2017 in Review 6

It’s that time of year again. Time to look back on 2017 and what a year it has been. Our budget was blown but what made up for it was a spectacular return on my investments. It was a mixed bag but I must admit, I think I must land on a positive note for us personally.

The blown budget

Let’s begin with the not so successful feature of 2017. When I retired, our budget was set at $65,000 a year. Due to extremely high and continuously high medical costs, I upped the budget to $71,000 going forward (increasing each year for inflation). The medical expenses are the new normal for us and we’ll cope but, just when you figure you’ve found a balance a botched up root canal happens and expenses go even higher. Higher by some $5,880, to be exact.

This was also the year my father passed away. As if the emotional blow isn’t hard enough, living 4,100 miles from home add a financial blow as well. The costs associated with travel, attending my father’s “memorial” and spending some time with my mom for a over week: $2,242

Those and some additional smaller expenses (new dryer, car repair) put our total expenditure for 2017 at $79,000.

On the bright side: Our son, who was scheduled for some very expensive orthodontics, managed to manually correct the situation by patiently pushing his jaw in the right direction.

Keeping busy

Retirement isn’t for all. You need to be able to stay busy when retiring and more importantly, you need to stay busy doing something you love. I’ve managed to find my passion and no, it’s not blogging about personal finance (the infrequent posts will tell you that). My passion lies in designing and building 3D printers. I spend 60% of my time working with Fusion 360 designing the perfect printer and 20% building them.

I’ve also gotten my feet wet in building prosthetic hands for those that really need it, but haven’t yet actually built one for an individual. Maybe next year.

The last few months I’ve been sharing my designs so other can use or build on them on Instructables.com and GrabCad.com.

Retirement also still allows me to spend whatever time I want with my kids. When their heads aren’t buried in the latest Minecraft, Terraria, or Undertale games, I try to stay active with them.

How about that Stock market

Can’t talk about 2017 and not talk about the stock market. For those of you that follow my, you know how much I’m invested in the Stock market. Mostly ETF(s) (electronically traded funds) and some tech stock (I own some google, Amazon and Apple).

As of this writing (who knows what the last 3 days of the year will bring) the S&P 500 (SPY) is up 19.84%, the NASDAQ (QQQ) up 29% and the Dow (DJI) is up 25.3%. A year like this, easily makes up for the budget failure and hopefully will ease the burden of our medical expenses for a few years to come.

My retirement has always been a risky one (retired at 43 with “just” a little over a million). Boosts like this make me optimistic about the chances of staying retired for the long run.

Thanks to the high rise in stock, I sold some additional stock for next year. For one, I’m expecting more health care cost (not medical cost but insurance premiums) and I’m also looking into having our waterfront dredged (a costly but good investment). I’m offsetting the additional capital gains with a loss I’ve been sitting on for the last 5 years. I once invested heavily in Energy Conversion Devices, which went belly up in 2012. I’ve kept the loss of some 11K on the books for when I really needed it. This year in order to stay within the 15% tax bracket, I needed it.

Preparing for the next 10 years

In my rush to retire at 43, I accidentally put too much of my paycheck in my 401(k) and too little in my after tax stock accounts. Not a problem for most individuals but it left me with the issue, of running out of funds from my after tax accounts at the age of 52. 7.5 years before I can start dipping(penalty free) into my retirement accounts.

For that reason, I started the Roth IRA conversion ladder this year. This year, and for the next foreseeable years, I’ll be converting $40,000 annually from my 401(k) to a Roth IRA. When contributing (on in this case rollover) to a Roth IRA, it’s allowed to take out the principal, 5 years after converting it. This means that 7 years from now (when I need it), I will be able to start getting at my retirement money, penalty and tax free.

The downside to this process is, paying regular income tax on the amount converted. Adding an automatic 40K of taxable income (income you can’t touch, btw) makes it challenging to stay within the 15% tax bracket (or whatever it will be going forward). Staying within the 15% tax bracket is important as it means paying 0% capital gains.

I’ll keep you posted in years to come as I keep climbing rungs of the Roth IRA conversion ladder.

Am I getting through?

My cousin approached me about Crypto currency and asked whether I had gotten in. I haven’t and I probably won’t. Am I right or wrong? I don’t know. What I do know is that I lost about 200k in the internet bubble and this smells, feels and looks like it, all over again.

My cousin will learn his own lessons (I advised him at smaller scale) but what is important here is that my cousin is talking about, and most importantly asking questions about finances and his future. I like to think I had a little to do with that.

Support

Last but not least, I’d like to thank my supporters in the Personal Finance world this year. Like I said, I don’t nearly blog enough so if you’re looking for a more regular dose of good information on personal finance, please visit Mr. and Mrs. Groovy at Freedom Is Groovy,  Jane and John at johnjanedoe.com and James at Retirement Savvy

Happy New Year and good luck reaching your financial goals