and our investments: Even though "long term" seems to be getting shorter with each year, I am still a believer in our system, and the abilities of large corporations to adapt to and survive most economic situations.
Q. How do you handle the expense of health care?
A. Unless your health expenses in the U.S. are covered by your company, out-of-pocket expenses, including insurance, are rapidly rising. Our suggestion -- besides eating healthier, exercising and common sense stuff -- is to look elsewhere for coverage. This means moving out of the States, receiving better care at a fraction of the cost or at the very least looking into medical tourism.We have been living off and on for years in Chapala, Mexico, a short flight from the U.S., where good medical options are available. Guadalajara, less than one hour away from Chapala, has world-class hospitals, highly trained doctors and an international airport.
Q. Are you comfortable with your portfolio and your lifestyle choice now, and if so, why?
A. If you are asking, would we be more comfortable with a larger portfolio, sure. But there is no way to place a dollar amount on the experiences we have accumulated during the last 20 years. Is the money you make worth the price that you pay? And this goes back to the question of how much is enough? Would our lifestyle change if we had twice our net worth? I doubt if it would change much of anything. Now, four times our current amount might have an effect on our spending, but we will cross that bridge when it happens. Remember, this is a lifestyle and not a vacation.
We feel comfortable with our lifestyle choice because we have learned the skill of how to live well on much less than we would need to spend if we lived in the States. For example, we recently dined with friends at an upscale restaurant, with appetizers, entrees including veal Marsala, salmon ravioli, roasted duck and grilled chicken. The total for the four of us was less than $20 per person, and that included wine and tip.
We have less stress, more affordable entertainment options available, and by living in exotic locations we continue to be challenged intellectually. Opportunities to mentor or volunteer are everywhere and these enrich our lives in countless ways.
The pressure to consume and impress one's neighbors isn't as prevalent as it is in the States and that has its obvious benefits as well.
Since our retirement 20 years ago, we figure that we have lived 70 percent of our time overseas. While Arizona is one of our more affordable locations to live, we don't see that pattern changing in the near future.
Q. Any final thoughts?
A. We did want to mention that when we retired two decades ago, we spent a lot of time around older retirees. At age 38 or 45, we were always the youngest retirees in the crowd (these days, that is no longer the case).
One important lesson that we learned from this experience is to live life without regrets. As we age, it's easy to contract, to play it safe and create a lifestyle filled with a dependable routine, with nothing too challenging on any front.
Some of the retirees we've met have made our adventures seem like child's play. Their courage, zest for life and sense of humor inspired us. So we prefer to see this period of getting older as a time to reinvent ourselves; to try something new -- to move the sides of the box so that we aren't so squeezed in by old descriptions.
That way, when we look back, we'll have fascinating memories and fewer disappointments. We'll know that we pushed forward instead of spending our time wishing. And really, that makes all the difference.
What do you think of the Kaderlis' perspective on retirement?
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