In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 4th decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience.
with Billy Kaderli
Billy and Akaisha Kaderli
Some of our Readers would love to sit down
and have a conversation with Billy, so we did an interview with him! Take a look
Traveling in the Ecuadorian Andes Mountains
Retire Early Lifestyle: For the
benefit of our Readers who don't know your background in finance before you
retired, could you give a quick synopsis?
Billy: In 1979
after traveling and working in France, we bought a restaurant, in the US, with "no money
down" and that is where I earned my "business degree". Years later I was
recruited by Dean Witter Reynolds, a brokerage firm where I rapidly advanced
and eventually became a branch manager.
REL: You and
Akaisha have been retired 30 years now. To what do you attribute your
Flexibility would have to be high on the
list. We never planned out our retirement schedule and pretty much have gone with the
flow. As you know we all have had challenges in these last couple of decades
including market crashes, global bird flu, personal medical emergencies and the Great Recession to name a
few. Our ability to adapt to the ever-changing world is key.
Riding in Northern Ecuador
REL: You mention
often in your writings "If we can do it, YOU can too!" Do you honestly believe
anyone can retire early?
Billy: Yes, if they have the drive, focus, and
motivation I believe they can do it. We worked hard, spent little and saved a
lot, always living below our means. We have met many travelers/retirees living
on their Social Security payments which is proof you do not have to be rich to
enjoy this lifestyle. All of these people including ourselves, have a sense of
adventure instilled in them.
What do you
do about health insurance?
Billy: Before we turned
65, we utilized the ďexpat exemptionĒ of the Affordable Care Act of being outside the US for 330 days or more per year.
Now that we are 65, we have enrolled in Medicare.
That stated, we have
had numerous healthcare encounters in
Thailand, Mexico and
everything from routine annual checkups including
eye care, colonoscopies,
dental care, full
physicals and lab work, to a
very serious accident which required surgery. In
each of those experiences we have had excellent treatment and care with positive
outcomes at a fraction of the costs in the US.
REL: What would you say to
people who will
retire early and stay in the US?
Billy: I would say to
plan ahead and budget accordingly
for healthcare expenses. For surgery procedures, they might take a look at
The Surgery Center of Oklahoma. They provide
domestic medical tourism and since they donít take insurance, their costs are
much lower than other hospitals. They may also research the various medical cost
sharing programs being offered.
also modify their housing
or relocate to a
state with a better cost of living, lower taxes, or that is generally friendlier
if your mortgage is paid off, owning property can come with some high costs. Do you still have
the place you purchased in Arizona? How do you figure that
Billy: Yes, we still own a
humble abode in an active adult community in Arizona. We donít own the land, we
lease it, and therefore our property taxes and insurances are minimal. Right now a friend of
ours who is disabled is staying there covering our expenses and upkeep. This
exchange helps both of us out.
REL: Do you have a permanent
residence anywhere? What about taxes?
Billy: We are residents
of the US currently. Most US citizens are required to file with the IRS no matter where their residency
REL: Would you
recommend retirees maintain a home, downsize, or move to a cheaper location?
Billy: Housing is a major
expense in any budget - retired or not - and a category to look for freeing up
capital. Sell the house, downsize and invest the difference? Thatís a personal
decision but one that worked well for us.
way we keep our housing costs down is by
sitting. We figure it has
improved our housing costs by about 30%, sometimes 40% annually. Keeping housing
costs low also frees you up to do some traveling or to spend the money elsewhere
in your budget.
Here are a few questions on investments.
How much do you think people need to diversify in today's volatile
Billy: Itís always a
volatile environment in the markets and none of us know the future. Therefore do
some homework, make your investments and adjust your allocation as the markets
REL: Is it risky owning assets such as REITs, small-caps and foreign stocks?
I am sure many of
our readers hold these investments and that is great but I do not want the tax
issues involved with REITís nor with individual foreign stocks. There is also
the issue of currency exchange rates when dealing with foreign holdings and I
donít want to expose us to currency risk.
REL: What percentage of
assets would you allocate to
bonds in order to reduce volatility?
Billy: I have never been a
big proponent of bonds, and I have missed probably the greatest bond market
rally ever with rates peaking in the early eighties. No doubt I blew itÖ but I
was quite young then and didnít have the capital or understanding to invest.
Today it is hard to see rates going lower. At least I hope they donít, therefore
I would underweight bonds.
about just owning one fund, like a Vanguard Wellington with a 70-30 allocation to
stocks and bonds and be done with it?
Billy: Sure, but from
what you can see in the chart, Vanguard Wellington has lagged the S&P500 over
the last ten years. Itís a matter of personal risk tolerance.
Many people do not want to babysit investments. Do you have a sample portfolio
allocation you can share?
Billy: This is a tough
question because it is a matter of age, risk tolerance and what other assets
someone has. I am a big believer in
financial assets, whether they are stocks,
bonds, metals, or cash, but there is a time to over- and to underweight each of these
asset classes in oneís portfolio.
REL: Should people rebalance
Billy: We make trades a
couple of times a year using a seasonal timing system. And this is done in our
IRAís so that there are no tax consequences and it frees up cash for buying
opportunities, hopefully, at lower prices.
Basically we hold
four ETFís as our main holdings, DVY, (iShares Select Dividend) VTI, (Vanguard
Total Stock Market) SPY (SPDR S&P 500 ETF Trust) and DIA (SPDRģ Dow Jonesģ
Industrial Average ETF) and no bond funds. I figure that Social Security acts
like a bond equivalent as it is a guaranteed source of income backed by the full
faith and credit of the US government, the same as TLT or the long government
At the Helm on Lake Atitlan, Guatemala
REL: You have mentioned that you used
Rule 72T for a while. Would you recommend that for a hypothetical couple in their 50s
with a portfolio of 50% of their money in IRA's or equivalents and 50% in
Billy: I can only write
about what we have done. Because we were in a similar position of 50% after tax
and 50% IRAís we used IRS rule 72T as a bridge until we turned sixty-two when we
started taking Social Security. By using the IRS projections for annual payments
we pulled out an amount equal to that from our retirement accounts. Then once
the Social Security checks started arriving, we turned off that spigot and let
the IRA grow once again. We started this when we were 55 so that we more than
satisfied the five year requirement in rule 72T. And because of the market
performance we have a higher IRA balance now than when we started taking
REL: What is your strategy
on taking Social Security early?
Billy: We decided to
take Social Security at age 62. We know there are as many ways to consider this
decision as there are days in a year. And many experts advise against taking
Social Security ďearlyĒ so that you get a bigger check at full retirement age.
It is hard to argue against that.
We have always lived
an unconventional lifestyle and the fact that so many experts agree on waiting
for payment gives us pause for thought. Here is our logic:
First, the S&P 500 index has
averaged 9.95% per year, including reinvestment of dividends since we retired in
1991. If we take Social Security early and invest it, we won't be losing the 8%
per year the experts claim is the annual increase of waiting - although one is
guaranteed and the other is not. Maybe the markets will trend sideways or go
down or even up, no one knows. For the last 30 years we have lived off of our
investments through up and down markets, and could easily make it a few more
if necessary, so investing the monthly check is definitely an option. More
likely, we will just not spend our stash and look for opportunities in the
markets as our cash positions grow. Plus we have control of the money at this
point, adding to our net worth.
Next letís look at some numbers.
For easy math, say at
62 you are going to receive $1000 per month in benefits, but if you wait until
you are 66, your payment will be $1360 ($1000 x 8% for the four years you have
waited). Sounds great, right? However, you would have missed receiving $48,000
dollars in payments from the previous 48 months. How long is it before you make
that money back? Using this example it would take 133 months or a little over 11
years ($48,000 divided by $360) and that would put us at 77 years of age, just
to break even. In that time frame, the Social Security we will be receiving plus
our investments should grow far outpacing the extra money received by waiting.
Sailing on an Outrigger in Boracay,
For some people
deferring until their full retirement age could make sense, especially if they
do not have the assets to support themselves, are poor at handling money or if
they are still working. However this is not our situation and therefore we have
decided to take the money and run.
Itís really a
question of who you think can handle your money better; you or Uncle Sam?
REL: Are both of you taking
just one of you?
Billy: We both are taking
REL: Are you
taking it early so that your investments can grow untouched?
point Social Security and dividends easily cover our
expenses and our assets can grow without tapping them.
REL: What about dipping into
one's principal? Is that a good idea?
Billy: This is a tough
question as there are many variables. Oneís time left on the planet is something
to consider, your cash flow, and your net worth. But you canít take it with you
and those who die with a large balance donít come out any better than someone
with a smaller one. Perhaps one wants to leave a large inheritance to their
heirs, or to charity. Itís a personal decision.
withdrawal rule, are you figuring 4% of your
Billy: Yes, it is one's total
liquid net worth. I look at the 4% rule as a guide and not set in stone.
We use a
spending spreadsheet that includes what percentage of our portfolio we are
spending each day and this spread sheet can be found in our book,
The Adventurer's Guide to Early Retirement, 4th Edition. This way if we get wild and spend too much or the markets head
south we can make adjustments immediately. Flexibility is the key.
REL: What you
would advise for people who want to keep their investments simple? Index funds? All-in-one funds?
Billy: The S&P 500
closed at 312.49 on our retirement date in January 1991 and, like I mentioned
earlier, has produced a 9.95% annual growth rate including dividends since then.
Therefore I would suggest a portion of your assets invested in SPY or VOO
(Vanguard S&P 500 ETF) for the long run.
Let's Go Places! Panajachel, Guatemala
REL: What has
surprised you the most in the 30 years you've been
Billy: How much we have been
able to travel, see the world, live in unique cultures and have a higher net
worth including inflation than when we started. Also, how much technology has
improved our lives.
REL: What is the biggest mistake
you see other early retirees making from a financial viewpoint?
Billy: Not retiring earlier
when they had the means to do so and were more mobile and daring.
REL: How do
you see your
future? Will you
travel as long as you can?
Billy: Financially, no
one knows the future of the markets, nor have they ever, so all we can do is
stay flexible and take opportunities as they present themselves. We intend to
continue traveling, but we are moving more slowly and donít feel the push to
always be on the road. We have been traveling for 30 years now and have seen a
lot! At some point we will probably be more ensconced in a community and travel
from there, but we arenít quite ready for that yet.
What can people do that is more important than anything else to move themselves
toward early retirement?
Billy: Get out of debtÖ all
debt including mortgage debt. Otherwise you are a wage slave to it.
REL: Once they
retire, is there one financial piece of advice that you could give them?
Billy: Continue to track
your spending and know what percentage of your net worth you are spending.
itís a lifestyle, not a vacation and that housing is your largest
expense. Reduce that, and you can free up resources for anything else.
REL: Is there
anything else you'd like to add?
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Thank you, Billy, for taking the time to answer these questions!
What's Your Number? - How much money do you need to retire?
About the Authors
Billy and Akaisha Kaderli are
recognized retirement experts and internationally published authors on
topics of finance, medical tourism and world travel. With the wealth of
information they share on their award winning website RetireEarlyLifestyle.com,
they have been helping people achieve their own retirement dreams since
1991. They wrote the popular books, The
Adventurerís Guide to Early Retirement and Your
Retirement Dream IS Possible available on their website
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Early Lifestyle appeals to a different
kind of person Ė the person who prizes their
independence, values their time, and who doesnít
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